SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012

Commission File Number: 000-23278

Brazil Fast Food Corp.

(Exact name of Registrant as specified in its charter)


Delaware		13-3688737
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

Rua Voluntários da Pátria, 89-9° andar

Rio de Janeiro RJ, Brazil, CEP 22270-010

(Address of principal executive offices)

Registrant’s telephone number: 011 55 21 2536-7500

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “larger accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 17, 2012, there were 8,129,437 shares outstanding of the Registrant’s Common Stock, par value $0.0001.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements	3

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	44

	Item 4. Controls and Procedures	44

PART II. OTHER INFORMATION		46

	Item 1. Legal Proceedings	46

	Item 1A. Risk Factors	46

	Item 6. Exhibits	47

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ITEM 1.

FINANCIAL STATEMENTS.

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Balance Sheets – Assets (Unaudited)

(in thousands of Brazilian Reais, except share amounts)


	June 30,			December 31,
	2012			2011
	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents (note 3)	R$	23,528		R$	21,357
Inventories		2,619			3,985
Accounts receivable
Clients		5,779			5,660
Franchisees		13,056			12,247
Allowance for doubtful accounts		(600	)		(801	)
Advances to suppliers		1,592			1,500
Prepaid expenses (note 4)		823			3,478
Receivables from properties sale (notes 4 and 5)		1,623			3,523
Other current assets		6,848			4,083

TOTAL CURRENT ASSETS		55,268			55,032
Other receivables and other assets (note 4)		12,884			10,862
Deferred tax asset, net		6,898			8,378
Goodwill (note 2)		2,699			799
Property and equipment, net		37,359			31,342
Intangible assets, net		5,061			4,472

TOTAL ASSETS	R$	120,169		R$	110,885

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Balance Sheets – Liabilities and Shareholders’ Equity (Unaudited)

(in thousands of Brazilian Reais, except share amounts)


	June 30,			December 31,
	2012			2011
	(unaudited)
CURRENT LIABILITIES:
Notes payable	R$	13,665		R$	11,523
Accounts payable and accrued expenses		9,084			11,608
Payroll and related accruals		5,512			5,618
Taxes		3,684			5,020
Deferred income tax		612			1,262
Current portion of deferred income (note 7)		4,247			1,118
Current portion of contingencies and reassessed taxes (note 6)		2,062			1,940
Accounts payble related to Yoggi acquisition (note 2)		1,199			—

TOTAL CURRENT LIABILITIES		40,065			38,089
Deferred income, less current portion (note 7)		2,910			4,057
NOTES PAYABLE, less current portion		5,330			5,068
CONTINGENCIES AND REASSESSED TAXES, less current portion (note 6)		18,226			18,215
Other liabilities (note 8)		450			—

TOTAL LIABILITIES		66,981			65,429

SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 5,000 shares authorized; no shares issued		—			—
Common stock, $.0001 par value, 12,500,000 shares authorized; 8,472,927 shares issued for both 2012 and 2011; and 8,129,437 shares outstanding for both 2012 and 2011		1			1
Additional paid-in capital		61,148			61,148
Treasury Stock (343,490 shares)		(2,060	)		(2,060	)
Accumulated Deficit		(9,045	)		(16,092	)
Accumulated comprehensive loss		(1,095	)		(1,128	)

TOTAL SHAREHOLDERS’ EQUITY		48,949			41,869

Non-Controlling Interest		4,239			3,587

TOTAL EQUITY		53,188			45,456



TOTAL LIABILITIES AND EQUITY	R$	120,169		R$	110,885

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(in thousands of Brazilian Reais, except share amounts)


	Six Months Ended June 30,
	2012			2011
REVENUES
Net Revenues from Own-operated Restaurants	R$	83,863		R$	78,468
Net Revenues from Franchisees		19,688			15,434
Revenues from trade partners		10,738			10,567
Other Income		1,302			1,462

TOTAL REVENUES		115,591			105,931

OPERATING COST AND EXPENSES
Store Costs and Expenses		(77,391	)		(72,082	)
Franchise Costs and Expenses		(6,808	)		(5,478	)
Marketing Expenses		(1,895	)		(1,391	)
Administrative Expenses		(16,243	)		(14,678	)
Other Operating Expenses		(2,785	)		(3,361	)
Net result of assets sold		83			(28	)

TOTAL OPERATING COST AND EXPENSES		(105,039	)		(97,018	)

OPERATING INCOME		10,552			8,913

Interest Income (expense), net		(373	)		142

NET INCOME BEFORE INCOME TAX		10,179			9,055

Income taxes		(2,706	)		(1,192	)

NET INCOME BEFORE NON-CONTROLLING INTEREST		7,473			7,863

Net (income) loss attributable to non-controlling interest		(426	)		(337	)

NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.	R$	7,047		R$	7,526

NET INCOME PER COMMON SHARE BASIC AND DILUTED	R$	0.87		R$	0.93

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC AND DILUTED		8,129,437			8,132,012

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(in thousands of Brazilian Reais, except share amounts)


	Three Months Ended June 30,
	2012			2011
REVENUES
Net Revenues from Own-operated Restaurants	R$	40,246		R$	38,322
Net Revenues from Franchisees		9,677			7,824
Revenues from trade partners		4,147			3,775
Other Income		982			1,065

TOTAL REVENUES		55,052			50,986

OPERATING COST AND EXPENSES
Store Costs and Expenses		(36,871	)		(34,992	)
Franchise Costs and Expenses		(3,729	)		(2,910	)
Marketing Expenses		(544	)		(376	)
Administrative Expenses		(7,641	)		(6,910	)
Other Operating Expenses		(1,387	)		(1,732	)
Net result of assets sold		127			(26	)

TOTAL OPERATING COST AND EXPENSES		(50,045	)		(46,946	)

OPERATING INCOME		5,007			4,040

Interest Income (expenses), net		(234	)		186

NET INCOME BEFORE INCOME TAX		4,773			4,226

Income taxes		(882	)		(600	)

NET INCOME BEFORE NON-CONTROLLING INTEREST		3,891			3,626

Net income attributable to non-controlling interest		(244	)		(330	)

NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.	R$	3,647		R$	3,296

NET INCOME PER COMMON SHARE
BASIC AND DILUTED	R$	0.45		R$	0.41

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: BASIC AND DILUTED		8,129,437			8,129,437

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands of Brazilian Reais)


	Six Months Ended June 30,					Three Months Ended June 30,
	2012		2011			2012		2011
NET INCOME	R$	7,047	R$	7,526		R$	3,647	R$	3,296
Other comprehensive income (loss):
Foreign currency translation adjustment		33		(39	)		16		(7	)

COMPREHENSIVE INCOME	R$	7,080	R$	7,487		R$	3,663	R$	3,289

There are no comprehensive income components attributable to non noncontrolling interest, accordingly Consolidated Statements of Comprehensive Income (loss) is stated from Net Income (Loss) attributable to BFFC.

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity (Unaudited)

(in thousands of Brazilian Reais)


	Common Stock				Additional Paid-In Capital		Treasury Stock			Accumulated (Deficit)			Accumulated Comprehensive Loss			Total Shareholders' Equity		Non- Controlling Interest		Total Equity
	Shares		Par Value		Additional Paid-In Capital		Treasury Stock			Accumulated (Deficit)			Accumulated Comprehensive Loss			Total Shareholders' Equity		Non- Controlling Interest		Total Equity
Balance, December 31, 2011		8,129,437	R$	1	R$	61,148	R$	(2,060	)	R$	(16,092	)	R$	(1,128	)	R$	41,869	R$	3,587	R$	45,456
Non-Controling Paid in Capital																	—		226		226
Net Income		—		—		—		—			7,047			—			7,047		426		7,473
Acquisition of Company’s own shares		—		—		—		—			—			—			—		0		—
Cummulative translation adjustment		—		—		—		—			—			33			33		—		33

Balance, June 30, 2012		8,129,437	R$	1	R$	61,148	R$	(2,060	)	R$	(9,045	)	R$	(1,095	)	R$	48,949	R$	4,239	R$	53,188

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(in thousands of Brazilian Reais)


	Six Months Ended June 30,
	2012			2011
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.	R$	7,473		R$	7,863
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		3,663			3,445
Loss on assets sold, net		(83	)		28
Deferred tax		830			(434	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,129	)		353
Inventories		1,366			(327	)
Prepaid expenses, advances to suppliers and other current assets		(202	)		(1,224	)
Other assets		(2,022	)		859
(Decrease) increase in:
Accounts payable and accrued expenses		(2,524	)		(4,846	)
Payroll and related accruals		(106	)		1,488
Taxes other than income taxes		(1,336	)		(1,726	)
Deferred income		1,982			4,204
Contingencies and reassessed taxes		133			(39	)
Other liabilities		450			(3	)

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES		8,495			9,641

CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment		(10,491	)		(2,556	)
Yoggi acquisiton		(701	)		—
Proceeds from sale of property, equipment and deferred charges		2,205			2,104

CASH FLOWS USED IN INVESTING ACTIVITIES		(8,987	)		(452	)

CASH FLOW FROM FINANCING ACTIVITIES:
Non-Controling Paid in Capital		226			(119	)
Net Borrowing (Repayments) under lines of credit		2,404			(4,846	)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		2,630			(4,965	)

EFFECT OF FOREIGN EXCHANGE RATE		33			(39	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		2,171			4,185
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		21,357			16,742

CASH AND CASH EQUIVALENTS AT END OF PERIOD	R$	23,528		R$	20,927

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(in Brazilian Reais, unless otherwise stated)

NOTE 1 - FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited consolidated financial statements of Brazil Fast Food Corp. and its subsidiaries (together referred as “the Company”) have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial statements. Accordingly they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These unaudited consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Unless otherwise specified, all references in these financial statements to (i) “Reais” or “R$” are to the Brazilian Real (singular), or to Brazilian Reais (plural), the legal currency of Brazil, and (ii) “U.S. Dollars” or “$” are to United States dollars.

The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The consolidated financial statements as of June 30, 2012 and for the six and three-month periods ended June 30, 2012 and 2011, included in this report, are unaudited. However, in management’s opinion, such consolidated financial statements reflect all normal recurring adjustments that are necessary for a fair presentation. The results for the interim periods are not necessarily indicative of trends or of results expected for the full year ending December 31, 2012.

The preparation of these financial statements requires the use of estimates and assumptions that reflect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto. Management reviews its estimates periodically, including those related to depreciation, contingencies, income taxes and allowance for doubtful accounts. While the Company uses its best estimates and judgments, actual results could differ from those estimates as further confirming events occur.

The Consolidated financial statements for the six months ended June 30, 2011 have been restated to conform the current quarter’s presentation, as follows:


R$'000	Six months ended June 30, 2011
	As previously reported			Reclassification			As currently reported
Store Costs and Expenses	R$	(73,371	)	R$	1,289		R$	(72,082	)
Administrative expenses		(13,814	)		(864	)		(14,678	)
Other Operating Expenses		(2,936	)		(425	)		(3,361	)

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NOTE 2 - BUSINESS AND OPERATIONS

Brazil Fast Food Corp. (the “Company”) was incorporated in the state of Delaware on September 16, 1992.

