##### Table of Contents

This report is being filed without the independent registered public accounting firms review
being completed.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



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Quarterly Report Pursuant to
Section 13 or 15 (d)

of the Securities Exchange Act of 1934



For the quarterly period ended: DECEMBER 11, 2005



Commission File Number: 001-7323



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FRISCHS RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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 December 27, 2005 was: 5,073,774



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##### Table of Contents

TABLE OF CONTENTS



Explanatory Note



In early December 2005, the Companys
actuarial consulting firm informed the Company of a formula error in the software program it created in 1995, which caused the software program to not properly pro-rate the benefit for service for plan participants in the Companys defined
benefit pension plan for managers, office employees and commissary employees with less than 28 years of service before normal retirement. This actuarial formula error caused the Companys net periodic pension cost (and related balance sheet and
income statement accounts) to be overstated. As a result, the Company intends to restate its previously issued financial statements contained in its Form 10-K for the fiscal year ended May 29, 2005 and its Form 10-Q for the fiscal quarter ended
September 18, 2005, to correct the net periodic pension cost. As the amendments to these previously issued financial statements have not yet been completed, the financial statements accompanying this report have not been reviewed by the
Companys independent registered public accounting firm as required by Rule 10-01(d) of Regulation S-X. The Company expects that its independent registered public accounting firm, Grant Thornton LLP, will complete the required quarterly review
following the Companys filing of the restated financial statements in the Form 10-K for the fiscal year ended May 29, 2005 and the Form 10-Q for the fiscal quarter ended September 18, 2005.



|                               |  |          |  |                                                                                      |  |        
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------ |  | -------
|                               |  |          |  |                                                                                      |  | 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 - 27 
|                               |  |          | 
|                               |  | Item 1A. |  | Risk Factors                                                                         |  | 28     
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operation |  | 29 - 36
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                           |  | 37     
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                              |  | 37     
|                               | 
|PART II - OTHER INFORMATION    |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                    |  | 38     
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                          |  | 38     
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                      |  | 38     
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                  |  | 39     
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                    |  | 39     
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                             |  | 39 - 40
|                               | 
|SIGNATURE                      |  | 41      



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)



|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|----------------------------------------- |  | ------------------------ | ----------- | - | --------------------------- | - | ----------- | ---------------- |  | - | --------------------------- | - |  | - | ---------- | -
|                                          |  | Twenty-eight weeks ended |             |   | Twelve weeks ended          |  
|                                          |  | December 11,2005         |             |   | December 12,2004 (restated) |   |             | December 11,2005 |  |   | December 12,2004 (restated) |  
|Sales                                     |  | $                        | 153,485,878 |   |                             | $ | 150,809,640 |                  |  | $ | 66,953,103                  |   |  | $ | 66,747,477 |  
|                                          |  |                          |             |  
|Cost of sales                             |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Food and paper                            |  |                          | 53,614,595  |   |                             |   | 52,752,737  |                  |  |   | 23,510,330                  |   |  |   | 23,338,433 |  
|Payroll and related                       |  |                          | 50,752,080  |   |                             |   | 50,043,146  |                  |  |   | 22,199,894                  |   |  |   | 22,135,748 |  
|Other operating costs                     |  |                          | 33,928,301  |   |                             |   | 30,758,207  |                  |  |   | 15,041,822                  |   |  |   | 13,203,667 |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|                                          |  |                          | 138,294,976 |   |                             |   | 133,554,090 |                  |  |   | 60,752,046                  |   |  |   | 58,677,848 |  
|                                          |  |                          |             |  
|Gross profit                              |  |                          | 15,190,902  |   |                             |   | 17,255,550  |                  |  |   | 6,201,057                   |   |  |   | 8,069,629  |  
|                                          |  |                          |             |  
|Administrative and advertising            |  |                          | 7,923,259   |   |                             |   | 7,665,386   |                  |  |   | 3,342,188                   |   |  |   | 3,340,625  |  
|Franchise fess and other revenue          |  |                          | (662,751    | ) |                             |   | (733,428    | )                |  |   | (290,408                    | ) |  |   | (310,573   | )
|(Gains) on sale of assets                 |  |                          |            |   |                             |   | (88,978     | )                |  |   |                            |   |  |   | (88,978    | )
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Operating profit                          |  |                          | 7,930,394   |   |                             |   | 10,412,570  |                  |  |   | 3,149,277                   |   |  |   | 5,128,555  |  
|                                          |  |                          |             |  
|Interest expense                          |  |                          | 1,439,592   |   |                             |   | 1,446,664   |                  |  |   | 657,506                     |   |  |   | 640,568    |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Earnings before income taxes              |  |                          | 6,490,802   |   |                             |   | 8,965,906   |                  |  |   | 2,491,771                   |   |  |   | 4,487,987  |  
|                                          |  |                          |             |  
|Income taxes                              |  |                          | 2,206,000   |   |                             |   | 3,225,000   |                  |  |   | 809,000                     |   |  |   | 1,702,000  |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Net Earnings                              |  | $                        | 4,284,802   |   |                             | $ | 5,740,906   |                  |  | $ | 1,682,771                   |   |  | $ | 2,785,987  |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Earnings per share (EPS) of common stock: |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Basic net earnings per share              |  | $                        | .85         |   |                             | $ | 1.14        |                  |  | $ | .33                         |   |  | $ | .55        |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  
|Diluted net earnings per share            |  | $                        | .83         |   |                             | $ | 1.11        |                  |  | $ | .33                         |   |  | $ | .54        |  
|                                          |  |                          |             |   |                             |   |             |                  |  |   |                             |   |  |   |            |  



The
accompanying notes are an integral part of these statements.



3



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet



ASSETS



|                                                    |  |                             |             |                               |   |            
|--------------------------------------------------- |  | --------------------------- | ----------- | ----------------------------- | - | -----------
|                                                    |  | December 11,2005(unaudited) |             | May 29, 2005 (Note)(restated)
|Current assets                                      |  |                             |             |                               |   |            
|Cash                                                |  | $                           | 322,800     |                               | $ | 306,300    
|Trade and other receivables                         |  |                             | 1,732,813   |                               |   | 1,389,975  
|Inventories                                         |  |                             | 4,653,942   |                               |   | 4,592,093  
|Prepaid expenses and sundry deposits                |  |                             | 3,203,718   |                               |   | 2,819,762  
|Prepaid and deferred income taxes                   |  |                             | 818,638     |                               |   | 942,611    
|                                                    |  |                             |             |                               |   |            
|Total current assets                                |  |                             | 10,731,911  |                               |   | 10,050,741 
|                                                    |  |                            
|Property and equipment                              |  |                             |             |                               |   |            
|Land and improvements                               |  |                             | 60,186,803  |                               |   | 56,830,344 
|Buildings                                           |  |                             | 83,907,737  |                               |   | 81,434,781 
|Equipment and fixtures                              |  |                             | 88,201,348  |                               |   | 84,240,573 
|Leasehold improvements and buildings on leased land |  |                             | 27,184,430  |                               |   | 21,590,570 
|Capitalized leases                                  |  |                             | 7,131,603   |                               |   | 7,131,603  
|Construction in progress                            |  |                             | 3,874,457   |                               |   | 6,435,214  
|                                                    |  |                             |             |                               |   |            
|                                                    |  |                             | 270,486,378 |                               |   | 257,663,085
|Less accumulated depreciation and amortization      |  |                             | 114,574,431 |                               |   | 109,461,135
|                                                    |  |                             |             |                               |   |            
|Net property and equipment                          |  |                             | 155,911,947 |                               |   | 148,201,950
|                                                    |  |                            
|Other assets                                        |  |                             |             |                               |   |            
|Goodwill                                            |  |                             | 740,644     |                               |   | 740,644    
|Other intangible assets                             |  |                             | 1,440,986   |                               |   | 1,400,659  
|Investments in land                                 |  |                             | 1,006,390   |                               |   | 974,370    
|Property held for sale                              |  |                             | 1,857,244   |                               |   | 1,857,244  
|Other                                               |  |                             | 4,209,142   |                               |   | 4,239,974  
|                                                    |  |                             |             |                               |   |            
|Total other assets                                  |  |                             | 9,254,406   |                               |   | 9,212,891  
|                                                    |  |                             |             |                               |   |            
|Total assets                                        |  | $                           | 175,898,264 |                               | $ | 167,465,582
|                                                    |  |                             |             |                               |   |            

---

Note: The balance sheet at May 29, 2005 was
derived from the audited consolidated financial statements at that date. Certain amounts, however, have been restated to correct an error in actuarial pension calculations, described more fully in Note B of the accompanying notes.



The accompanying notes are an integral part of these
statements.



4



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##### Table of Contents

LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                           |  |                             |             |                               |   |            
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----------- | ----------------------------- | - | -----------
|                                                                                                                           |  | December 11,2005(unaudited) |             | May 29, 2005 (Note)(restated)
|Current liabilities                                                                                                        |  |                             |             |                               |   |            
|Long-term obligations due within one year                                                                                  |  |                             |             |                               |   |            
|Long-term debt                                                                                                             |  | $                           | 8,747,594   |                               | $ | 7,598,182  
|Obligations under capitalized leases                                                                                       |  |                             | 495,000     |                               |   | 533,016    
|Self insurance                                                                                                             |  |                             | 877,864     |                               |   | 851,737    
|Accounts payable                                                                                                           |  |                             | 14,723,345  |                               |   | 12,799,147 
|Accrued expenses                                                                                                           |  |                             | 8,907,930   |                               |   | 8,763,971  
|Income taxes                                                                                                               |  |                             | 178,106     |                               |   | 416,125    
|                                                                                                                           |  |                             |             |                               |   |            
|Total current liabilities                                                                                                  |  |                             | 33,929,839  |                               |   | 30,962,178 
|                                                                                                                           |  |                            
|Long-term obligations                                                                                                      |  |                             |             |                               |   |            
|Long-term debt                                                                                                             |  |                             | 32,423,850  |                               |   | 29,570,481 
|Obligations under capitalized leases                                                                                       |  |                             | 2,917,050   |                               |   | 3,136,836  
|Self insurance                                                                                                             |  |                             | 1,950,409   |                               |   | 1,981,342  
|Deferred income taxes                                                                                                      |  |                             | 4,474,375   |                               |   | 4,830,375  
|Deferred compensation and other                                                                                            |  |                             | 3,838,904   |                               |   | 3,583,120  
|                                                                                                                           |  |                             |             |                               |   |            
|Total long-term obligations                                                                                                |  |                             | 45,604,588  |                               |   | 43,102,154 
|                                                                                                                           |  |                            
|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, 7,521,097 and 7,505,176 shares - stated value - $1 |  |                             | 7,521,097   |                               |   | 7,505,176  
|Additional contributed capital                                                                                             |  |                             | 62,531,392  |                               |   | 62,226,047 
|                                                                                                                           |  |                             |             |                               |   |            
|                                                                                                                           |  |                             | 70,052,489  |                               |   | 69,731,223 
|Retained earnings                                                                                                          |  |                             | 59,103,775  |                               |   | 56,490,185 
|                                                                                                                           |  |                             |             |                               |   |            
|                                                                                                                           |  |                             | 129,156,264 |                               |   | 126,221,408
|Less cost of treasury stock (2,447,323 and 2,449,394 shares)                                                               |  |                             | 32,792,427  |                               |   | 32,820,158 
|                                                                                                                           |  |                             |             |                               |   |            
|Total shareholders equity                                                                                                 |  |                             | 96,363,837  |                               |   | 93,401,250 
|                                                                                                                           |  |                             |             |                               |   |            
|Total liabilities and shareholders equity                                                                                 |  | $                           | 175,898,264 |                               | $ | 167,465,582
|                                                                                                                           |  |                             |             |                               |   |            



