Brazil Fast Food Corp.

Investment Thesis

“Analysis Connotes the careful study of available facts with the attempt to draw conclusions therefrom based on established principles and sound logic.” - Benjamin Graham With Benjamin Graham’s wise words in mind, we begin with a descriptive analysis of the company. Descriptive Brazil Fast Food Corp. (BFFC) is a holding company for BFFC do Brasil Participaoes Ltda. And its subsidiaries. The company has two operating segments: Operated Restaurants and Franchised Restaurants. BFFC was incorporated in Delware in 1992 and four years later in 1996, it acquired the Bob’s Burgers brand which is the second largest fast food chain in Brazil (behind McDonald’s domestic master franchisee Arcos Dorados Holdings Inc.) Additionally, in 2007 BFFC reached an agreement with Yum! Brands to become the master franchisee for its KFC brand in Brazil. In 2008 BFFC continued to build upon its core competency and acquired Internacional Restaurantes do Brasil (IRB) which is the largest franchisee of Pizza Hut in the country. Along with this acquisition also came a domestic coffee shop brand, In Bocca al Lupo which is wholly owned by IRB and operates as well as franchises cafes. A fifth brand which is locally owned by BFFC is Doggis. Doggis is the largest hot dog chain network in Latin America, in the third quarter of 2008 BFFC entered into an agreement with Grupo de Empresas Doggis S.A. which is the parent of the Doggis chain to become the master franchisee for the brand in Brazil. A more penetrating overview of each concept i believe is warranted which will attempt to identify the strong and weak points of each concept as well as compare BFFC’s exhibit with other companies in its category. But before, a bit more on the rich history of the Bob’s brand in Brazil as to understand why a company is where it is today, we must know how it got here. Bob’s was originally founded by American tennis star turned entrepreneur Bob Falkenburg in 1952 in Copacabana, Rio de Janeiro. At the time there were no other quick service restaurants in Brazil and Bob’s became the first fast food concept in the country.Bob’s initially prospered, adding six additional outlets in subsequent years and expanding to Sao Paulo before Mr. Falkenburg sold the chain to a local firm Libby do Brasil which was later acquired by Nestle. Nestle in turn divested its retailing operations to Vendex, a Dutch multinational in 1987. As usually happens, all the corporate re-shuffling began to take a toll on Bob’s as it’s operations were being neglected. So to their credit, Nestle recognizing that they could not effectively run the business sold it to BFFC in 1996 for $21 Mil. USD which brings us to the present. Bob’s

Bob’s is the second largest fast food restaurant chain in Brazil with approx. 708 points of sale (661 franchises and 47 wholly owned) as of Dec. 31, 2010. Approx. 15 of these locations are express stores (Bexpress) which offer pre-prepared sandwiches, milkshakes and ice cream sundaes. Bob’s restaurants can be found in every state in Brazil with a particular concentration in Rio de Janeiro and Sao Paulo where about 45.1% of all restaurants are located. Additionally, there are also three franchised restaurants in Angola, Africa and four in Chile, Latin America respectively. The company has also developed the “Bex Station” concept in a partnership with the Shell Company, and refers to an exclusive shelf for Bob’s express products in Shell Convenience Stores throughout Brazil. As of Dec. 31, 2010 there are 15 such mini stores within licensed Shell stations. The increased visibility such partnerships offer the company may be plus that could be more than offset by the drop off in quality and uniformity of food products if the company fails to adhere to strict standards of food preparation and cooking going forward. Below is a comparison of Bob’s and its primary competitors on the count of several critical factors:

Factor Bob’s McDonald’s* Giraffas Habib’s Burger King

Total Revenue $72.1 $3.0 Bil. - - -

Net Income $5.1 $106 - - -

CF From Operations

- $263.9 - - -

FCF - $88.2 - - -

No. of Stores 708 625 400 301 108

Same-Store Rev.

