<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON D.C.  20549

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

                                   FORM 10-Q


              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


                  FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS
                  --------------------------------------------
                            ENDED NOVEMBER 27, 1996
                            -----------------------


                         Commission File Number 0-2849


                       AMERICAN RECREATION CENTERS, INC.


       Incorporated in California         Federal Employer No. 94-1441151


          11171 Sun Center Drive, Suite 120, Rancho Cordova, CA 95670
            Mail Address:    P.O. Box 580, Rancho Cordova, CA 95741
            -------------------------------------------------------
                      Telephone:  Area Code (916) 852-8005
                      ------------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  X     No
                                         -----     -----                    

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

      Capital Stock Outstanding as of November 27, 1996 - 4,606,199 shares

                                  Page 1 of 12
                            Exhibit Index on Page 2
<PAGE>
 
                       AMERICAN RECREATION CENTERS, INC.

                               INDEX TO FORM 10-Q
                  FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS
                            ENDED NOVEMBER 27, 1996


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (all of which are unaudited)

         Condensed Consolidated Balance Sheet                                 3
         Consolidated Statement of Income and Retained Earnings               4
         Condensed Consolidated Statement of Cash Flows                       5

         Notes To Condensed Consolidated Financial Statements               6-7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               8-11


                          PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         The following exhibits of the Company are included or
         incorporated herein.  (Note: The exhibit number corresponds
         to the specific number within Item 601 of Regulation S-K)

         Exhibit
         Number
         ------

         27.1       Financial Data Schedule

         10.5       American Recreation Centers, Inc. 
                    1996 Director Plan

SIGNATURES                                                                   12

                                       2
<PAGE>
 
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                (in thousands)
<TABLE>
<CAPTION>
                                                    November 27,    May 29,
                                                        1996         1996
                                                     (Unaudited)   (Audited)
                                                    -------------  ---------
<S>                                                 <C>            <C>
        ASSETS
        ------                                    
Current assets:
  Cash and equivalents                                   $ 3,553   $  3,489
 Other current assets                                      3,192      3,266
                                                         -------   --------
    Total current assets                                   6,745      6,755
                                                         -------   --------
Property, equipment and leaseholds, at cost
 Land and buildings                                       41,636     41,965
 Machinery and equipment                                  38,517     37,777
 Leaseholds and leasehold improvements                     8,913      8,532
                                                         -------   --------
                                                          89,066     88,274
Less - accumulated depreciation and amortization         (30,194)   (28,572)
                                                         -------   --------
                                                          58,872     59,702
                                                         -------   --------
 
Property held for sale                                     2,558      2,557
Notes receivable                                           1,860      1,741
Other assets                                               1,350      1,376
                                                         -------   --------
                                                         $71,385   $ 72,131
                                                         =======   ========
 LIABILITIES AND SHAREHOLDERS' EQUITY
 ------------------------------------             
Current liabilities:
 Accounts payable and accrued expenses                   $ 6,576   $  6,134
 Short-term borrowings                                       300          -
 Current maturities of long-term debt                      1,764      1,796
                                                         -------   --------
    Total current liabilities                              8,640      7,930
                                                         -------   --------
Long-term debt and capital leases                         25,460     26,194
                                                         -------   --------
Income taxes deferred to future years                      7,209      7,209
                                                         -------   --------
Minority interests                                         1,849      2,060
                                                         -------   --------
Shareholders' equity
 Common stock:
   Authorized - 21,484,375 shares
   Issued and outstanding -
      4,606,199 and 5,047,619 shares                       9,584      9,845
 Preferred stock:
   Authorized - 5,000,000 shares
     Issued and outstanding - none                             -          -
 Retained earnings                                        18,643     18,893
                                                         -------   --------
    Total shareholders' equity                            28,227     28,738
                                                         -------   --------
Commitments and contingencies
                                                         $71,385   $ 72,131
                                                         =======   ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
             CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
                    (in thousands except per share amounts)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                     Thirteen Weeks Ended  Twenty-six Weeks Ended
                                     --------------------  ----------------------
                                      Nov. 27,   Nov. 29,   Nov. 27,   Nov. 29,
                                         1996      1995       1996      1995
                                         ----      ----       ----      ----  
<S>                                     <C>       <C>       <C>       <C>       
Operating revenue:
   Bowling and entertainment
     activities                         $ 8,333   $ 7,872   $14,670   $13,983
   Beverage and food                      3,445     3,312     5,847     5,671   
    Other                                   258       291       526       646
                                        -------   -------   -------   -------
                                         12,036    11,475    21,043    20,300
                                        -------   -------   -------   -------
Operating, general and
   administrative expenses:
   Salaries, wages and employee
     benefits                             4,696     4,526     8,950     8,553
   Operating costs                        3,495     3,326     6,875     6,589
   Cost of beverage and food sales        1,129     1,020     1,945     1,748
   Selling, general and administrative      591       560     1,067       987
   Depreciation and amortization            971       903     1,907     1,815
                                        -------   -------   -------   -------
                                         10,882    10,335    20,744    19,692
                                        -------   -------   -------   -------
Operating income                          1,154     1,140       299       608
 
