UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003
Commission file number: 000-23278

BRAZIL FAST FOOD CORP.

Av. Brasil
6431 - Bonsucesso
CEP 21040-360
Rio de Janeiro, Brazil

Registrant’s telephone number, including area code: 55 (21) 2564-4219

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.0001 per share
(Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |  |

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |  |

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |  | No |X|

     The aggregate market value of the voting common stock held by non-affiliates of the Registrant, computed by referenced to the average bid and asked price of such common stock, as of the last business day of the Registrant’s most recently completed second fiscal quarter, was $1,389,434 as of June 30, 2003.

     The number of shares outstanding of the Registrant’s common stock is 7,953,468 (as of April 8, 2004).

Documents Incorporated By Reference

     Portions of the Registrant’s definitive proxy statement for its 2004 annual meeting of shareholders, which proxy statement will be filed no later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2003, are hereby incorporated by reference in Part III of this Annual Report on Form 10-K.

     Unless otherwise specified, all references in this report to “Reais,” the “Real” or “R$” are to the Brazilian Ral (singular), or to the Brazilian Reais (plural), the legal currency of Brazil, and “U.S. Dollars” or “$” are to United States Dollars. Unless otherwise specified, all financial statements and other financial information presented herein are stated in R$ and are in accordance with generally accepted accounting principles in the United States (U.S. GAAP).

PART I

ITEM 1. BUSINESS

     Brazil Fast Food Corp., through its wholly-owned subsidiary, Venbo Comercio de Alimentos Ltda., a Brazilian limited liability company that conducts business under the trade name “Bob’s,” owns and operates, directly and through franchisees, the second largest fast food hamburger restaurant chain in Brazil. As of December 31, 2003, we had 345 restaurants, or “points of sale,” including 66 kiosks and trailers.

     The audit opinions of our independent public accountants contained elsewhere in this report contain qualifications that, due to our recurring losses from operations and our negative working capital position, there is substantial doubt as to our ability to continue as a going concern. See “Risk Factors — Risk Relating to Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of these factors.

     We were incorporated in Delaware in 1992. Our executive offices are located at Av. Brasil, 6431 — Bonsucesso, CEP 21040-360, Rio de Janeiro, Brazil. Our telephone number is 55 (21) 2564-6452.

Recent Developments

     The year 2002 was marked by a general recession that affected the Brazilian economy due, in part, to the economic problems in Argentina, as well uncertainty over the future of the economy after the Brazilian presidential elections that occurred in October 2002. Brazilian and foreigner investors doubted whether the measures of the new president would create a more positive economic environment, accordingly their investments were postponed. As a consequence, during this period the Brazilian economy faced higher inflation and higher interest rates, as well as significant devaluation of the Brazilian Real and the U.S. Dollar.

     The 2003 begun with a great level of expectation for the new elected president Luis Inacio Lula da Silva. From the beginning of this presidency, the new president and his team of advisors focused on two important economic issues taxes and social security reforms. As a result of the president’s actions investors gained new confidence with the Federal Government and inflation rates declined significantly and the Brazilian Real recovered its exchange rate against the US Dollar. However, the monetary policies implemented by the new administration’s economic team did not differ significantly from those of the previous one administration, and overnight interest rates, though slightly reduced, remained high. The high unemployment rates that Brazil faced in 2002 also remained relatively unchanged in 2003. In addition, consumer spend was very low during 2003, and according to the Brazilian Supermarket Association, a non-affiliated organization, retail sales were the worst since 1991.

     These factors negatively affected the Brazilian economy and, in turn, adversely affected our restaurant sales and the results of our operations in both 2002 and 2003. See “Risk Factors—Risks Relating to Brazil” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of these factors.

Restaurant Operations

     As of December 31, 2003, we had 345 points of sale, including 66 kiosks and trailers. Of the 345 points of sale, we own and operate 60 and the remaining 285 are franchises, which are each operated under the tradename “Bob’s” by a franchisee. For a description of our franchise program, see “—Franchise Program.” Approximately 210 of these points of sale are located in Rio de Janeiro and São Paulo and the remaining points of sale are widely spread throughout major cities in other parts of Brazil, except for three franchised restaurants that opened in

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Portugal in November 2001. The largest number of franchised operations outside of Rio and São Paulo are in Pernambuco, Santa Catarina, Pará, Bahia, Espirito Santo and Brasilia. All points of sale serve a uniform menu of hamburgers, chickenburgers, hot dogs, sandwiches, french fries, soft drinks, juices, desserts and milk shakes. Selected points of sale also serve coffee and/or beer. We are particularly known for our milkshakes and the special spicing of our hamburgers. Our target clients are between the ages of 15 and 35 and come from all social groups.

     Historically, our points of sale have been distinguishable from other “fast food” operations due to our unique service design whereby customers would place and pay for their food on one line and pick up their food on another line. Cooks would prepare orders as read to them by the counter service representative who took the order. We have changed this two line system into a single line system, which has improved both the quality and speed of service, while retaining our cooked-to-order philosophy. This change has been made possible by the deployment of software which facilitates communication between counter personnel and the kitchen staff. Under this new system, as each order is input by a service representative into a countertop terminal, it also appears on a computer screen in the kitchen, thereby assuring that each customer will receive his food rapidly while permitting us to retain cooked-to-order offerings.

     Our points of sale are generally open all year round, seven days a week. Historically, we have experienced increased sales each year during the Brazilian summer months and during Brazil’s school holiday periods in the months of December, January, February and July. We have also experienced strong sales in December due to the Christmas holidays.

     Our points of sale generally open at 10:00 a.m. for lunch and remain open for dinner. Closing hours vary according to location. In some locations with proximity to late night entertainment, the points of sale remain open for the “after hours” crowd. Our points of sale are not generally open for breakfast, as results of test-marketing that we conducted at various times during 1999 and 2000, which indicated that offering fast food breakfast is not economically viable.

     Our prices are consistently positioned at the same levels as those for comparable products offered by our major competitors. We attempt to maintain the overall cost of our meals at levels competitive with lunch prices offered by popular street snack bars known as “lanchonetes.”

     Originally, our points of sale were built as counter service facilities to accommodate our initial primary clientele of teenagers. In keeping with our current efforts to attract family-oriented customers, all of our points of sale built since 1980 have included seating facilities. In addition, all of our pre-1980 points of sale have now been renovated to update the decor, expand the seating facilities and provide air conditioning. During 2001, we introduced a new more modern and cheerful evolution of our logo and visible manifestations. All new franchisees open their restaurants with this same decor, and most of all existing restaurants were refitted with this décor during year 2003. This style is carried through in the uniforms worn by our personnel, which are occasionally modified to feature hats and shirts used in promotions.

     For the past several years, we have been the exclusive provider of hamburgers and related items at two of Brazil’s largest special events — the Rio de Janeiro Carnivale, the one week festive period which precedes the advent of Lent, and the Formula One Automobile Racing Championships. In addition, our food products are sold at other special events throughout Brazil, including boat fairs, automobile fairs and State rodeos. Using custom constructed trailers and moveable kiosks, we are able to offer most of our products at temporary locations for the duration of each special event. In addition to providing an additional revenue source, our visibility is enhanced by signage that can be picked up via television coverage of the special event and by reaching a consumer market where we may not have a permanent outlet. In November 2001, our first foreign franchise was opened in Portugal pursuant to a master franchise agreement, which provides for 30 franchises to be opened in Portugal over the next ten years.

     The following table presents the openings and closings of both our owned and operated restaurants and our franchised restaurants for the years ended December 31, 2003, 2002 and 2001:

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(a)		Does not include trailers and kiosks used for temporary locations during 2003, 2002 and 2001.
(b)		Includes 1 of our owned and operated points of sale that was sold to a franchisee during the year ended December 31, 2003.
(c)		Includes 5 of our owned and operated points of sale that were sold to a franchisee during the year ended December 31, 2002.
(d)		Includes 3 of our owned and operated points of sale that were sold to a franchisee during the year December 31, 2001.

     The average guest check per customer for our owned and operated points of sale for the years ended December 31, 2003, 2002 and 2001 was R$6.73, R$6.06 and R$5.87, respectively.

     We strive to maintain quality and uniformity throughout both our owned and operated and our franchised points of sale by publishing detailed specifications for food products, food preparation, and service, by continuous in-service training of employees and by field visits from our supervisors. Quality control at each point of sale is undertaken by the store manager, who visually inspects the products as they are being prepared for cooking. The manager also keeps a record of the expiration date of the products in inventory. In the case of our franchisees, a marketing manager in each of our six primary geographic regions periodically reviews their operations and makes recommendations to assist in the franchisees’ compliance with our specifications.

     Our quality control inspectors are also sent periodically to each restaurant, whether owned by us or by one of our franchisees, to conduct a review of the food stock. These inspectors also take samples of the water used at each restaurant in the preparation of food and drinks as well as random samples of one food item, which are taken to a contract laboratory for a microbiological analysis.

Growth Strategy

     Bob’s is Brazil’s second largest fast food operation. Although many of our major competitors have been experiencing operational and franchise difficulties, we continue to add points of sale and improve our revenues. Our primary goal is to continue to increase our network of points of sale in Brazil, where we believe fast food is a developing market, and to gain market share by entering city markets where we are under-represented.

     Brazil’s population of 169.8 million is the fifth largest in the world (behind China, India, the United States and Indonesia). São Paulo, Brazil’s largest city, has 10.4 million residents and a metropolitan area population of 17.9 million. The city of São Paulo is located within the state of São Paulo, which has a population of 37.0 million.

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Rio de Janeiro, Brazil’s second largest city, has 5.9 million residents and a metropolitan area population of 10.9 million. The city of Rio de Janeiro is located within the state of Rio de Janeiro, which has a population of 14.4 million. Thirteen metropolitan areas, including those of Rio de Janeiro and Sao Paulo, have populations in excess of one million. According to IBGE, a non-affiliated consulting concern, in 2000 the average annual income of the Brazilian population was as follows:

     According to Media Data ‘98, another non-affiliated consulting concern, the fast food market is one of Brazil’s fastest growing business segments, which could exceed 60,000,000 customers. Based upon the foregoing, we believe there is significant opportunity for sales growth in the Brazilian fast food market. To capitalize on this opportunity, we intend to make capital expenditures of R$3,000,000 in 2004 to refurbish old points of sale, install new signage, upgrade our equipment and maintain the number of our company owned and operated points of sale in Brazil at 60.