5



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders Equity

Twenty-eight weeks ended December 11, 2005 and December 12, 2004

(Unaudited)



|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|--------------------------------------------------- |  | --------------------------------------------- | --------- | ---------------------------- | - | ---------- | ---------------- |  | - | --------------- | - |  | ----- | ----------- | - |  | - | ---------- | -
|                                                    |  | Common stockat $1 per share -Shares andamount |           | Additionalcontributedcapital |   |            | Retainedearnings |  |   | Treasury shares |   |  | Total |            
|Balance at May 30, 2004 (as originally reported)    |  |                                               | 7,490,845 |                              |   | 61,976,027 |                  |  |   | 42,920,243      |   |  |       | (32,920,555 | ) |  |   | 79,466,560 |  
|Pension actuarial correction                        |  |                                               |          |                              |   |           |                  |  |   | 1,048,834       |   |  |       |            |   |  |   | 1,048,834  |  
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at May 30, 2004 (restated)                  |  |                                               | 7,490,845 |                              |   | 61,976,027 |                  |  |   | 43,969,077      |   |  |       | (32,920,555 | ) |  |   | 80,515,394 |  
|Net earnings for twenty-eight weeks (restated)      |  |                                               |          |                              |   |           |                  |  |   | 5,740,906       |   |  |       |            |   |  |   | 5,740,906  |  
|Stock options exercised - new shares issued         |  |                                               | 9,831     |                              |   | 146,995    |                  |  |   |                |   |  |       |            |   |  |   | 156,826    |  
|Stock options exercised - treasury shares re-issued |  |                                               |          |                              |   | (6,819     | )                |  |   |                |   |  |       | 69,173      |   |  |   | 62,354     |  
|Tax benefit from stock options exercised            |  |                                               |          |                              |   | 48,870     |                  |  |   |                |   |  |       |            |   |  |   | 48,870     |  
|Other treasury shares re-issued                     |  |                                               |          |                              |   | 38,862     |                  |  |   |                |   |  |       | 33,542      |   |  |   | 72,404     |  
|Employee stock purchase plan                        |  |                                               |          |                              |   | (32,612    | )                |  |   |                |   |  |       |            |   |  |   | (32,612    | )
|Cash dividends - $.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,663,570      | ) |  |       |            |   |  |   | (1,663,570 | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at December 12, 2004 (restated)             |  |                                               | 7,500,676 |                              |   | 62,171,323 |                  |  |   | 48,046,413      |   |  |       | (32,817,840 | ) |  |   | 84,900,572 |  
|                                                    |  |                                               |           |                              |  
|Net earnings for twenty-four weeks (restated)       |  |                                               |          |                              |   |           |                  |  |   | 8,999,919       |   |  |       |            |   |  |   | 8,999,919  |  
|Stock options exercised - new shares issued         |  |                                               | 4,500     |                              |   | 58,110     |                  |  |   |                |   |  |       |            |   |  |   | 62,610     |  
|Stock options exercised - treasury shares re-issued |  |                                               |          |                              |   | 3,710      |                  |  |   |                |   |  |       | 26,780      |   |  |   | 30,490     |  
|Tax benefit from stock options exercised            |  |                                               |          |                              |   | 25,629     |                  |  |   |                |   |  |       |            |   |  |   | 25,629     |  
|Other treasury shares re-issued                     |  |                                               |          |                              |   | 1,103      |                  |  |   |                |   |  |       | 1,393       |   |  |   | 2,496      |  
|Treasury shares acquired                            |  |                                               |          |                              |   |           |                  |  |   |                |   |  |       | (30,491     | ) |  |   | (30,491    | )
|Employee stock purchase plan                        |  |                                               |          |                              |   | (33,828    | )                |  |   |                |   |  |       |            |   |  |   | (33,828    | )
|Cash dividends - $.11 per share                     |  |                                               |          |                              |   |           |                  |  |   | (556,147        | ) |  |       |            |   |  |   | (556,147   | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at May 29, 2005 (restated)                  |  |                                               | 7,505,176 |                              |   | 62,226,047 |                  |  |   | 56,490,185      |   |  |       | (32,820,158 | ) |  |   | 93,401,250 |  
|                                                    |  |                                               |           |                              |  
|Net earnings for twenty-eight weeks                 |  |                                               |          |                              |   |           |                  |  |   | 4,284,802       |   |  |       |            |   |  |   | 4,284,802  |  
|Stock options exercised - new shares issued         |  |                                               | 15,921    |                              |   | 271,476    |                  |  |   |                |   |  |       |            |   |  |   | 287,397    |  
|Tax benefit from stock options exercised            |  |                                               |          |                              |   | 32,496     |                  |  |   |                |   |  |       |            |   |  |   | 32,496     |  
|Other treasury shares re-issued                     |  |                                               |          |                              |   | 24,098     |                  |  |   |                |   |  |       | 27,731      |   |  |   | 51,829     |  
|Employee stock purchase plan                        |  |                                               |          |                              |   | (22,725    | )                |  |   |                |   |  |       |            |   |  |   | (22,725    | )
|Cash dividends - $.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,671,212      | ) |  |       |            |   |  |   | (1,671,212 | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at December 11, 2005                        |  | $                                             | 7,521,097 |                              | $ | 62,531,392 |                  |  | $ | 59,103,775      |   |  | $     | (32,792,427 | ) |  | $ | 96,363,837 |  
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  



The accompanying notes are an
integral part of these statements.



6



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Twenty-eight weeks ended December 11, 2005 and December 12, 2004

(unaudited)



|                                                                             |  |      |             |   |                 |   |             |  
|---------------------------------------------------------------------------- |  | ---- | ----------- | - | --------------- | - | ----------- | -
|                                                                             |  | 2005 |             |   | 2004 (restated) |  
|Cash flows provided by (used in) operating activities:                       |  |      |             |   |                 |   |             |  
|Net earnings                                                                 |  | $    | 4,284,802   |   |                 | $ | 5,740,906   |  
|Adjustments to reconcile net earnings to net cash from operating activities: |  |      |             |   |                 |   |             |  
|Depreciation and amortization                                                |  |      | 6,860,709   |   |                 |   | 6,230,249   |  
|Loss (gain) on disposition of assets, including abandonments                 |  |      | 49,261      |   |                 |   | (30,317     | )
|                                                                             |  |      |             |   |                 |   |             |  
|                                                                             |  |      | 11,194,772  |   |                 |   | 11,940,838  |  
|                                                                             |  |     
|Changes in assets and liabilities:                                           |  |      |             |   |                 |   |             |  
|Accounts receivable                                                          |  |      | (342,838    | ) |                 |   | 117,871     |  
|Inventories                                                                  |  |      | (61,849     | ) |                 |   | (264,125    | )
|Prepaid expenses and sundry deposits                                         |  |      | (383,956    | ) |                 |   | (660,920    | )
|Other assets                                                                 |  |      | 20,927      |   |                 |   | 224,635     |  
|Prepaid, accrued and deferred income taxes                                   |  |      | (470,046    | ) |                 |   | 795,050     |  
|Tax benefit from stock options exercised                                     |  |      | 32,496      |   |                 |   | 48,870      |  
|Accounts payable                                                             |  |      | 1,366,083   |   |                 |   | (469,264    | )
|Accrued expenses                                                             |  |      | 143,959     |   |                 |   | (125,282    | )
|Self insured obligations                                                     |  |      | (4,806      | ) |                 |   | (336,761    | )
|Deferred compensation and other liabilities                                  |  |      | 255,784     |   |                 |   | 220,069     |  
|                                                                             |  |      |             |   |                 |   |             |  
|                                                                             |  |      | 555,754     |   |                 |   | (449,857    | )
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash provided by operating activities                                    |  |      | 11,750,526  |   |                 |   | 11,490,981  |  
|                                                                             |  |     
|Cash flows provided by (used in) investing activities:                       |  |      |             |   |                 |   |             |  
|Additions to property and equipment                                          |  |      | (14,574,428 | ) |                 |   | (13,138,614 | )
|Proceeds from disposition of property                                        |  |      |            |   |                 |   | 242,360     |  
|Change in other assets                                                       |  |      | (107,981    | ) |                 |   | (233,030    | )
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash (used in) investing activities                                      |  |      | (14,682,409 | ) |                 |   | (13,129,284 | )
|                                                                             |  |     
|Cash flows provided by (used in) financing activities:                       |  |      |             |   |                 |   |             |  
|Proceeds from borrowings                                                     |  |      | 8,500,000   |   |                 |   | 7,500,000   |  
|Payment of long-term debt and capital lease obligations                      |  |      | (4,755,021  | ) |                 |   | (4,030,572  | )
|Cash dividends paid                                                          |  |      | (1,113,097  | ) |                 |   | (1,108,034  | )
|Proceeds from stock options exercised - new shares issued                    |  |      | 287,397     |   |                 |   | 156,826     |  
|Proceeds from stock options exercised - treasury shares re-issued            |  |      |            |   |                 |   | 62,354      |  
|Other treasury shares re-issued                                              |  |      | 51,829      |   |                 |   | 72,404      |  
|Employee stock purchase plan                                                 |  |      | (22,725     | ) |                 |   | (32,612     | )
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash provided by financing activities                                    |  |      | 2,948,383   |   |                 |   | 2,620,366   |  
|                                                                             |  |      |             |   |                 |   |             |  
|Net increase in cash and equivalents                                         |  |      | 16,500      |   |                 |   | 982,063     |  
|Cash and equivalents at beginning of year                                    |  |      | 306,300     |   |                 |   | 294,410     |  
|                                                                             |  |      |             |   |                 |   |             |  
|Cash and equivalents at end of quarter                                       |  | $    | 322,800     |   |                 | $ | 1,276,473   |  
|                                                                             |  |      |             |   |                 |   |             |  
|Supplemental disclosures:                                                    |  |      |             |   |                 |   |             |  
|Interest paid                                                                |  | $    | 1,697,832   |   |                 | $ | 1,660,828   |  
|Income taxes paid (net of refunds, if any)                                   |  |      | 2,643,550   |   |                 |   | 2,381,137   |  
|Dividends declared but not paid                                              |  |      | 558,115     |   |                 |   | 555,536     |  
|Lease transactions capitalized                                               |  |      |            |   |                 |   | 537,777     |  



The accompanying notes are an integral
part of these statements.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Second Quarter Fiscal 2006, Ended December 11, 2005



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 are currently located in various regions of Ohio, Kentucky and Indiana. Golden Corral restaurants currently operate primarily in the greater metropolitan areas of Cincinnati, Dayton, Toledo and Cleveland, Ohio,
Louisville, Kentucky and Pittsburgh, Pennsylvania. Plans are in place to expand the Golden Corral operation into markets in Columbus, Ohio, 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.



Restatement of Financial Statements



The Company is in the process of restating its previously issued consolidated financial statements in its Form 10-K for the fiscal year ended May 29, 2005 and in its Form 10-Q for the first fiscal quarter ended September 18, 2005
due to the recent discovery of a formula error in the software program created by its actuarial consultant in June 1995 which caused the Companys net periodic pension costs to be overstated. These restatements, the impact of which has been
included with this Form 10-Q, will result in a reduction of payroll and related expenses in these prior periods associated with the Companys defined benefit pension plan for restaurant managers and office and commissary employees. The
cumulative effect of the software program error on total assets was understatements of $1,986,000 as of September 18, 2005 and $1,866,000 as of May 29, 2005. (See Note B  Restatement.)



Consolidation Practices



The accompanying consolidated financial statements include the accounts of Frischs
Restaurants, Inc. and all of its subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior year information to conform to the current year presentation.
In the opinion of management, these interim financial statements include all adjustments (all of which were normal and recurring, except for the restatement described above) necessary for a fair presentation of all periods presented.



Fiscal Year



The Companys fiscal year is the 52 or 53 week period ending on the Sunday 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.



Use of Estimates and 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. 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



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



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.



Cash and Cash Equivalents



Highly liquid investments with
original maturities of three months or less are considered to be cash equivalents. Outstanding checks in the amounts of $1,346,000 and $933,000 were included in accounts payable as of December 11, 2005 and May 29, 2005, respectively.



Receivables



The Company values its trade notes and accounts receivable on the reserve method. The
reserve balance was $30,000 as of December 11, 2005 and May 29, 2005. 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 the Company sells the food.



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 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 Statement of Financial Accounting
Standards No. 13 (SFAS 13), Accounting for Leases, as amended. Interest on borrowings is capitalized during active construction periods of new restaurants. Capitalized interest was $87,000 and $89,000 respectively, for the 28 weeks
ended December 11, 2005 and December 12, 2004, and was $30,000 and $64,000 respectively, for the twelve weeks ended December 11, 2005 and December 12, 2004. 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. Estimated remaining expenditures for new restaurant construction that was in progress as of December 11, 2005
totaled approximately $1,015,000 for one Big Boy restaurant. No Golden Corral restaurants were under construction at December 11, 2005. 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 judgment.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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. The installation of an enterprise information system was completed in September 2004. Preliminary project stage costs were expensed as incurred in fiscal years 2002 and 2003. Software
acquisition costs, installation, configuration, implementation and testing costs were capitalized during the application development stage. The capitalization of the project included interest costs together with payroll and payroll related costs for
certain employees who worked on the implementation. Capitalized interest for the 28 and twelve weeks ended December 12, 2004 was $20,000 and zero, respectively. Capitalized payroll and payroll related costs for the 28 and twelve weeks ended
December 12, 2004 was $96,000 and zero, respectively. Net of accumulated depreciation, the capitalized cost of the enterprise information system was $4,135,000 and $4,400,000, respectively, as of December 11, 2005 and May 29, 2005.



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 recorded during any of the periods presented in the accompanying consolidated financial statements.



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 SFAS 13, 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 term of the lease when no rent is paid to the landlord, often referred to as a rent holiday, that
generally occurs while a restaurant is being constructed on leased land. Effective September 19, 2005, the capitalization of rent recognized during rent holiday periods was discontinued and is now charged to expense.



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.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



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 December 11, 2005 and May 29, 2005, the carrying amount of goodwill acquired in prior years was $741,000, which is net of $308,000
amortized in prior years.