Interest expense                           (649)     (626)   (1,295)   (1,375)
Interest and other income                    76       193       173       319
Gain on sale of stock option                  -         -       800         -
                                        -------   -------   -------   -------
 
Income (Loss) from continuing
   operations before provision for
   income taxes and minority interests      581       707       (23)     (448)
 
Provision for income taxes                 (205)     (243)       (2)      179
Minority interests                          (68)      (81)       14        (2)
                                        -------   -------   -------   -------
 
Income (Loss) from continuing
   operations                               308       383      (11)    (271)
 
Discontinued operations:
   Gain on sale of investment in The
     Right Start, Inc., net of
      applicable income
      taxes of $320 and $1,568                -         -       360     2,251
   Income from operations of The 
      Right Start, Inc., net of 
       applicable income
       taxes of $49                           -         -         -        54
                                        -------   -------   -------   -------
Net income                                  308       383       349     2,034
Retained earnings, beginning of
 period                                                      18,893    16,898
Cash dividends ($.065 and $.0625)                              (599)     (630)
                                                            -------   -------
Retained earnings,  end of period                           $18,643   $18,302
                                                            =======   =======
 
Earnings (Loss) per share: 
  Continuing operations                 $  0.07   $  0.08   $  0.00    ($0.05)
  Discontinued operations                  0.00      0.00      0.08      0.46
                                        -------   -------   -------   -------
                                        $  0.07   $  0.08   $  0.08     $0.41
                                        =======   =======   =======   =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                Twenty-six Weeks Ended
                                                          ---------------------------------
                                                          November 27,          November 29,
                                                             1996                  1995
                                                          -----------           ------------
<S>                                                       <C>                    <C>
Cash Flows from (used in) Operating Activities:
 Net income                                                 $  349                  $ 2,034
 Adjustments to reconcile net income to
  net cash provided by operating activities:
   Depreciation and amortization                             1,907                    1,813
   Income from discontinued operations                        (360)                  (2,305)
   Gain on sale of stock option                               (800)                       -
   Results attributed to minority interests                    (14)                       2
   Decrease in other current assets                             74                       76
   Increase (Decrease) in accounts payable
    and accrued expenses                                       802                   (2,742)
                                                            ------                  -------
     Net cash from (used in) operations                      1,958                   (1,122)
                                                            ------                  -------

Cash Flows from (used in) Investing Activities:
   Proceeds from sale of subsidiary's stock                      -                   11,811
   Proceeds from sale of stock option                          800                        -
   Expenditures for property, equipment and leaseholds      (1,023)                  (3,829)
   Other                                                      (345)                      (2)
                                                            ------                  -------
      Net cash from (used in) investing activities            (568)                   7,980
                                                            ------                  -------
 
Cash Flows from (used in) Financing Activities:
  Short-term borrowings                                        300                     (415)
  Issuance of long-term debt                                     -                    2,200
  Repayment of long-term debt                                 (766)                  (4,856)
  Dividends to shareholders                                   (599)                    (630)
  Issuance (Retirement) of common stock                       (261)                     (64)
                                                            ------                  -------
     Net cash used in financing activities                  (1,326)                  (3,765)
                                                            ------                  -------
 
