<PAGE>
 
                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

(MARK ONE)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                For the quarterly period ended October 6, 1996

                                      OR

[_]  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 0-22802

                              BOSTON CHICKEN, INC.
             (Exact name of registrant as specified in its charter)

                       DELAWARE                       36-3904053
           (State or other jurisdiction of         (IRS Employer
           incorporation or organization )         Identification No.)


                           14103 Denver West Parkway
                                P. O. Box 4086
                            Golden, CO  80401-4086
         (Address of principal executive offices, including zip code)

                                (303) 278-9500
              (Registrant's telephone number, including area code)


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  X      No 
                                    ---        ---

Number of shares of Common Stock, $.01 par value per share, outstanding as of
November 11, 1996: 64,061,569.
<PAGE>
 
                              BOSTON CHICKEN, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                        Page No. 
<S>                                                                    <C>  
PART I.   FINANCIAL INFORMATION                                  

          Item 1.  Financial Statements
 
               Consolidated Balance Sheets as of December 31, 1995 and
               October 6, 1996........................................         2
 
               Consolidated Income Statements for the quarter and 
               three quarters ended October 1, 1995 and 
               October 6, 1996........................................         3
 
               Consolidated Statements of Cash Flows for the three
               quarters ended October 1, 1995 and October 6, 1996.....         4
 
               Notes to Consolidated Financial Statements.............         5
 
          Item 2.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations...............        10
 
PART II.  OTHER INFORMATION
 
          Item 6.  Exhibits and Reports on Form 8-K...................        15
 
          Signature Page..............................................        16
 
          Exhibit Index............................................... Exhibit-1
</TABLE>

                                       1
<PAGE>
 
                     BOSTON CHICKEN, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                          December 31,  October 6,
                                              1995         1996
                                          ------------  -----------
<S>                                       <C>           <C>
                                                        (Unaudited)
ASSETS
------
Current Assets:
  Cash and cash equivalents.............    $  310,436  $   59,358
  Accounts receivable, net..............        13,445      18,907
  Due from affiliates...................         9,614      10,462
  Notes receivable......................         5,462           -
  Prepaid expenses and other current             1,536       2,680
    assets..............................
  Deferred income taxes.................         3,322       8,534
                                            ----------  -----------  
    Total current assets................       343,815      99,941
 
Property and Equipment, net.............       258,550     358,567
Notes Receivable........................       450,572     710,111
Deferred Financing Costs, net...........        15,745      20,504
Excess of Purchase Price Over Fair
  Value of Net Assets Acquired, net.....             -     180,468
Other Assets, net.......................         5,195      53,179
                                            ----------  ----------- 
    Total assets........................    $1,073,877  $1,422,770
                                            ==========  ===========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------    
Current Liabilities:
  Accounts payable......................    $   12,292  $   10,218
  Accrued expenses......................         9,095      28,584
  Deferred franchise revenue............         8,945      11,290
                                            ----------  -----------
    Total current liabilities...........        30,332      50,092
 
Deferred Franchise Revenue..............         2,072       7,608
Revolving Credit Facility...............             -       1,200
Liquid Yield Option Notes...............       177,306     179,373
Convertible Subordinated Debt...........       129,872     129,862
Deferred Income Taxes...................        16,631      35,958
Other Noncurrent Liabilities............           833       7,258
Minority Interest.......................             -      99,090
Commitments and Contingencies
Stockholders' Equity:
  Preferred stock --$.01 par value;
   authorized 20,000,000 shares; no
   shares issued and outstanding.......              -           -
  Common stock --$.01 par value;
    authorized 100,000,000 shares;
    issued and outstanding:
    59,129,301 in 1995 and 63,902,895              
    in 1996.............................           591         640
   Additional paid-in capital...........       675,611     822,195
   Retained earnings....................        40,629      89,494
                                            ----------  ----------- 
                                               716,831     912,329
                                            ----------  ----------- 
      Total liabilities and                 
       stockholders' equity.............    $1,073,877  $1,422,770
                                            ==========  ===========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
                           part of these statements.

                                       2
<PAGE>

                     BOSTON CHICKEN, INC. AND SUBSIDIARIES

                        CONSOLIDATED INCOME STATEMENTS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                           Three
                                                             Quarter Ended             Quarters Ended
                                                      -------------------------   -----------------------
                                                        October 1,   October 6,   October 1,   October 6,
                                                           1995         1996         1995         1996
                                                      ------------   ----------   ----------   ----------
<S>                                                     <C>          <C>          <C>          <C>
Revenue:
 Royalties and franchise-related fees..............   $     26,566   $   45,646   $   73,163   $  130,816
 Company-operated stores...........................         12,105       28,664       40,415       55,402
                                                      ------------   ----------   ----------   ----------
  Total revenue....................................         38,671       74,310      113,578      186,218
Cost and Expenses:
 Cost of products sold.............................          4,510       10,567       15,111       20,515
 Salaries and benefits.............................          6,930       12,862       22,958       29,699
 General and administrative........................          8,350       31,368       28,689       58,084
                                                      ------------   ----------   ----------   ----------
  Total cost and expenses..........................         19,790       54,797       66,758      108,298
                                                      ------------   ----------   ----------   ----------
Income from Operations.............................         18,881       19,513       46,820       77,920
Other Income (Expense):
 Interest expense, net.............................         (4,593)      (3,803)      (9,090)     (10,138)
 Gain on sale of subsidiary's stock................              -       14,778            -       14,778
 Other income (expense), net.......................            (56)           4          (22)         316
                                                      ------------   ----------   ----------   ----------
  Total other income (expense).....................         (4,649)      10,979       (9,112)       4,956
                                                      ------------   ----------   ----------   ----------
Income Before Income Taxes and
 Minority Interest.................................         14,232       30,492       37,708       82,876
Income Taxes.......................................          5,418       11,194       14,358       30,992
Minority Interest in Earnings of
 Subsidiary........................................              -       (1,998)           -       (3,019)
                                                      ------------   ----------    ---------   ----------
Net Income.........................................   $      8,814   $   17,300    $  23,350   $   48,865
                                                      ============   ==========    =========   ==========

