<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q



    X     Quarterly report pursuant to section 13 or 15(d) of the Securities
  -----

Exchange Act of 1934

For the quarterly period ended September 26, 1999 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 33-14051
                                               --------

                                Prandium, Inc.
                                --------------
            (Exact name of registrant as specified in its charter)

   Delaware                                        33-0197361
   -------------------------------                 ----------------------------
   (State or other jurisdiction of                (Employer Identification No.)
   incorporation or organization)


               18831 Von Karman Avenue, Irvine, California 92612
               -------------------------------------------------
               (Address of principal executive offices)(Zip Code)


      Registrant's telephone number, including area code: (949) 757-7900
                                                          --------------

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 and (2) has been subject to such filing requirements for
the past 90 days.

                           Yes    X        No _______
                               -------

As of November 10, 1999, the registrant had issued and outstanding 180,380,513
shares of common stock, $.01 par value per share.

                                      -1-
<PAGE>

                        PART I.   FINANCIAL INFORMATION
                        -------------------------------


Item 1.    Financial Statements
-------

                                PRANDIUM, INC.
                                --------------

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     -------------------------------------
                               ($ in thousands)


<TABLE>
<CAPTION>
                                                                                  September 26,             December 27,
                                                                                      1999                     1998
                                                                                  -------------             ------------
                                                                                   (Unaudited)
ASSETS
------
<S>                                                                               <C>                       <C>
Current assets:
  Cash and cash equivalents                                                       $       3,715             $     17,707
  Receivables                                                                             5,067                    9,106
  Inventories                                                                             4,635                    5,020
  Other current assets                                                                    5,856                    3,957
                                                                                  -------------             ------------
    Total current assets                                                                 19,273                   35,790

Property and equipment, net                                                             199,307                  201,314
Reorganization value in excess of amount allocable to identifiable                       34,077                   35,129
 assets, net
Costs in excess of net assets of business acquired, net                                  66,745                   56,455
Other assets                                                                             16,458                   19,498
                                                                                  -------------             ------------
                                                                                  $     335,860             $    348,186
                                                                                  =============             ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

Current liabilities:
  Current portion of long-term debt, including                                    $       3,263             $      2,498
   capitalized lease obligations
  Accounts payable                                                                       15,609                   22,447
  Self-insurance reserves                                                                21,785                   25,040
  Other accrued liabilities                                                              63,708                   74,833
  Income taxes payable                                                                    3,614                    3,742
                                                                                  -------------             ------------
    Total current liabilities                                                           107,979                  128,560

Other long-term liabilities                                                               3,810                    3,612
Long-term debt, including capitalized lease obligations, less                           267,597                  237,151
 current portion

Stockholders' deficit:
  Common stock - authorized 300,000,000 shares, par value $.01 per share,
     180,380,513 shares issued and outstanding on September 26, 1999 and
     178,105,294 shares issued and outstanding on December 27,                            1,804                    1,781
      1998
  Additional paid-in capital                                                            222,353                  222,353
  Accumulated deficit                                                                  (267,683)                (245,271)
                                                                                  -------------             ------------
    Total stockholders' deficit                                                         (43,526)                 (21,137)
                                                                                  -------------             ------------
                                                                                  $     335,860             $    348,186
                                                                                  =============             ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements

                                      -2-
<PAGE>

                                  PRANDIUM, INC.
                                  --------------

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                -----------------------------------------------
                  ($ in thousands, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                           For the Quarters Ended
                                                  ---------------------------------------
                                                  September 26,             September 27,
                                                      1999                      1998
                                                  -------------            --------------
<S>                                               <C>                      <C>
Sales                                             $     134,264            $      115,293
                                                  -------------            --------------

Product costs                                            35,324                    30,492
Payroll and related costs                                47,790                    40,941
Occupancy and other operating expenses                   35,185                    30,416
Depreciation and amortization                             7,017                     5,586
General and administrative expenses                       7,637                     7,683
Opening costs                                               688                     1,103
Loss on disposition of properties, net                    1,806                     1,835
                                                  -------------            --------------

  Total costs and expenses                              135,447                   118,056
                                                  -------------            --------------

Operating loss                                           (1,183)                   (2,763)

Interest expense, net                                     8,170                     6,111
                                                  -------------            --------------

Loss before income tax provision                         (9,353)                   (8,874)

Income tax provision                                        147                        46
                                                  -------------            --------------

Net loss                                          $      (9,500)           $       (8,920)
                                                  =============            ==============

Net loss per share - basic and diluted            $       (0.05)           $        (0.07)
                                                  =============            ==============

Weighted average shares outstanding - basic
  and diluted                                       180,380,513               121,515,391
                                                  =============            ==============
</TABLE>

     See accompanying notes to condensed consolidated financial statements

                                      -3-
<PAGE>

<TABLE>
<CAPTION>
                                  PRANDIUM, INC.
                                  --------------

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                -----------------------------------------------
                  ($ in thousands, except per share amounts)
                                  (Unaudited)


                                                         For the Nine Months Ended
                                                  -------------------------------------
                                                  September 26,           September 27,
                                                      1999                     1998
                                                  -------------           -------------
<S>                                               <C>                     <C>
Sales                                             $     408,837           $     348,694
                                                  -------------           -------------

Product costs                                           107,970                  93,288
Payroll and related costs                               145,225                 122,859
Occupancy and other operating expenses                  104,720                  92,595
Depreciation and  amortization                           19,932                  16,208
General and administrative expenses                      24,508                  21,799
Opening costs                                             2,391                   2,361
Loss on disposition of properties, net                    2,999                   3,241
                                                  -------------           -------------

  Total costs and expenses                              407,745                 352,351
                                                  -------------           -------------

Operating income (loss)                                   1,092                  (3,657)

Interest expense, net                                    23,063                  17,937
                                                  -------------           -------------

Loss before income tax provision                        (21,971)                (21,594)

Income tax provision                                        441                     300
                                                  -------------           -------------

Net loss                                          $     (22,412)          $     (21,894)
                                                  =============           =============

Net loss per share - basic and diluted            $       (0.12)          $       (0.18)
                                                  =============           =============

Weighted average shares outstanding - basic
    and diluted                                     180,380,513             121,515,391
                                                  =============           =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements

                                      -4-
<PAGE>

                                PRANDIUM, INC.
                                --------------

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              --------------------------------------------------
                               ($ in thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                  For the Nine Months Ended
                                                                         -----------------------------------------
                                                                         September 26,               September 27,
                                                                              1999                      1998
                                                                         -------------               -------------

Decrease in Cash and Cash Equivalents
<S>                                                                      <C>                         <C>
Cash flows from operating activities:
  Cash received from customers, franchisees and licensees                $     410,153               $     350,267
  Cash paid to suppliers and employees                                        (401,111)                   (336,863)
  Interest paid, net                                                           (15,219)                    (14,320)
  Opening costs                                                                 (2,391)                     (2,017)
  Income taxes paid                                                               (569)                       (358)
                                                                         -------------               -------------

    Net cash used in operating activities                                       (9,137)                     (3,291)
                                                                         -------------               -------------

Cash flows from investing activities:
  Proceeds from disposal of property and equipment                               1,787                       4,585
  Proceeds from the sale of notes receivable, net                                3,246                           0
  Proceeds from payments on notes receivable                                     2,076                           0
  Bridge note receivable - KKR merger                                                0                      (3,000)
  Cash required for the acquisition of KKR                                      (2,300)                     (1,271)
  Capital expenditures                                                         (24,354)                    (17,703)
  Lease termination payments                                                    (2,855)                     (1,115)
  Other divestment expenditures                                                 (1,811)                          0
  Other                                                                           (746)                       (570)
                                                                         -------------               -------------

    Net cash used in investing activities                                      (24,957)                    (19,074)
                                                                         -------------               -------------

Cash flows from financing activities:
  Net proceeds from issuance of notes                                                0                      11,620
  Proceeds from working capital borrowings, net                                 21,800                           0
  Payment of debt issuance costs                                                  (177)                        (97)
  Reductions of long-term debt, including capitalized lease obligations         (1,521)                     (2,889)
                                                                         -------------               -------------

    Net cash provided by financing activities                                   20,102                       8,634
                                                                         -------------               -------------

Net decrease in cash and cash equivalents                                      (13,992)                    (13,731)
Cash and cash equivalents at beginning of period                                17,707                      32,518
                                                                         -------------               -------------

Cash and cash equivalents at end of period                               $       3,715               $      18,787
                                                                         =============               =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements

                                      -5-
<PAGE>

                                PRANDIUM, INC.
                                -------------

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
          -----------------------------------------------------------
                               ($ in thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                                For the Nine Months Ended
                                                                                             -------------------------------
                                                                                             September 26,     September 27,
                                                                                                  1999              1998
                                                                                             -------------     -------------

Reconciliation of net loss to net cash used in operating activities:
<S>                                                                                          <C>               <C>
Net loss                                                                                     $     (22,412)    $     (21,894)
Adjustments to reconcile net loss  to net cash used in operating activities:
    Depreciation and amortization                                                                   19,932            16,208
    Amortization of debt issuance costs                                                              1,164               896
    Expense of unamortized opening costs                                                                 0               344
    Loss on disposition of properties                                                                2,999             3,241
    Accretion of interest on discount notes                                                          7,147             6,066
    (Increase) decrease in receivables, inventories and other current assets                        (1,329)              601
    Decrease in accounts payable, self-insurance reserves, other accrued
      liabilities and income taxes payable                                                         (16,638)           (8,753)
                                                                                             -------------     -------------

Net cash used in operating activities                                                        $      (9,137)    $     $(3,291)
                                                                                             =============     =============
 </TABLE>

     See accompanying notes to condensed consolidated financial statements

                                      -6-
<PAGE>

                                PRANDIUM, INC.
                                --------------

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             ----------------------------------------------------
                                  (Unaudited)

     1.   Company.  Prandium, Inc., formerly known as Koo Koo Roo Enterprises,
          -------
Inc. and as Family Restaurants, Inc. (together with its subsidiaries, the
"Company"), was incorporated in Delaware in 1986. The Company is primarily
engaged in the operation of restaurants in the full-service and fast-casual
segments, through its subsidiaries. Information relating to periods ending prior
to October 30, 1998 included in this report relates to the historical operations
of Family Restaurants, Inc. and, except as otherwise indicated, does not reflect
the operations of Koo Koo Roo, Inc., a Delaware corporation, or The Hamlet
Group, Inc., a California corporation (collectively, "KKR"), which the Company
acquired on October 30, 1998. At September 26, 1999, the Company operated 307
restaurants in 27 states, approximately 68% of which are located in California,
Ohio, Pennsylvania, Indiana and Michigan, and franchised and licensed 22
restaurants outside the United States.

     2.   Financial Statements.  The Condensed Consolidated Financial Statements
          --------------------
in this Form 10-Q have been prepared in accordance with Securities and Exchange
Commission Regulation S-X. Reference is made to the Notes to the Consolidated
Financial Statements for the Year Ended December 27, 1998 included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 27, 1998
(the "Form 10-K") for information with respect to the Company's significant
accounting and financial reporting policies, as well as other pertinent
information. The Company believes that all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of the interim periods presented have been made. The results of operations for
the quarter and nine months ended September 26, 1999 are not necessarily
indicative of those for the full year.

     3.   Acquisition of KKR.  The following table summarizes unaudited pro
          ------------------
forma combined financial information for the Company, assuming the acquisition
of KKR occurred as of the beginning of fiscal 1998. The unaudited pro forma
combined financial information is not indicative of the results of operations of
the combined companies that would have occurred had the acquisition occurred at
the beginning of the period presented, nor is it indicative of future operating
results. The unaudited pro forma adjustments are based upon currently available
information and certain assumptions that management believes are reasonable
under the circumstances.

                                      -7-
<PAGE>

<TABLE>
<CAPTION>
                                                                        Nine Months
                                                      Quarter Ended        Ended
                                                     Sept. 27, 1998   Sept. 27, 1998
                                                     ---------------  ---------------
                                                               (Pro Forma)
                                                         ($ in thousands, except
                                                             per share data)
<S>                                                  <C>              <C>
Consolidated Statements of Operations Information
      Sales                                                $137,536         $416,003
      Net loss from continuing operations                  $(11,348)        $(40,613)
      Pro forma basic and diluted loss per common          $  (0.07)        $  (0.23)
      Pro forma weighted average number of common
        shares outstanding (in thousands)                   178,105          178,105
</TABLE>

     An appraisal of the acquired real estate, restaurant equipment, furniture,
fixtures and leasehold interests has been completed, and the final allocation of
purchase price to the fair value of tangible assets acquired and liabilities
assumed has been made.

     4.   Strategic Divestment Program.  In the fourth quarter of 1998, 48
          ----------------------------
non-strategic Chi-Chi's restaurants were designated for divestment (the
"Strategic Divestment Program"). In conjunction with the Strategic Divestment
Program, the Company recorded a provision for divestitures of $22,884,000,
including divestment reserves of $12,256,000. For the nine months ended
September 26, 1999, the Company utilized (i) $249,000 for severance costs
associated with certain restaurant and regional managers in connection with the
restaurants divested and (ii) $1,505,000 for net costs associated with lease
terminations, subsidized subleases, brokerage fees and other divestment costs.
Thirty of the restaurants were still in operation at the end of the third
quarter of 1999, and, accordingly, only $3,399,000 of the divestiture reserves
have been utilized as of September 26, 1999. The Strategic Divestment Program is
scheduled to be completed over a 12- to 24-month period and the operating
results will be included in the Company's consolidated statement of operations
until the divestments are completed.

     5.   Segment Information.  The Company operates exclusively in the
          -------------------
food-service industry. Substantially all revenues result from the sale of menu
products at restaurants operated by the Company. The Company's reportable
segments are based on restaurant operating divisions. Operating income (loss)
includes the operating results before interest. The corporate component of
operating income (loss) represents corporate general and administrative
expenses. Corporate assets include corporate cash, investments, receivables and
asset portions of financing instruments.

                                      -8-
<PAGE>

<TABLE>
<CAPTION>
                                              For the Quarters Ended     For the Nine Months Ended
                                              ----------------------     -------------------------
                                              Sept. 26,      Sept. 27,      Sept. 26,    Sept. 27,
                                                1999           1998          1999         1998
                                              -----------    --------    -----------    ----------
<S>                                           <C>            <C>         <C>            <C>
                                                                 (Unaudited)
                                                              ($ in thousands)
Sales
     El Torito Division                       $  55,693      $  53,778    $   167,793    $ 163,170
     Chi-Chi's Division                          56,894         61,515        174,599      185,524
     Koo Koo Roo Division                        21,677              0         66,445            0
                                               --------       --------     ----------     --------
        Total Sales                           $ 134,264      $ 115,293    $   408,837    $ 348,694
                                               ========       ========     ==========     ========

Depreciation and Amortization
     El Torito Division                       $   2,481      $   2,420    $     7,317    $   7,193
     Chi-Chi's Division                           2,904          2,778          7,988        7,847
     Koo Koo Roo Division                         1,374              0          3,848            0
     Corporate                                      258            388            779        1,168
                                               --------       --------     ----------     --------
        Total Depreciation and Amortization   $   7,017      $   5,586    $    19,932    $  16,208
                                               ========       ========     ==========     ========

Operating Income (Loss)
     El Torito Division                       $   2,414      $   2,313    $     7,572    $   8,144
     Chi-Chi's Division                          (2,722)        (4,665)        (4,214)     (10,235)
     Koo Koo Roo Division                          (507)             0           (586)           0
     Corporate                                     (368)          (411)        (1,680)      (1,566)
                                               --------       --------     ----------     --------
        Total Operating Income (Loss)         $  (1,183)     $  (2,763)   $     1,092    $  (3,657)
                                               ========       ========     ==========     ========

Interest Expense, net
     El Torito Division                       $     410      $     201    $       823    $     673
     Chi-Chi's Division                             279            145            455          458
     Koo Koo Roo Division                            26              0             69            0
     Corporate                                    7,455          5,765         21,716       16,806
                                               --------       --------     ----------     --------
        Total Interest Expense, Net           $   8,170      $   6,111    $    23,063    $  17,937
                                               ========       ========     ==========     ========

Capital Expenditures
     El Torito Division                       $   1,739      $   2,609    $     8,699    $   7,374
     Chi-Chi's Division                           5,824          5,108         13,571        9,716
     Koo Koo Roo Division                           548              0          1,682            0
     Corporate                                      140            276            402          613
                                               --------       --------     ----------     --------
        Total Capital Expenditures            $   8,251      $   7,993    $    24,354    $  17,703
                                               ========       ========     ==========     ========

<CAPTION>
                                                                           Sept. 26,      Dec. 27,
                                                                              1999          1998
                                                                         -----------    ----------
                                                                          (Unaudited)
                                                                              ($ in thousands)
<S>                                                                      <C>            <C>
Total Assets
     El Torito Division                                                  $   105,743    $  100,056
     Chi-Chi's Division                                                      113,184       112,328
     Koo Koo Roo Division                                                    100,826       108,410
     Corporate                                                                16,107        27,392
                                                                         -----------    ----------
                             Total Assets                                 $  335,860    $  348,186
                                                                         ===========    ==========
</TABLE>

                                      -9-
<PAGE>

   Item 2.   Management's Discussion and Analysis of Financial Condition and
   ------
             Results of Operations

     Certain information and statements included in this Management's Discussion
and Analysis of Financial Condition and Results of Operations, including,
without limitation, statements containing the words "believes," "anticipates,"
"expects," "intends," "plans," "estimates" and words of similar import,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and involve known and unknown risks and
uncertainties that could cause actual results of the Company or the restaurant
industry to differ materially from expected results expressed or implied by such
forward-looking statements.  Although it is not possible to itemize all of the
factors and specific events that could affect the outlook of a restaurant
company operating in a competitive environment, factors that could significantly
impact expected results include:

     .    the continuing development of successful marketing strategies for
          each of the Company's concepts;

     .    the effect of national and regional economic conditions;

     .    the ability of the Company to satisfy its debt obligations;

     .    the availability of adequate working capital;

     .    competitive products and pricing;

     .    changes in legislation;

     .    demographic changes;

     .    the ability to attract and retain qualified personnel;

     .    changes in business strategy or development plans;

     .    business disruptions;

     .    changes in consumer preferences, tastes and eating habits;

     .    increases in food and labor costs; and

     .    the Company's ability to mitigate the impact of the Year 2000 issue
          successfully.

     The Company disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.

                                      -10-
<PAGE>

     The following should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" presented in the
Form 10-K.

     Information relating to periods ending prior to October 30, 1998 included
herein relates to the historical operations of Prandium, Inc. (formerly known as
Koo Koo Roo Enterprises, Inc. and as Family Restaurants, Inc.) and does not
reflect the operations of KKR which the Company acquired on October 30, 1998.

     As used herein, "comparable restaurants" means restaurants operated by the
Company on April 1, 1998 and that continued in operation through the end of the
third quarter of 1999.  The Company has adjusted its comparable restaurant sales
calculation to conform to the general industry standard of an 18-month base
versus the prior 12-month base.  This change has not had a material impact on
reported comparable restaurant sales results due to the relatively low levels of
new restaurant growth.

Liquidity and Capital Resources
-------------------------------

     A.  Liquidity

     The Company reported net cash used in operating activities for the nine
months ended September 26, 1999 and September 27, 1998 of $9.1 million and $3.3
million, respectively.  Cash needs are being funded by available cash balances,
supplemented, as necessary, by working capital advances available under the
Foothill Credit Facility (as defined below).  In addition, in 1997 and 1998 FRI-
MRD Corporation, a wholly owned subsidiary of the Company ("FRI-MRD"), raised
approximately $67.3 million in cash from the issuance of senior discount notes
and senior secured discount notes to supplement its liquidity needs.  The
Company's viability has been and will continue to be dependent upon its ability
to generate sufficient cash flow to meet its obligations on a timely basis, and
to comply with the terms of its financing agreements.

     Statement of Cash Flows.  For the nine months ended September 26, 1999, net
cash used in operating activities was $9.1 million compared to $3.3 million for
the nine months ended September 27, 1998.  This increase was in part due to the
$4.4 million decline in cash received from customers, franchisees and licensees
net of cash paid to suppliers and employees.  In addition, interest paid, net,
opening costs and income taxes paid also increased by $0.9 million, $0.4 million
and $0.2 million, respectively.  For the first nine months of 1999, net cash
used in investing activities was $25.0 million compared to $19.1 million for the
same period in 1998.  In the first nine months of 1999, increases in capital
expenditures, cash required for the acquisition of KKR, lease termination
payments and other divestment expenditures of $6.7 million, $1.0 million, $1.7
million and $1.8 million, respectively, along with a reduction of $2.8 million
in proceeds from disposal of property and equipment, more than offset proceeds
from the sale of notes receivable of $3.2 million and proceeds from payments on
notes receivable of $2.1 million.  For the first nine months of 1999, net cash
provided by financing activities was $20.1 million compared to $8.6 million for
the same period in 1998.  During the first nine months of 1998, $11.6 million in
net proceeds from the issuance of notes was received, compared to $21.8 million
of net proceeds from working capital borrowings in 1999.

                                      -11-
<PAGE>

     EBITDA.  For the first nine months of 1999, the Company reported EBITDA
(defined as earnings (loss) before opening costs, gain (loss) on disposition of
properties, gain on sale of division, provision for divestitures and write-down
of long-lived assets, VCU termination expense, restructuring costs, interest,
taxes, depreciation and amortization and extraordinary items) of $26.4 million,
compared to $18.2 million for the same period in 1998.  The $8.3 million
improvement was due to the continuing impact of El Torito and Chi-Chi's cost
reduction and reengineering strategies which have improved operating margins,
improved comparable restaurant sales trends and $3.6 million contributed by KKR.
This improved EBITDA is the continuation of the trend that began in 1996 when
new management was installed at both El Torito and Chi-Chi's. Since 1995, the
divisional EBITDA of the Company's ongoing Mexican restaurant operations is set
forth in the following table.

                                        Divisional EBITDA
                                        -----------------
              Fiscal Year Ended         El Torito  Chi-Chi's
              -----------------         ---------  ---------
                                           ($ in thousands)

              December 31, 1995 (a)     $13,508     $(10,455)
              December 29, 1996          11,956       (4,278)
              December 28, 1997          17,627           36
              December 27, 1998          22,869        1,426

              (a)  Includes 53 weeks of operations and, in accordance with
                   Company policy at that time, excludes certain unallocated
                   corporate overhead.

     The Company has included information concerning EBITDA herein because it
understands that such information is used by certain investors as one measure of
an issuer's historical ability to service debt.  EBITDA should not be considered
as an alternative to, or more meaningful than, operating income (loss) as an
indicator of operating performance or to cash flows from operating activities as
a measure of liquidity.  Furthermore, other companies may compute EBITDA
differently, and therefore, EBITDA amounts among companies may not be
comparable.

     Working Capital Deficiency.  The Company operates with a substantial
working capital deficiency because:

     .    restaurant operations are conducted primarily on a cash (and cash
          equivalent) basis with a low level of accounts receivable;

     .    rapid turnover allows a limited investment in inventories; and

     .    cash from sales is usually received before related accounts payable
          for food, beverages and supplies become due.

     The Company had a working capital deficiency of $88.7 million on September
26, 1999.

                                      -12-
<PAGE>

     Credit Facility and Other Long-Term Debt.  The Company's credit facility
with Foothill Capital Corporation (the "Foothill Credit Facility"):

     .    provides for up to $35 million in revolving cash borrowings and up to
          $55 million in letters of credit (less the outstanding amount of
          revolving cash borrowings);

     .    is secured by substantially all of the real and personal property of
          the Company;

     .    contains covenants which restrict, among other things, the Company's
          ability to incur debt, pay dividends on or redeem capital stock, make
          certain types of investments, make dispositions of assets and engage
          in mergers and consolidations; and

     .    expires on January 10, 2002.

     The Company was in compliance with all financial ratios at September 26,
1999. Letters of credit are issued under the Foothill Credit Facility primarily
to provide security for future amounts payable under the Company's workers'
compensation insurance program ($16.1 million of such letters of credit were
outstanding as of November 10, 1999). $23.7 million in revolving cash borrowings
were outstanding as of November 10, 1999.

     The Company continues to be highly leveraged and has significant annual
debt service requirements, excluding requirements under the Foothill Credit
Facility, as follows:

                                            Cash
                                          Interest        Principal
                                          --------        ---------
                                              ($ in millions)

                 2000                     $29.4           $  4.0
                 2001                      29.0              4.0
                 2002                      16.0            205.7
                 2003                       3.7              1.2
                 2004                       1.9             31.6

     The Company is exploring several financing transactions and other strategic
alternatives in an effort to meet its debt service requirements and has retained
Donaldson, Lufkin & Jenrette Securities Corporation and U.S. Bancorp Libra as
financial advisors to assist in this process.  There can be no assurances,
however, that any such transactions will be consummated.  There can be no
assurance that the Company will be able to repay or refinance its 9-3/4% Senior
Notes due 2002 and its 10-7/8% Senior Subordinated Discount Notes due 2004, or
that FRI-MRD will be able to repay or refinance its 15% Senior Discount Notes
due 2002 and its 14% Senior Secured Discount Notes due 2002, at their respective
maturities.

     B.  Capital Expenditures

     Net cash used in investing activities was $25.0 million for the first nine
months of 1999, including $24.4 million for capital expenditures, as compared to
net cash used in investing activities

                                      -13-
<PAGE>

of $19.1 million for the same period in 1998. The increase in net cash used in
investing activities for the first nine months of 1999 was primarily due to (i)
cash required for the acquisition of KKR, (ii) increased capital expenditures,
(iii) increased lease termination payments and (iv) other divestment
expenditures.

     Capital expenditures of approximately $30 million to $31 million are now
anticipated for fiscal 1999, including approximately $6 million devoted to
normal improvements of the Company's restaurants.  The Company is continuing its
remodeling of both El Torito and Chi-Chi's restaurants and is committing
approximately $17 million to $18 million for this purpose in fiscal 1999.  As of
November 10, 1999, the Company has opened three new El Toritos, one new El
Torito Grill, three new El Torito Expresses and two new Koo Koo Roos and
anticipates opening one additional Koo Koo Roo restaurant during fiscal 1999.
The Company is also upgrading El Torito's in-store point-of-sale ("POS")
technology during fiscal 1999.

     From January 1, 1999 to November 10, 1999, the Company completed the
remodeling of ten additional El Torito restaurants in various markets and 38
additional Chi-Chi's restaurants in various markets.

Year 2000
---------

     Background.   In the past, many computers, software programs, and other
information technology ("IT systems"), as well as other equipment relying on
microprocessors or similar circuitry ("Non-IT systems"), were written or
designed using two digits, rather than four, to define the applicable year.  As
a result, date-sensitive systems (both IT systems and non-IT systems) may
recognize a date identified with "00" as the year 1900, rather than the year
2000.  This is generally described as the Year 2000 issue.  If this situation
occurs, the potential exists for system failures or miscalculations, which could
impact business operations.

     The Securities and Exchange Commission ("SEC") has asked public companies
to disclose four general types of information related to Year 2000 preparedness:
the company's state of readiness, costs (historical and prospective), risks and
contingency plans.  See SEC Release No. 33-7558 (July 29, 1998).  Accordingly,
the Company has prepared the following discussion in this report, in addition to
the Year 2000 disclosures previously filed with the SEC.

     State of Readiness.  The Company began a concerted effort to address its
Year 2000 issues in fiscal 1997.  In fiscal 1998, the Company formalized the
effort with a Y2K Preparedness Council that includes the Chief Executive
Officer, General Counsel, Chief Financial Officer, Vice President of
Public/Investor Relations, Vice President of Information Services and Vice
President of Assets Protection. This team decided in early 1998 that the
Company's best course of action was to replace the IT and non-IT systems that
were not Year 2000 compliant with new hardware and software.  In addition to
improving processes and allowing wider access to data, the new systems would be
Year 2000 compliant.

     The Company believes that it has identified all significant IT and non-IT
systems that require replacement in connection with Year 2000 issues.  Internal
resources have been used, and are continuing to be used, to make the required
changes and test Year 2000 readiness.  The required

                                      -14-
<PAGE>

modifications of all significant systems are well underway. The Company plans on
completing the replacement and testing of all significant IT systems in the
fourth quarter of 1999. The Company has analyzed its non-IT Systems and believes
that there will be no impact on these systems in Year 2000.

     In addition, the Company has communicated with suppliers, banks, vendors
and others with whom it does significant business (collectively, its "business
partners") to determine their Year 2000 readiness and the extent to which the
Company is vulnerable to any other organization's Year 2000 issues.  Based on
these communications and related responses, the Company is monitoring the Year
2000 preparations and state of readiness of its business partners.  Although the
Company is not aware of any significant Year 2000 problems with its business
partners, there can be no guarantee that the systems of other organizations on
which the Company's systems rely will be converted in a timely manner, or that a
failure to convert by another organization, or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect on the
Company.

     Costs.  The total cost to the Company of Year 2000 activities has not been
and is not anticipated to be material to its financial position or results of
operations in any given year.  The Company spent approximately $2.2 million on
the new software and related hardware and installation costs in 1998.  In
addition, the El Torito Restaurants' in-store Point-of-Sale (POS) upgrade
discussed in Capital Expenditures above and POS upgrades in the Company's other
operating divisions, including Koo Koo Roo and Chi-Chi's, which are required for
Year 2000 compliance, are expected to be completed in the fourth quarter of 1999
at a cost of approximately $6.5 million to $7.0 million, much of which is
anticipated to be lease financed.  Total Year 2000-related expenditures are
expected to approximate $9.0 million.  These costs, as well as the date on which
the Company plans to complete the Year 2000 modifications and testing processes,
are based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third-party modification plans and other factors.  However, there can
be no guarantee that these estimates will be achieved, and actual results could
differ from those estimates.

     Risks.  The Company utilizes IT systems and non-IT systems in many aspects
of its business. Year 2000 problems in some of the Company's systems could
possibly disrupt operations at some restaurants, but the Company does not expect
that any such disruption would have a material adverse impact on the Company's
operating results.

     The Company is also exposed to the risk that one or more of its suppliers
or vendors could experience Year 2000 problems that could impact the ability of
such suppliers or vendors to provide goods and services.  Although this risk is
lessened by the availability of alternative suppliers, the disruption of certain
services, such as utilities, could, depending upon the extent of the disruption,
potentially have a material adverse impact on the Company's operations.

     Contingency Plans.  Based on the above-described plans, the Company does
not believe that significant contingency plans will be necessary, but the
Company is preparing plans to deal with the possibility that some suppliers or
vendors might fail to provide goods and services on a timely basis as a result
of Year 2000 problems.  The Company expects these contingency plans will
generally include the identification, acquisition and/or preparation of backup
systems, suppliers and vendors.

                                      -15-
<PAGE>

All Year 2000 statements contained herein are designated as "Year 2000 Readiness
Disclosure" pursuant to the Year 2000 Information and Readiness Disclosure Act
of 1998.

Results of Operations.
---------------------

     The Company's total sales of $134,264,000 for the third quarter of 1999
increased by $18,971,000 or 16.5% as compared to the same period in 1998.  For
the first nine months of 1999, total Company sales of $408,837,000 increased by
$60,143,000 or 17.2% as compared to the same period in 1998.  The increases were
due to (i) the addition of sales from the Koo Koo Roo and Hamburger Hamlet
restaurants acquired on October 30, 1998,  (ii) sales increases in the
comparable El Torito and Chi-Chi's restaurants for the nine-month period and
(iii) sales from new restaurants, partially offset by sales decreases for
restaurants sold or closed.  The breakdown of the sales increases for the third
quarter and first nine months of 1999 is detailed below:

<TABLE>
<CAPTION>
                                                                                 First Nine
                                                               Third Quarter       Months
                                                              Sales Increase   Sales Increase
                                                              ---------------  ---------------
                                                                      ($ in thousands)

      <S>                                                     <C>              <C>
      Sales from the KKR Restaurant Division                         $21,677         $ 66,445
      Increase (Decrease) in Sales of Comparable
       Restaurants                                                    (1,094)           2,298
      Sales from New Restaurants                                       2,497            4,111
      Decrease in Sales of Restaurants Sold or Closed                 (4,109)         (12,711)
                                                                     -------         --------
                                                                     $18,971         $ 60,143
                                                                     =======         ========
      </TABLE>

     Sales for comparable restaurants of $108,217,000 for the third quarter of
1999 decreased by $1,094,000 or 1.0% as compared to the same period in 1998.
For the first nine months of 1999, sales of comparable restaurants of
$332,790,000 increased by $2,298,000 or 0.7% as compared to the same period in
1998.  As shown below, both comparable El Torito and Chi-Chi's restaurants
reported decreased sales in the third quarter, partially due to key competitors
increasing their advertising activity including discounts, after Chi-Chi's and
El Torito reported increased comparable sales for both the first and second
quarters.

                                    Third Quarter      First Nine Months
                                   Sales Decrease        Sales Increase
                               ------------------    --------------------
                                Amount   Percent     Amount       Percent
                               --------  --------    ------       -------
                                           ($ in thousands)
       Comparable El Torito    $  (534)    (1.0)%    $1,505         0.9 %
       Comparable Chi-Chi's       (560)     (1.0)       793         0.5
                               -------               ------       -------
       Total                   $(1,094)    (1.0)%    $2,298         0.7 %
                               =======     =====     ======       =======

     El Torito comparable sales were down 1.0% in the third quarter but up 0.9%
for the first nine months of 1999 as compared to the same periods in 1998.  The
third quarter advertising campaign

                                      -16-
<PAGE>

continued El Torito's 45th Anniversary Celebration. The third quarter print
campaign introduced the all new "45 RPM -Revolutionary Platter from Mexico." The
platter was designed and priced as a meal for two people and included sizzling
steak, chicken and carnitas served on a carousel with sides including guacamole,
jack cheese, sour cream and salsa. The campaign was supported by print media and
included special discount offers, such as "$5.00 off any 45 RPM Entree." The
print advertising also focused on the lunch day part by offering "$3.00 off any
Lunch Entree" and attempted to appeal to adults with children by offering "One
Free Kid's Meal with the Purchase of an Adult Entree." In addition, the "Happy
Dinner Hour" Program, which offers guests a 50% discount on the purchase of a
second entree from 3 to 5 p.m. Monday through Friday, continued throughout the
third quarter. The broad appeal of the offers in the print campaign is designed
to generate new guest visits and increase the frequency of existing guests. The
in-restaurant marketing for the promotion included a specially created table
menu featuring the 45 RPM Entree and El Torito's 27-ounce Grand Fruit
Margaritas. In addition, El Torito continues to test new, innovative products in
select markets for future system-wide introduction. In the third quarter, the
"Two to Tango" filet mignon and lobster burritos for two was tested in the San
Diego market.

     Chi-Chi's comparable sales for the third quarter of 1999 were down 1.0%
versus the same period in 1998.  This decrease was from a 3.1% increase for
fiscal year 1998 versus fiscal year 1997 for the same period.  Comparable sales
from January through September 1999 were up 0.5% compared to the same period in
1998.  This increase was in addition to a 0.9% increase for the same period in
1998 over 1997.  During the third quarter of 1999, twelve remodeled restaurants
celebrated their grand reopening, bringing the total number of remodeled Chi-
Chi's restaurants in the last three years to 80.  The July/August advertising
campaign featured the new "Mexi-Grill Feast," a three-course meal including
salad, entree and dessert for $10.99, which resulted in average guest orders of
5.0% throughout the eight-week event period. New programs introduced in the
third quarter were the $3.99 lunch program dubbed "El Cheapo Luncho," the "Five
O'Clock Fiesta" cantina program, "Weekend Wild Favorites" featuring in-
restaurant emphasis on specific menu items, and a special shaker presentation of
top shelf margaritas.  "Five O'Clock Fiesta" features food and beverage specials
that are specific to each day of the week, Monday through Friday from 5 to 7
p.m.  The program is merchandised through internal posters, table tents, flyers
and mobiles.  It also serves as the introduction vehicle for utilizing the new
Chi-Chi's Margaritaville Cantina/(R)/ name and logo. "Wild Weekend Favorites"
features six entrees as part of a special menu designed to influence guest
purchase decisions during the Friday through Sunday dinner meal periods.
Featured items range from the Outrageous Burrito at $8.99 to Shrimp Fajitas at
$12.99.

     In the third quarter of 1999, Koo Koo Roo's marketing activities began with
the continuation of the  Combo Meal promotion.  Each Combo Meal included an
entree, any two side dishes and a beverage for $5.99.  Following this promotion,
Koo Koo Roo introduced two new Chicken Chops --the Southwestern Chicken Chop and
the Thai Chicken Chop.  To leverage off of the popularity of the original
Chargrilled Chicken Chop, Koo  Koo Roo promoted these two new flavors along with
the original using a four-color print campaign in all markets.

     In the third quarter of 1999, Hamburger Hamlet introduced a line of "New
Gourmet Burgers From Around the World." There were five new hamburgers including
the French Onion Burger, Seven-Layer Mexican Burger and the All-American Classic
Burger. A crew incentive program

                                     -17-
<PAGE>

supported this promotion with added focus on increasing beverage and dessert
sales. This promotion was supported with four-color direct mail distributed
around the West Coast locations.

     Product costs of $35,324,000 for the third quarter of 1999 increased by
$4,832,000 or 15.8% as compared to the same period in 1998.  For the first nine
months of 1999, product costs of $107,970,000 increased by $14,682,000 or 15.7%
as compared to the same period in 1998.  The increases are primarily due to the
acquisition of the Koo Koo Roo and Hamburger Hamlet restaurants on October 30,
1998 which accounts for $6,850,000 or 141.8% of the increase for the third
quarter of 1999 and $20,673,000 or 140.8% of the increase for the first nine
months of 1999, partially offset by the impact of the 30 restaurants sold or
closed since the beginning of 1998.  As a percentage of sales, product costs
decreased to 26.3% in the third quarter of 1999 as compared to 26.4% in the same
period of 1998 and decreased to 26.4% for the first nine months of 1999 as
compared to 26.7% in the same period in 1998.

     Payroll and related costs of $47,790,000 for the third quarter of 1999
increased by $6,849,000 or 16.7% as compared to the same period in 1998.  For
the first nine months of 1999, payroll and related costs of $145,225,000
increased by $22,366,000 or 18.2% as compared to the same period of 1998.  The
increases are primarily due to the acquisition of the Koo Koo Roo and Hamburger
Hamlet restaurants on October 30, 1998 which accounts for $7,260,000 or 106.0%
of the increase for the third quarter of 1999 and $22,606,000 or 101.1% of the
increase for the first nine months of 1999, the impact of the minimum wage
increase in California on March 1, 1998, and the impact of improved management
staffing in many of the Company's restaurants.  As a percentage of sales,
payroll and related costs increased slightly to 35.6% in the third quarter of
1999 as compared to 35.5% in the same period of 1998 and increased to 35.5% for
the first nine months of 1999 as compared to 35.2% in the same period of 1998.
The increases in payroll and related costs as a percentage of sales were offset
in part by a continuing focus on improving labor scheduling and efficiencies.

     The Company is subject to Federal and state laws governing matters such as
minimum wages, overtime and other working conditions.  Approximately half of the
Company's employees are paid at rates related to the minimum wage.  Therefore,
increases in the minimum wage or decreases in the allowable tip credit (tip
credits reduce the minimum wage that must be paid to tipped employees in certain
states) increase the Company's labor costs.  This is especially true in
California, where there is no tip credit.  Effective September 1, 1997, the
Federal minimum wage was increased from $4.75 to $5.15.  However, a provision of
the new measure effectively froze the minimum wage for tipped employees at then
current levels by increasing the allowable tip credit in those states that allow
for a tip credit.  Furthermore, in California, the state's minimum wage was most
recently increased to $5.75 on March 1, 1998.  In response to the minimum wage
increases on March 1, 1997 and March 1, 1998, the Company raised menu prices at
its El Torito restaurants in an effort to recover the higher payroll costs.
Chi-Chi's also raised menu prices in October and December 1997 as a result of
the cumulative impact of these minimum wage increases.  Similarly, in March
1998, KKR also raised menu prices for its Koo Koo Roo restaurants. No minimum
wage increases are scheduled for the balance of 1999 at this time, but pressure
continues for further increases in both the Federal and California executive and
legislative branches.

                                      -18-
<PAGE>

     Occupancy and other operating expenses of $35,185,000 for the third quarter
of 1999 increased by $4,769,000 or 15.7% as compared to the same period in 1998.
For the first nine months of 1999, occupancy and other operating expenses of
$104,720,000 increased by  $12,125,000 or 13.1% as compared to the same period
in 1998.  The increases are primarily due to the acquisition of the Koo Koo Roo
and Hamburger Hamlet restaurants on October 30, 1998 which accounts for
$5,232,000 or 109.7% of the increase for the third quarter of 1999 and
$15,271,000 or 125.9% of the increase for the first nine months of 1999,
partially offset by the impact of the 30 restaurants sold or closed since the
beginning of 1998. As a percentage of sales, occupancy and other operating
expenses decreased to 26.2% in the third quarter of 1999 as compared to 26.4% in
the same period in 1998 and decreased to 25.6% for the first nine months of 1999
as compared to 26.6% in the same period in 1998.  These decreases primarily
reflect (i) the impact of El Torito and Chi-Chi's cost reduction strategies,
(ii) the impact of improved comparable restaurant sales trends for the nine-
month period and (iii) lower occupancy and other operating expenses as a
percentage of sales in the Koo Koo Roo and Hamburger Hamlet restaurants.

     Depreciation and amortization of $7,017,000 for the third quarter of 1999
increased by $1,431,000 or 25.6% as compared to the same period in 1998.  For
the first nine months of 1999, depreciation and amortization of $19,932,000
increased by $3,724,000 or 23.0% as compared to the same period in 1998.  The
increases are primarily due to the acquisition of the Koo Koo Roo and Hamburger
Hamlet restaurants on October 30, 1998 which accounts for $1,374,000 or 96.0% of
the increase for the third quarter of 1999 and $3,848,000 or 103.3% of the
increase for the first nine months of 1999, partially offset by the impact of
(i) the 30 restaurants sold or closed since the beginning of 1998 and (ii) the
reduced depreciable basis from the write-down of certain long-lived assets in
the fourth quarter of 1998.

     General and administrative expenses of $7,637,000 for the third quarter of
1999 decreased by $46,000 or 0.6% as compared to the same period in 1998.  For
the first nine months of 1999, general and administrative expenses of
$24,508,000 increased by $2,709,000 or 12.4% as compared to the same period in
1998.  General and administrative expenses of $1,414,000 for the third quarter
of 1999 and $4,390,000 for the first nine months of 1999 were incurred by or
allocated to the Koo Koo Roo and Hamburger Hamlet restaurant operations.  As a
percentage of sales, general and administrative expenses decreased to 5.7% in
the third quarter of 1999 as compared to 6.7% in the same period of 1998 and
decreased to 6.0% for the first nine months of 1999 as compared to 6.3% in the
same period of 1998.  Management continues to closely evaluate the Company's
general and administrative cost structure for savings opportunities.

     The Company reported a loss on disposition of properties of $1.8 million in
the third quarter of 1999 and $3.0 million for the first nine months of 1999 as
compared to a loss of $1.8 million for the third quarter of 1998 and $3.2
million for the first nine months of 1998.  These amounts primarily reflect
losses associated with restaurant divestments and closures and remodeled
restaurant asset retirements in such periods.

     Interest expense, net for the third quarter of 1999 of $8,170,000 increased
by $2,059,000 or 33.7% as compared to the same period in 1998.  Interest
expense, net for the first nine months of 1999 of $23,063,000 increased by
$5,126,000 or 28.6% as compared to the same period in 1998. The increases are
primarily the result of  (i) the issuance of $14 million face value of  FRI-
MRD's Senior Discount Notes in January 1998 and the additional accretion and
accrual of interest thereon in 1999, (ii) the issuance of $24 million face value
of FRI-MRD's

                                      -19-
<PAGE>

Senior Secured Discount Notes on October 30, 1998 and the accretion and accrual
of interest thereon, (iii) interest on working capital borrowings in 1999 and
(iv) reduced interest income on invested cash balances.

Seasonality.
-----------

     The Company, as a whole, does not experience significant seasonal
fluctuations in sales.  However, the Company's sales tend to be slightly greater
during the spring and summer months.

Selected Division Operating Data.
--------------------------------

     Until October 30, 1998, the Company primarily operated full-service Mexican
restaurants in two divisions under the El Torito, Chi-Chi's, Casa Gallardo and
other names.  On October 30, 1998, the Company acquired the Koo Koo Roo and
Hamburger Hamlet restaurant operations.  At September 26, 1999, the Company's El
Torito restaurant division operated 99 full-service and fast-casual restaurants,
the Company's Chi-Chi's restaurant division operated 152 full-service
restaurants and the Company's Koo Koo Roo restaurant division operated 56 fast-
casual and full-service restaurants.

     The following table sets forth certain information regarding the Company
and its El Torito, Chi-Chi's, and Koo Koo Roo restaurant divisions.

                                      -20-
<PAGE>

<TABLE>
<CAPTION>
                                             For the Quarters Ended                         For the Nine Months Ended
                                    -----------------------------------------        ------------------------------------------
                                    Sept. 26,      Sept. 27,        Sept. 28,         Sept. 26,     Sept. 27,         Sept. 28,
                                       1999           1998            1997              1999          1998              1997
                                    ----------    -----------     -----------        ----------    ----------        ----------
                                                          ($ in thousands, except average check amount)
<S>                                 <C>           <C>             <C>                <C>           <C>               <C>
El Torito Restaurant Division
-----------------------------
Restaurants Open at End of Period:
  Owned/operated                            99             95              97                99            95                97
  Franchised and Licensed                    8              8               7                 8             8                 7
Sales                               $   55,693    $    53,778     $    54,961        $  167,793    $  163,170        $  167,341
Restaurant Level Cashflow (a)            8,340          8,719           7,678            26,838        25,749            24,257
Divisional EBITDA (b)                    5,569          5,723           4,672            17,699        17,021            15,108
Percentage increase (decrease)
    in comparable restaurant sales        (1.0)           0.1%           (0.1)%             0.9%        (0.2)%             (0.4)%
Average check (excluding
    alcoholic beverage sales)       $    10.49    $     10.15     $      9.75        $    10.50    $    10.02        $     9.70


Chi-Chi's Restaurant Division
-----------------------------
Restaurants Open at End of Period:
  Owned/operated                           152            171             180               152           171               180
  Franchised and Licensed                   13             12              16                13            12                16
Sales                               $   56,894    $    61,515     $    61,624        $  174,599    $  185,524        $  187,325
Restaurant Level Cashflow (a)            5,290          4,474           4,118            16,189        13,411            12,135
Divisional EBITDA (b)                    1,900             96              65             5,319         1,300               423
Percentage increase (decrease)
    in comparable restaurant sales        (1.0)           3.1%           (5.1)%             0.5%          0.9%             (9.1)%
Average check (excluding
    alcoholic beverage sales)       $     9.24    $      8.58 (c) $      7.67 (c)    $     9.17    $     8.33 (c)    $     7.83 (c)


Koo Koo Roo Restaurant Division (d)
----------------------------------
Restaurants Open at End of Period:
  Owned/operated                            56              0               0                56             0                 0
  Franchised and Licensed                    1              0               0                 1             0                 0
Sales                               $   21,677    $         0     $         0        $   66,445    $        0        $        0
Restaurant Level Cashflow (a)            2,335              0               0             7,895             0                 0
Divisional EBITDA (b)                      927              0               0             3,578             0                 0
Percentage increase (decrease)
    in comparable restaurant sales        N.A.           N.A.            N.A.              N.A.          N.A.              N.A.
Average check (Koo Koo Roo
    restaurants only)               $     9.11    $      N.A.     $      N.A.        $     8.98    $     N.A.        $     N.A.


Total Company
-------------
Restaurants Open at End of Period:
  Owned/operated                           307            266             277               307           266               277
  Franchised and Licensed                   22             20              23                22            20                23
Sales                               $  134,264    $   115,293     $   116,585        $  408,837    $  348,694        $  354,666
EBITDA (e)                               8,328          5,761           4,682            26,414        18,153            15,396
</TABLE>

(a)  Restaurant Level Cashflow with respect to any operating division represents
     Divisional EBITDA (as defined below) before general and administrative
     expenses and any net franchise profit or miscellaneous income (expense)
     reported by the respective division.

(b)  Divisional EBITDA with respect to any operating division is defined as
     earnings (loss) before opening costs, gain (loss) on disposition of
     properties, interest, taxes, depreciation and amortization.

(c)  Restated to conform to the 1999 presentation.

(d)  Koo Koo Roo and Hamburger Hamlet restaurant operations were acquired on
     October 30, 1998.

(e)  EBITDA is defined as earnings (loss) before opening costs, gain (loss) on
     disposition of properties, gain on sale of division, provision for
     divestitures and write-down of long-lived assets, VCU termination expense,
     restructuring costs, interest, taxes, depreciation and amortization and
     extraordinary items. The Company has included information concerning EBITDA
     herein because it understands that such information is used by certain
     investors as one measure of an issuer's historical ability to service debt.
     EBITDA should not be considered as an alternative to, or more meaningful
     than, operating income (loss) as an indicator of operating performance or
     to cash flows from operating activities as a measure of liquidity.
     Furthermore, other companies may compute EBITDA differently, and therefore,
     EBITDA amounts among companies may not be comparable.

                                      -21-
<PAGE>

                          PART II.  OTHER INFORMATION
                          ---------------------------

Item 1.   Legal Proceedings
------

     The Company is involved in various litigation matters incidental to its
business. The Company does not believe that any of the existing claims or
actions will have a material adverse effect upon the consolidated financial
position or results of operations of the Company.

Item 2.   Changes in Securities and Use of Proceeds
------

     None.

Item 3.   Defaults Upon Senior Securities
------

     None.

Item 4.   Submission of Matters to a Vote of Security Holders
------

     None.

Item 5.   Other Information
------

     None.

Item 6.   Exhibits and Reports on Form 8-K
------

     (a)  Exhibits

          2    (a)  Agreement and Plan of Merger, dated as of June 9, 1998 by
                    and among the Company, Fri-Sub, Inc. and Koo Koo Roo, Inc.
                    ("KKR"). (Filed as Exhibit 2.1 to the Company's Form S-4
                    filed with the SEC on July 1, 1998.)

          3    (a)  Sixth Restated Certificate of Incorporation of the Company.
                    (Filed as Exhibit 3(a) to the Company's Form 10-Q
                    filed with the SEC on May 12, 1999.)

          3    (b)  Second Amended and Restated Bylaws of the Company. Exhibit
                    3(c) to the Company's Form 10-K filed (Filed as with the SEC
                    on March 29, 1999.)

          4    (a)  Indenture Dated as of January 27, 1994
                    Re: $300,000,000 9-3/4% Senior Notes Due 2002. (Filed as
                    Exhibit 4(a) to the Company's Form 10-K filed with the SEC
                    on March 28, 1994.)

                                      -22-
<PAGE>

          4    (b)  Indenture Dated as of January 27, 1994
                    Re: $150,000,000 10-7/8% Senior Subordinated Discount Notes
                    Due 2004.  (Filed as Exhibit 4(b) to the Company's Form 10-K
                    filed with the SEC on March 28, 1994.)

          4    (c)  First Supplemental Indenture, dated as of July 3, 1996,
                    between the Registrant and IBJ Schroder Bank & Trust
                    Company, a New York Banking corporation, as Trustee. (Filed
                    as Exhibit 10.1 to the Company's Form 8-K filed with the
                    SEC on July 9, 1996.)

          4    (d)  First Supplemental Indenture, dated as of July 3, 1996,
                    between the Registrant and Fleet National Bank, as successor
                    by merger to Fleet National Bank of Massachusetts, formerly
                    known as Shawmut Bank, N.A., as Trustee. (Filed as Exhibit
                    10.2 to the Company's Form 8-K filed with the SEC on July 9,
                    1996.)

          4    (e)  Note Agreement Dated as of August 12, 1997
                    Re: Up to $75,000,000 FRI-MRD Corporation Senior Discount
                    Notes Due January 24, 2002.  (Filed as Exhibit 4(e) to the
                    Company's Form 10-Q filed with the SEC on November 12,
                    1997.)

          4    (f)  Joinder Agreement Dated as of January 14, 1998
                    Re: FRI-MRD Corporation Senior Discount Notes due January
                    24, 2002. (Filed as Exhibit 4(f) to the Company's Form 10-K
                    filed with the SEC on March 30, 1998.)

          4    (g)  First Amendment dated as of June 9, 1998 to the Note
                    Agreement dated August 12, 1997. (Filed as Exhibit 4.7 to
                    the Company's Form S-4 filed with the SEC on July 1, 1998.)

          4    (h)  Note Agreement dated as of June 9, 1998 Re: $24,000,000
                    FRI-MRD Corporation Senior Secured Discount Notes due
                    January 24, 2002. (Filed as Exhibit 4.8 to the Company's
                    Form S-4 filed with the SEC on July 1, 1998.)

          4    (i)  First Amendment dated as of October 30, 1998 to the Note
                    Agreement dated as of June 9, 1998. (Filed as Exhibit 4(i)
                    to the Company's Form 10-Q filed with the SEC on November
                    12, 1998.)

          4    (j)  Waiver dated as of January 29, 1999 to the Note Agreements
                    dated as of August 12, 1997 and June 9, 1998. (Filed as
                    Exhibit 4(j) to the Company's Form 10-K filed with the SEC
                    on March 29, 1999.)

          *27       Financial Data Schedule.

                                      -23-
<PAGE>

     (b)  Reports on Form 8-K.

          None.



     --------
     * Filed herewith.

                                      -24-
<PAGE>

                                   SIGNATURE
                                   ---------


     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.


                                        Prandium, Inc.
                                        (Registrant)


                                        By: /S/ Robert T. Trebing, Jr.
                                            --------------------------
                                                Robert T. Trebing, Jr.
                                            Executive Vice President and
                                                Chief Financial Officer
                                            (Duly Authorized Officer and
                                             Principal Financial Officer)

Date: November 10, 1999

                                      -25-