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, or
approximately $91,000 per year in each of the next five years for the 34 Golden Corral restaurants in operation as of December 11, 2005. Amortization for the 28 weeks ended December 11, 2005 and December 12, 2004 was $45,000 and
$39,000 respectively, and was $20,000 and $17,000 respectively, for the twelve weeks ended December 11, 2005 and December 12, 2004. 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.



An analysis of other intangible assets follows:



|                                                                                |  |                  |       |   |             |   |       |  
|------------------------------------------------------------------------------- |  | ---------------- | ----- | - | ----------- | - | ----- | -
|                                                                                |  | December 11,2005 |       |   | May 29,2005 |  
|                                                                                |  | (in thousands)   |      
|Golden Corral initial franchise fees subject to amortization                    |  | $                | 1,360 |   |             | $ | 1,200 |  
|Less accumulated amortization                                                   |  |                  | (294  | ) |             |   | (249  | )
|                                                                                |  |                  |       |   |             |   |       |  
|Carrying amount of Golden Corral initial franchise fees subject to amortization |  |                  | 1,066 |   |             |   | 951   |  
|                                                                                |  |                 
|Current portion of Golden Corral initial franchise fees subject to amortization |  |                  | (91   | ) |             |   | (83   | )
|Golden Corral fees not yet subject to amortization                              |  |                  | 305   |   |             |   | 365   |  
|                                                                                |  |                 
|Other intangible assets                                                         |  |                  | 161   |   |             |   | 168   |  
|                                                                                |  |                  |       |   |             |   |       |  
|Total other intangible assets                                                   |  | $                | 1,441 |   |             | $ | 1,401 |  
|                                                                                |  |                  |       |   |             |   |       |  



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 expense as incurred.



Revenue Recognition



Revenue from restaurant operations is recognized upon receipt of payment from customers. Revenue from the sale of gift cards is deferred for recognition until redeemed by
the customer. 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.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



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:



|              |  |                |       |                |   |              |  |              |     |  |   |    
|------------- |  | -------------- | ----- | -------------- | - | ------------ |  | ------------ | --- |  | - | ---
|              |  | 28 weeks ended |       | 12 weeks ended
|              |  | Dec. 11,2005   |       | Dec. 12,2004   |   | Dec. 11,2005 |  | Dec. 12,2004
|              |  | (in thousands)
|Golden Corral |  | $              | 969   |                | $ | 786          |  | $            | 309 |  | $ | 282
|Big Boy       |  |                | 162   |                |   | 264          |  |              | 61  |  |   | 45 
|              |  |                |       |                |   |              |  |              |     |  |   |    
|              |  | $              | 1,131 |                | $ | 1,050        |  | $            | 370 |  | $ | 327
|              |  |                |       |                |   |              |  |              |     |  |   |    



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 annually amounts 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 F  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) 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  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 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 the common stock option. Although the Company owns the mutual funds until the retirement of the
participants, the funds are invested at the direction of the participants. The FESP liability to the participants is included in Deferred compensation and other long term obligations in the 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 Nondeferred Cash Balance Plan. (See Note F  Pension Plans.)



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



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



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. Claims experience has historically been reviewed each quarter, with a more comprehensive annual review being performed during the first quarter of each
fiscal year. The annual review would typically result in adjustments to the self-insurance liabilities to more closely match claims experience. Active claims management and post accident drug testing in recent years has effected vast improvements in
claims experience. As a result, management determined that a comprehensive review should be performed every quarter and that adjustments to the self-insurance liabilities should be recorded as needed based on claims experience, beginning with the
third quarter of fiscal 2005 that ended March 6, 2005. (Accordingly, adjustments of $349,000 and $81,000 were recorded respectively in the third and fourth quarters of fiscal 2005 to lower self-insurance liabilities.) A lower rate is being used
in the current fiscal year to accrue initial self-insurance liabilities, which should reduce future quarterly adjustments.



Self-insurance liabilities were lowered by $392,000 and $614,000 respectively, during the first quarters of fiscal years 2006 and 2005. The twelve weeks ended
December 11, 2005 (the second quarter of fiscal 2006) required an adjustment to increase self-insured liabilities by $18,000.



Fair Value of Financial Instruments



With the exception of long-term debt (see Note C - Long-Term Debt), the carrying value of the Companys financial instruments approximates fair value.



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.



Stock Based Compensation



The Company accounts for stock options using the intrinsic value method of measuring
compensation expense prescribed by Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting
for Stock Based Compensation. No stock based employee compensation cost is included in net income, as all options granted during the periods presented had an exercise price equal to the market value of the stock on the date of the grant. In
accordance with Statement of Financial Standards No. 148 (SFAS 148), Accounting for Stock Based Compensation  Transition and Disclosure, the following table presents the effect on net income and earnings per share if the
Company had accounted for stock options using the fair value recognition provisions of SFAS 123:



13



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



|                                                                                                                                        |  |                                       |       |                        |   |              |  |                        |       |  |   |      
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ----- | ---------------------- | - | ------------ |  | ---------------------- | ----- |  | - | -----
|                                                                                                                                        |  | 28 weeks ended                        |       | 12 weeks ended        
|                                                                                                                                        |  | Dec. 11,2005                          |       | (restated)Dec. 12,2004 |   | Dec. 11,2005 |  | (restated)Dec. 12,2004
|                                                                                                                                        |  | (in thousands, except per share data)
|Net Income, as reported                                                                                                                 |  | $                                     | 4,285 |                        | $ | 5,741        |  | $                      | 1,683 |  | $ | 2,786
|Deduct: total stock-based employee compensation expense determined under fair value based method for all grants (a), net of tax
effects |  |                                       | 193   |                        |   | 258          |  |                        | 96    |  |   | 130  
|                                                                                                                                        |  |                                       |       |                        |   |              |  |                        |       |  |   |      
|Pro forma net income                                                                                                                    |  | $                                     | 4,092 |                        | $ | 5,483        |  | $                      | 1,587 |  | $ | 2,656
|                                                                                                                                        |  |                                       |       |                        |   |              |  |                        |       |  |   |      
|Earnings per share                                                                                                                      |  |                                       |       |                        |   |              |  |                        |       |  |   |      
|Basic  as reported                                                                                                                     |  | $                                     | 0.85  |                        | $ | 1.14         |  | $                      | .33   |  | $ | .55  
|Basic  pro forma                                                                                                                       |  | $                                     | 0.81  |                        | $ | 1.09         |  | $                      | .31   |  | $ | .53  
|                                                                                                                                        |  |                                       |       |                       
|Diluted  as reported                                                                                                                   |  | $                                     | 0.83  |                        | $ | 1.11         |  | $                      | .33   |  | $ | .54  
|Diluted  pro forma                                                                                                                     |  | $                                     | 0.79  |                        | $ | 1.06         |  | $                      | .31   |  | $ | .52  

---

|(a) | For a summary of options granted, refer to the stock option section of Note E  Capital Stock.
|--- | ----------------------------------------------------------------------------------------------



The estimated total stock-based employee compensation expense was determined using the modified Black-Scholes option pricing model with the
following weighted average assumptions:



|                                               |  |                |         |   |                |   |         |              |  |   |              |   |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                               |  | 28 weeks ended |         |   | 12 weeks ended |  
|                                               |  | Dec. 11,2005   |         |   | Dec. 12,2004   |   |         | Dec. 11,2005 |  |   | Dec. 12,2004 |  
|Dividend yield                                 |  |                | 1.80    | % |                |   | 1.61    | %            |  |   | 1.80         | % |  |   | 1.61    | %
|Expected volatility                            |  |                | 26      | % |                |   | 29      | %            |  |   | 26           | % |  |   | 29      | %
|Risk free interest rate                        |  |                | 3.87    | % |                |   | 3.82    | %            |  |   | 4.25         | % |  |   | 3.35    | %
|Expected lives                                 |  |                | 5 years |   |                |   | 5 years |              |  |   | 5 years      |   |  |   | 5 years |  
|Weighted average fair value of options granted |  | $              | 6.19    |   |                | $ | 8.13    |              |  | $ | 6.12         |   |  | $ | 6.79    |  



New Accounting Pronouncements



In December 2004, the Financial
Accounting Standards Board revised Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based Compensation. The revised SFAS 123 (SFAS 123(R)), Share-Based Payment, supersedes Accounting
Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees. SFAS 123(R) requires the fair value of stock options issued to be expensed. It is effective as of the beginning of the first annual reporting period
that begins after June 15, 2005, which will be the Companys fiscal year 2007 that begins May 29, 2006. The impact upon adoption is expected to be similar to the pro forma information required by SFAS 148 that is disclosed elsewhere
in Note A  Accounting Policies.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A - ACCOUNTING POLICIES (CONTINUED)



Statement of Financial Accounting Standards No. 151 (SFAS 151), Inventory Costs, clarifies accounting for abnormal amounts
of idle facility expense, freight, handling costs and spoilage. SFAS 151 is effective for inventory costs incurred during fiscal years that begin after June 15, 2005. Earlier application is permitted. Its adoption is not expected to have any
material impact on the Companys earnings.



The Financial Accounting
Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period, on October 6, 2005. This FSP requires rental costs associated with ground or building operating
leases that are incurred during a construction period to be recognized as rental expense. The capitalization of such rental costs is to cease upon application of the FSP to the first reporting period beginning after December 15, 2005. Earlier
adoption being permitted, the Company elected to cease capitalizing such rental costs effective with the quarter that began September 19, 2005 (see the discussion of Leases under Note A  Accounting Policies).



The Company reviewed all other significant newly issued accounting pronouncements, including
Statements of Financial Accounting Standards Nos. 152 Accounting for Real Estate Time Sharing Transactions and 153 Exchanges of Nonmonetary Assets, and concluded that, other than those disclosed herein, no material impact is
anticipated on the financial statements as a result of future adoption. Statement of Accounting Standards No. 154 (SFAS 154), Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement
No. 3 was issued in May 2005, effective for fiscal years beginning after December 15, 2005. The Company will comply with the provisions of SFAS 154 for any accounting changes or error corrections that occur after May 28, 2006.



NOTE B - RESTATEMENT (for error in actuarial
calculations relating to defined benefit pension plan)



In early December
2005, the Companys actuarial consulting firm informed the Company of an error in the software program created by the consultant in June 1995, to calculate certain items in connection with the Companys defined benefit pension plan for
managers, office employees and commissary employees. The error was in a formula the consultant used to calculate the pro-ration of an individuals benefits between pre- and post- 1993 accounts. According to the actuarial consultant, its formula
failed to properly prorate the benefit for service for plan participants with less than 28 years of service before normal retirement. Given the nature of the error, the Company could not have identified this error through its review of the actuarial
information provided by the actuarial consultant.



The actuarial consultant has
confirmed to the Company that the error has had no effect on any benefits paid to plan participants.



The formula error has impacted the calculation (computed under Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions) of the Companys net periodic pension
cost (and related balance sheet and income statement accounts) for that defined benefit pension plan, resulting in a series of quarterly/annual overstatements of the net periodic pension cost for each of the previous ten fiscal years. The
overstatement in each period is deemed by the Company to be immaterial for that period. The cumulative balance sheet effect of these errors as of May 30, 2005 is an understatement of prepaid assets of approximately $1,866,000, of which $268,000
was understated in Prepaid expenses and sundry deposits and $1,598,000 was understated in Other long-term assets.