Net Income Per Common and
 Equivalent Share..................................   $       0.17   $     0.26    $    0.47   $     0.74
                                                      ============   ==========    =========   ==========

Weighted Average Number of Common
 and Equivalent Shares Outstanding.................         50,863       67,416       49,695       66,091
                                                      ============   ==========    =========   ==========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
                           part of these statements.

                                       3
<PAGE>

                     BOSTON CHICKEN, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                     Three Quarters Ended
                                                                   ------------------------
                                                                   October 1,    October 6,
                                                                      1995          1996
                                                                   ----------   -----------
<S>                                                                <C>          <C>
Cash Flows from Operating Activities:
Net income........................................................    $23,350   $    48,865
Adjustments to reconcile net income to net cash provided
 by operating activities:
  Depreciation and amortization...................................      8,380        15,559
  Interest on liquid yield option notes...........................      4,637        10,542
  (Gain) loss on sale of subsidiary's stock.......................          -       (14,778)
  Deferred income taxes...........................................     11,094       (21,843)
  Minority interest...............................................          -         3,019
  Loss (gain) on disposal of assets...............................        306          (160)
  Changes in assets and liabilities, excluding effects
   from acquisitions:
    Accounts receivable and due from affiliates...................     (5,120)       (3,877)
    Accounts payable and accrued expenses.........................     (3,837)        7,776
    Deferred franchise revenue....................................       (411)        2,713
    Other assets and liabilities..................................       (982)        1,175
                                                                    ----------    ----------
     Net cash provided by operating activities....................     37,417        48,991
                                                                    ----------    ----------

Cash Flows from Investing Activities:
 Purchase of property and equipment...............................    (99,519)      (92,351)
 Proceeds from the sale of assets.................................     47,171        58,996
 Increase in deferred financing costs and other assets............     (9,454)      (10,247)
 Issuance of notes receivable.....................................   (376,008)   (1,013,570)
 Repayments of notes receivable...................................    207,175       630,064
                                                                    ----------    ----------
     Net cash used in investing activities........................   (230,635)     (427,108)
                                                                    ---------    ----------
Cash Flows from Financing Activities:
 Proceeds from issuance of common stock...........................     36,610       110,833
 Proceeds from issuance of subsidiary's common stock..............          -        59,902
 Proceeds from issuance of liquid yield option notes..............    172,464             -
 Proceeds from revolving credit facilities........................    165,815        32,660
 Repayments of revolving credit facilities........................   (165,815)      (76,356)
                                                                    ---------    ----------
     Net cash provided by financing activities....................    209,074       127,039
                                                                    ---------    ----------
Net Increase (Decrease) in Cash and Cash Equivalents..............     15,856      (251,078)
Cash and Cash Equivalents, beginning of period....................     25,304       310,436
                                                                    ----------    ----------
Cash and Cash Equivalents, end of period..........................  $  41,160   $    59,358
                                                                    ==========  ===========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
                           part of these statements.

                                       4
<PAGE>
 
                     BOSTON CHICKEN, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     The consolidated financial statements have been prepared by Boston Chicken,
Inc. (the "Company") and are unaudited except for the consolidated balance sheet
at December 31, 1995. The financial statements have been prepared in accordance
with the instructions for Form 10-Q and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows as of
October 6, 1996 and for all periods presented have been made. The statements are
subject to year-end audit adjustment. A description of the Company's accounting
policies and other financial information is included in the audited consolidated
financial statements as filed with the Securities and Exchange Commission in the
Company's Form 10-K for the year ended December 31, 1995. The consolidated
results of operations for the quarter and three quarters ended October 6, 1996
are not necessarily indicative of the results expected for the full year.

2.  ACQUISITIONS

    During the three quarters ended October 6, 1996, the Company converted its
$120.0 million loan into common stock of Einstein/Noah Bagel Corp. ("ENBC") and
subsequently invested an additional $31.6 million in ENBC common stock,
resulting in a current ownership interest of approximately 58% of the
outstanding shares of common stock of ENBC. The Company also paid $21.6 million
in common stock and notes to acquire the equity interests of certain investors
in Mid-Atlantic Restaurant Systems L.P. ("Mid-Atlantic"), its Boston Market area
developer in Philadelphia. As part of this transaction, the Company assumed
$38.5 million in liabilities owed to third parties, including funded debt of
$27.0 million. The transaction resulted in the Company obtaining a 93% equity
interest in Mid-Atlantic. Subsequent to the Company's acquisition of Mid-
Atlantic, Mid-Atlantic acquired Boston Market stores for a purchase price of
$16.9 million, including the assumption of $1.1 million in liabilities owed to
third parties. These transactions have been accounted for as purchases, and,
accordingly, the purchase prices were allocated to assets and liabilities based
upon an evaluation of their fair values at the date of the transactions,
resulting in goodwill of $182.2 million which is being amortized over a 35-year
life. The Company will evaluate adjustments to the goodwill balance or useful
life based upon future events and circumstances, which could include, but are
not limited to, a change in business strategy or change in current and long-term
projected operating performance. If factors indicate that the assets should be
evaluated for possible impairment, the Company will use an estimate of such
assets' undiscounted projected cash flows in measuring whether the assets are
impaired. In such circumstances, the excess of the net carrying value of the
assets over their fair value would be deemed impaired, and consequently, charged
to earnings.

