Previously, AFM announced that it did not file its annual statements by the appropriate deadlines; and, as a result, the relevant securities commissions imposed Issuer Cease Trade Orders. With the release of 2003 financial statements and its interim statements for 2004, AFM Hospitality intends to satisfy the provisions of the securities commissions and cure its default of the financial statement reporting requirement. With the change of CFO's during 2004 and the departure of an interim CFO, AFM's management and its board of directors, believed that it was prudent to invest additional time to review AFM's books, records, and related disclosures in accordance with company guidelines and the new disclosure standards as AFM completed several complex transactions during 2003. While reporting a sizeable loss for 2003, AFM is pleased that it has received a clean opinion letter from its outside auditors and it has not been necessary to report any restatement of any periods prior to 2003.  Additionally, AFM expects to report a significant turn around for 2004 compared to 2003.

AFM has reported in its annual MDA that the significant world events had a large negative impact on many of AFM's customers during the prior 36 months.

The well-publicized impacts on the hospitality and travel industries included: the overall long-term effects of the September 11, 2001 disaster; the ensuing terrorism fears; the Iraq War and travelers' concerns relating to Severe Acute Respiratory Syndrome (SARS). AFM's 2003 fee income declined from 2002 to 2003 as its customers' room rates and occupancies suffered from the global turmoil affecting travelers in both Canada and the United States. Despite these factors, AFM realized growth in franchise and management contracts in large part due to the acquisition of the Trigild International management and receivership business in the United States and an increase in asset management assignments throughout 2003. This growth helped offset the reduction in fees from the individual franchisees and management contracts.

AFM reports in its MDA that its operating results were impacted in 2003 for various reasons, including:

• Poor economic conditions caused by a series of negative world events in both the United States and Canada;
• Not completing several anticipated new acquisitions and expensing the related acquisition costs and increased infrastructure spending incurred in anticipation of completion of these transactions;
• Declines in rooms revenues of existing franchisees in Canada impacted by world events, especially SARS, resulting in a decline of franchise fees received;
• Declines in management fee revenue combined with write-downs of management fee receivables related to several hotel insolvencies in the United States and Canada.

• Within AFM's Management Division, AFM reorganized Northwest Lodging International (USA) and Northwest Lodging International (Canada) into one company and eliminated several management positions; Unwound the RTM Management acquisition and terminated or resigned from 16 unprofitable management contracts;
• Within AFM's Franchise Division, AFM reduced annual expenses by an estimated $1 million in salaries and $500,000 in operating expenses; relocated its corporate headquarters from downtown Toronto to the airport with expected annual savings in excess of $200,000 per year; Consolidated its Vancouver BC offices into its Seattle WA offices with expected annual savings of $260,000; and reduced Corporate HR and admin functions with anticipated annual savings of $300,000 in 2004 vs. 2003.
• Within AFM's Interim Asset Management Division, AFM acquired Trigild International with two related companies which created an increase in revenues of US $3 million; Trigild finished 2003 with 142 engagements for 26 of the largest 100 US financial institutions; expanded its services into 22 states and provinces including receivership, asset management, and operational audits relating to hotels, restaurants, convenience and gas stations, multi-family apartments, and a shoe manufacturer; and hired a COO to direct the growth of the restaurant related engagements; and
• AFM reduced the size of its Board with the resignations of Mahesh Hathiramani and Richard Davis to eight directors.

• Negotiated payment plans for approximately $1.5 million of payables to its outside professional services providers and others; implemented changes in cash management, account receivable collection and other internal controls to enable it to manage its available cash resources more closely; and through two of its subsidiaries, completed outside several lines of credit using collateral and personal guarantees from AFM's CEO and another director/shareholder.
• AFM obtained the deferral of interest payments due to I.F.Propco, a lender controlled by a shareholder, and its continued deferment on interest payments due for 2003 and concurrently began to seek replacement financing for the remaining $3 million of debt and approximately $750,000 of accrued and unpaid interest.
• AFM established provisions for approximately $7.9 million dollars in anticipated bad debts, charges related to asset impairment and legal expenses related to the unwind of certain acquisitions and closure of other underperforming business segments (In thousands):

In March, 2004, AFM completed new financing through two US subsidiaries, Northwest Lodging International (USA) Inc. and AFM Asset Management Services Inc totaling $1,372,325 (USD $1,050,000) from a pool of private lenders. In order to secure the financing, the lenders have required that AFM's CEO and another director/shareholder provide personal guarantees and collateral outside AFM. Neither director/shareholder is receiving any compensation or remuneration for providing the guarantees and collateral.

In March 2004, AFM announced that it had entered into an agreement to acquire the assets of Boutique Hotels & Resorts International ("Boutique").  The transaction was completed on November 15, 2004. Boutique is a membership alliance, which provides independent hotel and resort properties with a distinctive upscale international brand identity, a state of the art reservations system, innovative marketing, worldwide sales and other services that are usually available through large international hotel chains only.  Under the terms of the purchase, in exchange for all the assets of Boutique Hotels & Resorts International(R) and the related intellectual property from First Capital Hospitality Financial Group, the sellers have received cash, notes and other consideration of approximately CDN $2.5 million as well as the right to an earn-out participation in the success of the related business over the next seven years.

Concurrent with this acquisition AFM closed on a financing package with a private Canadian and American lending group to provide USD $450,000 of acquisition financing, working capital, and capital to cover related transaction costs. The financing provides for terms with a twenty four month maturity, deferred interest and the right to participate in operating profits of the acquired business for the first twenty four months.

According to Lawrence P. Horwitz, AFM Chairman and CEO, "We are pleased with restructuring actions we implemented in 2003, the focus on our core strengths and businesses as seen in the very positive results to date in 2004, and with the continued commitment of our customers, our employees, our vendors, and our Board to the continued growth of AFM in 2004."

About AFM Hospitality Corporation
AFM Hospitality Corporation operates or has open and/or executed franchise and management agreements with 300 hotels, restaurants and other nationally franchised service businesses throughout North America. The company's focus is to increase the number of hotels franchised by the respective brands, franchise new brands, build the portfolio of hotel management agreements, provide valuable resources and hospitality experience to help hotel owners grow their business, and to acquire other hospitality and travel businesses. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSX: AFM).

This Press Release contains certain forward-looking statements and information from AFM Hospitality Corporation relating, but not limited to, the company's operations, anticipated financial performance, business prospects and strategies.