##### Table of Contents

---

UNITED STATES

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 QUARTER ENDED SEPTEMBER 18, 2007

COMMISSION FILE NUMBER 001-7323



---

FRISCHS RESTAURANTS, INC.

(Exact name of registrant as specified in its
charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|OHIO                                                           |  | 31-0523213                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|2800 Gilbert Avenue, Cincinnati, Ohio    |  | 45206     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code 513-961-2660

Not Applicable

Former name, former
address and former fiscal year, if changed since last report



---

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 by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

Large Accelerated Filer ̈Accelerated Filer   x    Non-accelerated Filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    YES ̈NO  x

The total number of shares outstanding of the issuers no par common stock, as of September 21, 2007 was: 5,133,155



---



---

##### Table of Contents

TABLE OF CONTENTS



|                               |  |          |  |                                                                                      |  |        
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------ |  | -------
|                               |  |          |  |                                                                                      |  | Page   
|PART I - FINANCIAL INFORMATION |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Financial Statements:                                                                |  |        
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Earnings                                                   |  | 3      
|                               |  |          | 
|                               |  |          |  | Consolidated Balance Sheet                                                           |  | 4 - 5  
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Shareholders Equity                                       |  | 6      
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Cash Flows                                                 |  | 7      
|                               |  |          | 
|                               |  |          |  | Notes to Consolidated Financial Statements                                           |  | 8 - 24 
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operation |  | 25 - 32
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                           |  | 33     
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                              |  | 33     
|                               | 
|PART II - OTHER INFORMATION    |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                    |  | 34     
|                               |  |          | 
|                               |  | Item 1A. |  | Risk Factors                                                                         |  | 34 - 36
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                          |  | 37     
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                      |  | 37     
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                  |  | 37     
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                    |  | 37     
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                             |  | 38 - 40
|                               | 
|SIGNATURE                      |  | 40      



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)



|                                          |  |                     |            |   |                    |   |            |  
|----------------------------------------- |  | ------------------- | ---------- | - | ------------------ | - | ---------- | -
|                                          |  | Sixteen Weeks Ended |           
|                                          |  | September 18, 2007  |            |   | September 19, 2006 |  
|Sales                                     |  | $                   | 89,526,444 |   |                    | $ | 88,248,425 |  
|                                          |  |                    
|Cost of sales                             |  |                     |            |   |                    |   |            |  
|Food and paper                            |  |                     | 31,597,768 |   |                    |   | 31,005,105 |  
|Payroll and related                       |  |                     | 29,779,042 |   |                    |   | 29,080,785 |  
|Other operating costs                     |  |                     | 20,360,313 |   |                    |   | 20,031,863 |  
|                                          |  |                     |            |   |                    |   |            |  
|                                          |  |                     | 81,737,123 |   |                    |   | 80,117,753 |  
|                                          |  |                    
|Gross profit                              |  |                     | 7,789,321  |   |                    |   | 8,130,672  |  
|                                          |  |                    
|Administrative and advertising            |  |                     | 4,346,460  |   |                    |   | 4,262,922  |  
|Franchise fees and other revenue          |  |                     | (378,452   | ) |                    |   | (393,861   | )
|(Gains) losses on sale of assets          |  |                     | (524,354   | ) |                    |   |           |  
|                                          |  |                     |            |   |                    |   |            |  
|Operating profit                          |  |                     | 4,345,667  |   |                    |   | 4,261,611  |  
|                                          |  |                    
|Interest expense                          |  |                     | 742,182    |   |                    |   | 818,411    |  
|                                          |  |                     |            |   |                    |   |            |  
|Earnings before income taxes              |  |                     | 3,603,485  |   |                    |   | 3,443,200  |  
|                                          |  |                    
|Income taxes                              |  |                     | 1,153,000  |   |                    |   | 1,171,000  |  
|                                          |  |                     |            |   |                    |   |            |  
|Net Earnings                              |  | $                   | 2,450,485  |   |                    | $ | 2,272,200  |  
|                                          |  |                     |            |   |                    |   |            |  
|Earnings per share (EPS) of common stock: |  |                     |            |   |                    |   |            |  
|                                          |  |                    
|Basic net earnings per share              |  | $                   | .48        |   |                    | $ | .45        |  
|                                          |  |                     |            |   |                    |   |            |  
|Diluted net earnings per share            |  | $                   | .47        |   |                    | $ | .44        |  
|                                          |  |                     |            |   |                    |   |            |  

The accompanying notes are an integral part of these statements.



3



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet

ASSETS



|                                                    |  |                    |             |              |   |            
|--------------------------------------------------- |  | ------------------ | ----------- | ------------ | - | -----------
|                                                    |  | September 18, 2007 |             | May 29, 2007
|                                                    |  | (unaudited)        |             |             
|Current Assets                                      |  |                    |             |              |   |            
|Cash                                                |  | $                  | 898,147     |              | $ | 321,200    
|Trade and other receivables                         |  |                    | 1,519,032   |              |   | 1,405,892  
|Inventories                                         |  |                    | 5,897,053   |              |   | 6,376,059  
|Prepaid expenses and sundry deposits                |  |                    | 1,477,997   |              |   | 984,132    
|Prepaid and deferred income taxes                   |  |                    | 1,930,701   |              |   | 1,930,701  
|                                                    |  |                    |             |              |   |            
|Total current assets                                |  |                    | 11,722,930  |              |   | 11,017,984 
|                                                    |  |                   
|Property and Equipment                              |  |                    |             |              |   |            
|Land and improvements                               |  |                    | 68,305,172  |              |   | 64,518,917 
|Buildings                                           |  |                    | 91,308,316  |              |   | 85,805,775 
|Equipment and fixtures                              |  |                    | 89,083,180  |              |   | 87,948,798 
|Leasehold improvements and buildings on leased land |  |                    | 29,357,818  |              |   | 29,153,070 
|Capitalized leases                                  |  |                    | 5,054,200   |              |   | 5,054,200  
|Construction in progress                            |  |                    | 154,533     |              |   | 7,435,071  
|                                                    |  |                    |             |              |   |            
|                                                    |  |                    | 283,263,219 |              |   | 279,915,831
|Less accumulated depreciation and amortization      |  |                    | 123,081,197 |              |   | 120,629,146
|                                                    |  |                    |             |              |   |            
|Net property and equipment                          |  |                    | 160,182,022 |              |   | 159,286,685
|                                                    |  |                   
|Other Assets                                        |  |                    |             |              |   |            
|Goodwill                                            |  |                    | 740,644     |              |   | 740,644    
|Other intangible assets                             |  |                    | 1,200,850   |              |   | 1,216,620  
|Investments in land                                 |  |                    | 2,249,890   |              |   | 2,249,890  
|Property held for sale                              |  |                    | 692,063     |              |   | 1,470,920  
|Other                                               |  |                    | 3,045,473   |              |   | 3,275,811  
|                                                    |  |                    |             |              |   |            
|Total other assets                                  |  |                    | 7,928,920   |              |   | 8,953,885  
|                                                    |  |                    |             |              |   |            
|Total assets                                        |  | $                  | 179,833,872 |              | $ | 179,258,554
|                                                    |  |                    |             |              |   |            

The accompanying notes are an integral part of these statements.



4



---

##### Table of Contents

LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                     |  |                    |             |   |              |   |             |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ------------ | - | ----------- | -
|                                                                                                                     |  | September 18, 2007 |             |   | May 29, 2007 |  
|                                                                                                                     |  | (unaudited)        |             |   |              |  
|Current Liabilities                                                                                                  |  |                    |             |   |              |   |             |  
|Long-term obligations due within one year                                                                            |  |                    |             |   |              |   |             |  
|Long-term debt                                                                                                       |  | $                  | 11,516,528  |   |              | $ | 11,774,604  |  
|Obligations under capitalized leases                                                                                 |  |                    | 2,431,786   |   |              |   | 2,480,419   |  
|Self insurance                                                                                                       |  |                    | 850,052     |   |              |   | 716,443     |  
|Accounts payable                                                                                                     |  |                    | 10,861,816  |   |              |   | 12,353,968  |  
|Accrued expenses                                                                                                     |  |                    | 8,387,925   |   |              |   | 9,235,002   |  
|Income taxes                                                                                                         |  |                    | 271,339     |   |              |   | 290,010     |  
|                                                                                                                     |  |                    |             |   |              |   |             |  
|Total current liabilities                                                                                            |  |                    | 34,319,446  |   |              |   | 36,850,446  |  
|                                                                                                                     |  |                   
|Long-Term Obligations                                                                                                |  |                    |             |   |              |   |             |  
|Long-term debt                                                                                                       |  |                    | 26,492,590  |   |              |   | 25,009,540  |  
|Obligations under capitalized leases                                                                                 |  |                    | 821,277     |   |              |   | 880,451     |  
|Self insurance                                                                                                       |  |                    | 976,796     |   |              |   | 1,133,606   |  
|Deferred income taxes                                                                                                |  |                    | 3,384,180   |   |              |   | 3,457,714   |  
|Deferred compensation and other                                                                                      |  |                    | 4,241,793   |   |              |   | 4,057,022   |  
|                                                                                                                     |  |                    |             |   |              |   |             |  
|Total long-term obligations                                                                                          |  |                    | 35,916,636  |   |              |   | 34,538,333  |  
|                                                                                                                     |  |                   
|Commitments                                                                                                          |  |                    |            |   |              |   |            |  
|                                                                                                                     |  |                   
|Shareholders Equity                                                                                                 |  |                    |             |   |              |   |             |  
|Capital stock                                                                                                        |  |                    |             |   |              |   |             |  
|Preferred stockauthorized, 3,000,000 shares without par value; none issued                                          |  |                    |            |   |              |   |            |  
|Common stockauthorized, 12,000,000 shares without par value; issued, 7,578,013 and 7,568,680 sharesstated
value$1 |  |                    | 7,578,013   |   |              |   | 7,568,680   |  
|Additional contributed capital                                                                                       |  |                    | 64,175,672  |   |              |   | 63,838,824  |  
|                                                                                                                     |  |                    |             |   |              |   |             |  
|                                                                                                                     |  |                    | 71,753,685  |   |              |   | 71,407,504  |  
|                                                                                                                     |  |                   
|Accumulated other comprehensive loss                                                                                 |  |                    | (1,167,200  | ) |              |   | (1,214,704  | )
|Retained earnings                                                                                                    |  |                    | 71,770,701  |   |              |   | 70,448,512  |  
|                                                                                                                     |  |                    |             |   |              |   |             |  
|                                                                                                                     |  |                    | 70,603,501  |   |              |   | 69,233,808  |  
|                                                                                                                     |  |                   
|Less cost of treasury stock (2,444,858 and 2,445,764 shares)                                                         |  |                    | (32,759,396 | ) |              |   | (32,771,537 | )
|                                                                                                                     |  |                    |             |   |              |   |             |  
|Total shareholders' equity                                                                                           |  |                    | 109,597,790 |   |              |   | 107,869,775 |  
|                                                                                                                     |  |                    |             |   |              |   |             |  
|Total liabilities and shareholders equity                                                                           |  | $                  | 179,833,872 |   |              | $ | 179,258,554 |  
|                                                                                                                     |  |                    |             |   |              |   |             |  



5



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders Equity

Sixteen weeks ended September 18, 2007 and September 19, 2006

(Unaudited)



|                                                  |  |                                                 |           |                                |   |            |                                               |  |    |                   |   |  |                 |            |   |       |    |             |   |  |   |             |  
|------------------------------------------------- |  | ----------------------------------------------- | --------- | ------------------------------ | - | ---------- | --------------------------------------------- |  | -- | ----------------- | - |  | --------------- | ---------- | - | ----- | -- | ----------- | - |  | - | ----------- | -
|                                                  |  | Common stock at $1 per share - Shares andamount |           | Additional contributed capital |   |            | Accumulated other comprehensive income (loss) |  |    | Retained earnings |   |  | Treasury shares |            |   | Total |   
|Balance at May 30, 2006                           |  | $                                               | 7,521,930 |                                | $ | 62,531,311 |                                               |  | $  |                  |   |  | $               | 63,420,622 |   |       | $  | (32,792,427 | ) |  | $ | 100,681,436 |  
|                                                  |  |                                                 |           |                                |   |           
|Net earnings for sixteen weeks                    |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | 2,272,200  |   |       |    |            |   |  |   | 2,272,200   |  
|Stock options exercisednew shares issued         |  |                                                 | 2,669     |                                |   | 46,795     |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 49,464      |  
|Excess tax benefit from stockbased compensation  |  |                                                 |          |                                |   | 4,235      |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 4,235       |  
|Treasury shares re-issued                         |  |                                                 |          |                                |   | 12,465     |                                               |  |    |                  |   |  |                 |           |   |       |    | 16,415      |   |  |   | 28,880      |  
|Stock-based compensation expense                  |  |                                                 |          |                                |   | 62,092     |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 62,092      |  
|Cash dividends$.22 per share                     |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | (1,116,878 | ) |       |    |            |   |  |   | (1,116,878  | )
|                                                  |  |                                                 |           |                                |   |            |                                               |  |    |                   |   |  |                 |            |   |       |    |             |   |  |   |             |  
|Balance at September 19, 2006                     |  |                                                 | 7,524,599 |                                |   | 62,656,898 |                                               |  |    |                  |   |  |                 | 64,575,944 |   |       |    | (32,776,012 | ) |  |   | 101,981,429 |  
|                                                  |  |                                                 |           |                                |   |           
|Net earnings for thirty-six weeks                 |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | 6,995,356  |   |       |    |            |   |  |   | 6,995,356   |  
|SFAS No. 158 adjustment net of tax                |  |                                                 |          |                                |   |           |                                               |  |    | (1,214,704        | ) |  |                 |           |   |       |    |            |   |  |   | (1,214,704  | )
|Stock options exercisednew shares issued         |  |                                                 | 44,081    |                                |   | 776,127    |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 820,208     |  
|Stock options exercisedtreasury shares re-issued |  |                                                 |          |                                |   | 1,800      |                                               |  |    |                  |   |  |                 |           |   |       |    | 4,475       |   |  |   | 6,275       |  
|Excess tax benefit from stockbased compensation  |  |                                                 |          |                                |   | 164,042    |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 164,042     |  
|Stock-based compensation expense                  |  |                                                 |          |                                |   | 251,743    |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 251,743     |  
|Employee stock purchase plan                      |  |                                                 |          |                                |   | (11,786    | )                                             |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | (11,786     | )
|Cash dividends$.22 per share                     |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | (1,122,788 | ) |       |    |            |   |  |   | (1,122,788  | )
|                                                  |  |                                                 |           |                                |   |            |                                               |  |    |                   |   |  |                 |            |   |       |    |             |   |  |   |             |  
|Balance at May 29, 2007                           |  |                                                 | 7,568,680 |                                |   | 63,838,824 |                                               |  |    | (1,214,704        | ) |  |                 | 70,448,512 |   |       |    | (32,771,537 | ) |  |   | 107,869,775 |  
|                                                  |  |                                                 |           |                                |   |           
|Net earnings for sixteen weeks                    |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | 2,450,485  |   |       |    |            |   |  |   | 2,450,485   |  
|Other comprehensive gain, net of income tax       |  |                                                 |          |                                |   |           |                                               |  |    | 47,504            |   |  |                 |           |   |       |    |            |   |  |   | 47,504      |  
|Stock options exercisednew shares issued         |  |                                                 | 9,333     |                                |   | 205,008    |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 214,341     |  
|Excess tax benefit from stockbased compensation  |  |                                                 |          |                                |   | 23,940     |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 23,940      |  
|Treasury shares re-issued                         |  |                                                 |          |                                |   | 15,829     |                                               |  |    |                  |   |  |                 |           |   |       |    | 12,141      |   |  |   | 27,970      |  
|Stock based compensation expense                  |  |                                                 |          |                                |   | 92,071     |                                               |  |    |                  |   |  |                 |           |   |       |    |            |   |  |   | 92,071      |  
|Cash dividends$.22 per share                     |  |                                                 |          |                                |   |           |                                               |  |    |                  |   |  |                 | (1,128,296 | ) |       |    |            |   |  |   | (1,128,296  | )
|                                                  |  |                                                 |           |                                |   |            |                                               |  |    |                   |   |  |                 |            |   |       |    |             |   |  |   |             |  
|Balance at September 18, 2007                     |  | $                                               | 7,578,013 |                                | $ | 64,175,672 |                                               |  | ($ | 1,167,200         | ) |  | $               | 71,770,701 |   |       | ($ | 32,759,396  | ) |  | $ | 109,597,790 |  
|                                                  |  |                                                 |           |                                |   |            |                                               |  |    |                   |   |  |                 |            |   |       |    |             |   |  |   |             |  

The accompanying notes are an integral part of these statements.