     We are also focusing our growth efforts on the development of new franchises, especially in northern Brazil, where competition is not as intense as in other urban areas. We will also seek to increase our number of franchisees. We intend to enter into territory agreements with franchisees which will require franchisees to commit to the development of several Bob’s points of sale in a particular region. We also intend to focus on developing joint ventures with gasoline station retailers. See “Franchise Program” below for a description of our franchise program and the terms of these joint ventures.

     We expect to continue to capitalize on our 51-year history in Brazil. As our operations are based almost exclusively in Brazil, we believe we have the capacity to understand and respond to consumer taste preferences in developing additional local markets and test marketing new products and concepts. We intend to utilize our customized trailers and moveable kiosks to maximize our ability to cater to special events and temporary markets, and also to test certain markets on a temporary basis. We also anticipate taking advantage of the continuing construction and development of shopping malls and supermarkets in Brazil, where fast food can be a significant profit center.

     In 1999, we initiated a computer-based delivery system for telephonic food and beverage orders. As of December 31, 2002, our telephonic order delivery system had been installed in almost all of our 60 owned and operated points of sale. At the end of 2003 we started to test out new call center in 9 of our owned and operated stores and in 3 of our franchised stores. We intend to introduce the call center to all of our stores (both franchised and owned and operated) during 2004. Our call center will enable our customers to place an order over the phone, which will order will then be directed to the nearest restaurant location, irrespective of whether that location is one of our owned and operated restaurants or a franchisee owned restaurant.

Franchise Program

     As of December 31, 2003, 285 of our 345 points of sale were owned and operated by franchises. In 2003, for the seven year in a row, Bob’s received the Quality Seal of the Brazilian Franchise Association and, for the second consecutive year, 100% of our franchisees who were interviewed by the Brazilian Franchise Association stated that they would purchase the franchise again.

     Our franchise agreements generally require the franchisee of a traditional Bob’s restaurant to pay us an initial fee of $30,000 and additional fees equal to 4% of the franchisee’s gross sales in its first two years of operation and 5% of monthly gross sales thereafter. In addition, franchisees pay us 4% of monthly gross sales in cooperative advertising fees. Our typical franchise agreement also provides that the franchisee has the right to use the Bob’s

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trademark and formulas in a specific location or area and must use our approved supplies and suppliers and must build each franchised outlet in accordance with our specifications at approved locations. The term of the majority of our franchise agreements is 10 years, with a few agreements having 5 year terms. Our existing franchise agreements have an average remaining duration of approximately eight years. Historically, upon expiration a franchise agreement is renewed without the interruption of the franchisee’s business. We generally have no financing obligations with respect to these franchise agreements.

     At present, approximately 9 months elapse between our initial contact with a prospective franchisee and the opening of a franchised point of sale. After the initial meeting, and if the potential franchisee meets certain basic conditions, such as significant business experience, financial resources and knowledge of the market in the area where the franchise will be located, a preliminary franchise agreement is signed, which, among other matters, requires the prospective franchisee to pay us a non-refundable sum equal to 50% of the initial franchising fee to partially compensate us for the cost of a three-month training program to familiarize the prospective franchisee with our operations. Following mutual agreement as to the site of a new restaurant, a definitive franchise agreement is signed, outlining the obligations and responsibilities of each party, including the franchising fees and promotion commissions to be paid to us. The franchisee then begins a three-month training program. Construction of the restaurant typically begins at the beginning of the training program and is generally completed within three to six months. The franchising fee is sufficient to cover all training expenses we incur.

     In some instances, the franchise agreements that we have negotiated with existing franchisees accommodate specific requirements and characteristics of the franchisee. We have entered into territory agreements with franchisees located in areas where we have determined that it is in our best interest to establish two or more stores within a geographic region. The territory agreements incorporate the same terms and conditions of our franchise agreements, but also provide for the franchisee to commit to opening an agreed-upon number and type of store within a specified time-frame. In a limited number of instances, we may grant franchisees exclusive territorial rights if we believe such grants would further the development of new market opportunities.

     Under Brazilian law, we cannot dictate the price at which our franchisees sell their products, although the prices charged by our franchisees generally mirror the prices charged by our owned and operated points of sale.

     Individuals wishing to own and operate a Bob’s franchise are required to submit an application. A steering committee formed by our top management receives formal franchising proposals and reviews them to determine which applications should be accepted. In addition to our existing 141 franchisees who, collectively, operated 285 points of sale, including 58 kiosks and 3 trailers, at December 31, 2003, we had signed final franchising contracts with approximately 56 new franchisees to open and operate a like number of additional points of sale, to be located in the states of Ceará, Rio de Janeiro, Sao Paulo, Parana, Rio Grande do Sul, Pernambuco, Santa Catarina, Sergipe, Bahia, Paraíba, Alagoas, Goias, and in the Federal District of Brasilia. The majority of these additional points of sale will begin operations in the first half of 2004.

     As part of our growth strategy, we have begun entering into franchise agreements requiring the franchisee to commit to the development of a fixed number of Bob’s points of sale. We are also focusing on developing joint ventures with gasoline retailers to house Bob’s points of sale in retail gasoline stations. We contemplate that substantially all of these new restaurant/gas stations, or “joint sites,” although housed at gas stations, will be built, owned and operated by our present and future franchisees and not the gasoline retailer. We will then share a portion of the royalties received from the franchisee of a particular joint site with its respective gasoline retailer. In 2000, based on favorable testing of joint sites in 1999, we entered into an agreement with Petrobras, one of the largest gasoline retailers in Brazil, with approximately 7,000 locations, whereby Petrobras has agreed to house a Bob’s restaurant in 30 of its gas stations over the next two years. Pursuant to this agreement, we and Petrobras will work together to select the proper locations to open these joint sites. To date, eight joint sites have been opened in Petrobras gas stations.

     We are currently testing several joint sites with other gasoline retailers, including Shell, Forza, Ale, AGIP and Repsol. Our agreements with each of these gasoline retailers do not establish a set number of joint sites to be opened. These agreements, like our standard franchise agreements, merely set forth conditions to establish a joint site and do not limit the number of joint sites that may be opened under the agreement. To date, Shell has three joint sites in operation, and we are negotiating an agreement with Shell to house a specific number of other joint sites in

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certain approved locations. Forza, a gasoline retailer catering to the taxicab industry, now has nineteen Bob’s sites in operation, with the objective of housing 20 joint sites in total. Alé, another gasoline retailer, has two joint sites, and we have an agreement with Alé to create a number of multiple joint sites.

     In our first effort to expand our “Bob’s” brand beyond Brazil, we entered into a master franchisee agreement in 2000 to open franchised points of sale in Portugal. This agreement requires the master franchisee to open 30 “Bob’s” retail points of sale over a 10-year period, of which no less than 5 must be owned and operated by the master franchisee and the remaining may be owned and operated by the master franchisee’s subfranchisees. The master franchisee will assume financial responsibility for marketing the “Bob’s” brand in Portugal. Pursuant to this agreement, which contains substantially the same operational guidelines as our standard Brazilian franchise agreement, the master franchisee agreed to pay us a master franchisee fee of $200,000 minus the costs related to registering the trademark “Bob’s” in Portugal. In addition, we will receive 33%, or at least $10,000, of the initial fees charged to the Portuguese franchisees by the master franchisee. The agreement provides that we will receive from the master franchisee initial fees in the amount of $16,000 for each of the five stores to be opened and operated by the master franchisee. The master franchisee also agreed to pay us 20% of royalty fees charged to the Portuguese franchisees. The first Portuguese franchise under this agreement opened in November 2001, and two more were opened in 2002. During 2003, two of our three stores in Portugal were closed. Currently, we are reevaluating our operations in Portugal, and depending upon the results of our reevaluation we may decide to curtail or altogether forego any further expansion in Portugal.

     We generally retain a right of first refusal in connection with any proposed sale of a franchisee’s interest.

Advertising and Promotions

     We utilize television, radio, outdoors and a variety of promotional campaigns to advertise our products. We also use colorful cardboard boxes imprinted with the “Bob’s” symbol for our premium sandwich offerings, replacing paper bags, thereby enhancing our quality image. In 2001, we updated our logo, and at the end of 2003 most of all of our points of sale were using such logo.

     We are constantly seeking to expand the breadth and quality of our product offerings:

•		In 1997, we launched a new line of chicken products in an effort to capitalize upon customers’ requests for “health-oriented” food offerings; one of these products, a chicken steak sandwich, has become one of our best selling offerings.
•		In 1998, we launched the “Bob’s Dog,” an extra-large hot dog with two different sauces.
•		In 1999, we introduced a chocolate mousse pie dessert; bacon was also added as an option to all of our sandwich offerings.
•		In 2000, we introduced a cheese, ham and egg sandwich and a hot fudge topped ice cream sundae; we also introduced our “MEGA” sized sandwiches and combination meals.
•		In 2001, we introduced chicken nuggets; we also introduced a new sandwich offering of bacon, egg and cheese.
•		In 2002 we introduced a 120 gram barbecue tasting hamburger with barbecue sauce and a prune sundae and milkshake, as well as a hamburger with cheddar cheese on a whole-wheat bun.
•		In 2003 we launched a 120 gram turkey tasting hamburger. We also extended our healthy-oriented menu, by introducing salad meals combined with any choice of our hamburger offerings.

