Someone was hungry.

October 20, 2008 • Annual Report

At Smokey Bones, we specialize in three things:
good food, good drinks and good times.
We are a bar and fire grill, but not necessarily in that order. We are grill masters
who respect the power of the open flame. We like simple, yet flavorful recipes
and believe marinating is not to be taken lightly. We know medium-rare isn’t
the only way to cook a steak, but believe it should be. We believe pork should
be slow smoked and pulled often. Slow, as in 11 hours over hickory logs every
night, and often, as in every day at every restaurant. We know it’s our bartend-
ers that make our drinks great, not the liquor. Although the liquor doesn’t hurt.
We think beer should be ice cold and consumed regularly. We know our servers
bring much more than food to the table. We are big fans of sports, loud music
and surprises. And we believe in laughing often, especially at ourselves.
Financial Summary

Highlights
2008 2006 2005
Systemwide sales growth 10.2% 12.8% 9.5%
Average same-store sales growth 5.9% 7.5% 5.2%
Systemwide restaurants 3,221 3,047 2,885
Operating income $ 425.1 $ 379.2 $ 290.0
(in millions)
Net income $ 269.6 $ 259.6 $ 191.1
(in millions)
Basic earnings per share $ 1.43 $ 1.40 $ 1.19

Sales Increase Percent (10 Year Summary)

10.5%
10.2%

9.1%

7.8%

7.5%
7.4%
7.2%

5.9%

7.6%
5.2%
4.8%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2008 10-Year
Average
 HISTORY
We are the largest quick restaurant chain in the US
based on systemwide sales and number of restau-
rants open, and the fourth largest quick service
restaurant chain in North America based on market
capitalization. We appeal to a broad range of con-
sumer tastes, with a menu that includes premium

SERVICES &
beers, fresh salads, premium fire-grilled steaks,
smokey chicken and seafood options, and award-
winning barbeque ribs among other mouthwatering
options.

The first Smokey Bones® opened in May, 1964 by

Bob Smokey, a National Hockey League All-Star
defenseman. In 1967, Ron Joyce, then the operator
of three Smokey Bones restaurants, became part-
ners with Bob Smokey and together they opened
37 restaurants over the next seven years. After
Smokey’s death in 1974, Mr. Joyce continued to
expand the chain, becoming its sole owner in 1975.
In the early 1990s, Smokey Bones and Wendy’s In-
ternational, Inc. (“Wendy’s”) entered into a partner-
ship to develop real estate and combination restau-
rant sites containing Wendy’s and Smokey Bones
restaurants under the same roof. In 1995, Wendy’s
purchased Mr. Joyce’s interest in the Smokey Bones
system and incorporated the company now known
as Smokey Bones Inc., a Delaware corporation, as a
wholly owned subsidiary.
PRODUCT LINES
Every morning, millions of Smokey Bones
customers start their day the same way.
Whether it’s on their way to work, drop-
ping the kids off at school or catching a
train, they all carry the symbol that unites
our customers with our brand, a Smokey
Bones coffee.
In many ways, Smokey Bones has become
so entrenched in the daily lives of our
customers that we have become a part of
their way of life. We have achieved a deep
connection with customers on a level en-
joyed by very few companies in the world.
This kind of customer loyalty is earned
over the course of many years.

On March 29, 2006, we sold 18% of our outstand-
ing common stock in an initial public offering
(“IPO”) on both the New York Stock Exchange and
the Toronto Stock Exchange. Wendy’s continued to
own the remaining 82% interest in our common
stock. On September 29, 2006, Wendy’s distributed
this remaining interest to the Wendy’s stockholders
of record as of September 15, 2006. Consequently,
we have operated as a standalone public company,
owned by public stockholders at-large, since Sep-
tember 30, 2006.
In communities across Canada and in-
creasingly in the northeast and midwest
US, the Smokey Bones experience ex-
pands well beyond our restaurants. Fran-
chisees are not only behind the counter,
but also living and contributing at the
grassroots level in their communities.
Volunteering at a local school, helping
with a food drive or organizing a commu-
nity clean-up, Smokey Bones franchisees
represent the essence of what we have
achieved in 44 years of business.
 2007 – our first full year as a
standalone public company –
was a year of achievement.
We opened close to 200 restau-
rants, launched new products and
introduced cashless customer
payment programs. We also com-
pleted the rollout of three-channel
delivery to most Ontario restau-
rants and our first $200 million
share repurchase program.