Net increase in cash and equivalents                            64                    3,093
Cash and equivalents at beginning of year                    3,489                    4,508
                                                            ------                  -------
Cash and equivalents at end of year                         $3,553                  $ 7,601
                                                            ======                  =======
 
</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


NOTE 1 - Description of Business and Significant Accounting Policies:
-------------------------------------------------------------------- 

American Recreation Centers, Inc. and its subsidiaries (the Company) operate
bowling centers in California, Texas, Wisconsin, Oklahoma, Kentucky and
Missouri.

There have been no changes in the Company's significant accounting policies as
set forth in the Company's 1996 annual report. These unaudited financial
statements as of November 27, 1996 and for the three and six month periods ended
November 27, 1996 and November 29, 1995 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.

"Discontinued Operations" include the operations and gain on sale of the
Company's majority interest in The Right Start, Inc. (Right Start), a catalog
company and retailer of infants' and children's products.  See Note 6.

NOTE 2 - Long-term Debt:
----------------------- 

Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>

                                    November 27,        May 29,
                                       1996              1996
                                    ------------        -------
<S>                                  <C>                <C>
Long-term notes:
 Secured notes payable in monthly
  installments with a weighted
  average interest rate of 8.94%
  at November 27, 1996               $26,488            $27,095

 Other                                   736                895
                                     -------            -------
                                      27,224             27,990
 Less-amounts due within one year      1,764              1,796
                                     -------            -------
                                     $25,460            $26,194
                                     =======            =======
</TABLE>
NOTE 3 - Operations:
-----------------------------------

The results of operations for this thirteen week period is not necessarily
indicative of the results to be expected for the entire year. Bowling is highly
seasonal with revenues during the first quarter normally not exceeding 19% to
22% of those for a full year. Second quarter revenue typically represents
between 25% to 27% of revenue for the full year.

                                       6
<PAGE>
 
NOTE 4 - Earnings Per Share of Common Stock:
------------------------------------------- 

Earnings per share is computed on the weighted average number of shares of
common stock and common stock equivalents outstanding during each period.
Common stock equivalents include the Company's stock options. The weighted
average number of common shares and common stock equivalents outstanding were
4,606,199 and 5,059,557 for the thirteen week periods ended November 27, 1996
and November 29, 1995; and 4,616,681 and 5,057,241 for the twenty-six week
periods then ended.

NOTE 5 - Gain on Sale of Stock Option:
------------------------------------- 

During the first quarter of fiscal 1997 the Company sold its option to
repurchase up to 400,000 shares of Right Start common stock for $800,000 cash,
resulting in an after-tax gain of $480,000, equal to $.10 per share.

NOTE 6 - Gain on Sale of The Right Start, Inc.:
---------------------------------------------- 

On August 4, 1995, the Company sold its 62.5 percent ownership in Right Start
for $11,811,000 in cash and recorded a $2,251,000 after-tax gain, equal to $.45
per share, in the first quarter of fiscal 1996.  In connection with the
transaction, the Company had agreed to reimburse Right Start up to $680,000
should it be unable to sustain ordinary loss treatment for its deferred loss tax
carry-forward and it have sufficient taxable income in or before its fiscal year
2000.  During the first quarter of fiscal 1997 the Company received a favorable
ruling from the IRS allowing ARC to reverse the reserve established for the
agreement at the time of the sale.  This resulted in a $360,000 increase in the
gain on sale which has been reported in discontinued operations.

NOTE 7 - Subsequent Event:
------------------------- 

On December 20, 1996 the Company's 85% owned joint venture, Triangle Bowl
Associates (TBA), completed the acquisition of two bowling centers, comprising
56 lanes, in the Dallas, Texas area.  The purchase price for the businesses,
equipment, liquor licenses and suppliers for both centers and the land and
building for one of the centers totaled $1.62 million.  TBA entered into a long-
term lease for the land and building of the second center. $1.325 million of the
purchase price was financed under a long-term bank loan.

