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, 2004
Commission file number: 0000-23278

BRAZIL FAST FOOD CORP.

Registrant’s telephone number, including area code: 55 21 2536-7500

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 o

     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. o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o 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.

     The number of shares outstanding of the Registrant’s common stock is 7,953,468 (as of April 14, 2005).

     Documents incorporated by reference portions of the Registrant’s definitive proxy statement for its 2005 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, 2004, are hereby incorporated by reference in Part III of this Annual Report on Form 10-K.

Table of Contents

     Unless otherwise specified, all references in this report to “Reais,” the “Real” or “R$” are to the Brazilian Real (singular), or to the Brazilian Reais (plural), the legal currency of Brazil, and “U.S. Dollars” or “$” 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

     (a) GENERAL DEVELOPMENT OF 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, 2004, we had 388 restaurants, or “points of sale,” including 98 kiosks and trailers.

     We were incorporated in Delaware in 1992. Our executive offices are located at Rua Voluntários da Pátria 89, 9º andar — Botafogo CEP 22.270-010, Rio de Janeiro, Brazil. Our telephone number is +5521 2536-7500.

     The audit opinions of our independent registered public accounting firms 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.

Recent Developments

     Different from 2003, when important reforms were approved in Brazil by the Senate and the Lower House, 2004 has seen many postponements. Discussions over prohibitive taxes and labor costs have cooled down, with no consistent proposal or major plan for the foreseeable future. Nevertheless, boosted by fundamentals built up on 2003, in 2004 Brazil has capitalized on international growth, depreciated Brazilian currency and higher commodities prices to grow 5.2%, according to the IBGE — Brazilian Institute of Geography and Statistics (a governmental institution), helping income and employment to recover from its worst figures in years. This positive environment has helped Brazil Fast Food Corp. achieve a positive result after many years of successive losses. Although such positive environment has raised fears of overheating in the Central Bank’s hard-core, that has been pushing interest rates higher since last September with no visible dead end, some analysts are optimistic about the economy, expecting Brazil GDP to grow up to 3.7% in 2005.

     In 2004, the Company held a Convention where its franchisees and suppliers reaffirmed their commitment to the company’s efforts to grow and succeed. In this Convention, the basic lines for the development of the Ethics Committee and the Franchisees Committee were drawn.

     Complementarily, the company has concluded two of its main projects to increase sales and diversify its customers. The Coffee Shop, that could be included in pre-existing stores or could be operated as a independent kiosk, and the Beer Station, a project, in association with Ambev, the biggest brewery company in Brazil, to offer beer in Bob’s stores. Also, the company was very successful in turning over some of its most problematic franchisees, as well as, in discussing and rescheduling debts long overdue by its franchisees.

     The Company completed on Dec. 20, 2004 a total buyout of AIG Latin America Equity Partners’ 375,000 share position in Brazil Fast Food. This buyout nullified a pre-existing shareholders agreement, which granted AIG certain rights over Brazil Fast Food’s administration, and increased the collective stake of Big Burger and CCC in Brazil Fast Food by about five percent to approximately 60 percent.

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     In addition, it has been approved by the Board of Directors a stock repurchase plan, to be financed by a small cash position built up in the US, in American dollars, that if sent to Brazil would have no meaningful impact on the company’s cash flow, ongoing marketing initiatives or debt expenses.

     (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     Not applicable. We operate in only one segment of Industry.

     (c) NARRATIVE DESCRIPTION OF BUSINESS

Restaurant Operations

     As of December 31, 2004, we had 388 points of sale, including 98 kiosks and trailers. Of the 388 points of sale, we own and operate 63 and the remaining 325 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 225, or 58%, 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 one franchised restaurant that opened in Portugal in November 2001. The largest number of franchised operations outside of Rio de Janeiro and São Paulo are in Santa Catarina, Paraná and Pernambuco.

     All points of sale serve a uniform menu of hamburgers, chicken burgers, hot dogs, sandwiches, french fries, soft drinks, juices, desserts, ice creams 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 fast-food service is based in a single line system distinguished from other competitors by its variety and flexibility, which allow customers to add items to or exclude items from the several meals they have to choose. Although this is highly valued by our customers, the extended time to conclude a sale and the lost in operational efficiency have made the company increase its investments in training personnel at stores and initiate studies on production methods.

     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. 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 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 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, almost all of our points of sale have now been renovated to update the decor, introduce our new logo created in 2001, modernize the menu boards, expand the seating facilities, include playground for children and provide air conditioning. All new franchisees open their restaurants with this housestyle, which is also carried through in the uniforms worn by our personnel (occasionally modified to feature hats and shirts used in promotions).

     For the past ten years, we have been the exclusive provider of hamburgers and related items at two of Brazil’s largest special events – the Rio de Janeiro Carnival, 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 shows, car shows and rodeos. Our kiosks showed expressive revenues in 2004 in Ronald Reagan Aircraft Carrier’s visit to Rio de Janeiro and in Coca-Cola Vibezone event. 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

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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. One store is been operated in Lisbon and we are looking for new candidates to franchises in Portugal. Even though internationalizing our fast-food chain is not a top priority, we do not exclude eventual opportunities. In 2005, the first Bob’s store will be opened in Angola.

     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, 2004, 2003 and 2002:

     The average guest check per customer for both our owned and operated points of sale and franchise for the years ended December 31, 2004, 2003 was R$7.57, R$6.70, 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.

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Growth Strategy

     Bob’s is Brazil’s second largest fast food hamburger restaurant chain in 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 has an estimated population of 181.6 million, a third of Latin America and Caribbean total population. The city of São Paulo, the largest city in Brazil with 10.8 million residents, is located within the state of São Paulo, which has a population of 39.8 million. Rio de Janeiro, Brazil’s second largest city, has 6.0 million residents. The city of Rio de Janeiro is located within the state of Rio de Janeiro, which has a population of 15.2 million. Fourteen metropolitan areas, including those of Rio de Janeiro and Sao Paulo, have populations in excess of one million. According to the IBGE — Brazilian Institute of Geography and Statistics, in 2002-2003 the average annual income of the Brazilian population was as follows:

     In 2005, we intend to make capital expenditures of R$4,000,000 to refurbish old points of sale, install new signage, upgrade our equipment and expand the number of our franchise operated points of sale in Brazil. Such capital expenditures will be funded both by our operating and financing activities. Our target is to achieve 500 operating points in 2005, and we are focusing our growth efforts on the development of new franchises, especially in São Paulo, Bahia and Rio Grande do Sul, three major Brazilian states, and in Brasília, Brasil’s Federal District, four important regions with strong, growing markets. Our growth strategy also includes to increase our marketing effort on children, implement a motivational program to improve service throughout our restaurant chain and begin a three-year expansion effort to franchise Bob’s kiosks. These kiosks require less start-up capital and deliver a faster return on investment for franchisees, since they sell only higher-margin items, such as ice creams and cold beverages – products that do especially well in Brazil’s warm climate.

     We expect to continue to capitalize on our 53-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. At the end of 2004, 18 own operated and 8 franchised operated stores were working with the new call center and expanding the delivery services. We didn’t reach the target fixed for last year, that is, to extend the centralized call center service to every point of sale, both franchised and own operated. In fact, communication problems and high operation costs obliged to a revision of the program and procedures but it is still a target to extend the call center to all stores of the chain.

Franchise Program

     As of December 31, 2004, 325 of our 388 points of sale were owned and operated by franchises. In 2004, for the eighth year in a row, Bob’s received the Quality Seal of the Brazilian Franchise Association — ABF.

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     Also, for the first time, the Brazilian magazine specialized in small business, Pequenas Empresas & Grandes Negócios (a non-affiliated company), has developed a research on franchising, creating the “Franchising Guide – Best Franchisers in Brazil 2004”, in which Bob’s has got the second place in the highly competitive food segment, explored by 98 of 450 chains operating in Brazil. The research took into consideration the chain’s franchising experience, total number of stores and geographic distribution, brand exposure, average revenue and payback period, communication with franchisees, support in training, operations and marketing initiatives.