15



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE B - RESTATEMENT (for error in actuarial calculations relating to defined benefit pension plan)
(CONTINUED)



The table below shows the financial statement effect of the error
on the Companys balance sheets for each of the last two fiscal years plus the first quarter of fiscal 2006:



|                                         |  |                |         |   |             |   |         |             |  |   |         |  
|---------------------------------------- |  | -------------- | ------- | - | ----------- | - | ------- | ----------- |  | - | ------- | -
|                                         |  | (in thousands) |        
|                                         |  | Sept. 18,2005  |         |   | May 29,2005 |   |         | May 30,2004 | 
|Prepaid pension cost  as reported       |  | $              | 2,761   |   |             | $ | 2,836   |             |  | $ | 2,957   |  
|Prepaid pension cost  as restated       |  |                | 4,747   |   |             |   | 4,702   |             |  |   | 4,546   |  
|Amount of understatement                 |  |                | (1,986  | ) |             |   | (1,866  | )           |  |   | (1,589  | )
|                                         |  |                |        
|Total assets  as reported               |  |                | 170,600 |   |             |   | 165,599 |             |  |   | 156,848 |  
|Total assets  as restated               |  |                | 172,586 |   |             |   | 167,465 |             |  |   | 158,437 |  
|Amount of understatement                 |  |                | (1,986  | ) |             |   | (1,866  | )           |  |   | (1,589  | )
|As a percentage of total assets          |  |                | 1.2     | % |             |   | 1.1     | %           |  |   | 1.0     | %
|                                         |  |                |        
|Deferred income taxes  as reported      |  |                | 4,372   |   |             |   | 4,196   |             |  |   | 3,540   |  
|Deferred income taxes - as restated      |  |                | 5,047   |   |             |   | 4,830   |             |  |   | 4,080   |  
|Amount of understatement                 |  |                | (675    | ) |             |   | (634    | )           |  |   | (540    | )
|                                         |  |                |        
|Total shareholders equity  as reported |  |                | 93,738  |   |             |   | 92,170  |             |  |   | 79,467  |  
|Total shareholders equity  as restated |  |                | 95,049  |   |             |   | 93,402  |             |  |   | 80,516  |  
|Amount of understatement                 |  |                | (1,311  | ) |             |   | (1,232  | )           |  |   | (1,049  | )
|As a percentage of shareholders equity  |  |                | 1.4     | % |             |   | 1.3     | %           |  |   | 1.3     | %



The table below shows the financial
statement effect of the error on the Companys income statements for each of the last five fiscal years (in thousands, except per share amounts):



|                                          |  |      |        |    |      |   |        |      |  |   |        |    |  |      |        |    |  |   |        |   
|----------------------------------------- |  | ---- | ------ | -- | ---- | - | ------ | ---- |  | - | ------ | -- |  | ---- | ------ | -- |  | - | ------ | --
|                                          |  | 2005 |        |    | 2004 |   |        | 2003 |  |   | 2002   |    |  | 2001 |       
|Payroll and related expense  as reported |  | $    | 92,629 |    |      | $ | 88,061 |      |  | $ | 81,004 |    |  | $    | 73,811 |    |  | $ | 64,826 |   
|Payroll and related expense  as restated |  |      | 92,352 |    |      |   | 87,818 |      |  |   | 80,815 |    |  |      | 73,633 |    |  |   | 64,662 |   
|Amount of overstatement                   |  |      | 277    |    |      |   | 243    |      |  |   | 189    |    |  |      | 178    |    |  |   | 164    |   
|As a percentage of sales                  |  |      | (0.1   | )% |      |   | (0.1   | )%   |  |   | (0.1   | )% |  |      | (0.1   | )% |  |   | (0.1   | )%
|                                          |  |      |        |    |     
|Net earnings  as reported                |  |      | 14,558 |    |      |   | 10,529 |      |  |   | 9,778  |    |  |      | 7,971  |    |  |   | 7,686  |   
|Net earnings  as restated                |  |      | 14,741 |    |      |   | 10,689 |      |  |   | 9,903  |    |  |      | 8,088  |    |  |   | 7,794  |   
|Amount of understatement                  |  |      | (183   | )  |      |   | (160   | )    |  |   | (125   | )  |  |      | (117   | )  |  |   | (108   | ) 
|As a percentage of net earnings           |  |      | 1.3    | %  |      |   | 1.5    | %    |  |   | 1.3    | %  |  |      | 1.5    | %  |  |   | 1.4    | % 
|                                          |  |      |        |    |     
|Diluted EPS  as reported                 |  |      | 2.82   |    |      |   | 2.05   |      |  |   | 1.95   |    |  |      | 1.59   |    |  |   | 1.49   |   
|Diluted EPS  as restated                 |  |      | 2.86   |    |      |   | 2.08   |      |  |   | 1.97   |    |  |      | 1.61   |    |  |   | 1.51   |   
|Amount of understatement                  |  |      | (.04   | )  |      |   | (.03   | )    |  |   | (.02   | )  |  |      | (.02   | )  |  |   | (.02   | ) 
|As a percentage of diluted EPS            |  |      | 1.4    | %  |      |   | 1.5    | %    |  |   | 1.0    | %  |  |      | 1.3    | %  |  |   | 1.3    | % 



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE B - RESTATEMENT (for error in actuarial calculations relating to defined benefit pension plan)
(CONTINUED)



The table below shows the financial statement effect of the error
on the Companys income statements for each of the last five fiscal quarters, (in thousands, except per share amounts):



|                                          |  |               |        |    |               |   |        |               |  |   |               |    |  |               |        |    |  |   |        |   
|----------------------------------------- |  | ------------- | ------ | -- | ------------- | - | ------ | ------------- |  | - | ------------- | -- |  | ------------- | ------ | -- |  | - | ------ | --
|Number of weeks in quarter:               |  | 16 1st Q 2006 |        |    | 12 4th Q 2005 |   |        | 12 3rd Q 2005 |  |   | 12 2nd Q 2005 |    |  | 16 1st Q 2005 |       
|Payroll and related expense  as reported |  | $             | 28,672 |    |               | $ | 21,432 |               |  | $ | 21,005        |    |  | $             | 22,200 |    |  | $ | 27,993 |   
|Payroll and related expense  as restated |  |               | 28,552 |    |               |   | 21,368 |               |  |   | 20,941        |    |  |               | 22,136 |    |  |   | 27,908 |   
|Amount of overstatement                   |  |               | 120    |    |               |   | 64     |               |  |   | 64            |    |  |               | 64     |    |  |   | 85     |   
|As a percentage of sales                  |  |               | (0.1   | )% |               |   | (0.1   | )%            |  |   | (0.1          | )% |  |               | (0.1   | )% |  |   | (0.1   | )%
|                                          |  |               |        |    |              
|Net earnings  as reported                |  |               | 2,522  |    |               |   | 2,772  |               |  |   | 6,143         |    |  |               | 2,744  |    |  |   | 2,899  |   
|Net earnings  as restated                |  |               | 2,601  |    |               |   | 2,814  |               |  |   | 6,185         |    |  |               | 2,786  |    |  |   | 2,956  |   
|Amount of understatement                  |  |               | (79    | )  |               |   | (42    | )             |  |   | (42           | )  |  |               | (42    | )  |  |   | (57    | ) 
|As a percentage of net earnings           |  |               | 3.1    | %  |               |   | 1.5    | %             |  |   | 0.7           | %  |  |               | 1.5    | %  |  |   | 2.0    | % 
|                                          |  |               |        |    |              
|Diluted EPS  as reported                 |  |               | .49    |    |               |   | .54    |               |  |   | 1.19          |    |  |               | .53    |    |  |   | .56    |   
|Diluted EPS  as restated                 |  |               | .50    |    |               |   | .55    |               |  |   | 1.20          |    |  |               | .54    |    |  |   | .57    |   
|Amount of understatement                  |  |               | (.01   | )  |               |   | (.01   | )             |  |   | (.01          | )  |  |               | (.01   | )  |  |   | (.01   | ) 
|As a percentage of diluted EPS            |  |               | 2.0    | %  |               |   | 1.9    | %             |  |   | 0.8           | %  |  |               | 1.9    | %  |  |   | 1.8    | % 



NOTE
C - LONG-TERM DEBT



|                             |  |                         |       |                        |   |                         |  |                        |       |  |   |       
|---------------------------- |  | ----------------------- | ----- | ---------------------- | - | ----------------------- |  | ---------------------- | ----- |  | - | ------
|                             |  | December 11, 2005       |       | May 29, 2005          
|                             |  | Payable within one year |       | Payable after one year |   | Payable within one year |  | Payable after one year
|                             |  | (in thousands)         
|Construction Draw Facility - |  |                         |       |                        |   |                         |  |                        |       |  |   |       
|Construction Phase Loans     |  | $                       |      |                        | $ | 1,500                   |  | $                      |      |  | $ | 2,000 
|Term Loans                   |  |                         | 8,748 |                        |   | 27,924                  |  |                        | 7,598 |  |   | 24,570
|Bullet Loan                  |  |                         |      |                        |   | 3,000                   |  |                        |      |  |   | 3,000 
|Revolving Credit Loan        |  |                         |      |                        |   |                        |  |                        |      |  |   |      
|                             |  |                         |       |                        |   |                         |  |                        |       |  |   |       
|                             |  | $                       | 8,748 |                        | $ | 32,424                  |  | $                      | 7,598 |  | $ | 29,570
|                             |  |                         |       |                        |   |                         |  |                        |       |  |   |       



The
portion payable after one year matures as follows:



|                      |  |  |  |                   |        |              |   |       
|--------------------- |  |  |  | ----------------- | ------ | ------------ | - | ------
|                      |  |  |  | December 11, 2005 |        | May 29, 2005
|                      |  |  |  | (in thousands)   
|Period ending in 2007 |  |  |  | $                 | 9,547  |              | $ | 9,363 
|2008                  |  |  |  |                   | 10,121 |              |   | 9,726 
|2009                  |  |  |  |                   | 5,039  |              |   | 5,161 
|2010                  |  |  |  |                   | 3,689  |              |   | 2,780 
|2011                  |  |  |  |                   | 2,662  |              |   | 2,058 
|Subsequent to 2011    |  |  |  |                   | 1,366  |              |   | 482   
|                      |  |  |  |                   |        |              |   |       
|                      |  |  |  | $                 | 32,424 |              | $ | 29,570
|                      |  |  |  |                   |        |              |   |       



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE C - LONG-TERM DEBT (CONTINUED)



On September 27, 2005, 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 Golden Corral construction, was amended to increase the maximum that may be borrowed from $61,500,000 to $76,500,000. As $57,500,000 had already been cumulatively drawn, the amount
available to be borrowed was effectively increased from $4,000,000 to $19,000,000. The expiration for borrowing under the Facility was extended from September 1, 2006 to September 1, 2008.



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. Upon conversion, the Company may select a fixed interest rate over the chosen term or may
choose among various adjustable rate options.



Fixed interest rates have been
chosen for all of the Term Loans (original notes for $61,500,000), the weighted average of which is 6.08 percent, and all of the Term Loans are being repaid in 84 equal monthly installments of principal and interest aggregating $913,000, expiring in
various periods ranging from May 2006 through December 2012. Prepayments of the Term Loans are permissible upon payment of sizeable prepayment fees and other amounts. As of December 11, 2005, $1,500,000 remained in the Construction Phase of the
Facility, which was subsequently converted to Term Loan on January 1, 2006. Any outstanding Construction Phase Loan that has not been converted into a Term Loan shall mature and be payable in full on September 1, 2008, unless extended.



The Bullet Loan bears interest at a fixed rate of 5.57 percent. It matures and
is payable in one installment on December 31, 2007. On September 27, 2005, four of six mortgages that had been held as collateral for the Bullet Loan were released pursuant to the amended and restated loan agreements. The approximate book
value of the real property secured by the two remaining mortgages is $4,291,000 as of December 11, 2005.



The Revolving Credit Loan allows for borrowing of up to $5,000,000 to fund temporary working capital needs. The loan, none of which was outstanding as of December 11, 2005, is subject to a 30 consecutive day
out-of-debt period each year. The amended and restated loan agreements extended its maturity from September 1, 2006 to September 1, 2008. Interest 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.



These loan agreements contain covenants relating to tangible net worth, cash flow, 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 December 11, 2005. Compensating balances are not required by these loan agreements.



Being variable rated interest loans, the fair values of any outstanding balances in the Construction Phase of the Construction Draw Facility or the Revolving Credit Loan
approximate carrying value as of December 11, 2005 and May 29, 2005. The fair value of the Bullet Loan also approximates carrying value. The fair values of the fixed rate Term Loans shown in the following table are based on fixed rates
that would be available for loans with identical terms and maturities, if borrowed at December 11, 2005 and May 29, 2005.



|                                              |  |                   |        |              |   |                |  |            |        |  |   |       
|--------------------------------------------- |  | ----------------- | ------ | ------------ | - | -------------- |  | ---------- | ------ |  | - | ------
|                                              |  | December 11, 2005 |        | May 29, 2005
|                                              |  | Carrying value    |        | Fair value   |   | Carrying value |  | Fair value
|                                              |  | (in thousands)   
|Term Loans - under Construction Draw Facility |  | $                 | 36,672 |              | $ | 35,681         |  | $          | 32,168 |  | $ | 31,715



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D - LEASED PROPERTY



Although it is the Companys policy to own its restaurant locations whenever possible, 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 fifteen years, and/or have favorable purchase options. As of December 11, 2005, 32 restaurants were in operation on leased
premises, ten of which are capital leases. Delivery equipment is also held under capitalized leases expiring during periods through 2012. 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 |       
|                              |  | December 11, 2005 |        |   | May 29, 2005 |  
|                              |  | (in thousands)    |       
|Restaurant facilities         |  | $                 | 5,967  |   |              | $ | 5,967  |  
|Equipment                     |  |                   | 1,165  |   |              |   | 1,165  |  
|                              |  |                   |        |   |              |   |        |  
|                              |  |                   | 7,132  |   |              |   | 7,132  |  
|Less accumulated amortization |  |                   | (6,072 | ) |              |   | (5,841 | )
|                              |  |                   |        |   |              |   |        |  
|                              |  | $                 | 1,060  |   |              | $ | 1,291  |  
|                              |  |                   |        |   |              |   |        |  



As of December 11, 2005, 22 of
the Companys restaurant properties are occupied pursuant to operating leases, eight of which are ground leases for Golden Corral restaurants. The Company is also obligated to a ground lease for a Big Boy restaurant that is currently under
construction and is scheduled to open in February 2006. Office space is occupied under an operating lease that expires during 2013, with renewal options available through 2023. The Company has the option to purchase the office property in 2023.