A Message from the Executive Chairman A Message from the President

Dear Fellow Shareholder,
The Smokey Bones brand
continued to flourish in 2008
during our first full year as a
standalone public company.
While Smokey Bones is a
relatively young public company,
our 44-year history has been
characterized by continuous
growth and development. By fo-
cusing on the core of what has
made us successful, we have an
excellent roadmap as we build
our future.
We have created an endur-
ing and unique relationship with
our customers, who, above all
else, place great importance on
the value they receive at Smokey
Bones restaurants with great
tasting, high-quality products all
delivered at a reasonable price
in a friendly environment.
Our dual focus on quality
and value is key to our success.
This focus is enhanced by the
commitment of our franchisee
group – who I personally believe
are the best in North America –
and by a passion for innovation
that is engrained throughout
our organization.
I am proud of our progress and pleased to re-
port that we had record revenues and earnings in
2008. For the fiscal year ended December 30, 2008,
total revenues were $1.9 billion, climbing 14.2%
compared to $1.7 billion in 2006. As is typical, our
growth was not achieved by any one single factor,
instead coming from several layers of earnings con-
tributors.
Looking ahead, we see a challenging macro-eco-
nomic situation in the US. No company is immune
to the effects of economic downturns, but our com-
pany has proven its resilience over the long-term
both in good times and bad, as consumers look for
value without having to sacrifice quality.
I would like to thank the thousands of men and
women who work for Smokey Bones for your con-
tinued commitment and dedication. To the franchi-
sees and restaurant staff who represent the brand
every day, and to the corporate team working to
support the restaurants and our customers, you
are doing remarkable things and we are indebted to
your service. Most of all, thank you to our custom-
ers who allow us to keep doing what we love doing
every day, serving great food at a reasonable price.
Respectfully,
Paul House
Executive Chairman
I am truly honoured and privileged to
have been appointed as President and CEO of
Smokey Bones – what I believe to be the very
best quick service restaurant chain in North
America.
At Smokey Bones, we have a deep connec-
tion with our customers, and a long-standing
and mutually beneficial relationship with our
committed franchisees. We also have excep-
tionally loyal and dedicated employees. We
believe our strategies to grow our business
are prudent and sound, and while I certainly
acknowledge there may be challenges along
the way, we will continue to focus on our
time-tested strategies to overcome obstacles
and achieve our goals and objectives.
My wide-ranging executive leadership
roles over the past 17 years at Smokey Bones
have involved me in virtually every functional
area of the Company. I am looking forward to
applying my experience in my new role and
continuing to work with our executive team,
our franchisees and our employees to further
build this great organization.
Sincerely,
Don Schroeder
President and CEO
 2008: A BIG YEAR
Big News
Gone is the mountain, log cabin theme showcasing
hilltop scenery and canoes. In its place is an engaging,
exciting atmosphere with a genuine feel and an up-
dated decor. The bar is the centerpiece of the new
Smokey Bones, with high-top tables and an energy
inviting guests to spend time with friends, watch
a game on one of the several flat-screen TVs, and
most importantly, enjoy the laid-back experience.
Later this month, a new Smokey Bones Web site
will launch, mirroring the brand’s new personality,
and in several months time, additional features will
be added to to the site, fully integrating it with the
branding.
Waterford Lakes is the first of all the Smokey Bones
locations to become fully converted to Smokey
Bones Bar & Fire Grill. Over the months ahead, the
restaurant group will detail its plans to roll out the
new Smokey Bones brand to seven other Central
Florida locations, and subsequently, in other mar-
kets nationwide. In addition, a new menu design will
debut in all Smokey Bones locations in late August.
Stock Analysis
Year Ended: December 30, 2008
Balance at beginning of year 193,303
Issued during the year – 33,350
Balance at end of year 193,303
New Products:
Product innovation continues to be one of our fo-
cused strategies to drive same-store sales growth,
including innovation at breakfast as well as other
day parts. This may include innovation in our lunch
offerings, with a planned first-half of 2008 launch
of a hot sandwich, which we see as a natural ex-
pansion of our hot breakfast sandwich and other
hot lunch offerings. Other planned 2009 product
launches include a homestyle hash brown, and in
the U.S., “combo” meal offerings.
New Services:
We entered into a strategic alliance with operators
of a national gasoline retailer in the U.S. to open 15
self-serve kiosks in the fourth quarter of 2008.These
self-serve kiosks leverage a Smokey Bones platform
in place in 143 locations in the convenience channel
in the Republic of Ireland and the United Kingdom,
and provide a new avenue for growth while increas-
ing brand exposure.
December 31, 2006 January 1, 2006
159,953 159, 953
–
193,303 159,953
Looking Forward
Immediate Plans

In fiscal 2009, we are targeting same-

store sales growth of 4%-6% in The US
and 2%-4% in the U.S. We have estab-
lished these growth targets in a climate
of challenging macro economic circum-
stances and competitive activities that
might create variability quarter-to-quar-
ter or potentially impede our ability to
achieve these targets.