$101 $2.7 - - -

Same-Store Sales YOY Growth %

4.7% - - - -

Debt Outstanding

$14.0 Mil. $469.2 Mil. - - -

* McDonald’s figures for Brazil are figures for Arcos Dorados Holdings Inc. (Largest franchisee in Brazil)- All figures given are in USD- All figures are for fiscal year 2010 - Debt outstanding figure for Bob’s is total BFFC consolidated debt The above chart is only a small representative sample of each company’s performance and underlying economics, obviously a much longer time frame for this data would be desirable such as one covering a ten year period. Unfortunately, such a comparison is not possible as three of Bob’s primary competitors (Giraffas, Habib’s and Burger King) are privately held and the other, Arcos Dorados only became a publicly traded entity in April 2011 making audited financials statements not available.

What we are left with leaves much to be desired, but we can draw some obvious conclusions from the available data set nevertheless, namely: - Arcos Dorados is by far larger and more profitable in every respect. - Same-Store Rev. figures indicate that Bob’s lower volume, non-traditional Bexpress and Bex Stations locations are pulling down this key metric number. Pizza Hut/KFC In February 2007 a partnership agreement was reached between BFFC and Yum! Restaurants Internacional, Yum! Brands Inc. Latin American subsidiary to expand the KFC brand in Brazil through both corporate owned stores and franchises. BFFC’s KFC operations currently consist of ten restaurants, nine wholly owned and one franchised in Rio de Janeiro and Sao Paulo respectively. The ownership of 17 Pizza Hut franchises came as a result of BFFC acquiring a controlling 60% in Internacional Restaurantes do Brasil S.A. (“IRB”) in August 2008. which is the largest domestic Pizza Hut franchisee. The remaining 40% of IRB is held by a private Brazilian company of which IRB’s current CEO is the majority stockholder. IRB also operates a coffee concept brand called “In Bocca al Lupo Café” which currently has four locations which are adjacent to the company’s Pizza Hut storefronts.In partnering with the largest quick service restaurant franchisor in the world Yum! Brands, BFFC has effectively taken control over the direction and further development of what would otherwise have been a major competitor in the largest Latin American market. Instead, by cooperating rather than competing BFFC will profit from the furtherance of both the KFC and Pizza Hut brands in its market. Indeed they already have, as together the KFC and Pizza Hut concepts now account for over 54% of all revenue from company owned restaurants. Same-store sales for KFC and Pizza Hut also grew year over year by approx. 3.7% and 13.2% respectively, making them the drivers for the company’s overall same-store sales growth over 2009. Doggis Doggis is a concept which was started in 1987 by two Chilean entrepreneurs (Oscar Fuenzalida and Ricardo Duch) and has gone on to become the largest specialty hot dog restaurant in Latin America with over 151 restaurants as of Dec 31, 2010. In October 2008, BFFC reached an exclusive master franchise agreement with the parent company of the Doggis brand (Doggis Company Group S.A.) which made BFFC responsible for developing the Doggis brand in Brazil and Doggis Group the master franchisee for Bob’s in Chile. BFFC now directly owns and operates 4 Doggis branded restaurants in Rio de Janeiro and as of July 2010 has signed on their first franchisee for the concept in Manaus. While the Doggis concept still makes up less than 3% of consolidated company revenues, i expect this figure to grow markedly as BFFC develops more franchisees for the restaurant as they plan to do

primarily in the North, Northeast and Southeast regions of the country initially. The initial agreement signed between BFFC and the Doggis Company Group also incentivize’s the rapid expansion of the brand in Brazil as it calls for BFFC to pay no royalties for the first ten domestic Doggis restaurants opened. Macro-Economic Considerations Consumer Food Services Industry The consumer food services industry in Brazil grew by an estimated 10% in 2010 over the prior year. This was due to several factors: - Overall GDP grew by 7.5% in 2010 compared to a negative reading in 2009 of -0.6% - Consumer Food Service as an industry is benefiting from an increase in consumer purchasing power by a lower economic class consumers. - Growth of over 4% in the domestic property construction market in 2010 fueled expansion of quick service restaurant chains into newly leased storefronts of recently built strip plazas and malls. To put things in perspective, the GDP growth factor cannot be counted upon with any reliability as numbers will fluctuate greatly (as seen above) even more so today as inflation becomes more prevalent around the world and is indeed already outstripping gross domestic product growth in many countries. The growth in other sectors of the economy can be counted upon even less as that would go on to require specialized knowledge of various other industries and sectors which may be outside of the area of competence of the investor. The most likely factor to have any positive impact on the industry as a whole is the increasing purchasing power of the population, particularly the emerging middle class which for the first time in 2010 makes up a little more than half the population combined with the need for convenience due to longer work hours and commutes which could foster growth in the sector as “fast food” becomes an everyday necessity as it is now in North America and Europe. Indeed, Brazilian consumers already eat about one in five meals away from home with casual food consumption growing at a faster clip than traditional meal intakes at sit-down restaurants. Overall. industry, sector and social economic factors are favorable for the short-mid-term. Political The political state in Brazil is stable as it is a democratic republic with Presidents being electable for four year terms and a multi-party system comprised of fifteen separate parties.

