Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 10 — SEGMENT INFORMATION

     Through the Company’s wholly-owned subsidiary, Venbo, which conducts business under the trade name “Bob’s”, the Company owns and operates, both directly and through franchisees, Brazil’s second largest fast food hamburger restaurant chain. Currently, the Company operates 39 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 operates 8 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 17 stores under the Pizza Hut brand.

     Since September, 2008, the Company has operated the Doggis brand in Rio de Janeiro through its subsidiary, DGS. At present, the Company operates 5 stores under the Doggis trade name.

     Currently, most of the Company’s operations are concentrated in southeastern Brazil. As of June 30, 2011, 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 736 franchise-operated point of sales, 383 were located at the same region, providing 56% of Net Revenues from Franchisees.

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

     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,
	2011			2010			2011			2010
Net Restaurant Sales		78.468			73.450			38.322			35.173
Store Costs and Expenses		—			—			—			—
Food, Beverage and Packaging		(25.876	)		(25.090	)		(12.352	)		(11.873	)
Payroll & Related Benefits		(16.790	)		(17.938	)		(8.158	)		(8.704	)
Restaurant Occupancy		(9.379	)		(8.681	)		(4.624	)		(4.322	)
Contracted Services		(9.723	)		(9.634	)		(4.818	)		(4.585	)
Depreciation and Amortization		(3.130	)		(2.786	)		(1.505	)		(1.320	)
Royalties charged		(2.853	)		(2.178	)		(1.469	)		(1.132	)
Other Store Costs and Expenses		(5.620	)		(4.828	)		(2.435	)		(2.074	)
Total Store Costs and Expenses		(73.371	)		(71.135	)		(35.361	)		(34.010	)
Operating margin		5.097			2.315			2.961			1.163

R$000’				Results from franchise operations
	Six months ended June 30,						Three months ended June 30,
	2011			2010			2011			2010
Net Franchise Revenues		15.434			12.648			7.824			6.054
Payroll & Related Benefits		(3.280	)		(3.471	)		(1.575	)		(1.850	)
Occupancy expenses		(426	)		(697	)		(183	)		(470	)
Travel expenses		(677	)		(590	)		(485	)		(404	)
Contracted Services		(463	)		(185	)		(267	)		(123	)
Other franchise cost and expenses		(632	)		(707	)		(400	)		(425	)
Total Franchise Costs and Expenses		(5.478	)		(5.650	)		(2.910	)		(3.272	)
Operating margin		9.956			6.998			4.914			2.782

     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.

     Own-stores operation conducted by the Company provided the following figures per brand:

	Results from Bob’s						Results from KFC’s						Results from Pizza Hut’s						Results from Doggi’s
	brand operations						brand operations						brand operations						brand operations
R$000’
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Revenues		R$33.759			R$35.367			R$12.346			R$9.979			R$31.209			R$27.071			R$1,154		R$	1.033
Food, Beverage and Packaging		(12.408	)		(12.817	)		(4.642	)		(3.629	)		(8.237	)		(8.045	)		(589	)		(599	)
Payroll & Related Benefits		(7.467	)		(9.172	)		(3.126	)		(2.821	)		(5.663	)		(5.522	)		(534	)		(423	)
Occupancy expenses		(3.731	)		(3.822	)		(1.659	)		(1.486	)		(3.639	)		(3.145	)		(350	)		(228	)
Contracted Services		(3.763	)		(4.479	)		(1.720	)		(1.676	)		(4.016	)		(3.302	)		(224	)		(177	)
Depreciation and Amortization		(1.095	)		(1.305	)		(614	)		(547	)		(117	)		(844	)		(1.304	)		(90	)
Royalties charged		—			—			(793	)		(368	)		(2.042	)		(1.810	)		(18	)		—
Other Store Costs and Expenses		(3.025	)		(3.028	)		(1.158	)		(353	)		(1.342	)		(1.376	)		(95	)		(71	)
Total Own-stores cost and expenses		(31.489	)		(34.623	)		(13.712	)		(10.880	)		(25.056	)		(24.044	)		(3.114	)		(1.588	)
Operating margin		R $2.270			R$744			R$(1.366	)		R$(901	)		R$ 6.153			R $3.027			R$(1.960	)		R$ (555)

	Results from Bob’s						Results from KFC’s						Results from Pizza Hut’s						Results from Doggi's
	brand operations						brand operations						brand operations						brand operations
R$000’	Three months ended June 30,						Three months ended June 30,						Three months ended June 30,						Three months ended June 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Revenues		R$15.474			R$15.877			R$6.132			R$4.876			R$16.273			R$13.936			R $443			R $484
Food, Beverage and Packaging		(5.592	)		(5.647	)		(2.304	)		(1.791	)		(4.245	)		(4.170	)		(211	)		(265	)
Payroll & Related Benefits		(3.434	)		(4.262	)		(1.629	)		(1.495	)		(2.835	)		(2.733	)		(261	)		(214	)
Occupancy expenses		(1.781	)		(1.712	)		(845	)		(770	)		(1.827	)		(1.695	)		(170	)		(145	)
Contracted Services		(1.728	)		(1.933	)		(813	)		(909	)		(2.187	)		(1.649	)		(90	)		(94	)
Depreciation and Amortization		(503	)		(657	)		(318	)		(275	)		564			(355	)		(1.248	)		(33	)
Royalties charged		—			—			(391	)		(201	)		(1.060	)		(931	)		(18	)		—
Other Store Costs and Expenses		(1.306	)		(1.184	)		(597	)		(188	)		(492	)		(667	)		(40	)		(35	)
Total Own-stores cost and expenses		(14.344	)		(15.395	)		(6.897	)		(5.629	)		(12.082	)		(12.200	)		(2.038	)		(786	)
Operating margin		R$ 1.130			R$482			R$(765)			R$ (753	)		R$4.191			R$1.736			R$(1.595	)		R$ (302	)

     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,
	2011			2010			2011			2010
Bob ´s Operating Income		R$2.270			R$744			R$1.130			R$482
KFC ´s Operating Loss		(1.366	)		(901	)		(765	)		(753	)
Pizza Hut ´s Operating Income		6.153			3.027			4.191			1.736
Doggi ´s Operating Loss		(1.960	)		(555	)		(1.595	)		(302	)
Total Operating Income		5.097			2.315			2.961			1.163
Income from franchise operations		9.956			6.998			4.914			2.782
Unallocated Marketing Expenses		(1.391	)		(2.169	)		(376	)		(1.069	)
Unallocated Administrative Expenses		(13.814	)		(11.947	)		(6.910	)		(5.791	)
Unallocated Other Operating Expenses		(2.936	)		(2.907	)		(1.363	)		(1.890	)
Unallocated Net Revenues from Trade Partners		10.567			8.592			3.775			5.179
Unallocated Other income		1.462			2.806			1.065			1.000
Unallocated Net result of assets sold and impairment of assets		(28	)		(18	)		(26	)		9
Unallocated Interest Income (Expenses)		142			(1.000	)		186			(660	)
Total Unallocated Expenses		(5.998	)		(6.643	)		(3.649	)		(3.222	)
NET INCOME BEFORE INCOME TAX		9.055			2.670			4.226			723