6



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Sixteen weeks ended September 18, 2007 and September 19, 2006

(unaudited)



|                                                                             |  |                   |            |   |                   |   |            |  
|---------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                             |  | September 18,2007 |            |   | September 19,2006 |  
|Cash flows provided by (used in) operating activities:                       |  |                   |            |   |                   |   |            |  
|Net earnings                                                                 |  | $                 | 2,450,485  |   |                   | $ | 2,272,200  |  
|Adjustments to reconcile net earnings to net cash from operating activities: |  |                   |            |   |                   |   |            |  
|Depreciation and amortization                                                |  |                   | 4,227,892  |   |                   |   | 4,077,173  |  
|(Gain) loss on disposition of assets, including abandonments                 |  |                   | (458,082   | ) |                   |   | 46,434     |  
|Stock based compensation expense                                             |  |                   | 92,071     |   |                   |   | 62,092     |  
|                                                                             |  |                   |            |   |                   |   |            |  
|                                                                             |  |                   | 6,312,366  |   |                   |   | 6,457,899  |  
|                                                                             |  |                  
|Changes in assets and liabilities:                                           |  |                   |            |   |                   |   |            |  
|Accounts receivable                                                          |  |                   | (113,140   | ) |                   |   | 160,746    |  
|Inventories                                                                  |  |                   | 479,006    |   |                   |   | (351,144   | )
|Prepaid expenses and sundry deposits                                         |  |                   | (421,889   | ) |                   |   | (1,025,590 | )
|Other assets                                                                 |  |                   | 213,185    |   |                   |   | 491,884    |  
|Prepaid, accrued and deferred income taxes                                   |  |                   | (92,736    | ) |                   |   | 1,001,799  |  
|Excess tax benefit from stock based compensation                             |  |                   | (23,940    | ) |                   |   | (4,235     | )
|Accounts payable                                                             |  |                   | (2,056,799 | ) |                   |   | 756,936    |  
|Accrued expenses                                                             |  |                   | (847,077   | ) |                   |   | (1,355,414 | )
|Self insured obligations                                                     |  |                   | (23,201    | ) |                   |   | (14,949    | )
|Other liabilities                                                            |  |                   | 184,771    |   |                   |   | 34,367     |  
|                                                                             |  |                   |            |   |                   |   |            |  
|                                                                             |  |                   | (2,701,820 | ) |                   |   | (305,600   | )
|                                                                             |  |                   |            |   |                   |   |            |  
|Net cash provided by operating activities                                    |  |                   | 3,610,546  |   |                   |   | 6,152,299  |  
|                                                                             |  |                  
|Cash flows provided by (used in) investing activities:                       |  |                   |            |   |                   |   |            |  
|Additions to property and equipment                                          |  |                   | (5,469,304 | ) |                   |   | (4,086,972 | )
|Proceeds from disposition of property                                        |  |                   | 1,711,407  |   |                   |   | 5,000      |  
|Change in other assets                                                       |  |                   | (95,471    | ) |                   |   | 35,293     |  
|                                                                             |  |                   |            |   |                   |   |            |  
|Net cash (used in) investing activities                                      |  |                   | (3,853,368 | ) |                   |   | (4,046,679 | )
|                                                                             |  |                  
|Cash flows provided by (used in) financing activities:                       |  |                   |            |   |                   |   |            |  
|Proceeds from borrowings                                                     |  |                   | 4,500,000  |   |                   |   | 1,000,000  |  
|Payment of long-term debt and capital lease obligations                      |  |                   | (3,382,833 | ) |                   |   | (3,121,502 | )
|Cash dividends paid                                                          |  |                   | (563,649   | ) |                   |   | (558,243   | )
|Proceeds from stock options exercisednew shares issued                      |  |                   | 214,341    |   |                   |   | 49,464     |  
|Excess tax benefit from stock based compensation                             |  |                   | 23,940     |   |                   |   | 4,235      |  
|Treasury shares re-issued                                                    |  |                   | 27,970     |   |                   |   | 28,880     |  
|                                                                             |  |                   |            |   |                   |   |            |  
|Net cash provided by (used in) financing activities                          |  |                   | 819,769    |   |                   |   | (2,597,166 | )
|                                                                             |  |                   |            |   |                   |   |            |  
|Net increase (decrease) in cash and equivalents                              |  |                   | 576,947    |   |                   |   | (491,546   | )
|Cash and equivalents at beginning of year                                    |  |                   | 321,200    |   |                   |   | 815,346    |  
|                                                                             |  |                   |            |   |                   |   |            |  
|Cash and equivalents at end of quarter                                       |  | $                 | 898,147    |   |                   | $ | 323,800    |  
|                                                                             |  |                   |            |   |                   |   |            |  
|Supplemental disclosures:                                                    |  |                   |            |   |                   |   |            |  
|Interest paid                                                                |  | $                 | 876,869    |   |                   | $ | 907,367    |  
|Income taxes paid                                                            |  |                   | 1,245,735  |   |                   |   | 1,162,988  |  
|Income taxes refunded                                                        |  |                   |           |   |                   |   | 993,787    |  
|Dividends declared but not paid                                              |  |                   | 564,647    |   |                   |   | 558,635    |  

The accompanying notes are an integral part of these statements.



7



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2008, Ended September 18, 2007

NOTE A 
ACCOUNTING POLICIES

A summary of the Companys significant accounting policies consistently applied in the preparation of the accompanying
consolidated financial statements follows:

Description of the Business

Frischs Restaurants, Inc. (The Company) is a regional company that operates full service family-style restaurants under the name Frischs Big Boy. The Company also operates grill buffet style
restaurants under the name Golden Corral pursuant to certain licensing agreements. All Big Boy restaurants operated by the Company are currently located in various regions of Ohio, Kentucky and Indiana. Golden Corral restaurants
currently operate primarily in the greater metropolitan areas of Cincinnati, Columbus, Dayton, Toledo and Cleveland, Ohio, Louisville, Kentucky and Pittsburgh, Pennsylvania. The Company has development rights to expand Golden Corral operations into
markets in northern Indiana and southern Michigan.

The Company owns the trademark Frischs and has exclusive, irrevocable ownership of
the rights to the Big Boy trademark, trade name and service mark in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. All of the Frischs Big Boy restaurants also offer drive-thru service. The
Company also licenses Big Boy restaurants to other operators, currently in certain parts of Ohio, Kentucky and Indiana. In addition, the Company operates a commissary and food manufacturing plant near its headquarters in Cincinnati, Ohio that
services all Big Boy restaurants operated by the Company, and is available to supply restaurants licensed to others.

Consolidation Practices

The accompanying unaudited consolidated financial statements include the accounts of Frischs Restaurants, Inc. and all of its subsidiaries,
prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, these interim
financial statements include all adjustments (all of which were normal and recurring) necessary for a fair presentation of all periods presented.

Fiscal Year

The Companys fiscal year is the 52 week (364 days) or 53 week (371 days) period ending on the Tuesday nearest to the last
day of May. The first quarter of each fiscal year contains sixteen weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, the additional week needed to make a 53 week year is added to the fourth quarter,
resulting in a thirteen week fourth quarter. The current fiscal year will end on Tuesday, June 3, 2008, a period of 53 weeks, which will include an additional week added to the fourth quarter.

Use of Estimates and Critical Accounting Policies

The preparation of
financial statements in conformity with GAAP requires management to use estimates and assumptions to measure certain items that affect the amounts reported. These judgments are based on knowledge and experience about past and current events, and
assumptions about future events. Although management believes its estimates are reasonable and adequate, future events affecting them may differ markedly from current judgment. Significant estimates and assumptions are used to measure self insurance
liabilities, deferred executive compensation obligations, net periodic pension cost and future pension obligations, the carrying values of property held for sale and for long-lived assets including property and equipment, goodwill and other
intangible assets.

Management considers the following accounting policies to be critical accounting policies because the application of estimates to these
policies require managements most difficult, subjective or complex judgments: self insurance liabilities, net periodic pension cost and future pension obligations, and the carrying values of long-lived assets.



8



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A  ACCOUNTING POLICIES (CONTINUED)



Cash and Cash Equivalents

Highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Funds in transit from credit card processors are classified as cash. Outstanding checks totaling $2,140,000 were included in
accounts payable as of May 29, 2007.

Receivables

The Company values its trade notes and accounts receivable on the reserve method. The reserve balance was $30,000 as of September 18, 2007 and May 29, 2007. The reserve is monitored for adequacy based on historical collection
patterns and write-offs, and current credit risks.

Inventories

Inventories, comprised principally of food items, are valued at the lower of cost, determined by the first-in, first-out method, or market.

Accounting for Rebates

Cash consideration received from certain food vendors is treated as a reduction of cost of sales and is recognized
in the same period that the Company sells the food.

Leases

Minimum scheduled lease payments on operating leases, including escalating rental payments, are recognized as rent expense on a straight-line basis over the term of the lease, including option periods considered to be part of the lease
term, as defined by Statement of Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases, as amended. Contingent rentals, typically based on a percentage of restaurant sales in excess of a fixed amount, are expensed
as incurred. SFAS 13 also requires rent to be recognized during that part of the term of the lease when no rent is paid to the landlord, often referred to as a rent holiday, that generally occurs while the restaurant is being constructed
on leased land. Rental costs associated with rent holidays are recognized as rental expense. The Company does not typically receive leasehold incentives from landlords.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided principally on the
straight-line method over the estimated service lives, which range from ten to 25 years for new buildings or components thereof and five to ten years for equipment. Leasehold improvements are depreciated over the shorter of the useful life of the
asset or the lease term as lease terms are defined in SFAS 13, as amended. Property betterments are capitalized while the cost of maintenance and repairs is expensed as incurred.

The cost of land not yet in service is included in construction in progress if construction has begun or if construction is likely within the next twelve months. No new Big Boy or Golden Corral
construction was in progress as of September 18, 2007. Interest on borrowings is capitalized during active construction periods of new restaurants. Capitalized interest for the sixteen weeks ended September 18, 2007 and September 19,
2006 was $95,000 and $12,000, respectively. As of September 18, 2007, pending agreements were in place to acquire in fee three existing Big Boy restaurants pursuant to purchase privilege provisions in expiring leases. Although the costs have
yet to be determined, the aggregate purchase price will not be less than $2,300,000.

The cost of land on which construction is not likely within the next
twelve months is classified as Investments in land in the consolidated balance sheet. Certain surplus property is currently held for sale. All of the surplus property is stated at the lower of cost or market and is classified as
Property held for sale in the consolidated balance sheet. Market values are generally determined by real estate brokers and/or managements judgement.



9



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A  ACCOUNTING POLICIES (CONTINUED)



Capitalized computer software is depreciated on the straight-line method over the estimated service lives, which
range from three to ten years. The Companys cost capitalization policy with respect to computer software complies with the American Institute of Certified Public Accountants Statement of Position 98-1 (SOP 98-1), Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining service life.

Impairment of Assets

Under Statement of Financial Accounting
Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets, management considers a history of cash flow losses on a restaurant-by-restaurant basis to be its primary indicator of potential
impairment. Carrying values are reviewed for impairment when events or changes in circumstances indicate that the assets carrying values may not be recoverable from the estimated future cash flows expected to result from the properties
use and eventual disposition. When undiscounted expected future cash flows are less than carrying values, an impairment loss is recognized equal to the amount by which the carrying values exceed the net realizable values of the assets. Net
realizable values are generally determined by estimates provided by real estate brokers and/or the Companys past experience in disposing of unprofitable restaurant properties.

No impairment losses were recognized during either of the sixteen weeks ended September 18, 2007 or September 19, 2006.

Restaurant Closing Costs

Any liabilities associated with exit or disposal activities are recorded in accordance with Statement of Financial
Accounting Standards No. 146 (SFAS 146), Accounting for Obligations Associated with Disposal Activities. SFAS 146 requires that liabilities be recognized for exit and disposal costs only when the liabilities are incurred, rather
than upon the commitment to an exit or disposal plan. Its application has not materially impacted the Companys financial statements in any of the periods presented.

Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, is applicable to legal obligations associated with the retirement of certain tangible
long-lived assets. Its application has not materially impacted the Companys financial statements in any of the periods presented. FASB Interpretation No. 47, Accounting for Conditional Asset Obligations (FIN 47), requires that
conditional obligations be included in the definition of an asset retirement obligation under SFAS 143 and therefore requires current recognition if fair value is reasonably estimable. Its application has had no material impact on the Companys
financial statements.

Goodwill and Other Intangible Assets, Including Licensing Agreements

Acquired goodwill is tested annually for impairment and also whenever an impairment indicator arises. Impairment losses are recorded when impairment is determined to have
occurred. As of September 18, 2007 and May 29, 2007, the carrying amount of goodwill acquired in prior years was $741,000.

Intangible assets
having a finite useful life are subject to amortization, and are tested annually for impairment. The Companys other intangible assets consist principally of initial franchise fees paid for each new Golden Corral restaurant the Company opens.
Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method over the 15 year term of each individual restaurants franchise agreement. The fees are ratably amortized at $2,667 per year
per restaurant. This equates to $93,000 per year in each of the next five years for the 35 Golden Corral restaurants that were in operation as of September 18, 2007. Amortization was $28,000 and $28,000 respectively, for the sixteen weeks ended
September 18, 2007 and September 19, 2006. The remaining balance of other intangible assets, including fees paid for future Golden Corral restaurants, is not currently being amortized because these assets have indefinite or as yet to be
determined useful lives.



10



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A  ACCOUNTING POLICIES (CONTINUED)



An analysis of other intangible assets follows:



|                                                                                |  |                   |       |   |             |   |       |  
|------------------------------------------------------------------------------- |  | ----------------- | ----- | - | ----------- | - | ----- | -
|                                                                                |  | September 18,2007 |       |   | May 29,2007 |  
|                                                                                |  | (in thousands)    |      
|Golden Corral initial franchise fees subject to amortization                    |  | $                 | 1,400 |   |             | $ | 1,360 |  
|Less accumulated amortization                                                   |  |                   | (455  | ) |             |   | (427  | )
|                                                                                |  |                   |       |   |             |   |       |  
|Carrying amount of Golden Corral initial franchise fees subject to amortization |  |                   | 945   |   |             |   | 933   |  
|Current portion of Golden Corral initial franchise fees subject to amortization |  |                   | (93   | ) |             |   | (91   | )
|Golden Corral fees not yet subject to amortization                              |  |                   | 295   |   |             |   | 320   |  
|Other intangible assets                                                         |  |                   | 54    |   |             |   | 54    |  
|                                                                                |  |                   |       |   |             |   |       |  
|Total other intangible assets                                                   |  | $                 | 1,201 |   |             | $ | 1,216 |  
|                                                                                |  |                   |       |   |             |   |       |  

The franchise agreements with Golden Corral Franchising Systems, Inc. also require the Company to pay fees based
on defined gross sales. These costs are charged to operations as incurred.