In December 2006, the Company established a holding company in Brazil called BFFC do Brasil Participações Ltda. (“BFFC do Brasil”, formerly 22N Participações Ltda.), to consolidate all its business in the country and allow the Company to pursue its multi-brand program, as discussed below:

BOB’S TRADEMARK

During 1996, the Company acquired 100.0% of the capital of Venbo Comercio de Alimentos Ltda. (“Venbo”), a Brazilian limited liability company which conducts business under the trade name “Bob’s”, and owns and operates, both directly and through franchisees, a chain of hamburger fast food restaurants in Brazil.

In 2011, three of the own-operated restaurants of Venbo were transferred to two newly affiliated companies, LM Comércio de Alimentos Ltda. and PCN Comércio de Alimentos Ltda., both subsidiaries of BFFC do Brasil, in order to enhance these three stores results through the inclusion of a minor partner directly responsible for the stores operation.

KFC TRADEMARK

During the first quarter of 2007, the Company reached an agreement with Yum! Brands, owner of the KFC brand. By this agreement, BFFC do Brasil, through its subsidiary CFK Comércio de Alimentos Ltda. (“CFK”, formerly Clematis Indústria e Comércio de Alimentos e Participações Ltda.), started to conduct the operations of four directly owned and operated KFC restaurants in the city of Rio de Janeiro as a Yum! Brands franchisee, and took over the management, development and expansion of the KFC chain in Brazil. CFK started its activities on April 1, 2007.

During 2011, four of the own-operated restaurants of CFK in Sao Paulo were transferred to two newly affiliated companies, CFK São Paulo Comércio de Alimentos Ltda. (“CFK SP”) and MPSC Comércio de Alimentos Ltda. (“MPSC”). Both CFK SP and MPSC are newly affiliated companies and subsidiaries of BFFC do Brasil created in order to enhance these four stores results through the inclusion of two minor partners (one for each new affiliated) directly responsible for the stores operation.

Suprilog Logística Ltda. (“Suprilog”), which used to warehouse equipment and spare parts and provide maintenance services for our own-operated restaurants, changed its business purpose. FCK Comércio de Alimentos Ltda. (“FCK”, former Suprilog Logística Ltda.) is responsible for developing and expanding KFC chain in Brazil.

- 11 -

On May 3, 2012, Brazil Fast Food and Yum! Restaurants International (YRI) announced the satisfactory completion of the first phase of their efforts to expand the KFC and Pizza Hut brands in Brazil, pursuant to which the Company was engaged to provide franchise support services to KFC and Pizza Hut franchisees and to develop these brands, upon its reentry into Brazil.

Accordingly, beginning as of May 2012, YRI started to directly manage its franchise business in Brazil, supporting KFC businesses in Brazil.

YRI and BFFC will remain close partners as BFFC will continue to contribute to the development of KFC brand as a KFC franchisee focused in Rio de Janeiro and São Paulo.

PIZZA HUT TRADEMARK

During 2008, the Company reached an agreement with Restaurants Connection International Inc (“RCI”) to acquire, through its wholly-owned holding subsidiary, BFFC do Brasil, 60% of Internacional Restaurantes do Brasil (“IRB”), which operates Pizza Hut restaurants in the city of São Paulo as a Yum! Brands franchisee. The remaining 40% of IRB is held by another Brazilian company of which IRB’s current CEO is the main stockholder.

In connection to such acquisition, the Company recorded R$799 as Goodwill, which represents the excess of cost over the net tangible assets and identifiable intangible assets of IRB.

IRB also operates a coffee concept brand called “In Bocca al Lupo Café”, which has four stores in the city of São Paulo.

As discussed above, during May 2012, YRI started to directly manage its franchise business in Brazil, supporting Pizza Hut businesses in Brazil from its Restaurant Support Center in São Paulo. However, BFFC will continue to contribute to the development of Pizza Hut brand as a Pizza Hut franchisee with operations in the São Paulo metropolitan area.

Beginning as of May 2012, YRI started to directly manage its franchise business in Brazil, supporting both of its KFC and Pizza Hut businesses in Brazil from its Restaurant Support Center in São Paulo, which will be resourced to support the growth of both brands.

YRI and BFFC will remain close partners as BFFC will continue to contribute to the development of YRI’s brands as a KFC franchisee focused in Rio de Janeiro and São Paulo and as a Pizza Hut franchisee with operations in the São Paulo metropolitan area.

DOGGIS TRADEMARK

During October 2008, the Company reached an agreement with Gastronomía & Negocios Sociedad Anonima (“G&N”, former Grupo de Empresas Doggis Sociedad Anonima), one of the fast food leaders in Chile, where it has 150 stores.

By this agreement, BFFC do Brasil would establish a Master Franchise to manage, develop and expand the Doggis hot-dog chain in Brazil through own-operated restaurants and franchisees and G&N would establish a Master Franchise to manage, develop and expand the Bob’s hamburger chain in Chile through own-operated restaurants and franchisees.

The Master Franchise established in Brazil was named DGS Comercio de Alimento S.A. (“DGS”) and the Master Franchise established in Chile was named BBS S.A. (“BBS”). BFFC do Brasil has 20% of BBS and G&N has 20% of DGS.

YOGGI TRADEMARK

During May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”) which operates a franchise network of frozen yogurt in Brazil since 2008 with 48 franchised point of sales.

The Company acquired 100% of Yoggi’s equity for R$2 million, paying approximately R$0.5 million at the acquisition closing and the balance in 7 equal monthly installments with CDI-based interest rate (currently 8.25% p.y.).

In connection with the Yoggi acquisition the Company has recorded approximately R$1.9 million of excess purchase price over net assets acquired. This reflects a preliminary allocation of purchase price and is subject to final valuation and allocation of all Yogi’s assets and liabilities against an increase of Yoggi’s equity.

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NOTE 3 – CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:


R$'000	June 30,		December 31,
	2012		2011
	R$		R$
Cash at point of sales		879		858
Cash with money collectors		330		460
Bank accounts		846		4,807
Investments funds (a)		21,473		15,232

	R$	23,528	R$	21,357

Bank account figures are comprised of the amount of R$83,000 (R$476,000 in 2011) which is deposited in a financial institution located in the U.S.A. and the remaining balance in financial institutions located in Brazil.

(a) The Company invests its temporary overflow of cash in financial funds linked, in their majority, to fixed-income securities, with original maturities of less than three months.

NOTE 4 – PREPAID EXPENSES AND OTHER RECEIVABLES AND OTHER ASSETS

Company’s prepaid expenses were R$823,000 in June 30, 2012 and R$3,478,000 in December 31, 2011. During December 2011 the Company paid expenses in advance related to imported fixed assets. During the second quarter of 2012 the acquisition of those fixed were concluded and great portion of such amount was transferred to Property and Equipment.

Other receivables and other assets consist of the following:


	June 30,		December 31,
	2012 (unaudited)		2011
Receivables from franchisees (a)	R$	1,567	R$	343
Judicial deposits (b)		8,986		8,528
Properties held for sale (c)		1,142		1,135
Investment in BBS (Bobs—Chile) (d)		809		808
Other receivables		380		48

	R$	12,884	R$	10,862

(a)

Long term portion of receivables derived from the sale of the Company’s own-operated restaurants assets, e.g. inventories and uniforms and other current receivables (which include receivables related to reimbursement of expenses incurred by the Company in the franchisee benefit, e.g. during training and delivery operations, and pre-sale of products in events where the Company participates);

(b)

Deposits required by Brazilian court in connection to some legal disputes, also discussed at note 6;

(c)

Company sold its real estate properties as discussed at note 5. A portion of the sale was not finalized until June 30, 2012 and the Company recorded the carrying amount (cost of acquisition, net of accumulated depreciation) as property for sale (R$1,142,000). The amount of R$1,623,000—stated as current asset in balance sheet—represents receivables from the property sale which was completed until June 30, 2012 (R$3,523,000 in 2011); and

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(d)

Refers to the Company´s investment in a 20% capital interest in BBS (see note 2), recorded at cost. The observed market prices for this asset are not available and the Company has no sufficient information in order to develop its own assumptions for evaluating the fair value of such investment.

NOTE 5 – SALE OF ASSETS

During the third quarter of 2010 the Company entered into an agreement to sell all its eight properties to Bigburger Ltda. and CCC Empreendimentos e Participações Ltda., entities controlled by Mr. José Ricardo Bomeny and Rômulo B. Fonseca, respectively, two major shareholders of the Company. Seven of those sold properties operate under the Bob’s brand (Three own-operated stores and four stores operated by franchisees) and one store operated by third party not related the Company´s brands. The sale transaction only included the buildings and improvements on it and did not include either the operating assets or the operation of the stores. Therefore, after the sale of the properties, the Company kept on operating its stores as usual, as did the franchisees.

This transaction was conducted at fair value and resulted in sale proceeds of R$13.5 million on assets with carrying amount of R$6.4 million. Management prepared fair value estimates for these asset sales and in considered valuation reports of third-party real estate consultants.

By December 31, 2010, much of the transaction had already been concluded (seven of the eight properties transferred), for which reason the company accounted for a net gain of R$5.4 million (R$3.6 million, net of income taxes) recognized as income. Some legal issues have held up the sale of the one remaining property, though this is expected to be concluded in 2012, for an expected additional gain of approximately R$1.7 million (R$1.1 million, net of income taxes). The assets which were not transferred until June 30, 2012 were reclassified in the account Properties for sale (part of “Other receivable and other assets – see note 4) considering at their carrying amount (R$1.1 million).

The terms of the sale included a down-payment of approximately 20% of the total amount, with the balance to be paid in 24 monthly installments. The buyers also accepted certain conditions to protect the Company’s long-term interests, including the maintenance of existing rental agreements and loan guarantees. All payments due until June 30, 2012, (approximately R$10.1 million) were received by the Company. The short term portion of those receivables is classified as “Receivables from properties sale” and the long term portion is classified as part of “Other receivable and other assets”. The Company evaluates the status of those receivables and concluded that there are no issues with their collectability.

This transaction will enable the Company to reduce its debt and permit management to focus its attention on the core restaurant operations.

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NOTE 6 – CONTINGENCIES AND REASSESSED TAXES

Liabilities related to tax amnesty programs and litigation consist of the following:


R$ 000'	June 30, 2012 (unaudited)						December 31, 2011
	Total Liability		Current Liability		Long Term Liability		Total Liability		Current Liability		Long Term Liability
Reassessed taxes
Federal taxes (REFIS IV)		3,402		2,062		1,340		4,121		1,940		2,181
Contingencies						—
REFIS IV		7,180		—		7,180		6,658				6,658
ISS tax litigation		8,044		—		8,044		7,666		—		7,666
Labor litigation		1,338		—		1,338		1,464				1,464
Property leasing and other litigation		324		—		324		246		—		246

TOTAL		20,288		2,062		18,226		20,155		1,940		18,215

Reassessed taxes

Over the past ten years, the Brazilian government has launched four amnesty programs for domestic companies to pay off tax in arrears. To apply to each program, the companies had to abandon any litigation that they may have started against the Brazilian government, and to take on the liability under dispute in such litigation. In exchange the amnesty programs guaranteed discounts of these tax debts and gave companies the opportunity to pay these debts at low interest rates over periods of time that could exceed ten years.