     According to the Brazilian Franchise Association — ABF, Bob’s is the second largest fast food chain in number of stores in Brazil. Our franchise agreements generally require the franchisee of a traditional Bob’s restaurant to pay us an initial fee of R$90,000 and additional fees equal to 5% of the franchisee’s gross sales. Initial fees are lower for kiosks and small stores. Franchisees pay also 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 trademark and formulas in a specific location or area, 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. 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 four-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. First fees paid by franchisees usually cover the costs of keeping a strong and efficient expansion team and internal costs of the training programs, mainly manuals and the normal lack of efficiency of the School Stores.

     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.

     We encourage mature and profitable franchisees to increase the number of stores they operate. As a consequence of this strategy, the number of stores per franchisee increased from 1.77 in 1999 to 3.19 in December 2004. At December 31, 2004, we had 102 franchisees who, collectively, operated 325 points of sale, including 84 kiosks and 3 trailers.

     We are also focusing on developing special agreements with gasoline retailers to house Bob’s points of sale in retail gasoline stations. We contemplate that some 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.

     We are currently testing several joint sites with gasoline retailers, including Shell, Forza, Ale, and Petrobras, the largest one in Brazil with approximately 7,000 locations. 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, ten joint sites have been opened in Petrobras gas stations. Shell has four joint sites in operation and we are negotiating an agreement with them to house a specific number of other joint sites in certain approved locations. Forza, a gasoline retailer catering to the taxicab industry, now has nineteen Bob’s sites

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in operation, with the objective of housing 20 joint sites in total. Alé, another gasoline retailer, has two joint sites, and an agreement with them for the creation of multiple joint sites has been signed. Besides, other five join sites have been operating in Esso, Bandeira Branca, Ipiranga and Repsol.

     Currently we are reevaluating the Portugal operation. We will open a new store in Angola in 2005 with a local franchisee. The project is approved, the franchise contract signed and the store is been built up.

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 2004 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 2002 we introduced a 120 grams 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 grams turkey tasting hamburger. We also extended our healthy-oriented menu, by introducing salad meals combined with any choice of our hamburger offers.
	•	In 2004 we launched a sandwich of chicken breast under the lineage of Bob’s Grill, which includes pork, barbecue and turkey tasting hamburgers. Also, we launched a double cheeseburger with salad and extended our healthy-oriented menu, by introducing two choices of salad in two different sizes, one of them with the option to add chicken slices.

     We launched the slogan “Gostoso como eu gosto” (tasty as I want), pointing out the flexibility of the chain in adding items to or excluding items from the meals it offers. In addition to that, we started a promotional campaign on our traditional items, as our leading hamburger, Big Bob, and our milkshakes. “Devore os Clássicos” (devour the classics) was intended to consolidate our tradename on the market and boost our total number of customers by promoting our top selling products.

     We occasionally launch a combination of sandwiches and soft drinks for a promotional price, the “Combat” campaign, designed to attract snack bars’ traditional customers.

     Because ice creams and sundaes are highly seasonal, we often introduce, for a limited period of time, new toppings and new syrups flavors in order to balance the decrease in volume by an increase in revenue by product. In 2004, we launched a marshmallow top, as well as a caramel and a pineapple syrup, for our sundaes.

     We and our advertising agency annually develop a multi-media marketing program to advertise our restaurant network in its primary markets. During 2004, we sponsored Botafogo de Futebol e Regatas one of the most traditional soccer teams in the Brazilian soccer league. 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, Biba, and Bonga”, our mascots. 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.

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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 long-term exclusivity agreements with Coca-Cola, for its soft drink products, Ambev, the biggest Brazilian brewery company, Farm fries, the Argentinean producer of french fries, and Sadia, one of the biggest meat processors in Brazil, as well as with Novartis Nutricion for its Ovomaltine chocolate. These agreements are extensive to four to five years. The Coca-Cola agreement was amended in 2000 to extend the exclusivity period to 2008.

     In November 2003, TGB Transportadora, a Brazilian limited liability company, that for several years rendered the transportation services of FBP (food, beverage, packing) goods for the whole Bob’s chain, both own stores and franchise stores, declared that their services would had to be interrupted at the beginning of 2004 due to operational and financial problems.

     This emergency obliged us to find an urgent solution. Yet, it was imperative to maintain the commercial conditions of these services, in particular its costs, delivery dates and frequency. Considering we handle both dry and refrigerated goods, it was necessary to set up a fleet of special trucks or to engage a company covering the whole country fully adapted to our needs.

     Because we didn’t find a company able to fulfill all our demands in time, the Board of Directors approved, after discussion, the Company’s decision to buy all the trucks belonging to TGB and to operate the transportation service. The decision, qualified as a temporary solution that might be periodically submitted to new evaluation, involved creating a new company that could operate the vehicles at least for the time necessary to build up a better solution. We understood that transportation was not in our core business, but it was a very sensible part of it because of its costs and importance to the performance of the chain. The company was established in Rio de Janeiro with the name of SUPRILOG Transportadora, a limited liability company, at the beginning 90 % owned by VENBO, BFFC only subsidiary, and 10 % owned by a private individual that was going to be the CEO of the company. Later on in 2004 the CEO left the society and VENBO became 100 % the owner of SUPRILOG.

     The total capital of SUPRILOG is R$150,000 and VENBO paid in 90%, R$135,000, with three of the 30 trucks bought from TGB. The other trucks were under leasing contracts with financial institutions with different terms and with right to keep the trucks after the last payment. VENBO transferred to SUPRILOG all these trucks under a trust contract authorizing SUPRILOG to operate the vehicles and pay regularly the monthly leasing installments.

     In December 2004, the remaining 10% of capital was paid in.

     During 2004 SUPRILOG could satisfy Bob’s chain transportation requirements.

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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:

     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

     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.

     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.

     In seven consecutive years, CartaCapital and Interscience (two non-affiliated companies) have accessed companies’ development and behavior through the research called “The Most Admired Companies in Brazil”, in which 1,054 executives are interviewed about singled out companies in eleven different key-factors and among their own segment.

     In 2004, Bob’s has conquest the 46^th place among all companies and the 2^nd place among fast-food chains, followed by Casa do Pão de Queijo and Habib’s.

     There are no official statistics for our specific market in Brazil. We can only give some ideas about the development of fast food restaurants based on a few publications and on our own observation of the market.

     The accumulated result of industry in 2004 was the best in 18 years. Retail sales also grew but at a very lower rate: 9,25% in volume and 12,97% in R$. This was an excellent result if we consider that retail sales in 2001, 2002 and 2003 showed a rate of growth of –1.57%, +0.7% and +3.67% respectively. But food and beverage retail sales grew only 7.22% in 2004, a lower growth than the average of the retail market. Anyway this improvement was largely boosted by some government measures that created smoother credit conditions for consumers in December.

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     Considering the segment total revenue of R$3.4 billion, informed in the “Franchising Guide – Best Franchisers in Brazil 2004", Bob’s has a market share of approximately 7%. Bob’s is the third fast-food chain in total revenue, after Habib’s, a local franchiser with Arabian options in its menu, which focus on lower class consumers.

     McDonald’s, the fast food leader in Brazil, went through a very difficult situation with franchisees in 2003; however, in 2004, prioritizing its own stores and limiting its number of points of sale, it seems to have found a new equilibrium and is once again aggressive as it used to be in the past years.

     Burger King returned to Brazil in 2004 with three stores in São Paulo. This is a new investment project in association with a Brazilian partner. Certainly it represents a great threat for McDonald’s but we cannot neglect it as our competitor. Other international brands in the food market are also arriving or enlarging their small chains as KFC, Domino’s, Pizza Hut and Subway. Domino’s, operated in Brazil by a Mexican company, recently initiated a partnership with Spoleto, a Brazilian chain of Italian food restaurants with 100 point of sales in Brazil. Giraffas, another Brazilian fast food chain, is slowly but steadily growing although it is still under the mark of 200 stores.

