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AFC Enterprises, Inc. (AFCE)

Q2 2008 Earnings Conference Call

August 21, 2008

Executives

Cheryl Bachelder – CEO and President

Ms. Cheryl Fletcher – Director of Finance and Investor Relations

H. Melville Hope – Chief Financial Officer

Analysts

Michael Gallo – C.L. King & Associates, Inc.

Chris O'Cull – Suntrust Robinson Humphrey

Kenny Smith – Lenox Equity Research

Adrian Mice - Corsare

Operator

Good day ladies and gentlemen and welcome to the second quarter 2008 AFC Enterprises Incorporated Earnings Conference call. My name is Heather and I'll be your coordinator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I'll now turn the presentation over to your host for today's conference Ms. Cheryl Fletcher Director of Finance and Investor Relations. Please proceed.

Cheryl Fletcher

Thank you Heather and good morning everyone. Before we begin, I'd like to read the following forward-looking statements. Certain statements made on this call regarding future events and developments and our future performance, as well as management's expectations, beliefs or projections relating to the future are forward-looking statements within the meaning of the federal securities laws.

These forward-looking statements are subject to a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are; competition from other restaurants concepts and food retailers, our ability to franchise new restaurant units and expand our brand, increases in food and labor cost, effects of increased gasoline prices and other general economic conditions.

And the risk factors detailed in our 2007 annual report on form 10K and other documents we file with the Securities and Exchange Commission. You should not place any undue reliance on any forward-looking statements. Such statements speak only as the date they are made. During this call references may be made to non GAAP terms of EBITDA and free cash flow.

The company defines EBITDA as earnings before interest expense, taxes, depreciation, and amortization. The company defines free cash flow as net income plus appreciation and amortization, plus stock compensation expense, minus maintenance capital expenses. The company's computations and reconciliation’s to GAAP measures of the numbers referenced for this term are contained in our earning's press release and can be found on the company's website at www.afce.com.

I would now like to turn our call over to Cheryl Bachelder, our CEO and President.

Cheryl Bachelder

Thank you Cheryl and good morning everyone. Welcome to our second quarter earnings conference call. Today I'm going to review our second quarter financial and operational highlights, our full year guidance and update you on the four pillars of our strategic plan. Mel Hope, our CFO will review the second quarter and second quarter year-to-date financials in more detail.

First we are pleased with our earning's performance for the second quarter at $6.6million or $0.26 per diluted share. During the second quarter, our earnings benefited from $3.8 million or $0.09 per diluted share from the settlement of a previous DNO insurance claim, which was partially offset by an impairment charge for certain company operated restaurants. We now expect our full year earnings to be $0.75 to $0.80 per diluted share, which includes $0.09 per diluted share from other income we realized in the second quarter.

Our highly franchised business model continues to generate solid cash flows at $16.8 million for the second quarter year-to-date and our EBITDA margins at 32.3% for the second quarter year-to-date, remain at the high end of our industry.

During the second quarter, we opened 32 restaurants, bringing our year-to-date restaurant openings to 69 units compared to 53 restaurants in the same time period a year ago. The second quarter openings included 17 domestic and 15 international restaurants in existing markets. With our progress year-to-date, we remain confident in our full year guidance of 115 to 130 global openings.

We had 31 closures in the quarter, which included 13 domestic units and 18 international units. In 2008, we expect our closures to be similar to prior years. As a result, net openings for fiscal 2008 are expected to be consistent with previous guidance of 5 to 15 units.

Our international same-store sales increased 1.7% during the second quarter, due to strong same-store sales in the Middle East, Latin America and Canada, partially offset by negative performance in Korea, Mexico and U.S Military bases.

Our international franchisees are facing similar economic conditions to the U.S, including high commodity cost. They are responding with similar strategies, raising prices where necessary due to the commodity cost and continuing to offer strong value in to promotion events.

Our total domestic same-store sales were negative 1.7 for the quarter. This trend is comparable to our first quarter same-store sales of negative 1.8%.

During the second quarter, Popeye’s promoted offerings with competitive price points in the three to five dollar range.