     We work together with our advertising agency to annually develop a multi-media marketing program to advertise our restaurant network in our main markets. During 2003 we advertised our products mainly through

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outdoor advertising and city buses. We also periodically run television and radio commercials Temporary product discounts are offered in Rio de Janeiro and Sao Paulo through radio and television advertising several times a year. During 2003 we sponsored Botafogo de Futebol e Regatas, one of the most traditional soccer teams in Brazil, in the Brazilian soccer league. Other successful promotional programs have included offering products tied into popular movies with certain value meals, and selling specially produced hats at a discount with certain value meals. We also offer a “kids meal,” which includes three food items and a small packaged toy. Certain of our points of sale offer special services for children’s birthday parties and also feature appearances by “Bobi”, our mascot. All these programs are reinforced by visual tools, such as banners, posters and place mats.

     We keep franchisees informed of current advertising techniques and effective promotions and make our advertising materials available to our franchisees. Our franchisees are generally required to pay us 4% of their monthly gross receipts for advertising and promotions. Individual stores also develop promotional programs to attract additional clientele or to assist in the implementation of expanded business hours. These promotions are paid for by each outlet. We commit approximately 4% of our system-wide gross sales to marketing activities.

     We are a participant in a joint retail marketing effort initiated in 1998 in Rio de Janeiro, together with Shell, Lojas Americanas (one of the biggest department store chains in Brazil) and Sendas (one of the biggest supermarket chains in Brazil), of memberships in “Smart Club,” which offers special premiums to repeat customers. This program, which has been expanded to encompass other areas of Brazil, is ongoing.

     We intend are increase our marketing efforts in Sao Paulo in an effort to capitalize upon our increasing number of stores in the number one city market of Brazil.

Sources of Supply

     We and our franchisees have not experienced any material shortages of food, equipment, fixtures, or other products which are necessary to restaurant operations. We anticipate no such shortages of products and, in any event, believe that alternate suppliers are available.

     We purchase food products and packaging from numerous independent suppliers. In selecting and periodically adjusting the mix of our suppliers, we assess and continuously monitor the efficiency of their regional and national distribution capabilities. To take advantage of volume discounts, we have entered into centralized purchasing agreements. Food products are ordered by, and delivered directly to each point of sale. Billing and payment for our company owned and operated points of sale are handled through the centralized office, while franchisees handle their own invoices directly. Packaging and durable goods are delivered to a centralized warehouse operated by a non-affiliated person, which delivers supplies to each of our points of sale. This centralized purchasing helps assure availability of products and provides quantity discounts, quality control and efficient distribution.

     We participate in joint promotion and marketing programs with Coca-Cola for its soft drink products and with Novartis Nutricion for its Ovomaltine chocolate, as well as with Mate Leao for a popular Brazilian brand of iced tea. Pursuant to a 1996 agreement with a Brazilian subsidiary of Coca-Cola, we agreed to sell, on an exclusive basis, Coca-Cola soft drink products in our restaurants until 2006 in exchange for $4,000,000. This agreement was amended in 2000 to extend the exclusivity period to 2008.

Trademarks

     We believe that our trademarks and service marks, all of which are owned by us, are important to our business.

     Our trademarks and service marks have been registered in the Brazilian trademark office. These trademarks and service marks expire at various times from 2005 to 2012, when they are routinely renewed. The following table sets forth our significant trademarks and service marks that are registered in the Brazilian trademark office:

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     Renewals of these trademarks and service marks generally have been obtained prior to their expiration. We have begun the process of registering the “Bob’s” trademark in Portugal and we have a temporary license to use the trademark in our franchised points of sale prior to such registration.

Competition

     In terms of the number of points of sale, we are the second largest hamburger food service organization in Brazil. Each of our restaurants is in competition with other food service operations within the same geographical area. We compete with other organizations primarily through the quality, variety, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, and effectiveness of marketing are also important factors. The price charged for each menu item may vary from market to market depending on competitive pricing and the local cost structure.

     Based on several articles which have appeared in independent Brazilian newspapers and periodicals, we believe that we and McDonald’s are the market leaders in the hamburger fast food business in Rio de Janeiro and São Paulo. As of December 31, 2002 and 2001 McDonald’s had approximately 1,254 (584 restaurants and 670 kiosks) and 1,174 (568 restaurants and 606 kiosks) Brazilian points of sale, respectively. As of the date of this Annual Report, McDonald’s did not disclose the number of their points of sale as of December 31, 2003; however McDonalds recently stated in a newspaper article published in an independent Brazilian newspaper that they had closed 35 restaurants ending the year 2003 with 549 restaurants. As of December 31, 2003, 2002 and 2001 Pizza Hut had 62 fast food pizza points of sale in Brazil. Domino’s Pizza had 31 points of sale in Brazil as of December 31, 2002 and 23 and 20 points of sale as of December 31, 2002 and 2001, respectively. Arby’s closed all points of sale in Brazil during 1999. Habib’s, a Middle Eastern fast food chain, had approximately 200 points of sale in Brazil as of December 31, 2003 and 2002 and 170 as of December 31, 2001.

     Our competitive position is enhanced by our use of fresh ground beef and special flavorings, made-to-order operations, comparatively diverse menu, use of promotional products, wide choice of condiments, atmosphere and decor of our restaurants and our relatively long history in Brazil. We believe that the use of moveable trailers and kiosks, which are not utilized by our competitors, affords us an advantage over our competitors. We also believe that, as a Brazilian-based company, we have the advantage over our non-Brazilian competitors of being able to readily understand and respond to local consumer preferences.

Personnel

     As of December 31, 2003, we, including our franchisees, employed 8,785 persons (6,544 in 2002), of whom 1,546 (1,596 in 2002) were employed in our owned and operated restaurants. The total number of full-time employees as of December 31, 2003 was 1,660 (1,704 in 2002) of which 260 (98 in 2002) were temporary personnel.

     Our employee relations historically have been satisfactory. We are not a party to any collective bargaining agreements. However, we have agreed to be bound by the terms, as they may be applicable to our employees, of agreements negotiated on a city-by-city basis by trade associations of hotel, restaurant and fast food owners and operators, of which we are a member.

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FORWARD LOOKING STATEMENTS

     This Annual Report contains forward-looking statements including statements regarding, among other items, business strategy, growth strategy and anticipated trends in our business, which are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect” and “anticipate” and similar expressions identify forward-looking statements, which speak only as of the date the statement is made. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this report, including those set forth in “Risk Factors,” describe factors, among others, that could contribute to or cause such differences. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Annual Report will in fact transpire or prove to be accurate. Investors are cautioned that such forward looking statements involve risks and uncertainties including without limitation the following:

Risks Relating to Operations

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We have a history of significant net losses, and we may not be profitable in the future; we may need to seek the forbearance of creditors in the future.

     We incurred net losses of R$4,118,000, R$11,210,000 and R$ 8,250,000 for the years ended December 31, 2003, 2002 and 2001, respectively. Our accumulated deficit at December 31, 2003 was R$ 63,732,000 and our working capital deficit at such date was R$ 5,882,000. There is no assurance that our future operations will become profitable. We may continue to report net losses for the foreseeable future, which could adversely affect our ability to service our debt or finance our business operations in the future.

     In order to sustain our operations, we have, in the past, been dependent upon the continued forbearance of our creditors. While we are currently in full compliance with all covenants under agreements with our creditors, there can be no assurance that we will not be forced to seek the forbearance of our creditors in the future.

•

Our independent auditors’ report raises uncertainties about our ability to continue as a going concern; need for additional financing.

     The reports of Grant Thornton, the independent auditors of our consolidated financial statements for the years ended December 31, 2003, 2002 and 2001, recites that our recurring losses from operations and negative working capital raise substantial doubt about our ability to continue as a going concern. Our plans to continue as a going concern, discussed elsewhere in this report, focus on efforts to raise additional capital and increase our cash flow. We are currently working to evaluate strategic alternatives that will enable us to obtain the funds necessary to continue our business operations. At this time, we cannot state with any degree of certainty whether such funding will be available to us and, if available, that the source of such funding would be available on terms and conditions acceptable to us. Any potential sources of additional financing may be subject to business and economic conditions outside of our control. If we do not obtain the funds we need to pay our debt obligations or operating expenses, we may need to curtail our operations or we may be forced to evaluate other alternatives to continuing our present operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

•

The composition of our board of directors is controlled by the parties to a stockholders’ agreements, which restrict our ability to direct certain aspects of our business and operations

     On August 11, 1997 we entered into a stockholders’ agreement (the “1997 Stockholders’ Agreement”) with AIG Latin America Equity Partners, Ltd., referred to herein as “AIGLAEP,” and our then executive officers and directors, and certain of their affiliates as a condition to the closing of a stock purchase agreement with AIGLAEP,

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pursuant to which AIGLAEP purchased 375,000 shares of our common stock and warrants to purchase 62,500 shares of our common stock.

     Pursuant to the terms of the 1997 Stockholders’ Agreement, each of the parties to the agreement agreed, among other things, to vote their respective shares of our common stock to elect as directors one designee of AIGLAEP, two designees of Shampi Investments A.E.C., two designees of Lawrence Burstein and certain other of our former executive officers and directors, and one designee of BigBurger Ltda.

     The 1997 Stockholders’ Agreement provides that if we fail to achieve 75% of our projected cumulative EBITDA (earnings before interest, taxes, depreciation and amortization), as set forth in the 1997 Agreement, for each of the periods from January 1, 1997 to December 31, 1999, 2000 or 2001, respectively, AIGLAEP could appoint such number of its designees which, together with an expansion of the board and the filling of vacancies created by the resignation of certain directors serving at such time, would then constitute a majority of our board of directors, thereby effecting a change in our control.

     We failed to achieve the performance targets for year ended December 31, 2000. Following negotiations with AIGLAEP, the 1997 Stockholders’ Agreement was amended on March 14, 2001, to provide, among other things, for the suspension, until the completion of our audited financial statements for the year ended December 31, 2002, of AIGLAEP’s right to appoint a majority of our board of directors. In partial consideration of AIGLAEP’s agreeing to the suspension and possible termination of its right to take control of our board and certain of its prior approval rights, we issued to AIGLAEP warrants to purchase 35,813 shares of our common stock at an exercise price of $5.00 per share and reduced the exercise price of additional warrants to purchase 64,187 shares of our common stock held by AIGLAEP to $5.00 per share. Further, certain of our shareholders agreed to grant AIGLAEP an option to purchase an aggregate of 40,000 shares of our common stock held by such shareholders (and among them as they shall agree) at an exercise price of $1.50 per share.

