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                     AMID BROAD MARKET RALLY IN 4TH QUARTER 2004

Carried by a broad market rally following the November presidential elections, the Rosenberg
Center Franchise 50 Index1 surged 13.2 percent in the 4th quarter (October 2004 – December
2004) and finished the year with an 18.5 percent gain. The S&P 500 Index, on the other hand,
gained 8.7 percent in the 4th quarter 2004 and 9 percent for the whole year (see table and chart

Total Returns: RCF 50 Index vs. S&P 500 Index
           Period            Rosenberg Center Franchise                                 S&P 500 Index
                                      50 Index
      4th Quarter 2004                +13.2%                                               +8.7%
    Year-to-Date 2004                 +18.5%                                               +9.0%
         2000-2004                    +52.3%                                               -13.1%

                                          Rosenberg Center Franchise 50 Index
                                                     2000 - 2004
                                                      RCF50             S&P500



Index (%)




                     2Q00   4Q00   2Q01        4Q01       2Q02            4Q02   2Q03    4Q03   2Q04    4Q04

Most of the RCF 50 Index components had significant gains this quarter, and 20 of the 50
index components each advanced more than 15 percent. FirstService Corp (FSRV) and CKE
Restaurants Inc. (CKR) turned in the best performances this quarter with 35.8 percent and 31.3
percent gains, respectively. Gymboree Inc (GYMB) and Ruby Tuesday Inc. (RI) had the worst
performances this quarter with 11 percent and 6.4 percent losses, respectively.

FirstService Corp. (FSRV), a provider of diversified services (residential property
management, integrated security services, consumer services and business services) to
commercial, residential and institutional, customers, soared 35.8 percent this quarter after
announcing strong earnings (+30 percent growth), two acquisitions (the leading residential
property management company in Las Vegas, Nevada, and CMN International), and a 2-for-1
stock split. FirstService has made more than 100 acquisitions since its inception in 1988,
including The Franchise Company in July 2004. The Franchise Company owns or controls
nine franchise systems, including California Closets, Paul Davis Restoration, College Pro
Painters, CertaPro Painters, and Nutri-Lawn.

CKE Restaurants (CKR), the owner, operator, and franchisor of the Carl’s Jr., Hardee’s, and
La Salsa Fresh Mexican Grill food chains, jumped 31.3 percent this quarter, propelled by a 13-
fold increase in earnings. The company’s strategy of going against the current trend of
healthier nutrition seems to be paying off as its focus on “bigger, tastier” burgers has translated
into improved sales, margins, and profits. This quarter, Hardee’s introduced the “Monster
Thickburger,” a burger composed of two 1/3-pound patties, four pieces of bacon, and
American cheese on a sesame seed bun, all adding up to 1,420 calories and 107 grams of fat.
Carl’s Jr. introduced the Breakfast Burger, an all-beef patty topped with a fried egg, bacon,
hash brown nuggets, cheese and ketchup on a sesame-seed bun. Carl’s Jr. also announced plans
to open 25 franchise restaurants in Singapore and Malaysia.

Children’s retailer Gymboree Corp (GYMB) had the weakest performance this quarter, falling
11 percent. Closure of its retail operations in the United Kingdom and Ireland, competition
from the Children’s Place, lower margins, and lackluster growth in same store sales resulted in
a 34 percent drop in quarterly profits. Its CFO resigned in December.

Casual dining restaurants operator and franchisor Ruby Tuesday Inc. (RI) dropped 6.2 percent
this quarter after repeatedly lowering its profits outlook. Its stock price dropped 14.8 percent
on Oct. 5, 2004, to a 52-week low, after it predicted a decrease in future same-store sales and
reduced future earnings growth. It dropped a further 4.7 percent Dec. 7 after reporting weak
sales and lowering, once again, its earnings outlook. The company blamed the sales shortfall
on weakness in the consumer spending patterns of casual diners, a transition in the company’s
marketing strategy (reduction in its only form of promotion – coupons -- and transition to
media advertising), and on the reduction of the portion sizes and values of some of its menu
items. Later in December, Ruby Tuesday announced a new franchise venture in South Korea.

McDonald’s, the RCF 50 Index’ largest component, gained 14.4 percent this quarter after once
again delivering better than expected financial results and raising its profits outlook. It has
become evident that the company’s strategic turnaround plan “Plan to Win,” centered on
operational excellence and leadership marketing, is succeeding. McDonald’s worldwide
comparable sales have been positive for six consecutive quarters and its profitability continues
to improve. It has recently introduced several new menu items, including more premium
offerings such as Chicken Selects and salads, new marketing programs, improved service, and
extended hours. Investors were also impressed by a seamless leadership transition when Jim
Skinner, a highly regarded McDonald’s veteran was named CEO in November 2004 to replace
Charlie Bell, who resigned to focus on fighting colorectal cancer. Also, in December 2004,
McDonald's was named the "Marketer of the Year" by Advertising Age magazine for the
brand's marketing achievements around the world in 2004.

In 2004, the best performing RCF 50 Index components were CKE Restaurants (+127.1
percent), Jack in the Box (+72.6 percent), and Choice Hotels International (+67.4 percent).
The worst performing components were Krispy Kreme (-65.6 percent), CDI (-28.6 percent),
and Gymboree (-25.6 percent).
Over the January 2000 – December 2004 period, the RCF 50 Index is up 52.3 percent, while
the S&P 500 Index is down 13.1 percent.

   1. The Rosenberg Center Franchise 50 Index, developed by the University of New
      Hampshire’s William Rosenberg International Center for Franchising, is an index that
      tracks the market performance of the top 50 US public franchisors. These 50
      franchisors represent over 98 percent of the market capitalization of all US public
      companies engaged in business format franchising. For more information on the RCF
      50 Index, contact Dr. E. Hachemi Aliouche ( or Dr. Udo
      Schlentrich ( For more information on the William
      Rosenberg International Center of Franchising, visit the Center’s web site at