Burger King Holdings Inc ( BKC ) 5505 BLUE LAGOON DRIVE MIAMI, FL, 33126 305−378−3000 http://www.bk.com/ 10−K Annual report pursuant to section 13 and 15(d) Filed on 8/26/2010 Filed Period 6/30/2010 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10−K (Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2010 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001−32875 BURGER KING HOLDINGS, INC. (Exact name of Registrant as Specified in Its Charter) Delaware 75−3095469 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5505 Blue Lagoon Drive, Miami, Florida 33126 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code (305) 378−3000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Title Exchange of on Each Which Class Registered Common Stock, par value $0.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well−known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ 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 þ No o 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 o No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S−K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10−K or any amendment to this Form 10−K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non−accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b−2 of the Exchange Act. (Check one): Large accelerated filer þ Accelerated filer o Non−accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b−2 of the Exchange Act). Yes o No þ The aggregate market value of the Common Stock held by non−affiliates of the registrant as of December 31, 2009 was $1.7 billion. The number of shares outstanding of the Registrant’s Common Stock as of August 19, 2010 was 135,882,489. DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates certain information by reference from Registrant’s definitive proxy statement for the 2010 annual meeting of stockholders, which proxy will be filed no later than 120 days after the close of the Registrant’s fiscal year ended June 30, 2010. BURGER KING HOLDINGS, INC. 2010 FORM 10−K ANNUAL REPORT TABLE OF CONTENTS PART I Item 1. Business 3 Item 1A. Risk Factors 19 Item 1B. Unresolved Staff Comments 33 Item 2. Properties 34 Item 3. Legal Proceedings 34 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 Item 6. Selected Financial Data 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8. Financial Statements and Supplementary Data 68 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 113 Item 9A. Controls and Procedures 113 Item 9B. Other Information 113 PART III Item 10. Directors, Executive Officers and Corporate Governance 114 Item 11. Executive Compensation 114 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 114 Item 13. Certain Relationships and Related Transactions, and Director Independence 114 Item 14. Principal Accounting Fees and Services 114 PART IV Item 15. Exhibits and Financial Statement Schedules 114 EX−10.60 EX−10.61 EX−21.1 EX−23.1 EX−31.1 EX−31.2 EX−32.1 EX−32.2 Burger King®, Whopper®, Whopper Jr.®, Have It Your Way®, Burger King Bun Halves and Crescent Logo®, BK Burger Shots®, BK® Value Menu, BK® Fresh Apple Fries, BK® Stacker, BK Wrapper®, BK® Breakfast Muffin Sandwich, BK® Kids Meal, Home of the Whopper®, Hungry Jack’s®, BK Positive Steps®, Tendercrisp®, TenderGrill®, Angry Whoppertm, BK Breakfast Shotstm, BK Fusiontm, BKtm Positive Steps, Come Como Reytm, King Dealstm, Long Chickentm, Steakhouse XTtm, Whoppertm Bar, BKtm Fire−Grilled Ribs, BBQtm Stackticon, BKtm Ofertas, BKtm Breakfast Bowl, Stunner Dealstm and Mega Angus XTtm are trademarks of Burger King Corporation. References to fiscal 2010, fiscal 2009 and fiscal 2008 in this Form 10−K are to the fiscal years ended June 30, 2010, 2009 and 2008, respectively, and references to fiscal 2011 are to the fiscal year ending June 30, 2011. Unless the context otherwise requires, all references to “we”, “us”, “our” and “Company” refer to Burger King Holdings, Inc. and its subsidiaries. In this document, we rely on and refer to information regarding the restaurant industry, the quick service restaurant segment and the fast food hamburger restaurant category that has been prepared by the industry research firm The NPD Group, Inc. (which prepares and disseminates Consumer Reported Eating Share Trends, or CREST data) or compiled from market research reports, analyst reports and other publicly available information. All industry and market data that are not cited as being from a specified source are from internal analysis based upon data available from known sources or other proprietary research and analysis. All financial information within this document has been rounded to one place past the decimal point. 2 Table of Contents Item 1. Business Overview Burger King Holdings, Inc. (“we” or the “Company”) is a Delaware corporation formed on July 23, 2002. Our restaurant system includes restaurants owned by the Company and by franchisees. We are the world’s second largest fast food hamburger restaurant, or FFHR, chain as measured by the total number of restaurants and system−wide sales. As of June 30, 2010, we owned or franchised a total of 12,174 restaurants in 76 countries and U.S. territories, of which 1,387 restaurants were Company restaurants and 10,787 were owned by our franchisees. Of these restaurants, 7,258 or 60% were located in the United States and 4,916 or 40% were located in our international markets. Our restaurants feature flame−broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other affordably−priced food items. During our more than 50 years of operating history, we have developed a scalable and cost−efficient quick service hamburger restaurant model that offers customers fast food at affordable prices. We generate revenues from three sources: (1) retail sales at Company restaurants; (2) franchise revenues, consisting of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; and (3) property income from restaurants that we lease or sublease to franchisees. Approximately 90% of our current restaurants are franchised and we have a higher percentage of franchise restaurants to Company restaurants than our major competitors in the FFHR category. We expect that the percentage of franchise restaurants will increase as franchisees open new restaurants and as we accelerate sales of Company restaurants to franchisees, or “refranchisings,” over the next five years. We believe that this restaurant ownership mix provides us with a strategic advantage because the capital required to grow and maintain the Burger King ® system is funded primarily by franchisees, while still giving us a base of Company restaurants to demonstrate credibility with franchisees in launching new initiatives. As a result of the high percentage of franchise restaurants in our system, we believe we have lower capital requirements compared to our major competitors. However, our franchise dominated business model also presents a number of drawbacks and risks, such as our limited control over franchisees and limited ability to facilitate changes in restaurant ownership. In addition, our operating results are closely tied to the success of our franchisees, and we are dependent on franchisees to open new restaurants as part of our growth strategy. Our History Burger King Corporation, which we refer to as BKC, was founded in 1954 when James McLamore and David Edgerton opened the first Burger King restaurant in Miami, Florida. The Whopper ® sandwich was introduced in 1957. BKC opened its first international restaurant in the Bahamas in 1966. BKC also established its brand identity with the introduction of the “bun halves” logo in 1969 and the launch of the first Have It Your Way® campaign in 1974.