     We must also mention the existence of a large number of snack bars that have a very strong appeal to the local market but don’t represent brands or constitute chains. Another typical Brazilian restaurant largely expanded and in constant growth is the weight-food priced restaurant. In these restaurants the price paid by the client is given by the weight of his (her) consumption. The menu is very large and cheap. They represent a good alternative for food consumers and we consider them great competitors. The profitability of these restaurants is a doubtful question and their owners or operators show a high turnover, but the number of points of sales are in constant expansion.

     We can say that the food market in Brazil is an expanding market, both because of a population growing at an annual rate of 2% and because of the improvement we can expect of its expending power. See “Risk factors – Risks relating to Brazil”.

Personnel

     As of December 31, 2004, we, including our franchisees, employed 8,089 persons, of whom 1,569 were employed in our owned and operated restaurants. The total number of full-time employees as of December 31, 2004 was 1,681 of which 230 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.

     (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

     Not applicable

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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

•

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.

     Although we have reached a positive result for the first time in 2004, we incurred in net losses of R$4,118,000 and R$11,210,000 for the years ended December 31, 2003 and 2002, respectively. Our accumulated deficit at December 31, 2004 was R$63,131,000 and our working capital deficit at such date was R$5,235,000. The year 2004 presented a positive macroeconomic scenario that, together with strong measures implemented by the Company in its operation and administration, has helped it turns itself profitable. Yet, we cannot say that the negative tendency is wholly reversed. Some of our own stores are still non-profitable and our small operation margins are constantly been affected by market factors concerning raw material, wages, location costs with lawsuits in due course and the general condition of many stores in Rio de Janeiro that need urgent repairing and heavy investments.

•

Our registered public accounting firm’s report raises uncertainties about our ability to continue as a going concern; Need for additional financing.

     The reports of Grant Thornton, the registered public accounting firm of our consolidated financial statements for the years ended December 31, 2003, 2002 and 2001, recite that our recurring losses from operations and negative working capital raise substantial doubt about our ability to continue as a going concern. Grant Thornton had a partnership with Trevisan, a highly respected Brazilian firm of independent auditors that came to an end in the middle of 2004. Trevisan made a new partnership with BDO and so, consolidated financial statements for the year ended December 31, 2004 were audited by the new auditors. Their report confirms the doubts on our ability to continue as a going concern.

     Our financial situation, discussed elsewhere in this 10-K report, is largely better than in the past years but the necessity of new funds to finance obligatory investments is a constant challenge to our funding strategies.

     At this time, we cannot state with any degree of certainty whether such funding will be available to us and, if available, that the terms and conditions of such funding will be acceptable to us. Any potential sources of additional financing may be subject to business and economic conditions outside of our control. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

•

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. 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. In 2003 McDonald’s went through a very difficult period strongly affected by internal disputes in the franchise chain. But they are overcoming this situation

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and their over-all financial and other resources available to them, vastly greater than ours, give them all the chances to reverse their position in the market where they still keep the first place in the fast food activity.

     Besides that, the arrival of international competitors, like the Burger King to São Paulo, the biggest city in Brazil, the expansion of Habib’s, a local fast food chain, and the permanent growth of other restaurants, like the typical Brazilian “weight food restaurant”, are the challenges we will continue to face in the following years.

     We are confident on Brazil’s increasing market for fast food restaurants, but the diversity and strength of our competitors may oblige us to enhance our managerial and marketing efforts affecting our margins and/or increasing our funding necessities. As stated in the previous sections we cannot take for granted our capacity to find new resources with convenient conditions for our operational margins.

•

A new challenge: light food

     In order to remain competitive, we are required to respond to changing consumer preferences, tastes and eating habits, sometimes variable depending on regional or local tendencies. Significant investments are necessary to maintain a permanent research on new plates, new raw materials, new methods and training. But there is a new trend in the world which Brazil seems to follow : light food, light plates, low fat products. This is a great challenge for the fast food industry. In the past years we developed salads and turkey light sandwiches that are now incorporated to our menu. But both the public demand and government policies are increasing pressure for lighter products and a large disclosure of the nutrition data of food exposed in the stores or in packages. All this means an increase in investments and in direct costs. The dispute for a market place in the following years may be developed in this extremely harsh field. Once again we cannot assure that we will be able to finance this new challenge or even to find a solution that will maintain our 2004 profitability.

•

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. In the past years this strategy has been successful in spite of a slower rate of growth as compared to the basic plan in 2004, mainly due to our greater requests on the financial and operating capacity of new franchisees. But 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. 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.

•

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. Brazilian taxes are a heavy burden for our business and the tendency of the present government during the past years has been to increase taxes. These increases have had the immediate effect of reducing margins due to the fact that the market cannot support a transfer of new taxes to sale prices.

     If all these factors continue to negatively affect our operations, we cannot assure that we will be able to manage or find the necessary tools to keep a profitable activity.

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Risks Relating to Brazil

•

Our operations are subject to changes in Brazil’s economy

     Three fundamentals of our business are the quality of products, the excellence of the service rendered to the customers and the power for consumption of the urban population. The first two greatly depend on our capacity to invest in research and training and, naturally, to our managerial capacity to handle our business. Nevertheless the three fundamentals are strongly affected by the general economic situation of the Country.

     Costs of manpower and food, beverage and packing, taxes and location costs are, among other costs, also subject to government regulations and strategies and to their success or failure.

     For the last ten years Brazil went through a very long and painful road towards the solution of traditional problems and difficulties that affected Latin-American Countries and Brazil itself in specific ways. Two presidents made efforts to conduct this struggle, Fernando Henrique Cardoso and Luiz I. Lula da Silva. Both of them followed the same line of thought concerning macroeconomic regulations respecting the international engagements and maintaining relations in agreement with the IMF.

     Inflation was controlled within the limits that the Country can support; this means yearly rates under 10%. This is normally a symptom of simultaneous GDP growth. Yet it was not the case of Brazil. Annual growth oscillated between 2 and 3%, a very low rate for developing countries, with negative growth as in 2003. A 5.2% growth in 2004 gave some oxygen to the economy and the forecasts for 2005 is 3.5%. Countries that we could compare to Brazil in the present phase of development as the Asian countries had annual growth rates of more than 7%. This doesn’t seem possible for Brazil in the next years.

     The trade balance was one of the outstanding points in Brazilian economy in 2004, although it was still very small if compared to the Asian countries. It reached US$35billion in 2004 and it will probably increase in 2005. This has been for the past two years an excellent source for the reduction for public debt denominated in dollars. Reserves in foreign exchange have increased. And the balance didn’t drop in spite of the valuation of the local currency, the Real (R$). Our company is no more very sensible to the exchange rate. We have no more financial debts in dollars and we only import french fries from Argentina. The only influence of the rate of change is its share in costs of our raw materials, particularly packing and very few other supplies. It could have an influence in public services but they constitute a particular problem. Even with a depressed dollar, national policies and the respect of ancient contracts with the private companies that explore these services pushed the prices up in the last two years, showing a certain independence of the exchange rate.

     Unemployment has been reduced in 2004 reaching 9.6% in last December but the average income in real terms dropped and this is very important for our business.

     But may be the most important problem for Brazilian economy is the real annual interest rate that is now around 12,5% and is regulated by an almost independent Central Bank. This is a very high level, roughly incompatible with a sustained growth of economy. And even worse, the rates of interest actually paid by companies and individuals go from 35 to 100% a year turning credit sources very expensive and depressing any tendency to consume. To control inflation with monetary techniques is successful but it doesn’t push the growth of economy.

     In fact, three questions are crucial for company CEOs and investors in general in the short term: (a) how long will the US Dollar exchange rate remain at a dangerous low level in connection with the necessity of sustaining a positive trade balance?, (b) will there be a squeeze on liquidity that will significantly compromise the country growth? and (c) how long and how high will the growth in basic interest rates be?

     This short explanation on Brazilian economy shows the uncertain future of the different factors that affect our business. In this scenario it is very difficult to predict government regulations and other external accidents that influence our costs and the nature and cost of financial resources that could help us go through long periods of internal or external crises that can touch Brazilian economy and its fundamentals. That is to say that the behavior of

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our clients and our capacity to face these challenges could be compromised and could result in lower demand of our products and a decline in revenues.