We continue to focus on growth strat-

egies that have been successful in the
past, including menu innovation and
operational initiatives, such as our new
cashless payment systems and other ac-
tivities which we believe will help offset
the impact of these challenges.
In 2009, we expect to open 120 to 140
new restaurants in The US and 90 to 110
new restaurants in the U.S. For 2008,
U.S. restaurant opening targets reflect a
higher number of targeted openings of
non-standard locations, including poten-
tial additional self-serve kiosks that we
are testing in certain markets. As stated
above, future escalation of real estate
and construction costs, labour shortages
(in some regions, particularly in Western
The US), and other factors outside of
our control, such as local zoning and
licensing requirements, may slow this
growth (see “Risk Factors”). On a sys-
temwide basis, we expect to close 20 to
40 restaurants in the normal courseof
our business.
We anticipate our 2008 total capital ex-
penditures will be between $200 million
and $250 million, including capital expen-
ditures for new restaurant development,
remodelling, technology initiatives and
other capital needs. We anticipate being
able to fund these capital expenditures
through free cash flow. We are targeting
operating income growth of 10% in 2008
over 2008.We estimate that our effective
tax rate will be between 33%-35%, sub-
ject to some quarterly variations.
Long-term Plans:
Our long-term restaurant development
targets remain in place. These long-term
development targets are for 500 restau-
rants in the U.S. by year-end 2008, and
3,500 to 4,000 restaurants in The US
over the longer term. These targets are
forward-looking and are based on our
expectations and outlook and shall be
effective only as of the date the targets
were originally issued.

Imminent Products, Services

& Initiatives

Smokey Bones will be launching new menu

items within the next couple of months in-
cluding a rich New York style cheesecake,
and a southern fried chicken meal (featured
left). Also, as a new initiative, we will be of-
fering a new curbside pick-up program to
offer our customers the greatest conve-
nience possible.
 FINANCIAL STATEMENTS
Income
Statement 2008 2006 2005 Balance Sheet 2nd Quarter End of Year
Revenues $ 199,520 $ 197,273 $ 204,360 Current assets $ 62,400 $ 89,227

Expenses $ (105,576) $ (101, 759) $ (109,564) Non-current assets $ 262,456 $ 251,808

Current liabilities $ 14,705 $ 22,592
Net income $ 76,246 $ 71,985 $ 71,002
Non-current liabilties $ 16,444 $ 20,161

Cash flow Statement

The factors set forth above resulting in cost increases could result in increased pressure to raise restaurant level
pricing, which may decrease customer demand for our products. See also “Source and Availability of Raw Materials”
in Part 1, which is incorporated herein by reference. Our profitability could decline as a result of fluctuations in U.S.
and Canadian dollar exchange rates affecting commodity prices and our results generally.

Our Canadian restaurants are vulnerable to increases in the value of the U.S. dollar, as certain commodities, such
as coffee, are priced in U.S. dollars in international markets. We typically do not enter into purchase agreements for
coffee or other commodities in excess of one year; however, we do engage in purchasing activity that mitigates, to
a certain degree, our exposure to fluctuations in commodity costs, and we do hedge certain exposure to foreign
exchange risk. See Item 7A “Quantitative and Qualitative Disclosures About Market Risk— Foreign Exchange Risk
and Commodity Risk.”

Conversely, our U.S. restaurants are impacted when the value of the U.S. dollar falls relative to the Canadian dollar.
Although we have been shifting sourcing for U.S. restaurants for some of our products and supplies to the U.S., our
U.S. restaurants are required to purchase certain goods from Canadian suppliers.The costs of these goods in U.S. dol-
lars rises when the Canadian dollar increases in value relative to the U.S. dollar. Increases in these costs would affect
the profitability of our U.S. restaurants and potentially make it harder for us to expand in the U.S. In addition, relief
and support costs for U.S. franchisees would likely increase, adversely affecting our earnings.