The current President, Dilma Rousseff was sworn in on January 1, 2011 succeeding Lula da Silva who enjoyed the highest approval rating in the country’s history. Both are representatives of the Worker’s Party (PT), a centre-left social democratic party. The PT has a strong base in the organised working class and the poor, and is committed to building a working class political alternative. PT introduced 'participatory budgeting' in 1990. Meaning that each year residents participate in grassroots meetings to discuss the allocation of 50 percent of the municipal budget.It has proven to be popular and PT mayors have been re-elected four times. However, given the party’s strong socialist views and policies it is distinctly at odds with the right wing and more pro business advocates in general. This is certainly a drawback as an emerging economy such as Brazil’s requires an encouraging environment for industry as well as entrepreneurship if it is to flourish and become a more developed country over the coming decades. There is also the case of the country’s tumultuous political and economic past of the past two centuries before the country returned to civilian rule in 1985. Despite the improvements in the last several years, the country still suffers from constant institutional changes that make the continuity of long-term business development plans difficult and can also adversely affect strategies. In this case BFFC may be negatively affected by political and constitutional uncertainty in the country as well as adverse business and economic legislation which their is a risk the current government may administer. Economy Brazil’s economy is the seventh largest in the world by nominal GDP and the largest in Latin America. The country has a centrally planned economy by the Central Bank of Brazil (Banco Central do Brasil) Brazil is one of the fastest growing economies in the world with GDP growth above 5% (7.5% in 2010), despite this GDP per capital is still a very marginal $10,471 showing that the country is still decades away from becoming a major developed economy. The domestic economy is largely service driven with an estimated (as of 2008) 65% of GDP contributed by the services industry, followed by the industrial and agriculture sectors. BFFC’s business is especially sensitive to economic activity as its affects consumer spending and employment. The second major factor affecting business is inflation, as higher food, utility and packing material prices depresses margins and increases the cost of doing business. In this case, the domestic economy has taken several notable, positive steps in the last decade, namely reducing its dependence on imported oil, Brazil became a self-sufficient producer of oil in 2006. The country also recently adopted reform measures to balance the economy. A law of fiscal responsibility

was enacted which controls public expenditure by the Executive Branches at federal, state and municipal levels. At the same time, investments were made towards administration efficiency. Checks and balances on government is a step in the right direction and one that many countries around the world today would be wise to consider. While the country still runs a budget deficit and inflation still largely running on the high side (down from a high of approx. 12.5% in 2002 to a current 7.2% as of Aug. 2011) according to statistics, which should always be taken with a grain of salt as inflation typically tends to be under-reported by statistical agencies. Despite this, if the fiscal responsibility measures cited above are indeed stringently implemented along with Brazil’s favorable social economic trends taking hold via a growing middle class and inflation is reigned in by a strengthening Brazilian Real, the overall economic picture should remain largely stable with moderate ebbs and flows felt from effects of the economies of trade partners. Now that we have a fundamental understanding of both the company’s operations and the environment in which it competes, a critical look at management and it’s strategy is in order to begin determining whether we would like to own part of this business at it stands today. Management Not a lot is personally known about the board of directors and current executive team other than some very basic information. The current Chairman of the Board, Guillermo Hector Pisano has served as a director of the company since 2002 and the company’s other directors (5 in total) have served on the board for an average of more than four years. One thing we do know is that the board believes in efficiency and keeping costs minimal wherever possible. BFFC trimmed down its board from a total of seven members in 2009 to the current five and the total pay (including bonuses) given to current CEO Richard Bomeny is $238,391 BRL. The board and management together currently own approx. 6.1% of BFFC which is a much higher percentage of insider ownership than at comparable companies such as Arcos Dorados where insiders own less than 0.2% of the company.The 6.1% owned by present management is also higher than the 1.74% of BFFC currently owned by a total of two institutions/funds. The current operational strategy of management is multi-tiered and can be divided into the following categories:

- Company Owned Restaurants - Franchised Restaurants - Advertising/Promotions Company Owned Restaurants. The most significant initiative undertaken by management in its operated restaurants and indeed in its franchised as well is the maintenance of quality and uniformity throughout the restaurants owned and operated by the company. This endeavour largely entails publishing detailed specifications for food products, food preparation and service, to continuous in-service training of employees and by field visits from company supervisors. It is a positive sign to see management take this step as the lack of uniformity and quality control has been a major factor plaguing BFFC in the past and indeed a primary reason why the company lost its leading position in the quick service sector to McDonald’s which it had obtained through its first mover advantage as MCD’s operations were much more sophisticated and streamlined and largely still are. But management is keenly aware of this problem and rightfully taking corrective steps. Franchised Restaurants. BFFC is focused on developing and strengthening its franchise/licensing system as well as increasing its total number of both traditional and alternative franchised units. The total number of franchised restaurants currently stands at 712 points of sale, including 319 alternative locations (express stores, kiosks and convenience store locations which have a limited menu) these units are owned by approx. 230 groups of franchisees. Franchised restaurant growth is emphasized due to the much lower fixed costs of opening new storefronts as well as the higher margins from franchisee’s initial fees and payment of royalties which are based on a set percentage of sales. Another area of focus as espoused in BFFC’s 2010 10-K is quality and consistency (as talked about above) when its comes to its franchised units. This increased focus on the overall quality of its operations seems to be paying off as BFFC received another “Franchise Excellence Award” in 2010 given by the Brazilian Association of Franchising (ABF) Advertising & Promotions. The primary demographic targeted by BFFC is young consumers (Age 13-25) as this group makes up the largest segment of the population which consumes fast food in Brazil. BFFC implements a standard multi-media marketing program encompassing television, radio, outdoor and social media. Funds for such a program come from both BFFC and franchisees which contribute a contracted percentage of their sales to a marketing fund. In addition, for the past fifteen years the company has utilized a pop-up store strategy to participate in

several annual events, namely Rio de Janeiro’s Carnival Parade and the Pan-American Games (North, Central and South America Olympics) using custom constructed trailers and kiosks at temporary locations for the duration of each event. This strategy has provided not only an annual boost to top line revenue but non-paid visibility as kiosks and signage are picked up via local television coverage of the events. From the above we can draw out several strengths, weaknesses and potential opportunities for the company: Strengths * Management’s interests are aligned with shareholders making operational efficiencies, cost cutting and adequate allocation of capital more plausible going forward. * Dedication to overall product quality and brand consistency is beginning to be rewarded via improved operations and increased margins. * Intimate understanding of domestic market and local cuisine preferences (Brazil has extensive differences in regional cuisines) translates into effective implementation of customized regional menus, pricing policy and marketing efforts. * Goodwill of Bob’s KFC & Pizza Hut brands along with long established presence in the country and extensive market share provide adequate barriers to entry for potential competitors as well as a good (but not great) moat. Weaknesses * Lack of investment in operations and promotional inconsistencies by Bob’s former corporate parent (Vendex) caused considerable damage to the brand’s goodwill and enabled its primary competitor McDonald’s (Arcos Dorados) to gain a leading market share in Brazil. * Operational efficiencies still need to be improved upon as individual restaurant revenues and margins are not near those of similar establishments such as McDonald’s and Giraffas. * Highly competitive industry and regional market with multitude of quick service restaurant choices. This puts downward pressure on prices and increases operational expenses as companies compete for market share. Opportunities * As BFFC develops its multi-brand platform (Consisting of Bob’s KFC, Pizza Hut & Doggis) i expect the overall market share of the company to grow as well as the higher same store sales and margins derived from KFC and Pizza Hut restaurants to have a positive effect on income from operations. * Implementation of alternative marketing/promotional strategies (Pop up stores and social media) is