•

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 country is experiencing a healthy democracy and the arrival of left ideologies to the government proved that Brazilian left is not far from a national democracy and deep-rooted in capitalism. The problem that represents a risk for our business comes from the difficulties this government is showing to create a strong base to vote important reforms. Financial, political and social welfare reforms are been postponed or neglected by lack of a unanimous wish of changing the real sources of the public deficit and the stagnation that restrains Brazilian growth. There can be no assurance that the necessary measures to change basically this situation will be pursued or adopted. 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.

•

Government regulations may limit our ability to interact with foreign capital and investors

     Brazil still practices a very strict control of transactions in foreign currencies. In the present situation foreign investments are welcome and regularly the remittance of foreign currencies abroad is authorized when duly justified by the nature of the transaction: capital return to foreign countries, dividends remittances, licenses, merchandise trades, etc. But in the past we have seen hard restrictions to international intercourse of currencies, a situation that we cannot assure to be definitely abandoned. 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.

Risks related to our common stock and shareholders agreement

•

Common stock.

     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 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.

•

Shareholders agreement.

     On August 11, 1997 the company entered into a shareholder’s agreement with AIG Latin America Equity Partners, Ltd. (referred herein as ‘AIGLAEP”) further amended in March 14, 2001 (herein referred to “The 1997/2001 agreement”). The 1997/2001 agreement was signed by several shareholders, among them Shampi InvestmentsA.E.C., Lawrence Burstein and BigBurger Ltda. Pursuant to The 1997/2001 agreement AIGLAEP purchased 375,000 shares of our common stock and warrants to purchase 62,500 shares of our common stock.

     Pursuant to The 1997/2001 agreement, each of the parties to it agreed, among other things, to vote their respective shares of our common stock to elect as directors determined representatives of the signers. It also provided that if the administrators failed to achieve certain targets concerning EBITDA from January 1, 1997 to December 31, 1999, 2000 or 2001, respectively, AIGLAEP could appoint such numbers 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 the year ended December 31, 2000 and this gave place to the mentioned amendment to the agreement signed in March 14, 2001. The 1997/2001 agreement determined that in case AIGLAEP at any time would own less than 187,500 issued or outstanding shares of our common stock, AIGLAEP’s right to take control of our Board of Directors and certain of its prior approval rights would terminate. Pursuant to the amendment new options and warrants were issued to AIGLAEP and AIGLAEP agreed to interrupt

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their right to take control of the Board of Directors. Also pursuant to the amendment new targets were determined for the year ending December 31, 2002 but it contains a provision that requires the parties to renegotiate the performance targets in good faith in the event that (a) the Brazil SELIC Central Bank rate would exceed an average of 18% for a continuous period of 90 business days or (b) there would be a devaluation of the Brazilian Real against the US dollar exceeding 10% over any three month period. We failed to achieve the performance targets but the events contemplated in the amendment’s provision occurred and news targets should have been negotiated.

     As of December 29, 2004, AIGLAEP sold their shares of our common stock to CCC Empreendimentos e Participações Ltda (187,500 shares) and BigBurger Ltda. (187,500 shares) two companies respectively controlled by Romulo Fonseca and José Ricardo Bomeny. All options and warrants to purchase shares of our common stock had already expired. As a consequence of this transaction, the 1997/2001 agreement is no longer valid.

     On May 15, 2002, we entered into an additional stockholders’ agreement (“The 2002 Agreement”) with Gustavo Figueiredo Bomeny and CCC Empreendimentos e Particpações Ltda (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 Vorst 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 2002 agreement, each of the partiers 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 New Investors. The 2002 agreement, by its terms, was subject to the terms of the 1997/2001 agreement. The effect of the 1997/2001 agreement having expired, as related herein in this chapter, the 2002 agreement is no longer subject to it.

Risks related to juridical and financial contingencies

•

Special financing of fiscal debts.

     Since the year 2002 we have been beneficiaries of a special financing of fiscal past due obligations. This program was called REFIS and, pursuant to several regulations, the past due obligations are now consolidated in a program called PAES. This program consists in paying monthly to the government a sum corresponding to 1,5% of our revenues together with interest calculated on the basis of the TJLP, a variable annual rate determined by the government and turning around 10%. The term for this PAES program is 15 years counted from July 1, 2003 when the PAES became valid and in full execution. At the present moment our debt is around R$16,000,000.

     The sum we pay monthly increases as a function of our revenues growth. Interests are paid monthly calculated on the balance of the debt, the TJLP been applied to the balance from July 1, 2003. This means that if our sales don’t grow at the same rate as the TJLP the balance of the debt in current terms will always grow and the sum we will pay monthly will become greater. All companies participating of this program know they will be in serious financial difficulties in 4 or 5 years. The only solution for this problem would be an amnesty voted by the government and confirmed by the parliament that would reduce the debt or the interest paid, but we cannot assure this solution will be adopted. As a consequence this represents a serious risk to our possibility of refinancing our fiscal debt in the next years.

•

Past due fiscal obligations of VENDEX.

     VENDEX was the owner of Venbo Comércio de Alimentos Ltda, our Brazilian subsidiary, before BFFC purchased it in 1996. At that moment a due diligence was done on Venbo’s accounts to valuate their debts and other liabilities and assets. The agreement that was signed between VENDEX and BFFC covering the transaction determined that VENDEX would be responsible for any hidden liability or future liability concerning the acts of the company prior to the date of the agreement. Yet, a clause restricts VENDEX responsibility to 5% of the price paid by BFFC, a sum that is around R$3,500,000 at the present moment.

     In the past years we have surveyed the situation of Venbo’s fiscal debts prior to 1996 through the communications we received from the fiscal authorities. These communications were immediately sent to VENDEX lawyers with whom we were in permanent contact and who took care of the several processes in which VENDEX

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was involved. The sums in discussion seemed to be within the limits of the agreement. Yet, in the last months of 2004, we found that other debts had appeared and sums begun to exceed the mentioned limit so becoming a financial risk for our company that could be included in the government’s demands. All government demands are been discussed by VENDEX lawyers, but we have called Venbo’s lawyers to defend our interests against VENDEX. Our lawyers have been studying the purchase agreement VENDEX/BFFC because other clauses of this agreement may be used to protect our company. Anyway, this is a contingency that we cannot evaluate at the present moment. We don’t know the probability of success the matters contained in lawsuits, the extent of VENDEX and Venbo’s responsibilities and we don’t know exactly the amount that is involved in each process or that could be a new liability in our balance sheet.

•

Legal contingencies.

     One franchisee has recently initiated a lawsuit against our company. He was an unsuccessful franchisee that became a permanent debtor of royalty and marketing contributions. All the efforts we have done for long periods to improve his business failed. We finally decided to interrupt the franchise contract and we obtained the closure of the stores explored by this franchisee. His demand is based on a principle that is against the basis of the franchise way of operation. He supposes the franchiser may be considered responsible for having offered the operation of a store with guaranteed profitability. Even if this argument is completely against the franchise laws and the usual practices of our business, it is not impossible that this franchisee may succeed in convincing a jury or a judge that some indemnity or compensation must be paid by our company. This contingency is not accrued as a liability in our financial statements for we consider the risk of failure in our defense is remote. However, we must call the attention of our shareholders and future investors to the existing risk.

•

Tax contingencies.

     In 2004 a new regulation included franchise royalties and other revenues in the list of “services rendered” that pay a 5% tax on these revenues to the Town Hall. We are defending, as all other franchisers, that the franchise law explicitly determines that franchise revenues don’t pay services but rights to use a brand. Concerning marketing taxes they are not revenues but sums franchisees transfer to the franchiser for him to administrate marketing events, publicity and promotions. Our demand failed in the first instance but we have appealed to the Court and our lawyers think we can win in the Superior Tribunal.

     Yet, Municipal Inspectors investigated our subsidiary in routine inspection that started last year and was concluded on March 2005. They stated in their report that ISS must be applied to all franchise revenues from the year 2000, that means the whole period involving our two lawsuits in due course. The amount to be paid is R$ 2.5 millions plus interests and fines. They also stated that we should pay ISS on the sums received for exclusivity contracts with suppliers representing R$ 91.5 thousands plus interests and fines. We are pleading also in Court that these contracts are not services. Anyway, this ISS tax is a risk that could oblige us to increase our prices seriously affecting our revenues in the future and in case we would be losers in law suits it would seriously affect our bottom line income and our cash flow.