Rent expense under operating leases:



|                    |  |                |       |                |   |               |  |               |     |  |   |    
|------------------- |  | -------------- | ----- | -------------- | - | ------------- |  | ------------- | --- |  | - | ---
|                    |  | 28 weeks ended |       | 12 weeks ended
|                    |  | Dec. 11, 2005  |       | Dec. 12, 2004  |   | Dec. 11, 2005 |  | Dec. 12, 2004
|                    |  | (in thousands)
|Minimum rentals     |  | $              | 1,025 |                | $ | 837           |  | $             | 471 |  | $ | 352
|Contingent payments |  |                | 28    |                |   | 32            |  |               | 15  |  |   | 18 
|                    |  |                |       |                |   |               |  |               |     |  |   |    
|                    |  | $              | 1,053 |                | $ | 869           |  | $             | 486 |  | $ | 370
|                    |  |                |       |                |   |               |  |               |     |  |   |    



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D - LEASED PROPERTY



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



|                             |  |                    |       |   |                  |   |       
|---------------------------- |  | ------------------ | ----- | - | ---------------- | - | ------
|Period ending December 11,   |  | Capitalized leases |       |   | Operating leases
|                             |  | (in thousands)    
|2006                         |  | $                  | 776   |   |                  | $ | 1,751 
|2007                         |  |                    | 2,777 |   |                  |   | 1,776 
|2008                         |  |                    | 189   |   |                  |   | 1,764 
|2009                         |  |                    | 116   |   |                  |   | 1,720 
|2010                         |  |                    | 81    |   |                  |   | 1,439 
|2011 to 2025                 |  |                    | 153   |   |                  |   | 17,409
|                             |  |                    |       |   |                  |   |       
|Total                        |  |                    | 4,092 |   |                  | $ | 25,859
|                             |  |                    |       |   |                  |   |       
|Amount representing interest |  |                    | (680  | ) |                  |   |       
|                             |  |                    |       |   |                  |   |       
|Present value of obligations |  |                    | 3,412 |   |                  |   |       
|Portion due within one-year  |  |                    | (495  | ) |                  |   |       
|                             |  |                    |       |   |                  |   |       
|Long-term obligations        |  | $                  | 2,917 |   |                  |   |       
|                             |  |                    |       |   |                  |   |       



Not included in the above table is a
contingent liability 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. Should the third party default, the Company has the right to re-assign the
lease.



NOTE E - CAPITAL STOCK



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 Plan will continue in effect until terminated by the Board of Directors. Subject to adjustment for changes in capitalization, the maximum number of shares of common stock that the Plan may issue is 800,000. 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 Compensation Committee (the Committee) of the Board of Directors. 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 10 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.



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).



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE E  CAPITAL STOCK (CONTINUED)



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 10 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 December 11, 2005, options to purchase 84,500 shares had been granted, including
20,000 that belong to the President and Chief Executive Officer. The Committee has determined that outstanding options belonging to the President and Chief Executive Officer vest six months from the date of grant. The Committee has further
determined that outstanding options granted to other key employees vest in three equal annual installments and that outstanding options granted to non-employee members of the Board of Directors vest one year from the date of grant. As of
December 11, 2005, 724,000 shares remain available to be optioned, including 8,500 shares granted that were subsequently forfeited, which are again available for grants in accordance with the Re-Use of Shares provision of the Plan.



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.



Other Stock Option Plans



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. As of December 11, 2005, 6,204 shares remained available to be optioned. Of the 556,228 cumulative shares optioned to date,
342,821 remain outstanding as of December 11, 2005, 211,478 of which belong to the President and Chief Executive Officer.



Shares may be optioned to employees at not less than 75% of fair market value on the date granted. The Amended Plan added a provision for automatic, annual stock option
grants of 1,000 shares to each of the Companys non-employee directors. The per share exercise price for options granted to non-employee directors must equal 100 percent of fair market value on the date of grant. The Amended Plan also added a
Company right to repurchase shares acquired on exercise of options if an optionee chooses to dispose of such shares. Stock appreciation rights are not provided for under the Amended Plan. All outstanding options under the 1993 Plan were granted at
fair market value and expire 10 years from the date of grant. Outstanding options to the President and Chief Executive Officer generally vest in six months, while options granted to non-employee members of the Board of Directors vest after one year.
Outstanding options granted to other key employees vest in three equal annual installments.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE E  CAPITAL STOCK (CONTINUED)



The changes in outstanding and exercisable options involving both the 1993 Stock Option Plan and the 2003 Stock Option and Incentive Plan:



|                                 |  |                   |   |                   |                              |       |              |         |   |                              |   |      
|-------------------------------- |  | ----------------- | - | ----------------- | ---------------------------- | ----- | ------------ | ------- | - | ---------------------------- | - | -----
|                                 |  | 28 weeks ended   
|                                 |  | December 11, 2005 |   | December 12, 2004
|                                 |  | No. ofshares      |   |                   | Weighted avg.price per share |       | No. ofshares |         |   | Weighted avg.price per share
|Outstanding at beginning of year |  | 376,577           |   |                   | $                            | 18.90 |              | 319,993 |   |                              | $ | 15.97
|Granted during the 28 weeks      |  | 77,500            |   |                   | $                            | 24.50 |              | 81,000  |   |                              | $ | 29.37
|Exercised during the 28 weeks    |  | (15,921           | ) |                   | $                            | 18.05 |              | (14,997 | ) |                              | $ | 14.61
|Expired during the 28 weeks      |  |                  |   |                   | $                            |      |              |        |   |                              | $ |     
|Forfeited during the 28 weeks    |  | (19,335           | ) |                   | $                            | 25.90 |              | (1,919  | ) |                              | $ | 18.94
|                                 |  |                   |   |                   |                              |       |              |         |   |                              |   |      
|Outstanding at end of quarter    |  | 418,821           |   |                   | $                            | 19.65 |              | 384,077 |   |                              | $ | 18.84
|                                 |  |                   |   |                   |                              |       |              |         |   |                              |   |      
|Exercisable at beginning of year |  | 283,903           |   |                   | $                            | 17.04 |              | 227,314 |   |                              | $ | 14.94
|                                 |  |                   |   |                   |                              |       |              |         |   |                              |   |      
|Exercisable at end of quarter    |  | 315,319           |   |                   | $                            | 17.84 |              | 260,571 |   |                              | $ | 15.58
|                                 |  |                   |   |                   |                              |       |              |         |   |                              |   |      



Stock options outstanding and
exercisable as of December 11, 2005 for the 1993 Stock option Plan and the 2003 Stock option and Incentive Plan:



|                                   |  |               |  |                                  |       |                                          |           
|---------------------------------- |  | ------------- |  | -------------------------------- | ----- | ---------------------------------------- | ----------
|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                   |  | 72,229        |  | $                                | 10.62 |                                          | 4.36 years
|$13.01 to $18.00                   |  | 58,085        |  | $                                | 13.74 |                                          | 5.55 years
|$18.01 to $24.20                   |  | 160,507       |  | $                                | 19.78 |                                          | 7.27 years
|$24.21 to $30.13                   |  | 128,000       |  | $                                | 27.25 |                                          | 8.96 years
|                                   |  |               |  |                                  |       |                                          |           
|$ 8.31 to $30.13                   |  | 418,821       |  | $                                | 19.65 |                                          | 7.05 years
|                                   |  |               | 
|Exercisable:                       |  |               |  |                                  |       |                                          |           
|$ 8.31 to $13.00                   |  | 72,229        |  | $                                | 10.62 |                                          |          
|$13.01 to $18.00                   |  | 58,085        |  | $                                | 13.74 |                                          |          
|$18.01 to $24.20                   |  | 135,998       |  | $                                | 19.46 |                                          |          
|$24.21 to $30.13                   |  | 49,007        |  | $                                | 28.87 |                                          |          
|                                   |  |               |  |                                  |       |                                          |           
|$ 8.31 to $30.13                   |  | 315,319       |  | $                                | 17.84 |                                          |          



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 October 31, 2005 (latest available data), 109,868 shares had been purchased
through the plan. Shares purchased through the Plan are held by the Plans custodian until withdrawn or distributed. As of October 31, 2005, the custodian held 37,371 shares on behalf of employees.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE E  CAPITAL STOCK (CONTINUED)



A total of 58,492 common shares (as adjusted for changes in capitalization in earlier years) were reserved for issuance under the
non-qualified Executive Savings Plan (see Note A  Accounting Policies) when it was established in 1993. As of December 11, 2005, 48,330 shares remained in the reserve, including 10,162 shares allocated but not issued to participants.



There are no other outstanding options,
warrants or rights.



Treasury Stock



As of December 11, 2005, the Companys treasury held 2,447,323
shares of the Companys common stock. From September 1998 through January 2002, 1,135,286 shares of the Companys common stock were repurchased at a cost of $12,162,000 pursuant to repurchase programs authorized by the Companys Board
of Directors. No shares were repurchased under the two-year authorization that expired October 7, 2004.



Most of the remaining shares held in the treasury were acquired in 1997 pursuant to the terms of a modified Dutch Auction self-tender offer.



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           |  | Stockequivalents |      | Diluted earnings per share
|                             |  | Weighted averageshares outstanding |  | EPS              |      |                            |         | Weighted averageshares outstanding |           | EPS
|28 weeks ended:              |  |                                    |  |                  |      |                            |         |                                    |           |     |   |     
|                             |  |                                    |  |                  |     
|December 11, 2005            |  | 5,061,406                          |  | $                | 0.85 |                            | 100,295 |                                    | 5,161,701 |     | $ | 0.83
|December 12, 2004 (restated) |  | 5,036,682                          |  | $                | 1.14 |                            | 116,355 |                                    | 5,153,037 |     | $ | 1.11
|                             |  |                                    |  |                  |     
|12 weeks ended:              |  |                                    |  |                  |      |                            |         |                                    |           |     |   |     
|                             |  |                                    |  |                  |     
|December 11, 2005            |  | 5,066,385                          |  | $                | .33  |                            | 95,881  |                                    | 5,162,266 |     | $ | .33 
|December 12, 2004 (restated) |  | 5,039,103                          |  | $                | .55  |                            | 105,119 |                                    | 5,144,222 |     | $ | .54 



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE F - PENSION PLANS



As discussed more fully in Note A  Accounting Policies, the Company sponsors two qualified defined benefit pension plans plus an
unfunded non qualified Supplemental Executive Retirement Plan (SERP) for highly compensated employees (HCEs). Also, see Note B  Restatement. The following table shows the components of net periodic pension cost for all
periods presented in these consolidated financial statements:



|                                                                  |  |                |        |   |                        |   |        |              |  |   |                        |   |  |   |      |  
|----------------------------------------------------------------- |  | -------------- | ------ | - | ---------------------- | - | ------ | ------------ |  | - | ---------------------- | - |  | - | ---- | -
|                                                                  |  | 28 weeks ended |        |   | 12 weeks ended         |  
|Net periodic pension cost components                              |  | Dec. 11, 2005  |        |   | (restated)Dec. 12,2004 |   |        | Dec. 11,2005 |  |   | (restated)Dec. 12,2004 |  
|                                                                  |  | (in thousands) |       
|Service cost                                                      |  | $              | 894    |   |                        | $ | 873    |              |  | $ | 405                    |   |  | $ | 348  |  
|Interest cost                                                     |  |                | 790    |   |                        |   | 770    |              |  |   | 357                    |   |  |   | 306  |  
|Expected return on plan assets                                    |  |                | (1,068 | ) |                        |   | (1,043 | )            |  |   | (484                   | ) |  |   | (415 | )
|Amortization of prior service cost                                |  |                | 38     |   |                        |   | 35     |              |  |   | 17                     |   |  |   | 14   |  
|Amortization of loss                                              |  |                | 269    |   |                        |   | 261    |              |  |   | 126                    |   |  |   | 108  |  
|                                                                  |  |                |        |   |                        |   |        |              |  |   |                        |   |  |   |      |  
|Net periodic pension cost                                         |  | $              | 923    |   |                        | $ | 896    |              |  | $ | 421                    |   |  | $ | 361  |  
|                                                                  |  |                |        |   |                        |   |        |              |  |   |                        |   |  |   |      |  
|Weighted average discount rate                                    |  |                | 6.0    | % |                        |   | 6.5    | %            |  |   | 6.0                    | % |  |   | 6.5  | %
|Weighted average rate of compensation increase                    |  |                | 4.5    | % |                        |   | 5.0    | %            |  |   | 4.5                    | % |  |   | 5.0  | %
|Weighted average expected long-term rate of return on plan assets |  |                | 8.5    | % |                        |   | 8.5    | %            |  |   | 8.5                    | % |  |   | 8.5  | %



The Company anticipates making
contributions to the two qualified defined benefit pension plans sufficient to satisfy legal funding requirements for the year ending May 28, 2006 plus additional tax-deductible amounts that may be deemed advisable.