Revenue Recognition

Revenue from restaurant operations is recognized upon the sale of products as they are sold to customers. All sales revenue is recorded on a net basis, which excludes
sales tax from sales and costs. Revenue from the sale of commissary products to Big Boy restaurants licensed to other operators is recognized upon shipment of product. Revenue from franchise fees, based on sales of Big Boy restaurants licensed to
other operators, is recorded on the accrual method as earned. Initial franchise fees are recognized as revenue when the fees are deemed fully earned and non-refundable, ordinarily upon the execution of the license agreement, in consideration of the
Companys services to that time.

Revenue from the sale of gift cards is deferred for recognition until redeemed by the customer, as service fees are
assessed or the card otherwise expires. Except where prohibited by law, recognition of previously deferred revenue from paper gift certificates (no longer issued by the Company) occurs when the probability is remote that customers will demand full
performance.

New Store Opening Costs

New store
opening costs consist of new employee training costs, the cost of a team to coordinate the opening and the cost of certain replaceable items such as uniforms and china. New store opening costs are charged to expense as incurred:



|              |  |                     |     |                   |   |    
|------------- |  | ------------------- | --- | ----------------- | - | ---
|              |  | Sixteen weeks ended
|              |  | September 18,2007   |     | September 19,2006
|              |  | (in thousands)     
|Golden Corral |  | $                   | 370 |                   | $ |   
|Big Boy       |  |                     | 215 |                   |   | 130
|              |  |                     |     |                   |   |    
|              |  | $                   | 585 |                   | $ | 130
|              |  |                     |     |                   |   |    



11



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A  ACCOUNTING POLICIES (CONTINUED)



Benefit Plans

The Company has two qualified defined benefit pension plans covering all of its eligible employees. Qualified defined benefit pension plan benefits are based on years-of-service and other factors. The Companys funding policy is to
contribute at least the minimum annual amount sufficient to satisfy legal funding requirements plus such additional tax-deductible amounts deemed advisable under the circumstances. Contributions are intended to provide not only for benefits
attributed to service-to-date, but also for those expected to be earned in the future. (See Note E  Pension Plans.) Hourly restaurant employees hired after December 31, 1998 are ineligible to participate in the qualified defined benefit
pension plans. Instead, these employees are offered participation in a 401(k) savings plan (the hourly plan), a defined contribution plan, with a matching 40 percent employer cash contribution. The Companys match vests on a scale based on
length of service.

The executive officers of the Company and certain other highly compensated employees (HCEs) are disqualified from
participation in the Companys 401(k) savings plan (the salaried plan), a defined contribution plan, with a ten percent matching employer cash contribution with immediate vesting. A non-qualified savings plan  Frischs Executive
Savings Plan (FESP)  provides a means by which the HCEs may continue to defer a portion of their compensation. FESP allows deferrals of up to 25 percent of a participants salary into a choice of mutual funds or common stock of the
Company. Matching contributions are added to the first ten percent of salary deferred at a rate of ten percent for deferrals into mutual funds, while a fifteen percent match is added to deferrals into common stock. Although the Company owns the
mutual funds until the retirement of the participants, the funds are invested at the direction of the participants. The common stock is a phantom investment, which may be paid in actual shares or in cash upon retirement of the
participants. The FESP liability to the participants is included in Deferred compensation and other long term obligations in the consolidated balance sheet.

The Company also has an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) that was originally intended to provide a supplemental retirement benefit to the HCEs whose benefits under the
qualified defined benefit pension plans were reduced when their compensation exceeded Internal Revenue Code imposed limitations or when elective salary deferrals were made to FESP. In 2000, HCEs became ineligible to be credited with additional
benefits for service under the qualified defined benefit pension plans and the SERP (interest continues to accrue). Comparable pension benefits are provided through a non-qualified Non Deferred Cash Balance Plan. (See Note E  Pension Plans.)

Prepaid pension benefit costs (see Note E  Pension Plans) and FESP assets are the principal components of Other long-term assets in the
consolidated balance sheet.

Self-Insurance

The
Company self-insures its Ohio workers compensation claims up to $300,000 per claim. Initial self-insurance liabilities are accrued based on prior claims history, including an amount developed for incurred but unreported claims. Active claims
management and post accident drug testing in recent years has effected vast improvements in claims experience. Management performs a comprehensive review each fiscal quarter and adjusts the self-insurance liabilities as deemed appropriate based on
claims experience. Self-insurance liabilities were increased by $18,000 (charged against earnings) during the sixteen weeks ended September 18, 2007 and were lowered by $383,000 (credited to earnings) during the sixteen weeks ended
September 19, 2006.

Indicative of the improvements in claims experience, lower rates to accrue initial self-insurance liabilities have been in place
since fiscal year 2006. The implementation of these lower rates should effect a continuation in the trend of reducing the size of future quarterly adjustments.

Fair Value of Financial Instruments

The carrying value of the Companys financial instruments approximates fair value.



12



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A  ACCOUNTING POLICIES (CONTINUED)



Income Taxes

Taxes are provided on all items included in the statement of earnings regardless of when such items are reported for tax purposes. The provision for income taxes in all periods has been computed based on managements estimate of the
effective tax rate for the entire year.

New Accounting Pronouncements

FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), provides guidance for recognition and measurement on financial
statements of tax positions taken in tax returns or expected to be taken on a future tax return. The Company adopted the provisions of FIN 48 effective May 30, 2007, as required. There was no cumulative effect adjustment to retained earnings
that resulted from the adoption of FIN 48 and there was no material change in the amount of unrecognized tax benefits in the quarter ended September 18, 2007. The Company does not expect any changes that may occur in the amount of unrecognized
tax benefits would have any significant impact on its results of operations or financial position.

In September 2006, the staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements in Current Year Financial Statements. SAB 108 was issued to provide guidance in quantifying the effects of
financial statement misstatements. Two approaches have widely been used in practice for the purpose of accumulating and quantifying such misstatements: the rollover and iron curtain approaches. The rollover method quantifies
a misstatements effect on the current years statement of earnings, which does not consider the carryover effects of prior year misstatements. The iron curtain method quantifies errors as the cumulative amount by which the balance sheet
for the current year is misstated. SAB 108 requires the Company to quantify the materiality of such errors under both approaches, which is referred to as the dual approach. The Company has historically relied upon this approach when such
errors have arisen. No effects have resulted from the initial application of SAB 108.

Statement of Financial Accounting Standards No. 157 (SFAS 157),
Fair Value Measurements, is effective for fiscal years beginning after November 15, 2007 (the Companys fiscal year that will end June 2, 2009). In addition to defining fair value, SFAS 157 provides a framework for the
measurement of fair value and expands disclosure requirements about fair value measurements. Statement of Financial Accounting Standards No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, is
also effective for fiscal years beginning after November 15, 2007. It provides an option of whether to report selected financial assets and liabilities at fair value. The Company has yet to evaluate the impact of SFAS 157 or SFAS 159 on its
financial statements.

NOTE B  LONG-TERM DEBT



|                             |  |                       |        |                      |   |                       |  |                      |        |  |   |       
|---------------------------- |  | --------------------- | ------ | -------------------- | - | --------------------- |  | -------------------- | ------ |  | - | ------
|                             |  | September 18, 2007    |        | May 29, 2007        
|                             |  | Payablewithinone year |        | PayableAfter oneyear |   | PayableWithinone year |  | Payableafter oneyear
|                             |  | (in thousands)       
|Construction Draw Facility - |  |                       |        |                      |   |                       |  |                      |        |  |   |       
|Construction Phase Loans     |  | $                     |       |                      | $ | 4,500                 |  | $                    |       |  | $ |      
|Term Loans                   |  |                       | 8,549  |                      |   | 20,423                |  |                      | 8,826  |  |   | 23,111
|Revolving Credit Loan        |  |                       | 2,000  |                      |   |                      |  |                      | 2,000  |  |   |      
|Bullet Loan                  |  |                       | 968    |                      |   | 1,570                 |  |                      | 949    |  |   | 1,899 
|                             |  |                       |        |                      |   |                       |  |                      |        |  |   |       
|                             |  | $                     | 11,517 |                      | $ | 26,493                |  | $                    | 11,775 |  | $ | 25,010
|                             |  |                       |        |                      |   |                       |  |                      |        |  |   |       



13



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE B  LONG-TERM DEBT (CONTINUED)



The portion payable after one year matures as follows:



|                      |  |                   |        |             |   |       
|--------------------- |  | ----------------- | ------ | ----------- | - | ------
|                      |  | September 18,2007 |        | May 29,2007
|                      |  | (in thousands)   
|Period ending in 2009 |  | $                 | 12,165 |             | $ | 8,443 
|2010                  |  |                   | 5,496  |             |   | 6,100 
|2011                  |  |                   | 4,346  |             |   | 4,657 
|2012                  |  |                   | 2,877  |             |   | 3,241 
|2013                  |  |                   | 1,201  |             |   | 1,935 
|Subsequent to 2013    |  |                   | 408    |             |   | 634   
|                      |  |                   |        |             |   |       
|                      |  | $                 | 26,493 |             | $ | 25,010
|                      |  |                   |        |             |   |       

In September 2007, the Company amended and restated all of its loan agreements with its lender. The Construction
Draw Facility (the Facility), an unsecured draw credit line intended to finance new restaurant construction, was amended to increase the amount available to be borrowed from $2,500,000 to $15,000,000. The expiration for borrowing under the Facility
was extended from September 1, 2008 to September 1, 2010.

The Facility is subject to a .25 percent unused commitment fee. Under the terms of the
Facility, funds borrowed are initially governed as a Construction Phase Loan, with interest determined by a pricing matrix that uses changeable basis points, determined by certain of the Companys financial ratios. The basis points are added to
or subtracted from one of various indices chosen by the Company. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly. Within six months of the completion and opening of
each restaurant, the balance outstanding under each Construction Phase Loan must be converted to a Term Loan amortized over a period not to exceed seven years. The September 2007 amendment allows outstanding balances converted to Term Loans after
September 2007 to be amortized over a period between seven and twelve years as selected by the Company. The amendment also affords the Company with an option to extend the amortization period once during the term of any Term Loan that is initiated
after September 2007. Upon conversion to an amortizing Term Loan, the Company may select a fixed interest rate over the chosen term or may choose among various adjustable rate options.

As of September 18, 2007, the aggregate outstanding balance under the Facility was $33,472,000, consisting of $28,972,000 in Term Loans plus $4,500,000 in the Construction Phase. Five of the original Term Loans
($8,000,000 out of $69,500,000 originally borrowed) had been retired as of September 18, 2007. All of the outstanding Term Loans are subject to fixed interest rates, the weighted average of which is 6.04 percent, all of which are being repaid
in 84 equal monthly installments of principal and interest aggregating $908,000, expiring in various periods currently ranging from October 2007 through June 2014. Prepayments of the Term Loans are permissible upon payment of sizeable prepayment
fees and other amounts. The $4,500,000 balance in the Construction Phase as of September 18, 2007 was subject to variable rated interest of 6.75 percent. It will be converted into a Term Loan before October 31, 2007. Any outstanding amount
in the Construction Phase of the Facility that has not been converted into a Term Loan on September 1, 2010 shall mature and be payable in full at that time, as extended by the September 2007 amendment.



14



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE B  LONG-TERM DEBT (CONTINUED)



The Revolving Credit Loan is an unsecured line of credit that allows for borrowing of up to $5,000,000 to fund
temporary working capital needs through September 1, 2010, as extended by the September 2007 amendment. As of September 18, 2007, $2,000,000 was outstanding. As the loan is subject to a 30 consecutive day out-of-debt period each year, the
outstanding balance must be reduced to zero by May 1, 2008. Interest, currently payable at a variable rate of 6.61 percent through November 23, 2007, is determined by the same pricing matrix used for Construction Phase Loans under the
Construction Draw Facility, the basis points from which are added to or subtracted from one of various indices chosen by the Company. The loan is subject to a .25 percent unused commitment fee. Interest is payable at the end of each specific rate
period selected by the Company, which may be monthly, bi-monthly or quarterly.

The Bullet Loan was converted into a term loan effective March 15,
2007. The provisions of the term loan require 36 equal monthly installments of $92,000 including principal and interest at a fixed 6.13 percent rate. The loan is secured by mortgages that encumber the real property of two Golden Corral restaurants
having an approximate book value of $4,135,000 as of September 18, 2007.

These loan agreements contain covenants relating to cash flows, debt levels,
capitalization changes, asset dispositions, investments and restrictions on pledging certain restaurant operating assets. The Company was in compliance with all loan covenants as of September 18, 2007. Compensating balances are not required by
these loan agreements.

NOTE C  LEASED PROPERTY

The
Companys policy is to own its restaurant locations whenever possible, however, the Company occupies certain of its restaurants pursuant to lease agreements. Most of the leases are for fifteen or twenty years and contain renewal options for ten
to twenty years, and/or have favorable purchase options. As of September 18, 2007, 28 restaurants were in operation on non-owned premises, consisting of five capital leases (all of which are for Big Boy operations) and 23 operating leases
(fifteen are for Big Boy operations and eight are for Golden Corral operations). Three of the capital leases will expire on October 31, 2007 and the final two will expire in May 2008. The three restaurants with capital leases expiring
October 31, 2007 will continue to be occupied on a month-to-month arrangement until the Company executes its right to purchase the properties from the landlord, currently anticipated in January 2008. Although the costs have yet to be
determined, the aggregate purchase price will not be less than $2,300,000. The Company also currently intends to exercise it privilege to purchase the two restaurants that have capital leases expiring in May 2008.

Office space is occupied under an operating lease that expires during fiscal year 2013, with renewal options available through fiscal year 2023. A purchase option is
available in 2023 to acquire the office property in fee. Delivery equipment is also held under capitalized leases expiring during various periods through fiscal year 2013.

Amortization of capitalized lease assets is computed on the straight-line method over the primary terms of the leases. An analysis of the capitalized leased property follows:



|                              |  |                   |        |   |             |   |        |  
|----------------------------- |  | ----------------- | ------ | - | ----------- | - | ------ | -
|                              |  | Asset balances at |       
|                              |  | September 18,2007 |        |   | May 29,2007 |  
|                              |  | (in thousands)    |       
|Restaurant facilities         |  | $                 | 3,496  |   |             | $ | 3,496  |  
|Equipment                     |  |                   | 1,558  |   |             |   | 1,558  |  
|                              |  |                   |        |   |             |   |        |  
|                              |  |                   | 5,054  |   |             |   | 5,054  |  
|Less accumulated amortization |  |                   | (4,014 | ) |             |   | (3,910 | )
|                              |  |                   |        |   |             |   |        |  
|                              |  | $                 | 1,040  |   |             | $ | 1,144  |  
|                              |  |                   |        |   |             |   |        |  



15



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE C  LEASED PROPERTY (CONTINUED)



Rent expense under operating leases for the sixteen weeks ended:



|                    |  |                    |     |                    |   |    
|------------------- |  | ------------------ | --- | ------------------ | - | ---
|                    |  | September 18, 2007 |     | September 19, 2006
|                    |  | (in thousands)    
|Minimum rentals     |  | $                  | 590 |                    | $ | 710
|Contingent payments |  |                    | 16  |                    |   | 12 
|                    |  |                    |     |                    |   |    
|                    |  | $                  | 606 |                    | $ | 722
|                    |  |                    |     |                    |   |    

Future minimum lease payments under capitalized leases and operating leases, including aggregate residual value
guarantees of $2,101,000 on certain of the capitalized leases, having an initial or remaining term of one year or more follow:



|                             |  |                   |        |   |                 |   |       
|---------------------------- |  | ----------------- | ------ | - | --------------- | - | ------
|Period ending September 18,  |  | Capitalizedleases |        |   | Operatingleases
|                             |  | (in thousands)   
|2008                         |  |                   | $2,548 |   |                 | $ | 1,879 
|2009                         |  |                   | 299    |   |                 |   | 1,859 
|2010                         |  |                   | 268    |   |                 |   | 1,523 
|2011                         |  |                   | 252    |   |                 |   | 1,416 
|2012                         |  |                   | 108    |   |                 |   | 1,409 
|2013 to 2027                 |  |                   |       |   |                 |   | 15,362
|                             |  |                   |        |   |                 |   |       
|Total                        |  |                   | 3,475  |   |                 | $ | 23,448
|                             |  |                   |        |   |                 |   |       
|Amount representing interest |  |                   | (222   | ) |                 |   |       
|                             |  |                   |        |   |                 |   |       
|Present value of obligations |  |                   | 3,253  |   |                 |   |       
|Portion due within one-year  |  |                   | (2,432 | ) |                 |   |       
|                             |  |                   |        |   |                 |   |       
|Long-term obligations        |  | $                 | 821    |   |                 |   |       
|                             |  |                   |        |   |                 |   |       

Not included in the above table is a secondary liability for the performance of a ground lease that the Company
has assigned to a third party. The annual obligation of the lease approximates $48,000 through 2020. Should the third party default, the Company has the right to re-assign the lease.