Venbo had outstanding tax debts from 1999, 2000 and 2002 and, as a consequence, applied for the four amnesty programs. Venbo’s administration believed that the government had incorrectly calculated its tax liabilities in each of the amnesty program, and until September 2009 Venbo had been discussing this matter with the Brazilian government on an administrative level.

Venbo enrolled in the fourth and last amnesty program in September 2009 (the “REFIS IV program”). Its aim was to take the original debts from the previous programs, update these debts by the Brazilian Federal Bank base interest rate, and deduct the payments made during the previous programs. The Brazilian government took two years to make this calculation. At the end of September 2011, the Brazilian government announced that Venbo’s consolidated tax debt was approximately R$22.4 million. Since the amnesty program allowed income tax credits to reduce the debt, Venbo was able to reduce its tax debts by the R$11.1 million it had in income tax credits.

Venbo disagrees with the amount calculated by the Brazilian government in September 2011. Venbo believes that the Brazilian government did not consider the payments made during the prior amnesty programs, which total of R$10.4 million. According to Venbo’s records, Venbo should owe R$4.2 million after the income tax credits are included in the account.

- 15 -

Venbo has decided to file an administrative appeal to the Brazilian Internal Revenue Service to have the calculations for the REFIS IV program reviewed. At this time, Venbo cannot estimate what the outcome of this claim will be and whether it will be able to reduce the liability to the amount it believes it owes.

These circumstances have the following impact on the company’s consolidated financial statements:

- the liability relating to the financing of taxes, previously stated at R$10.0 million, has been raised to R$11.3 million, charged against other operating expenses, in the income statement of 2011;

- the portion of the liability described above which Venbo is disputing has been reclassified from the reassessed taxes account to a contingency account;

- as described above, Venbo’s total income tax credits that were used when the debt was consolidated was R$11.3 million;

According to the REFIS IV program, Venbo will pay 151 monthly installments of approximately R$47,300 and 24 monthly installments of approximately R$111,700 commenced in January 2012 with interest accruing at rates set by the Brazilian federal government (SELIC), which is currently 8.2%p.y.

During the six months ended June 30, 2012, the Company paid approximately R$1.1 million (R$0.7 million in the same period of 2011) related to REFIS IV program.

Contingencies

• REFIS IV – as discussed above, the Company did not agree with a portion of the fiscal debt consolidated by the Brazilian Federal government, and initiated a dispute to discuss the correct amount. The portion of the liability which is being disputed was reclassified to a contingency account.

• ISS tax litigation

None of the Company’s revenues were subject to municipal tax on services rendered (ISS) until 2003. Notwithstanding, at the beginning of 2004, a new legislation stated that royalties were to be considered liable for ISS tax payment. Although the Company is claiming in court that royalties should not be understood as payment for services rendered and therefore should not be taxed under ISS legislation, the Company is monthly depositing in court the amount claimed.

As of June 30, 2012, the Company has deposited R$7.9 million (R$7.6 million in December 31, 2011, which is considered by the Company’s management, based on the opinion of its legal advisors, sufficient to cover the Company’s current ISS tax contingencies.

During the third quarter of 2009, the Company’s claim was partially settled in court. The decision was for Rio de Janeiro municipality to reimburse the Company approximately R$0.5 million taxed before the ISS new legislation was enacted. The Company is studying how probable tax credits to be received from the municipality could be offset against taxes to be paid to the municipality, since the Company is currently depositing the amount due in court. Because of the uncertainty of realizing this tax credit, the Company did not recognize the related amount as a gain.

- 16 -

The referred change in ISS tax legislation triggered much debate on whether marketing fund contribution and initial fees paid by franchisees should be considered services rendered and be liable for ISS tax payment. The Company and its legal advisors understand that those figures are not covered by the ISS legislation and, accordingly, they are not subject to such taxation. The Company and its legal advisors are working to adopt all necessary measures to avoid an inadequate interpretation of ISS taxation that could lead on marketing fund contribution and initial fees.

• Labor litigation

During 2005, the Company was ordered to pay to a former employee R$480,000. Although unusually high, the Company cannot guarantee it will not receive other labor complaints of similar magnitude.

As of June 30, 2012 the Company accounted for labor related liabilities the amount of R$1.6 million (R$1.5 million in December 31, 2011), which is considered by Management, based on the opinion of its legal advisors, sufficient to cover the Company’s existing labor contingencies.

Other contingencies

As of June 30, 2012 the Company had other unresolved claims pending related to the former owner of Venbo, to franchisees or ex-franchisees, to owners of properties where the Company held lease contracts, to former employees and others, for which its legal advisors evaluated as possible and favorable outcome. For those claims no liability was recorded in the Company´s balance sheet as per the accounting practices.

NOTE 7 – DEFERRED INCOME

When a vendor bonus is received in advance in cash, it is recorded as an entry in the “Cash and cash equivalents” with a corresponding credit in deferred income and is recognized on a straight line basis over the term of the related supply agreement on a monthly basis.

Performance bonuses may also include Exclusivity agreements, which are normally paid in advance by suppliers.

- 17 -

NOTE 8 – OTHER LIABILITY

During the second quarter, the Company initiated a new intensive program through which certain of its employees may receive compensation bonus in cash in 2015 if certain targets are annually met from 2012 to 2015. In connection with such new program, the Company accrued R$450,000 as other liability in its consolidate balance sheet.

NOTE 9 – TREASURY STOCK

In the last quarter of 2004, the Company’s Board of Directors approved a stock repurchase plan involving the repurchase of as many as 200,000 shares of its own common stock. The plan’s goal is to optimize the cash generated in the United States, and the repurchase limit was increased by 200,000 shares on October 18, 2006.

During the semester of 2011, the Company repurchased 8,325 shares related to such plan. During the same period of 2012, the Company did not repurchase any share under the referred stock repurchase plan.

Up to June 30, 2012, the Company repurchased a total amount of 343,490 shares and the accumulated stock purchases totaled R$2.1 million. Those transactions are accounted for as a reduction of Paid in Capital and an increase in treasury stock, in the Shareholders’ Equity.

NOTE 10 – SEGMENT INFORMATION

The Company owns and operates, both directly and through franchisees, Bob’s chain, Brazil’s second largest fast food hamburger restaurant chain. The Company owns and operates, through its subsidiaries Venbo, LM and PCN, 38 points of sale under the Bob’s brand.

Since April 2007, the Company has operated the KFC brand in Brazil through its wholly-owned subsidiary, CFK. Presently, the Company owns and operates, through its subsidiaries CFK, CFK SP and MPSC, 11 stores in Rio de Janeiro under the trade name KFC.

Since December 1, 2008, the Company has operated the Pizza Hut brand in São Paulo, Brazil, through its subsidiary IRB. It currently operates 18 stores under the Pizza Hut brand.

Since September, 2008, the Company has operated the Doggis brand in Rio de Janeiro through its subsidiary, DGS. During 2011 the Company converted all of our own-operated Doggis’ stores to franchised stores and inaugurated 9 new franchised stores in 2011.

During May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”) which operates a franchise network of frozen yogurt in Brazil since in 2008 with 48 franchised point of sales.

Currently, most of the Company’s operations are concentrated in southeastern Brazil. As of June 30, 2012, all point sales operated by the Company listed above were located at that region which provided 100.0% of total Net Revenues from Own-operated Restaurants for the year. In addition, from the total of 893 franchise-operated points of sales, 472 were located at the same region, providing 55.5% of Net Revenues from Franchisees.

Outside Brazil, the Bob’s brand is also present through franchise operations in Angola, Africa (five stores) and, since the last quarter of 2009, in Chile, South America (eight stores). These operations are not material to our overall results.

- 18 -

The Company manages and internally reports its operations in two segments: (1) own-stores operations (2) franchise operations. The following tables present the Company’s revenues, costs/expenses and operating income per segment:


R$ 000'	Results from own-stores operations
	Six months ended June 30,						Three months ended June 30,
	2012			2011			2012			2011
Net Restaurant Sales		83,863			78,468			40,246			38,322
Store Costs and Expenses		—			—			—			—
Food, Beverage and Packaging		(27,329	)		(25,876	)		(12,408	)		(12,352	)
Payroll & Related Benefits		(18,254	)		(16,790	)		(9,093	)		(8,158	)
Restaurant Occupancy		(9,572	)		(9,379	)		(3,652	)		(4,624	)
Contracted Services		(9,709	)		(8,859	)		(6,273	)		(4,818	)
Depreciation and Amortization		(2,889	)		(2,705	)		(1,398	)		(1,136	)
Royalties charged		(3,317	)		(2,853	)		(1,491	)		(1,469	)
Other Store Costs and Expenses		(6,321	)		(5,620	)		(2,556	)		(2,435	)

Total Store Costs and Expenses		(77,391	)		(72,082	)		36,871			(34,992	)

Operating margin		6,472			6,386			3,375			3,330


R$ 000'	Results from franchise operations
	Six months ended June 30,						Three months ended June 30,
	2012			2011			2012			2011
Net Franchise Revenues		19,688			15,434			9,677			7,824
Payroll & Related Benefits		(4,515	)		(3,280	)		(2,463	)		(1,575	)
Occupancy expenses		(680	)		(426	)		(333	)		(183	)
Travel expenses		(427	)		(677	)		(202	)		(485	)
Contracted Services		(588	)		(463	)		(472	)		(267	)
Other franchise cost and expenses		(598	)		(632	)		(259	)		(400	)

Total Franchise Costs and Expenses		(6,808	)		(5,478	)		(3,729	)		(2,910	)

Operating margin		12,880			9,956			5,948			4,914

Currently, the Bob’s brand accounts for most of the franchise activity, as shown in the table below:


R$ 000’	Franchise Operating Margin
	Six months ended June 30,						Three months ended June 30,
	2012			2011			2012			2011
Bob’s Brand		14,326			10,032			7,470			4,997
KFC’s Brand		(1,058	)		(76	)		(1,144	)		(83	)
Doggi’s Brand		(473	)		—			(463	)		—
Yoggi’s Brand		85			—			85			—

Franchise Operating Margin		12,880			9,956			5,948			4,914

Cost and expenses that are exclusively related to own-operated stores—even the ones incurred at the headquarters—are considered in the item “Results from own-store operations”.

Cost and expenses that are exclusively related to franchisee operated stores—even the ones incurred at the headquarters—are considered in the item “Results from franchise operations”.

There are items that support both activities, such as (i) administrative expenses (finance department collects the receivables from franchise but also reviews daily own store sales); (ii) selling expenses (our marketing campaigns enhance the sales of our stores as well as the sales of our franchisees); (iii) interest expense (income); (iv) income tax (benefits); (v) exclusivity and other agreements with suppliers; and (vi) extraordinary items. Such items were not included in none of the segment results disclosed in the table above because (a) their segregation would require a high level of complexity and (b) the chief operating decision maker relies primarily on operating margins to assess the segment performance.

Currently, besides the accounts receivables from franchisees (derived from franchise fees, royalties, and marketing fund), the Company does not have assets exclusively used at the franchise business. Accordingly, except for those receivables, assets presented in the Consolidated Balance Sheets are used at the restaurant operating business.