                                       7
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Introductory Note
-----------------

This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include ( i ) the success of the Company's
operations, particularly its new Fun Fest and family entertainment center (FEC)
concepts, (ii) anticipated competition, (iii) potential future revenue and
income, (iv) potential future decreases in costs, and (v) the need for, and
availability of, additional financing.

The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties.  Such factors include, among
others, the following: general economic and business conditions; advertising,
marketing and sales efforts; success of the Company's efforts to restage certain
bowling centers as family entertainment centers; acceptance of new programs and
entertainment offerings; business abilities and judgement of personnel;
availability of qualified management personnel; changes in, or the failure to
comply with, government regulations; weather conditions; operating cost
containment efforts; continued availability of lines of credit; availability of
qualified construction personnel; ability to remodel, refurbish and restage
Company facilities in a cost effective and timely manner; uncertainties
surrounding consolidation of the industry; the historically cyclical nature of
the bowling industry; and other factors referenced in this Form 10-Q.

Although the Company believes that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could prove inaccurate
and therefore, there can be no assurance that the results contemplated in the
forward-looking statements will be realized.  In addition, the business and
operations of the Company are subject to substantial risks, as discussed above,
which increase the uncertainty inherent in such forward-looking statements.  In
light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.

The following is managements' discussion and analysis of certain significant
factors which have affected the earnings and financial position of the Company
during the period included in the accompanying financial statements.  This
discussion compares the thirteen and twenty-six week periods ended November 27,
1996 with the thirteen and twenty-six week period ended November 29, 1995.  This
discussion should be read in conjunction with the financial statements and notes
thereto.

                                       8
<PAGE>
 
Results of Continuing Operations
--------------------------------


Second quarter

Revenue for the second quarter of fiscal 1997 increased nearly 5% to $12.0
million from $11.5 million  while income from continuing operations declined to
$308,000, or $.07 per share from $383,000, or $.08 per share.

The overall increase in revenue for the quarter was attributable to acquisitions
and new revenue attractions.  The Company's new Bowl Aire Center in Wisconsin,
the new Fun Fest family entertainment center in Texas and other "FEC-type"
attractions installed at existing locations produced a total of over $1.0
million in revenue and contributed $122,000 in incremental operating income.

Revenue for comparable centers and comparable bowling operations declined
$442,000, or 4%. $80,000 of the decline was attributable to the Company's
Arlington, Texas center  where 24 bowling  lanes have been removed and
construction is underway to convert it to a Fun Fest FEC. The balance of the
decrease was due to a decline in bowler traffic which contributed to a 4% drop
in the volume of games bowled which led to a similar decrease in bowling lineage
revenue.  Ancillary revenue sources such as beverage and food declined 3% and
2%, respectively from the decrease in bowler traffic. .

Operating income for the second quarter of fiscal 1997 increased slightly  to
$1.154 million from $1.140 million.  This was due to the incremental operating
income generated by new locations and new revenue attractions as discussed
above.  These increases were partially offset by a decline in operating income
from comparable centers due to the drop in revenue at these centers.  However,
the impact of the decline in revenue on operating income was partially mitigated
by a reduction in operating costs for comparable center operations.

Second quarter interest expense increased  to $649,000 from $626,000 due
primarily to additional debt incurred to finance the  Bowl Aire acquisition and
construction of the first Fun Fest.  These increases were partially offset by
reductions in interest expense due to  $2.6 million in debt that was retired
during last year's fourth quarter in connection with the sale of a commercial
real estate project.    Interest and other income declined to $76,000 from
$193,000 because last year's numbers reflect the short-term investment of some
of the proceeds from the sale of the Company's majority interest in The Right
Start, Inc. (see Discontinued Operations below).

                                       9
<PAGE>
 
Six months year-to-date

Revenue for the six months ended November 27, 1996 rose almost 4% to $21.0
million from $20.3 million.  The net loss from continuing operations for the
same period improved to ($11,000), or $.00 per share from ($271,000), or ($.05)
per share.  However, during this year's six month period an option to repurchase
400,000 shares of Right Start's common stock was sold for $800,000 in cash,
resulting in an after-tax gain of $480,000, or $.10 per share.  The option had
been retained after last year's first quarter sale of Right Start and contained
exercise prices ranging from $3.60 to $6.00 over a seven year period.  The
option was sold when Right Start's common stock was trading at $6 3/8.