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. Rua Voluntários da Pátria 89, 9º andar - - Botafogo CEP 22.270-010, 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.

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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 8 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 3 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 were located till June 2004 in premises at Avenida Brasil, 6431 Bonsucesso, CEP 21040-360, Rio de Janeiro, brazil, which Venbo acquired in 1995.

     In January 2004 we adhered to an amnesty program issued by the Rio de Janeiro state concerning ICMS (a tax on value added) past dues. Payments had been negotiated in monthly installments that we were paying regularly when the government of Rio de Janeiro became interested in our headquarters building that included an own operated store and a large parking lot. After long negotiations we finally sold the building to the government for a price we consider exceptional in face of the deterioration of the region were our installations were located. The price was R$2,800,000 and we received R$2,100,000 in cash and R$700,000 as a compensation of the balance of the ICMS debt consolidated at that moment. The headquarters moved to Rua Voluntários da Pátria, 89 – 9^th floor – Botafogo in Rio de Janeiro – RJ. These are leased modern offices and we have been able to reduce expenses due to the fact that we occupy a smaller surface with less expenditure of electricity and air conditioning machines.

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, now called PAES, 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 9.75% per year. In fact, Debts included in the PAES are divided into debts related to federal taxes and debts related to social security obligations. We pay separately 0.75% for each institution, the “Receita Federal” in the first case and the “INSS” for the latter. The great problem we have faced is the consolidation of these debts in order to determine if the provisions registered in our financial statements are correct. We have found several differences in the figures exposed by the government and our books. All of them seem to come from government errors and we are pleading for corrections.

     We also adhered to an amnesty issued by the Government of Rio de Janeiro state concerning past due ICMS (a tax on aggregated value). We paid a debt of around R$3,500,000 with a 80% reduction on fines and we compensated R$700,000 in the sale of our headquarters’ building in Avenida Brasil. Yet the state government couldn’t find a debt of about R$1,039,000 that is accrued in our balance sheet but they couldn’t identify in their records. We believe this situation will soon be cleared up and we will negotiate a new term for payment. A reserve is been done in our cash flow. Ver página 33.

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     Concerning legal proceedings in due course we mentioned in Item 1. “Risks related to juridical and financial contingencies” the case of one lawsuit against our company initiated by one franchisee. He sustains that Venbo offered points of sale with a guarantee of profitability and success, something completely against the principles and philosophy of the franchise business as defined in the franchise law. Although we believe that the probability of winning this lawsuit is great we cannot exclude the decision of judges or juries that would oblige us to pay an indemnity or compensation to this franchisee. The store belonging to this franchisee is now been operated by us with a good performance.

     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.

     See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of these matters.

     ISS –The ISS is a tax on services rendered. The franchiser’s activities were not considered services until 2003; however, in the beginning of 2004, a new ISS legislation determined that all revenues including franchise activities would pay the ISS. This is in contradiction with the Franchise Law.

     Three revenues may be taxed according to this new law: initial fees paid by franchisees, marketing contributions and royalties.

     Our lawyers consider that initial fees pay the right to purchase the use of a brand, so they are not a service rendered. Marketing contributions are sums the franchiser administrates in the name of the franchisee and so they do not constitute real revenues.

     Royalties are probably doubtful. In fact they pay the right to use the brand but judges could say there are services included as training and technical assistance. Yet, this is not what the franchise law determines.

     Pursuing to our lawyers’ opinion we are not paying ISS on initial fees and marketing fund contributions and we are carrying on a lawsuit against the city of Rio de Janeiro concerning royalties. In this case a judiciary pledge is being done monthly since the publication of the law. We lost the administrative stage of the lawsuit but our lawyers say this is normal and our rights will be admitted by the courts.

     Years ago the company had been intimated to pay ISS on royalties. We are discussing in court the intimation with a better chance to win this lawsuit because at the time there was no law concerning this matter, except the franchise law that clearly says franchise activity is not a service.

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 2004.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     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:

     The above quotations represent prices between dealers, without retail markup, markdown or commission. They do not necessarily represent actual transactions. 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 payment of dividends is restricted under the American law because of the accumulated losses registered in the balance sheet.

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, 2004.

EQUITY COMPENSATION PLAN INFORMATION

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ITEM 6. SELECTED CONSOLIDATED HISTORICAL 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 report.

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

     The following discussion should be read in conjunction with ITEM 6, “Selected Consolidation Historical Financial Data”, ITEM 1.(e) “Forward Looking Statements” and with our consolidated financial statements and related notes appearing elsewhere in this report.

Background

     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, the impeachment of another president, as well as rapid turnover at and immediately below the cabinet level, have adversely affected the implementation of consistent economic and monetary policies. Yet, the political tendency of the different presidents or parties in government till 2002 was always conservative and right-wing oriented. The arrival of President Ignácio Lula da Silva in 2003, a union representative, a blue collar with only primary instruction level, made everybody think of a change to the left. In fact, in the economic field nothing changed. Capitalism is sustained and international relations with occidental institutions as IMF as well as the private rights to capital and contracts are been respected. The only modification in the political scenario may be the exacerbation of populist tendencies that characterize the Labor Party (PT) specially in the strengthening of government institutions and a significant growth in bureaucracy. The continuous growth of government taxes has not been the privilege of the PT. This is a phenomenon that initiated some ten years ago with the center-right government of Fernando Henrique Cardoso. The political conditions of the present government are not different to the previous ones: the lack of majority of PT in the upper and lower houses of parliament obliges to expensive and wasting negotiations with the other parties and complicates or delays important decisions. Nevertheless we must welcome the fact that democracy is alive and little by little politicians become more representative of classes and groups, especially in the states and urban communities.

     Brazilian Economy

     Some characteristics of Brazilian economy are endemic traditions as inflation, a large inequality of personnel income, enormous international and domestic debts, high interest rates, small rates of GDP growth (with some exceptions in the 70s but always inferior to other developing countries, particularly in Asia) and deficits in government cash balance.

     In March 1994, the Brazilian government introduced an economic stabilization program known as the “Real Plan” (Real referring to the Brazilian currency) that actually reduced, from 1994 to 2000, the rate of inflation and caused the exchange rate between the Real and the US$ to remain relatively stable. But foreign crisis as terrorist attacks in New York, economic problems in Russia, Turkey and Argentina, the increased cost of debts, oil prices and internal problems as the electricity rationing forced by an energy crisis, the expected expansion of economy didn’t occur. And in the past two years, 2003 and 2004, inflation showed a growing tendency. The government of President Lula followed the monetary prescriptions and raised the interest rate (SELIC). This raise made the SELIC annual rate go from 16% average in 2004 (January to August) to 18.5 % in last February 2005.

     Inflation in 2004 reached 7,6% (measured by the IPCA, Broad Consumer Index, government rate that considers middle class consumers’ prices), within the maximum targets but greater than the 5.1% Central Bank target. IGP-M, General Market Price, a broader and wholesale business rate largely used to adjust contracts in the private market, reached 12.13%. If we consider an average inflation of 10% the SELIC rate reduces to around 8%, yet a very high rate for a country that needs great sums to booster its industrial growth. High rates attract capitals but generally these are speculative capitals and not productive ones.

     But SELIC rates are only an indicator for special contracts and for government credit that also uses TJLP, a long range rate, to day 9.75%, that is used to fix a basic level that corrects fiscal debts and is used for government funded credits (normally a 2 or 3% rate is added and a commission of the intervening Bank institution make these

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credits reach the SELIC rate). But rates used by Banks to tax credits for corporations or for individuals go from 40% to 100%, a great barrier for the economy development.

     One positive factor that is sustaining economy is the foreign sector performance. For the first time in history of the Brazilian economy, the accelerated pace of growth in productive activity is in peaceful coexistence with the current account surplus of 2,25% of GDP. The trade balance ended 2004 with a 33,7 billion dollars surplus. The current account surplus was 11.7 billion dollars or 1.9% of GDP, the best surplus since 1947!