     The following represents the unaudited pro forma results of operations
through October 6, 1996, as if the aforementioned transactions had occurred at
the beginning of the Company's fiscal year (in thousands of dollars, except per
share data):

<TABLE>
<CAPTION>
             <S>                       <C>
             Revenue................   $247,485
             Net income.............   $ 35,633
             Net income per share...   $   0.54
</TABLE>

     This pro forma information is not indicative of the results of operations
that actually would have been obtained if the transactions had occurred at the
beginning of the Company's fiscal year. The pro forma information is not
intended to be a projection of future results.


                                       5


<PAGE>
 

3.  AREA DEVELOPER FINANCING

  The Company currently offers convertible and non-convertible secured debt
financing to certain Boston Market area developers to partially finance store
development and working capital needs. Only developers which are developing a
significant portion of an area of dominant influence or metropolitan area of a
major city and which meet all of the Company's requirements are eligible for
such financing. Area developer financing generally requires the developer to
expend at least 75% of its contributed capital prior to drawing on its revolving
loan, with advances permitted during a two- or three-year draw period (or
additional draw period in the event of a loan amendment) in a pre-determined
maximum amount, equal to two to four times the amount of the area developer's
contributed capital. Upon expiration of the draw period, the loan converts to an
amortizing term loan payable over four to five years in periodic installments,
sometimes with a final balloon payment. The Company may extend the draw and
repayment periods, subject to the area developer purchasing additional
development rights, contributing additional capital, or in connection with other
amendments to the loan agreement. Interest is set at 1% over the applicable
reference rate of Bank of America Illinois as established from time to time and
is payable each period. The loan is secured by a pledge of substantially all of
the assets of the area developer and generally by a pledge of the equity
interests of the owners of the developer.

  ENBC offers secured debt financing to its area developers to partially finance
store development and working capital needs on terms similar to those offered by
the Company to Boston Market area developers.

  (a)  LOAN CONVERSION OPTION

  The Company may convert all or any portion of the convertible loan amount
after a moratorium period (generally two years from execution or subsequent
amendment of the loan) and generally after the area developer has completed not
less than 80% of its area development commitment (or in the event of certain
defaults) and generally up to the later of full repayment of the loan or a
specified date in the agreement, into equity in the area developer at the
conversion price set forth in the loan agreement, generally at a 12% to 15%
premium over the per unit price paid by the investors in the area developer for
their equity investment made concurrently with the execution of the loan
agreement or subsequent amendments thereto. The maximum loan amount is
established to give the Company majority ownership of the developer upon
conversion, provided the Company exercises its right to participate in any
intervening financing of the developer. To the extent such loan is not fully
drawn or has been drawn and repaid, the Company has a corresponding option to
acquire, at the loan conversion price, the amount of additional equity it could
have acquired by conversion of the loan, had the loan been fully drawn.

  ENBC's loan agreements with its area developers contain conversion and option
features similar to the Company's loan agreements with its Boston Market area
developers.

  There can be no assurance that the Company or ENBC will exercise future rights
to convert their loans to area developers into, or acquire an equity interest in
any area developer to which they provide financing or that such exercise or
acquisition would result in a majority interest in the area developer.

  (b)  COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING

  The following table summarizes credit commitments and outstanding balances set
forth on the Company's balance sheets for area developer financing of Boston
Market area developers as of both December 31, 1995 and October 6, 1996 and ENBC
area developers as of October 6, 1996 (in thousands of dollars, except number of
area developers):

<TABLE>
<CAPTION>
                                                         December 31,    October 6,
                                                             1995         1996
                                                         ------------   ----------
<S>                                                      <C>            <C>
Boston Market:
  Number of area developers receiving financing......           15              14
  Loan commitments...................................    $ 614,094       $ 761,415
  Unused revolving loans.............................     (202,676)       (170,692)
                                                         ---------       ---------
  Loans outstanding (included in Notes Receivable)...    $ 411,418       $ 590,723
                                                         =========       =========
</TABLE>
                                       6
<PAGE>


<TABLE>
<CAPTION>                                                   

                                                        December 31,    October 6,
                                                           1995            1996
                                                        ------------    ---------- 
<S>                                                      <C>            <C>
ENBC:
  Number of area developers receiving financing......            -              10
  Loan commitments...................................    $       -       $ 210,800
  Unused revolving loans.............................            -        (110,070)
                                                         ---------       ---------
  Loans outstanding (included in Notes Receivable)...    $       -       $ 100,730
                                                         =========       =========
</TABLE>

  (c)  CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES

  The allowance for Boston Market and ENBC financed area developers' loan losses
is maintained at a level that in management's judgment is adequate to provide
for estimated possible loan losses. The amount of the allowance is based on
management's review of use of loan proceeds, adherence to store development
schedules, store performance trends, type and amount of collateral securing the
loan, prevailing economic conditions, and other factors which management deems
relevant at the time. Based upon this review and analysis, no allowance for loan
losses was required as of December 31, 1995 and October 6, 1996.