     The amendment to the 1997 Stockholders’ Agreement provides that if certain economic performance targets, based on our results of operations for the year ending December 31, 2002 and set out in the amendment to the 1997 Stockholders’ Agreement, are met, or if AIGLAEP at any time owns less than 187,500 issued and outstanding shares of our common stock, subject to any adjustments for any stock split or restructuring, AIGLAEP’s right to take control of our board of directors and certain of its prior approval rights will terminate. If, however, we fail to meet these performance targets, our chief executive officer must promptly resign and our board of directors will be required, except as limited by their fiduciary obligations, to adopt recommendations for improving our financial performance as may be proposed by a committee of the board of directors composed of representatives of AIGLAEP and certain other investors who purchased our equity securities in a private offering in March 2001.

     As reflected in the financial statements contained elsewhere in this report, we failed to meet the original performance targets for the year ended December 31, 2002. However, the amendment to the 1997 Stockholders’ Agreement contains a provision that requires the parties to renegotiate the performance targets in good faith in the event that (i) the Brazil SELIC central bank rate exceeds an average of 18% for a continuous period of ninety business days or (ii) there is a devaluation of the Brazilian Real against the US dollar exceeding 10% over any three-month period. Both such events have occurred since the amendment. However, due to the fact that the AIGLAEP has not accepted our invitation to renegotiate the performance targets in good faith, we believe that the performance targets are inapplicable.

     On May 15, 2002, we entered into an additional stockholders’ agreement (the “2002 Stockholders’ Agreement”) with Gustavo Figueredo Bomeny and CCC Emprendimentos e Participacoes Ltd. (the “New Investors”) and certain of our current investors, namely BigBurger Ltda., Jose Ricardo Bousquet Bomeny, Omar Carneiro da Cunha, Seaview Venture Group, Peter van Voorst Vader and Shampi Investments A.E.C., as a condition to the closing of a stock purchase agreement with the New Investors, pursuant to which the New Investors purchased 3,700,000 shares of our common stock.

     Pursuant to the terms of the 2002 Stockholders’ Agreement, each of the parties to the agreement agreed, among other things, to vote their respective shares of our common stock to elect as directors one designee of Omar Carneiro da Cunha, one designee of Lawrence Burstein, one designee of BigBurger Ltda. and two designees of the

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New Investors. The 2002 Stockholders’ Agreement, by its terms, is subject to the terms of the 1997 Stockholders’ Agreement.

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Our success depends on our ability to compete with our major competitors in the fast food industry

     The success of our business is dependent upon our ability to compete with other restaurants and fast food chains. To compete, we may be required to spend significant funds on marketing and promotions and on developing and offering new products, while maintaining the prices we charge our customers. Many of our competitors, like McDonald’s, have vastly greater over-all financial and other resources available to them than we do. We may not have the resources necessary to compete effectively, which may cause consumers to prefer the products of our competitors. As a result, we could experience a decrease in revenues which would have an adverse impact on our business and operations.

•

The fast food industry may be adversely affected by current “value pricing” trends

     In order to remain competitive, we are required to respond to changing consumer preferences, tastes and eating habits, increases in food and labor costs and national, regional and local economic conditions. Many companies internationally have adopted “value pricing” strategies. Such strategies could have the effect of drawing customers away from companies that do not engage in discount pricing and could also negatively impact the operating margins of competitors that do attempt to match competitors’ price reductions. There can be no assurance that the use of “value pricing” strategies will stop. If companies were to continue to implement value pricing, we may be forced to reduce our sales prices or maintain our prices and perhaps lose customers, either of which would cause a reduction in our revenues.

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Our future success is dependent upon the success and expansion of our franchise program

     A portion of our revenues are attributable to the fees we collect from our franchisees. To improve our revenues in the future, we have developed a growth strategy that includes increasing our number of franchised points of sale. This growth strategy is substantially dependent upon our ability to attract, retain and contract with qualified franchisees and the ability of these franchisees to open and operate their Bob’s points of sale successfully. In addition, our continued growth will depend in part on the ability of our existing and future franchisees to obtain sufficient financing or investment capital to meet their market development obligations. If we experience difficulty in contracting with qualified franchisees, if franchisees are unable to meet their development obligations or if franchisees are unable to operate their points of sale profitably, the amount of franchise fees paid to us by our franchisees would decrease and our future operating results could be adversely affected.

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We are subject to extensive regulatory requirements applicable to the food service industry

     Both we and our franchisees are subject to regulatory provisions relating to the wholesomeness of food, sanitation, health, safety, fire, land use and environmental standards. Suspension of certain licenses or approvals due to our or our franchisees failure to comply with applicable regulations could interrupt the operations of the affected restaurant and inhibit our or their ability to sell products. Both we and our franchisees are also subject to Brazilian federal labor codes, which establish minimum wages and regulate overtime and working conditions. Changes in such codes could result in increased labor costs that could cause a reduction in our operating income. We are also subject to Brazilian federal franchising laws applicable to franchise relationships and operations. Changes in these or any other regulations may contain requirements that impose increased burdens on our business, which may adversely affect our results of operations. We cannot assure you that we will be able to deal successfully with any potential new or amended regulations.

Risks Relating to Brazil

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Our operations are subject to changes in Brazil’s economy

     In March 1994, the Brazilian government introduced an economic stabilization program, known as the “Real Plan,” intended to reduce the rate of inflation by reducing certain public expenditures, collecting liabilities

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owed to the Brazilian government, increasing tax revenues, continuing to privatize government-owned entities and introducing a new currency. The Real was introduced as Brazil’s currency in July 1994, based on a monetary correction index, the URV, introduced earlier in that year. The Real Plan resulted in a substantial reduction in Brazil’s rate of inflation, which declined from 2,489.11% per annum in 1993 to 8.7% per annum in 2003. With the exception of a few months in 1999, the Real Plan also caused the exchange rate between the Real and the U.S. Dollar to remain relatively stable from 1994 to 2000.

     Although Brazil’s economy was expected to expand from 2001 onwards, a number of factors limited this expansion, including the September 11^th terrorist attacks in New York City and Washington, D.C., economic problems in Argentina, the increased cost of debt in Brazil, the devaluation of the Real against the U.S. Dollar and an energy crisis in Brazil that caused the Brazilian federal government to implement electricity rationing, and resulted in a rate of inflation of 10.4% and a 18.7% devaluation of the Real against the U.S. Dollar for the year ended December 31, 2001. To reduce inflation, the Central Bank of Brazil increased interest rates by over 18% for the year ended December 31, 2001. The instability in the Brazilian economy continued during 2002, principally due to speculation on the Brazilian presidential crisis and the ongoing economic weakness in the United States, resulting in a rate of inflation of 25.3% and a devaluation of 52.3% for the year ended December 31, 2002.

     Although the inflation rate declined to 8.7% during the year 2003, the economic stabilization program remains incomplete during the tenth year of the Real Plan. There can be no assurance that changes or additions to this economic program will be any more successful than previous programs in reducing inflation over the long term. Accordingly, periods of substantial inflation may continue to have significant adverse effects on the Brazilian economy, interest rates and on the value of the Real. These adverse effects could cause our costs and expenses to increase. If we are not able to counteract these increased costs and expenses by increasing our sales prices, we may experience lower demand for our products and a decline in revenues.

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Currency fluctuations between the Real and the U.S. Dollar will have a direct impact on our financial condition and our results of operations

     Fluctuations in the exchange rates between the Brazilian Real and the U.S. Dollar have a significant impact on our financial condition and our results of operations. For example, financing costs on our U.S. Dollar-denominated debt, which are paid by us with Reais, would increase substantially as the Real devalues against U.S. Dollars. Similarly, most of the products and raw materials we purchase are, or contain, commodities that are denominated in U.S. Dollars, such as plastic cups, bread (which includes wheat grown in the United States), meat and chicken. Our costs to purchase these products and raw materials rise significantly when the Reais used to pay for them must be converted into U.S. Dollars using the current exchange rate. If we cannot raise our selling prices to accommodate increases in the cost of these products and raw materials, our profit on these products and raw materials will decrease.

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Our business may be affected by political and constitutional uncertainty in Brazil

     The Brazilian political environment has been marked by high levels of uncertainty since the country returned to civilian rule in 1985 after 20 years of military government. The death of a president-elect in 1985 and the resignation of another president in 1992 in the midst of impeachment proceedings, as well as rapid turnover at and immediately below the cabinet level, have adversely affected the implementation of consistent economic and monetary policies. Measures by the government intended to influence the course of Brazil’s economy (e.g. actions to control inflation, interest rates or consumption) have been frequent and occasionally drastic. While the free market and liberalization measures of recent years have enjoyed broad political and public support, some important political factions remain opposed to significant elements of the reform program. Mr. Fernando Henrique Cardoso, who was re-elected to a second four-year term as president in October 1998, continued to pursue the adoption of free market and economic liberalization measures similar to those undertaken prior to his re-election. Mr. Luiz Inácio Lula da Silva was elected president in October 2002, and his four-year term began in 2003. There can be no assurance that economic policies initially adopted by Mr. Lula da Silva will continue to be pursued, or if adopted, that they will be successful. Failure to adopt economic reform measures could adversely impact Brazil’s economy and inhibit our ability to sell products, which could impair our results of operations.