     The Stock Exchange was the outstanding profitability feature among investments in the last two years. The Ibovespa, São Paulo’s Stock Exchange market index, grew from 10,941 to 26,000 points, a 137.6% growth. But we must consider that this index was largely depressed in the past years and SP Stock Exchange is a small market with a daily rate of R$ 1.2 billion or $ 460 million. It is a greatly speculative market with limited dividend distribution. Anyway, its growth indicates a relatively significant recovery of Industry confirmed by a growth of 8.3% in real terms in 2004. Foreign capital also showed faith in Brazilian economy with new investors assuring a positive inflow in the Stock Market and an important rising of US$ in the international market by the central government at reasonable rates of interest. The private market rose $ 8.29 billions in 2004. The Brazilian rate of risk fell down under 400 points (that means that international credit is 4 points over current taxes for Brazil), a good symptom but not enough if we compare to other developing countries as Mexico, Turkey, Chorea or Russia itself.

     Our business.

     In spite of these positive factors that we consider macroeconomic milestones of Brazilian economy we must analyze the factors that mainly influence our fast-food market. The retail sales behavior showed a different pattern. They increased 9.25% in 2004 in value, an outstanding growth after three years decreasing figures, but it was boosted by the growth of 26.37% of electro domestic and furniture. In fact, personnel credit was directed to paying past dues and buying home equipment. Food and beverage increase was only 7.51% in 2004 pursuing official rates and 3.8% according to the Association of Retail Stores Traders.

     Geographical factors were not favorable to our own stores sales that are concentrated in Rio de Janeiro (RJ). Industry growth in RJ was only 2.4% (8.3% average growth in Brazil. The number of new industrial companies opened in RJ decreased 21.17%.

     The increase in taxes, especially income taxes, has affected out of home food consumption. In 4 years income taxes and social security taxes increased 70% against an inflation rate of 42%.

     Our success in making the whole chain grow in 2004 is mainly due to marketing campaigns and local effort in captivating clients done by our own stores and franchisees leaders. These compensated a very small inclination to consumption, an inflation that obliged us, as our competitors, to rise sale prices and adverse weather conditions (a very light summertime with abnormally low temperatures and rain).

     Since the Company has no longer dollar denominated debt, the exchange rate influence is limited to the Brazilian economic scenario as a whole. Brazil is still a vulnerable developing country which depends upon international inflows. Although the country has also reduced its dollar denominated debt, both domestically and abroad, exposition to global meltdowns is still extremely high. An overshooting could trigger inflation and reduce consumer spending, affecting the Company business.

     The highly competitive environment has reduced the Company’s ability to pass through prices increases. Because of that, the Company has been investing in hard negotiations with suppliers to maintain prices. Although some of the raw materials used are based on commodities traded internationally in dollars, suppliers increased competition and effectiveness has helped prices to remain stable.

     The only product the Company imports is french fries from Argentina, but in case the exchange rate starts to deteriorate the business the company could try to develop a supplier in Brazil or start to negotiate in local currency, as the Brazilian Central Bank regulates the Settlement House designed to facilitate commercial trade between Mercosur members.

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     Prospects

     The observers are describing 2005 as a year with a controlled inflation around 6.0%, a smaller trade balance pursuant to an increase in imports following a GDP growth of around 3.5%. It is very difficult to make prospects in Brazil but we have prepared the company for a consistent growth of the franchise chain and a growth of sales, both based on a strong effort to expand the number of stores, marketing actions and people training.

     The year of 2005 is very important for the first time elected left-wing Labor Party (PT) in Brazil because a sustained economic growth will increase their probability to win a second term. So, incentive for private investments, expansion of credit, controlled inflation and fiscal responsibility should increase in 2005. Nevertheless, the proximity to an electoral year could exacerbate discussions over the Brazilian presidential election in 2006 and deteriorate the economic scenario.

     The following table sets forth Brazilian inflation, as measured by the IGP-M – Índice Geral de Preços ao Mercado, and the evolution of exchange rate for the Brazilian currency against the U.S. Dollar for the periods shown.

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RESULTS OF OPERATIONS

     COMPARISON OF YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Amount in thousand of Brazilian Reais)

     For the first quarter of 2003 onward, the Company has reformatted its consolidated statement of operations in order to improve the quality of analysis. The reformatted statement differs from the previous one by segregating the earnings provided by our operated stores business from the earnings provided by 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 connection with such evolution. Because of such new format, the consolidated statement of operation for the twelve-month period ended December 31, 2002 has been restated to conform with the current presentation.

     The following table sets forth certain operating data for the periods of twelve months ended December 31, 2004, 2003 and 2002.

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STORE RESULTS

Net Restaurant Sales

     Restaurant sales for our company-owned and operated points of sales increased R$4,872 or 8.1% to R$65,338 for the year ended December 31, 2004 as compared to R$60,466 and R$63,465 for the years ended December 31, 2003 and 2002, respectively. Same store sales increased approximately 6.16% for the year ended December 31, 2004 as compared to the year ended December 31, 2003. Same store sales for the year ended December 31, 2003 increased by 0.07% when compared to 2002.

     Besides the improvement of the macroeconomic scenario in Brazil during 2004, the increase of restaurant sales from 2003 to 2004 was due to (i) our promotional campaigns; (ii) introduction of new products, mainly the “grill line” sandwiches; (iii) an average increase of 10% in the sales prices of our products since December 31, 2003; (iv) implementation of incentive plans to our store personnel. These positive effects on restaurant sales were partially offset by the increase of one of the Brazilian Sales Taxes (COFINS) in January 2004.

     The decrease from 2003 to 2002 of restaurant sales is mainly due to the reduction of our company-owned retail restaurant from 55 as of December 31, 2002 to 51 as of December 31, 2003. Such decrease is also attributable to the adverse period that the retail market faced during 2003 in Brazil due to macroeconomic factors and to a higher taxation on Company’ s revenue (PIS), which resulted on lower net sales.

Food, Beverage and Packaging Costs

     As a percentage of net restaurant sales, food, beverage and packaging costs were (37.8%), (39.3%) and (39.9%) for the years ended December 31, 2004, 2003 and 2002, respectively.

     Food, beverage and packaging costs decrease from 2003 to 2004 as a percentage of net restaurant sales, is due to our ongoing efforts on negotiations of long term agreements with some suppliers. The permanent growth of our franchise network is enhancing its negotiation power with the suppliers. In addition, investments on logistics and distribution made by the Company in the midle of 2004 also derived in the reduction of such costs.

     The decrease of food, beverage and packaging costs in the year of 2003 as compared to 2002 is also attributable to successful long-term agreements with some suppliers. In addition, some 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.

Payroll & Related Benefits

     As a percentage of net restaurant sales, store payroll and related benefits were (22.6%) for both years ended December 31, 2003 and 2004. For the year ended December 31, 2002 the percentage was (21.7%).

     Payroll costs increased during 2004 due to costs related to purchase of new uniforms, annual increases in salaries mandated by union-driven agreements and, as a consequence, social charges that are computed based on employees salaries.

     Despite of those increases, the growth of our revenues (mentioned above) did not require significant increase of number of store employees and accordingly, the payroll costs decreased as a percentage of restaurant sales, as a result of the optimization of our labor force.

     The increase from 2002 to 2003 is attributable the increase in the number of store supervisors, in order to improve the quality of our restaurant operations.

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Restaurant Occupancy Costs and Other Expenses

     As a percentage of restaurant sales, restaurant occupancy costs and other expenses were (12.8%), (12.5%) and (13.3%) for the years ended December 31, 2004, 2003 and 2002, respectively.

     Similar to our labor force, the increase of our sales provoked on optimization of occupancy costs, especially for those locations which rent costs are fixed. However, there were increases in such rent obligations, derived from its contractual restatements, according to Brazilian inflation, currently at 12.4% per annum, that partially offset such decrease. In addition, during 2004 we open a new premium store with relevant rent cost.

     The decrease of occupancy costs in 2003 as compared to 2002 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.