- 19 -

The Company also manages its business concerning each of the brands it operates. Own-stores operation conducted by the Company provided the following figures per brand:


	Results from Bob´s brand operations						Results from KFC´s brand operations						Results from Pizza Hut´s brand operations						Results from Doggi's brand operations
R$ 000'
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011			2012			2011			2012		2011
Revenues	R$	32,334		R$	33,759		R$	15,995		R$	12,346		R$	35,534		R$	31,209		R$	—	R$	1,154
Food, Beverage and Packaging		(11,703	)		(12,408	)		(6,108	)		(4,642	)		(9,518	)		(8,237	)		—		(589	)
Payroll & Related Benefits		(7,684	)		(7,467	)		(3,885	)		(3,126	)		(6,685	)		(5,663	)		—		(534	)
Occupancy expenses		(3,520	)		(3,731	)		(2,157	)		(1,659	)		(3,895	)		(3,639	)		—		(350	)
Contracted Services		(3,559	)		(2,899	)		(1,709	)		(1,720	)		(4,441	)		(4,016	)		—		(224	)
Depreciation and Amortization		(1,081	)		(1,095	)		(811	)		(614	)		(995	)		(879	)		—		(117	)
Royalties charged		—			—			(1,004	)		(793	)		(2,313	)		(2,042	)		—		(18	)
Other Store Costs and Expenses		(3,515	)		(3,025	)		(1,224	)		(1,158	)		(1,584	)		(1,342	)		—		(95	)

Total Own-stores cost and expenses		(31,062	)		(30,625	)		(16,898	)		(13,712	)		(29,431	)		(25,818	)		—		(1,927	)

Operating margin	R$	1,272		R$	3,134		R$	(903	)	R$	(1,366	)	R$	6,103		R$	5,391		R$	—	R$	(773	)


	Results from Bob´s brand operations						Results from KFC´s brand operations						Results from Pizza Hut´s brand operations						Results from Doggi's brand operations
R$ 000'
	Three months ended June 30,						Three months ended June 30,						Three months ended June 30,						Three months ended June 30,
	2012			2011			2012			2011			2012			2011			2012		2011
Revenues	R$	14,008		R$	15,474		R$	8,008		R$	6,132		R$	18,230		R$	16,273		R$	—	R$	443
Food, Beverage and Packaging		(4,527	)		(5,592	)		(3,074	)		(2,304	)		(4,807	)		(4,245	)		—		(211	)
Payroll & Related Benefits		(3,717	)		(3,434	)		(2,044	)		(1,629	)		(3,332	)		(2,835	)		—		(261	)
Occupancy expenses		(1,038	)		(1,781	)		(661	)		(845	)		(1,953	)		(1,827	)		—		(170	)
Contracted Services		(2,414	)		(1,728	)		(1,130	)		(813	)		(2,729	)		(2,187	)		—		(90	)
Depreciation and Amortization		(579	)		(503	)		(402	)		(318	)		(416	)		(254	)		—		(61	)
Royalties charged		—			—			(305	)		(391	)		(1,186	)		(1,060	)		—		(18	)
Other Store Costs and Expenses		(2,050	)		(1,306	)		(227	)		(597	)		(280	)		(492	)		—		(40	)

Total Own-stores cost and expenses		(14,325	)		(14,344	)		(7,843	)		(6,897	)		(14,703	)		(12,900	)		—		(851	)

Operating margin	R$	(317	)	R$	1,130		R$	165		R$	(765	)	R$	3,527		R$	3,373		R$	—	R$	(408	)

Below we provide the segment information and its reconciliation to the Company´s income statement:


R$ 000’	Six Months Ended June 30,						Three Months Ended June 30,
	2012			2011			2012			2011
Bob’s Operating Income	R$	1,272		R$	3,134		R$	(317	)	R$	1,130
KFC’s Operating Income (Loss)		(903	)		(1,366	)		165			(765	)
Pizza Hut’s Operating Income		6,103			5,391			3,527			3,373
Doggi’s Operating Loss		—			(773	)		—			(408	)

Total Operating Income		6,472			6,386			3,375			3,330
Income from franchise operations		12,880			9,956			5,948			4,914

Unallocated Marketing Expenses		(1,895	)		(1,391	)		(544	)		(376	)
Unallocated Administrative Expenses		(16,243	)		(14,678	)		(7,641	)		(6,910	)
Unallocated Other Operating Expenses		(2,785	)		(3,361	)		(1,387	)		(1,732	)
Unallocated Net Revenues from Trade Partners		10,738			10,567			4,147			3,775
Unallocated Other income		1,302			1,462			982			1,065
Unallocated Net result of assets sold and impairment of assets		83			(28	)		127			(26	)
Unallocated Interest Income (Expenses)		(373	)		142			(234	)		186

Total Unallocated Expenses		(9,173	)		(7,287	)		(4,550	)		(4,018	)

NET INCOME BEFORE INCOME TAX		10,179			9,055			4,773			4,226

- 20 -

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following MD&A is intended to help readers understand the results of the Company’s operations, its financial condition and cash flows. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements.

Special Note about Forward-Looking Statements

Certain statements in the Management’s Discussion and Analysis (“MD&A”) other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the company’s Annual Report on Form 10-K for the year ended December 31, 2011. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

OUR BUSINESS

References to “we”, “us” or the “Company” are to Brazil Fast Food Corp.

In 1996, we acquired 100.0% of the capital of Venbo Comercio de Alimentos Ltda. (“Venbo”), a Brazilian limited liability company that owns and operates, both directly and through franchisees, Bob’s hamburger fast food chain.

In 2006, we established a holding company in Brazil called BFFC do Brasil Participações Ltda. (“BFFC do Brasil”, formerly 22N Participações Ltda.), to consolidate all our business in the country and allow us to pursue our multi-brand program.

In 2007, we reached an agreement with Yum! Brands, owner of the KFC brand. By this agreement, BFFC do Brasil, through its subsidiary CFK Comércio de Alimentos Ltda. (“CFK”, formerly Clematis Indústria e Comércio de Alimentos e Participações Ltda.), started to conduct the operations of directly owned and operated KFC restaurants as a Yum! Brands franchisee, and took over the management, development and expansion of the KFC chain in Brazil.

In 2008, we reached an agreement with Restaurants Connection International Inc (“RCI”) to acquire, through its wholly-owned holding subsidiary, BFFC do Brasil, 60% of Internacional Restaurantes do Brasil (“IRB”), which operates Pizza Hut restaurants in the city of São Paulo as a Yum! Brands franchisee. The remaining 40% of IRB is held by another Brazilian company of which IRB’s current CEO is the main stockholder. IRB also operates a coffee concept brand called “In Bocca al Lupo”, which is present as a “corner” operation, inside Pizza Hut stores.

- 21 -

During 2012, Yum! Restaurants International (YRI) will directly manage its franchise business in Brazil, supporting both of its KFC and Pizza Hut businesses in Brazil from its Restaurant Support Center in São Paulo, which will be resourced to support the growth of both brands See further comments on note 2.

Also in 2008, we reached an agreement with Gastronomía & Negocios Sociedad Anonima (“G&N”, former Grupo de Empresas Doggis Sociedad Anonima), the leading food service company in Chile. By this agreement, BFFC do Brasil would establish a Master Franchise to manage, develop and expand the Doggis hot-dog chain in Brazil through own-operated restaurants and franchisees and G&N would establish a Master Franchise to manage, develop and expand the Bob’s hamburger chain in Chile through own-operated restaurants and franchisees. The Master Franchise established in Brazil was named DGS Comercio de Alimento S.A. (“DGS”) and the Master Franchise established in Chile was named BBS S.A. (“BBS”). BFFC do Brasil has 20% of BBS and G&N has 20% of DGS.

During May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”) which operates a franchise network of frozen yogurt in Brazil since 2008, with 48 franchised point of sales.

We have five Bob’s franchised restaurants in Luanda, capital of Angola; although we have been receiving royalties attributable to this operation, the total amount received is not relevant to our operations. We also have eight Bob’s franchised restaurants in Chile owned by BBS. The figures are also not material in our consolidated financial statements but they are disclosed at note 4 of the financial statements of this form 10-Q.

Our revenues are comprised of retail sales at Company restaurants and kiosks, franchise revenues from initial fees paid upon the signing of a new franchise contract or franchise contract renewal and royalty fees based on a percentage of sales reported by franchise restaurants and kiosks, performance bonus from trade partners’ agreements, and property income from restaurants that we lease or sublease to franchisees for a period no longer than one year.

We, through BFFC do Brasil, manage the second largest fast food chain in Brazil based on number of system units.

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RESULTS OF OPERATIONS—COMPARISON OF QUARTERS ENDED JUNE 30, 2012 AND 2011

(Amount in thousand of Brazilian Reais)

The following table sets forth the statement of operations for the three and six months ended June 30, 2012 and 2011. All the operating figures are stated as a percentage of total net revenues. However, the details of store costs and expenses and franchise expenses also include these figures as a percentage of net revenues from own-operated restaurants and net franchise revenues, respectively.


R$ 000'	Three Months Ended 30-Jun-12			%			Three Months Ended 30-Jun-11			%			Six Months Ended 30-Jun-12			%			Six Months Ended 30-Jun-11			%
REVENUES
Net Revenues from Own-operated Restaurants	R$	40,246			73.1	%	R$	38,322			75.2	%	R$	83,863			72.6	%	R$	78,468			74.1	%
Net Revenues from Franchisees		9,677			17.1	%		7,824			15.3	%		19,688			16.8	%		15,434			14.6	%
Revenues from Trade Partners		4,147			7.3	%		3,775			7.4	%		10,738			9.2	%		10,567			10.0	%
Other Income		982			1.8	%		1,065			2.1	%		1,302			1.1	%		1,462			1.4	%

TOTAL REVENUES		55,052			100.0	%		50,986			100.0	%		115,591			100.0	%		105,931			100.0	%
OPERATING COST AND EXPENSES
Store Costs and Expenses		(36,871	)		-67.0	%		(34,992	)		-68.6	%		(77,391	)		-67.0	%		(72,082	)		-68.0	%
Franchise Costs and Expenses		(3,729	)		6.8	%		(2,910	)		-5.7	%		(6,808	)		5.9	%		(5,478	)		-5.2	%
Marketing Expenses		(544	)		-1.0	%		(376	)		-0.7	%		(1,895	)		1.6	%		(1,391	)		-1.3	%
Administrative Expenses		(7,641	)		-14.3	%		(6,910	)		-13.6	%		(16,693	)		-14.3	%		(14,678	)		-13.9	%
Other Operating Expenses		(1,387	)		-0.9	%		(1,732	)		-3.4	%		(2,785	)		-1.6	%		(3,361	)		-3.2	%
Net result of assets sold		127			0.2	%		(26	)		-0.1	%		83			0.1	%		(28	)		0.0	%

TOTAL OPERATING COST AND EXPENSES		(50,045	)		90.9	%		(46,946	)		-92.1	%		(105,039	)		-91.9	%		(97,018	)		-91.6	%

OPERATING INCOME		5,007			9.1	%		4,040			7.9	%		10,552			8.1	%		8,913			8.4	%

Interest Income (Expense)		(234	)		-0.4	%		186			0.4	%		(373	)		-0.3	%		142			0.1	%

NET INCOME BEFORE INCOME TAX		4,773			8.7	%		4,226			8.3	%		10,179			7.8	%		9,055			8.5	%

Income taxes		(882	)		-2.1	%		(600	)		-1.6	%		(2,706	)		-3.2	%		(1,192	)		-1.5	%

NET INCOME BEFORE NON-CONTROLLING INTEREST		3,891			9.7	%		3,626			9.5	%		7,473			8.9	%		7,863			10.0	%

Net loss attributable to non-controlling interest		(244	)		-0.6	%		(330	)		-0.9	%		(426	)		-0.5	%		(337	)		-0.4	%

NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.		3,647			9.1	%		3,296			8.6	%		7,047			8.4	%		7,526			9.6	%

Net Revenues from Own-Operated Restaurants

Net restaurant sales for our company-owned retail outlets increased R$5.4 million or 9.4%, to R$83.8 million for the six months ended June 30, 2012 as compared to R$78.4 million for the six months ended June 30, 2011.