As was the case with the results for the second quarter, the overall increase in
revenue was attributable to acquisitions and new revenue attractions.  These new
revenue sources contributed over $2.0 million in new revenue and nearly $250,000
in incremental operating income.  Revenue for comparable centers was off almost
6% for the period due to the decline in bowler traffic.  Ancillary revenue
sources were down correspondingly.  Beverage sales were down 4% and food sales
were down slightly less than 4%.

Operating income for the six month period declined from $608,000 last year to
$299,000 this year.  Incremental operating income from new revenue sources was
not sufficient to offset the decline in comparable center, comparable operations
revenue.  However, some of the comparable center revenue decline was offset by
cost reductions.

Interest expense was reduced from $1.375 million last year to $1.295 million
this year for the period.  Increases in interest expense due to additional debt
incurred to finance the Bowl Aire acquisition and Fun Fest construction were
offset by the reduction in interest associated with the repayment of certain
debt upon the sale of a commercial real estate project as discussed above and
last year's prepayment at the beginning of the second quarter of approximately
$2.5 million in debt using a portion of the proceeds from the sale of Right
Start.   Some of the Right Start proceeds were invested on a short-term basis
during last year's six month period which contributed to a decline in interest
income from $319,000 last year to $173,000 this year.


Results of Discontinued Operations
----------------------------------

During the first quarter of fiscal 1996, the Company sold its 62.5% ownership in
Right Start for $11.811 million in cash and recorded a $2.251 million after-tax
gain, equal to $.45 per share.  In connection with the transaction, the Company
had agreed to reimburse Right Start up to $680,000 should it be unable to
sustain ordinary loss treatment for its deferred loss tax carry-forward and it
have sufficient taxable income in or before its fiscal 2000. During the first
quarter of fiscal 1997, the Company received a favorable ruling from the IRS
allowing it to reverse the reserve established for the reimbursement agreement
at the time of the sale. This resulted in a $360,000, or $.08 per share,
increase in the gain on sale which has been reported in discontinued operations.

                                       10
<PAGE>
 
Liquidity and Capital Resources
-------------------------------

At November 27, 1996, the Company had $10.168 million available under an unused
bank commitment.  Advances can be used to acquire, construct or refurbish
bowling centers or to acquire other compatible recreation businesses and would
bear interest at the prime rate plus .75%.

The Company also maintains various line-of-credit arrangements to augment
seasonal shortfalls in working capital.  At November 27, 1996 and November 29,
1995, there were no advances outstanding under the Company's $2 million line-of-
credit.  Advances under this line would bear interest at the prime rate plus
 .5%.  There was $300,000 outstanding at November 27, 1996 under a $1 million
line-of-credit which is designated for use by one of the Company's wholly-owned
subsidiaries.  This line bears interest at the prime rate plus 1%.

The Company's Board of Directors approved a stock repurchase plan in October
1995 that authorized repurchase of up to 20% of the Company's outstanding stock.
Through November 27, 1996, the Company had repurchased 499,530 shares,
representing nearly 10% of its common stock outstanding when the plan was
approved.  The total cost of the reacquired shares was $3.337 million.  The
repurchased shares were retired by the Company and not held as treasury shares.
The plan expired December 31, 1996.

The Company has paid quarterly cash dividends for over 28 consecutive years.
The second quarter dividend of $.065 per share represents a 4% increase over
last year when the quarterly dividend was $.0625 per share.

                                       11
<PAGE>
 
                                   SIGNATURES


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

                       AMERICAN RECREATION CENTERS, INC.



Date January 10, 1997           /s/Robert A. Crist
    ------------------         -----------------------------------------
                               Robert A. Crist, President



Date January 10, 1997           /s/Karen B. Wagner
    ------------------         -----------------------------------------
                               Karen B. Wagner, Vice President/Treasurer

                                       12