  The following table sets forth certain aggregate financial information as of
the dates indicated provided annually by Boston Market and ENBC financed area
developers (excluding Mid-Atlantic which is now consolidated in the Company's
financial statements), even though such loans made by ENBC pre-date its
consolidation in the Company's financial statements (in thousands, except number
of financed area developers and store data):

<TABLE>
<CAPTION>
                                                                         December 26,           December 25,           December 31,
                                                                             1993                   1994                   1995
                                                                         ------------           ------------           ------------
<S>                                                                      <C>                    <C>                    <C>
Total number of financed area developers...........................              5                     12                     18

Total number of financed area developer stores open................             78                    274                    649

Total gross assets.................................................        $71,880               $237,833               $531,153

Total debt:

  To the Company or ENBC...........................................         43,794                163,971                379,556

  To third parties (including capital lease obligations)...........           -                     3,068                 14,606

Total stockholder/partner/member equity (deficit)..................         10,006                  7,448                 (6,083)
</TABLE>

4.  DEBT

  The Company and ENBC each have a revolving bank credit facility, which
together aggregate $109.5 million. The Company's facility provides for
borrowings of up to $64.5 million through June 30, 1997 and ENBC's facility
provides for borrowings up to $45.0 million through April 30, 1998. Borrowings
under the Company's facility may be either floating rate loans with interest at
the bank's reference rate or eurodollar rate loans plus an applicable margin.
Borrowings under ENBC's facility may be either floating rate loans with interest
at the bank's base rate plus .5% or eurodollar rate loans plus an applicable
margin. In addition, a commitment fee applicable to each facility equal to .25%
of the average daily unused portion of the loan is required. The credit facility
agreements contain covenants, among others, restricting other borrowings,
prohibiting cash dividends, and requiring the respective borrowers maintenance
of interest coverage and cash flow ratios, minimum capital levels, and specified
store level sales. ENBC's facility is

                                       7
<PAGE>

collateralized by substantially all of its assets. As of October 6, 1996, no
amount was outstanding under the Company's facility and $1.2 million was
outstanding under ENBC's facility.

5.  STOCK OPTIONS

  The Company accounts for its employee stock options in accordance with APB 
No. 25.

6.  STOCKHOLDERS' EQUITY

  In August 1996, ENBC completed an initial public offering and other financings
which in the aggregate raised net proceeds of $86.0 million, including an
investment by the Company of $31.6 million. Prior to these transactions, the
Company held approximately a 70% interest in ENBC and subsequent to these
transactions, the Company held approximately a 58% interest in ENBC. The
transactions resulted in a pretax gain of approximately $14.8 million. Deferred
income taxes have been provided for on the gain.



7.  ROYALTIES AND FRANCHISE-RELATED FEES

  Royalties and franchise-related fees for the Company and ENBC (from the date
of the Company's conversion of its loan into ENBC common stock) are comprised of
the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                            Quarter Ended                  Three Quarters Ended
                                                   --------------------------------  --------------------------------
                                                   October 1, 1995  October 6, 1996  October 1, 1995  October 6, 1996
                                                   ---------------  ---------------  ---------------  ---------------
<S>                                                <C>              <C>              <C>              <C>
Royalties........................................          $ 8,756          $14,159          $24,165         $ 40,519
Initial franchise and area developer fees........            3,013            5,978            9,079           13,255
Interest income..................................            8,678           15,522           22,044           47,421
Real estate, lease, and related services income..            4,352            7,000           12,338           20,255
Software fees....................................            1,713            2,858            5,454            9,238
Other............................................               54              129               83              128
                                                   ---------------  ---------------  ---------------  ---------------
                                                           $26,566          $45,646          $73,163         $130,816
                                                   ===============  ===============  ===============  ===============
</TABLE>


8.  COMMITMENTS

  Through October 6, 1996, twelve Boston Market area developers sold to BC
Equity Funding, L.L.C. an aggregate of $56.7 million of 10% cumulative preferred
equity, redeemable at any time by the area developers at a premium initially
equal to 10% of the initial issue price, to be increased 2% each year up to a
maximum of 20% of the initial issue price plus accrued dividends (the
"Redemption Price"). The Company has agreed that in the event its conversion and
option rights under its secured loan agreement with the area developers have
expired

                                       8
<PAGE>
 
unexercised (see Note 3) and the Company does not consent to an initial public
offering of the area developer, the Company will purchase the preferred equity
from the holders at the Redemption Price.

     In December 1995, Bagel Store Development Funding, L.L.C. ("Bagel Funding")
was formed to invest in existing and proposed area developers of ENBC. Through
October 6, 1996, Bagel Funding had raised $90.0 million (including an aggregate
of $20.7 million in subscriptions receivable) and had invested a total of $51.9
million in ENBC area developers. ENBC is obligated to purchase Bagel Funding's
equity interest in an area developer at a formula price in the event that the
area developer fails to fulfill its obligation to redeem such interests at such
price in any one of the following circumstances: (i) ENBC converts into or
otherwise acquires a majority interest in the area developer; (ii) ENBC does not
consent to the area developer undertaking an initial public offering after
ENBC's conversion and/or option rights under its loan agreement with the area
developer have expired unexercised; or (iii) ENBC does not consent to the
termination of the area developer's area development and franchise agreements
with ENBC after ENBC's conversion and/or option rights under its loan agreement
with the area developer have expired unexercised.

9.  CONTINGENCIES

     The Company is subject to various lawsuits, claims, and other legal matters
in the course of conducting its business, including its business as a
franchisor. The Company believes that the outcome of such lawsuits, claims, and
other legal matters will not have a material impact on the Company's
consolidated financial position or results of operations.