Net restaurant sales for our company-owned retail outlets increased R$1.9 million or 10.2%, to R$40.2 million for the three months ended June 30, 2012 as compared to R$38.3 million for the three months ended June 30, 2011.

The breakdown of net revenues from the Company’s own restaurants is as follows:


	Net revenues from own-operated restaurants
	6 Months June 30,		Increase (Decrease)			6 Months June 30,		3 Months June 30,		Increase (Decrease)			3 Months June 30,
Brand	2012		%			2011		2012		%			2011
Bob’s	R$	32,334		-4.2	%	R$	33,759	R$	14,008		-9.5	%	R$	15,474
KFC		15,995		29.6	%		12,346		8,008		30.6	%		6,132
IRB—Pizza Hut		35,534		13.9	%		31,209		18,230		12.0	%		16,273
DOGGIS		—		-100.0	%		1,154		—		-100.0	%		443

Consolidated Net Revenues	R$	83,863		6.9	%	R$	78,468	R$	40,246		5.0	%	R$	38,322

Based on the criterion of same store sales, which only includes stores that have been open for more than one year and represents a non-GAAP statistic used in retail industry analysis, Bob’s net restaurant sales in the six months ended June 30, 2012 were 4.9% higher than in the same six-month period in 2011. The increase is attributable to face-lift of some stores and to discounted price on one of the major sandwiches, as well as special events such as Rio+20 and intensive actions to improve business at the lunch time and at drive-thrus. However, Bob’s overall sales decreased due to the reduction in the number of points of sale (from 39 in June 30, 2011 to 38 at June 30, 2012).

- 23 -

During 2011 the Company converted all of our own-operated Doggis’ stores to franchised stores. For this reason the Company’s results for the six months ended June 30, 2012 do not disclose any Doggis’ restaurant sales in 2012.

The decrease in the number of Bob’s and DGS’s point of sales reflects the company’s strategy to limit its direct operations to its most profitable outlets and to focus on growing its franchise network.

Under the criterion of same store sales, net restaurant sales increased approximately 7.1% for the KFC brand between the six months ended June 30, 2012 and the equivalent period in 2011. KFC’s overall sales increased due to (i) actions improving delivery business, and mailing and web sales and promotions, such as R$1.00 ice cream and family combos. KFC’s overall sales also increased due to the growth of point of sales from 8 at June 30, 2011 to 11 at June 30, 2012.

Under the criterion of same store sales, Pizza Hut’s net restaurant sales increased by approximately 12.8% between the six–month period ended June 30, 2012 and the equivalent period of 2011. Pizza Hut’s sale increase is attributable to (i) review of marketing actions and canals such as newspapers, internet, outdoors and buses; (ii) intensive training of store personnel to improve suggestive sales of starters and deserts (iii) alteration of the menus including products and product combinations and selling prices; (iv) the design of specific actions to selected restaurants; (v) co-branding deals with Nestle, Mars and Hershey’s products, and (vi) discounted prices during Monday to Thursday. Pizza Hut’s revenues were also positively impacted by the increased number of point of sales from 17 at June 30, 2011 to 18 at June 30, 2012).

Net Franchise Revenues

Net franchise revenues are comprised of initial fees (due upon the signing of a new franchise contract) and royalty fees (a percentage on sales paid by stores operated by franchisees), as set forth below:


R$'000	Six Months ended June 30,				Three Months ended June 30,
Brand	2012		2011		2012		2011
Net Franchise Royalty Fees	R$	17,328	R$	13,638	R$	8,461	R$	6,942
Initial Fee		2,360		1,796		1,216		882

Net Franchise Revenues	R$	19,688	R$	15,434	R$	9,677	R$	7,824

Net franchise revenues increased R$4.3 million or 27.6%, to R$19.7 million for the six months ended June 30, 2012 from R$ 15.4 million for the six months ended June 30, 2011.

Net franchise revenues increased R$1.9 million or 23.7%, to R$ 9.7 million for the three months ended June 30, 2012 from R$ 7.8 million for the three months ended June 30, 2011.

- 24 -

These increases are attributable to the growth of Company’s franchise business from 736 retail outlets as of June 30, 2011 to 893 as of June 30, 2012.

Currently, the Bob’s brand accounts for most of the franchise activity.

Alongside the royalty fees and initial fees, the Company receives marketing contributions from its franchisees, which are designed to finance corporate marketing investments and are accounted for as discussed in Marketing Expenses.

Revenue from Trade partners and Other Income

We regularly negotiate commercial agreements with leading suppliers to benefit all restaurant chains under our management. We negotiate, through a specialized third party company, with suppliers of equipment, appliances, packaging, cleaning material and uniforms targeting the constant modernization of our chains, including development of new equipments and appliances, their regulatory and visual identification adequacy and reduced costs. We also negotiate with beverage and food suppliers, but due to exclusive formulas, those negotiations require confidentiality agreements and extended time for analysis and conclusion. We strategically decide whether to use one or more suppliers for each product and negotiate a monthly performance bonus which will depend on the product sales volume to our chains.

The Company settles agreements with beverage and food suppliers and for each product, the Company negotiates a monthly performance bonus which will depend on the product sales volume to its chains (including both own-operated and franchise operated). The performance bonus can be paid monthly or in advance (which are estimated), depending on the agreement terms negotiated with each supplier. The performance bonus is recognized as a credit in the Company’s income statement (under “revenues from trade partners”). Such revenue is recorded when cash from vendors is received, since it is difficult to estimate the receivable amount and significant doubts about its collectability exists until the vendor agrees with the exact bonus amounts.

The rise in the number of franchisees, from 736 on June 30, 2011 to 893 on June 30, 2012, together with the expansion of the multi-brand concept, has given the Company’s management greater bargaining power with its suppliers.

In addition, the growth of the franchisee chain has boosted the volume of purchases made from suppliers. According to the terms of its Trade Partner Agreements, this means the Company has benefited from volume-related performance bonuses from its suppliers.

Other income is mainly comprised of lease of Company’s properties and nonrecurring gains.

Store Costs and Expenses

As a percentage of Total revenues, Store costs and expenses were (67.0%) and (68.0%) for the semesters ended June 30, 2012 and 2011, respectively.

As a percentage of Total revenues, Store costs and expenses were (67.0%) and (68.6%) for the quarters ended June 30, 2012 and 2011, respectively.

Analyzed as a segment (own-store operations), the respective store costs and expenses for own-operated restaurants as compared to net revenues can be seen below:

- 25 -


R$ 000'	3 Months Ended 30/Jun/12			%			3 Months Ended 30/Jun/11			%			6 Months Ended 30/Jun/12			%			6 Months Ended 30/Jun/11			%
STORE RESULTS
Net Revenues from Own-operated Restaurants		40,246			100.0	%		38,322			100.0	%		83,863			100.0	%		78,468			100.0	%
Store Costs and Expenses
Food, Beverage and Packaging		(12,408	)		-30.8	%		(12,352	)		-32.2	%		(27,329	)		-32.6	%		(25,876	)		-33.0	%
Payroll & Related Benefits		(9,093	)		-22.6	%		(8,158	)		-21.3	%		(18,254	)		-21.8	%		(16,790	)		-21.4	%
Restaurant Occupancy		(3,652	)		-9.1	%		(4,624	)		-12.1	%		(9,572	)		-11.4	%		(9,379	)		-12.0	%
Contracted Services		(6,273	)		-15.6	%		(4,818	)		-12.6	%		(9,709	)		-11.6	%		(8,859	)		-11.3	%
Depreciation and Amortization		(1,398	)		-3.3	%		(1,136	)		-3.0	%		(2,889	)		-3.4	%		(2,705	)		-3.4	%
Royalties charged		(1,491	)		-3.5	%		(1,469	)		-3.8	%		(3,317	)		-3.9	%		(2,853	)		-3.6	%
Other Store Costs and Expenses		(2,556	)		6.4	%		(2,435	)		-6.4	%		(6,321	)		7.5	%		(5,620	)		-7.2	%
Total Store Costs and Expenses		(36,871	)		-91.6	%		(34,992	)		-91.3	%		(77,391	)		-92.3	%		(72,082	)		-91.9	%

STORE OPERATING INCOME		3,375			8.4	%		3,330			8.7	%		6,472			7.7	%		6,386			8.1	%

Food, Beverage and Packaging Costs

The tables below set for\th the cost of food per brand:


R$'000	6 Months ended June 30, 2012								6 Months ended June 30, 2011
Brand	Revenues		Cost of Food			%			Revenues		Cost of Food			%
Bob's	R$	32,334	R$	(11,703	)		-36.2	%	R$	33,759	R$	(12,408	)		-36.8	%
KFC		15,995		(6,108	)		-38.2	%		12,346		(4,642	)		-37.6	%
IRB—Pizza Hut		35,534		(9,518	)		-26.8	%		31,209		(8,237	)		-26.4	%
DOGGIS		—		—			0.0	%		1,154		(589	)		-51.0	%

Consolidated	R$	83,863	R$	(27,329	)		-32.6	%	R$	78,468	R$	(25,876	)		-33.0	%


R$'000	3 Months ended June 30, 2012								3 Months ended June 30, 2011
Brand	Revenues		Cost of Food			%			Revenues		Cost of Food			%
Bob's	R$	14,008	R$	(4,527	)		-32.3	%	R$	15,474	R$	(5,592	)		-36.1	%
KFC		8,008		(3,074	)		-38.4	%		6,132		(2,304	)		-37.6	%
IRB—Pizza Hut		18,230		(4,807	)		-26.4	%		16,273		(4,245	)		-26.1	%
DOGGIS		—		—			0.0	%		443		(211	)		-47.6	%

Consolidated	R$	40,246	R$	(13,863	)		-30.8	%	R$	38,322	R$	(12,352	)		-32.2	%

The overall increase in the cost of food, beverages and packaging as a percentage of Net Revenues from Own-Operated Restaurants from 2011 to 2012 was mainly due a review of sales prices which derived lower margins. Also, the cost of food increased due to a higher purchase price of some raw materials used at Bob’s and KFC, such as bread, hamburger, ice cream and packaging products, and used at Pizza Huts such as cheese and vegetables. These increases were partially offset by a reduction in the purchase price of other important products at KFC and Bobs, like rice, beans and french fries and soft drinks and meat at Pizza Hut.