NOTE D  CAPITAL STOCK

The Company has two equity compensation plans adopted respectively in 1993 and 2003 under which
certain employees and non-employee directors of the Company are eligible to receive stock option grants.

2003 Stock Option and Incentive Plan

Shareholders approved the 2003 Stock Option and Incentive Plan (the 2003 Incentive Plan or Plan) on October 6, 2003. The
2003 Incentive Plan provides for several forms of awards including stock options, stock appreciation rights, stock awards including restricted and unrestricted awards of stock, and performance awards. The Board of Directors adopted certain
amendments in December 2006 to bring the Plan into compliance with the American Jobs Creation Act of 2004 and Section 409A of the Internal Revenue Code. No award shall be granted under the Plan on or after October 6, 2013 or after such
earlier date on which the Board of Directors terminates the Plan. The maximum number of shares of common stock that the Plan may issue is 800,000, subject, however, to proportionate and equitable adjustments determined by the Compensation Committee
of the Board of Directors (the Committee) as deemed necessary following the event of any equity restructuring that may occur.



16



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE D  CAPITAL STOCK (CONTINUED)



The Plan provides that the total number of shares of common stock covered by options plus the number of stock
appreciation rights granted to any one individual may not exceed 80,000 during any fiscal year. Additionally, no more than 80,000 shares of common stock may be issued in payment of performance awards denominated in shares, and no more than
$1,000,000 in cash (or fair market value, if paid in shares) may be paid pursuant to performance awards denominated in dollars, granted to any one individual during any fiscal year if the awards are intended to qualify as performance based
compensation. Employees of the Company and non-employee directors of the Company are eligible to be selected to participate in the Plan. Participation is based on selection by the Committee. Although there is no limit to the number of participants
in the Plan, there are approximately 40 persons currently participating in the Plan.

Options to purchase shares of the Companys common stock permit
the holder to purchase a fixed number of shares at a fixed price. When options are granted, the Committee determines the number of shares subject to the option, the term of the option which may not exceed ten years, the time or times when the option
will become exercisable and the price per share that a participant must pay to exercise the option. No option will be granted with an exercise price that is less than 100 percent of fair market value on the date of the grant. The option price and
obligatory withholding taxes may be paid pursuant to a cashless exercise/sale procedure involving the simultaneous sale by a broker of shares covered by the option.

Stock appreciation rights (SARs) are rights to receive payment, in cash, shares of common stock or a combination of the two, equal to the excess of (1) the fair market value of a share of common stock on
the date of exercise over (2) the price per share of common stock established in connection with the grant of the SAR (the reference price). The reference price must be at least 100 percent of the common stocks fair market value on the
date the SAR is granted. SARs may be granted by the Committee in its discretion to any participant, and may have terms no longer than ten years.

Stock awards are grants of shares of common stock that may be restricted (subject to a holding period or other conditions) or unrestricted. The Committee determines the amounts, vesting, if any, terms and conditions of the awards, including
the price to be paid, if any, for restricted awards and any contingencies related to the attainment of specified performance goals or continued employment or service.

The Committee may also grant performance awards to participants. Performance awards are the right to receive cash, common stock or both, at the end of a specified performance period, subject to satisfaction of the
performance criteria and any vesting conditions established for the award.

As of September 18, 2007, options to purchase 154,000 shares had been
granted under the Plan, including 20,000 that belong to the President and Chief Executive Officer (CEO). The Committee has determined that outstanding options belonging to the CEO vest six months from the date of grant, while outstanding options
granted to other key employees vest in three equal annual installments. The Committee has further determined that outstanding options granted to non-employee members of the Board of Directors vest one year from the date of grant. The Committee may,
in its sole discretion, accelerate the vesting of all or any part of any awards held by a terminated participant, excluding, however, any participant who is terminated for cause.

As of September 18, 2007, 670,000 shares remain available to be optioned, including 24,000 shares granted that were subsequently forfeited, which are again available to be granted in accordance with the
Re-use of Shares provision of the Plan. There were 119,005 options outstanding as of September 18, 2007.

No other awardsstock
appreciation rights, restricted stock award, unrestricted stock award or performance awardhad been granted under the 2003 Stock Option and Incentive Plan as of September 18, 2007.



17



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE D  CAPITAL STOCK (CONTINUED)



1993 Stock Option Plan

The 1993 Stock Option Plan was not affected by the adoption of the 2003 Stock Option and Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for changes in
capitalization in earlier years) of the common stock of the Company for a ten-year period beginning May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the
availability of options to be granted to October 4, 2008. The Board of Directors adopted certain amendments in December 2006 to bring the Amended Plan into compliance with the American Jobs Creation Act of 2004 and section 409A of the Internal
Revenue Code. As of September 18, 2007, 6,204 shares remained available to be optioned. Of the 556,228 cumulative shares optioned to date, 289,065 remain outstanding as of September 18, 2007, 211,478 of which belong to the CEO.

All outstanding options under the 1993 Stock Option Plan, or the Amended Plan, were granted at fair market value and expire ten years from the date of grant.
Outstanding options to the CEO vested in six months, while options granted to non-employee directors vested after one year. Outstanding options granted to other key employees vest in three equal annual installments. Stock appreciation rights are not
provided for under the Amended Plan.

Outstanding and Exercisable Options

The changes in outstanding and exercisable options involving both the 1993 Stock Option Plan and the 2003 Stock Option and Incentive Plan are shown below as of September 18, 2007:



|                                 |  |               |   |  |                               |       |                                          |            |                                          |   |      
|-------------------------------- |  | ------------- | - |  | ----------------------------- | ----- | ---------------------------------------- | ---------- | ---------------------------------------- | - | -----
|                                 |  | No. of shares |   |  | Weighted avg. price per share |       | Weighted avg. Remaining Contractual Term |            | Aggregate Intrinsic Value (in
thousands)
|Outstanding at beginning of year |  | 395,487       |   |  | $                             | 20.05 |                                          |            |                                          |   |      
|Granted                          |  | 24,250        |   |  | $                             | 31.40 |                                          |            |                                          |   |      
|Exercised                        |  | (9,333        | ) |  | $                             | 22.97 |                                          |            |                                          |   |      
|Forfeited or expired             |  | (2,334        | ) |  | $                             | 30.13 |                                          |            |                                          |   |      
|                                 |  |               |   |  |                               |       |                                          |            |                                          |   |      
|Outstanding at end of quarter    |  | 408,070       |   |  | $                             | 20.60 |                                          | 5.79 years |                                          | $ | 3,277
|                                 |  |               |   |  |                               |       |                                          |            |                                          |   |      
|Exercisable at end of quarter    |  | 342,137       |   |  | $                             | 19.37 |                                          | 5.16 years |                                          | $ | 3,116
|                                 |  |               |   |  |                               |       |                                          |            |                                          |   |      

The intrinsic value of stock options exercised during the sixteen weeks ended September 18, 2007 and
September 19, 2006 was $70,000 and $12,000, respectively.

Stock options outstanding and exercisable as of September 18, 2007 for the 1993 Stock
Option Plan and the 2003 Stock Option and Incentive Plan are shown below:



|                                   |  |               |  |                                  |        |                                          |           
|---------------------------------- |  | ------------- |  | -------------------------------- | ------ | ---------------------------------------- | ----------
|Range of Exercise Prices per Share |  | No. of shares |  | Weighted average price per share |        | Weighted average remaining life in years
|Outstanding:                       |  |               |  |                                  |        |                                          |           
|$ 8.31 to $13.00                   |  | 69,312        |  | $                                | 10.62  |                                          | 2.64 years
|$ 13.01 to $18.00                  |  | 50,167        |  | $                                | 13.79  |                                          | 3.81 years
|$ 18.01 to $24.20                  |  | 120,167       |  | $                                | 19.76  |                                          | 5.45 years
|$ 24.21 to $31.40                  |  | 168,424       |  | $                                | 27.33  |                                          | 7.92 years
|                                   |  |               |  |                                  |        |                                          |           
|$ 8.31 to $31.40                   |  | 408,070       |  | $                                | 20.60  |                                          | 5.79 years
|                                   |  |               | 
|Exercisable:                       |  |               |  |                                  |        |                                          |           
|$ 8.31 to $13.00                   |  | 69,312        |  |                                  | $10.62 |                                          | 2.64 years
|$ 13.01 to $18.00                  |  | 50,167        |  |                                  | $13.79 |                                          | 3.81 years
|$ 18.01 to $24.20                  |  | 119,000       |  |                                  | $19.73 |                                          | 5.42 years
|$ 24.21 to $31.40                  |  | 103,658       |  |                                  | $27.52 |                                          | 7.21 years
|                                   |  |               |  |                                  |        |                                          |           
|$ 8.31 to $31.40                   |  | 342,137       |  |                                  | $19.37 |                                          | 5.16 years



18



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE D  CAPITAL STOCK (CONTINUED)



Employee Stock Purchase Plan

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee Stock Purchase Plan) in 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to
purchase shares of the Companys common stock through payroll deduction. Immediately following the end of each semi-annual offering period, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair
market value of shares at the beginning of the offering period or at the end of the offering period. The Plan authorizes a maximum of 1,000,000 shares that may be purchased on the open market or from the Companys treasury. As of April 30,
2007 (latest available data), 123,219 shares had been cumulatively purchased through the Plan. Shares purchased through the Plan are held by the Plans custodian until withdrawn or distributed. As of April 30, 2007, the custodian held
34,721 shares on behalf of employees.

Frischs Executive Savings Plan

A total of 58,492 common shares (as adjusted for changes in capitalization in earlier years) were reserved for issuance under the non-qualified Frischs Executive Savings Plan (FESP) (see Benefit Plans in Note A
 Accounting Policies) when it was established in 1993. As of September 18, 2007, 45,880 shares remained in the FESP reserve, including 9,491 shares allocated but not issued to participants.

There are no other outstanding options, warrants or rights.

Treasury
Stock

As of September 18, 2007, the Companys treasury held 2,444,858 shares of the Companys common stock. Most of the shares were
acquired in a series of repurchase programs authorized by the Board of Directors from 1998 through January 2002, and through a modified Dutch Auction self-tender offer in 1997.

Earnings Per Share

Basic earnings per share is based on the weighted
average number of outstanding common shares during the period presented. Diluted earnings per share includes the effect of common stock equivalents, which assumes the exercise and conversion of dilutive stock options.



|                   |  |                                     |  |                   |     |                            |         |                                     |           |     |   |    
|------------------ |  | ----------------------------------- |  | ----------------- | --- | -------------------------- | ------- | ----------------------------------- | --------- | --- | - | ---
|                   |  | Basic earnings per share            |  | Stock equivalents |     | Diluted earnings per share
|                   |  | Weighted average shares outstanding |  | EPS               |     |                            |         | Weighted average shares outstanding |           | EPS
|September 18, 2007 |  | 5,126,285                           |  | $                 | .48 |                            | 126,323 |                                     | 5,252,608 |     | $ | .47
|September 19, 2006 |  | 5,075,969                           |  |                   | .45 |                            | 90,855  |                                     | 5,166,824 |     |   | .44

Stock options to purchase 51,400 shares in the quarter ended September 18, 2007 and 156,100 in the quarter
ended September 19, 2006 were excluded from the calculation because the effect was anti-dilutive.

Share-Based Payment (Compensation Cost)

The Company adopted Statement of Financial Accounting Standards No. 123 (R) (SFAS 123 (R)), Share-Based Payment on May 31, 2006.
SFAS 123 (R) requires the fair value of stock options granted to be recognized as compensation cost. It applies to all awards granted on or after the adoption date, with compensation cost based on the fair value of the award on the date of the
grant. The cost is recognized in the consolidated statement of earnings on a straight-line basis over the vesting period of the award. In addition, because the Company elected the modified prospective application transition method in adopting SFAS
123 (R), compensation cost is also recognized for the portion of outstanding options vesting in the period that were granted prior to, but not yet vested as of the adoption date, based on the fair value of those awards as was calculated under the
original provisions of SFAS 123 and the pro forma disclosures under Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock Based Compensation  Transition and Disclosure.



19



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE D  CAPITAL STOCK (CONTINUED)



Compensation costs arising from stock options granted are shown below:



|                                                  |  |                   |     |                   |   |    
|------------------------------------------------- |  | ----------------- | --- | ----------------- | - | ---
|                                                  |  | September 18,2007 |     | September 19,2006
|                                                  |  | (in thousands)   
|Charged to administrative and advertising expense |  | $                 | 92  |                   | $ | 62 
|Tax benefit                                       |  |                   | 31  |                   |   | 21 
|                                                  |  |                   |     |                   |   |    
|Total share-based compensation cost, net of tax   |  | $                 | 61  |                   | $ | 41 
|                                                  |  |                   |     |                   |   |    
|Effect on basic earnings per share                |  | $                 | .01 |                   | $ | .01
|                                                  |  |                   |     |                   |   |    
|Effect on diluted earnings per share              |  | $                 | .01 |                   | $ | .01
|                                                  |  |                   |     |                   |   |    

The fair value of each option award is estimated on the date of the grant using the modified Black-Scholes option
pricing model, developed with the following assumptions:



|                                       |  |                   |           |   |                   |   |           |  
|-------------------------------------- |  | ----------------- | --------- | - | ----------------- | - | --------- | -
|                                       |  | September 18,2007 |           |   | September 19,2006 |  
|Weighted average fair value of options |  | $                 | 8.62      |   |                   | $ | 6.54      |  
|Dividend yield                         |  |                   | 1.4       | % |                   |   | 1.8       | %
|Expected volatility                    |  |                   | 27        | % |                   |   | 25        | %
|Risk free interest rate                |  |                   | 4.94      | % |                   |   | 4.77      | %
|Expected lives                         |  |                   | 5.0 years |   |                   |   | 5.0 years |  

Dividend yield is based on the Companys current dividend yield as being the best estimate of projected
dividend yields within the contractual life of the options. Expected volatility is based on the historical volatility of the Companys stock using the month end closing price of the previous five years. Risk free interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. Expected life represents the period of time the options are expected to be outstanding based on historical exercise behavior.

As of September 18, 2007, there was $287,000 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized
over a weighted average period of 1.21 years.

SFAS 123 (R) also requires compensation cost to be recognized in connection with the Companys
Employee Stock Purchase Plan (described elsewhere in Note D). Compensation costs related to the Employee Stock Purchase Plan amounted to $5,000 and $10,000 respectively, during the sixteen weeks ended September 18, 2007 and September 19,
2006.