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•

Controls on foreign investments may limit our ability to receive capital from our Brazilian operating subsidiary

     Brazil generally requires the registration of foreign capital invested in Brazilian markets or businesses. Thereafter, any repatriation of the foreign capital, or income earned on the foreign capital investment, must be approved by the Brazilian government. In the past, the Brazilian government has also imposed temporary restrictions on foreign capital remittances abroad when Brazil’s foreign currency reserves decline significantly. Although approvals on repatriation are usually granted and we know of no current restrictions on foreign capital remittances, there can be no assurance that in the future approvals on repatriation will be granted or restrictions or adverse policies will not be imposed. If the Brazilian government delays or refuses to grant approval for the repatriation of funds or imposes restrictions on the remittance of foreign capital, the ability of our Brazilian operating subsidiary, Venbo Comercio de Alimentos Ltda., to transfer cash from our operations out of Brazil may be limited, which would prevent us from paying our non-Brazilian debts and accounts payable. Any defaults on these obligations may cause the acceleration of such obligations or require us to pay penalties.

Risks Relating to Our Common Stock

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Our common stock has been delisted from The Nasdaq SmallCap Market

     Our common stock was delisted from The Nasdaq SmallCap Market on March 11, 2002. As a result, our common stock is now quoted on the OTC Bulletin Board, which may further reduce the already thin trading market of our common stock. In addition, the delisting from The Nasdaq SmallCap Market may significantly impair our ability to raise additional funds to operate our business.

Availability of Reports and Other Information

     We make available, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 after we file electronically such material with, or furnish it to, the United States Securities and Exchange Commission (the “Commission”). Persons wanting copies of such reports may send us their requests in writing at Brazil Fast Food Corp. Av. Brasil, 6431 — Bonsuecesso, CEP 21040-360, Rio de Janeiro, Brazil, Attention Corporate Secretary. In addition, such reports are available on the Commission’s website located at www.sec.gov. The Commission makes available on this website, free of charge, reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the Commission. Additionally, our reports, proxy and information statements may be read and copied at the Commission’s public reference room at 450 Fifth Street, NW, Washington, DC 20549.

ITEM 2. PROPERTIES

     All of our restaurants currently in operation, excluding kiosks and movable trailers, have been built to our specifications as to exterior style and interior decor, are either in a strip of stores on a neighborhood street or in mall food court points of sale, with some free-standing, one-story buildings, and are substantially uniform in design and appearance. They are constructed on sites ranging from approximately 1,100 to 7,500 square feet, free-standing points of sale. Most are located in downtown areas or shopping malls, are of a store-front type and vary according to available locations but generally retain standard signage and interior decor.

     We own the land and buildings for 9 points of sale, 5 of which are presently leased to franchisees. In addition, we own the land and the buildings located on the land for 4 points of sale, and we also have leases for 56 points of sale. Our land and building leases are generally written for terms of five years with one or more five-year renewal options. In certain instances, we have the option to purchase the underlying real estate. Certain leases require the payment of additional rent equal to the greater of a percentage (ranging from 1% to 10%) of monthly sales or specified amounts.

     Our corporate headquarters are located in premises at Avenida Brasil, 6431-Bonsucesso, CEP 21040-360, Rio de Janeiro, Brazil, which Venbo acquired in 1995.

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ITEM 3. LEGAL PROCEEDINGS

     In 1999, we commenced court actions to defer payment of R$11,444 million past due taxes to Brazilian state and federal taxing authorities. These actions, which were filed pursuant to procedures enacted under Brazilian law specifically to challenge the payments of taxes in arrears and to seek a deferred payment schedule, were intended to extend payments on past due taxes and reduce financing interest charges. During 2000 and 2002, we reached agreements with the state authorities and obtained the right to fulfill our outstanding state tax obligation by making payments over a ten-year period, as indexed to Brazil’s Unidade Fiscal de Referencia, which is currently 12.0% per annum. Consequently, we withdrew the legal action. During 2000 and 2003, we also applied and were accepted to join tax amnesty programs offered by the Brazilian federal government and withdrew our action regarding the federal taxes. Under those federal tax amnesty programs, we may fulfill our outstanding federal tax obligation by making monthly installment payments equal to 1.5% of our gross sales, with interest accruing at rates set by the Brazilian federal government, which are currently set at 10.5% per year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of these matters.

     In 2001, we initiated a court action to seek a judicial determination that our equipment lease financing agreements should not have their respective principal amounts indexed to the US dollar, but instead stated in Brazilian reais bearing interest at 12% per annum. While awaiting the court’s determination, we have deposited all installment payments due under our lease financing agreements with the court in reais, inclusive of 12% per annum interest. In the event that we have an unfavorable outcome in the litigation, we would be required to pay R$1,897,000, in addition to the R$1,246,000 previously deposited with the court.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of security holders during the fourth quarter of 2003.

PART II

     Our common stock is quoted on OTC Bulletin Board under the symbol “BOBS.OB.” Prior to March 11, 2002, our common stock was quoted on The Nasdaq SmallCap Market. There is a limited public trading market for our common stock. The following table sets forth the range of the high and low bid quotations for our common stock for the periods indicated:

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     The above quotations represent prices between dealers, without retail markup, markdown or commission. They do not necessarily represent actual transactions. As of December 31, 2002, there were 101 recordholders of our common stock.

     We have never paid or declared cash dividends on our common stock, and we currently intend to retain any future earnings for the development of our business. Therefore, we do not anticipate paying any cash dividends in the foreseeable future.

     Brazil generally requires the registration of foreign capital invested in Brazilian markets or businesses. Thereafter, any repatriation of the foreign capital, or income earned on the foreign capital investment, must be approved by the Brazilian government. In addition, the Brazilian government may also impose temporary restrictions on foreign capital remittances abroad if Brazil’s foreign currency reserves decline significantly. Although approvals on repatriation are usually granted and we know of no current restrictions on foreign capital remittances, our payment of dividends would be subject to these limits if the Brazilian government delays, imposes these restrictions on, or does not approve, the transfer by our Brazilian operating subsidiary, Venbo Comercio de Alimentos Ltda., of funds out of Brazil for the payment of dividends to our non-Brazilian shareholders. See “Risk Factors — Risks Relating to Brazil.”

     Our ability to declare dividends is subject to the prior written approval of AIG Latin America Equity Partners, Ltd., or “AIGLAEP,” pursuant to the terms of the 1997 Stockholders’ Agreement, as amended on March 14, 2001. AIGLAEP’s prior right of approval expires if we meet certain performance criteria for the two-year period ended December 31, 2002, as set forth in the amendment to the 1997 Stockholders’ Agreement.

     Our payment of dividends is also restricted under the terms of the documents governing our lines of credit and other notes payable.

Equity Compensation Plans

     The following table give information about our common stock that may be issued upon the exercise of options, warrants, and right under all existing equity compensation plans as of December 31, 2003.

EQUITY COMPENSATION PLAN INFORMATION

ITEM 6 SELECTED FINANCIAL DATA

     The following selected consolidated financial data has been derived from our audited financial statements and should be read in conjunction with our consolidated financial statements, including the accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, appearing elsewhere in this Annual Report.

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ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS F OPERATIONS

     The following discussion should be read in conjunction with Item 6. “Selected Financial Data” and our consolidated financial statements and related notes appearing elsewhere in this Annual Report.

Overview

     Over the last six years, we have endeavored to reduce our operating costs, to increase our product offerings, to improve our image to our customers, to continuously develop and implement promotional campaigns and to steadily increase our restaurant network and franchise base. As a result, we have experienced improve in our operating results. Due primarily to macro-economical factors that have caused reductions in consumer spending as

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well as sharp devaluations of the Real against the U.S. Dollar and increases in interest rates charged on our obligations, we have been unable to be profitable. These factors include the following:

Brazilian Political Environment

     The Brazilian political environment has been marked by high levels of uncertainty since the country returned to civilian rule in 1985 after 20 years of military government. The death of a president in 1985 and the resignation of another president in the midst of impeachment proceedings in 1992, as well as rapid turnover at and immediately below the cabinet level, have adversely affected the implementation of consistent economic and monetary policies. Measures by the government intended to influence the course of Brazil’s economy (e.g. actions to control inflation, interest rates or consumption) have been frequent and occasionally drastic. While the free market and liberalization measures of recent years have enjoyed broad political and public support, some important political factions remain opposed to significant elements of the reform program. Mr. Fernando Henrique Cardoso, who was re-elected to a second four-year term as president in October 1998, continued to pursue the adoption of free market and economic liberalization measures similar to those undertaken prior to his re-election. Mr. Luiz Inácio Lula da Silva, who was elected president in October 2002, took office with his political team in January 2003 and continue the economic stabilization program, as well as a stimulation program for economic growth. To date, economic reform measures have failed to provide Brazil with sustained positive economic results and stability.

Brazilian Economy

During 2001 and 2002, certain factors brought a halt to the recovery of the Brazilian economy experienced in 1999 and 2000, which had a negative impact on our restaurant sales and the results of our operations. These factors include the following:

•		Worsening of Argentina’s economy: After years of economic recession, the perception of Argentina’s lack of alternatives to bolster or maintain its economy grew stronger during 2001. This perception was fueled by rumors that Argentina would have to either devaluate the peso or fully adopt the U.S. Dollar as the national currency in the near future. These rumors, which became a reality when Argentina was forced to devalue the peso by nearly 300% against the U.S. Dollar, together with the concern that Argentina would possibly default on its debt, caused the financial markets to view the economies of all Latin America countries as unstable. The worsening economic outlook in Argentina during 2001, which culminated in Argentina declaring itself bankrupt, made it more expensive for Brazilian firms to raise and maintain their funding due to the increased perception of risk for the entire South American region.
•		Increasing cost of debt in Brazil: Due to several factors, the September 11th terrorist attacks and the increase of uncertainty in Latin American economies, Brazil’s rate of inflation steadily increased throughout 2001. In an attempt to reduce the rate of inflation, Brazilian banks quickly revised their credit policies and increased their interest rates on short-term debt. As a result, funding through Brazilian banks became more difficult to obtain and much more expensive.
•		Political uncertainty: The pre-election process for the October 2002 presidential election caused a lot of speculation on the outcome of these elections resulting in a speculation against the Real.

     The elected president from the Labor’s Party, Luis Inacio Lula da Silva, took office beginning in 2003, and although the economic measures he implemented had a generally positive effect, interest and unemployment rates remained high, delaying economic growth.