- 26 -

Payroll & Related Benefits

The tables below set forth the payroll costs per brand:


R$'000	6 Months ended June 30, 2012								6 Months ended June 30, 2011
Brand	Revenues		Payroll			%			Revenues		Payroll			%
Bob's	R$	32,334	R$	(7,684	)		-23.8	%	R$	33,759	R$	(7,467	)		-22.1	%
KFC		15,995		(3,885	)		-24.3	%		12,346		(3,126	)		-25.3	%
IRB—Pizza Hut		35,534		(6,685	)		-18.8	%		31,209		(5,663	)		-18.1	%
DOGGIS		—		—			0.0	%		1,154		(534	)		-46.3	%

Consolidated	R$	83,863	R$	(18,254	)		-21.8	%	R$	78,468	R$	(16,790	)		-21.4	%


R$'000	3 Months ended June 30, 2012								3 Months ended June 30, 2011
Brand	Revenues		Payroll			%			Revenues		Payroll			%
Bob's	R$	14,008	R$	(3,717	)		26.5	%	R$	15,474	R$	(3,434	)		-22.2	%
KFC		8,008		(2,044	)		-25.5	%		6,132		(1,629	)		-26.6	%
IRB—Pizza Hut		18,230		(3,332	)		-18.3	%		16,273		(2,835	)		-17.4	%
DOGGIS		—		—			0.0	%		443		(260	)		-58.7	%

Consolidated	R$	40,246	R$	(9,093	)		22.6	%	R$	38,322	R$	(8,158	)		-21.3	%

The Payroll & Related Benefits costs as a percentage of Net Revenues from Own-Operated Restaurants remained at the same level for the six and three month periods ended June 30, 2012 as compared to the same period in 2011.

- 27 -

Restaurant Occupancy Costs and Other Expenses

The tables below set forth the occupancy costs per brand:


R$'000	6 Months ended June 30, 2012								6 Months ended June 30, 2011
Brand	Revenues		Occupancy			%			Revenues		Occupancy			%
Bob's	R$	32,334	R$	(3,520	)		-10.9	%	R$	33,759	R$	(3,731	)		-11.1	%
KFC		15,995		(2,157	)		-13.5	%		12,346		(1,659	)		-13.4	%
IRB—Pizza Hut		35,534		(3,895	)		-11.0	%		31,209		(3,639	)		-11.7	%
DOGGIS		—		—			0.0	%		1,154		(350	)		-30.3	%

Consolidated	R$	83,863	R$	(9,572	)		-11.4	%	R$	78,468	R$	(9,379	)		-12.0	%


R$'000	3 Months ended June 30, 2012								3 Months ended June 30, 2011
Brand	Revenues		Occupancy			%			Revenues		Occupancy			%
Bob's	R$	14,008	R$	(1,038	)		-7.4	%	R$	15,474	R$	(1,781	)		-11.5	%
KFC		8,008		(661	)		-8.3	%		6,132		(845	)		-13.8	%
IRB—Pizza Hut		18,230		(1,953	)		-10.7	%		16,273		(1,827	)		-11.2	%
DOGGIS		—		—			0.0	%		443		(171	)		-38.6	%

Consolidated	R$	40,246	R$	(3,652	)		9.1	%	R$	38,322	R$	(4,624	)		-12.1	%

The decrease in restaurant occupancy costs and other expenses as a percentage of Net Revenues from Own-Operated Restaurants is mainly due to certain restaurant revenues during the second quarter of 2012 that were not subject to variable rent charges. Such decrease was partially offset due to higher store rents, as the rent agreements were adjusted, per their terms, by the IGP-M inflation index, which was 5.4% p.y.

Contracted Services

The tables below set forth the contracted service costs per brand:


R$'000	6 Months ended June 30, 2012								6 Months ended June 30, 2011
Brand	Revenues		Services			%			Revenues		Services			%
Bob's	R$	32,334	R$	(3,559	)		-11.0	%	R$	33,759	R$	(2,899	)		-8.6	%
KFC		15,995		(1,709	)		-10.7	%		12,346		(1,720	)		-13.9	%
IRB—Pizza Hut		35,534		(4,441	)		-12.5	%		31,209		(4,016	)		-12.9	%
DOGGIS		—		—			0.0	%		1,154		(224	)		-19.4	%

Consolidated	R$	83,863	R$	(9,709	)		-11.6	%	R$	78,468	R$	(8,859	)		-11.3	%

- 28 -

The increase in expenses related to contracted services as a percentage of net revenues from own-operated restaurants were due to increase in maintenance, delivery and utilities costs.

Depreciation and Amortization (Stores and Headquarters)

Depreciation and amortization nominal costs remained at the same level for the six-month period ended June 30, 2012 as compared to the same period in 2011.

Other Store Cost and Expenses

Other store cost and expenses expressed as a percentage of net revenues from own-operated restaurants remained at the same level for the six-month period ended June 30, 2012 as compared to the same period in 2011.

Franchise Costs and Expenses

As a percentage of Total Revenues, Franchise costs and expenses were (6.7%) and (5.2%) for the semesters ended June 30, 2012 and 2011, respectively.

As a percentage of Total Revenues, Franchise costs and expenses were (8.4%) and (5.7%) for the quarters ended June 30, 2012 and 2011, respectively.

Analyzed as a segment (franchise operations), franchise costs and expenses had the following behavior against net franchise revenues:


R$ 000'	3 Months Ended 30/Jun/12			%			3 Months Ended 30/Jun/11			%			6 Months Ended 30/Jun/12			%			6 Months Ended 30/Jun/11			%
FRANCHISE RESULTS
Net Franchise Revenues		9,677			100.0	%		7,824			100.0	%		19,688			100.0	%		15,434			100.0	%
Payroll & Related Benefits		-2463			-25.5	%		(1,575	)		-20.1	%		(4,515	)		-22.9	%		(3,280	)		-21.3	%
Occupancy expenses		(333	)		-3.4	%		(183	)		-2.3	%		(680	)		-3.5	%		(426	)		-2.8	%
Travel expenses		(202	)		-2.1	%		(485	)		-6.2	%		(427	)		-2.2	%		(677	)		-4.4	%
Contracted Services		(472	)		-4.9	%		(267	)		-3.4	%		(588	)		-3.0	%		(463	)		-3.0	%
Other franchise cost and expenses		(259	)		-2.7	%		(400	)		-5.1	%		(598	)		-3.0	%		(632	)		-4.1	%

Franchise Costs and Expenses		(3,729	)		-38.5	%		(2,910	)		-37.2	%		(6,808	)		-34.6	%		(5,478	)		-35.5	%

FRANCHISE OPERATING INCOME		5,948			61.5	%		4,914			62.8	%		12,880			65.4	%		9,956			64.5	%

Franchise cost and expenses expressed as a percentage net franchise revenues were approximately (39.6%) and (35.5%) for the periods of six months ended June 30, 2012 and 2011, respectively.

Franchise cost and expenses expressed as a percentage net franchise revenues were approximately (48.8%) and (37.2%) for the periods of three months ended June 30, 2012 and 2011, respectively.

These increases are attributable to the growth of franchise business and the related necessity to spread its infra-structure. Accordingly, there were increases of franchise department personnel and their compensation. The expansion in the number of employees also derived increases on occupancy costs, and traveling expenses in 2012.

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Marketing, General and Administrative Expenses

Marketing Expenses

Bob´s Brand

According to our franchise agreements, the Bob’s marketing fund dedicated to advertising and promotion is comprised of financial contributions paid by the franchisees and contributions by us. The fund is administrated by us and must be used in the common interest of the Bob’s chain, through the best efforts of the marketing department, to increase its restaurant sales.

The marketing contributions from franchisees are recorded on an accrual basis as assets in accounts receivables and in a cross entry as liabilities in the marketing fund. The contributions due by Venbo are recorded on an accrual basis as marketing expenses and in a cross entry as liabilities in the marketing fund.

In general, Bob’s franchisees monthly contribute with 4.0% of their monthly gross sales to the Bob’s marketing fund. Since 2006, we have also committed 4.0% of its gross sales from its own-operated restaurant monthly gross sales (sales derived from special events are not subject to such contribution). These contributions can be deducted from our marketing department expenses if previously agreed with the our franchisees. However, the total marketing investments may be greater than 4.0% of combined sales if a supplier makes an extra contribution (joint marketing programs) or if we use more of our own cash on marketing, advertising and promotions.

We primarily invest the Bob’s marketing fund resources in nationwide advertising programs (commercials or sponsorship on TV, radio and outdoors). Our franchisees may also invest directly in advertising and promotions for their own stores, upon previous consent from us, which freely decides whether the cost of such single advertisement or promotion should be deducted from the marketing contribution owed.

The Bob’s marketing fund resources are not required to be invested during the same month or year that they were received, but must be used in subsequent periods.

Periodically, we meet with the Bob’s Franchisee Council to divulge the marketing fund accounts in a report that is similar to a cash flow statement. This statement discloses the marketing contributions received and the marketing expenses, both on a cash basis.

The balance of any resources from the marketing fund that was not spent is recognized as accrued accounts payable and totaled R$ 1.1 million as of June 30, 2012 (R$3.1 million as of December 31, 2011).

This balance represents contributions made by Venbo and franchisees that have not yet been used in campaigns.

The marketing fund expenses on advertising and promotions are recognized as incurred. Total marketing investments financed by the marketing fund amounted to R$16.8 million and R$18.4 million for the six months ended June 30, 2012 and 2011, respectively.

- 30 -

KFC and Pizza Hut Brands

We contribute 0.5% of KFC’s and Pizza Hut’s monthly net sales into a marketing fund managed by YUM! Brands—Brazil. In addition, the Company is also committed to investing 5.0% of KFC’s and Pizza Hut’s monthly net sales in local marketing and advertising.

The marketing expenses on KFC and Pizza Hut advertising and promotions are recognized as incurred and amounted R$3.9 million and R$2.1 million for the six months ended June 30, 2012 and 2011, respectively.

Doggis Brand

We are committed to invest at least 4% of the Doggis restaurant sales in local marketing expenses. There is no contribution to a marketing fund.

Local marketing expenses on Doggis advertising and promotions are recognized as incurred and amounted R$ 0.1 million for the six months ended June, 2012 and R$0.3 million for the six months ended June, 2011.

As a percentage of total revenues, marketing expenses were approximately (2.6 %) and (1.3%) for the six months ended June 30, 2012 and 2011, respectively.

General and Administrative Expenses

As a percentage of total revenues, general and administrative expenses were approximately (14.3%) and (13.9%) for the six months ended June 30, 2012 and 2011, respectively.

As a percentage of total revenues, general and administrative expenses were approximately ( 14.3%) and (13.6%) for the three months ended June 30, 2012 and 2011, respectively.

These increases are attributable to outsourcing of various positions at our finance department, deriving labor severance costs, increase of salaries due to union agreements, as well as increase of administrative personnel in order to support the Company’s growth. In addition severance cost of Company’s high management during the second quarter derived increase of General and Administrative Expenses.