Contracted Services

     Expenses related to contracted services expressed as a percentage of net restaurant sales were approximately (12.7%), (13.1%) and (11.9%) for the twelve months ended December 31, 2004, 2003 and 2002, respectively.

     This decrease in percentage of net restaurant sales during 2004 is mainly attributable to the reduction obtained on some contracted services such as delivery, technology, maintenance and security for special events during 2004. The effect of those decreases was partially offset by expenses related to our call center, which operations started in December 2003, as well as increases in the costs of maintenance parts.

     The increase from 2002 to 2003 is 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 (3.4%), (2.8%) and (2.9%) for the twelve months ended December 30, 2004, 2003 and 2002, respectively.

     The increase during 2004 is mainly attributable to the increase on the insurance costs, increase of consumption of material costs and higher traveling expenses due to new stores open away from the Company’s headquarters.

     Other store cost and expenses remained almost constant from 2002 to 2003.

FRANCHISE RESULTS

Net Franchise Royalty Fees

     Franchise income increased R$1,372 or 20.6% to R$8,035 for the year ended December 31, 2004, as compared to R$6,663 and R$4,904 for the years ended December 31, 2003 and 2002, respectively. These increases are mainly attributable to the growth of our franchised business from 245 points of sale as of December 31, 2002 to 280 as of December 31, 2003 to 325 as of December 31, 2004.

     In addition of royalty fees derived from a percentage on the sales of the stores operated by franchisees, the Company receives from franchisees:

(a)

initial fees are due at the signing of a new franchise contract and are accounted for as Other Income at the Consolidated Statements of Results

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(b)

market funds which represent franchise contributions to finance corporate marketing investments and are accounted for as Market Income at the Consolidated Statements of Results.

Franchise Costs and Expenses

     Franchise cost and expenses expressed as a percentage of net restaurant sales were approximately (2.9%), (3.6%) and (1.8%) for the twelve months ended December 31, 2004, 2003 and 2002, respectively.

     The decrease observed during the twelve months ended December 31, 2004 as contrasted to the same period of 2003 is attributable to the optimization of the franchise expenses related to the growth of the franchise network, as well as a reduction on the number of employees dedicated to franchise operation.

     The increase observed in 2003 in comparison to 2002, is attributable to the growth of franchise network and to an improvement on our policy of following the operation of our franchisees: our supervisors responsible for franchised stores had increased the number of visits all around the Brazilian territory which, in turn, increased traveling expenses.

MARKETING, GENERAL AND ADMINISTRATIVE (EXPENSES) INCOME

Marketing (expenses) income

     As a percentage of net restaurant sales, marketing income (expenses) were approximately 0.5%, (1.1)% and (0.6%) for the twelve months ended December 31, 2004, 2003 and 2002, respectively.

     Marketing contributions are highly influenced by the performance of the franchisees stores, not only because it is a percentage of its gross sales but also because franchisees’ positive cash flow reduces non payment.

     Both in 2002 and 2003, the company exceed its marketing income by its marketing expenses, and so has used other sources of income to maintain the marketing expenses it believed necessary to its business. In 2004, the company has limited its marketing expenses in order to balance the funds it used before, but comparatively it has been increasing the total amount invested in marketing every year.

     The reversal from net marketing (expense) in 2003 to net marketing income in 2004 is mainly attributable to a higher level of marketing funds derived from the increase of franchisees from period to period, as well as an optimization of marketing investments.

     Advertising and publicity costs increased during the year ended December 31, 2003 as contrasted to 2002 due to higher expenses derived from more intensive promotional campaigns of new products on the Company’s menu. The year of 2003 had a worse Brazilian economic scenario which required stronger marketing actions.

General and Administrative Expenses

     As a percentage of restaurant sales, general and administrative expenses were approximately (10.7%), (10.8%) and (11.7%) for the twelve months ended December 31, 2004, 2003 and 2002, respectively.

     There were increases on administrative expenses observed in 2004 mainly attributable to increase on salaries and labor charges of our administrative personnel as well as increase on consultant fees regarding tax-planning services. In addition, a reduction of administrative personnel occurred during June 2004, derived extra expenses related to the legal obligations for employee dismissals. Those increases were in lower level than the increase on restaurant sales, result of an optimization of such expenses and, accordingly a percentage reduction from 2003 to 2004.

     The decrease observed on comparing the twelve month periods of 2003 and 2002 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) expressed as a percentage of net restaurant sales were 1.8%, for the twelve months ended December 31, 2004, (0.6%) for the twelve months ended December 31, 2003 and (1.0%) for the same period ended December 31, 2002.

     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. The following table sets forth the breakdown of Other Operating Income (Expense):

     The improvement of other operating income (expense) is due to a greater amount of rebates negotiated with suppliers during the twelve months of 2004, compared to the same period of 2003. In addition, 2003 was negatively impacted by non-recurring charges related to adjustments of the Company’s balance of its tax amnesty program.

     The positive effects of those rebates were partially offset by expenses related to an upgrade of the corporate computer system and by pre-opening expenses linked to relevant new store.

Depreciation and Amortization (Stores and Headquarters)

     As a percentage of restaurant sales, depreciation and amortization expense, (both store and headquarters) was approximately (5.2%), (5.5%) and (5.9%) for the years ended December 31, 2004, 2003 and 2002, respectively.

     The 2004 and 2003 decreases are attributable to the completion of depreciation upon some assets (mainly computers and leasehold improvements).

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 outlets, which required us to take a significant write-off during the year ended December 31, 2002.

     During 2004, our review in accordance with SFAS 144, derived no charge to the income statement.

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

Interest Expenses

     As a percentage of restaurant sales, net interest expense and foreign exchange gains and/or losses were approximately (4.8%), (5.0%) and (6.6%) for the years ended December 31, 2004, 2003 and 2002, respectively.

     Interest expenses increased for the twelve months ended December 31, 2004 as compared to the same period in 2003 due to the increase of overall interest rates in Brazil during 2004. However, the perception of such increase was diluted by the growth of restaurant sales.

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

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 (0.4%), (0.7%) and (5.5%) for the twelve months ended December 31, 2004, 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 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. The valuation of Brazilian Real continued during 2004, resulting in amounts even lower than those observed in 2003. 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 and 2004 is also attributable to the extinguishment of debts denominated in U.S. Dollars.

LIQUIDITY AND CAPITAL RESOURCES (Amounts in thousand of Brazilian reais)

     A) Introduction

     Since March 1996, we have funded our cumulative operating losses of R$63,131 and made acquisitions of businesses and capital improvements (including remodeling of our retail outlets) 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, 2004, we had cash on hand of R$1,717 and a working capital deficiency of R$5,235.

     For the year ended December 31, 2004, we had net cash provided by operating activities of R$1,703, net cash used in investing activities of R$1,614 and net cash provided by financing activities of R$590. 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.

     For the year ended December 31, 2003, we had net cash used in operating activities of R$181, net cash used in investing activities of R$1,081 and net cash provided by financing activities of R$572. 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.

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     Our earnings before interest, taxes, depreciation and amortization (EBITDA) were as follows:

     Company disclose EBITDA because it has been used as a target in past Stockholders’ Agreements. 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.

     B) Debt Obligation — financial institutions

     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, 2004 were as follows:

     At December 31, 2004, future maturities of notes payable are as follows:

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(c)	Comprised of credit facilities from two Brazilian private financial institutions, guaranteed by certain officers and receivables. Repayment of principal of one facility and the payment of interests of 36.9% per annum are due in 10 monthly installments (ending October 2005) of approximately R$115. Repayment of principal of the other facility is due in 12 monthly installments (ending December 2005) of approximately R$155. Interest of 34% per annum is due monthly in addition to principal repayment.
(d)	This credit facility was used to purchase two stores. Repayment of principal is due in 19 monthly installments of R$52 in addition of 2 annual installments of R$467, starting January, 2005, 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.
(e)	This amount is comprised of 10 different lease facilities with Brazilian private institutions:

	•	8 of such facilities provide maximum borrowing of R$2,020 for the funding of trucks and other vehicle; payable in monthly installments together with interest with final payments due ranging from January 2005 to February 2008; secured by equipment under lease;
	•	the remaining 2 facilities provide maximum borrowing of R$260 for the funding of truck equipment; one of such facility is payable in monthly installments together with interest totaling R$4 (final payment due on December, 2005) and the other facility is payable in monthly installments together with interest totaling R$3 (final payment due on December, 2007); both facilities are secured by equipment under lease;

     C) Debt Obligation — taxes

     During 1999, 2001 and beginning 2002 certain Brazilian State and Federal taxes levied on the Company were not paid. In addition during 2002, Brazilian Social Security Authorities applied penalties against the Company, by charging certain operating transactions not covered by the Company’s previous calculation of Social Security contributions. Those debts were renegotiated in different moments and with different levels of Brazilian Government.