Compensation expense (not included in the net periodic pension cost described above) relating
to the Nondeferred Cash Balance Plan (see Note A  Accounting Policies) was $268,000 and $275,000 respectively, during the 28 weeks ended December 11, 2005 and December 12, 2004, and was $109,000 and $124,000 respectively, for the
twelve weeks ended December 11, 2005 and December 12, 2004. Contributions of $367,000 and $521,000 respectively, were made to the Plan in December 2005 and December 2004.



The Company sponsors two 401(k) plans (see Note A  Accounting Policies). In addition, a non-qualified Executive Savings Plan is
sponsored for certain HCEs who have been disqualified from participation in the 401(k) plans (see Note A  Accounting Policies). In the 28 weeks ended December 11, 2005 and December 12, 2004, matching contributions to the 401(k)
plans amounted to $85,000 and $91,000 respectively, and were $36,000 and $38,000 respectively, during the twelve weeks ended December 11, 2005 and December 12, 2004. Matching contributions to the Executive Savings Plan were $12,000 and
$12,000 respectively, during the 28 weeks ended December 11, 2005 and December 12, 2004, and were $5,000 and $4,000 respectively, during the twelve weeks ended December 11, 2005 and December 12, 2004.



The Company does not sponsor post retirement health care
benefits.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE G  SEGMENT INFORMATION



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



|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|-------------------------------- |  | -------------- | ------- | - | ---------------------- | - | ------- | ------------ |  | - | ---------------------- | - |  | - | ------ | -
|                                 |  | 28 weeks ended |         |   | 12 weeks ended         |  
|                                 |  | Dec. 11,2005   |         |   | (restated)Dec. 12,2004 |   |         | Dec. 11,2005 |  |   | (restated)Dec. 12,2004 |  
|                                 |  | (in thousands) |        
|Sales                            |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 99,528  |   |                        | $ | 100,594 |              |  | $ | 44,394                 |   |  |   | 45,401 |  
|Golden Corral                    |  |                | 53,958  |   |                        |   | 50,216  |              |  |   | 22,559                 |   |  |   | 21,346 |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 153,486 |   |                        | $ | 150,810 |              |  | $ | 66,953                 |   |  | $ | 66,747 |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Earnings before income taxes     |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 12,033  |   |                        | $ | 12,297  |              |  | $ | 5,559                  |   |  | $ | 5,978  |  
|Opening expense                  |  |                | (162    | ) |                        |   | (264    | )            |  |   | (60                    | ) |  |   | (45    | )
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Total Big Boy                    |  |                | 11,871  |   |                        |   | 12,033  |              |  |   | 5,499                  |   |  |   | 5,933  |  
|                                 |  |                |         |  
|Golden Corral                    |  |                | 743     |   |                        |   | 2,502   |              |  |   | (542                   | ) |  |   | 869    |  
|Opening expense                  |  |                | (969    | ) |                        |   | (786    | )            |  |   | (310                   | ) |  |   | (282   | )
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Total Golden Corral              |  |                | (226    | ) |                        |   | 1,716   |              |  |   | (852                   | ) |  |   | 587    |  
|                                 |  |                |         |  
|Total restaurant level profit    |  |                | 11,645  |   |                        |   | 13,749  |              |  |   | 4,647                  |   |  |   | 6,520  |  
|                                 |  |                |         |  
|Administrative expense           |  |                | (4,377  | ) |                        |   | (4,159  | )            |  |   | (1,788                 | ) |  |   | (1,791 | )
|Franchise fees and other revenue |  |                | 663     |   |                        |   | 733     |              |  |   | 290                    |   |  |   | 311    |  
|Gain on asset sales              |  |                |        |   |                        |   | 89      |              |  |   |                       |   |  |   | 89     |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Operating profit                 |  |                | 7,931   |   |                        |   | 10,412  |              |  |   | 3,149                  |   |  |   | 5,129  |  
|                                 |  |                |         |  
|Interest expense                 |  |                | (1,440  | ) |                        |   | (1,446  | )            |  |   | (657                   | ) |  |   | (641   | )
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Earnings before income taxes     |  | $              | 6,491   |   |                        | $ | 8,966   |              |  | $ | 2,492                  |   |  | $ | 4,488  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Depreciation and amortization    |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 4,072   |   |                        | $ | 3,884   |              |  | $ | 1,785                  |   |  | $ | 1,688  |  
|Golden Corral                    |  |                | 2,789   |   |                        |   | 2,346   |              |  |   | 1,229                  |   |  |   | 1,053  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 6,861   |   |                        | $ | 6,230   |              |  | $ | 3,014                  |   |  | $ | 2,741  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Capital expenditures             |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 6,004   |   |                        | $ | 5,973   |              |  | $ | 3,203                  |   |  | $ | 2,746  |  
|Golden Corral                    |  |                | 8,570   |   |                        |   | 7,166   |              |  |   | 3,298                  |   |  |   | 1,394  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 14,574  |   |                        | $ | 13,139  |              |  | $ | 6,501                  |   |  | $ | 4,140  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  



|                    |  |              |         |                      |   |        
|------------------- |  | ------------ | ------- | -------------------- | - | -------
|                    |  | As of       
|                    |  | Dec. 11,2005 |         | (restated)May29,2005
|Identifiable assets |  |              |         |                      |   |        
|Big Boy             |  | $            | 86,898  |                      | $ | 84,944 
|Golden Corral       |  |              | 89,000  |                      |   | 82,522 
|                    |  |              |         |                      |   |        
|                    |  | $            | 175,898 |                      | $ | 167,466
|                    |  |              |         |                      |   |        



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE H  CONTINGENCIES



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.) On July 30, 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 claims is owed by the Company under the construction contract. The Company denies the claim and has filed a counterclaim against the general
contractor alleging defective construction and claiming damages, lost profits, interest and costs in an amount exceeding $1,000,000. The Company is vigorously prosecuting this claim and believes that it will ultimately prevail in the matter, which
is currently before the American Arbitration Association.



On August 29,
2002, the Company filed a separate lawsuit against the architect that designed the defective building alleging negligent design and claiming 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.



A group of current and former employees of one of the Companys Golden Corral restaurants filed a collective action against the Company in December 2003 alleging
multiple violations of the Fair Labor Standards Act. The parties have negotiated a settlement agreement that dismissed the case in U. S. District Court and submitted the matter to arbitration. The settlement contains a provision for opt-in notices
to be sent to all current and former employees of the restaurant who are eligible to participate in the arbitration. While it is not possible to ascertain the ultimate legal and financial liability of the Company with respect to this matter, the
Company has set aside a reserve that it believes is a reasonable estimate for the probable resolution of the matter. The charge against earnings to establish a reserve during the quarter ended September 18, 2005 did not have a material adverse
impact on the Companys earnings or financial position.



The Company is
subject to various other claims and suits that arise in the ordinary course of business. The Company does not believe that any ultimate liability for such claims will have a material impact on its earnings, cash flows or financial position.



Other Contingencies



The Company is contingently 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. Should the third party default, the Company has the right to re-assign the lease.



As of December 11, 2005, the Company has two outstanding letters of credit totaling $164,000 in support of its self- insurance program
(See Note A  Accounting Policies). The Company also has an outstanding letter of credit for $162,000 that supports an environmental remediation plan for the restoration of certain land that the Company no longer owns, which was contaminated by
a previous owner who can not be located. There are no other outstanding letters of credit issued by the Company.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE I  LIFE INSURANCE BENEFIT



The Company owned a number of life insurance policies on the Chairman of the Board of Directors (formerly President and Chief Executive
Officer of the Company), who died on February 2, 2005. As the primary beneficiary of these policies, the Company filed claims for death benefits aggregating $9,659,000. Estimates of the cash surrender value of the policies totaling $4,719,000
had previously been recorded in the balance sheet as Net cash surrender value  life insurance policies. The excess of the proceeds over the cash surrender value amounted to $4,440,000, which is net of $500,000 that was due another
beneficiary (see Note J  Related Party Transactions), was credited to earnings as a non-taxable benefit during the third quarter of fiscal 2005. All of the death benefit proceeds have been collected in full.



NOTE J - RELATED PARTY TRANSACTIONS



A Big Boy licensed restaurant owned by an officer and director of the Company and two Big
Boy licensed restaurants owned by children and other family members of another director of the Company 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 $2,662,000 and $2,705,000 respectively, during the 28 weeks ended December 11, 2005 and December 12, 2004, and was $1,173,000 and $1,216,000 respectively, during the twelve
weeks ended December 11, 2005 and December 12, 2004. The amount owed to the Company from these restaurants was $152,000 and $106,000 respectively, as of December 11, 2005 and May 29, 2005. 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.



One of the life insurance policies that the Company owned on the Chairman of the Board (see Note H  Life Insurance Benefit) was a split dollar policy that provided for the sum of $500,000 to be paid to the
Chairmans widow, who is a director of the Company.



The Chairman of the
Board had an employment agreement that had 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, which is to be adjusted annually to reflect 50 percent of the annual percentage change in the Consumer Price Index. The present value of the
long-term portion of the obligation approximating $1,482,000 is reflected in the balance sheet under the caption Deferred compensation and other. The present value of the current portion of the obligation approximating $123,000 is
included in current liabilities.



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##### Table of Contents

ITEM 1A. RISK FACTORS



Food safety is the most
significant risk to any company that operates in the restaurant industry. It has become 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.



Severe winter weather could have a prominent negative impact upon revenue during the
twelve-week third quarter of fiscal 2006 which spans most of the winter season from mid December through early March 2006. Consumer confidence, already weakened by a soft economy in the Companys Midwest operating markets and the steep cost of
gasoline, may decline further during the winter months as home heating costs soar and consumer debt payments are scheduled to rise, harming discretionary spending in general, and spending in restaurants in particular. The Companys occupancy
and other fixed operating costs will have a greater adverse impact on results of operations during any quarter that may experience disruptions to normal sales patterns.



The Companys costs are also obviously affected by increasing energy prices. Petroleum based material is often used to package certain
products for distribution. The cost to transport these products from the commissary to restaurant operations will rise with each increase in gasoline prices. Finally, and most significantly, rising natural gas prices are expected to result in much
higher costs to heat dining rooms and cook food during the winter months.



Golden Corral same-store sales declines have been experienced for nine consecutive quarters. During the quarter for which this report on Form 10-Q is being filed, Golden Corrals pre-tax earnings declined nearly $1,440,000 from the
same period a year ago to a pre-tax loss of just over $850,000, resulting in a pre-tax loss of $226,000 for the first half of fiscal 2006. Seven Golden Corrals are now cash flow negative. 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.



The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of
some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks previously disclosed in Exchange Act reports (and not specifically repeated or
restated here) 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 the 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.



28



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##### 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



Certain statements contained in this Managements Discussion and Analysis of Financial
Condition and Results of Operation (MD&A) are forward-looking statements (as that item is defined in the Private Securities Litigation Reform Act of 1995) that are subject to risks, uncertainties and other factors that could cause
actual results and performance to differ materially from those 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 Item 1A. Risk
Factors. Forward-looking statements can generally be identified in sentences that contain words such as should, would, could, may, plan, anticipate,
project, believe, will, expect, estimate, intend, continue, assumptions, goals, target, and similar words (or derivatives
thereof) that may be used to convey forward-looking statements that are contained in this MD&A.



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. The Company undertakes no obligation to update any forward-looking statements that may be contained in this MD&A.



RESTATEMENTS



The Company is in the process of restating its previously issued consolidated financial statements on Form 10-K as of and for the period
ended May 29, 2005 and on Form 10-Q as of and for the period ended September 18, 2005. These restatements, the impact of which has been included with the filing of this report on Form 10-Q for the quarter ended December 11, 2005, will
result in a reduction of expense in prior periods associated with one of the Companys defined benefit pension plans. The cumulative effect of the error on total assets was $1,866,000 as of May 29, 2005 and $1,986,000 as of
September 18, 2005. The restatement is the result of correcting a formula error created by the Companys actuarial consulting firm, which dates back to 1995. The error caused the Companys annual pension liability and net periodic
pension cost determination to be overstated in every reporting period since 1995.



CORPORATE OVERVIEW



The Companys Second Quarter of Fiscal 2006 consists of the twelve weeks ended December 11, 2005, and compares with the twelve weeks ended December 12,
2004, which constituted the Second Quarter of Fiscal 2005. The First Half of Fiscal 2006 consists of the 28 weeks ended December 11, 2005, and compares with the 28 weeks ended December 12, 2004, which constituted the First Half of Fiscal
2005. The first half of the Companys fiscal year normally accounts for a disproportionate share of annual revenue and earnings because it contains 28 weeks whereas the second half of the year normally contains only 24 weeks. The twelve-week
third quarter in particular is a disproportionately smaller share of annual revenue and earnings because it spans most of the winter season from mid December through early March. Additionally, severe winter weather can have a marked negative impact
upon revenue and earnings during the third quarter. Operations consist of two reportable segments within the restaurant industry: Big Boy restaurants and Golden Corral restaurants.