critical as the company has an opportunity to take advantage of upcoming international events (World Cup 2014 and Summer Olympics 2016) to increase goodwill as well as expand margins and franchise development. * BFFC has an opportunity to further develop the Bob’s concept in Latin America outside of Brazil through master franchises. Indeed, the company has already taken such steps with franchises awarded in Angola, Africa and Chile via a master franchise agreement with Grupo de Empresas Doggis S.A. Critical Analysis The following company valuations of BFFC will help us reach a definitive conclusion as whether an investment at prevailing prices (as of Sept. 19, 2011) is warranted and provides us with any margin of safety. Reproduction Value In this scenario we are attempting to determine what a realistic cost would be for a competitor to enter the market and essentially duplicate or “reproduce” BFFC’s business at it stands today. We begin with the assets:

Assets Book Value Reproduction Value

Cash $16.7 $16.4

Cash at Points of Sale $890 $890

Cash in Bank $2.9 $2.9

Marketable Securities (a) $12.5 $12.5

Cash with Collectors (b) $359 -

Inventories $3.4 $3.4

Accounts Recievable $15.9 $15.9

Food Sales $8.2 $8.2

Current Accounts $7.0 $7.0

Re-Neg. Past Due Accounts $1.8 $1.8

Sales of Assets $566 $566

Other Current Assets $4.2 $3.6

Witheld Taxes $655 -

Third Party Receivables $601 $601

Franchise Receivables $1.5 $1.5

Other Current Receivables $1.4 $1.4

Total Current Assets $40.5 $39.3

Property/Plant/Equip. $29.8 $29.8

Leasehold Improvements $22.1 $22.1

Machinery, Equp., Software $32.6 $32.6

Furniture & Fixtures $6.9 $6.9

Vehicles $257 $257

Work In Progress $675 $675

Deferred Charges $5.8 $5.8

Deferred Tax Assets $11.9 $11.9

Other Assets $16.2 $6.5

Receivables From Franchisees $660 $660

Judicial Deposits (c) $9.5 $0

Properties For Sale $1.3 $1.3

Receivables From Prop. Sale $4.4 $4.4

Investment in BBS $124 -

Other Receivables $148 $148

Goodwill $799 $799

Total Assets $112.5 $75.6

- All Figures are 2010 fiscal year figures.- Property, Plant & Equipment figures are displayed after depreciation(a) Majority of funds are invested in fixed-income securities, with original maturities of less than three months.(b) No description of this item was given in the Notes to the financial statements in BFFC’s 2010 10-K.(c) Deposits required by Brazilian court in connection to certain legal disputes. The next step is to deduct the Total Liabilities from our Total Assets figure and then proceed to add back certain expenditures to the asset category which add value and that potential competitors will have to reproduce in order to effectively compete with BFFC.

In this case, no competitor will be able to do without a good amount of marketing/advertising, sales/franchise development costs as well as potential franchise consulting fees payable to third parties for compliance and legal advice.