In May and June we featured 8 piece Buffalo Nuggets for $2.99 and in July, the restaurants promoted a Popeye’s fire cracker butterfly shrimp combo for $4.99.

We believe our marketing and messaging during the second quarter helped us withstand some of the continued pressures we are seeing in the market. According to NPD Sales Track Weekly, our same-store sales performance during the quarter continued to out-pace chicken QSR by approximately 9/10 of a percentage point. As we move into the second half of 2008, our business plan has significant new marketing and menu news and we expect these initiatives to start gaining traction as we enter the fourth quarter. As such we remain committed to our previous guidance of domestic same-store sales at - 1.0% to -2.0% for the full year. I would now like to update you on the progress we've made in the four pillars of our strategic plan. As a reminder those pillars are building a distinct and relevant brand, running great restaurants, strengthening our unit economics and aligning people and resources to the deliver results.

First, to discuss our distinct and relevant brand. This fall we are launching the new venue offerings that I have hinted in our previous call, we have an arsenal of new products on three venue platforms, value offerings, quick lunches and portable snacks. This month we are launching the first of this three new platforms, the big deals. These are three new sandwiches priced at $1.49, the loaded chicken wrap, the delta mini featuring our new delta first and the chicken biscuit, all offering consumers terrific food a compelling value and keeping our operations simple. These value sandwiches are designed to pull in traffic from the younger value focused customer, with an emphasis on driving traffic during snacking and late night day parts.

In addition to new products, we recently announced GSD&M idea city as our new national creative ad agency. We chose them not only because of their great work for other successful brands such as Southwest Airlines, BMW, and Kohler, but because of their particular insight about the Popeye's brand. They crisply explained why Popeye's is a cut above other QSR’s. Its not just what we make, its how we make it, our slow authentic Louisiana cooking. Their initial work for Popeye's will hit the air waves in August along with our new big deal value sandwiches. We are also updating refreshing our Popeye's identity with the new contemporary logo design. That new Popeye's logo will be evident in packaging and in store materials beginning with this big deal promotion.

Moving now to running great restaurants. Our operations and field support teams continue to stay focused on improving operations consistency through out the Popeye's system. The guest experience monitor, which we call GEM, is now in use in more than 75.0% of our domestic restaurants. Our goal is to have all US restaurants on GEM by the end of the year. While, results are still early we are encouraged by our scores of delighted guests, which have increased six percentage points in six months.

We've also done a third party bench marking study to demonstrate similar results, Popeye's in that study is up 5 percentage points since the beginning of year. We believe our emphasis on operational improvement is starting to pay dividends for our guests. The field support team is also completed in-restaurant assessments in approximately two thirds of our restaurants. By the end of the year we expect to be on plan, to do quarterly restaurant assessments in every restaurant.

This industry proving operating systems and routines help us know exactly where to focus to drive improved operations performance. So this is a foundational year, as we put the tools in place, we expect to see steady improvement in our operations, as we train our restaurant general managers to act on this information.

Additionally, our restaurant support teams are making sure everything is in place to ensure that we flawlessly execute the roll out of all the new products we have on our three new venue platforms. This will remain a focus throughout the end of the year.

Now to talk about our unit economics. As you know, commodity cost remain a challenge this year in the restaurant industry and Popeye's is no exception. Second quarter Year-to-date, our commodity cost for domestic system have increased 10.0% year-over-year for both bone and chicken and other food costs.

This increase in food costs translates to approximately 300 basis points impact on our restaurant level profit margins before pricing action. To offset some of these pressure, we've taken a 2.0% price increase in our company upgraded restaurants, our franchisees have typically taken increases in the three to five percent range.

We expect to see continued cross pressures throughout the balance of this year with, commodity cost projected to be up 10.0% to 13.0% for the full year. This would translate to a 300 to 400 basis point impact on the resultant P&L before pricing action.

In our company restaurants we expect to recover approximately half of that commodity cost increase. The company is continuing to work to identify restaurant level profits margin improvement by implementing tools for managing ideal food cost, labor scheduling and rolling out a new cooking oil management process that increases efficiency in the restaurant.