Certain reclassifications to the consolidated statement of earnings have been made to the
Second Quarter of Fiscal 2005 and the First Half of 2005 to conform to the current year presentation.



Despite reaching record sales of $66,953,000 during the Second Quarter of Fiscal 2006 (an increase of $206,000, or .3 percent higher than the Second Quarter of Fiscal 2005), sales volume was disappointing:



| |  | Big Boy same store sales decreased 1.8 percent.
|- |  | -----------------------------------------------



| |  | Golden Corral same store sales declined 10.7 percent.
|- |  | -----------------------------------------------------



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##### Table of Contents

Record sales of $153,486,000 were reached for the First Half of Fiscal 2006, an increase of $2,676,000 or 1.8 percent
higher than the First Half of Fiscal 2005. However, it should be noted:



| |  | Big Boy same store sales decreased of 1.2 percent.
|- |  | --------------------------------------------------



| |  | Golden Corral same store sales declined 10.5 percent.
|- |  | -----------------------------------------------------



Net earnings for the Second Quarter of Fiscal 2006 were $1,683,000, or diluted earnings per share (EPS) of $.33. Comparable net earnings from the Second Quarter of Fiscal
2005 (as restated) were $2,786,000, or $.54 diluted EPS. Net earnings for the First Half of Fiscal 2006 were $4,285,000, or $.83 diluted EPS. Comparable net earnings from the First Half of Fiscal 2005 (as restated) were $5,741,000, or $1.11 diluted
EPS. The erosion of sales had its impact on comparable gross profits:



| |  | Big Boy gross profit declined 6.6 percent from the Second Quarter of Fiscal 2005 (as restated), and 1.4 percent below the First Half of Fiscal 2005 (as restated).
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Golden Corral gross profit was 135 percent below the Second Quarter of Fiscal 2005 (as restated), and was 66.6 percent below the First Half of Fiscal 2005 (as restated).
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



RESULTS OF OPERATION



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 when new restaurants are opened and
older restaurants are closed. Below is the detail of consolidated restaurant sales:



|                              |  |                |        |              |   |              |  |              |         |  |   |        
|----------------------------- |  | -------------- | ------ | ------------ | - | ------------ |  | ------------ | ------- |  | - | -------
|                              |  | Second Quarter |        | First Half  
|                              |  | Dec. 11,2005   |        | Dec. 12,2004 |   | Dec. 11,2005 |  | Dec. 12,2004
|                              |  | (in thousands)
|Big Boy restaurant sales      |  | $              | 42,119 |              | $ | 43,147       |  | $            | 94,381  |  | $ | 95,994 
|Wholesale sales to licensees  |  |                | 2,119  |              |   | 2,103        |  |              | 4,799   |  |   | 4,277  
|Other wholesale sales         |  |                | 156    |              |   | 151          |  |              | 349     |  |   | 323    
|                              |  |                |        |              |   |              |  |              |         |  |   |        
|Total Big Boy Sales           |  |                | 44,394 |              |   | 45,401       |  |              | 99,529  |  |   | 100,594
|                              |  |                |        |             
|Golden Corral sales           |  |                | 22,559 |              |   | 21,346       |  |              | 53,957  |  |   | 50,216 
|                              |  |                |        |              |   |              |  |              |         |  |   |        
|Consolidated restaurant sales |  | $              | 66,953 |              | $ | 66,747       |  | $            | 153,486 |  | $ | 150,810
|                              |  |                |        |              |   |              |  |              |         |  |   |        



Decreased Big Boy restaurant sales
shown in the above table are attributable to same store sales declines of 1.8 percent and 1.2 percent respectively, in the Second Quarter of Fiscal 2006 and the First Half of Fiscal 2006. The same store sales declines can be further traced to lower
customer counts, as current traffic fell 3.5 percent below the Second Quarter of Fiscal 2005 and 3 percent lower than the First Half of Fiscal 2005. Big Boy same store sales have declined for three consecutive quarters. Menu prices were increased
1.4 percent in September 2005, 1 percent in February 2005 and 1.5 percent in September 2004. Another price increase is currently being planned for February 2006.



Through the third quarter of fiscal 2005 (ended March 6, 2005), Big Boy restaurants had achieved same store sales increases in 29 of
the last 30 quarters. Management continues to believe there is a direct correlation between lower customer counts that have been experienced over the last three quarters and the continuing steep cost of gasoline. It is noteworthy that gasoline
prices first crossed the threshold of $2.00 per gallon in March 2005. A soft economy in the Companys Midwest markets has probably affected consumer confidence in general especially as home heating costs are likely to soar over the coming
winter months.



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##### Table of Contents

The Company currently operates 89 Big Boy restaurants. This count includes one that re-opened in August 2005 following
its reconstruction. It had been temporarily closed since May 2005. No other new Big Boy restaurants have opened during the last twelve months. One older, low volume Big Boy restaurant ceased operations in November 2004. A brand new Big Boy is
currently under construction, scheduled to open in February 2006. Two existing Big Boy restaurants are planned for relocation to better sites within the same markets (during calendar year 2006). No interruption of sales is expected during
construction.



The Golden Corral sales increases were due entirely to more
restaurants in operation:



|                                    |  |             |  |            |  |      |  |     
|----------------------------------- |  | ----------- |  | ---------- |  | ---- |  | ----
|                                    |  | Second Qtr. |  | First Half
|                                    |  | 2006        |  | 2005       |  | 2006 |  | 2005
|In operation at beginning of period |  | 32          |  | 27         |  | 30   |  | 26  
|Opened during the period            |  | 2           |  | 2          |  | 4    |  | 3   
|In operation at end of period       |  | 34          |  | 29         |  | 34   |  | 29  
|Total sales weeks during period     |  | 394         |  | 339        |  | 892  |  | 763 



There were no Golden Corral
restaurants under construction as of December 11, 2005. Current plans now call for only two Golden Corral restaurants to open in calendar year 2006.



For the Second Quarter of Fiscal 2006, Golden Corral same store sales were 10.7 percent below the Second Quarter of Fiscal 2005, as customer counts fell by 11.3 percent.
Golden Corral restaurants have now suffered nine consecutive quarters of same store sales decreases, including 45 consecutive weekly declines, most of which have been double-digit declines. For the First Half of Fiscal 2006, same store sales
decreased 10.5 percent on an 11.6 percent drop in customer counts. Prices were increased 1.8 percent in May 2005.



Steep gasoline prices have been especially harsh on Golden Corrals customer counts. In addition, the soft Midwest economy has had a greater effect on Golden Corral
sales than on Big Boy sales. However, management believes that operational execution is in need of improvement. Certain strategies are now being implemented to grow sales and halt unacceptable margin erosions. Reducing new store openings will allow
management to focus on a return to fundamentals, including proper in-store execution, every day promotion, labor scheduling and staffing. A new marketing strategy  Everyone Deserves a Good Meal, Everyday - is also being put into
place that features special menu items at dinner each day of the week.



Gross Profit



Gross profit for the Big
Boy segment includes wholesale sales and cost of wholesale sales. Gross profit differs from restaurant level profit discussed 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 shown below:



|                                  |  |                |       |            |                          |   |               |  |                          |        |  |   |       
|--------------------------------- |  | -------------- | ----- | ---------- | ------------------------ | - | ------------- |  | ------------------------ | ------ |  | - | ------
|                                  |  | 2nd Quarter    |       | First Half
|                                  |  | Dec. 11, 2005  |       |            | (restated) Dec. 12, 2004 |   | Dec. 11, 2005 |  | (restated) Dec. 12, 2004
|                                  |  | (in thousands)
|Big Boy gross profit              |  | $              | 6,563 |            |                          | $ | 7,027         |  | $                        | 14,256 |  | $ | 14,459
|Golden Corral gross profit (loss) |  |                | (362  | )          |                          |   | 1,043         |  |                          | 935    |  |   | 2,797 
|                                  |  |                |       |            |                          |   |               |  |                          |        |  |   |       
|Total gross profit by segment     |  | $              | 6,201 |            |                          | $ | 8,070         |  | $                        | 15,191 |  | $ | 17,256
|                                  |  |                |       |            |                          |   |               |  |                          |        |  |   |       



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##### Table of Contents

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 which addresses cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.



|                                                |  |                   |  |                              |  |                   |  |                              |  |        |  |       |  |       |  |        |  |       |  |       |  |        |  |      
|----------------------------------------------- |  | ----------------- |  | ---------------------------- |  | ----------------- |  | ---------------------------- |  | ------ |  | ----- |  | ----- |  | ------ |  | ----- |  | ----- |  | ------ |  | -----
|                                                |  | 12 weeks 12/11/05 |  | 12 weeks 12/12/04 (restated) |  | 28 weeks 12/11/05 |  | 28 weeks 12/12/04 (restated)
|                                                |  | Total             |  | BigBoy                       |  | GC                |  | Total                        |  | BigBoy |  | GC    |  | Total |  | BigBoy |  | GC    |  | Total |  | BigBoy |  | GC   
|Sales                                           |  | 100.0             |  | 100.0                        |  | 100.0             |  | 100.0                        |  | 100.0  |  | 100.0 |  | 100.0 |  | 100.0  |  | 100.0 |  | 100.0 |  | 100.0  |  | 100.0
|Food and Paper                                  |  | 35.1              |  | 32.5                         |  | 40.2              |  | 35.0                         |  | 33.0   |  | 39.2  |  | 34.9  |  | 32.6   |  | 39.3  |  | 35.0  |  | 32.7   |  | 39.5 
|Payroll and Related                             |  | 33.2              |  | 34.0                         |  | 31.6              |  | 33.2                         |  | 34.0   |  | 31.3  |  | 33.1  |  | 34.2   |  | 31.0  |  | 33.2  |  | 34.3   |  | 30.9 
|Other Operating Costs (including opening costs) |  | 22.5              |  | 18.7                         |  | 29.8              |  | 19.8                         |  | 17.5   |  | 24.6  |  | 22.1  |  | 18.9   |  | 28.0  |  | 20.4  |  | 18.6   |  | 24.0 
|Gross Profit                                    |  | 9.2               |  | 14.8                         |  | -1.6              |  | 12.0                         |  | 15.5   |  | 4.9   |  | 9.9   |  | 14.3   |  | 1.7   |  | 11.4  |  | 14.4   |  | 5.6  



Food cost percentages in the Golden
Corral segment are much higher than Big Boy because of the all-you-can-eat nature of the Golden Corral concept. Golden Corrals food cost percentages increased over comparable periods due to primarily high beef prices. Big Boys
percentages improved reflecting cost stabilization of certain commodities combined with the effects of higher menu prices.



Self-insured claims experience has historically been reviewed each quarter, with a comprehensive review during the first quarter of each year, when the self-insured
reserves would be adjusted to more closely reflect claims experience. The Company has been able to take significant reductions to the reserves during the first quarters of recent years because of active claims management and post accident drug
testing. Beginning with the third quarter of fiscal 2005, management determined that comprehensive reviews were warranted each quarter, and that self-insured reserves should be adjusted as necessary based on claims experience.



The reviews of self-insured reserves resulted in favorable adjustments of $392,000 and
$614,000, respectively, during the first quarters of fiscal 2006 and fiscal 2005. An unfavorable adjustment of $18,000 was recorded during the Second Quarter of Fiscal 2006. A lower percentage of payroll is being used in the current fiscal year to
accrue initial self-insurance reserves, which should reduce the size of future quarterly adjustments.



Payroll and related cost percentages remained fairly stable in all periods presented reflecting significant reductions in the number of hours worked to coincide with lower sales levels. Although congressional efforts
continually mount to increase the federal minimum wage, the Company believes it is unlikely that such federal legislation will be passed in the near term. The Company believes minimum wage legislation at the state level poses a greater threat. When,
and if, such legislation is enacted, the Company will counter the effects with higher menu prices, together with tighter payroll standards and a reduction in hours worked. New overtime pay rules initiated by the U. S. Department of labor went into
effect in August 2004. The new rules had a negligible impact on the Company.



Net periodic pension cost (computed under Statement of Financial Accounting Standards No. 87) was $421,000 in the Second Quarter of Fiscal 2006 and was $361,000 the Second Quarter of Fiscal 2005, as restated. Net periodic pension cost
was $923,000 for the First Half of Fiscal 2006 and was $896,000 for the First Half of Fiscal 2005, as restated. The Company anticipates making contributions to the two qualified defined pension plans that it sponsors that will satisfy legal funding
requirements for the year ending May 28, 2006 plus additional tax-deductible amounts that may be deemed advisable.



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##### Table of Contents

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. As most of these expenses 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 Big Boy and Golden Corral. Lower opening costs over the second half of fiscal 2006 should help improve the Golden Corral percentage, reflecting
the Companys decision to not build any more Golden Corrals during fiscal 2006. From that decision, the Company also expects to improve operational execution in same stores.