Total Assets $112.5

Adjusted Assets $75.6

Total Liabilities $78.4

Total Equity -$2.8

Marketing/Advertising Value (Brand Value) $76.6

Franchise Development Value (a) $20.4

Cash Needed For Operations $4.1

Non-Interest Bearing Debt $25.8

Excess Cash $4.0

- Brand value calculated as 80% of past 5 year’s marketing/adveritsing expenditures.(a) Franchise development value consists of franchise expenses made to secure, train and develop new franchisees.- Franchise development value calculated as 80% of past 3 year’s franchise expense costs. A few quick notes regarding the calculations made in the last table above, the brand and franchise values given above are very conservative estimates of what a competitor would have to spend on these two areas of operations to duplicate BFFC’s business. One must keep in mind that BFFC (Bob’s) has been operating in Brazil since 1952 and has been more or less investing in its business and brand since that time. In this respect, it may in actuality require a potential competitor to spend much more than the equivalent of the last five year’s of BFFC’s marketing/advertising costs to create a favorable image in the mind’s of consumers as well as a recognizable brand name. Regarding the remainder of the estimates made, the formulas in Bruce Greenwald’s Value Investing were adhered to in respect to the calculation of franchise value, cash needed for operations (without re-investment in the business) and excess cash.

Total Per Share

Tangible Book Value $34.1 $4.19

Adjusted Book Value -$2.8 -

Net/Net Working Capital -$48.8 -

Reproduction Cost $97.0 $11.9

Reproduction Cost Book Value

$18.4 $2.26

Net Reproduction Cost $67.2 $8.25

Based on our very conservative estimate a potential competitor would have to spend at least $67.2 Mil. in order to compete against BFFC. This figure seems like an extraordinarily low number to reproduce 737 points of sale, master franchise agreements with two of the most recognized quick service restaurant brands in the world (KFC & Pizza Hut) as well as country wide brand recognition. Indeed, the former CEO of the company commented back in 2002, when Bob’s only had approx. 267 points of sale and not managing any other brands, that if someone wanted to build a similar company from scratch, it would cost over $100 Mil. Full interview can be found here: http://findarticles.com/p/articles/mi_m0OQC/is_1_3/ai_100439343/ Our next estimate of BFFC’s earnings power value (EPV) should provide us with a more approximate intrinsic value figure. Earnings Power Value Earnings Power Value (EPV): $100.9 Mil. ($12.40 Per Share) Current Market Valuation: $97.5 Mil. ($12.00 Per Share) The earnings power value (EPV) calculation indicates that BFFC enjoys only a slight competitive advantage over our estimated reproduction value ($8.25 per share) or a difference of $4.15. An avg. figure of 15% was used for the discount rate in the EPV calculation. This figure was used due to BFFC having several debt obligations outstanding to both Brazilian banks and private financial institutions with interest rates ranging from a low of 12% to a high of 16%. To be conservative in our calculations we erred on the high side in determining an avg. borrowing cost for BFFC. We will now look at several other valuations to determine if our EPV figure falls within an approximate range. Benjamin Graham Intrinsic Value Formula

Earnings Per Share ($1.43) X 8.5 + 2 X 4.4/Y (20 year AAA corporate bond rate) = $13.93 ($113.2 Mil.) This is Benjamin Graham’s original formula from the time he penned The Intelligent Investor with some minor adjustments, which are clearly articulated at Jae Jun’s OldSchoolValue site. To sum up, the 8.5 is the PE of a stock with no growth whatsoever, 2 is the estimated growth rate of BFFC (more on this in a moment) and 4.4 is the interest rate used to divide by today’s 20 year AAA corporate bond rate (4.47) to derive our $13.93 per share figure. This figure is most definitely within range of our EPV estimate of $12.40 per share. The 2% growth rate assumed going forward 5 years, is again very conservative. BFFC’s top line revenue has grown by 12.5%, 50% and 14.5% for 2010, 2009 and 2008 respectively. During this period, operating income also grew by an even greater 65% and 100% during 2010 and 2009 respectively with a contraction in 2008 due to abnormal business conditions (double digit gains in operating income were also posted in 2007 and 2006) Our last estimate may bring us closest to BFFC’s intrinsic value as we attempt to compare the company’s current valuation with similar companies which are either currently publicly traded or have been acquired in M&A transactions. Private Market Value

BFFC Arcos Dorados IMC

Market Value $99.9 $5.7 Bil. $1.0 Bil. (R)