                                       9
<PAGE>
 

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

  CERTAIN STATEMENTS IN THIS FORM 10-Q UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONSTITUTE "FORWARD-
LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE, OR ACHIEVEMENTS OF BOSTON CHICKEN, INC. (THE "COMPANY"),
EINSTEIN/NOAH BAGEL CORP. ("ENBC"), THEIR AREA DEVELOPERS AND FRANCHISEES,
BOSTON MARKET(R) STORES, EINSTEIN BROS. BAGELS(TM) STORES AND NOAH'S NEW YORK
BAGELS(R) STORES TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: COMPETITION;
SUCCESS OF OPERATING INITIATIVES, INCLUDING ROLL-OUT OF THE F.A.S.T. TRACK(TM)
SYSTEM AT BOSTON MARKET STORES; AREA DEVELOPERS' ADHERENCE TO DEVELOPMENT
SCHEDULES; ADVERTISING AND PROMOTIONAL EFFORTS; ADVERSE PUBLICITY; ACCEPTANCE OF
NEW PRODUCT OFFERINGS; EXPANSION OF THE HOLIDAY HOME MEAL REPLACEMENT BUSINESS;
AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR STORE DEVELOPMENT; CHANGES IN
BUSINESS STRATEGY OR DEVELOPMENT PLANS; AVAILABILITY AND TERMS OF CAPITAL; FOOD,
LABOR, AND EMPLOYEE BENEFIT COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL
WEATHER CONDITIONS; AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q OR IN THE
COMPANY'S FORM 10-K FOR ITS 1995 FISCAL YEAR. THE SUCCESS OF THE COMPANY AND
ENBC IS DEPENDENT ON THEIR RESPECTIVE AREA DEVELOPERS AND FRANCHISEES AND THE
MANNER IN WHICH THEY OPERATE AND DEVELOP BOSTON MARKET STORES AND EINSTEIN BROS.
BAGELS AND NOAH'S NEW YORK BAGELS STORES.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL

  On June 17, 1996, the Company converted its loan to ENBC into ENBC common
stock and currently owns approximately a 58% equity interest. On April 22, 1996,
the Company acquired a 93% interest in Mid-Atlantic Restaurant Systems L.P.
("Mid-Atlantic"), its Boston Market area developer in the Philadelphia area.
During the quarter ended October 6, 1996, Mid-Atlantic acquired additional
Boston Market stores. As a result of the conversion of the ENBC loan, the
revenue previously generated from ENBC by the Company as a lender and service
provider has been eliminated in consolidation and replaced with revenue (and
operating expenses) from ENBC franchise operations as well as from ENBC operated
stores. As a result of the acquisition of Mid-Atlantic and its subsequent
acquisition of stores, the revenue previously generated by the Company as a
franchisor, lender and service provider has been eliminated in consolidation and
replaced with revenue (and operating expenses) from Company-operated stores. The
foregoing results are adjusted in the "minority interest" line item to reflect
the minority interest not owned by the Company. As a result of these
transactions, the operating results for the period are not readily comparable to
those for the quarter ended October 1, 1995.

  As of October 6, 1996, the Company owned 95 Boston Market stores in the
Philadelphia market. The following table sets forth store performance data for
these stores:

<TABLE>
<CAPTION>
                                             Quarter Ended October 6, 1996
                                             -----------------------------
                                                (dollars in thousands)

<S>                                          <C>               <C>
     Net sales...........................         $25,964.5         100.0%
     Food and paper costs................           9,606.2          37.0%
     Salaries and benefits...............           6,614.0          25.5%
     Operating expenses..................           2,033.8           7.8%
     Occupancy and advertising costs.....           2,813.5          10.8%
                                             --------------    -----------
     Store cash flow.....................         $ 4,897.0          18.9%
                                             ==============    ===========
</TABLE>

                                      10

<PAGE>
 
RESULTS OF OPERATIONS
----------------------

STORE ACTIVITY

  The results of operations are significantly impacted by the number of stores
opened during the quarter.  The following table sets forth systemwide store
activity for the Company and ENBC for the period indicated.

<TABLE>
<CAPTION>
                             Quarter Ended October 6, 1996
               ----------------------------------------------------------
                 Beginning       Stores         Stores         Ending
                  Stores         Opened         Closed         Stores
               -------------  -------------  -------------  -------------
<S>            <C>            <C>            <C>            <C>
Boston Market       957             67            (1)           1,023
ENBC                188             53             0              241
</TABLE>

REVENUE

  Total revenue increased 92% for the quarter ended October 6, 1996 over the
prior comparable quarter. For the three quarters ended October 6, 1996, total
revenue increased 64% over the prior comparable period. Royalties and franchise-
related fees increased 72% for the quarter ended October 6, 1996 and increased
79% for the three quarters ended October 6, 1996. The increases in royalties and
franchise-related fees were primarily attributable to higher interest income
from loans made to Boston Market area developers, higher royalties due to higher
systemwide store revenue in the Boston Market system and the inclusion of ENBC's
royalties and franchise-related fees from the date of conversion of the
Company's loan to ENBC into ENBC common stock. The increases in interest income
were due to higher outstanding loan balances associated primarily with the
increases in stores opened by area developers. Higher royalties were the result
of an increase in Boston Market systemwide store revenue which increased to
$288.9 million in the quarter ended October 6, 1996, up 46% from $197.5 million
for the prior comparable quarter. Systemwide store revenue increased to $861.1
million in the three quarters ended October 6, 1996, up 55% from $556.3 million
for the prior comparable period. The increase in systemwide store revenue was
due primarily to an increase in the number of Boston Market stores open and
higher weekly per store averages ("WPSAs") for the Boston Market system, which
increased 5.7% to $24,716 for the quarter ended October 6, 1996, from $23,388 in
the prior comparable quarter. WPSA increased 7.1% to $23,673 for the three
quarters ended October 6, 1996, from $22,098 in the prior comparable period.
WPSA represents the weekly per store average gross revenue for all stores in the
Boston Market system based upon the actual number of days the stores are open in
the reporting period. The inclusion of ENBC's royalties and franchise-related
fees from the date of conversion accounted for 42% of the increase in royalty
and franchise-related fees for the third quarter and 19% of the increase for the
three quarters ended October 6, 1996.