Operating Profit



To arrive at the measure of operating profit, administrative and advertising expense is subtracted from gross profit 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 $258,000, or 3.4 percent during the First Half of Fiscal 2006, while the Second Quarter of Fiscal 2006 was roughly the same as the second Quarter of Fiscal 2005. The
cost of litigating certain matters is the largest component of the increase during the First Half of Fiscal 2006.



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 December 11, 2005, 28 Big Boy restaurants were licensed to other operators and are paying fees to the Company. Other revenue also includes certain
other fees from licensed restaurants along with miscellaneous rent and investment income.



Gains and losses on the sale of assets consist of transactions involving real property and sometimes may include restaurant equipment that is sold together with real property as a package when closed restaurants are
sold. Gains and losses reported on this line do not include abandonment losses that often arise when certain equipment is replaced before it reaches the end of its expected life. Abandonment losses are instead reported in other operating costs. The
amount reported on the line (Gain) on sale of assets in the Second Quarter of Fiscal 2005 resulted from the sale of an undeveloped tract of land.



Other Expense



Despite lower debt levels during fiscal 2006, interest expense was roughly level with comparable periods last year. Higher interest rates have been experienced in fiscal
2006 on funds held in the construction phase of a Construction Draw Facility, before conversion into term loans. Also, lower capitalized interest has been recorded in fiscal 2006. Finally, interest expense associated with the payment of a deferred
compensation arrangement has been accrued through the First Half of 2006.



As a
percentage of pre-tax earnings, the estimated effective tax rate for the entire year was reduced to 34 percent during the Second Quarter of Fiscal 2006, down from 35 percent in the first quarter. During the Second Quarter of Fiscal 2005, the rate
was increased to 36 percent, up from 34 percent in the first quarter. These rates have been kept consistently low through the Companys use of tax credits, principally the federal credit allowed for Employer Social Security and Medicare Taxes
Paid on Certain Employee Tips.



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 employees exercise stock options 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 retire any of its obligations when due, including the aggregated obligations and commercial
commitments shown in the table below.



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Aggregated Information about Contractual Obligations and Commercial Commitments

December 11, 2005



|  |  |                                          |  |        |  |                                       |  |        |  |        |  |        |  |        |  |                  
|- |  | ---------------------------------------- |  | ------ |  | ------------------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | -----------------
|  |  |                                          |  |        |  | Payments due by period (in thousands)
|  |  |                                          |  | Total  |  | year 1                                |  | year 2 |  | year 3 |  | year 4 |  | year 5 |  | more than 5 years
|  |  | Long-Term Debt                           |  | 41,171 |  | 8,748                                 |  | 9,547  |  | 10,121 |  | 5,039  |  | 3,689  |  | 4,027            
|  |  | Rent due under Capital Lease Obligations |  | 4,092  |  | 776                                   |  | 2,777  |  | 189    |  | 116    |  | 81     |  | 153              
|1 |  | Rent due under Operating Leases          |  | 25,859 |  | 1,751                                 |  | 1,776  |  | 1,764  |  | 1,720  |  | 1,439  |  | 17,409           
|2 |  | Unconditional Purchase Obligations       |  | 5,397  |  | 5,397                                 |  |        |  |        |  |        |  |        |  |                  
|3 |  | Other Long-Term Obligations              |  | 2,098  |  | 214                                   |  | 217    |  | 220    |  | 223    |  | 226    |  | 998              
|  |  | Total Contractual Cash Obligations       |  | 78,617 |  | 16,886                                |  | 14,317 |  | 12,294 |  | 7,098  |  | 5,435  |  | 22,587           

---

|1 | Not included in the table is a contingent liability 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. 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
Standards No. 13, Accounting for Leases, as amended.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | Primarily consists of commitments for capital projects plus certain food and beverage items.
|- | --------------------------------------------------------------------------------------------

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



The working capital deficit was $23,198,000 as of December 11, 2005. The deficit was $20,911,000 as of May 29, 2005. The working capital deficit is expected to
level off in the near term as new construction debt is scaled back to a debt neutral position, reflecting the reduction in expected new restaurant openings. As of December 11, 2005, $13,500,000 remained available under the terms of a
Construction Draw Facility, which expires September 1, 2008, unless extended. Additionally, a $5,000,000 working capital revolving line of credit (currently unused) is readily available through September 1, 2008, if needed.



Operating Activities



Operating cash flows were $11,750,000 in the First Half of Fiscal 2006, or $260,000 higher
than the First Half of Fiscal 2005. However, management believes a more reliable gauge to measure cash flows from the operation of the business is to use the simple method of net earnings plus depreciation. This method yields $11,195,000 in cash
flows from operating activities for the First Half of Fiscal 2006 versus $11,941,000 in the First Half of Fiscal 2005, the decrease reflecting lower earnings.



Investing Activities



Capital spending is the principal component of the Companys investing activities. Capital spending was $14,574,000 during the First Half of Fiscal 2006, an increase
of $1,435,000 over the First Half of Fiscal 2005. The capital spending includes $8,570,000 for Golden Corral restaurants, consisting of new restaurant construction, site acquisitions and remodeling costs. Capital spending for Big Boy restaurants
totaled $6,004,000, which included new restaurant construction, remodeling costs, routine equipment replacements and other capital outlays.



Financing Activities



Borrowing against credit lines amounted to $8,500,000 during the First Half of Fiscal 2006, including $5,500,000 borrowed during the Second Quarter of Fiscal 2006.
Scheduled and other payments of long-term debt and capital lease obligations amounted to $4,755,000 during the First Half of Fiscal 2006. Regular quarterly cash dividends paid to shareholders totaled $1,113,000. Dividends declared but not paid as of
December 11, 2004 totaled $558,000. The Company expects to continue its 45 year practice of paying regular quarterly cash dividends.



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##### Table of Contents

During the First Half of Fiscal 2006, employees acquired nearly 16,000 shares of the Companys common stock pursuant
to the exercise of stock options, yielding proceeds to the Company of approximately $288,000. As of December 11, 2005, 418,821 shares granted under the Companys two stock option plans remain outstanding including 315,319 fully vested
shares at a weighted average price per share of $17.84. As of December 11, 2005, 730,204 shares are available to be granted under these plans.



Other Information



The Company reached a new agreement with Golden Corral Franchising Systems, Inc. in July 2004. The new agreement added 22 Golden Corrals to the development schedule,
bringing to 63, the total number of restaurants planned to be in operation by December 31, 2011. The development agreement, which had called for five new restaurants to open in each calendar year through 2010 with the final four scheduled for
2011, was modified in June 2005 to permit the opening of only three restaurants in calendar year 2006. It now appears likely only two will be built in 2006. As of December 11, 2005, 34 Golden Corral restaurants were in operation. No Golden
Corral restaurants were under construction. Five Golden Corral restaurants are being remodeled in Fiscal 2006 at an approximate cost of $150,000 per restaurant.



Construction of a brand new Big Boy restaurant began in October 2005 that is expected to open in February 2006. Plans are currently being made to relocate two existing
Big Boy restaurants (during calendar year 2006) to better sites within the same market areas. Approximately one-fifth of the 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. A typical kitchen redesign costs approximately $125,000.



Including land and land improvements, the cash required to build and equip each new
restaurant ranges from $2,600,000 to $3,500,000 for a Golden Corral, and from $2,200,000 to $2,900,000 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.



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. Six of the 34 Golden Corral restaurants now in operation
were constructed on leased land. The Big Boy restaurant currently under construction is also being 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 December 11, 2005, the Company occupied a total of 32 restaurants pursuant to leases, ten of which are capital leases under the provisions SFAS 13.



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 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.



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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. The plan assets are targeted to be invested 70
percent in equity securities, as these investments have historically provided the greatest long-term returns. The Company has used an 8.5 percent expected long-term rate of return on plan assets for many years, and will likely continue with that
rate for the foreseeable future. Management believes that 8.5 percent is a fair rate over the long term, despite poor market performance in the early years of the current decade which has adversely impacted net periodic pension cost in recent years,
after many years of steady, low costs. Managements application of these assumptions in no way caused the error in the calculation of net periodic pension cost described in detail in Note B to the consolidated financial statements.



Long-Lived Assets



Long-lived assets include property and equipment, goodwill and other intangible assets.
Property and equipment typically approximate 85 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.



In addition, carrying values of property and equipment are tested for impairment each quarter using historical cash flow losses on a restaurant-by-restaurant basis.
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.



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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.



Food supplies
are generally plentiful and may be obtained from any number of suppliers. Quality, timeliness of deliveries and price are the principal determinants of source. Commodity pricing affects the cost of many of the Companys food products. Commodity
pricing can be extremely volatile, as supply is affected by import and export restrictions, 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. The Company does not use
financial instruments as a hedge against changes in commodity pricing.



Except
for items such as 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 vendor that
Golden Corral Franchising Systems, Inc. (the Franchisor) uses for its operations. Deliveries are made two to three 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 December 11, 2005. 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 December 11,
2005 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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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 had been 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.



On July 30,
2002, Fortney filed a Demand for Arbitration against the Company with the American Arbitration Association. Fortney sought recovery of its outstanding contract balance, in the sum of $293,638, plus interest, fees, and costs. Fortney
contends that it is owed this money by the Company under the terms of the General Construction Contract. The Company has denied that it owes these monies to Fortney, and has filed a counterclaim against Fortney alleging defective construction. The
Companys claim against Fortney is for excess cost of construction, loss profit, interest and costs, in an amount exceeding $1,000,000.



On August 29, 2002, the Company filed a lawsuit in the Stark County, Ohio Court of Common Pleas against its former architect, LMH&T, alleging 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 (CBC). In July 2003, the Company resolved all claims, counterclaims, and cross-claims, against and involving the trial court defendants. The trial court defendants,
including 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 (design team) is separate
and apart from the dispute between Fortney and the Company, which is before the American Arbitration Association. The arbitration is on going.



A group of current and former employees of one of the Companys Golden Corral restaurants filed a collective action against the Company in December 2003 alleging
multiple violations of the Fair Labor Standards Act. The parties have negotiated a settlement agreement that dismissed the case in U. S. District Court and submitted the matter to arbitration. The settlement contains a provision for opt-in notices
to be sent to all current and former employees of the restaurant who are eligible to participate in the arbitration. While it is not possible to ascertain the ultimate legal and financial liability of the Company with respect to this matter, the
Company has set aside a reserve that it believes is a reasonable estimate for the probable resolution of the matter.



The Company is subject to various other claims and suits that arise in the ordinary course of business. The Company does not believe that any ultimate liability for such
claims will have a material impact on its earnings, cash flows or financial position.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Not applicable



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



Not applicable



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



Not applicable



ITEM 5. OTHER INFORMATION



|ITEM 6. | EXHIBITS
|------- | --------



3 (a) 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 (b) Code of
Regulations, filed as Exhibit (3) (a) to the Registrants Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.



3 (c) Amendments to the Code of Regulations adopted October 1, 1984, filed as Exhibit (3) (b) to the
Registrants Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.



3 (d) Amendments to the Code of Regulations adopted October 24, 1996, filed as Exhibit (3) (c) to the Registrants Form 10-Q
Quarterly Report for December 15, 1996, 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, is 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, are incorporate 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) Employment Agreement between the Registrant and Jack C. Maier effective May 29, 2000, filed as Exhibit (10) (d) to the
Registrants Form 10-Q Quarterly Report for September 17, 2000, is incorporated herein by reference. *



10 (g) Employment Agreement between the Registrant and Craig F. Maier effective June 2, 2003, filed as Exhibit 10 (h) to the
Registrants Form 10-K Annual Report for 2003, is incorporated herein by reference. *



10 (h) 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. *



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10 (i) Second Amendment to the Frischs Executive Savings Plan 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. *



10 (j) Third Amendment to the Frischs Executive Savings Plan effective June 7, 2005, is incorporated herein by reference. *



10 (k) Fourth Amendment to the Frischs Executive Savings Plan
effective August 30, 2005, is incorporated herein by reference. *



10 (l) 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 (m) Amendment No. 1 to Frischs Executive
Retirement Plan 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 (n) 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 (o) 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, filed as Exhibits 99.1 and 99.2 to the Registrants From
8-K dated October 1, 2004, are incorporated herein by reference. *



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



10 (r) 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. *



10 (s) 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, Paul F. McFarland, W. Gary King, Karen F. Maier, Ken C. Hull, Michael E. Conner, Todd M. Rion and certain other highly compensated employees (Grantors). *



10 (t) 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. *

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|* | denotes compensatory plan or agreement
|- | --------------------------------------



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.



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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 January 20, 2006 |  |    |  |                                                                                   
|                      |  |   
|                      |  | BY |  | /s/ Donald H. Walker                                                              
|                      |  |    |  | Donald H. Walker                                                                  
|                      |  |    |  | Vice President  Finance, Treasurer and Principal Financial and Accounting Officer



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