Effects of Inflation and Devaluation

     In March 1994, the Brazilian government introduced an economic stabilization program, known as the “Real Plan,” intended to reduce the rate of inflation by reducing certain public expenditures, collecting liabilities owed to the Brazilian government, increasing tax revenues, continuing to privatize government-owned entities and introducing the “Real,” a new currency based on a monetary correction index. From 1994 to 2000, the Real Plan

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resulted in a substantial reduction in Brazil’s rate of inflation and, with the exception of a few months in 1999, caused the exchange rate between the Real and the U.S. Dollar to remain relatively stable.

     Although Brazil’s economy was expected to expand in 2001, a number of factors, including the September 11^th terrorist attacks in New York City and Washington, D.C., economic problems in Argentina, the increased cost of debt in Brazil, the devaluation of the Real against the U.S. Dollar and an energy crisis in Brazil that caused the Brazilian federal government to implement electricity rationing, limited this expansion and caused inflation rates and interest rates to increase and the further devaluation of the Real against the U.S. Dollar.

     During the second half of fiscal 2002, Brazilian currency devaluated significantly against the US dollar due to the political uncertainty attendant to the outcome of the Brazilian presidential election in October 2002 and the subsequent victory of Labor Party. The new Brazilian President took office in January 2003 and started to take actions including the discussion of implementing structural reforms, in order to reverse the previous year-end scenario. In response to such acts, Brazilian inflation started to decline and the Brazilian Real increased against the US Dollar during 2003.

     The following table sets forth Brazilian inflation, as measured by the Indice Geral de Precos-Mercado, and the devaluation of the Brazilian currency against the U.S. Dollar for the periods shown.

     Devaluation of the Brazilian Real against the U.S. Dollar, and its effect on transactions involving the exchange of Reais and U.S. Dollars, have a significant impact on our financial condition and our results of operations. For example, financing costs on U.S. Dollar-denominated debt, which are paid by us with Reais, increase substantially when adjusted to take into account the current sharp exchange rate. Similarly, most of the products and raw materials we purchase are, or contain, commodities that are denominated in U.S. Dollars, such as plastic cups, bread (which includes wheat grown in the United States), meat and chicken. Our costs to purchase these products and raw materials rise significantly when the Reais used to pay for them must be converted into U.S. Dollars using the current exchange rate. If we cannot raise our selling prices to accommodate increases in the cost of these products and raw materials, our profit on these products and raw materials are adversely affected.

Energy Crisis.

     In May 2001, as a result of a shortfall of electricity generating and transmission capacity by Brazilian utilities suppliers, the Brazilian federal government announced an electricity rationing plan in order to avoid electricity outages throughout most of Brazil. The rationing plan imposed significant penalties on residences and companies that failed to reduce electricity consumption by at least 20% in relation to amounts consumed in the previous year. These penalties ranged from substantial increases in tariffs on consumption to the disruption of electricity service for a number of days. We have effected at least a 20% reduction in our electrical consumption, thereby avoiding the imposition of penalties under this rationing plan, and, furthermore, we are selling the excess electricity savings to other companies. We have achieved this reduction through, among other measures, selective and temporary curtailed hours of operation in many of our points of sale. We are aware that many of our franchisees have effected similar cutbacks.

     We believe reduced hours of operation will continue to impact adversely both our operating and franchise revenues. We are unable to predict the quantitative impact that long-term continuation of the government’s energy conservation plan, which is currently facing constitutional challenges in the Brazilian federal courts, and the penalties imposed by it, will have on our future results of operations.

     The energy rationing plan was terminated in February 2002, but some of the changes in habits that people developed, coupled with an increase in the cost of energy, may still impact our business.

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RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

     For the first quarter of 2003 onward, we reformatted our consolidated statement of operations in order to improve the quality of analysis. The reformatted statement differs from previous statements by segregated the earnings provided by our owned and operated stores from the earnings provided by our franchise business. However, all the operating figures were stated as a percentage of the Net Restaurant Sales because we believe that, in general, either kind of business (restaurant operations or franchise net earns) move towards Net Restaurant Sales evolution, and, accordingly, cost and expenses should be analyzed in conjunction with such evolution.

     The consolidated statement of operation for the twelve-month period ended December 31, 2003, 2002 and 2001 has been restated to conform with the current presentation.

     The following table sets forth certain operating data for the twelve month periods ended December 31, 2003, 2002 and 2001. (Amounts in Brazilian Reais)

STORE RESULTS

Net Restaurant Sales

     Restaurant sales for our owned and operated points of sale decreased R$2,999,000 or 4.7% to R$60,466,000 for the year ended December 31, 2003, as compared to R$63,465,000 and R$68,107,000 for the years ended December 31, 2002 and 2001, respectively. Same store sales remained stable, increasing approximately

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0.07% for the year ended December 31, 2003 as compared to the year ended December 31, 2002. Same store sales for the year ended December 31, 2002 decreased by 3.2% when compared to 2001.

     The decrease from 2003 to 2002 of restaurant sales is mainly due to the reduction of our owned and operated retail restaurant from 55 as of December 31, 2002 to 51 as of December 30, 2003.

     We closed 1 owned and operated store during the period between December 31, 2002 and December 31, 2003, and we sold 4 stores to franchisees. During this same period, we also acquired one store and one kiosk from franchisees, and we opened two new kiosks. As of December 31, 2003, we had 60 points of sale, which was one less than the 61 we had as of December 31, 2002.

     The decrease from 2003 to 2002 of restaurant sales is also attributable to the following:

      -  the adverse period that the retail market faced during 2003 in Brazil due to macroeconomic factors described above. The industrial production in Brazil during 2003 was 1.0% lower than the one observed in the previous year and trading activities declined 2.6% in the same period. Those statistical data confirm the significant reduction in consumer spending.

      -  since December 2002, the Brazilian Federal Government changed the manner of calculation of PIS (one of the Brazilian taxes on gross revenue) and, considering our business segment, this reflected in an increase of approximately of 0.5% of such sale tax. As result of higher taxation, we had accounted for lower restaurant net sales.

      -  stronger competition featured by “pay per weight” restaurants which present fast meals with competitive prices.

     Despite of all these adverse facts, we had the following that partially offset the net decrease on restaurant sales:

•		constant sales initiatives and promotional campaigns;
•		continuous introduction of new products and the expansion of our product offerings; and
•		an average increase of 12% in the sales prices of our products during the year of 2003.

     The decrease from 2002 to 2001 of restaurant sales is also attributable to the macroeconomic factors described above, as well as to the reduction of our owned and operated points of sale from 70 as of December 31, 2001 to 61 as of December 31, 2002. We closed 3 owned and operated stores in the year ended December 31, 2002, sold 7 stores to franchisees and opened 1 new outlet. This reflects our strategy to limit our direct operations to highly profitable stores, and to focus on the growth of franchises, which management anticipates will significantly reduce the level of our future capital expenditures.

     This decrease was partially offset by:

•		an average increase of 12% in the sales prices of our products during the year of 2002; and
•		a change in the manner of calculating tax upon our sales in the State of Sao Paulo, which resulted in higher net sales of approximately R$665,000 in the year ended December 31, 2002.

Food, Beverage and Packaging Costs

     As a percentage of net restaurant sales, food, beverage and packaging costs were (39.3%), (39.9%), and (40.1%) for the years ended December 31, 2003, 2002 and 2001, respectively.

     Food, beverage and packaging costs decreased from 2002 to 2003, although the pressure from suppliers to increase their prices has become stronger. The effect of increasing our sales prices and successful long-term agreements with some suppliers and recent rebates negotiations have helped to reduce the cost of products. In

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addition, those products, which prices increased due to devaluation of Brazilian Real against the US Dollar in mid 2002, returned to their original cost due to the reversed exchange situation during 2003.

     The decrease of food, beverage and packaging costs in the year of 2002 as compared to 2001 is primarily attributable to decreases in our cost of ice cream, meat and chicken products in July of 2002, resulting from our negotiations with suppliers. The devaluation of the Brazilian Real against the US dollar during year 2002 partially offset such decrease.

Payroll & Related Benefits

     As a percentage of net restaurant sales, store payroll and related benefits increased from (21.7%) to (22.6%) for the year ended December 31, 2002 and 2003, respectively. The percentage in 2001 was (20.5%).

     These increases are mainly attributable to annual increases in employee transportation cost, to annual increases in salaries mandated by union-driven agreements and, as a consequence, social charges that are computed based on employees salaries. In addition, the increase in the number of store supervisors, in order to improve the quality of our restaurant operations, also impacted our 2003 payroll costs.

     The increase from 2001 to 2002 is also attributable the reduction in the number of trainees and shifting them to employees, which raised payroll expenses.

Restaurant Occupancy Costs and Other Expenses

     As a percentage of restaurant sales, restaurant occupancy costs and other expenses were (12.5%), (13.3%), and (12.2%) for the years ended December 31, 2003, 2002 and 2001, respectively.

     The decrease in 2003 is mainly attributable to temporary and permanent reduction of the occupancy cost of some of our stores, as well as to the closing of one unprofitable store which had extremely high lease costs. On the other hand, increases in our minimum rent obligations, which are indexed to Brazilian inflation - 8.7%per annum in the twelve months ended December, 31, 2003- partially offset such decrease.

     The increase of occupancy costs in 2002 as compared to 2001 is mainly attributable to the effect of our decreased restaurant sales, noted above, as well as the increases derived from the inflationary indexation. For the twelve months ended December 31, 2002 Brazilian inflation measured by the IGP-M has reached 25.3% per annum.

Contracted Services

     Expenses related to contracted services expressed as a percentage of net restaurant sales were approximately (13.1%), (11.9%) and (10.8%) for the twelve months ended December 31, 2003, 2002 and 2001, respectively.

     These increases are mainly attributable to increases in utility costs, mainly electricity which rate has increased approximately 19% during 2003, as well as higher delivery costs. The effect of those increases was partially offset by reductions obtained on maintenance service contracts.