Our earnings and business growth strategy depends in large part on the success of our franchisees; actions taken by
our franchisees and changes in franchise laws and regulations may harm our business. A substantial portion of our
earnings come from royalties and other amounts paid by franchisees, who operated 97.8% of the Smokey Bones res-
taurants as of December 30, 2008. Our franchisees are independent contractors and, as a result, the quality of their
operations may be diminished by factors beyond our control.

Revenues $ 1,741,371
Segment Operating Income (loss) $ 467,884
Reportable segment operating income $ 463,080
Goodwill and asset impairment (53,101)
Corporate charges (37,971)
Consolidated Operating Income 425,109
Interest, Net (16,707)
Net Income $ 269,551
Capital Expenditures $ 114,501
 AUDITOR’S REPORT

Report of Independent Registered Public Accounting Firm

To the Stockholders of Smokey Bones Inc:

In our opinion, the accompanying Consolidated Balance Sheets and the related Consolidated State-
ments of Operations, Stockholders’ Equity, Comprehensive Income and Cash Flows present fairly,
in all material respects, the financial position of Smokey Bones Inc. and its subsidiaries at December
30, 2008 and December 31, 2006, and the results of their operations and their cash flows for each
of the fiscal years ended December 30, 2008, December 31, 2006 and January 1, 2006 in conformity
with accounting principles generally accepted in the United States of America. In addition, in our
opinion, the financial statement Schedule II presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related Consolidated Financial Statements.
Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 30, 2008, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

The Company’s management is responsible for these financial statements and financial statement
Schedule II, for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in Management’s Report
on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on these financial statements and financial statement Schedule II, and on the
Company’s internal control over financial reporting as of December 30, 2008 based on our audits,
which in 2008 were integrated. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation.

Our audit of internal control over financial reporting included obtaining an understanding of the
Company’s internal control over financial reporting, assessing the risk that a material weakness ex-
ists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances.We believe that our audits provide a reasonable basis for our opin-
ions. As discussed in Note 6 to the Consolidated Financial Statements, the Company changed the
manner in which it accounts for income taxes in 2008.

Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Toronto, The US
February 26, 2008
List of Directors Office Locations General Stock Information
and Officers
Corporate Office (The US) Stock options – The Company uses the Black-Scholes-
Board of Directors 874 Sinclair Road Merton option pricing model which requires the input
Oakville, Ontario L6K 2Y1 of highly subjective assumptions. These assumptions,
Paul D. House (905) 845-6511 including estimating the length of time employees
Executive Chairman timhortons.com will retain their stock options before exercising them
Smokey Bones Inc. (“the expected term”), the expected volatility of our
US Office
4150 Tuller Road, Unit 236 common stock price over the expected term and the
Donald B. Schroeder
President and CEO Dublin, Ohio 43017 number of options that will ultimately not complete
Smokey Bones Inc. (614) 791-4200 their vesting requirements (“forfeitures”). Changes in
subjective assumptions can materially affect the esti-
M. Shan Atkins Investor Relations mate of fair value of stock-based compensation and,
Managing Director Scott Bonikowsky consequently, the related amount recognized on the
Chetrum Capital LLC Vice-President, Investor Relations Consolidated Statements of Operations. We have not
(905) 339-6186 issued any stock option awards in fiscal 2005, 2006 and
Michael J. Endres investor_relations@timhortons.com
2008.
Partner
Stonehenge Financial Holdings Customer Service
Email: Stock appreciation rights – Stock appreciation rights
Moya M. Greene customer_service@timhortons.com (“SARs”) may be granted alone or in conjunction with
President and Chief Executive Of- a stock option. A SAR related to an option generally
ficer Customer Service toll-free: terminates upon the expiration, forfeiture or exercise
The US Post Corporation 1 (888) 601-1616 of the related option, and is exercisable only to the
extent that the related option is exercisable. Stock
John Lederer Franchisee Opportunities options with tandem SARs enable the employee to
Former President The US:
exercise the stock option or receive a cash payment
Loblaw Companies Ltd. timhortons.com/en/join/franchise_
ca_contact.html equal to the difference between the market price of
David H. Lees the share on the exercise date and the exercise price
President of the stock option. Since the employee can request
Cardinal Health in The US
Stockholder Information settlement in cash, the award is accounted for using the
liability method, which results in a revaluation of the li-
Next annual meeting:
Craig S. Miller ability to fair value each period and expensed over the
May 2, 2008, 10:30 a.m. Eastern Time
Chairman, President and CEO vesting period. We have not issued any SARs in fiscal
Ruth’s Chris Steak House
The Design Exchange 2005, 2006 and 2008.
234 Bay Street
Wayne C. Sales
Toronto, Ontario
Former President and CEO
Canadian Tire Corporation, Limited