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Other Operating Expenses

Other operating expenses are mainly comprised of uncollectible receivables, depreciation, preopening and non recurring expenses. Other operating expenses expressed as a percentage of Total revenues were (1.6%), for the six months ended June 30, 2012 and (3.2%) for the six months ended June 30, 2011. Other operating expenses expressed as a percentage of Total revenues were (0.9%), for the three months ended June 30, 2012 and (3.4%) for the three months ended June 30, 2011.

The following table sets forth the breakdown of Other Operating Expenses:


	Six months ended						Three months ended
R$ 000’	June 30,						June 30,
	2012			2011			2012			2011
Uncollectable receivables	R$	(146	)	R$	890		R$	(125	)	R$	618
Depreciation of Headquarters’ fixed assets		(774	)		(740	)		(497	)		(530	)
Non-recurring logistics expenses		—			(2,411	)		—			(1,261	)
Accruals for contingencies		(274	)		(747	)		352			(446	)
Preopening and other expenses		(1,591	)		(353	)		(1,117	)		(113	)

	R$	(2,785	)	R$	(3,361	)	R$	(1,387	)	R$	(1,732	)

During the first semester of 2011 the Company paid out one-time expenses in the amount of R$2.4 million to cover momentary shortfalls in the distribution of raw materials to point of sales located at distant areas in the north and mid-west of Brazil, which are complicated to organize and have high logistics costs. Since the second quarter of 2012, the Company improved its logistics system, by Company changing its logistics operator.

Also during the first quarter of 2011, the Company received approximately R$900,000 of receivables which were previously written-off and expensed as uncollectible. Therefore, as of June 30, 2011 this amount was computed as a gain, reversing the doubtful receivable expenses incurred in the period, reducing the percentage discussed above.

Impairment of Assets and Net Result of Assets Sold

The Company reviews its fixed assets in accordance with guidance on the impairment or disposal of long-lived assets in the Property Plant and Equipment Topic of the FASB ASC 360.

During the quarters ended June 30, 2012 and 2011, the Company’s review in accordance with FASB ASC 360, resulted in no charge to the income statement.

Interest Expense, net

Interest expense increase as a percentage of Total Revenues is mainly due to the increase of Company’s indebtedness.

Income Taxes

As a percentage of total revenues, income taxes were approximately (3.2%) and (1.5%) for the six months ended June 30, 2012 and 2011, respectively.

As a percentage of total revenues, income taxes were approximately (2.1%) and (1.6%) for the three months ended June 30, 2012 and 2011, respectively.

From January, 2007 to December 2011 the Company recorded tax credits derived from its restructuring, completed on December 31, 2006, when all of the Company’s businesses in Brazil started to be consolidated through BFFC do Brasil. Since this credit extinguished on the end of 2011, income tax expenses increased from the first semester of 2011 to the same period of 2012.

During the second quarter of 2012, the Company reviewed the apportionment of its corporate expenses and such review derived in the reduction of the taxable income of some of its subsidiaries and partially offset the increase discussed in the previous paragraph.

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

A) Introduction

Since March 1996, we have funded our cumulative operating losses of approximately R$10.1 million and made acquisitions of businesses and capital improvements (including the refurbishment of some of the Company’s stores), for which we used cash remaining at the closure of our acquisition of Venbo, borrowed funds from various sources, and made private placements of our securities. As of June 30, 2012, we had cash on hand of approximately R$23.5 million—which included a R$21.4 million investment in cash equivalent—and a working capital of approximately R$13.3 million. Our cash on hand should be adequate to sustain our operations for the next twelve (12) months.

In the past, debts denominated in any other currency than Brazilian Reais increased with the major devaluation of the Brazilian Real at the beginning of 1999. A sequence of years with reduced sales, mainly due to the weak economic environment in Brazil, worsened the situation and we were not able to pay some of our obligations, including taxes. In the following years the payment of taxes in arrears was renegotiated with levels of Brazilian government so they could be paid off in monthly installments.

With the improvement of the Brazilian economy since 2002, our total revenues have increased and, joined to a capital injection of R$9.0 million, we have started to reduce our debt position. In 2003 we rescheduled much of the debt to long term. The continued improvement of sales led us to (i) drastically reduce our debts with financial institutions in 2005; and (ii) extinguish those debts and reverse its financial position to present time deposits with financial institutions at the end of 2006. The improved collection rate from our franchisees, commencing in 2005, also strengthened our current assets. In 2007 and the first three quarters of 2008, we maintained this positive scenario and recorded positive working capital.

Since the last quarter of 2008, when we increased our bank debt position in order to fund the acquisition of IRB, the expansion of the KFC stores and the startup of the Doggis brand, these transactions brought the Company’s working capital back into negative territory. After a sequence of positive results (operating income in the years of 2009, 2010 and 2011, as well as in the first semester of 2012) the Company returned to positive working capital.

For the quarter ended June 30, 2012, we had net cash provided by operating activities of R$8.5 million (R$9.4 million in 2011), net cash used in investing activities of R$8.9 million (R$0.5 million used in 2011) and net cash provided by financing activities of R$2.6 million (R$4.9 million used in 2011). Net cash used in investing activities was primarily the result of Company’s investment in property and equipment to improve Company’s retail operations, mainly setting up new own-operated KFC and Pizza Hut stores. Net cash provided by financing activities was mainly the result of new borrowings to fund the Company’s investments and operations.

Since the beginning of the repurchase program, we have also invested approximately R$2.1 million in the financial market, re-purchasing 335,165 shares that had gained considerable value in the over-the-counter market where they are negotiated.

We have had a policy of retaining future earnings for the development of our business. Today, our dividend policy is subject to the discretion of the Board of Directors and depends upon a number of factors, including future earnings, financial condition, cash requirements, and general business conditions. Each year, the Board of Directors discusses our profits distribution while considering our investment programs.

Although in 2008 and 2010 our Board of Directors decided to distribute cash dividends to our shareholders by virtue of our successful reorganization and increased operational margins, in 2009 and 2011 there were no dividends paid.

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B) Debt Obligation - financial institutions

As of June 30 2012 and December 31, 2011, we had the following debt obligations with financial institutions:


R$ 000'	June 30,			December 31,
	2012 (unaudited)			2011
Revolving lines of credit (a)	R$	18,176		R$	16,054
Other loan (b)		819			537

		18,995			16,591
Less: current portion		(13,665	)		(11,523	)

	R$	5,330		R$	5,068

At June 30, 2012, future maturities of notes payable are as follows:


R$ 000'
Remaining	2012	R$	13,371
	2013		1,321
	2014		1,321
	2015		1,321
	2016		1,661

		R$	18,995

(a) Part of this debt (R$13.4 million) is due on demand from two Brazilian financial institutions at interest of approximately 13.6%p.y. Another portion (R$4.9 million) is payable to a Brazilian financial institution in 53 installments of R$92,600 (commencing on June 2012 and ending on November, 2016), plus interests of 12.9%p.y. All debts of this category are collateralized by certain officers and receivables.

(b) Other loan was mainly comprised of loan taken out with UBS Pactual related to the acquisition of the Pizza Hut business in Brazil. This debt was fully repaid during 2011. The remaining debt is comprised of equipment financing with a Brazilian Government Bank (BNDES) and is due in 48 installments, with interests of 12.3% a.a.

The carrying amount of notes payable approximates fair value at June 30, 2012 because they are at market interest rates.

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C) Debt Obligation—taxes

Venbo disagrees with the amount calculated by the Brazilian government in September 2011. Venbo believes that the Brazilian government did not consider the payments made during the prior amnesty programs, which total R$10.4 million. According to Venbo’s records, Venbo should owe R$4.2 million after the income tax credits are included in the account.

These circumstances have the following impact on the company’s consolidated financial statements as of December 31, 2011:

- the liability relating to the financing of taxes, previously stated at R$10.0 million, has been raised to R$11.3 million, charged against other operating expenses, in the income statement of 2011;

- the portion of the liability described above which Venbo is disputing has been reclassified from the reassessed taxes account to a contingency account;

- as described above, Venbo’s total income tax credits that were used when the debt was consolidated was R$11.3 million;

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During the six months ended June 30, 2012, the Company paid approximately R$1.1 million (R$0.7 million in the same period of 2011) related to REFIS IV program.

D) Other Obligations

We also have long-term contractual obligations in the form of operating lease obligations related to the Company’s own-operated stores.

The future minimum lease payments under those obligations with initial or remaining noncancelable lease terms in excess of one year at June 30, 2012 are as follows:


R$ 000'
Fiscal Year		Contractual Leases
Remaining	2012	R$	8,682
	2013		13,164
	2014		11,238
	2015		5,579
	2016		3,909
Thereafter			8,382

		R$	50,954

Rent expense was R$9.1 million for the period of six months ended June 30, 2012 (R$8.5 million in 2011).

We require capital primarily for the improvement of our owned and operated points of sale. Currently, all our owned-operated retail outlets are located in leased facilities. Our land and building operational leases are generally written for terms of five years with one or more five-year renewal options.

In the past, we 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 injections.

The average cost of opening a retail outlet is approximately R$200,000 to R$2,000,000 including leasehold improvements, equipment and beginning inventory, as well as expenses for store design, site selection, lease negotiation, construction supervision and the obtainment of permits.

We estimate that our capital expenditure for the remaining fiscal year of 2012 to be used for maintaining and upgrading our current restaurant network, making new investments in restaurant equipment, and expanding the KFC, Pizza Hut, Doggis and Yoggi chains in Brazil through own-operated stores, will come to approximately R$6.0 million. In 2012, 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 expenditure. In addition, the expansion will provide income derived from initial fees charged on new franchised locations.

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.

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R$ 000’
Fiscal Year		Contractual Leases		Fiscal debt (REFIS IV)		Loans Payable		Total
Remaining	2012	R$	8,682	R$	1,031	R$	13,371	R$	23,084
	2013		13,164		2,062		1,321		16,547
	2014		11,238		2,062		1,321		14,621
	2015		5,579		2,062		1,321		8,962
	2016		3,909		2,062		1,661		7,632
Thereafter			8,382		1,303		—		9,685

		R$	50,954	R$	10,582	R$	18,995	R$	80,531

Lease obligations are usually adjusted to keep in line with inflation, which is currently at 5.4% p.y. Fiscal debts are payable with interest, the rates of which are discussed in letter C above. All the amounts disclosed in the previous tables include interest incurred up to June 30, 2012 on an accrual basis.

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

the expansion of Company’s franchisee base, which may be expected to generate additional cash flows from royalties and franchise initial fees without significant capital expenditures;

the improvement of food preparation methods in all stores to increase the operational margin of the chain, including acquiring new store’s equipment and hiring a consultancy firm for stores’ personnel training program;

the continuing of motivational programs and menu expansions to meet consumer needs and wishes;

the improvement and upgrade of our IT system

the negotiation with suppliers in order to obtain significant agreements in long term supply contracts; and

the renegotiation of past due receivables with franchisees.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The management’s discussion and analysis of the 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 disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011 in pages F-8 through F-51), the following involve a higher degree of judgment and/or complexity.