We are rolling out thess initiatives to our system in our October annual franchise convention. As we discussed on our last call, we believe these tools will help our small and medium sized operators find approximately two percentage points of restaurant level margin to offset the commodity cost pressure.

Our new openings remain on track for 2008 in both the US and internationally, so we are now focusing on securing the 2009 pipeline. Net new-unit growth remains the key opportunity for Popeye's. For US, we are currently developing new real estate modeling tools for market planning and new site development. With these tools, we'll be creating a strong and strategic new unit growth plan for Popeye's.

Similarly, we have in place a market prioritization tool for international, that's helped us tee up new markets globally. We're now working on strengthening our real estate capabilities internationally to ensure we select only high volume sites.

As I've mentioned before, this work is aimed at moving us to our goal of four to 6.0% net new-unit growth for Popeye's going forward.

Aligning our people and resources to deliver results. As we indicated in our press release, our Board of Directors have approved the negotiation of definitive agreements to re-franchise the company operated restaurants in Atlanta, Georgia and Nashville, Tennessee. We've identified strong operating partners for both of these markets and these re-franchising activities will accelerate our unit growth to position Popeye's well for the future. The company remains committed to the strategy of re-franchising its company restaurants with the best franchise operators for Popeye's long-term growth. Mel is going to discuss this in more detail in a few minutes.

Our partnership with our franchise owners continues to strengthen. As we roll out these new marketing venue and operation's initiative, we're pleased with the alignment and commitment of our franchise owners. In October we hold our annual franchise business conference and there we will continue to build on this strategic road map we've established for Popeye's future.

Just one final topic. Last week, the Popeye's international team presented a strategic plan to our Board of Directors. This was the beginning of discussions with our board on the strategies we see for accelerating global growth. We will be communicating more to you about international growth strategy as part of our 2009 plan discussion early next year.

In closing, in spite of the challenges in the marketplace, we remain confident in our full year operational and earnings guidance. We're committed to building a strong brand that will deliver steady sales, profit growth and return to our shareholders. As a reminder, we are also committed to delivering strong long-term Popeye's performance with our goal stated of 2.0% to 3.0% same-store sales growth, four to 6.0% net growth in units and 12.0% to 15.0% earnings per share growth.

Thank you for your attention. I'll now turn over the call to Mel.

Melville Hope

Thank you Cheryl and good morning. I am going to review the performance through the second quarter then give some additional color on re-franchising of company restaurants and then I'll revisit our full year guidance.

As Cheryl indicated, we're pleased with our 2008 second quarter earnings performance of $6.6 million or $0.26 per diluted share. Second quarter earnings for 2008, included the favorable effects of 3.8 million from other non-operating income. Excluding these items, our second quarter earnings would have been $4.3 million or $0.17 per diluted share, which was in line with analysts' estimates.

Total revenues for the second quarter were $39.3 million versus $38.3 million in the second quarter last year. During the second quarter, sales from company operated restaurants were $18.8 million representing an increase of $700,000 over the second quarter of last year. This increase was primarily due to an $800,000 increase in sales generated from new company operated restaurants opened in the Atlanta and Tennessee markets, and a $600,000 increase from the timing of temporary restaurant closures primarily in New Orleans.

This increase in total sales was partially offset by a $700,000 decrease from lower same-store sales. Franchise revenues, which are the revenues realized from royalties and fees, paid by Popeye's franchisees, were $19.6 million in the second quarter, compared to $19.1 million last year. The increase was primarily due to opening of new franchise restaurants, which was partially offset by the decrease in domestic same-store sales.

G&A expenses for the second quarter were $12 million versus $9.5 million last year. This $2.5 million dollar increase was principally due to investments in strengthening the brand, which we announced in the first quarter and which are associated with new management and the non-recurring marketing and menu professional fees.