  Revenue from Boston Market Company-operated stores is significantly affected
by the average number of such stores in the periods being compared. The average
number of Boston Market Company-operated stores for the third quarter of 1996
was 94 compared to 32 for the third quarter of 1995. The average number of
Boston Market Company-operated stores for the three quarters ended October 6,
1996 was 53 compared to 39 in the comparable 1995 period. This change in average
number is attributable to the timing of store sales to area developers in 1995
and the acquisition of stores in 1996. Revenue from Company-operated stores
increased 137% for the third quarter of 1996 compared with the comparable
quarter last year and increased 37% for the three quarters ended October 6, 1996
compared with the prior comparable period. The increase for these periods was
due to a combination of a higher average number of Boston Market Company-
operated stores and the inclusion of ENBC operated stores from the date of
conversion. The inclusion of revenue from ENBC operated stores from the date of
conversion accounted for 14% of the increase in store revenue for the third
quarter and 39% of the increase for the three quarters ended October 6, 1996.

                                       11

<PAGE>
 
COST OF PRODUCTS SOLD

  As a result of the higher average number of Boston Market Company-operated
stores operating in the quarter ended October 6, 1996, cost of products sold
increased 134% compared with the prior comparable quarter. Cost of products sold
increased 36% for the three quarters ended October 6, 1996, compared with the
comparable period last year, also as a result of the higher average number of
Boston Market Company-operated stores operating in the three quarters ended
October 6, 1996, compared with the prior comparable period. ENBC operated stores
included from the date of conversion accounted for 13% of the increase in cost
of products sold for the third quarter and 37% of the increase for the three
quarters ended October 6, 1996.

SALARIES AND BENEFITS

  Primarily as a result of the higher average number of Boston Market Company-
operated stores operating in the quarter ended October 6, 1996, salaries and
benefits increased 86% compared with the prior comparable quarter. The increase
for the third quarter of 1996 was also due to the inclusion of ENBC employees
from the date of conversion and an increased number of employees at the
Company's support center. ENBC accounted for 31% of the increase in salaries and
benefits for the third quarter. Salaries and benefits increased 29% for the
three quarters ended October 6, 1996 compared with the comparable period last
year. The increase in salaries and benefits for the three quarters ended October
6, 1996 was due to an increased number of employees at the Company's support
center and the inclusion of ENBC employees from the date of conversion. ENBC
accounted for 34% of the increase in salaries and benefits for the three
quarters ended October 6, 1996.

GENERAL AND ADMINISTRATIVE

  Included in general and administrative expenses for the quarter and three
quarters ended October 6, 1996, was a non-recurring provision of approximately
$15.0 million to purchase store equipment from Boston Market area developers
which equipment will be made obsolete due to the introduction of a new service
system designed to provide faster customer service. Absent this provision,
general and administrative expenses increased 96% for the quarter ended October
6, 1996 over the prior comparable quarter and increased 50% for the three
quarters ended October 6, 1996 over the comparable 1995 period. The increase for
the quarter was attributable to inclusion of ENBC's general and administrative
expenses from the date of conversion, greater depreciation and amortization
expense, and a higher average number of Company-operated Boston Market stores.
ENBC accounted for 13% of the increase in general and administrative expenses
for the third quarter. The increase for the three quarters ended October 6, 1996
was primarily attributable to greater depreciation and amortization expense, an
increase in the general and administrative expenses at the support center
necessary to support systemwide expansion, and inclusion of ENBC's general and
administrative expenses from the date of conversion. ENBC accounted for 14% of
the increase. Included in general and administrative expenses were depreciation
and amortization charges of $6.3 million for the third quarter of 1996 compared
with $2.9 million in the third quarter of 1995. Depreciation and amortization
charges were $15.6 million for the three quarters ended October 6, 1996,
compared with $8.4 million for the comparable period last year. The increases in
depreciation and amortization expense were primarily attributable to the
goodwill associated with the acquisition of Mid-Atlantic and the conversion of
the ENBC loan, as well as a higher fixed asset base reflecting the Company's and
ENBC's investment in support center infrastructure.

OTHER INCOME (EXPENSE)

  Included in other income (expense) for the quarter and three quarters ended
October 6, 1996, was approximately a $14.8 million gain recognized as a result
of ENBC issuing 4.4 million shares of common stock to third parties in the third
quarter. Absent this gain, the Company had a net expense of $3.8 million in the
third quarter of 1996 compared to a net expense of $4.6 million in the
comparable quarter of 1995 and a net expense of $9.8 million for the three
quarters ended October 6, 1996 compared to a net expense of $9.1 million in the
comparable 1995 period. The decrease in the expense in the 1996 quarter was
attributable to additional interest income earned in the third quarter of 1996.
The increase in the expense for the three quarters ended October 6,

                                      12

<PAGE>
 
1996 was due to additional interest expense incurred in 1996 resulting from the
Liquid Yield Option Notes being outstanding for the entire period in 1996 versus
only a portion of the year in 1995.

INCOME TAXES

  The provision for income taxes for 1996 is based upon the Company's and ENBC's
anticipated tax rates.

MINORITY INTEREST

  The minority interest in the earnings of subsidiary of $2.0 million for the
quarter and $3.0 million for the three quarters ended October 6, 1996,
represents the minority ownership interest in the earnings of ENBC.

LIQUIDITY AND CAPITAL RESOURCES

  Liquidity. The Company's and ENBC's principal capital requirements relate to
establishing brand awareness and leadership by providing partial financing to
area developers for their use in rapid store development and to finance their
working capital needs. As of October 6, 1996, the Company had secured loan
commitments to its Boston Market financed area developers aggregating
approximately $761.4 million, of which approximately $590.7 million had been
advanced. As of October 6, 1996, ENBC had secured loan commitments to its
area developers aggregating approximately $210.8 million, of which
approximately $100.7 million had been advanced.

  As a result of executing the rapid expansion strategy required by the Company,
Boston Market area developers have incurred net losses in each of the last three
years. The losses incurred over this three year period, aggregating $149.1
million in 1995, $47.0 million in 1994, and $9.8 million in 1993, include (a)
depreciation and amortization charges of approximately $49 million, (b)
approximately $86 million attributable to development overhead, scale
inefficiencies in operating overhead, and other start-up costs which the Company
believes are necessary to establish the Boston Market brand in new territories
and open stores at a rate sufficient to gain a competitive advantage over
similar concepts, and (c) royalties, interest, and other franchise-related fees
that would no longer be incurred in the event the Company were to acquire, or
convert its convertible secured loans, to such financed area developers. As a
result of the foregoing factors, as well as ongoing improvements to store
operating performance, the Company does not consider these start-up losses to be
a meaningful financial measure during this rapid expansion phase (i.e. that
period during which new stores constitute a significant percentage of stores
open in an area of dominant influence). The Company believes the rapid expansion
phase for most of its developers should last approximately four to five years
from the time significant development commences in such area developer's area of
dominant influence. As the rapid expansion phase ends, the size of the area
developer's store base should enable the developer to gradually reduce and
eventually recover such start-up losses. The reduction in and recovery of losses
is expected to be driven primarily by lower development overhead, increased
operational and advertising efficiencies, greater economies of scale, and
further increases in store revenue through continued product and service
enhancements. The point at which losses may be recovered will vary by area
developer depending primarily upon the size and timing of the area developer's
store development schedule, the achievement of advertising efficiency, the level
of interest charges, the intensity of regional competition, and the quality of
management, however, there can be no assurance that such losses will be
recovered. Because the financed area developers are generally two to three years
into significant store development in their respective areas of dominant
influence, the Company believes substantially all of its financed area
developers will remain in the rapid expansion phase during 1996 in most of their
areas of dominant influence and the Company, accordingly, anticipates that such
financed area developers will continue to incur start-up losses in 1996.
Subsequent to the completion of the rapid expansion phase, the Company expects
area developer profitability to be a more meaningful factor in assessing loan
recoverability and any future loan commitments. Although the Company believes
its current financed area developers will achieve such profitability, in the
event the foregoing strategy does not come to fruition or an area developer
otherwise fails to achieve a sufficient level of profitability subsequent to its
rapid expansion phase, such event could have a material adverse impact on the
Company's
                                     13

<PAGE>
 
financial position and results of operations. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 10.

  ENBC's area developers are pursuing a similar rapid expansion strategy and the
Company believes such area developers will also incur net losses during their
rapid expansion phase. The Company also believes however, that the foregoing
factors applicable to start-up losses and recovery will apply to ENBC area
developers as well. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON
PAGE 10.

  Pursuant to the terms of the loan agreement with its area developers, the
Company may convert all or any portion of the convertible loan amount into
equity of the area developer after a moratorium period, provided generally the
area developer has completed not less than 80% of its area development
commitment or in the event of certain defaults. Any determination to convert any
area developer loan or otherwise acquire an equity interest would involve a
variety of economic and operational considerations, including the projected
financial impact of converting the loan, the status of the area developer's
market penetration, the performance of the area developer's stores, the
Company's desire to own such stores and the willingness of the Company to incur
the risk of owning stores versus receiving income as a franchisor, lender and
service provider, the Company's ability to manage such stores if necessary, the
future capital requirements of the area developer and its ability to raise such
capital, and the demand on Company resources. Any such conversion could occur in
conjunction with combinations of existing area developers with one another or
otherwise. In addition, any loan conversion or other acquisition of an equity
interest in an area developer by the Company would not be indicative of whether
the Company intended to, or would, convert or otherwise acquire an equity
interest in any other area developer. Upon conversion, the Company would
typically become majority equity owner of the area developer, resulting in the
Company consolidating the area developer's operations in its financial
statements. Consequently, the franchise and related fees earned by the Company
(including interest, royalties, real estate related, software, and other fees)
from such an area developer would be eliminated in consolidation. The operating
results of the area developer (primarily store revenue, less expenses) would be
included in the Company's financial results. Such results would be adjusted for
any remaining minority interest in such area developer not acquired by the
Company.

  Capital Resources.  For the three quarters ended October 6, 1996, the Company
generated approximately $49.0 million of cash from operating activities and
$170.7 million from the issuance of shares of common stock.  In August 1996,
ENBC completed an initial public offering and other financings which in the
aggregate raised net proceeds of $86.0 million, including an investment by the
Company of $31.6 million.  Of such net proceeds, approximately $45.0 million was
used to repay the balance outstanding under its bank revolving credit facility.
As of October 6, 1996, the Company had $59.4 million available in cash and cash
equivalents and $108.3 million available under its revolving credit facilities.

  The Company anticipates that it, ENBC, and their respective area developers
will have need for additional financing dependent primarily on the number of
stores opened, the cost of such stores, and store operating results. The
Company's capital requirements depend primarily on the amount and timing of
borrowings under the loan agreements between the Company and its area developers
and the Company and ENBC. The Company, ENBC, and their respective area
developers, may seek additional funds from public or private offerings of debt
or equity securities. There can be no assurance that the Company, ENBC, or their
area developers will be able to raise such funds on satisfactory terms when
needed. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 10.

                                      14
<PAGE>
 
PART II - OTHER INFORMATION

Item 2.  Changes in Securities

         Pursuant to a warrant purchase agreement dated July 18, 1996, the
         Company issued and sold from September 27, 1996 until October 6, 1996
         warrants to purchase an aggregate of 750,000 shares of common stock to
         certain area developers of the Company at an exercise price of $25.00
         per share. The aggregate cash purchase price for the warrants was
         $7,327,500. Such warrants were sold without registration under 
         the Securities Act of 1933, as amended ("Securities Act") in
         reliance on Section 4(2) of the Securities Act.

Item 6.  Exhibits and Reports on Form 8-K

     A.  Exhibits: See Exhibit Index appearing elsewhere herein, which is
         incorporated herein by reference.

     B.  Reports on Form 8-K: No reports on Form 8-K were filed during the
         quarter ended October 6, 1996. A Form 8-K/A supplementing the Company's
         Form 8-K dated June 17, 1996 was filed on August 28, 1996. Such Form 8-
         K/A updated information under Item 2 (Acquisition or Disposition of
         Assets) and included under Item 7 (Exhibits) financial statements of
         Einstein/Noah Bagel Corp. ("ENBC"), pro forma condensed consolidated
         financial statements of the Company and Subsidiaries, excerpts from
         ENBC's Registration Statement on Form S-1 (Reg. No. 333-04725), and a
         consent of auditors.

                                      15
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                               BOSTON CHICKEN, INC.


Date:  November 19, 1996       /s/ Scott A. Beck
                               -------------------------------------
                                   Scott A. Beck
                               Co-Chairman of the Board and Chief 
                               Executive Officer


Date:  November 19, 1996       /s/ Mark W. Stephens
                               -------------------------------------
                                   Mark W. Stephens
                               Vice Chairman and Chief Financial
                               Officer (Principal Financial Officer)

                                      16
<PAGE>
 
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT                      
NUMBER                             EXHIBITS
-------
<S>  <C>
4.1   Warrant Purchase Agreement dated July 18, 1996 by and between the Company
      and Market Partners, L.L.C. ("Market Partners"), including the form of
      Warrant ("Warrant Purchase Agreement") (incorporated by reference to
      Exhibit 4.17 to the Company's Registration Statement on Form S-8
      (Registration No. 333-15389)).
      
4.2   Registration Rights Agreement dated September 27, 1996 by and between the
      Company and Market Partners (incorporated by reference to Exhibit 4.18
      to the Company's Registration Statement on Form S-8 (Registration No.
      333-15389)).
      
10.1  Warrant Purchase Agreement (included in Exhibit 4.1).
      
10.2  Second Amendment to the Amended and Restated Loan Agreement between the
      Company and Einstein/Noah Bagel Corp. ("ENBC") dated September 16, 1996
      and Second Amendment to Secured Demand Note of ENBC dated September 16,
      1996 (incorporated by reference to Exhibit 10.1(c) to ENBC's Registration
      Statement on Form S-1 (Registration No. 333-12395)).
      
10.3  First Amendment and Waiver dated August 27, 1996 to Secured Credit
      Agreement dated as of May 17, 1996 among ENBC, the Lenders named therein,
      and Bank of America Illinois, as Agent (incorporated by reference to
      Exhibit 10.9(b) to ENBC's Registration Statement on Form S-1 (Registration
      No. 333-12395)).
      
10.4  Fourteenth Amendment dated July 12, 1996 to Amended and Restated Credit
      Agreement dated as of May 18, 1994 among the Company, the Lenders named
      therein, and Bank of America Illinois, as Agent (incorporated by reference
      to Exhibit 4.4(o) to the Company's Registration Statement on Form S-8
      (Registration No. 333-15389)).
      
10.5  Option Agreement dated August 27, 1996 among the Company, Harlan Bagel
      Supply Company, L.L.C., and Hal P. Harlan, Hugh P. Harlan, and Doug H.
      Harlan (the "Harlans") (incorporated by reference to Exhibit 10.25 ENBC's
      Registration Statement on Form S-1 (Registration No. 333-12395)).
      
10.6  Right of First Refusal Agreement among the Company, Harlan Bakeries, Inc.
      and the Harlans (incorporated by reference to Exhibit 10.26 to ENBC's
      Registration Statement on Form S-1 (Registration No. 333-12395)).
      
10.7  Option Agreement between the Company and Saad J. Nadhir Dated as of 
      July 25, 1996.
      
10.8  Option Agreement between the Company and John Todd dated as of July 29,
      1996.
      
10.9  Letter Agreement between the Company and Jeffry J. Shearer dated as of
      August 19, 1996. </TABLE>
<PAGE>
 
<TABLE> 
<CAPTION> 

<S>     <C> 
  10.10  Fourth Amended and Restated Limited Liability Company Agreement of
         Bagel Store Development Funding, L.L.C. dated as of July 1, 1996
         (incorporated by reference to Exhibit 10.28 to ENBC's Registration
         Statement on Form S-1 (Registration No. 333-12395)).
         
  10.11  Form of Warrant Purchase Agreement between the Company, Market Partners
         and certain area developers of the Company, including the form of 
         Warrant issued by each such area developer to Market Partners.

  11     Statement re Computation of Earnings Per Share.
         
  27     Financial Data Schedule.
</TABLE>   
 
In the case of incorporation by reference to documents filed by ENBC, ENBC's
file number under that Act is 0-21097.

                                  Exhibit - 1