Revenue $206.2 $3.0 Bil. $921

Net Income $11.6 $106 $68

CF From Operations $16.4 $263 $6.5*

Free Cash Flow $11.0 $88.2 -

Operating Margin 9.3 6.7 -0.8

Net Profit Margin 5.4 3.5 -3.7

Return on Equity 39.9 21.1 -7.5

P/E 10 48.1 -

P/B 4.3 8.1 2.4

P/S 0.8 1.7 2.2

P/CF 9 19.5 52.0

(R) Figure displayed in Brazilian Real’s* For the six month period from Jan. 1-June 30, 2011. Although BFFC’s closest competitors are clearly larger, the premium imparted to them by the market is not justified as evidenced by the financial and key metric figures displayed above. The fact that BFFC is now the master franchisee of both KFC & Pizza Hut in Brazil and also aggressively growing its Bob’s brand in other Latin American markets as evidenced by the master franchise agreement signed with Doggis Group in Chile is not as yet recognized by the market. Both of these measures will inevitably increase both top line revenue and bottom line profits and margins which the market will certainly weigh favorably as time passes. If we are to also compare BFFC’s current valuation to the industry average, it lags significantly behind in this measure as well. The aggregate price/earnings ratio for the industry is 19.9, compared to BFFC’s 10. The price/book also lags with the avg. being 6, while BFFC is valued at only 4.2. This is in spite of the company possessing higher revenue growth, much larger return on equity than the avg. as well as a more attractive debt/equity ratio of approx. 0 compared to an avg. of about 4 for its peers. We must also take into consideration several going private transactions which have transpired in the quick service restaurant industry over the past several years.

Company Acquirer Market Val. Private Market Val.

Premium Paid

Trans. Date

Burger King 3G Capital $2.2 Bil. $3.2 Bil. 46% Sept. 2010

CKE Rest. Apollo Mag. $559 $693 24% July 2010

Church’s Chicken

Friedman Fleischer & Lowe, LLC

- $320 - June 2009

Lone Star Steakhouse

Lone Star Funds $539 $619 15% Dec. 2006

- No market value or premium paid data is available due to Church’s being privately held (Arcapita) before their sale.

Admittedly, this is a very narrow sample to work with, even more so because no regional Brazilian transaction data is available to draw from. But this limited data set serves our needs in two respects, one in that it provides us with a small sample of quick service restaurant chains of similar size to BFFC and two, it gives us transaction prices which are above BFFC’s current market valuation but within an approximate range. The current average premium paid in acquisitions of public companies is 24% as of August 2011 according to Dealogic. This number is certainly within range of the average premiums paid in our data set. If we are to apply this 24% premium to BFFC’s current market valuation of $93.8 Mil. (As of Sept. 19) then our approximate private market value figure would be $116.4 Mil. This figure is certainly within range of our previous estimates of $67.2 Mil. (Reproduction Value) $100.9 Mil. (EPV) $113.2 Mil. (Ben Graham Valuation) We can state with some certainty that BFFC’s current intrinsic value is currently between $100-120 Mil.Given today’s (Sept. 19, 2011) prevailing price of $11.55 per share or market valuation of $93.8 Mil. one would have a slight margin of safety in their purchase. If one were to have bought a minority stake in the business at the beginning of the 2011 calendar year, the then prevailing price of approx. $8.09 per share or $65.7 Mil. for the entire business would have provided a large margin of safety indeed, as the company was valued even below a very conservative estimation of its reproduction value. One key thing to keep in mind from our analysis is that, the valuation figure arrived at is for the company as it stands today assuming no growth whatsoever. The no growth story is a hard one to believe in BFFC’s case, especially seeing as how top line revenue has gone from just under $97 Mil. in 2006 to over $206 Mil. today and operating income from $9 Mil. in 2006 to over $24 Mil. in 2010. Although a discounted cash flow analysis (DCF) would inevitably provide us with a much larger intrinsic value figure than our previous estimates, i believe it is outside of my capabilities and any other persons for that matter to come up with an approximate figure of what the company will be earning a decade or two from now. My satisfaction comes from owning a stake in a good business which is valued by the market below its current intrinsic value. While recognizing the fallacy that lies in humans attempting to predict the future, if i were to venture a reasonable estimation, i would ascertain that both the company’s brand and operating business will be worth much more in ten or twenty years than they are currently.