Other expense in income reflected net Other income of $3.8 million in the second quarter, which includes a benefit of $12.3 million for the final settlement of the historical director's and officer's insurance claim. Partially offset by an $8.1million non-cash impairment charge for certain company-operated restaurants, which we expect to re-franchise. If you look at note seven in our 10Q, it outlines the Other expenses and income line item in some detail.

Our EBITDA in the second quarter, was $14.5 million and remember that EBITDA includes the net non-operating benefit of the DNO insurance settlement and the impairment charge I just mentioned. Operating profit in the second quarter was $12.9 million versus $12.7 million last year. Second quarter interest expense, was $1.9 million in 2008 and $2 million in 2007.

Effective June 30, 2008, we entered in to interest rate storage swap agreement on $100 million of our debt. The effect of the agreement is to limit the interest rate exposure on that portion of 2005 credit facility by fixing the rate at 4.87%. A tax provision of $4.4 million reflects an effective tax rate for the quarter of 40.0%. This higher rate is due to the fact that about $600,000 of the assets on which we took an impairment charge during the quarter was goodwill, was is not deductible for income tax purposes. This will increase our expected full year income tax rate from 38.5% to 39.2%.

Year-to-date our earnings were $13 million, or about $0.50 per diluted share, which includes the benefit of $5.1 million from Other none recurring income. Total revenues for the second quarter year-to-date were $92.6 million versus $89.3 million last year. This increase in total revenue is primarily due to six additional company operating restaurants and 17 additional franchise restaurants compared to last year during same time period.

This increase was partially offset, by the impact of negative domestic same-store sales. Year-to-date our G&A was $28.8 million compared to $24.4 million last year. As I mentioned previously, this increase reflects our announced investments to strengthen the brand performance and is associated with new management and non-recurring marketing and venue professional fees.

Our EBITDA in the second quarter year-to-date was $29.9 million with margins at 32.3% and our operating profit was $26.2 million versus $25.7 million last year. With respect to the company's cash, and our usage of that cash during the year, the company has generated free cash flow of $16.8 million during the year through the end of the second quarter. This figure includes the $5.1 million of the Other non-operating income realized during the year, which is net of the $8.1 million of non-cash impairment recognized during the quarter.

We completed our previously announced accelerated stock repurchase during the quarter which had the effect of retiring shares earlier in the year. Year-to-date we have repurchased and retired 2.1 million shares of our common stock for $18.9 million.

Since the beginning of 2005, the company has retired over $98 million of company stock through its share repurchase program. During the second quarter the company also reduced its borrowing under the revolver by $10 million at the end of the quarter, our debt including the $15 million on our revolver, was $134.1 million.

Let me turn to our re-franchising efforts for just a minute. During our first quarter we announced that we could consider proposals from qualified operators to purchase and re-franchise the company's operated restaurant as well as develop new Popeye's restaurants in the under penetrated markets where our company operated restaurants are located.

Management has evaluated multiple re-franchising proposals for every company market and it has been authorized to negotiate definitive agreements for the company operated restaurants in the Atlanta and Nashville markets. Based on the proposals, we expect to receive cash proceeds from the transactions in those markets of approximately $9 million, which is the value we expected for those markets in our original estimates. Using the proposed terms, the company recognized a second quarter impairment charge of $8.1 million associated with the Atlanta and Nashville markets.

We remain committed to our strategy of re-franchising all companies operated restaurants over time. However, due to the current conditions in the credit markets, I cannot currently provide you with a reliable estimate on the timing of the future re-franchising transactions or their effects on earnings.

After the re-franchising of the restaurants in Atlanta and Nashville, the company operated restaurants which remain will be in the Memphis and New Orleans markets. These restaurants are generally high volume restaurants and the Memphis market includes opportunities to expand through the development of new Popeye's restaurants.

We continue to expect the combined cash proceeds from re-franchising all the company operated restaurants to be no less than our original estimate of $38 million – $42 million while individual transactions for certain restaurants could trigger a loss. In the aggregate, future re-franchising of all the company operated restaurants, in Memphis and New Orleans markets would result in substantial net gains

Finally, to remind you of our 2008 guidance, as Cheryl mentioned earlier, we expect total domestic same-store sales for fiscal 2008 to be consistent with previous guidance of –1.0 to –2.0%. We also expect global new restaurant openings for 2008 to remain in the range of 115 to 130 units. Throughout 2008, we expect our closures to be similar to the past few years. Net openings for fiscal 2008 are expected to be in the range of 5 to 15 restaurants, which is consistent with our previous guidance.

