##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q



---

Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED March 6, 2007

COMMISSION FILE NUMBER 001-7323



---

FRISCHS RESTAURANTS, INC.

(Exact name of registrant as specified in its
charter)



---



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



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



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

Not Applicable

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



---

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

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

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 March 23, 2007 was: 5,106,087



---



---

##### Table of Contents

TABLE OF CONTE
NTS



|                               |  |          |  |                                                                                       |  |        
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------- |  | -------
|                               |  |          |  | 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 - 28 
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 29 - 38
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 39     
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                               |  | 39     
|                               | 
|PART II  OTHER INFORMATION    |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                     |  | 40     
|                               |  |          | 
|                               |  | Item 1A. |  | Risk Factors                                                                          |  | 41 - 42
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 43     
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                       |  | 43     
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 43     
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                     |  | 43     
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                              |  | 43 - 45
|                               | 
|SIGNATURE                      |  | 45      



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)



|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|----------------------------------------- | ------------- | ----------------- | ----------- | ------------- | ------------------ | - | ------------- | - |  | ------------- | ---------- | - |  | - | ---------- | -
|                                          |               | Forty weeks ended |             |               | Twelve weeks ended |  
|                                          | March 6, 2007 |                   |             | March 5, 2006 |                    |   | March 6, 2007 |   |  | March 5, 2006 |           
|                                          |               |                   |            
|Sales                                     |               | $                 | 221,968,379 |               |                    | $ | 220,745,741   |   |  | $             | 65,451,505 |   |  | $ | 67,259,863 |  
|                                          |               |                   |             |              
|Cost of sales                             |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|Food and paper                            |               |                   | 77,213,602  |               |                    |   | 77,317,462    |   |  |               | 22,824,288 |   |  |   | 23,702,867 |  
|Payroll and related                       |               |                   | 73,403,437  |               |                    |   | 72,969,756    |   |  |               | 21,910,389 |   |  |   | 22,217,676 |  
|Other operating costs                     |               |                   | 48,745,320  |               |                    |   | 48,715,459    |   |  |               | 13,986,988 |   |  |   | 14,787,158 |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   | 199,362,359 |               |                    |   | 199,002,677   |   |  |               | 58,721,665 |   |  |   | 60,707,701 |  
|                                          |               |                   |             |              
|Gross profit                              |               |                   | 22,606,020  |               |                    |   | 21,743,064    |   |  |               | 6,729,840  |   |  |   | 6,552,162  |  
|                                          |               |                   |             |              
|Administrative and advertising            |               |                   | 11,177,026  |               |                    |   | 11,158,025    |   |  |               | 3,487,951  |   |  |   | 3,234,766  |  
|Franchise fees and other revenue          |               |                   | (965,337    | )             |                    |   | (960,515      | ) |  |               | (275,625   | ) |  |   | (297,764   | )
|(Gains) losses on sale of assets          |               |                   | (250,069    | )             |                    |   | (393,595      | ) |  |               |           |   |  |   | (393,595   | )
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Operating profit                          |               |                   | 12,644,400  |               |                    |   | 11,939,149    |   |  |               | 3,517,514  |   |  |   | 4,008,755  |  
|                                          |               |                   |             |              
|Interest expense                          |               |                   | 2,046,177   |               |                    |   | 2,104,649     |   |  |               | 616,517    |   |  |   | 665,057    |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Earnings before income taxes              |               |                   | 10,598,223  |               |                    |   | 9,834,500     |   |  |               | 2,900,997  |   |  |   | 3,343,698  |  
|                                          |               |                   |             |              
|Income taxes                              |               |                   | 3,603,000   |               |                    |   | 3,344,000     |   |  |               | 986,000    |   |  |   | 1,138,000  |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Net Earnings                              |               | $                 | 6,995,223   |               |                    | $ | 6,490,500     |   |  | $             | 1,914,997  |   |  | $ | 2,205,698  |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Earnings per share (EPS) of common stock: |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Basic net earnings per share              |               | $                 | 1.38        |               |                    | $ | 1.28          |   |  | $             | .38        |   |  | $ | .43        |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  
|                                          |               |                   |             |              
|Diluted net earnings per share            |               | $                 | 1.35        |               |                    | $ | 1.26          |   |  | $             | .37        |   |  | $ | .43        |  
|                                          |               |                   |             |               |                    |   |               |   |  |               |            |   |  |   |            |  

The accompanying notes are an integral part of these statements.