20



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE E  PENSION PLANS



As discussed more fully in Note A  Accounting Policies, the Company sponsors two qualified defined benefit
plans plus an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) for highly compensated employees (HCEs). The following table shows the components of net periodic pension cost for all three plans for the sixteen
weeks ended September 18, 2007 and September 19, 2006:



|                                                                  |  |                     |      |   |                   |   |      |  
|----------------------------------------------------------------- |  | ------------------- | ---- | - | ----------------- | - | ---- | -
|                                                                  |  | Sixteen weeks ended |     
|Net periodic pension cost components                              |  | September 18,2007   |      |   | September 19,2006 |  
|Service cost                                                      |  | $                   | 488  |   |                   | $ | 469  |  
|Interest cost                                                     |  |                     | 502  |   |                   |   | 509  |  
|Expected return on plan assets                                    |  |                     | (681 | ) |                   |   | (602 | )
|Amortization of prior service cost                                |  |                     | 5    |   |                   |   | 9    |  
|Amortization of loss                                              |  |                     | 67   |   |                   |   | 139  |  
|                                                                  |  |                     |      |   |                   |   |      |  
|Net periodic pension cost                                         |  | $                   | 381  |   |                   | $ | 524  |  
|                                                                  |  |                     |      |   |                   |   |      |  
|                                                                  |  |                    
|Weighted average discount rate                                    |  |                     | 6.00 | % |                   |   | 6.25 | %
|Weighted average rate of compensation increase                    |  |                     | 4.50 | % |                   |   | 4.50 | %
|Weighted average expected long-term rate of return on plan assets |  |                     | 8.00 | % |                   |   | 8.00 | %

The Company anticipates making contributions to the two qualified defined benefit pension plans sufficient to
satisfy legal funding requirements for the year that will end June 3, 2008, plus additional tax-deductible amounts that may be deemed advisable. Total contributions are currently estimated at $1,000,000. Obligations to participants in the SERP
are satisfied in the form of a lump sum distribution upon retirement of the participants.

Compensation expense (not included in the net periodic pension
cost described above) relating to the Non Deferred Cash Balance Plan (see Benefit Plans in Note A  Accounting Policies) was $71,000 and $123,000 respectively, during the sixteen weeks ended September 18, 2007 and September 19, 2006.
Fiscal 2008s contribution to the Non-Deferred Cash Balance Plan is currently expected to approximate $230,000. In addition, the President and Chief Executive Officer (CEO) has an employment contract that allows additional annual contributions
to be made for the CEOs benefit under the Non Deferred Cash Balance Plan when certain levels of annual pretax earnings are achieved.

The Company
also sponsors two 401(k) plans and a non-qualified Executive Savings Plan for certain HCEs who have been disqualified from participation in the 401(k) plans (see Benefit Plans in Note A  Accounting Policies). In the sixteen weeks ended
September 18, 2007 and September 19, 2006, matching contributions to the 401(k) plans amounted to $50,000 and $47,000 respectively. Matching contributions to the Executive Savings Plan were $8,000 and $9,000 respectively, during the
sixteen weeks ended September 18, 2007 and September 19, 2006.

The Company does not sponsor post retirement health care benefits.

NOTE F  COMPREHENSIVE INCOME



|                                                                                 |  |                   |       |                   |   |      
|-------------------------------------------------------------------------------- |  | ----------------- | ----- | ----------------- | - | -----
|                                                                                 |  | September 18,2007 |       | September 19,2006
|                                                                                 |  | (in thousands)   
|Net earnings                                                                     |  | $                 | 2,450 |                   | $ | 2,272
|Amortization of amounts included in net periodic pension cost, net of $24 in tax |  |                   | 48    |                   |   |     
|                                                                                 |  |                   |       |                   |   |      
|Comprehensive income                                                             |  | $                 | 2,498 |                   | $ | 2,272
|                                                                                 |  |                   |       |                   |   |      



21



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE G  SEGMENT INFORMATION



The Company has two reportable segments within the food service industry: Big Boy restaurants and Golden Corral
restaurants. Financial information by operating segment is as follows:



|                                 |  |                     |         |   |                   |   |         |  
|-------------------------------- |  | ------------------- | ------- | - | ----------------- | - | ------- | -
|                                 |  | Sixteen weeks ended |        
|                                 |  | September 18,2007   |         |   | September 19,2006 |  
|                                 |  | (in thousands)      |        
|Sales                            |  |                     |         |   |                   |   |         |  
|Big Boy                          |  | $                   | 57,767  |   |                   | $ | 56,404  |  
|Golden Corral                    |  |                     | 31,759  |   |                   |   | 31,844  |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  | $                   | 89,526  |   |                   | $ | 88,248  |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  |                    
|Earnings before income taxes     |  |                     |         |   |                   |   |         |  
|Big Boy                          |  | $                   | 6,157   |   |                   | $ | 6,456   |  
|Opening expense                  |  |                     | (370    | ) |                   |   | (130    | )
|                                 |  |                     |         |   |                   |   |         |  
|Total Big Boy                    |  |                     | 5,787   |   |                   |   | 6,326   |  
|                                 |  |                    
|Golden Corral                    |  |                     | 130     |   |                   |   | (263    | )
|Opening expense                  |  |                     | (215    | ) |                   |   |        |  
|                                 |  |                     |         |   |                   |   |         |  
|Total Golden Corral              |  |                     | (85     | ) |                   |   | (263    | )
|                                 |  |                    
|Total restaurant level profit    |  |                     | 5,702   |   |                   |   | 6,063   |  
|                                 |  |                    
|Administrative expense           |  |                     | (2,259  | ) |                   |   | (2,195  | )
|Franchise fees and other revenue |  |                     | 378     |   |                   |   | 393     |  
|Gains on asset sales             |  |                     | 524     |   |                   |   |        |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  |                    
|Operating profit                 |  |                     | 4,345   |   |                   |   | 4,261   |  
|                                 |  |                    
|Interest expense                 |  |                     | (742    | ) |                   |   | (818    | )
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  | $                   | 3,603   |   |                   | $ | 3,443   |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  |                    
|Depreciation and amortization    |  |                     |         |   |                   |   |         |  
|Big Boy                          |  | $                   | 2,417   |   |                   | $ | 2,304   |  
|Golden Corral                    |  |                     | 1,811   |   |                   |   | 1,773   |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  | $                   | 4,228   |   |                   | $ | 4,077   |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  |                    
|Capital expenditures             |  |                     |         |   |                   |   |         |  
|Big Boy                          |  | $                   | 3,813   |   |                   | $ | 3,383   |  
|Golden Corral                    |  |                     | 1,656   |   |                   |   | 704     |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  | $                   | 5,469   |   |                   | $ | 4,087   |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 | 
|                                 |  | As of               |        
|                                 |  | September 18,2007   |         |   | May 29, 2007      |  
|Identifiable assets              |  |                     |         |   |                   |   |         |  
|Big Boy                          |  | $                   | 95,006  |   |                   | $ | 94,011  |  
|Golden Corral                    |  |                     | 84,828  |   |                   |   | 85,248  |  
|                                 |  |                     |         |   |                   |   |         |  
|                                 |  | $                   | 179,834 |   |                   | $ | 179,259 |  
|                                 |  |                     |         |   |                   |   |         |  



22



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE H  COMMITMENTS AND CONTINGENCIES



Commitments

In
the ordinary course of business, purchase commitments are entered into with certain of the Companys suppliers. Most of these agreements are typically for periods of one year or less in duration; however, longer term agreements are also in
place. Future minimum payments under these arrangements are $2,709,000, $2,470,000, $2,244,000, $2,244,000 and $2,244,000 respectively, for the periods ending September 18, 2008, 2009, 2010, 2011 and 2012, with $1,683,000 to be paid thereafter.
These agreements are intended to secure favorable pricing while ensuring availability of desirable products. Management does not believe such agreements expose the Company to any significant risk.

Litigation

The construction of a Golden Corral restaurant in Canton,
Ohio was halted in August 2001 in order to assess structural concerns. In March 2002, a final assessment of the defects resulted in the Companys decision to construct a new building on another part of the lot. (The restaurant finally opened
for business in January 2003.) In July 2002, the general contractor that built the defective building filed a demand for arbitration against the Company seeking $294,000 plus interest, fees, and costs it claimed were owed by the Company under the
construction contract. The Company denied the claim and filed a counterclaim against the general contractor that alleged defective construction and claimed damages, lost profits, interest and costs in an amount exceeding $1,000,000. In August 2006,
the arbitration panel that heard the case awarded the Company $538,000 and denied the general contractors claim against the Company. The Company filed a Motion to Modify the award to increase the time period for which the Company was entitled
to damages, including interest, believing the arbitration panel inadvertently failed to consider the full range of time that was required for investigation and to obtain building permits and other approvals associated with the replacement structure.
The general contractor also filed a Motion to Modify, which alleged that the panel misinterpreted the testimony as to the calculation of lost profits. The arbitration panel rejected both Motions in November 2006. The Company immediately filed an
Application in the local Court system to confirm the arbitration panels original award. The general contractor responded by filing a Motion with the same Court to vacate the award. In April 2007, the Court granted the Companys
Application and denied the general contractors Motion to vacate. The general contractor filed a Notice of Appeal in May 2007. A Court date for oral arguments has yet to be set.

In August 2002, the Company filed a separate lawsuit against the architect that designed the defective restaurant building that alleged negligent design and claimed damages, lost profits, interest and costs exceeding
$2,500,000. In July 2003, the Company resolved all claims, counterclaims and cross claims against the trial court defendants, including the architect and the architects structural engineering consultant. The defendants agreed to pay the
Company the sum of $1,700,000 in full and final settlement of all claims. The Company received the settlement funds in full in July 2004 and the case was dismissed. The resolution between the Company and the trial court defendants was separate and
apart from the on-going dispute between the general contractor and the Company.

The Company is subject to various other claims and suits that arise from
time to time in the ordinary course of business. Management does not currently believe that financial resources to resolve outstanding claims will exceed provisions already included in the consolidated financial statements and therefore, the
ultimate liability, if any, will not have a material impact on the Companys earnings, cash flows or financial position.

Other Contingencies

The Company self-insures a significant portion of expected losses under its workers compensation program in the state of Ohio. Insurance coverage is
purchased from an insurance company for individual claims exceeding $300,000. (See Self Insurance in Note A  Accounting Policies.) Insurance coverage is maintained for various levels of casualty and general and product liability.



23



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE H  COMMITMENTS AND CONTINGENCIES (CONTINUED)



The Company currently has two outstanding letters of credit totaling $135,000 in support of its self- insurance
program. There are no other outstanding letters of credit issued by the Company.

As of September 18, 2007, the Company operated 28 restaurants on
non-owned properties. (See Note C  Leased Properties.) Certain of the leases provide for contingent rental payments, typically based on a percentage of the leased restaurants sales in excess of a fixed amount.

The Company is secondarily liable for the performance of a ground lease that has been assigned to a third party. The annual obligation of the lease approximates $48,000
through 2020. Since there is no reason to believe that the third party will default, no provision has been made in the consolidated financial statements for amounts that would be payable by the Company. In addition, the Company has the right to
re-assign the lease in the event of the third partys default.

NOTE I  RELATED PARTY TRANSACTIONS

The Chief Executive Officer of the Company (Craig F. Maier), who also serves as a director of the Company, owns a Big Boy restaurant licensed to him by the Company. A Big
Boy licensed restaurant is owned by certain family members of another director of the Company (Blanche F. Maier) and a Big Boy licensed restaurant is owned by certain children of such other director (excluding Craig F. Maier), one of whom is also an
officer and director of the Company (Karen F. Maier).

These three restaurants pay to the Company franchise and advertising fees, employee leasing and
other fees, and make purchases from the Companys commissary. The total paid to the Company by these three restaurants amounted to $1,471,000 and $1,453,000 respectively, during the sixteen weeks ended September 18, 2007 and
September 19, 2006. The amount owed to the Company from these restaurants was $131,000 and $104,000 respectively, as of September 18, 2007 and May 29, 2007. Amounts due are generally settled within 28 days of billing.

All related party transactions described above were effected on substantially similar terms as transactions with persons having no relationship with the Company.

The Chairman of the Board of Directors (Jack C. Maier, deceased February 2005) from 1970 to 2005 had an employment agreement with a provision for deferred
compensation. The agreement provided that upon its expiration or upon the Chairmans retirement, disability, death or other termination of employment, the Company would become obligated to pay the Chairman or his survivors for each of the next
ten years the amount of $214,050, adjusted annually to reflect 50 percent of the annual percentage change in the Consumer Price Index (CPI). Monthly payments of $17,838 to the Chairmans widow (Blanche F. Maier), a director of the Company,
commenced in March 2005. Monthly payments were increased to $18,141 and $18,368 respectively in March 2006 and March 2007 to reflect the change in the CPI. The present value of the long-term portion of the obligation approximating $1,238,000 is
included in the consolidated balance sheet under the caption Deferred compensation and other. The present value of the current portion of the obligation approximating $143,000 is included in current liabilities in the consolidated
balance sheet.



24



---

##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS

SAFE HARBOR
STATEMENT under the PRIVATE SECURITIES LITIGATION REFORM ACT of 1995

Statements included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) that are not historical facts are forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks, uncertainties and other factors that could cause actual results and performance to differ materially from anticipated results that may be expressed or implied by those statements. Factors that could cause such differences to occur
include, but are not limited to, those discussed in this Form 10-Q under Part II, Item 1A. Risk Factors.

Forward-looking
statements can generally be identified in sentences that contain words such as should, would, could, may, plan(s), anticipate(s), project(s), believe(s),
will, expect(s), estimate(s), intend(s), continue, assumption(s), goal(s), target and similar words (or derivatives thereof) that are used to convey
forward-looking statements that are not historical or present facts.

All forward-looking information in this MD&A is provided by the
Company pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of all risk factors. Except as may be required by law, the Company undertakes no obligation to update
any forward-looking statements that may be contained in this MD&A.

CORPORATE OVERVIEW

The Companys operations consist of two reportable segments within the restaurant industry: full service family style Big Boy restaurants and grill
buffet style Golden Corral restaurants. As of September 18, 2007, 89 Big Boy restaurants and 35 Golden Corral restaurants were owned and operated by the Company, located in various regions of Ohio, Kentucky and Indiana, plus smaller
areas in Pennsylvania and West Virginia.

The Companys First Quarter of Fiscal 2008 consists of the sixteen weeks ended September 18, 2007, and
compares with the sixteen weeks ended September 19, 2006, which constituted the First Quarter of Fiscal 2007. The first quarter of the Companys fiscal year normally accounts for a disproportionate share of annual revenue and earnings
because it contains sixteen weeks, whereas the following three quarters normally contain only twelve weeks each. References to Fiscal 2008 refer to the 53 week year that will end on June 3, 2008, the fourth quarter of which will include
thirteen weeks.

Sales reached a record $89,526,000 during the First Quarter of Fiscal 2008, as sales rose $1,278,000 higher than the First Quarter of
Fiscal 2007. The 1.4 percent sales increase was primarily effected through the opening of new stores, as same store sales decreased 2.8 percent in the Golden Corral segment while Big Boy posted a 1.2 percent same store increase. Net earnings for the
First Quarter of Fiscal 2008 were $2,450,000, or diluted earnings per share (EPS) of $.47, compared with $2,272,000, or diluted EPS of $.44 in the First Quarter of Fiscal 2007.

In November 2006, Ohio voters approved a mandate to annually increase the states minimum wage as follows:



|1 | The minimum wage was increased 33 percent from $5.15 per hour to $6.85 per hour beginning January 1, 2007, and will increase to $7.00 per hour on January 1, 2008 in
accordance with the mandates provision to automatically adjust the rate annually for inflation based on changes in the consumer price index.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2 | The minimum wage for tipped employees increased 61 percent from $2.13 per hour to $3.43 per hour beginning January 1, 2007. It increases to $3.50 per hour on January 1,
2008 in accordance with the inflation provision in the mandate.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As more than two thirds of the Companys payroll costs are incurred in
Ohio, the first full calendar years effect will add more than an estimated $3,500,000 to its operating costs. To compensate, the Company increased its menu prices in early January 2007 by 2.4 percent for Big Boy and 2.1 percent for Golden
Corral. The price increases were designed to incorporate the regular semi-annual price changes that would have been implemented anyway in February 2007.