Other Store Cost and Expenses

     Other store cost and expenses expressed as a percentage of net restaurant sales were approximately (2.8%), (2.9%) and (4.2%) for the twelve months ended December 30, 2003, 2002 and 2001, respectively. Other store cost and expenses remained almost constant from 2002 to 2003.

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FRANCHISE RESULTS

Net Franchise Royalty Fees

     Franchise income increased R$1,759,000 or 35.9% to R$6.663,000 for the year ended December 31, 2003, as compared to R$4,904,000 and R$3,981,000 for the years ended December 31, 2002 and 2001, respectively. These increases are mainly attributable to the growth of our franchised business from 195 points of sale as of December 31, 2001 to 242 as of December 31, 2002 to 285 as of December 31, 2003. The 2002 and 2003 increases were partially offset by the effects of the macro-economic factors described above, which had a negative impact on our franchised restaurant’s sales.

     Through the period from January 1, 2002 to December 31, 2003, we sold 11 of our restaurants to franchisees. These stores had either low profitability or, in some cases, operating losses. Our historical experience has shown that franchisee administration can enhance the profitability of such stores, primarily as a result of:

•		lower taxation (tax incentives from Federal and state governments to small companies);
•		better knowledge of specific markets and their local customs; and
•		lower operating expenses.

Franchise Costs and Expenses

     Franchise cost and expenses expressed as a percentage of net restaurant sales were approximately (3.6%), (1.8%) and (2.0%) for the twelve months ended December 31, 2003, 2002 and 2001, respectively.

     The increase observed in 2003 is attributable to the growth of franchise network and to improvements in our policy of closely monitoring the operations of our franchisees: our supervisors responsible for franchised stores increased the number of their to our franchisees in 2003, which, in turn, increased traveling expenses.

     In addition, our franchise department saw its payroll costs increase, basically for the same reasons described under “STORE RESULTS — Payroll & Related Benefits.”

MARKETING, GENERAL AND ADMINISTRATIVE (EXPENSES) INCOME

Marketing Income (Expenses)

     As a percentage of net restaurant sales, marketing expenses were approximately (1.1%), (0.6%) and (3.5%) for the twelve months ended December 31, 2003, 2002 and 2001, respectively.

     The percentage decrease from the year period of 2001 to the same period of 2002 arose from an optimization of marketing investments and cost reduction measures, such as fewer TV ads and more advertisement in newspapers, magazines and outdoors.

     Advertising and publicity costs increased during the year ended December 31, 2003 as a result of growth of points of sale (owner operated and franchise operated), and due to higher expenses resulting from more intensive promotional campaigns of new products on out menu.

General and Administrative Expenses

     As a percentage of restaurant sales, general and administrative expenses were approximately (10.8%), (11.7%) and (11.2%) for the twelve months ended December 31, 2003, 2002 and 2001, respectively.

     The decrease observed on comparing the twelve month periods is mainly attributable to reductions or non-renewal of a great number of outsourced administrative services, such as payroll processing, legal, accounting and auditing services.

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Other Operating Income (Expenses)

     Other operating income (expenses) are mainly comprised of the initial fees paid by our franchisees, as well as income derived from suppliers pursuant to terms of certain exclusivity agreements and non recurring income or expenses.

     Other operating income (expenses) expressed as a percentage of net restaurant sales were (0.6%), for the twelve months ended December 31, 2003, (1.0%) for the twelve months ended December 31, 2002 and (3.0%) for the same period ended December 31, 2001.

     The reversal from net income to net (expenses) comparing the twelve-month periods of 2002 and 2001 was mainly attributable to recognition of a greater allowance for doubtful accounts during 2002, as well as to recognition of fines applied against us by the Brazilian Social Security Authorities, which charged certain operating transactions not covered by our previous calculation of Social Security contributions.

     During 2003, other operating results remained negative due to a provision for fines that may be applied against us (in addition to those recognized at the end of fiscal 2002) by the Brazilian Social Security Authorities, which charged certain operating transactions not covered by our previous calculation of Social Security contributions, as well as the provision for the monetary restatement of such unpaid debt. All those social security debts were included in the Federal Tax amnesty program discussed below. We also recorded a non-recurring gain related to a reversal of accrued Delaware Franchise Taxes derived from a review of such tax computation, and recorded a greater number of rebate agreements with suppliers during 2003.

Depreciation and Amortization

     As a percentage of restaurant sales, depreciation and amortization expense was approximately (5.5%), (5.9%) and (5.8%) for the years ended December 31, 2003, 2002 and 2001, respectively.

     Depreciation and amortization expense has remained stable from 2001 to 2002.

     The 2003 decrease is attributable to the completion of depreciation upon some assets (mainly computers and leasehold improvements) and to the reduction of depreciation derived by the sale of fixed assets located at stores transferred to franchise operation.

Impairment of Assets and Net Result of Assets Sold

     We usually review our fixed assets in accordance with SFAS 144, which requires that long-lived assets being disposed of be measured at the lower of carrying amount or fair value less cost to sell. As a consequence of such review, we recorded expenses in 2003 and 2002 derived by the adjustments to reach such appropriate fixed asset value.

     The higher figures observed in 2002 were due to fixed assets inventories held in the second and third quarters of 2002, as well as management’s decision to close 2 unprofitable stores, which required us to take a significant write-off during the year ended December 31, 2002.

INTEREST INCOME (EXPENSES) AND FOREIGN EXCHANGE GAIN (LOSS)

Interest Income and Expenses

     As a percentage of restaurant sales, net interest expense and foreign exchange gains and/or losses were approximately (5.0%), (6.6%) and (8.1%) for the years ended December 31, 2003, 2002 and 2001, respectively.

     The percentage decreases for the twelve months ended December 31, 2003 as compared to the same periods in 2002 and 2001 is primarily attributable to reduction of the level of our bank indebtedness.

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Foreign Exchange and Monetary Restatement Gain (Loss)

     As a percentage of net restaurant sales, net foreign exchange and monetary restatement gain and/or losses were approximately (0.7%), (5.5%) and (2.5)% for the twelve months ended December 31, 2003 and 2002, respectively.

     The decreases of foreign exchange losses during the period of 2003 is primarily attributable to the valuation of the Brazilian Real against the US Dollar during the twelve month period ended December 31, 2003, as contrasted to a devaluation of the Brazilian Real against the US Dollar in the same period of 2002. Those effects of foreign exchange gain or losses are derived from the restatements of our obligations denominated in U.S. Dollars. The decrease of net losses during 2003 is also attributable to the extinguishment of debts denominated in U.S. Dollars.

LIQUIDITY AND CAPITAL RESOURCES

     Since March 1996, we have funded our cumulative operating losses of R$63,732,000 and made acquisitions of businesses and capital improvements (including remodeling of our stores) by using cash remaining at the closing of our acquisition of Venbo, by borrowing funds from various sources and from private placements of securities. As of December 31, 2002, we had cash on hand of R$1,063,000 and a working capital deficiency of R$5,882,000.

     For the year ended December 31, 2003, we had net cash used in operating activities of R$180,000, net cash used in investing activities of R$1,081,000 and net cash provided by financing activities of R$572,000. Net cash used in investing activities was primarily the result of our investment in property and equipment to improve our retail operations. Net cash provided by financing activities was a result of our borrowings from financial institutions and from related parties.

     For the year ended December 31, 2002, we had net cash used in operating activities of R$2,989,000, net cash used in investing activities of R$733,000 and net cash provided by financing activities of R$3,389,000. Net cash used in investing activities was primarily the result of our investment in property and equipment to improve our retail operations. Net cash provided by financing activities was a result of our private placement of equity shares in May 2002. The proceeds from the private placement were used to reduce our debt, including debt with private individuals, debt with financial institutions in Brazil, and past due accounts payable with suppliers and others.

     Our earnings before interest, taxes, depreciation and amortization (EBITDA) were approximately R$2,664,000 for the year ended December 31, 2003 and approximately R$217,000 for the year ended December 31, 2002. EBITDA is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either loss from operations or net loss as an indicator of operating performance or cash flows as a measure of liquidity, as determined in accordance with accounting principles generally accepted in the United States.

     Our cash resources are currently used primarily to pay for the servicing costs on our debt obligations, which costs have increased significantly due to increased interest rates in Brazil charged on short-term debt and the devaluation of the Real against the U.S. Dollar. Our debt obligations as of December 31, 2003 were as follows:

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     At December 31, 2003, future maturities of notes payable are as follows:

     (a) Due on demand from various Brazilian financial institutions as well as private individuals with interest rates raging from 18.7% to 19.7% per annum, and guaranteed by certain officers and receivables. Currently, we have no relevant unused credit line.

     (b) Credit facilities from related parties, including company and private individuals. Repayment of principal is indexed to IGP-M (currently at 8.0% per annum) with interest of 12.0% per annum. Those transactions were made at usual market value.

     (c) This credit facility was used to purchase three stores. Repayment of principal with respect to one of these stores is due in 6 monthly installments of R$29. Repayment of principal with respect to the other two stores is due in 31 monthly installments of R$46 in addition of 3 annual installments of R$415, starting January, 2004, ending January 2006. There is no interest charged on these borrowings. Principal is indexed to Brazilian inflation measured by IGP-M. This facility is secured by the fixed assets purchased.

     Pursuant to settlements reached with Brazilian state taxing authorities in 2000 and 2002, we are required to make repayments over a ten-year period, interest free, in amounts indexed to Brazil’s UNIDADE FISCAL DE REFERENCIA, which is currently 12.0% per annum. During January 2004, the Rio de Janeiro state government launched a debt-rescheduling program through which all previous amnestied debt, parceled in 36, 60 or 120 months, will be substantially reduced and paid in 6 monthly installments. We, subsequently to December 31, 2003, applied to be included in such debt-reschedule program. Adjustments to the State Tax Obligations item on our balance sheet, derived from such program, will be recognize during 2004, when the Rio de Janeiro state government will be recalculating the total debt due by us.

     In addition, in 2000, we applied to, and were accepted by, the Brazilian federal government to join a tax amnesty program (REFIS), which restructured our outstanding 1999 federal tax obligations into monthly payments equal to 1.2% of our gross sales, with interest accruing at a rate set from time-to-time by the Brazilian federal government (TJLP), which was 10.5% a.a. as of December 30, 2003.