3



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet

ASSETS



|                                                    |  |                           |             |              |   |            
|--------------------------------------------------- |  | ------------------------- | ----------- | ------------ | - | -----------
|                                                    |  | March 6, 2007 (unaudited) |             | May 30, 2006
|Current assets                                      |  |                           |             |              |   |            
|Cash                                                |  | $                         | 389,141     |              | $ | 815,346    
|Trade and other receivables                         |  |                           | 1,861,288   |              |   | 1,538,024  
|Inventories                                         |  |                           | 5,486,219   |              |   | 4,791,898  
|Prepaid expenses and sundry deposits                |  |                           | 3,557,036   |              |   | 2,795,444  
|Prepaid and deferred income taxes                   |  |                           | 1,418,674   |              |   | 2,122,544  
|                                                    |  |                           |             |              |   |            
|Total current assets                                |  |                           | 12,712,358  |              |   | 12,063,256 
|                                                    |  |                          
|Property and equipment                              |  |                           |             |              |   |            
|Land and improvements                               |  |                           | 64,647,113  |              |   | 60,691,775 
|Buildings                                           |  |                           | 87,039,576  |              |   | 84,830,307 
|Equipment and fixtures                              |  |                           | 88,202,968  |              |   | 89,151,961 
|Leasehold improvements and buildings on leased land |  |                           | 28,871,323  |              |   | 28,171,132 
|Capitalized leases                                  |  |                           | 4,810,895   |              |   | 5,257,019  
|Construction in progress                            |  |                           | 3,597,219   |              |   | 2,211,659  
|                                                    |  |                           |             |              |   |            
|                                                    |  |                           | 277,169,094 |              |   | 270,313,853
|Less accumulated depreciation and amortization      |  |                           | 120,022,268 |              |   | 115,943,839
|                                                    |  |                           |             |              |   |            
|Net property and equipment                          |  |                           | 157,146,826 |              |   | 154,370,014
|                                                    |  |                          
|Other assets                                        |  |                           |             |              |   |            
|Goodwill                                            |  |                           | 740,644     |              |   | 740,644    
|Other intangible assets                             |  |                           | 1,329,109   |              |   | 1,383,729  
|Investments in land                                 |  |                           | 2,240,155   |              |   | 2,272,405  
|Property held for sale                              |  |                           | 1,170,598   |              |   | 805,784    
|Other                                               |  |                           | 2,843,318   |              |   | 3,646,989  
|                                                    |  |                           |             |              |   |            
|Total other assets                                  |  |                           | 8,323,824   |              |   | 8,849,551  
|                                                    |  |                           |             |              |   |            
|                                                    |  |                          
|Total assets                                        |  | $                         | 178,183,008 |              | $ | 175,282,821
|                                                    |  |                           |             |              |   |            

The accompanying notes are an integral part of these statements.



4



---

##### Table of Contents

LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                     |  |                          |             |              |   |            
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ------------ | - | -----------
|                                                                                                                     |  | March 6, 2007(unaudited) |             | May 30, 2006
|Current liabilities                                                                                                  |  |                          |             |              |   |            
|Long-term obligations due within one year                                                                            |  |                          |             |              |   |            
|Long-term debt                                                                                                       |  | $                        | 11,476,584  |              | $ | 8,926,194  
|Obligations under capitalized leases                                                                                 |  |                          | 1,944,416   |              |   | 388,222    
|Self insurance                                                                                                       |  |                          | 830,656     |              |   | 856,962    
|Accounts payable                                                                                                     |  |                          | 10,267,853  |              |   | 10,330,378 
|Accrued expenses                                                                                                     |  |                          | 9,295,312   |              |   | 9,639,747  
|Income taxes                                                                                                         |  |                          | 276,223     |              |   | 441,045    
|                                                                                                                     |  |                          |             |              |   |            
|Total current liabilities                                                                                            |  |                          | 34,091,044  |              |   | 30,582,548 
|                                                                                                                     |  |                         
|Long-term obligations                                                                                                |  |                          |             |              |   |            
|Long-term debt                                                                                                       |  |                          | 26,880,065  |              |   | 30,991,636 
|Obligations under capitalized leases                                                                                 |  |                          | 1,276,479   |              |   | 3,125,742  
|Self insurance                                                                                                       |  |                          | 1,457,595   |              |   | 1,549,499  
|Deferred income taxes                                                                                                |  |                          | 3,560,022   |              |   | 4,496,802  
|Deferred compensation and other                                                                                      |  |                          | 4,027,508   |              |   | 3,855,158  
|                                                                                                                     |  |                          |             |              |   |            
|Total long-term obligations                                                                                          |  |                          | 37,201,669  |              |   | 44,018,837 
|                                                                                                                     |  |                         
|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, 7,551,851 and 7,521,930 sharesstated
value$1 |  |                          | 7,551,851   |              |   | 7,521,930  
|Additional contributed capital                                                                                       |  |                          | 63,372,133  |              |   | 62,531,311 
|                                                                                                                     |  |                          |             |              |   |            
|                                                                                                                     |  |                          | 70,923,984  |              |   | 70,053,241 
|                                                                                                                     |  |                         
|Retained earnings                                                                                                    |  |                          | 68,737,848  |              |   | 63,420,622 
|                                                                                                                     |  |                          |             |              |   |            
|                                                                                                                     |  |                          | 139,661,832 |              |   | 133,473,863
|Less cost of treasury stock (2,445,764 and 2,447,323 shares)                                                         |  |                          | 32,771,537  |              |   | 32,792,427 
|                                                                                                                     |  |                          |             |              |   |            
|Total shareholders equity                                                                                           |  |                          | 106,890,295 |              |   | 100,681,436
|                                                                                                                     |  |                          |             |              |   |            
|Total liabilities and shareholders equity                                                                           |  | $                        | 178,183,008 |              | $ | 175,282,821
|                                                                                                                     |  |                          |             |              |   |            