25



---

##### Table of Contents

Effective July 24, 2007, legislation increased the federal minimum wage from $5.15 per hour to $5.85 per hour
for non-tipped employees, and is scheduled to increase to $6.55 per hour in July 2008 and to $7.25 per hour in July 2009. The rate for tipped employees was not impacted by the federal legislation and remains unchanged at $2.13 per hour. Recently
enacted minimum wage legislation in Kentucky was identical to the federal legislation except that it was effective in June 2007. The near term effect of the federal and Kentucky legislation is expected to be minimal, as market conditions already
dictate wage rates in excess of $5.85 per hour.

RESULTS of OPERATIONS

Sales

The Companys sales are primarily generated through the operation of Big Boy restaurants and Golden
Corral restaurants. Big Boy sales also include wholesale sales from the Companys commissary to restaurants licensed to other operators and the sale of Big Boys signature brand tartar sauce to grocery stores. Same store sales comparisons
are a key metric that management uses in the operation of the business. Same store sales are affected by changes in customer counts and menu price increases. Changes in sales also occur as new restaurants are opened and older restaurants are closed.
Below is the detail of consolidated restaurant sales:



|                                  |  |                |        |      |   |       
|--------------------------------- |  | -------------- | ------ | ---- | - | ------
|                                  |  | 1st Quarter   
|                                  |  | 2008           |        | 2007
|                                  |  | (in thousands)
|Big Boy restaurants               |  | $              | 54,691 |      | $ | 53,398
|Wholesale sales to licensees      |  |                | 2,855  |      |   | 2,775 
|Wholesale sales to grocery stores |  |                | 221    |      |   | 231   
|                                  |  |                |        |      |   |       
|Total Big Boy sales               |  |                | 57,767 |      |   | 56,404
|Golden Corral restaurants         |  |                | 31,759 |      |   | 31,844
|                                  |  |                |        |      |   |       
|Consolidated restaurant sales     |  | $              | 89,526 |      | $ | 88,248
|                                  |  |                |        |      |   |       

Big Boy restaurant sales increased $1,363,000, or 2.4 percent higher than the First Quarter of Fiscal 2007. The
increase includes a same store increase of 1.2 percent. Same store customer counts decreased 2.3 percent. Management believes a direct correlation continues to exist between the lower customer counts that have been experienced over the last three
fiscal years and the steep cost of gasoline. The Companys Midwest market areas are continuing to experience difficulty recovering from and adjusting to high gas prices.

The same store sales comparisons include average menu price increases of 1.2 percent and 1.1 percent implemented respectively in the First Quarter of Fiscal 2008 and the First Quarter of Fiscal 2007. In addition, a
2.4 percent increase was put in place in January 2007 specifically to offset higher costs associated with a mandated increase in the minimum wage.

The
Company currently operates 89 Big Boy restaurants, including two new ones that opened respectively in June and July 2007 plus a third one that opened in August 2007 that replaced an older facility that had closed in April 2007. Three low volume Big
Boy restaurants ceased operating during the last twelve months, closing respectively in January, April and June 2007. One existing Big Boy restaurant will close in the spring of 2008 to be re-opened in a new facility later that summer.

The first new Golden Corral restaurant to be constructed since November 2005 opened for business in July 2007. No other Golden Corral restaurants are currently
planned to open over the next twelve months.

The decline in Golden Corral same store sales continued in the First Quarter of Fiscal 2008, decreasing 2.8
percent on 8.2 percent fewer customers. Golden Corral restaurants have now suffered same store sales decreases in fifteen of the last sixteen quarters. A sales promotion featuring steak and shrimp was launched in October 2007 to help boost sales. A
2.1 percent menu price increase was implemented in January 2007 in response to the government mandated increase in the minimum wage. A 3.2 percent menu price hike was put into place late in September 2006.



26



---

##### Table of Contents

Gross Profit

Gross
profit for the Big Boy segment includes wholesale sales and cost of wholesale sales. Gross profit differs from restaurant level profit disclosed in Note G (Segment Information) to the consolidated financial statements, as advertising expense is
charged against restaurant level profit. Gross profit for both operating segments is highlighted below:



|                           |  |                |       |      |   |      
|-------------------------- |  | -------------- | ----- | ---- | - | -----
|                           |  | 1st Quarter   
|                           |  | 2008           |       | 2007
|                           |  | (in thousands)
|Big Boy gross profit       |  | $              | 7,169 |      | $ | 7,677
|Golden Corral gross profit |  |                | 620   |      |   | 454  
|                           |  |                |       |      |   |      
|Total gross profit         |  | $              | 7,789 |      | $ | 8,131
|                           |  |                |       |      |   |      

The operating percentages shown in the following table are percentages of total sales, including Big Boy wholesale
sales. The table supplements the discussion that follows concerning cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.



|                                                |  |                  |  |                  |  |       |  |       |  |        |  |      
|----------------------------------------------- |  | ---------------- |  | ---------------- |  | ----- |  | ----- |  | ------ |  | -----
|                                                |  | 1st Quarter 2008 |  | 1st Quarter 2007
|                                                |  | Total            |  | BigBoy           |  | GC    |  | Total |  | BigBoy |  | GC   
|Sales                                           |  | 100.0            |  | 100.0            |  | 100.0 |  | 100.0 |  | 100.0  |  | 100.0
|                                                |  |                  |  |                  |  |      
|Food and Paper                                  |  | 35.3             |  | 33.4             |  | 38.7  |  | 35.1  |  | 32.5   |  | 39.8 
|                                                |  |                  |  |                  |  |      
|Payroll and Related                             |  | 33.3             |  | 35.0             |  | 30.2  |  | 33.0  |  | 34.7   |  | 29.8 
|                                                |  |                  |  |                  |  |      
|Other Operating Costs (including opening costs) |  | 22.7             |  | 19.2             |  | 29.1  |  | 22.7  |  | 19.2   |  | 28.9 
|                                                |  |                  |  |                  |  |      
|Gross Profit                                    |  | 8.7              |  | 12.4             |  | 2.0   |  | 9.2   |  | 13.6   |  | 1.5  

The food and paper cost percentages for the Golden Corral segment are much higher than the Big Boy segment because
of the all-you-can-eat nature of the Golden Corral concept, as well as its use of steak as a featured item on the buffet. The effect of commodity price increases is actively managed with changes to the Big Boy menu mix and effective selection of
items served on the Golden Corral food bar, together with periodic increases in menu prices. The managed effect is reflected in the above table by the improvement in food cost percentages for Golden Corral. However, rapid escalations in costs of
commodities such as poultry, pork, beef, fish and dairy products can be problematic to effective menu management in the Big Boy segment, as evidenced in the rising percentages shown in the above table despite higher menu prices being charged to
customers.

Although payroll and related cost percentages have inched upward for both Big Boy and Golden Corral, higher wage costs associated with mandated
minimum wage increases have been mitigated through higher menu prices and a resolute focus on reducing the number hours worked by hourly paid employees.

The quarterly review of insurance reserves during the First Quarter of Fiscal 2008 resulted in an unfavorable adjustment to the insurance reserve of $18,000. A favorable adjustment of $383,000 was recorded during the First Quarter of Fiscal
2007. Because of improved claims experience, the result of active claims management with post accident drug testing, lower rates (as a percentage of payroll) to accrue initial self insured reserves have been in place since Fiscal 2006. The use of
these lower rates should effect a continuation in the trend of reducing the size of future quarterly adjustments.



27



---

##### Table of Contents

Net periodic pension cost (computed under Statement of Financial Accounting Standards No. 87, Employers
Accounting for Pensions) was $381,000 and $524,000 respectively, in the First Quarter of Fiscal 2008 and the First Quarter of 2007. The decrease is due principally to the combination of favorable asset returns and favorable pay experience. The
Company anticipates making contributions to the two qualified defined benefit pension plans that it sponsors that will satisfy legal funding requirements for the year ending May 29, 2007 plus additional tax-deductible amounts that may be deemed
advisable. Total contributions are currently estimated at $1,000,000.

Other operating costs include occupancy costs such as maintenance, rent,
depreciation, property tax, insurance and utilities; field supervision; accounting and payroll preparation costs; franchise fees for Golden Corral restaurants; opening costs and many other restaurant operating expenses. Opening costs were $370,000
for Big Boy restaurants and were $215,000 for Golden Corral restaurants during the First Quarter of Fiscal 2008. During the First Quarter of Fiscal 2007, opening costs were $130,000 for Big Boys and zero for Golden Corrals. As most of the other
expenses charged to other operating costs tend to be more fixed in nature, same store sales decreases cause these costs to be a higher percentage of sales, as reflected in the above table for the Golden Corral segment.

Operating Profit

To arrive at the measure of operating profit,
administrative and advertising expense is subtracted from gross profit while franchise fees and other revenue is added to it. Gains and losses from sale of real property, if any, are then respectively added or subtracted.

Administrative and advertising expense increased $84,000 during the First Quarter of Fiscal 2008, or 2.0 percent higher than the First Quarter of Fiscal 2007. The
increase is attributable to higher costs for advertising and stock based compensation costs than were incurred during the First Quarter of Fiscal 2007.

Revenue from franchise fees is based on sales of Big Boy restaurants that are licensed to other operators. The fees are based principally on percentages of sales generated by the licensed restaurants and are recorded on the accrual method
as earned. As of September 18, 2007 and September 19, 2006, 28 Big Boy restaurants were licensed to other operators and paying franchise fees to the Company. No licensed Big Boy restaurants have opened or closed during any of the periods
presented in this MD&A. Other revenue also includes certain other fees from licensed restaurants along with miscellaneous rent and investment income.

Gains from the sale of real property amounted to $524,000 during the First Quarter of Fiscal 2008. The gains resulted from the dispositions of three low volume Big Boy restaurants that ceased operations respectively in January, April and
June 2007. Aggregate proceeds amounted to $1,685,000. No dispositions of real property occurred during the First Quarter of Fiscal 2007. No impairment of assets was recorded during either the First Quarter of Fiscal 2008 or the First Quarter of
Fiscal 2007.

Interest Expense

Debt remained roughly
level with last years levels and the weighted average rate of interest in place as of September 18, 2007 did not appreciably change from September 19, 2006. The $76,000 decrease in interest expense during the First Quarter of Fiscal
2008 when compared with the First Quarter of Fiscal 2007 was primarily the result of higher levels of capitalized interest.

Income Tax Expense

Income tax expense as a percentage of pretax earnings was estimated at 32 percent in the First Quarter of Fiscal 2008 and was 34 percent in the First
Quarter of Fiscal 2007. The effective tax rate for Fiscal 2007 was ultimately lowered to 31.4 percent. These rates have been kept consistently low through the Companys use of tax credits, especially the federal credit allowed for Employer
Social Security and Medicare Taxes Paid on Certain Employee Tips. The Company adopted the provisions of FIN 48 (Accounting for Uncertainty in Income Taxes) effective May 30, 2007, as required. There was no cumulative effect adjustment to
retained earnings nor was there any material change in the amount of unrecognized tax benefits.



28



---

##### Table of Contents

LIQUIDITY and CAPITAL RESOURCES

Sources of Funds

Sales to restaurant customers provide the Companys principal source of cash. The funds from
sales are immediately available for the Companys use, as substantially all sales to restaurant customers are received in cash or are settled by debit or credit cards. Net earnings plus depreciation provide the primary source of cash provided
by operating activities. Other sources of cash may include borrowing against credit lines, proceeds received when stock options are exercised and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for
discretionary objectives, including capital projects (principally restaurant expansion) and dividends.

Working Capital Practices

The Company has historically maintained a strategic negative working capital position, a common practice in the restaurant industry. As significant cash flows are
consistently provided by operations, and credit lines are readily available, the use of this practice should not hinder the Companys ability to satisfactorily retire any of its obligations when due, including the aggregated contractual
obligations and commercial commitments shown in the following table.

Aggregated Information about Contractual Obligations and Commercial Commitments

September 18, 2007



|  |  |                                          |  |                                       |        |        |   |        |  |        |        |        |   |        |  |                  |       |  |   |       |  |   |       
|- |  | ---------------------------------------- |  | ------------------------------------- | ------ | ------ | - | ------ |  | ------ | ------ | ------ | - | ------ |  | ---------------- | ----- |  | - | ----- |  | - | ------
|  |  |                                          |  | Payments due by period (in thousands)
|  |  |                                          |  | Total                                 |        | year 1 |   | year 2 |  | year 3 |        | year 4 |   | year 5 |  | morethan 5 years
|  |  | Long-Term Debt                           |  | $                                     | 38,009 |        | $ | 11,517 |  | $      | 12,165 |        | $ | 5,496  |  | $                | 4,346 |  | $ | 2,877 |  | $ | 1,608 
|  |  | Rent due under Capital Lease Obligations |  |                                       | 3,475  |        |   | 2,548  |  |        | 299    |        |   | 268    |  |                  | 252   |  |   | 108   |  |   |      
|1 |  | Rent due under Operating Leases          |  |                                       | 23,448 |        |   | 1,879  |  |        | 1,859  |        |   | 1,523  |  |                  | 1,416 |  |   | 1,409 |  |   | 15,362
|2 |  | Unconditional Purchase Obligations       |  |                                       | 15,894 |        |   | 5,009  |  |        | 2,470  |        |   | 2,244  |  |                  | 2,244 |  |   | 2,244 |  |   | 1,683 
|3 |  | Other Long-Term Obligations              |  |                                       | 1,775  |        |   | 222    |  |        | 225    |        |   | 228    |  |                  | 231   |  |   | 234   |  |   | 635   
|  |  | Total Contractual Cash Obligations       |  |                                       | 82,601 |        |   | 21,175 |  |        | 17,018 |        |   | 9,759  |  |                  | 8,489 |  |   | 6,872 |  |   | 19,288

---

|1 | Not included in the table is a secondary liability for the performance of a ground lease that has been assigned to a third party. The annual obligation of the lease approximates $48
through 2020. Should the third party default, the Company has the right to re-assign the lease. Operating leases include option periods considered to be part of the lease term under the provisions of Statement of Financial Accounting Statement
No. 13, Accounting for Leases, as amended.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | Primarily consists of commitments for certain food and beverage items, plus capital projects including commitments to purchase real property pursuant to purchase option provisions
in leases.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | Deferred compensation liability.
|- | --------------------------------

The working capital deficit was
$22,597,000 as of September 18, 2007 and was $25,832,000 as of May 29, 2007. The improvement in the deficit largely reflects lower accounts payable associated with new restaurant construction. No new restaurant construction was in progress
as of September 18, 2007. Three Big Boys and one Golden Corral restaurant were at various stages of construction as of May 29, 2007, all of which opened for business during the First Quarter of Fiscal 2008.

In September 2007, the maximum amount that may be borrowed under the terms of the Companys Construction Draw Credit Facility was increased by $12,500,000, which
brought to $15,000,000 the amount available to be drawn upon before the Facility expires on September 1, 2010. Additionally, $3,000,000 remains available on a $5,000,000 working capital revolving line of credit that is available through
September 1, 2010. Its $2,000,000 outstanding balance is subject to an annual resting period, meaning the balance outstanding must be brought to zero no later than May 1, 2008 for a resting period of 30 days.