For the full year of 2008, we expect earnings per share to now be in the range of $0.75 to $0.80 per diluted share, including the $0.09 of other non-operating income that we realized during the second quarter. For the next two quarters, we expect our G&A run-rate to be slightly higher than our first and second quarters. As we indicated on our last conference call, we expect the fourth quarter to be slightly higher due to the timing of our franchise business conference, year-end expenses, and professional fees.

For the full year, we continue to expect our G&A expenses, as a percentage of system-wide sales, will be consistent with our previous guidance, at 3.0% to 3.1% of our system large sales. Cheryl, do you want to ...

Cheryl Bachelder

Okay, we will now open up the call for our Q & A

Question-and-Answer Session

Operator

Thank you.(Operator instructions)

Your first question comes from the line of Michael Gallo with C.L. King, please proceed.

Michael Gallo – C.L. King & Associates, Inc.

Hi and good morning.

Melville Hope

Good morning Mike.

Michael Gallo – C.L. King & Associates, Inc.

Couple of questions, first I just wanted to hit on the non-recurring expenses that hit on the G&A line in the quarter; it looked like, I know you didn't break it out in your prepared remarks or in the press release, but it looked like it was about $900, 000, is that about right? The second part of that question is, how much more in additional non-recurring costs do you expect to incur in the back half and should we expect to see all those also embedded in the G&A line?

Melville Hope

I think in the second quarter the non-recurring fees would have been about $900,000. We've guided to non-recurring expenses for the full year at about $3.50 million. I think that in the back half of the year, not sure on that number right at the top of my head but its balanced about 50/50 between the front and the back half of the year.

Michael Gallo – C.L. King & Associates, Inc.

Okay. So just wanted to come back to clarify something you said about G&A being a little higher in the back half, I assume that you mean on a week for week basis. Obviously you have a 16 week quarter in the first quarter, so we certainly wouldn't expect any of the quarters to be higher than the G&A was in the first quarter. Is that fair?

Melville Hope

Mike we typically have some increase in the G&A spending during particularly for the fourth quarter because of the timing of our international franchise

Michael Gallo – C.L. King & Associates, Inc.

Oh sure

Melville Hope

…and year end fees. Think about, for example the audit fees and that sort of thing.

Michael Gallo – C.L. King & Associates, Inc.

I guess as we start to head into 2009, I mean roughly again $900, 000 a quarter, lets call it rough numbers of G&A that’s being spent on a non-recurring fashion, would you expect particularly given you started to see some progress on franchising units, I know its early, though we should actually potentially see G&A come down in ’09 versus ‘08?

Melville Hope

The guidepost that we put out there is that we are going to monitor our G& A around the 3.0% of system wide sales figures.

Michael Gallo – C.L. King & Associates, Inc.

Okay, great.The second question I had is how many units are being refranchised, is it 14 in Atlanta and two in Nashville, for 16 total.

Melville Hope

It would be 25 in both those markets.

Michael Gallo – C.L. King & Associates, Inc.

25 combined.

Melville Hope

Excuse me, what?

Michael Gallo – C.L. King & Associates, Inc.

It'd be 25 combined.

Cheryl Bachelder

25 in Atlanta and four in Nashville

Michael Gallo – C.L. King & Associates, Inc.

29 combined, okay.

Michael Gallo – C.L. King & Associates, Inc.

Okay, and just final question, I guest just as youstart to roll out some of these new product platforms, obviously there's a lot of pressure on food costs, it seems like you are offering a compelling value offering at the $1.49 as a price point. I was wondering if you can just give us some update on, I guess whether those products were engineered to carry a good margin at those food costs. whether the products become more of a traffic driver, and any further color you can give us on that. Thank you.