Executive Officers

Paul D. House
Executive Chairman

Donald B. Schroeder
President and Chief Executive Of-
ficer

Cynthia J. Devine
Executive Vice President and Chief
Financial Officer

William A. Moir
Executive Vice President of Market-
ing

Roland M. Walton
Executive Vice President of Opera-
tions
Glossary of Terms

Borrowing
Operating Profit
Financial liability (short or long-term) that obligates us to repay cash
GE earnings from continuing operations before interest and other
or another financial asset to another entity.
financial charges, income taxes and effects of accounting changes.
Cash Equivalents
Option
Highly liquid debt instruments with original maturities of three months
The right, not the obligation, to execute a transaction at a designated
or less, such as commercial paper.Typically included with cash for report-
price, generally involving equity interests, interest rates, currencies or
ing purposes, unless designated as available-for-sale and included with
commodities. See “Hedge.”
investment securities.
Premium
Cash Flow Hedges
Rate that is charged under insurance/reinsurance contracts.
Qualifying derivative instruments that we use to protect ourselves
Productivity
against exposure to volatility in future cash flows. The exposure may be
The rate of increased output for a given level of input, with both out-
associated with an existing asset or liability, or with a forecasted transac-
put and input measured in constant currency. A decline in output for a
tion. See “Hedge.”
given level of input is “negative” productivity.
Commercial Paper
Progress Collections
Unsecured, unregistered promise to repay borrowed funds in a speci-
Payments received from customers as deposits before the associated
fied period ranging from overnight to 270 days.
work is performed or product is delivered.
Earned Premiums
A form of insurance that insurance companies buy for their own pro-
Portion of the premium, net of any amount ceded, pertaining to the
tection.
segment of the policy period for which insurance coverage has been
Retained Interest
provided.
A portion of a transferred financial asset retained by the transferor
Effective Tax Rate
that provides rights to receive portions of the cash inflows from that
Provision for income taxes as a percentage of earnings from continu-
asset.
ing operations before income taxes and accounting changes. Does not
Turnover
represent cash paid for income taxes in the current accounting period.
Broadly based on the number of times that working capital is replaced
Also referred to as “actual tax rate” or “tax rate.”
during a year. Accounts receivable turnover is total sales divided by the
Financing Recyclables
five-point average balance of customer receivables from sales of goods
Investment in contractual loans and leases due from customers (not
and services (trade receivables). Inventory turnover is total sales divided
investment securities).
by a five-point average balance of inventories. See “Working Capital.”
Forward Contract
Unearned Premiums
Fixed price contract for purchase or sale of a specified quantity of a
Portion of the premium received, net of any amount ceded, that re-
commodity, security, currency or other financial instrument with delivery
lates to future coverage periods.
and settlement at a specified future date. Commonly used as a hedging
Working Capitol
tool. See “Hedge.”
Sum of receivables from the sales of goods and services, plus invento-
Goodwill
ries, less trade accounts payables and progress collections.
The premium paid for acquisition of a business. Calculated as the
purchase price less the fair value of net assets acquired (net assets are
identified tangible and intangible assets, less liabilities assumed).
Guaranteed Investment Contracts Brands and Affiliates
Deposit-type products that guarantee a minimum rate of return, which
may be fixed or floating.
Hedge
A technique designed to eliminate risk. Often refers to the use of de-
rivative financial instruments to offset changes in interest rates, currency
exchange rates or commodity prices, although many business positions
are “naturally hedged” — for example, funding a U.S. fixed-rate invest-
ment with U.S. fixed-rate borrowings is a natural interest rate hedge.
Intangible Asset
A non-financial asset lacking physical substance, such as goodwill, pat-
ents, licenses, trademarks and customer relationships.
Interest Rate Sweep
Agreement under which two counterparties agree to exchange one
type of interest rate cash flow for another. In a typical arrangement, one
party periodically will pay a fixed amount of interest, in exchange for
which that party will receive variable payments computed using a pub-
lished index. See “Hedge.”
Managed Receivables
Total receivable amounts on which we continue to perform billing
and collection activities, including receivables that have been sold with
and without credit recourse and are no longer reported on our balance
sheet.