29



---

##### Table of Contents

Operating Activities

Operating cash flows were $3,611,000 in the First Quarter of Fiscal 2008, or $2,542,000 lower than the First Quarter of Fiscal 2007. The decrease is primarily attributable to normal changes in assets and liabilities such as prepaid
expenses, inventories and accounts payable, all of which can and do often widely fluctuate (see the discussion above regarding the working capital deficit as it relates to accounts payable). Management believes a better, more reliable gauge to
measure cash flows from the operation of the business is to use the simple method of net earnings plus non cash expenses such as depreciation, losses (net of any gains) on dispositions of assets and stock based compensation expense. This method
yields $6,312,000 in cash flows from operating activities for the First Quarter of Fiscal 2008 versus $6,458,000 in the First Quarter of Fiscal 2007.

Investing Activities

Capital spending is the principal component of the Companys investing activities. Capital spending was
$5,469,000 during the First Quarter of Fiscal 2008, an increase of $1,382,000 from the First Quarter of Fiscal 2007. This years capital spending includes $3,813,000 for Big Boy restaurants and $1,656,000 for Golden Corral restaurants. These
capital expenditures consisted of new restaurant construction, site acquisitions, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.

Proceeds from disposition of property during the First Quarter of Fiscal 2008 amounted to $1,711,000, primarily reflecting the sale of three low-volume Big Boy
restaurants that ceased operations respectively in January, April and June 2007. The sales of the three properties resulted in an aggregate gain of $524,000. No dispositions of real property took place during the First Quarter of Fiscal 2007.

Financing Activities

Borrowing against credit lines
amounted to $4,500,000 during the First Quarter of Fiscal 2008. Scheduled and other payments of long-term debt and capital lease obligations amounted to $3,383,000 during the First Quarter of Fiscal 2008. Regular quarterly cash dividends paid to
shareholders totaled $564,000. Dividends declared but not paid as of September 18, 2007 totaled $565,000. The Company expects to continue its 47 year practice of paying regular quarterly cash dividends.

During the First Quarter of Fiscal 2008, employees acquired approximately 9,300 shares of the Companys common stock pursuant to the exercise of stock options,
yielding proceeds to the Company of approximately $214,000. As of September 18, 2007, 408,000 shares granted under the Companys two stock option plans remain outstanding, including 342,000 fully vested shares at a weighted average
exercise price per share of $19.37. As of September 18, 2007, approximately 675,000 shares remained available to be granted under these plans, net of 24,000 options granted to employees in June 2007.

Other Information

The Companys 35thGolden Corral restaurant opened for business in July 2007. It was the first new restaurant to be opened by the Company
since November 2005. The Company has the approval of Golden Corral Franchising Systems, Inc. to curtail development of Golden Corral restaurants until operating performance levels improve in existing restaurants. The curtailment allows the Company
to use its cash flows and credit facilities to strengthen its balance sheet and keep interest costs in check, while allowing management to focus on rebuilding same store sales.

Although the Company continues to possess development rights for up to 28 more Golden Corral restaurants, no other Golden Corral restaurants are currently planned to open during Fiscal 2008. Current plans call for
continuing to search for cost effective sites for future development. Three Golden Corral restaurants were renovated during the First Quarter of Fiscal 2008, with two more renovations planned over the rest of Fiscal 2008.

Two new Big Boy restaurants opened for business respectively in June and July 2007. A third Big Boy restaurant opened in August 2007. It replaced an older facility that
closed and was razed in April 2007. Several sites are currently being evaluated for future acquisition and development. One existing Big Boy is scheduled to close and be razed in the spring of 2008 and replaced with a new building.

Approximately one-fifth of the Companys Big Boy restaurants are routinely renovated or decoratively updated each year at an average cost of $75,000 per restaurant.
In addition, certain high-volume Big Boy restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies and whether an expansion of the dining room is warranted. A typical kitchen redesign
costs approximately $125,000 and a dining room expansion can cost up to $500,000.



30



---

##### Table of Contents

Including land and land improvements, the cash required to build and equip each new restaurant currently ranges from
$3,200,000 to $4,000,000 for a Golden Corral, and from $2,200,000 to $3,000,000 for a Big Boy. The actual cost depends greatly on the price paid for the land and the cost of land improvements, which can vary widely from location to location, and
whether the land is purchased or leased. No agreements to acquire real property for the purpose of restaurant expansion were in place as of September 18, 2007.

It is the Companys policy to own the land on which it builds new restaurants; however, it is becoming more frequently necessary to enter ground leases to obtain desirable land on which to build. Eight of the 35
Golden Corral restaurants now in operation were built on leased land. Three Big Boy restaurants opened since 2003 were also built on leased land. All of these leases have been accounted for as operating leases pursuant to Statement of Financial
Accounting Standards No. 13 (SFAS 13), Accounting for Leases as amended.

As of September 18, 2007, the Company occupied 28
restaurants pursuant to leases, of which five are capital leases under the provisions of SFAS 13. Three of the capital leases will expire on October 31, 2007 and the final two will expire in May 2008. The three Big Boy restaurants with capital
leases expiring October 31, 2007 will continue to be occupied on a month-to-month arrangement until the Company executes its right to purchase the properties from the landlord, currently anticipated in January 2008. Although the costs have yet
to be determined, the aggregate purchase price will not be less than $2,300,000. The Company also currently intends to exercise its privilege to purchase the two Big Boy restaurants that have capital leases expiring in May 2008.

APPLICATION of CRITICAL ACCOUNTING POLICIES

The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America requires management to use estimates and assumptions to measure certain items that affect the amounts reported in the financial
statements and accompanying footnotes. These judgments are based on knowledge and experience about past and current events, and assumptions about future events. Accounting estimates can and do change as new events occur and additional information
becomes available. Actual results may differ markedly from current judgment.

Two factors are required for an accounting policy to be deemed critical. The
policy must be significant to the fair presentation of a companys financial condition and its results of operations, and the policy must require managements most difficult, subjective or complex judgments. The Company believes the
following to be its critical accounting policies.

Self Insurance

The Company self-insures a significant portion of expected losses from its workers compensation program in the state of Ohio. The Company purchases coverage from an insurance company for individual claims in
excess of $300,000. Reserves for claims expense include a provision for incurred but not reported claims. Each quarter, the Company reviews claims valued by its third party administrator (TPA) and then applies experience and judgment to
determine the most probable future value of incurred claims. As the TPA submits additional new information, the Company reviews it in light of past history of claims for similar injuries, probability of settlement, and any other facts that might
provide guidance in determining ultimate value of individual claims. Unexpected changes in any of these or other factors could result in actual costs differing materially from initial projections.

Pension Plans

Pension plan accounting requires rate assumptions for
future compensation increases and the long term return on plan assets. A discount rate is also applied to the calculations of net periodic pension cost and projected benefit obligations. An informal committee consisting of executives from the
Finance Department and the Human Resources Department, with guidance provided by the Companys actuarial consulting firm, develops these assumptions each year. The consulting firm also provides services in calculating estimated future
obligations and net periodic pension cost.



31



---

##### Table of Contents

Assets of the pension plans are targeted to be invested 70 percent in equity securities, as these investments have
historically provided the greatest long-term returns. To determine the long-term rate of return on plan assets, the committee looks at the target asset allocation of plan assets and determines the expected return on each asset class. The expected
returns for each asset class are combined and rounded to the nearest 25 basis points to determine the overall expected return on assets. The committee determines the discount rate by looking at the projected future benefit payments and matching them
to spot rates based on yields of high-grade corporate bonds. A single discount rate is selected, rounded to the nearest 25 basis points, that produces the same present value as the various spot rates.

Long-Lived Assets

Long-lived assets include property and equipment,
goodwill and other intangible assets. Property and equipment typically approximates 85 to 90 percent of the Companys total assets. Judgments and estimates are used to determine the carrying value of long-lived assets. This includes the
assignment of appropriate useful lives, which affect depreciation and amortization expense. Capitalization policies are continually monitored to assure they remain appropriate.

Management considers a history of cash flow losses on a restaurant-by-restaurant basis to be the primary indicator of potential impairment. Carrying values of property and equipment are accordingly tested for
impairment each quarter. In addition, carrying values are also reviewed whenever events or circumstances indicate the carrying value may be impaired. When undiscounted expected future cash flows are less than carrying values, an impairment loss is
recognized for the amount by which carrying values exceed estimated realizable values. Future cash flows can be difficult to predict. Changing neighborhood demographics and economic conditions, and many other factors may impact operating
performance, which affect cash flow. Estimated realizable values are provided by real estate brokers and/or the Companys past experience in disposing of property.

Sometimes it becomes necessary to cease operating a certain restaurant due to poor performance. The final impairment amount can be significantly different from the initial charge, particularly if the eventual market
price received from the disposition of the property differs materially from initial estimates of realizable values.

Acquired goodwill and other intangible
assets are tested for impairment annually or whenever an impairment indicator arises.



32



---

##### Table of Contents

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES about MARKET RISKS

The Company has no significant market risk exposure to
interest rate changes as substantially all of its debt is currently financed with fixed interest rates. The Company does not currently use derivative financial instruments to manage its exposure to changes in interest rates. Any cash equivalents
maintained by the Company have original maturities of three months or less. The Company does not use foreign currency.

Big Boy restaurants utilize
centralized purchasing and food preparation through the Companys commissary and food manufacturing plant. The Company believes the commissary operation ensures uniform product quality and safety, timeliness of distribution to restaurants and
ultimately results in lower food and supply costs. The commissary operation does not supply Golden Corral restaurants.

Commodity pricing affects the cost
of many of the Companys food products. Commodity pricing can be extremely volatile, affected by many factors outside the Companys control, including import and export restrictions, supply versus demand, production levels and the impact
of weather on crop yields. Certain commodities purchased by the commissary, principally beef, chicken, pork, dairy products, fish, french fries and coffee, are generally purchased based upon market prices established with vendors. Purchase contracts
for some of these items may contain contractual provisions that limit the price to be paid. These contracts are normally for periods of one year or less but may have longer terms if favorable long-term pricing becomes available. Food supplies are
generally plentiful and may be obtained from any number of suppliers, which mitigates the Companys overall commodity cost risk. Quality, timeliness of deliveries and price are the principal determinants of source. The Company does not use
financial instruments as a hedge against changes in commodity pricing.

Except for items such as bread, fresh produce and dairy products that are purchased
from any number of local suppliers, the Golden Corral segment of the business currently purchases substantially all food, beverage and other menu items from the same approved vendor that Golden Corral Franchising Systems, Inc. (Franchisor) uses for
its operations. Deliveries are made two times per week. Other vendors are available to provide products that meet the Franchisors specifications at comparable prices should the Company wish or need to make a change.

ITEM 4. CONTROLS and PROCEDURES

a) Evaluation of Disclosure Controls and Procedures. The Companys Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) reviewed and evaluated the Companys disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 240.15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act)) as of September 18, 2007. Based on that evaluation, the CEO and CFO concluded that the Companys disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the
reports that the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

b) Changes in Internal Control over Financial Reporting. The CEO and CFO have concluded that there were no changes in the Companys internal control over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fiscal quarter ended September 18, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.



33



---

##### Table of Contents

PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is the owner of a Golden Corral Restaurant located in North Canton, Ohio. In 2001,
the Companys general contractor, Fortney & Weygandt, Inc. (Fortney) constructed a Golden Corral Restaurant at the original location on the North Canton site. Geological conditions at the site required that the restaurant
be built on a structural slab (platform), which rested upon driven piles. The foundation system for the building was designed by a Houston, Texas engineering firm, Maverick Engineering, Inc. (Maverick), a subcontractor to the
Companys architect of record, LMH&T. Shortly before the scheduled opening of the restaurant, it was discovered that design and construction errors had caused the building to shift, separating the building from its underground plumbing
system. The Company elected to demolish the original structure, and subsequently built a new building on a different portion of the original parcel. The restaurants grand opening was, therefore, delayed until January 2003.

In July 2002, Fortney filed a Demand for Arbitration against the Company which sought recovery of its outstanding contract balance, in the sum of $293,638,
plus interest, fees, and costs. Fortney contended that the Company owed this money to Fortney under the terms of the General Construction Contract. The Company denied that it owed these monies to Fortney, and filed a counterclaim against Fortney
that alleged defective construction and claimed damages, lost profits, interest and costs, in an amount exceeding $1,000,000. The arbitration hearing before the American Arbitration Association concluded February 28, 2006, with closing
arguments held on June 30, 2006. On August 24, 2006, the arbitration panel awarded the Company $537,967 and denied Fortneys claim against the Company. The Company filed a Motion to Modify the award to increase the time period for
which the Company is entitled to damages, including interest, believing the arbitration panel inadvertently failed to consider the full range of time that was required for investigation and to obtain building permits and other approvals associated
with the replacement structure. Fortney also filed a Motion to Modify, alleging that the panel misinterpreted the testimony as to the calculation of lost profits. The arbitration panel rejected both Motions in November 2006. The Company immediately
filed an Application in the Cuyahoga County (Ohio) Court of Common Pleas to confirm the arbitration panels original award. Fortney responded by filing a Motion with the same court to vacate the award. On April 27, 2007, the Cuyahoga Court
of Common Pleas granted the Companys Application and denied Fortneys Motion to vacate. On May 1, 2007, Fortney filed a Notice of Appeal. A date for oral arguments has yet to be set in the Court of Appeals, Eighth Appellate District,
Cuyahoga County, Ohio.

In August 2002, the Company filed a lawsuit in the Stark County (Ohio) Court of Common Pleas against its former architect,
LMH&T. The lawsuit alleged negligent design as a causal factor in the demise of the original structure. The Company sought damages including lost profits, interest, and costs exceeding $2,500,000. LMH &T brought into the lawsuit its
structural engineering consultant, Maverick, as well as the Companys soils consultant, Cowherd Banner Carlson Engineering, collectively, the trial court defendants. In July 2003, the Company resolved all claims, counterclaims, and
cross-claims, against and involving the trial court defendants when LMH&T and Maverick, agreed to pay to the Company the sum of $1,700,000 in full and final settlement of all claims. The Company received the settlement funds in full and the case
was dismissed. The resolution between the Company and the trial court defendants is separate and apart from the on-going dispute between Fortney and the Company.

The Company is subject to various other claims and suits that arise from time to time in the ordinary course of business. Management does not currently believe that financial resources to resolve outstanding claims will exceed provisions
already included in the consolidated financial statements and therefore, the ultimate liability, if any, will not have a material impact on the Companys earnings, cash flows or financial position.

ITEM 1A. RISK FACTORS

The Company continually takes reasonable preventive measures to reduce its risks and uncertainties.
However, the nature of some risks and uncertainties provides little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently
unforeseen, could result in significant adverse effects on the Companys financial position, results of operations and cash flows, which could include the permanent closure of any affected restaurant(s) with an impairment of assets charge taken
against earnings, and could adversely affect the price at which shares of the Companys common stock trade.



34



---

##### Table of Contents

Food Safety

Food
safety is the most significant risk to any company that operates in the restaurant industry. It is the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Companys exposure to the risk of
food contamination, management rigorously emphasizes and enforces the Companys food safety policies in all of the Companys restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants.
These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes
use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food
handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

Failure to protect the Companys food supplies could result in food borne illnesses and/or injuries to customers. Publicity of such events in the past has caused
irreparable damages to the reputations of certain operators in the restaurant industry. If any of the Companys customers become ill from consuming the Companys products, the affected restaurants may be forced to close. An instance of
food contamination originating at the commissary operation could have far reaching effects, as the contamination would affect substantially all Big Boy restaurants.

Economic Factors

The Companys operations are predominantly located in Ohio, Indiana and Kentucky, where
consumer confidence remains below national average and other regions. The effects of higher gasoline prices in particular may impact discretionary consumer spending in restaurants. The Companys costs are also affected by increasing energy
prices. Petroleum based material is often used to package certain products for distribution. In addition, many suppliers have added surcharges for fuel to their invoices. The cost to transport products from the commissary to restaurant operations
will rise with each increase in gasoline prices. Higher natural gas prices have resulted in much higher costs to heat restaurant facilities and to cook food. Inflationary pressure, particularly on food costs, labor costs (especially associated with
increases in the minimum wage) and health care benefits, can also negatively impact the operation of the business. Shortages of qualified labor may also be experienced in certain local economies. In addition, the loss of a key executive could pose a
significant adverse effect on the Company.