Cheryl Bachelder

Mike they are in fact engineered for a very solid food costs. Food costs that our franchisees can withstand and they are very much developed towards driving traffic among a younger frequent customer.

Michael Gallo – C.L. King & Associates, Inc.

That's helpful, thanks a lot.

Operator

Your next question comes from line of Chris O'Cull with Suntrust. Please proceed.

Chris O'Cull – Suntrust Robinson Humphrey

Good morning guys?

Company representatives

Good morning Chris.

Chris O'Cull – Suntrust Robinson Humphrey

Now, on a per store basis, it appears that Nashville and Atlanta markets were sold for lower prices in which you hope to average for all the units. What is—different about the remaining company markets that should support the greater value per store.

Melville Hope

Atlanta and Nashville are two markets where the opportunities for the franchisee to improve are the greatest among those markets

Chris O'Cull – Suntrust Robinson Humphrey

Okay in terms of just the AUVs for those units, plus the future development plans?

Melville Hope

Future development, the AUVs and the profitability of the units

Chris O'Cull – Suntrust Robinson Humphrey

Okay

Cheryl Bachelder

Okay. And the flip side of that Chris, is that remaining markets have very high UV’s with strong profitability

Chris O'Cull – Suntrust Robinson Humphrey

Can you give us any valuation metricswhen you look at the Nashville and Atlanta markets?

Melville Hope

What we talked about in the spring is consistent with those markets as well for overall, which we assumed about a 4.5% to 5.0% times EBITDA to arrive at our proceeds of $38 million to $42 million

Chris O'Cull – Suntrust Robinson Humphrey

Perfect. And then could you describe the development plans or the agreement you hope to get from the franchisees for, like the Nashville market?

Cheryl Bachelder

The Nashville market has significant outside opportunities as we only have four restaurants there.The Atlanta market also has significant development on the north side of Atlanta. So, in both cases we will be accelerating new unit growth going forward.

Chris O'Cull – Suntrust Robinson Humphrey

And that should probably begin in ‘09?

Cheryl Bachelder

Yes

Melville Hope

As a general rule,those agreements run three to five years terms and they are for multiple units.

Chris O'Cull – Suntrust Robinson Humphrey

Right, Okay and then, Cheryl will the Big deal advertising, will that support that promotion? Will that begin after the Olympics?

Cheryl Bachelder

Yes

Chris O'Cull – Suntrust Robinson Humphrey

Okay. And I’m assuming you'll be using local spot TV?

Cheryl Bachelder

Yes. We are using a combination of local and national television.

Chris O'Cull – Suntrust Robinson Humphrey

Oh great. Okay, no cable?

Cheryl Bachelder

When I say national, I mean cable.

Chris O'Cull – Suntrust Robinson Humphrey

Okay. And then Mel, given that you entered into a swap agreement during the first quarter, I guess fixing the rate for $100 million of the debt, would you expect your debt level to remain around $100 million?

Melville Hope

For the foreseeable future, yes.

Chris O'Cull – Suntrust Robinson Humphrey

There’s no issues though taking the notional amount below that?

Melville Hope

I am not sure I understand the question, taking the notional…

Chris O'Cull – Suntrust Robinson Humphrey

Once you have the proceeds from these asset sales, is there any issue with paying down more than $100 million on the debt facility?

Melville Hope

Well, yes, if we were to part with all the company restaurants today, then there would certainly have to be a conversation with the banks and that might include reducing the debt as well since the credit facility is collateral as it secures all the company’s assets.

Chris O'Cull – Suntrust Robinson Humphrey

But the intent would be to go back and try to amend mabe those restrictions?

Melville Hope

Well, yes, the intent is to have a conversation with the banks when and if that’s necessary on this.

Chris O'Cull – Suntrust Robinson Humphrey

Okay, great. Thanks guys.

Cheryl Bachelder

Thank you Chris.

Operator

(Operator Instructions).

And your next question is from line of Kenny Smith with Lenox Equity Research. Please proceed.

Kenny Smith – Lenox Equity Research

Thanks. Good morning.