     We have other past due federal taxes which were not paid in the beginning of 2002, in the approximate amount of R$839,000,as well as fines applied against us by the Brazilian Social Securities Authorities, in the approximate amount of R$9,400,000, which are not covered by any of the above mentioned tax agreements. However, during June 2003 the Brazilian Government implemented another tax amnesty (PAES), to which we applied and are waiting for Government acceptance. Through this program the balance of the previous Federal tax amnesty program (REFIS) and unpaid 2002 federal tax, as well as the Social Security penalties, will be paid in monthly installments equivalent to 1.5% of the our gross sales, with interest accruing at rates set by the Brazilian Federal government (TJLP), currently 10.5% per year.

     Considering all the above mentioned fiscal debts, we are required to pay restructured past-due Brazilian state taxes of approximately R$4,515,000 and federal taxes of approximately R$15,050,000.

     For the fiscal 2004, we expect to pay approximately R$892,000 pursuant to the state tax settlements and approximately R$715,000 pursuant to the federal tax amnesty program.

     Since June 2002, we have paid all of our current taxes on a timely basis.

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     We also have long-term contractual obligations in the form of operating lease obligations related to our owned and operated stores.

     The future minimum lease payments under those obligations with an initial or remaining noncancelable lease terms in excess of one year at December 31, 2003 are as follows: (Amounts in Brazilian Reais)

     Rent expense was R$5,609,000 for the years ended December 31, 2003.

     In the past, we have generated cash and obtained financing sufficient to meet our debt obligations. We plan to fund our current debt obligations mainly through cash provided by our operations, borrowings and capital raising.

     Our capital expenditures for fiscal 2003 were approximately R$1,500,000. We require capital primarily for the improvement of our owned and operated points of sale. Currently, four of our owned and operated stores are located in facilities that we own, and all of our other owned and operated stores are located in leased facilities.

     Our average cost to open a retail outlet was approximately R$300,000 to R$500,000 including leasehold improvements, equipment and beginning inventory, as well as expenses for store design, site selection, lease negotiation, construction supervision and obtaining permits.

     We have estimated that our capital expenditures for fiscal 2004, which will be used to maintain and upgrade our current restaurant network, will be approximately R$3,000,000. We anticipate that the primary use of our cash resources during 2004 will be to service our debt obligations. During 2004, we intend to focus our efforts on expanding both the number of our franchisees and the number of our franchised stores, neither of which are expected to require significant capital expenditures.

     As discussed above, we have contractual obligations in different forms. The following table summarizes our contractual obligations and financial commitments, as well as their aggregate maturities. (Amounts in Brazilian Reais)

     Cash provided by operations along with our borrowing capacity and other sources of cash will be used to satisfy the obligations and our estimates for capital improvements (including remodeling of our stores).

     We plan to address our immediate and future cash flow needs to include focusing on a number of areas including:

•

the sale of certain of our owned and operated stores;

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•		the reduction of expenses, including reducing our per-store headcount expense by continuing to expand our operations while maintaining our current headcount;
•		the expansion of our franchisee base, which may be expected to generate additional cash flows from royalties and franchise fees without significant capital expenditures;
•		the introduction of new programs and menu expansions to meet consumer needs and wishes; and
•		negotiation with suppliers in order to obtain significant rebates in long term supply contracts.

GOING CONCERN ISSUE

     In order to sustain our operations, we have, in the past, been dependent upon the continued forbearance of our creditors. While we are currently in full compliance with agreements with our creditors, there can be no assurance that we will not be forced to seek the forbearance of our creditors in the future. In addition, there can be no assurance that our plans will be realized, or that additional financing will be available to us when needed, or on terms that are desirable. Furthermore, there can be no assurance that we will locate suitable new franchisees, or desirable locations for new and existing franchisees to open stores. Our ability to further reduce expenses and optimize our headcount is directly impacted by our need to maintain an infrastructure to support changing the locations, if required, of both our current and future stores and operations. Our ability to re-market our owned and operated stores to franchisees, and to generate cash flows from such activities, is impacted by our ability to locate suitable buyers with the interest and capital to complete such transactions, and the time to complete such sales. Additionally, our ability to achieve our plans is further impacted by the instability of both the political and economic environment in Brazil, which has a direct impact on the desire and ability of consumers to visit fast food outlets. We are also dependent upon the continued employment of key personnel. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

     We annually review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. We believe that of our significant accounting policies involve a higher degree of judgment and/or complexity. (See summary of significant accounting policies more fully described in the Notes to Consolidated Financial Statements on pages F-9 through F-13.)

     We follow SFAS No. 144 with regard to impairment of long lived assets and intangibles. If there is an indicator of impairment (i.e. negative operating cash flows) an estimate of undisclosed future cash flows produced by each restaurant within the asset grouping is compared to its carrying value. If any asset is determined to be impaired, the loss is measured by the excess of the carrying value. If any asset is determined to be impaired, the loss measured by the excess of the carrying amount of the asset over its fair value.

NEW ACCOUNTING STANDARDS

Asset retirement obligations

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, Accounting for Asset Retirement Obligations, effective January 1, 2003. The Statement requires legal obligations associated with the

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retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, the cost will be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The adoption of SFAS No. 143 did not have a material effect on the our results of operations or financial position.

Variable interest entities

     In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest Entities, which requires an enterprise to consolidate or make certain, disclosures about variable interest entities that meet certain criteria, effective January 1, 2003. FIN No. 46 is not applicable to the us.

Impairment of long-lived assets and intangible assets

     We follow SFAS Nos. 144 and 141 with regard to the impairment of long lived assets and intangibles. If there is an indicator of impairment (i.e. negative operating cash flows) an estimate of undiscounted future cash flows produced by each restaurant within the asset grouping is compared to its carrying value. If any asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value.”

OFF-BALANCE SHEET ARRANGEMENTS

     We are not involved in any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

     We finance a portion of our operations by issuing debt and entering into bank credit facilities. These debt obligations expose us to market risks, including interest rate risk and foreign currency exchange risk. A portion of our purchase commitments are denominated in U.S. Dollars, while our operating revenues are denominated in Brazilian Reais. We extinguished all of our debt denominated in US Dollars during 2003. Fluctuations in exchange rates between the Real and the U.S. Dollar expose us to significant foreign exchange risk. We attempt, when possible, to protect our revenues from foreign currency exchange risks by periodically adjusting our selling prices in Reais.

     We do not engage in trading market risk-sensitive instruments or purchasing hedging instruments or “other than trading” instruments that are likely to expose us to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk. We have not entered into any forward or futures contracts, purchased options or entered into swaps.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial statements and supplementary data for the Registrant are on pages F-1 through F-24.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 10. CONTROLS AND PROCEDURES

     In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis, we have formalized our disclosure controls and procedures. Ricardo Figueiredo Bomeny, our principal executive and acting as our principal financial officer has reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of December 31, 2003. Based on such evaluation, Mr. Bomeny has concluded that, as of December 31, 2003, our disclosure controls and procedures were effective in timely alerting

28

him to material information relating to us (and our consolidated subsidiaries) required to be included in our periodic SEC filings.

     There have been no significant changes in our internal controls or other factors that could significantly affect internal controls subsequent to the date of their evaluation.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The items required by Part III, Item 10 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

ITEM 11. EXECUTIVE COMPENSATION

     The items required by Part III, Item 11 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

     The items required by Part III, Item 12 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The items required by Part III, Item 13 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The items required by Part III, Item 14 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K

(a)

Financial Statements and Financial Statement Schedules:

               (i) Financial Statements filed as a part of this Annual Report are listed on the “Index to Financial Statements” at page F-1 herein.

               (ii) Financial Statement Schedules

     All financial statement schedules are omitted because the conditions requiring their filing do not exist or the information required thereby is included in the financial statements filed, including the notes thereto.

(b)		Reports on Form 8-K
		None.

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(c)

Exhibits

*		Filed herewith.
(1)		Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (File No. 333-3754).
(2)		Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (File No. 33-71368).
(3)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated August 29, 1997 (File No. 0-23278).
(4)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated April 1, 2001.
(5)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated May 15, 2002
(6)		Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 0-23278).

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rio de Janeiro, Federative Republic of Brazil, on the 14th day of April, 2004.

		BRAZIL FAST FOOD CORP.
		By:  /s/ Ricardo Figueiredo Bomeny
		Ricardo Figueiredo Bomeny
		President and Chief Executive Officer

     KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints and hereby authorizes Ricardo Figueiredo Bomeny and Peter J.F. van Voorst Vader, severally, such person’s true and lawful attorneys-in-fact, with full power of substitution or resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign on such person’s behalf, individually and in each capacity stated below, any and all amendments, to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

31

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EXHIBIT INDEX

*		Filed herewith.
(1)		Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (File No. 333-3754).
(2)		Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (File No. 33-71368).
(3)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated August 29, 1997 (File No. 0-23278).
(4)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated April 1, 2001.
(5)		Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated April 1, 2002.
(6)		Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 0-23278).

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Brazil Fast Food Corp. and subsidiary

We have audited the accompanying consolidated balance sheets of Brazil Fast Food Corp. and subsidiary (a Delaware corporation) as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brazil Fast Food Corp. and subsidiary as of December 31, 2003 and 2002 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

The financial statements as of December 31, 2003 and for the year then ended have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, to the financial statements, the Company has suffered recurring losses and has a negative working capital and shareholders’ equity that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Rio de Janeiro, Brazil
March 22, 2004

Grant Thornton Auditores Independentes

F-2

BRAZIL FAST FOOD CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian Reais, except share amounts)

The accompanying notes are an integral part of the consolidated financial statements.

F-3

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Brazilian Reais, except share amounts)

The accompanying notes are an integral part of the consolidated financial statements.

F-4

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands of Brazilian Reais)

The accompanying notes are an integral part of the consolidated financial statements.

F-5

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of Brazilian Reais)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Brazilian Reais)