Competition

The restaurant industry is highly competitive and many of the Companys competitors are substantially larger and possess greater financial resources than does the Company. Both the Big Boy and Golden Corral operating segments have
numerous competitors, including national chains, regional and local chains, as well as independent operators. None of these competitors, in the opinion of the Company, presently dominate the family-style sector of the restaurant industry in the
Companys operating markets. That could change at any time due to:



| |  | changes in economic conditions
|- |  | ------------------------------



| |  | changes in demographics in neighborhoods where the Company operates restaurants
|- |  | -------------------------------------------------------------------------------



| |  | changes in consumer perceptions of value, food and service quality
|- |  | ------------------------------------------------------------------



| |  | changes in consumer preferences, particularly based on concerns with nutritional content of food on the Companys menus
|- |  | -----------------------------------------------------------------------------------------------------------------------



| |  | new competitors that enter the Companys markets from time to time
|- |  | ------------------------------------------------------------------



| |  | increased competition from supermarkets and other non-traditional competitors
|- |  | -----------------------------------------------------------------------------



| |  | increased competition for quality sites on which to build restaurants
|- |  | ---------------------------------------------------------------------

Development Plans

The Companys business strategy and development plans also face risks and uncertainties.
These include the inherent risk of poor management decisions in the selection of sites on which to build restaurants, the ever rising cost and availability of desirable sites and increasingly rigorous requirements on the part of local governments to
obtain various permits and licenses. Other factors that could impede plans to increase the number of restaurants operated by the Company include saturation in existing markets and limitations on borrowing capacity and the effects of higher interest
rates.



35



---

##### Table of Contents

The Supply and Cost of Food

Food purchases can be subject to significant price fluctuations that can considerably impact results of operations from quarter to quarter. Price fluctuations can be due to seasonality or any number of factors. The market for beef, in
particular, continues to be highly volatile due in part to import and export restrictions. The Company depends on timely deliveries of perishable food and supplies. Any interruption in the continuing supply would harm the Companys operations.

Litigation

Employees, customers and other parties
bring various claims against the Company from time to time. Defending such claims can distract the attention of senior level management away from the operation of the business. In addition, negative publicity that may be associated with any
significant judgment against the Company in the future could harm the Companys reputation and adversely affect operating results.

Governmental
and Other Rules and Regulations

Governmental and other rules and regulations can pose significant risks to the Company. Examples include:



| |  | changes in environmental regulations that would significantly add to the Companys costs
|- |  | ----------------------------------------------------------------------------------------



| |  | exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and labor regulations regarding the employment
of minors in particular
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | any future imposition by OSHA of costly ergonomics regulations on workplace safety
|- |  | ----------------------------------------------------------------------------------



| |  | legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements
|- |  | ---------------------------------------------------------------------------------------------------------------



| |  | legislation or court rulings that result in changes to tax codes that are adverse to the Company
|- |  | ------------------------------------------------------------------------------------------------



| |  | changes in accounting standards imposed by governmental regulators or private governing bodies could adversely affect the Companys financial position
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | estimates used in preparing financial statements and the inherent risk that future events affecting them may cause actual results to differ markedly
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

Catastrophic Events

Unforeseen
catastrophic events could disrupt the Companys operations, the operations of the Companys suppliers and the lives of customers. The Big Boy segments dependency on the commissary operation in particular could present an extensive
disruption of products to restaurants should a catastrophe impair its ability to operate. Examples of catastrophic events include but are not limited to:



| |  | adverse winter weather conditions
|- |  | ---------------------------------



| |  | natural disasters such as earthquakes or tornadoes
|- |  | --------------------------------------------------



| |  | fires or explosions
|- |  | -------------------



| |  | criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes
|- |  | -----------------------------------------------------------------------------------------------------



| |  | acts of terrorists or acts of war
|- |  | ---------------------------------



| |  | civil disturbances and boycotts
|- |  | -------------------------------



| |  | disease transmitted across borders that may enter the food supply chain
|- |  | -----------------------------------------------------------------------

Technology and Information Systems

The strategic nature of technology and information systems is of vital importance
to the operations of the Company. Events that could pose threats to the operation of the business include:



| |  | catastrophic failure of certain information systems
|- |  | ---------------------------------------------------



| |  | security violations or any unauthorized access to information systems
|- |  | ---------------------------------------------------------------------



| |  | difficulties that may arise in maintaining existing systems
|- |  | -----------------------------------------------------------



| |  | difficulties that may occur in the implementation of and transition to new systems
|- |  | ----------------------------------------------------------------------------------



| |  | financial stability of technology vendors to support software over the long-term
|- |  | --------------------------------------------------------------------------------

Golden Corral

Golden Corral same-store sales declines have been experienced in fifteen of the last sixteen quarters,
during which cash flows from Golden Corral operations have deteriorated. The ability of the Company to identify the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and
margin growth, poses a significant risk to the Company.



36



---

##### Table of Contents

ITEM 2. UNREGISTERED SALES of EQUITY SECURITIES and USE of PROCEEDS

Not applicable

ITEM 3. DEFAULTS upon SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS



| | a) | The Annual Meeting of Shareholders was held on October 1, 2007.
| | -- | ---------------------------------------------------------------



| | b) | Directors elected on October 1, 2007 to serve until the 2009 annual meeting of shareholders:
| | -- | --------------------------------------------------------------------------------------------



|                  |  |                  |  |                    
|----------------- |  | ---------------- |  | -------------------
|Dale P. Brown     |  | Blanche F. Maier |  | Jerome P. Montopoli
|Daniel W. Geeding |  | Craig F. Maier   |  |                    

Directors whose terms continued after the meeting (serving until the 2008 annual meeting of
shareholders):



|                       |  |                      |  | 
|---------------------- |  | -------------------- |  | 
|Robert J. (RJ) Dourney |  | William J. Reik, Jr. |  | 
|Lorrence T. Kellar     |  | Karen F. Maier       |  | 



| | c) | The following matters were voted upon:
| | -- | --------------------------------------

1) Election of
Directors to serve until the 2009 annual meeting of shareholders:



|                    |  |           |  |                   
|------------------- |  | --------- |  | ------------------
|Name                |  | For       |  | Withheld Authority
|Dale P. Brown       |  | 4,603,096 |  | 55,545            
|Daniel W. Geeding   |  | 4,541,888 |  | 116,753           
|Blanche F. Maier    |  | 4,538,548 |  | 120,093           
|Craig F. Maier      |  | 4,584,787 |  | 73,854            
|Jerome P. Montopoli |  | 4,603,211 |  | 55,430            

2) Proposal to ratify the appointment of Grant Thornton LLP as the Companys Independent

Registered Public Accounting Firm for the fiscal year commencing May 30, 2007 was approved.



|          |  |         |  |        
|--------- |  | ------- |  | -------
|For       |  | Against |  | Abstain
|4,625,953 |  | 24,821  |  | 7,867  



| | d) | Not applicable
| | -- | --------------

ITEM 5. OTHER INFORMATION

Not applicable



37



---

##### Table of Contents

ITEM 6. EXHIBITS

3 (i) Third Amended Articles of Incorporation, filed as Exhibit (3) (a) to the
Registrants Form 10-K Annual Report for 1993, is incorporated herein by reference.

3 (ii) Amended and Restated Code of Regulations
effective October 2, 2006, filed as Exhibit A to the Registrants Definitive Proxy Statement dated September 1, 2006, is incorporated herein by reference.

10 (a) Intellectual Property Use and Noncompete Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit
(10) (a) to the Registrants Form 10-Q Quarterly Report for March 4, 2001, is incorporated herein by reference.

10 (b) Transfer
Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit (10) (b) to the Registrants Form 10-Q Quarterly Report for March 4, 2001, is
incorporated herein by reference.

10 (c) 1) First Amended and Restated Loan Agreement (Golden Corral Construction Facility) and Exhibit 10
(c) 2) Second Amended and Restated Loan Agreement (Revolving and Bullet Loans) between the Registrant and US Bank NA effective October 15, 2004, filed as exhibits 10 (c) 1 and 10 (c) 2 to the Registrants Form 10-Q Quarterly Report for
September 19, 2004, are incorporated herein by reference.

10 (d) 1) Amendment No. 1 to First Amended and Restated Loan Agreement (Golden
Corral Construction Facility) and Exhibit 10 (d) 2) Amendment No. 1 to Second Amended and Restated Loan Agreement (Revolving and Bullet Loans) between the Registrant and US Bank NA effective September 27, 2005, filed as Exhibits 10 (d) 1) and 10 (d)
2) to the Registrants Form 10-Q Quarterly Report for September 18, 2005, are incorporated herein by reference.

10 (e) Area
Development Agreement, Termination Agreement and Addendum effective July 20, 2004 between the Registrant and Golden Corral Franchising Systems, Inc., filed as Exhibit (10) (f) to the Registrants Form 10-K Annual Report for 2004, is
incorporated herein by reference.

10 (f) Agreement to Purchase Stock between the Registrant and Frisch West Chester, Inc. dated June 1,
1988, filed as Exhibit 10 (f) to the Registrants Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by reference.

10 (g) Agreement to Purchase Stock between the Registrant and Frisch Hamilton West, Inc. dated February 19, 1988, filed as Exhibit 10 (g) to the Registrants Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by
reference.

10 (h) Employment Agreement between the Registrant and Craig F. Maier effective May 28, 2006, filed as Exhibit 99.1 to the
Registrants Form 8-K Current Report dated March 14, 2006, is incorporated herein by reference. *

10 (i) First Amendment to the
Employment Agreement (see Exhibit 10 (h) above) between the Registrant and Craig F. Maier effective May 28, 2006, filed as Exhibit 99.1 to the Registrants Form 8-K Current Report dated June 7, 2006, is incorporated herein by reference. *

10 (j) Frischs Executive Savings Plan effective November 15, 1993, filed as Exhibit (10) (a) to the Registrants Form 10-Q
Quarterly Report for September 17, 1995, is incorporated herein by reference. *

10 (k) Second Amendment to the Frischs Executive
Savings Plan (see Exhibit 10 (j) above) effective July 28, 2004, filed as Exhibit 10 (h) to the Registrants Form 10-Q Quarterly Report for September 19, 2004, is incorporated herein by reference. *



38



---

##### Table of Contents

10 (l) Third Amendment to the Frischs Executive Savings Plan (see Exhibit 10 (j) above) effective
June 7, 2005, filed as Exhibit 10 (j) to the Registrants Form 10-Q Quarterly Report for September 18, 2005, is incorporated herein by reference. *

10 (m) Fourth Amendment to the Frischs Executive Savings Plan (see Exhibit 10 (j) above) effective August 30, 2005, filed as Exhibit 10 (k) to the Registrants Form 10-Q Quarterly Report for September 18,
2005, is incorporated herein by reference. *

10 (n) Frischs Executive Retirement Plan effective June 1, 1994, filed as Exhibit (10)
(b) to the Registrants Form 10-Q Quarterly Report for September 17, 1995, is incorporated herein by reference. *

10 (o) Amendment No.
1 to Frischs Executive Retirement Plan (see Exhibit 10 (n) above) effective January 1, 2000, filed as Exhibit 10 (k) to the Registrants form 10-K Annual Report for 2003, is incorporated herein by reference. *

10 (p) 2003 Stock Option and Incentive Plan, filed as Appendix A to the Registrants Proxy Statement dated August 28, 2003, is incorporated herein by
reference. *

10 (q) Amendment # 1 to the 2003 Stock Option and Incentive Plan (see Exhibit 10 (p) above) effective September 26, 2006,
filed as Exhibit 10 (q) to the Registrants Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by reference. *

10 (r) Forms of Agreement to be used for stock options granted to employees and to non-employee directors under the Registrants 2003 Stock Option and Incentive Plan (see Exhibit 10 (p) above), filed as Exhibits 99.1 and 99.2 to the
Registrants Form 8-K dated October 1, 2004, are incorporated herein by reference. *

10 (s) Amendments to the 2003 Stock Option and
Incentive Plan (see Exhibit 10 (p) above) effective December 19, 2006, filed as Exhibit 99.2 to the Registrants Form 8-K Current Report dated December 19, 2006, is incorporated herein by reference. *

10 (t) Amended and Restated 1993 Stock Option Plan, filed as Exhibit A to the Registrants Proxy Statement dated September 9, 1998, is incorporated
herein by reference. *

10 (u) Amendments to the Amended and Restated 1993 Stock Option Plan (see Exhibit 10 (t) above) effective December
19, 2006, filed as Exhibit 99.1 to the registrants Form 8-K Current Report dated December 19, 2006, is incorporated herein by reference. *

10 (v) Employee Stock Option Plan, filed as Exhibit B to the Registrants Proxy Statement dated September 9, 1998, is incorporated herein by reference. *

10 (w) Change of Control Agreement between the Registrant and Craig F. Maier dated November 21, 1989, filed as Exhibit (10) (g) to the Registrants Form 10-K Annual Report for 1990, is incorporated herein by
reference. It was also filed as Exhibit 99.2 to the Registrants Form 8-K Current Report dated March 17, 2006, which is also incorporated herein by reference. *

10 (x) First Amendment to Change of Control Agreement (see Exhibit 10 (w) above) between the Registrant and Craig F. Maier dated March 17, 2006, filed as Exhibit 99.1 to the Registrants Form 8-K Current Report
dated March 17, 2006, is incorporated herein by reference. *

10 (y) Frischs Nondeferred Cash Balance Plan effective January 1, 2000,
filed as Exhibit (10) (r) to the Registrants Form 10-Q Quarterly Report for December 10, 2000, is incorporated herein by reference, together with the Trust Agreement established by the Registrant between the Plans Trustee and Donald H.
Walker (Grantor). There are identical Trust Agreements between the Plans Trustee and Craig F. Maier, Karen F. Maier, Ken C. Hull, Michael E. Conner, Louie Sharalaya, Lindon C. Kelley and certain other highly compensated employees
(Grantors). *



39



---

##### Table of Contents

10 (z) First Amendment (to be effective June 6, 2006) to the Frischs Nondeferred Cash Balance
Plan that went into effect January 1, 2000 (see Exhibit 10 (y) above), filed as Exhibit 99.2 to the Registrants Form 8-K Current Report dated June 7, 2006, is incorporated herein by reference. *

10 (aa) Senior Executive Bonus Plan effective June 2, 2003, filed as Exhibit (10) (s) to the Registrants Form 10-K Annual Report for 2003, is
incorporated herein by reference. *

---

|* | Denotes a compensatory plan or agreement
|- | ----------------------------------------



|     |  |                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------
|15   |  | Letter re: unaudited interim financial statements, is filed herewith.                               
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to rule 13a -14(a)/15d  14(a) is filed herewith. 
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to rule 13a - 14(a)/15d  14(a) is filed herewith.
|     | 
|32.1 |  | Section 1350 Certification of Chief Executive Officer is filed herewith.                            
|     | 
|32.2 |  | Section 1350 Certification of Chief Financial Officer is filed herewith.                            

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.



|                      |  |    |  |                                           
|--------------------- |  | -- |  | ------------------------------------------
|                      |  |    |  | FRISCHS RESTAURANTS, INC.                
|                      |  |    |  | (Registrant)                              
|DATE October 18, 2007 |  |    |  |                                           
|                      |  | BY |  | /s/ Donald H. Walker                      
|                      |  |    |  | Donald H. Walker                          
|                      |  |    |  | Vice President  Finance, Treasurer and   
|                      |  |    |  | Principal Financial and Accounting Officer



40