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. Revenues and expenses are translated at the weighted-average exchange rates for the year. The resulting translation adjustments are recognized in 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

Accounts receivable consist primarily of receivables from food sales, franchise royalties and assets sold to franchisees.

As of June 30, 2012 the Company has approximately 651 franchisees that operate approximately 893 points of sales. A few of them may undergo financial difficulties in the course of their business and may therefore fail to pay their monthly royalty fees.

In July 2010, the FASB issued ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20), which significantly increases disclosures about credit quality of financing receivables and the allowance for credit losses, and requires disclosures to be made at a greater level of disaggregation. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. The adoption of this guidance in 2011 only resulted in increased disclosures related to the Company’s notes receivable.

If a franchisee fails to pay its invoices for more than six months in a row, one of the following procedures is adopted: either (i) the franchisee’s accounts receivable are written off if the individual invoices are below R$5,000; or (ii) the Company records an allowance for doubtful accounts with a corresponding reduction in net revenues from franchisees, if the individual invoices are over R$5,000.

In addition, the Company recognizes an allowance for doubtful receivables to cover any amounts that may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against this allowance.

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Despite writing-off those receivables on the accounting books or recording an allowance for doubtful accounts, the finance department keeps records of all uncollected receivables from franchisees for purposes of commercial negotiations.

When a franchisee has past due accounts due to unpaid royalty fees, the Company may reassess such debts with the franchisee and collect them in installments. The Company may also intermediate the sale of the franchise business to another franchisee (new or owner of another franchised store) and reschedule such accounts receivable as part of the purchase price. When either kind of agreement is reached and collectability of the past due amounts is reasonably assured, the Company records these amounts as “Franchisees—renegotiated past due accounts”.

Impairment or Disposal of Long-lived assets

The Company adopted guidance on the impairment or disposal of long-lived assets in the FASB ASC Topics Property Plant and Equipment and Intangibles Other than Goodwill, which require an impairment loss shall be recognized if the carrying amount of a long-lived asset is not recoverable and its carrying amount exceeds its fair value. Also, such guidance require that long-lived assets being disposed of be measured at either the carrying amount or the fair value less cost to sell, whichever is lower, whether reported in continuing operations or in discontinued operations.

If an indicator of impairment (e.g. negative operating cash flows for the most recent trailing twelve-month period) exists for any group of assets, an estimate of undiscounted future cash flows produced by each restaurant within the asset grouping is compared to its carrying value. If any asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value as determined by an estimate of discounted future cash flows.

For purposes of impairment testing for our long-lived assets, we have concluded that an individual point of sale is the lowest level of independent cash flows. The Company reviews long-lived assets of such individual point of sales (primarily Property & Equipment and allocated intangible assets subject to amortization) that are currently operating annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of a point of sale may not be recoverable. The Company evaluates recoverability based on the point of sale’s forecasted undiscounted cash flows, which incorporate the best estimate of sales growth and margin improvement based upon our plans for the unit and actual results at comparable point of sales. For point of sales’ assets that are deemed to not be recoverable, we write down the impaired point of sale to its estimated fair value. Key assumptions in the determination of fair value are the future discounted cash flows of the point of sales. The discount rate used in the fair value calculation is our estimate of the Company’s weighted average cost of capital. Estimates of future cash flows are highly subjective judgments and can be significantly impacted by changes in the business or economic conditions.

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Revenue recognition

Restaurant sales revenue is recognized when purchase in the store is effected.

Initial franchise fee revenue is recognized when all material services and conditions relating to the franchise have been substantially performed or satisfied which normally occurs when the restaurant is opened. Monthly royalty fees equivalent to a percentage of the franchisees’ gross sales are recognized in the month when they are earned.

The Company settles agreements with beverage and food suppliers and for each product, the Company negotiates a monthly performance bonus which will depend on the product sales volume to its chains (including both own-operated and franchise operated). The performance bonus, or vendor bonuses, can be paid monthly or in advance (estimated), depending on the agreement terms negotiated with each supplier. The performance bonus is recognized as a credit in the Company’s income statement (under “revenues from trade partners”). Such revenue is recorded when cash from vendors is received, since there is a great difficulty in estimating the receivable amount and significant doubts about its collectability exists until the vendor agrees with the exact bonus amounts.

When a vendor bonus is received in advance in cash, it is recognized as deferred income and is charged to income on a straight line basis over the term of the related trade partner agreement on a monthly basis. Income from performance bonus is only possible because the number of restaurants that operate throughout Brazil under the prestigious brands, especially Bob’s, franchised by us represents an excellent channel for suppliers to increase their sales.

Income obtained by lease of any of the Company’s properties, by administration fees on marketing fund and nonrecurring gains are recognized as other income when earned and deemed realizable.

The relationship between the Company and each of its franchisees is legally bound by a formal contract, where each franchisee agrees to pay monthly royalty fees equivalent to a percentage of its gross sales. The formal contract and the franchisees’ sales (as a consequence of their business) meet three of the four revenue recognition requirements:

Persuasive evidence that an arrangement exists—the contract is signed by the franchisee;

Delivery has occurred or services have been rendered—franchisee sales are the basis of royalty revenues;

The seller’s price to the buyer is fixed or determinable—the contract states that royalties are a percentage of the franchisee’s gross sales;

The Company also meets the fourth requirement for revenue recognition (Collectability is reasonably assured) when recording its revenues. If a franchisee fails to pay its invoices for more than six months in a row, the Company does not stop invoicing the contracted amounts. However, in such cases the Company offsets any additional invoiced amounts with a corresponding full allowance for doubtful accounts.

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Marketing fund and expenses

Bob´s Brand

The Bob’s marketing fund resources are not required to be invested during the same month or year that they were received, but must be used in subsequent periods.

The balance of any resources from the marketing fund that was not spent is recognized as accrued accounts payable and represents contributions made by Venbo and franchisees that have not yet been used in campaigns.

The marketing fund expenses on advertising and promotions are recognized as incurred.

KFC and Pizza Hut Brands

The marketing expenses on KFC and Pizza Hut advertising and promotions are recognized as incurred.

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Doggis Brand

We are committed to invest at least 4% of the Doggis restaurant sales in local marketing expenses. There is no contribution to a marketing fund.

Local marketing expenses on Doggis advertising and promotions are recognized as incurred.

Income taxes

The Company accounts for income tax in accordance with guidance provided by the FASC ASC on Accounting for Income Tax. Under the asset and liability method set out in this guidance, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities on the financial statements and their respective tax basis and operating loss carry-forwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The valuation allowance reflects the Company’s assessment of the likelihood of realizing the net deferred tax assets in view of current operations and is comprised of tax loss carryfowards held by the Company through the portion of its subsidiaries’ tax losses which are greater than the respective projected taxable income.

Under the above-referred guidance, the effect of a change in tax rates or deferred tax assets and liabilities is recognized in income in the period they are enacted.

The effect of income tax positions are recorded only if those positions are “more likely than not” of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Although we do not currently have any material charges related to interest and penalties, such costs, if incurred, are reported within the provision for income taxes.

NEW ACCOUNTING STANDARDS

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards (IFRS). The new standards are effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company will implement the provisions of ASU 2011-11 as of January 1, 2013.

In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This ASU permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. The adoption of ASU 2011-08 in 2012 did not have an effect on the Company’s consolidated financial statements.

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In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. An entity should apply the ASU retrospectively. In December 2011, the FASB decided to defer the effective date of those changes in ASU 2011-05 that relate only to the presentation of reclassification adjustments in the statement of income by issuing ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive income in Accounting Standards Update 2011-05. The adoption of ASU 2011-05 in 2012 did not have an effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or U.S. GAAP. For U.S. GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS. The adoption of ASU 2011-04 in 2012 did not have an effect on the Company’s consolidated financial statements.

In December 2010, the FASB issued ASU 2010-28, Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts, a consensus of the FASB Emerging Issues Task Force (Issue No. 10-A). ASU 2010-28 modifies Step 1 of the goodwill impairment test under ASC Topic 350 for reporting units with zero or negative carrying amounts to require an entity to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are adverse qualitative factors in determining whether an interim goodwill impairment test between annual test dates is necessary. The adoption of ASU 2010-28 in 2012 did not have a material impact on its consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (EITF Issue No. 08-1, “Revenue Arrangements with Multiple Deliverables”). ASU 2009-13 amends FASB ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements, to eliminate the requirement that all undelivered elements have vendor specific objective evidence of selling price (VSOE) or third party evidence of selling price (TPE) before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already have been delivered. In the absence of VSOE and TPE for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. The overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. Application of the “residual method” of allocating an overall arrangement fee between delivered and undelivered elements will no longer be permitted upon adoption of ASU 2009-13. Additionally, the new guidance will require entities to disclose more information about their multiple-element revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of ASU 2009-13 in 2011 did not have an effect on the Company’s consolidated financial statements.

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OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

A portion of our purchase commitments are denominated in U.S. Dollars, while our operating revenues are denominated in Brazilian Reais. We extinguished all of our debt denominated in US$ in 2003. Fluctuations in exchange rates between the Real and the U.S. Dollar expose us to foreign exchange risk.

We finance a portion of our operations by issuing debt and using bank credit facilities. These debt obligations expose us to market risks, including changing CDI-based interest rate risk. The CDI is a daily variable interest rate used by Brazilian banks. It is linked to the Brazilian equivalent of the Federal Reserve fund rates and its fluctuations are much like those observed in the international financial market.

We had a R$18.2 million variable-rate (CDI-based interest) debt outstanding at June 30, 2012, and R$14.7 million outstanding at December 31, 2011. Based on these outstanding amounts, a 100 basis point change in interest rates would raise our interest expense by approximately $0.5 million at June 2012. Whenever possible, we make every effort to protect our revenues from foreign currency exchange risks by periodically adjusting our selling prices in Reais.

We are 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. Our primary market risk exposures are those relating to interest rate fluctuations and possible devaluations of the Brazilian currency. In particular, a change in Brazilian interest rates would affect the rates at which we could borrow funds under our several credit facilities with Brazilian banks and financial institutions.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2012, the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Based upon the foregoing evaluation as of June 30, 2012, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and operating as of June 30, 2012, to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2012, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the matters mentioned above.

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PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

Other than the tax appeals described in Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q, we are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

ITEM 1A.

RISK FACTORS.

An investment in our securities involves a high degree of risk. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011 that was filed with the Securities and Exchange Commission on April 30, 2012.

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ITEM 6.

EXHIBITS.


Exhibits Number		Title
31.1		Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer and Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.INS#		XBRL Instance Document#

101.SCH#		XBRL Taxonomy Extension Schema Document#

101.CAL#		XBRL Taxonomy Extension Calculation Linkbase Document#

101.DEF#		XBRL Taxonomy Extension Definition Linkbase Document#

101.LAB#		XBRL Taxonomy Extension Label Linkbase Document#

101.PRE#		XBRL Taxonomy Extension Presentation Linkbase Document#

*	Filed herewith.

**	Furnished herewith.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 17, 2012


	BRAZIL FAST FOOD CORP.

By:	/s/	Ricardo Figueiredo Bomeny

		Ricardo Figueiredo Bomeny
		Chief Executive Officer and Chief Financial Officer

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Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

BRAZIL FAST FOOD CORP 10-Q