Melville Hope

Good morning.

Kenny Smith – Lenox Equity Research

On the sales of the units you’ve already negotiated, what remains to be done? Is financing at all a factor?

Melville Hope

Not for most of them, so it’s really sitting down the table and hammering out the final terms.

Kenny Smith – Lenox Equity Research

How many buyers are there? Is it one buyer or multiple?

Melville Hope

These are in three different transactions.

Kenny Smith – Lenox Equity Research

Okay, and regarding what you were saying about the under-performance of those units and relative to the ones which remain to be sold in New Orleans and Memphis, I find it kind of curious that you are able to sell the under performers first, where as your better performers have yet to be sold. Can you give any color as to why the more difficult ones were able to sell first? Difficult in the sense of their performance.

Cheryl Bachelder

I think it will be fair to say that there's very desirable upside in both of those markets that we're selling that excited people who were developers and then the flip side of that question is that, I think that particularly New Orleans is a larger transaction in a difficult credit market, so I think that gives you some perspective.

Kenny Smith – Lenox Equity Research

Alright. Are you willing to sell New Orleans in pieces?

Cheryl Bachelder

We've really not made a decision on how we'll sell New Orleans and Memphis going forward.

Kenny Smith – Lenox Equity Research

Okay and then with your new menu platform that is coming out, curious, will that pretty much hit the franchise system in an entirety within a short period of time or is there going to be a number of weeks or longer before they are all carrying that new menu?

Cheryl Bachelder

We've talked about the fact that the three new menu platforms will all be launched this fall.

Kenny Smith – Lenox Equity Research

Great. So it will be pretty quick then?.

Cheryl Bachelder

Yes I would call that quick.

Kenny Smith – Lenox Equity Research

Okay. Alright thank you very much.

Operator

(Operator instructions)

And we have a question from the line of Adrian Mice with Corsare please proceed.

Adrian Mice - Corsare

Good morning thanks. My first question is on the CapEx for the rest of the year was $1.2 million in Q2 and it sounds like you opened a couple of new restaurants. Can you give us the percent for the rest of the year and then assuming this transaction closes, kind of where and when would the ongoing CapEx be for the business.

Melville Hope

Let me answer the second question first. For an ongoing basis, if we part with all the company restaurants on a full year, our CapEx is significantly smaller, and I'm thinking in the $1 million to $2 million range, essentially ourcorporate headquarters and IT. For the balance of this year, where we do continue to operate company restaurants, our CapEx will probably be another couple of million dollars .

Adrian Mice - Corsare

Okay. And then the accelerated share repurchase, it sounded like from the press release like that is completely done and JP Morgan, or whoever was doing it, is completely out of the market, is that correct?

Melville Hope

Thats right we closed that up.

Adrian Mice - Corsare

And you still have about 20 million you guys can do on your own through

Melville Hope

Yes. It is under the credit facility, we have about $19 million that is available, a little bit more than that.

Adrian Mice - Corsare

And what would you anticipate for the rest of six months. A similar pace?

Melville Hope

We don't typically guide our re purchases .

Adrian Mice - Corsare

Would there be any reason to think that it would be halted? Would there be anything in the sale of restaurants will prohibit you from being able to do it?

Melville HopeI think it's fair to say in this credit market we look, closely at a ourcash balance right now and that includes the discussion of how deploy that cash for the balance of the rest of the year

Adrian Mice - Corsare

Okay thanks

Operator

And seeing no further questions on the queue at this time, I will like to turn the call back over to Cheryl Bachelder for closing remarks.

Cheryl Bachelder

We want to just thank you for joining us this morning. We appreciate your continued interest in our company, and just in summary we are pleased with our earnings performance for this quarter and remain confidence in the guidelines for the full year. So we will be looking forward to reporting out to you on our next call, later this year. We thank you and have a great day.

Operator

Ladies and gentlemen thank you for your participation in today’s conference. This concludes the presentation, you may now disconnect, have a great day.

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Source: AFC Enterprises Q2 2008 Earnings Conference Call
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