     Since June 2002, the Company has paid all its current taxes on a timely basis. The tax debt evolution and their current status are summarized as follows:

     State tax

     Since the second quarter of 2000, the Company has been reaching a sequence of agreements with the Rio de Janeiro state government to parcel unpaid taxes.

     The last agreement with the Rio de Janeiro state government was settled during the third quarter of 2004, through which the Company sold one of its property in exchange of (a) a sum in cash; (b) the waiver of the balance of the unpaid state tax that were parceled according to previous agreements; (c) tax credits which compensated tax on revenues accounted for during the last quarter of 2004.

     During the last agreement a portion of the Company state tax liability was not recognized by the fiscal authorities and another portion is being recalculated by them. The consolidation of the remaining debt is not expected to be computed during 2005. Company estimates that both portions amounts to R$1,039 and fully accrued such amount as of December 31, 2004.

     During 2004, the Company paid approximately R$3,620 related to Rio de Janeiro state government agreements.

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     Federal Taxes

     Concerning the unpaid Federal taxes and the Social Security penalties, the Company applied to join and was accepted into two subsequent amnesty programs offered by the Brazilian Federal government (REFIS during 1999 and PAES during 2003).

     The second amnesty program (PAES) included the balance of the previous Federal tax amnesty program (REFIS) and unpaid 2001 and 2002 federal tax, as well as the Social Security penalties. The total debt included in such program is being paid in monthly installments equivalent to 1.5% of the Company’s gross sales, with interest accruing at rates set by the Brazilian Federal government, currently 9.75% per year.

     All installments related to those programs have been paid on a timely basis.

     During 2004, the Company paid approximately R$1,357 related to such Brazilian Federal tax amnesty program.

     D) Debt Obligation — summary

     Considering all the above mentioned fiscal debts, we are required to pay restructured past-due Brazilian state taxes of approximately R$1,039 and federal taxes of approximately R$16,215.

     For the fiscal 2005, we expect to pay approximately R$1,339 pursuant to the federal tax amnesty program. We do not expect to have any payment regarding the state tax settlements during 2005, since the remaining balance is not expected to be consolidated by the tax authorities through that period.

     E) Other Obligations

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

     The future minimum lease payments under those obligations with an initial or remaining noncancelable lease terms in excess of one year at December 31, 2004 are as follows:

     Rent expense was R$6,199 for the year ended December 31, 2004.

     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 2004 were approximately R$1,600. We require capital primarily for the improvement of our owned and operated points of sale. Currently, four of our owned and operated retail outlets are located in facilities that we own and all of our other owned and operated retail outlets are located in leased facilities.

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     Our average cost to open a retail outlet was approximately R$300 to R$500 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 2005, which will be used to maintain and upgrade our current restaurant network as well to provide new investments on restaurant equipments, will be approximately R$4,456. We anticipate that the primary use of our cash resources during 2005 will be to service our debt obligations. During 2005, we intend to focus our efforts on expanding both the number of our franchisees and the number of our franchised retail outlets, 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.

     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 retail outlets.

     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 retail outlets;
	•	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; and
	•	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.

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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 retail outlets. 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 retail outlets and operations. Our ability to re-market our company-owned retail outlets 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 (See the Notes to Consolidated Financial Statements or summary of significant accounting policies more fully described in pages F-10 through F-14 , the following involve a higher degree of judgement and/or complexity.

Constant currency restatement

     Through June 30, 1997 the Brazilian economy was hyperinflationary as defined in Statement of Financial Accounting Standards (“SFAS”) No.52. The financial statements prior to that time were comprehensively restated for the effects of inflation. After that date, inflation restatement was not applied, however the non-monetary assets reflect the effects of inflation through that date.

Foreign currency

     Assets and liabilities recorded in functional currencies other than Brazilian Reais are translated into Brazilian Reais at the prevailing exchange rate as reported by the Central Bank of Brazil as of the balance sheet date. Revenue and expenses are translated at the weighted-average exchange rates for the year. The resulting translation adjustments are charged or credited to other comprehensive income. Gains or losses from foreign currency transactions, such as those resulting from the settlement of receivables or payables denominated in foreign currency, are recognized in the consolidated statement of operations as they occur.

Accounts receivable

     The allowance for doubtful accounts is estimated based on aspects such as aging of due receivables and client’s current economic situation.

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Long-Lived Assets

     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

Inventory Cost

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs”. This statement requires that certain costs such as idle facility expense, excessive spoilage, double freight, and re-handling costs be recognized as current-period charges and that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of the statements shall be effective for inventory costs incurred during fiscal years beginning after June 15,2005. Adoption of this statement is not anticipated to have a significant impact on the Company’s financial condition, results of operations, or cash flows.

Share-Based Payment

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment”. This statement is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. This statement requires that the Company records compensation expense for stock options issued based on the estimated fair value of the options at the date of grant. This statement is effective as of the first interim period beginning after June 15, 2005. We currently are not required to record stock-based compensation charges if the employee’s stock option exercise price is equal to or exceeds the fair value of the stock at the date of grant. We have not yet determined what impact, if any, the proposed pronouncement would have on our financial statements.

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 have extinguished all of our debt denominated in US$ 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See pages F-1 through F-24 comprising a portion of this report.

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

     Grant Thornton had a partnership with Trevisan, a highly respected Brazilian firm of independent auditors that came to an end in the middle of 2004. Trevisan made a new partnership with BDO and so, consolidated financial statements for the year ended December 31, 2004 were audited by the new auditors.

ITEM 9. A. 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, 2004. Based on such evaluation, Mr. Bomeny has concluded that, as of December 31, 2004, our disclosure controls and procedures were effective in timely alerting 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.

ITEM 9. B. OTHER INFORMATION

     The 1997/2001 stockholders’ agreement between us and several stockholders was terminated on December 29^th, 2004 and is no longer of any force or effect.

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 2005 Annual Meeting of Shareholders to be filed on or before April 30, 2005.

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 2005 Annual Meeting of Shareholders to be filed on or before April 30, 2005.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The items required by Part III, Item 12 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2005 Annual Meeting of Shareholders to be filed on or before April 30, 2005.

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 2005 Annual Meeting of Shareholders to be filed on or before April 30, 2005.

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 2005 Annual Meeting of Shareholders to be filed on or before April 30, 2005.

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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

Brazil Fast Food Corp.
Schedule II — Valuation And Qualifying Accounts
Years Ended December 31, 2004, 2003 and 2002

     (b) Reports on Form 8-K

          None.

     (c) Exhibits

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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 15th day of April, 2005.

	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:

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EXHIBIT INDEX

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
Brazil Fast Food Corp. and subsidiaries

We have audited the accompanying consolidated balance sheets of Brazil Fast Food Corp. and subsidiaries (a Delaware corporation) as of December 31, 2004, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity (deficit) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financing reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financing reporting. Accordingly, we express no such opinion. 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 subsidiaries as of December 31, 2004 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The financial statements as of December 31, 2004 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. Additionally, there are some lawsuits that, although evaluated as remote probability of loss by the legal advisories, could result in cash losses to the Company which are not quantified and consequently not accrued. 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 31, 2005

Trevisan Auditores Independentes

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for each of the two 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 the standards of the Public Company Accounting Oversight Board. 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 the results of their operations and their cash flows for each of the two 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 20, 2004

Grant Thornton Auditores Independentes

F-3

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

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

F-4

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES