<PAGE>   1
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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

                    FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
                                                        or
[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
                         Commission file number 1-12104

                             BACK YARD BURGERS, INC.
                 (Name of small business issuer in its charter)

           DELAWARE                                             64-0737163
(State or other jurisdiction of                              (I.R.S. employer
incorporation or organization)                              identification no.)

         2768 COLONY PARK DRIVE
           MEMPHIS, TENNESSEE                                        38118
(Address of principal executive offices)                          (Zip code)

                                 (901) 367-0888
                           (Issuer's telephone number)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE SECURITIES
                              EXCHANGE ACT OF 1934:

                                                         Name of Each Exchange
Title of Each Class                                       on Which Registered
-------------------                                       -------------------

     None                                                         None


              SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE SECURITIES
EXCHANGE ACT OF 1934:

                                                        Name of Each Market
     Title of Each Class                                  on Which Listed
     -------------------                                  ---------------

Common Stock, $.01 par value                          NASDAQ Small-Cap Market

         Check whether the Issuer (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
                     ---   ---

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of registrant's knowledge in definitive proxy or in
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The Issuer's revenues for its most recent fiscal year were $26,034,000.

         The aggregate market value of voting Common Stock, $.01 par value, held
by non-affiliates on March 20, 1998, was approximately $7,776,000.

         The number of shares outstanding of the Registrant's Common Stock, $.01
par value and Preferred Stock, $.01 par value, as of March 20, 1998, was
4,540,404 and 40,556, respectively.

===============================================================================

         CERTAIN PORTIONS OF PART II ARE INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED JANUARY 3, 1998
AND CERTAIN PORTIONS OF PART III ARE INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S PROXY STATEMENT RELATING TO THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON MAY 21, 1998.
Transitional Small Business Disclosure Format Yes     No X
                                                 ---    ---
===============================================================================



<PAGE>   2



                                FORM 10-KSB INDEX


PART I

<TABLE>
<S>        <C>                                                                                                   <C>
Item 1.    Business.............................................................................................  1
           Business Development.................................................................................  1
           Concept and Strategy.................................................................................  1
           Restaurant Operations................................................................................  2
           Franchise Operations.................................................................................  5
           Competition..........................................................................................  7
           Trademarks and Service Marks.........................................................................  8
           Government Regulations...............................................................................  8
           Executive Officers of the Company....................................................................  9
           Employees............................................................................................  9
Item 2.    Properties........................................................................................... 10
Item 3.    Litigation........................................................................................... 10
Item 4.    Submission of Matters to a Vote of Security-holders.................................................. 10

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters................................ 11
Item 6.    Management's Discussion and Analysis of Financial Condition and Results of Operations................ 11
Item 7.    Financial Statements................................................................................. 11
Item 8.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................. 11

PART III

Item 9.    Directors and Executive Officers of the Company...................................................... 12
Item 10.   Executive Compensation............................................................................... 12
Item 11.   Security Ownership of Certain Beneficial Owners and Management....................................... 12
Item 12.   Certain Relationships and Related Transactions....................................................... 12
Item 13.   Exhibits and Reports on Form 8-K..................................................................... 12
</TABLE>


                                        i

<PAGE>   3



                                     PART I

ITEM 1.  BUSINESS

BUSINESS DEVELOPMENT

         The Company operates and franchises quick-service restaurants under the
name Back Yard Burgers(R) (the "Restaurants"). The Company was incorporated in
December, 1986 as Back Yard Burgers, Inc., a Mississippi corporation, and opened
its first Restaurant in Cleveland, Mississippi in March 1987. The Company was
reorganized under the laws of the State of Delaware in January 1991 and
succeeded to the business operated by Back Yard Burgers Mississippi. Unless the
context requires otherwise, references in this Annual Report to the "Company"
and its operations mean Back Yard Burgers, Inc., a Delaware corporation, the
surviving corporation in the merger transaction described below, and its
subsidiaries.

         The Company consummated a merger transaction concurrently with the
closing of its Initial Public Offering on July 2, 1993. As of January 3, 1998,
the Company's operations included 32 Company-operated Restaurants and 45
franchised Restaurants located in a total of 15 states.

CONCEPT AND STRATEGY

         The Restaurants are designed to project a backyard theme that
emphasizes charbroiled, freshly prepared, great tasting food, including gourmet
hamburgers, chicken sandwiches and other gourmet sandwich items as customers
would prepare in their own backyard. The Company's operating strategy includes:

          -   offering a diverse menu of freshly prepared food items that are
              competitive with the everyday prices of the three largest
              hamburger chains;

          -   utilizing Restaurant designs featuring a single drive-thru concept
              integrated with indoor dining, which projects a uniform image and
              creates pleasing curb appeal.

          -   serving high quality, great tasting food comparable to that of
              sit-down casual dining restaurants;

          -   providing fast and friendly service with emphasis on the customer
              experience; and

          -   actively training, supervising and supporting franchised and
              Company-operated Restaurants.

         The Company's strategy is to serve great tasting food in inviting
surroundings. During 1998, the Company will continue its evolution to "fast
casual" by adding dining rooms whose design will match the standards set by the
quality of the food. This evolution will be communicated through a creative and
well-balanced marketing campaign and a focus on delivering the best possible
service.



<PAGE>   4



RESTAURANT OPERATIONS

         Restaurant Locations. The following table sets forth the number of
Restaurants located in each market of the Company's system at January 3, 1998.

                                Company-operated
                                (32 Restaurants)

<TABLE>
<CAPTION>
TENNESSEE:                  MISSISSIPPI:               ARKANSAS:                 
<S>                         <C>                        <C>
  Bartlett (1)                 Horn Lake (1)             Benton (1)              
  Brentwood (1)                                          Conway (1)              
  Collierville (1)          TEXAS:                       Jacksonville (1)        
  Columbia (1)                 Austin (1)                Little Rock (5)         
  Cordova (1)                                            North Little Rock (2)   
  Franklin (2)                                      
  Germantown (1)
  Memphis (10)
  Millington (1)
  Nashville (1)

<CAPTION>
                                   Franchised
                                (45 Restaurants)

ALABAMA:                      ARKANSAS:                 TEXAS:                           
<S>                           <C>                       <C>
   Anniston (1)                 Fayetteville (1)          Texarkana (1)                  
   Birmingham (1)               Fort Smith (1)                                           
                                Jonesboro (1)           TENNESSEE:                       
KANSAS:                         West Memphis (1)          Chattanooga (1)                
   Mission (1)                                            Cleveland (1)                  
   Olathe (1)                                             Hixson (1)                     
   Overland Park (2)          KENTUCKY:                   Jackson (1)                    
                                Paducah (1)               Knoxville (3)                  
                                                                                         
FLORIDA:                      LOUISIANA:                MISSOURI:                        
  Deerfield Beach (1)           Bossier City (1)           Blue Springs (1)              
  Fort Lauderdale (1)                                      Springfield (1)               
  Orlando (1)                 OHIO:                                                      
  Sarasota (1)                  Wooster (1)             NORTH CAROLINA:                  
                                                          Asheville (1)                  
                              MISSISSIPPI:                Boone (1)                      
OKLAHOMA:                       Clarksdale (1)            Charlotte (2)                  
   Tulsa (1)                    Cleveland (1)             Fayetteville (2)               
                                Jackson (1)               Hope Mills (1)                 
GEORGIA:                        Meridian (1)              Lenoir (1)                     
   Marietta (2)                 Picayune (1)                                             
                                Tupelo (1)              SOUTH CAROLINA
                                                          Greenville (1)   
</TABLE>



                                        2

<PAGE>   5



The following table sets forth information as to the sales of both
Company-operated and franchised Restaurants in operation for the periods
indicated.

<TABLE>
<CAPTION>
                           52-Week Period Ended               53-Week Period Ended
                           --------------------               --------------------
                            December 28, 1996                  January 3, 1998 (a)
                            -----------------                  -------------------
<S>                        <C>                                <C>
Company-operated              $22,281,000                         $24,150,000
Franchised                     27,234,000                          31,648,000
                              -----------                         -----------
System-wide                   $49,515,000                         $55,798,000
                              ===========                         ===========
</TABLE>


         Restaurant Openings and Closings. The following table presents an
activity summary of the Company-operated and franchised Restaurants during the
periods presented.


<TABLE>
<CAPTION>
                                                                Year Ended
                                      -----------------------------------------------------------------
                                      12/31     12/31     1/1       12/31     12/30     12/28     1/3
                                      1991      1992      1993      1994      1995      1996      1998
                                      -----     -----     ----      -----     -----     -----     -----
<S>                                   <C>       <C>       <C>       <C>       <C>       <C>       <C>
Restaurants

Company-operated
  Open beginning of period               3         2         3        15        26        32        34
  Opened during period                  --         1         1        10         5         2         1
  Converted from Franchised             --        --        11         1         2         1        --
  Converted to Franchised               --        --        --        --        --        (1)       (1)
  Closed during period                  (1)       --        --        --        (1)       --        (2)
                                       ---       ---       ---       ---       ---       ---       ---
  Open at end of period                  2         3        15        26        32        34        32
                                       ---       ---       ---       ---       ---       ---       ---

Franchised (b)
  Open beginning of period              19        27        39        36        39        36        47
  Opened during period                  10        13        11        16         7        11         4
  Converted to Company-operated         --        --       (11)       (1)       (2)       (1)        1
  Converted from Company-
      operated                          --        --        --        --        --        (1)       --
  Closed during period                  (2)       (1)       (3)      (12)       (8)       --        (7)
                                       ---       ---       ---       ---       ---       ---       ---
  Open at end of period                 27        39        36        39        36        47        45
                                       ---       ---       ---       ---       ---       ---       ---

    Total Restaurants                   29        42        51        65        68        81        77
                                       ===       ===       ===       ===       ===       ===       ===
</TABLE>


--------------------

         (a) As a result of the Company's fiscal year ending on the Saturday
closest to December 31, fiscal 1997 contains 53 weeks versus 52 weeks for fiscal
1996. As a result, sales for fiscal 1997 are not directly comparable to those of
fiscal 1996.

         (b) Subsequent to January 3, 1998, (i) one franchised Restaurant closed
in each of Fort Smith, Arkansas, Fort Lauderdale, Florida and Deerfield Beach,
Florida, (ii) one Company-operated Restaurant was converted to a franchised
Restaurant in Austin, Texas and (iii) one franchised Restaurant was opened in
each of Jackson, Mississippi and Oxford, Mississippi.

         Site Selection. The Company believes that the location of a Restaurant
is critical to its success. Management inspects each potential Restaurant site
prior to final selection of the site. In evaluating particular sites, the
Company considers various criteria including traffic count, speed of traffic,
convenient access, size and configuration, demographics and density of
population, visibility and cost. The Company also reviews potential competition
and the sales and traffic counts of national and regional chain restaurants
operating in the area. A majority of both Company-operated and franchised
Restaurants are located on leased land and the Company intends to continue to
use leased sites where possible.


                                        3

<PAGE>   6



         Restaurant Design and Service. The Restaurants are built to
Company-approved specifications in configurations including i) single drive-thru
with indoor dining, ii) double drive-thru without indoor dining and iii) double
drive-thru with indoor dining. In limited circumstances, Restaurants may be
constructed via the conversion of buildings used previously by other concepts,
including other restaurants. The Restaurant size ranges from 820 square feet to
3,400 square feet. The Restaurants also include Company-approved interior and
exterior decor, equipment, fixtures, furnishings, signs, parking and site
improvements. The Restaurants have a highly visible, distinctive and uniform
look that is intended to appeal to customers of all ages.

         Prior to 1994, the Company operated and franchised predominately double
drive-thru restaurants without indoor dining. Since that time, the Company has
added a number of indoor dining facilities to its operations, including the
retrofitting of many existing double drive-thru restaurants to include indoor
dining. At January 3, 1998, the number of Restaurants with indoor dining was 17
for Company-operated facilities and 27 for Franchised facilities.

          It is the Company's objective to serve customers within 60 seconds of
their arrival at the drive-thru window. Each Restaurant has a computerized
point-of-sale system which displays each individual item ordered on a monitor in
front of the food and drink preparers. This enables the preparers to begin
filling an order before the order is completed and totaled and thereby increases
the speed of service to the customer and the number of sales per hour. The
Restaurants are generally open from 12 to 15 hours per day, seven days a week,
for lunch, dinner and late-night snacks and meals.

         Supplies. The Company and its franchisees purchase their food,
beverages and supplies from Company-approved suppliers. All products must meet
standards and specifications set by the Company. Management constantly monitors
the quality of the food, beverages and supplies provided to the Restaurants. The
Company has been successful in negotiating price concessions from suppliers for
bulk purchases of food and paper supplies used by the Restaurants. The Company
believes that these arrangements have achieved cost savings, improved food
quality and consistency and helped decrease volatility of food and supply costs
for the Restaurants. All essential food and beverage products are available or,
upon short notice, could be made available from alternate qualified suppliers.

         Management and Employees. Each Company-operated Restaurant employs an
average of approximately 25 hourly employees, many of whom work part-time. The
management staff of a typical Restaurant operated by the Company consists of a
unit supervisor and two co-unit supervisors. Each Company-operated Restaurant
unit supervisor reports directly to a district manager. The district managers
are able to provide close, hands-on management of each Company-operated
Restaurant since they have responsibility for only five to eight Restaurants.
Each district manager reports directly to a director of operations.

         Supervision and Training. The Company believes that training and
personnel development is crucial for the success of the Company. The Company's
training program is an intensive four week program consisting of both in-store
and classroom training. The in-store training stresses food quality, fast,
friendly customer service, restaurant cleanliness, and proper management
operations of a quick service restaurant. The classroom training consists of
such topics as food safety and sanitation, employment laws and regulations,
interviewing and hiring of employees, and systems to control both food and labor
costs. Prior to opening, each Restaurant must have a minimum of three trained
and certified managers that have successfully completed the Company training
program.

         For new store openings, the Company sends a store opening team for each
new Restaurant opening. The team arrives prior to the opening and stays during
the first several days of operation. The primary function of the store opening
team is to ensure a smooth and successful new store opening by assisting the
franchisee's management staff in the training and development of their
employees.



                                        4

<PAGE>   7



         The Company has a staff of three franchise district managers that visit
each Restaurant in their territory every eight to ten weeks. Franchise district
managers act as business consultants to franchisees to ensure that each
Restaurant is providing quality products and fast, friendly service. The
franchise district manager acts as the communication link between the Company
and each franchisee. In addition, the district manager assists in developing
business and marketing plans, as well as assisting in the training and
development of the franchisee's staff. Presently, the Company has one franchise
district manager for each 15 Restaurants. That ratio will increase as existing
franchisees develop new stores within existing territories. Franchise district
managers are compensated on a fixed salary basis.

         Advertising and Promotion. Marketing promotions are planned by the
Company's national marketing committee made up of four Company employees and
four franchisees, two chosen by the Company's franchise association and two
chosen by the Company and certain of its executive officers. Production of some
marketing materials is paid for through a national advertising fund which
collects 1% of taxable sales from each franchisee and Company-operated
Restaurant. Of that 1%, 50% goes toward the creation of marketing tools such as
advertising copy for use on local radio and television, ad slicks, four-color
art, design and other collateral pieces and marketing expenses and 50% goes
toward testing new products and systems, market research, improvements in
operation methods and techniques or for other such purposes that the Company
shall deem to be in the interest of improving operations and earnings of
Restaurants.

         Franchisees are required to participate in the seasonal promotions
which are supported by television, radio, newspaper, banners, point-of-purchase
materials and other local store marketing activities. The Company's marketing
manual outlines advertising and public relations promotions as well as new store
opening information, grand opening information, trade area surveys and describes
how to write a marketing plan and budget for the franchisee's area. Marketing is
supported by a staff consisting of a marketing director and marketing managers
who coordinate plans and implementation with a national advertising agency.
Approved suppliers are set up to facilitate such things as uniforms and
collateral materials.

         Restaurant Reporting. Each Restaurant has a computerized point-of-sale
system monitored by the management of the Restaurant. With this system, managers
are able to monitor sales, labor and food costs, customer counts and other
pertinent information every 30 minutes that the Restaurant is open. This
information allows a manager to better control labor utilization, inventories
and operating costs. For Company-operated Restaurants, management monitors
sales, food and labor costs, product mix, inventories and customer counts on a
weekly basis and profit and loss statements and balance sheets on a monthly
basis.

FRANCHISE OPERATIONS

         Strategy. In addition to the operational development of
Company-operated Restaurants, the Company will focus on (i) the continued
retrofitting of existing double drive-thru Restaurants into single drive-thru
concepts integrated with indoor dining, (ii) the addition of strategically
placed Company-operated Restaurants, (iii) the operational development of
Company-operated Restaurants, (iv) the development of additional franchised
Restaurants expected to be opened pursuant to existing Area Development
Agreements and Franchise Agreements (as defined) and (v) the pursuit of
additional franchised Restaurants pursuant to new area Development Agreements
and Franchise Agreements. The Company believes that it has attracted a committed
and enthusiastic group of franchisees as a result of the strength of its
concepts and operating strategies.

         Franchisee Support Services. The Company maintains a staff of
well-trained and experienced Restaurant operations personnel whose only
responsibilities are to help train and assist franchisees in opening new
Restaurants and to monitor the operations of existing Restaurants. These
services are provided as part of the Company's franchise program. Upon the
opening of a new franchised Restaurant, the Company sends an opening team to the
Restaurant to assist the franchisee during the first several days that the
Restaurant is open. This management team works in the Restaurant to monitor
compliance with the Company's standards as to quality of product and service.
The Company employs three franchise district managers, each of whom supervises
franchised Restaurants in defined geographic areas. Each franchise district
manager has been fully trained by the Company to assist franchisees in
implementing the


                                        5

<PAGE>   8



operating procedures and policies of the Company once a Restaurant is open. As
part of these services, the franchise service representative rates the
Restaurant's hospitality, food quality, speed of service and cleanliness and
maintenance of facilities. The franchisees receive a written report of the
findings and, if any deficiencies are noted, recommended procedures to be
followed to correct such deficiencies.

         The Company also provides construction support services to its
franchisees. All site plans must be approved by the Company before construction
or site improvements begin. These plans include information detailing building
location, internal traffic patterns and curb cuts, location of utilities,
walkways, driveways, signs and parking lots and a complete landscape plan. The
Company also approves all plans and specifications for the Restaurant building
to ensure uniformity of design of the building and the site improvements. The
Company's personnel also visit the site during construction, to meet with the
franchisees and verify that all standards are met.

         Area Development and Franchise Agreements. Except in those instances
where a franchisee operates a single Restaurant under a single Franchise
Agreement, each franchisee is required to execute two agreements (consisting of
an "Area Development Agreement" and a "Franchise Agreement"). The Area
Development Agreement grants to the franchisee the right to develop and open a
specified number of Restaurants within a limited period of time and in a defined
geographic area (the "Territory") and thereafter to operate each Restaurant in
accordance with the terms and conditions of the Franchise Agreement. The
Franchise Agreement grants an exclusive license at a specified location to
operate a Restaurant in accordance with the Back Yard Burgers system and to
utilize the Company's trademarks, service marks and other rights of the Company
relating to the sale of its menu items. The term of a Franchise Agreement is 10
years, renewable for successive five year periods, if certain conditions
pertaining to such renewal are met, including the payment of a $500 renewal fee.

         Each Area Development Agreement establishes the number of Restaurants
the franchisee is to construct and open in the Territory during the term of the
Area Development Agreement after considering many factors, including the
residential, commercial and industrial characteristics of the area, geographic
factors, population of the area and the previous experience of the franchisee.
The franchisee's development schedule for the Restaurants is set forth in the
Area Development Agreement. As of January 3, 1998, the Company had entered into
Franchise Agreements and Area Development Agreements with certain franchisees
which require them to open or have under construction a minimum of 25
Restaurants by the end of April 30, 2002. Of the 45 franchised Restaurants as of
January 3, 1998, 28 were being operated under Area Development Agreements by
multiple unit franchisees and 17 were being operated under single Franchise
Agreements by single unit franchisees. The Company may revoke an Area
Development Agreement of any franchisee who is unsuccessful in meeting its
projected development schedule. During the past three years, the Company has
exercised its right to terminate 14 Area Development Agreements, five during
1997, for lack of performance by multiple unit franchisees with respect to their
projected development schedules. Additionally, during the past three years, one
Franchise Agreement was terminated, in 1995, because of a lack of performance by
a single unit franchisee with respect to certain Franchise Agreement
requirements. The Company believes that its overall experience with franchisees
who commit to develop Restaurants under Franchise Agreements and Area
Development Agreements has been favorable, although there can be no assurance
that future performance by franchisees under these agreements will be
successful.

         The Franchise Agreement and Area Development Agreement require that the
franchisee submit information regarding proposed Restaurant sites to the Company
for its review. The Company does not arrange or make any provisions for
financing the development of Restaurants by its franchisees. Each franchisee is
required to purchase all fixtures, equipment, inventory, products, ingredients,
materials and other supplies used in the operation of its Restaurants from
approved suppliers, all in accordance with the Company's specifications. The
Company provides a training program for management personnel of its franchisees.
Under the terms of the Franchise Agreement, the Company has adopted standards of
quality, service and food preparation for franchised Restaurants. Each
franchisee is required to comply with all of the standards for Restaurant
operations as published from time to time in the Company's operations manual.


                                        6

<PAGE>   9



         The Company may terminate a Franchise Agreement for several reasons,
including among others, the franchisee's bankruptcy or insolvency, default in
the payment of royalties or advertising fees to the Company, failure to maintain
standards set forth in the Franchise Agreement or operations manual, material
violation of any law, ordinance or governmental rule or regulation or cessation
of business. In such event, the Company may also elect to terminate a multiple
unit franchisee's Area Development Agreement.

         Franchise Fees and Royalties. Under the current Franchise Agreement,
each franchisee is generally required to pay a franchise fee (the "Franchise
Fee") of $25,000. If a franchisee purchases an area pursuant to an Area
Development Agreement, the franchisee must pay $25,000 for the first Restaurant
and agree to pay a Franchise Fee of $22,000 for each additional Restaurant
covered under the agreement. With respect to the Area Development Agreement, the
amount of the fee (the "Area Development Fee") varies depending upon the number
of Restaurants the Company estimates can be developed within the Territory. Upon
signing the Area Development Agreement, the franchisee will pay to the Company a
Franchise Fee of $25,000 for the first Restaurant, plus a $5,000 (per
Restaurant) Area Development Fee (to be credited toward the subsequent $22,000
Franchise Fees(s)) for subsequent Restaurants covered under the Area Development
Agreement. For example, for a franchisee whose Area Development Agreement
requires the development of five Restaurants, the Franchise Fee will be $25,000
for the first Restaurant, and $17,000 ($22,000 less $5,000) for each of the next
four Restaurants for an aggregate total of $113,000. Each franchisee is also
generally required to pay the Company a weekly royalty of 4% of the Restaurant's
taxable sales and to pay 1% of the Restaurant's weekly taxable sales to the
Company's national advertising fund. Each Restaurant is required to spend 2% of
the Restaurant's taxable sales on local store marketing.

COMPETITION

         Restaurant Operations. The restaurant industry, particularly the fast
food segment, is highly competitive with respect to price, service, food quality
and location and there are numerous well-established competitors possessing
substantially greater financial, marketing, personnel and other resources than
the Company. The Company believes that its direct competitors consist of the
three largest hamburger chains (i.e., McDonald's, Burger King and Wendy's). In
addition, there are other national, regional and local fast food chains, many of
which specialize in or offer hamburger products. The Company can also be
expected to face competition from a broad range of other restaurants and food
service establishments. Many of the Company's competitors have achieved
significant national, regional and local brand name and product recognition and
engage in extensive advertising and promotional programs, both generally and in
response to efforts by additional competitors to enter new markets or introduce
new products. In addition, the fast food industry is characterized by the
frequent introduction of new products, accompanied by substantial promotional
campaigns. In recent years, numerous companies in the fast food industry have
introduced products positioned to capitalize on growing consumer preference for
food products which are, or are perceived to be, healthful, nutritious low in
calories and low in fat content. It can be expected that the Company will be
subject to competition from companies whose products or marketing strategies
address these consumer preferences. In addition, the market for suitable
Restaurant locations is highly competitive in that fast food companies, major
restaurant companies and non-food companies compete for prime real estate sites.

         Certain Factors Affecting the Fast Food Restaurant Industry. The
Company will be required to respond to various factors affecting the restaurant
industry, including changes in consumer preferences, tastes and eating habits,
demographic trends and traffic patterns, increases in food and labor costs and
national, regional and local economic conditions. A number of fast food
restaurant companies have recently been experiencing flattening growth rates and
declines in average sales per restaurant, in response to which certain of such
companies have adopted "value pricing" strategies. Such strategies could have
the effect of drawing customers away from companies which do not engage in
discount pricing and could also negatively impact the operating margins of
competitors, including the Company, which attempt to match competitors' price
reductions.

         Franchise Operations. In addition to its Restaurant operations, the
Company competes with fast food chains, major restaurant chains and other
franchisors for franchisees. Many franchisors, including those in the restaurant
industry have greater market recognition and greater financial, marketing and
human resources.


                                        7

<PAGE>   10




TRADEMARKS AND SERVICE MARKS

         The Company believes its trademarks and service marks have significant
value and are important to its marketing efforts. The Company has registered
certain trademarks and service marks (including the name "Great Little Burger")
with the United States Patent and Trademark Office. The Company has also
registered the name "Back Yard Burgers" and the kettle and flame design as
service marks. The Company's policy is to pursue registration of its marks
whenever possible and to oppose vigorously any infringement of its marks.

GOVERNMENT REGULATIONS

         The Company is subject to Federal Trade Commission ("FTC") regulation
and several state laws which regulate the offer and sale of franchises. The
Company is also subject to a number of state laws which regulates substantive
aspects of the franchisor -- franchisee relationship. The FTC's Trade Regulation
Rule on Franchising (the "FTC Rule") requires the Company to furnish to
prospective franchisees a franchise offering circular containing information
prescribed by the FTC Rule.

         State laws that regulate the offer and sale of franchises and the
franchisor -- franchisee relationship presently exist in a substantial number of
states. Such laws generally require registration of the franchise offering with
state authorities and regulate the franchise relationship by, for example,
requiring the franchisor to deal with its franchisees in good faith, prohibiting
interference with the right of free association among franchisees, limiting the
imposition of standards of performance on a franchisee and regulating
discrimination against franchisees in charges, royalties or fees. Although such
laws may restrict a franchisor in the termination of a franchise agreement by,
for example, requiring "good cause" to exist as a basis for the termination,
advance notice to the franchisee of the termination, an opportunity to cure a
default and a repurchase of inventory or other compensation, these provisions
have not had a significant effect on the Company's franchise operations. The
Company is not aware of any pending franchise legislation which in its view is
likely to affect significantly the operations of the Company. The Company
believes that its operations comply in all material respects with the FTC Rule
and the applicable state franchise laws.

         Each Company-operated and franchised Restaurant is subject to licensing
and regulation by a number of governmental authorities, which may include
health, sanitation, safety, fire, building and other agencies in the state or
municipality in which the Restaurant is located. Difficulties in obtaining or
failure to obtain the required licenses or approvals could delay or prevent the
development of a new Restaurant in a particular area. The Company is subject to
federal and state environmental regulations, but these have not had a material
effect on the Company's operations. More stringent and varied requirements of
local governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent the development of a new Restaurant in a
particular area.

         The Company is also subject to state and federal labor laws that govern
its relationship with its employees, such as minimum wage requirements, overtime
and working conditions and citizenship requirements. Significant numbers of the
Company's food service and preparation personnel are paid at rates governed by
the federal minimum wage. Accordingly, further increases in the minimum wage
would increase the Company's labor costs and may have an adverse effect on the
Company's operating margins.


                                        8

<PAGE>   11



EXECUTIVE OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
Name and Age                               Title
------------                               -----

<S>                                        <C>
Lattimore M. Michael                       Mr. Michael has been Chairman and Chief Executive Officer since
(54)                                       1993.  From 1987 to 1992, Mr. Michael was the Company's President
                                           and Chief Executive Officer.

Joseph L. Weiss                            Mr. Weiss has been President and Chief Operating Officer since
(38)                                       1993. From 1989 to 1993, Mr. Weiss was the Company's 
                                           Secretary/Treasurer. From 1989 to 1993, Mr. Weiss was also the
                                           President of Double S Development, Inc., a Mississippi
                                           corporation, which owned and operated franchised Company
                                           restaurants in the metropolitan Memphis area.

William N. Griffith                        Mr. Griffith has been Executive Vice President and
(35)                                       Secretary/Treasurer of the Company since 1993. From 1989 to
                                           1992, Mr. Griffith was the Company's Senior Vice President -
                                           Operations.

Stephen J. King                            Mr. King has been Chief Financial Officer and Principal
(46)                                       Accounting Officer since July 1993.  From 1988 to 1993, Mr.
                                           King was the Comptroller for Southland Racing Corporation.
                                           Prior to 1988, Mr. King practiced accounting at Price Waterhouse.

Michael C. McDermott                       Executive Vice President - Company Operations.  Mr. McDermott
(51)                                       joined the Company in September 1996. From April 1996 to
                                           September 1996, he was an operating partner for Wyatt's
                                           Cafeterias. From August 1995 to November 1995, he was an
                                           owner/operator of Hudson's Grills. From 1992 to 1995, he was a
                                           regional manager for Country Harvest Buffet, Inc.  Prior to March
                                           1992, Mr. McDermott was Vice President of Operations for
                                           O'Charley's Inc.

Stephen C. Reid                            Vice President-Research and Development.  Mr. Reid has been an
(39)                                       executive officer of the Company since 1988.
</TABLE>


EMPLOYEES

         As of March 20, 1998, the Company employed approximately 1,000
persons in its Restaurant operations, 17 of whom are corporate personnel, 106 of
whom are Restaurant management and supervisory personnel and the remainder of
whom are hourly Restaurant personnel. Of the 17 corporate employees, 6 are in
management positions and 11 are administrative or office employees.


                                        9

<PAGE>   12



ITEM 2.  PROPERTIES

         Of the 32 Company-operated Restaurants as of January 3, 1998, the
Company has entered into ground leases, as lessee, for 21 Restaurants. The
Company owns the real property for three Restaurants. The Company's leases are
generally written for a term of five to 15 years with one or more five-year
renewal options. The Company's average monthly lease cost for the 21
Company-operated Restaurants located on leased sites is approximately $2,900 per
month. For the eight Restaurants where the Company leases the building as well
as the site, the average monthly cost is approximately $4,820 per month. Most
leases are treated as operating leases. Leasehold improvements made by the
Company generally become the property of the landlord upon expiration or earlier
termination of the lease; however, in most instances, if the Company is not in
default under the lease, modular buildings remain the property of the Company
and can be removed from the site upon expiration of the ground lease. With
respect to the buildings and equipment relating to the 32 Company-operated
Restaurants, management believes that its commercial insurance coverage is
adequate.

         The Company's executive offices are located in approximately 4,800
square feet of leased space at 2768 Colony Park Drive, Memphis, Tennessee 38118.
The Company's lease expires on October 15, 1998, and provides for a minimum
annual rent of $44,500. Also, BYB Properties, Inc., a wholly-owned subsidiary of
the Company, leases nominal office space at 103 Faulk Road, Suite 200,
Wilmington, Delaware 19803. This lease expires on September 30, 1998, and
provides for annual rent of $3,850.

ITEM 3.  LITIGATION

         The Company is involved in certain litigation matters incidental to its
business, including, but not necessarily limited to, claims alleging violations
of the Civil Rights Act of 1964 and/or violations of federal and state
discrimination laws. Aside from the cost of defense, such litigation is not
presently considered by management to be material to the financial condition of
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         No items are reportable hereunder.



                                       10

<PAGE>   13



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is traded and quoted on The Nasdaq SmallCap
Market tier of the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") under the symbol "BYBI". The following table sets
forth, for all periods indicated, the high and low bid prices for the Common
Stock as reported by Nasdaq. Such price information contains inter-dealer
prices, without retail mark-up, mark-down or commissions paid, and may not
necessarily reflect actual transactions.

<TABLE>
<CAPTION>
                  Quarter Ended                          High              Low
                  -------------                          ----              ---

                  <S>                                   <C>              <C>  
                  March 28, 1997.....................   $2.25            $1.75
                  June 28, 1997......................   $2.00            $1.63
                  September 27, 1997.................   $2.00            $1.75
                  January 3, 1998....................   $3.63            $1.94
</TABLE>


         At March 20, 1998, the Common Stock was held of record by approximately
515 record stockholders. On March 20, 1998, the last sale price for the Common
Stock as reported by Nasdaq was $2.88 per share.

         The Company has not paid or declared cash distributions or dividends
and does not intend to pay cash dividends on the Common Stock or its Preferred
Stock in the foreseeable future. Future cash dividends, if any, will be
determined by the Board of Directors based on the Company's earnings, financial
condition, capital requirements and other relevant factors.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         Incorporated herein by reference from the Company's Annual Report for
the Annual Meeting of Stockholders to be held May 21, 1998.

ITEM 7.  FINANCIAL STATEMENTS

         Incorporated herein by reference from the Company's Annual Report for
the Annual Meeting of Stockholders to be held May 21, 1998.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         No items are reportable hereunder.



                                       11

<PAGE>   14



                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held May 21, 1998, to be
filed pursuant to Regulation 14A. Certain information concerning the Company's
executive officers is contained in response to Item 1 of Part I.

ITEM 10. EXECUTIVE COMPENSATION

         Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held May 21, 1998, to be
filed pursuant to Regulation 14A.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held May 21, 1998, to be
filed pursuant to Regulation 14A.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held May 21, 1998, to be
filed pursuant to Regulation 14A.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

<TABLE>
<CAPTION>
Exhibit
Number                     Description
------                     -----------

<S>             <C>
 3.1            Restated Certificate of Incorporation.(6)

 3.2            Amended and Restated By-Laws.(3)

 4.1            Specimen Common Stock Certificate.(3)

 4.2            Warrant of ABYB delivered to a stockholder of ABYB, who received a like
                number of ABYB shares (the "Bridge Investor") as part of certain
                short-term unsecured financing provided to ABYB in February 28,
                1993.(1) Such Warrant is now a Warrant for a like number of the 
                Registrant's common shares.

 4.3            Underwriter's Warrant delivered to Franklin-Lord, Inc.(2)

10.1            Employment Agreement, dated April 15, 1993, between the Registrant and
                Lattimore M. Michael.(1)

10.2            Form of Employment Agreement executed as of June 6, 1993, between the
                Registrant and Joseph L. Weiss.(3)
</TABLE>


                                       12

<PAGE>   15


<TABLE>
<S>             <C>
10.3            Form of Employment Agreement executed as of June 6, 1993, between the
                Registrant and William N. Griffith.(3)

10.4            Form of Incentive Stock Option Plan of 1993.(1)

10.5            Lease, dated February 1, 1990, between Trezevant Properties and the
                Registrant.(1)

10.6            Joint Venture Agreement of Lester's Back Yard Burgers Joint Venture I by
                and among William L. Lester, Pattie F. Lester, Patricia B. Litow, Elizabeth
                B. Fox and Back Yard Burgers, Inc., dated November 15, 1994.(5)

10.7            Joint Venture Agreement of Lester's Back Yard Burgers Joint Venture II by
                and among William L. Lester, Pattie F. Lester, Patricia B. Litow, Elizabeth
                B. Fox, Charles B. Fox, David P. Fox and Back Yard Burgers, Inc., dated
                November 15, 1994.(5)

10.8            1995 Employee Stock Purchase Plan of Back Yard Burgers, Inc.(6)

10.9            The 1995 Incentive Award Plan of Back Yard Burgers, Inc.(6)

10.10           Joint Venture Agreement of Lester's Back Yard Burgers Joint Venture III
                by and among Pattie F. Lester, Patricia B. Litow, Elizabeth B. Fox, Charles
                B. Fox, David P. Fox, Alexandra B. Litow, Andrew R. Litow and Back Yard
                Burgers, Inc., dated September 12, 1995.(6)

10.11           Line of Credit Commitment by and between Trust One Bank and Back Yard
                Burgers, Inc. dated December 20, 1995.(7)

10.12           Loan commitment by and between Phoenix Leasing Incorporated and Back
                Yard Burgers, Inc. dated October 4, 1996. (8)

10.13           Loan commitment by and between Trust One Bank and Back Yard Burgers,
                Inc. dated January 23, 1997. (8)

10.14*          Capital Contribution Agreement between Back Yard Burgers, Inc. and BYB
                Properties, Inc. dated October 10, 1997.

10.15*          Trademark Assignment by Back Yard Burgers, Inc. to BYB Properties, Inc.
                dated October 10, 1997.

10.16*          Trademark License Agreement between BYB Properties, Inc. and
                Back Yard Burgers, Inc. dated October 10, 1997.

10.17*          Revolving Loan Agreement regarding Uncommitted Line of Credit
                Agreement from BYB Properties, Inc. to Back Yard Burgers, Inc.
                dated October 10, 1997.

10.18*          Promissory Note of Back Yard Burgers, Inc. to BYB Properties,
                Inc. dated October 10, 1997 in the original principal amount of
                $6,000,000.
</TABLE>


                                       13

<PAGE>   16



<TABLE>
<S>             <C>
10.19*          Tax Sharing Agreement between BYB Properties, Inc. and Back Yard  
                Burgers, Inc. dated October 10, 1997.                             
                
10.20*          Loan Agreement by and between Trust One Bank and Back Yard
                Burgers, Inc. dated December 15, 1997.
                
10.21*          Promissory Note of Back Yard Burgers, Inc. to Trust One Bank in
                the original principal amount of $460,000 dated December 15,
                1997.

11*             Statement re: Computation of Net Income (Loss) per Share

13*             Registrant's Annual Report to Stockholders for the 53-week
                period ended January 3, 1998. Portions of the Annual Report not
                specifically incorporated by reference herein are not deemed to
                be filed herewith.

21*             Subsidiaries of the Registrant.

27              Financial Data Schedule (for SEC use only) (9)
</TABLE>

--------------

*    Filed herewith.

(1)  Previously filed with the Securities and Exchange Commission (the
     "Commission") as an Exhibit to the Registrant's Form SB-2 on April 20, 1993
     (File No. 33-61356).

(2)  Previously filed with the Commission as an Exhibit to the Registrant's
     Amendment No. 1 to Form SB-2 on June 11, 1993 (File No. 33-61356).

(3)  Previously filed with the Commission as an Exhibit to the Registrant's
     Amendment No. 2 to Form SB-2 on June 25, 1993 (File No. 33-61356).

(4)  Previously filed with the Commission as an Exhibit to the Registrant's Form
     10-KSB, dated January 1, 1994 and filed on March 30, 1994.

(5)  Previously filed with the Commission as an Exhibit to the Registrant's Form
     10-KSB, dated December 31, 1994 and filed on March 31, 1995.

(6)  Previously filed with the Commission as an Exhibit to the Registrant's Form
     10-QSB, dated September 30, 1995 and filed on November 14, 1995.

(7)  Previously filed with the Commission as an Exhibit to the Registrant's Form
     10-KSB, dated December 30, 1995 and filed on March 29, 1996.

(8)  Previously filed with the Commission as an Exhibit to the Registrant's Form
     10-KSB, dated December 28, 1996 and filed on March 28, 1997.

(9)  Submitted electronically to the Securities and Exchange Commission for
     information only and not filed.

(b)  Reports on Form 8-K

     None.


                                       14

<PAGE>   17


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       BACK YARD BURGERS, INC.



                                       By:      /s/ Lattimore M. Michael
                                          -------------------------------------
                                          Lattimore M. Michael, Chairman
                                          and Chief Executive Officer

                                       Date:    April 2, 1998
                                            -----------------------------------

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated on the dates indicated.

<TABLE>
<CAPTION>
Signature                                            Title                                       Date
---------                                            -----                                       ----


<S>                                                  <C>                                         <C>
/s/ Lattimore M. Michael                             Chairman, Chief Executive Officer           April 2, 1998
--------------------------------------------           and Director
Lattimore M. Michael                                               


/s/ Joseph L. Weiss                                  President, Chief Operating Officer          April 2, 1998
--------------------------------------------           and Director
Joseph L. Weiss                                                    


/s/ William N. Griffith                              Executive Vice President and Director       April 2, 1998
--------------------------------------------
William N. Griffith


/s/ Stephen J. King                                  Chief Financial Officer                     April 2, 1998
--------------------------------------------
Stephen J. King                                       and Director


/s/ William B. Raiford, III                          Director                                    April 2, 1998
--------------------------------------------
William B. Raiford, III


/s/ W. Kurt Henke                                    Director                                    April 2, 1998
--------------------------------------------
W. Kurt Henke


/s/ Joe Colonnetta                                   Director                                    April 2, 1998
--------------------------------------------
Joe Colonnetta
</TABLE>


                                       15