5



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders Equity

Forty weeks ended March 6, 2007 and March 5, 2006

(Unaudited)



|                                                  |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |             |  
|------------------------------------------------- |  | --------------------------------------------- | --------- | ---------------------------- | - | ---------- | ---------------- |  | - | --------------- | - |  | ----- | ----------- | - |  | - | ----------- | -
|                                                  |  | Common stockat $1 per share -Shares andamount |           | Additionalcontributedcapital |   |            | Retainedearnings |  |   | Treasury shares |   |  | Total |            
|Balance at May 29, 2005                           |  |                                               | 7,505,176 |                              |   | 62,226,047 |                  |  |   | 56,490,185      |   |  |       | (32,820,158 | ) |  |   | 93,401,250  |  
|Net earnings for forty weeks                      |  |                                               |          |                              |   |           |                  |  |   | 6,490,500       |   |  |       |            |   |  |   | 6,490,500   |  
|Stock options exercisednew shares issued         |  |                                               | 15,921    |                              |   | 271,476    |                  |  |   |                |   |  |       |            |   |  |   | 287,397     |  
|Tax benefit from stock options exercised          |  |                                               |          |                              |   | 32,496     |                  |  |   |                |   |  |       |            |   |  |   | 32,496      |  
|Treasury shares re-issued                         |  |                                               |          |                              |   | 24,098     |                  |  |   |                |   |  |       | 27,731      |   |  |   | 51,829      |  
|Employee stock purchase plan                      |  |                                               |          |                              |   | (22,725    | )                |  |   |                |   |  |       |            |   |  |   | (22,725     | )
|Cash dividends$.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,671,212      | ) |  |       |            |   |  |   | (1,671,212  | )
|                                                  |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |             |  
|Balance at March 5, 2006                          |  |                                               | 7,521,097 |                              |   | 62,531,392 |                  |  |   | 61,309,473      |   |  |       | (32,792,427 | ) |  |   | 98,569,535  |  
|                                                  |  |                                               |           |                              |  
|Net earnings for twelve weeks, plus 2 days        |  |                                               |          |                              |   |           |                  |  |   | 2,669,265       |   |  |       |            |   |  |   | 2,669,265   |  
|Stock options exercisednew shares issued         |  |                                               | 833       |                              |   | 14,944     |                  |  |   |                |   |  |       |            |   |  |   | 15,777      |  
|Tax benefit from stock options exercised          |  |                                               |          |                              |   | 1,592      |                  |  |   |                |   |  |       |            |   |  |   | 1,592       |  
|Employee stock purchase plan                      |  |                                               |          |                              |   | (16,617    | )                |  |   |                |   |  |       |            |   |  |   | (16,617     | )
|Cash dividends$.11 per share                     |  |                                               |          |                              |   |           |                  |  |   | (558,116        | ) |  |       |            |   |  |   | (558,116    | )
|                                                  |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |             |  
|Balance at May 30, 2006                           |  |                                               | 7,521,930 |                              |   | 62,531,311 |                  |  |   | 63,420,622      |   |  |       | (32,792,427 | ) |  |   | 100,681,436 |  
|                                                  |  |                                               |           |                              |  
|Net earnings for forty weeks                      |  |                                               |          |                              |   |           |                  |  |   | 6,995,223       |   |  |       |            |   |  |   | 6,995,223   |  
|Stock options exercisednew shares issued         |  |                                               | 29,921    |                              |   | 510,192    |                  |  |   |                |   |  |       |            |   |  |   | 540,113     |  
|Stock options exercisedtreasury shares re-issued |  |                                               |          |                              |   | 1,800      |                  |  |   |                |   |  |       | 4,475       |   |  |   | 6,275       |  
|Excess tax benefit from stock-based compensation  |  |                                               |          |                              |   | 81,157     |                  |  |   |                |   |  |       |            |   |  |   | 81,157      |  
|Stock-based compensation expense                  |  |                                               |          |                              |   | 231,120    |                  |  |   |                |   |  |       |            |   |  |   | 231,120     |  
|Other treasury shares re-issued                   |  |                                               |          |                              |   | 12,465     |                  |  |   |                |   |  |       | 16,415      |   |  |   | 28,880      |  
|Employee stock purchase plan                      |  |                                               |          |                              |   | 4,088      |                  |  |   |                |   |  |       |            |   |  |   | 4,088       |  
|Cash dividends$.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,677,997      | ) |  |       |            |   |  |   | (1,677,997  | )
|                                                  |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |             |  
|Balance at March 6, 2007                          |  | $                                             | 7,551,851 |                              | $ | 63,372,133 |                  |  | $ | 68,737,848      |   |  | $     | (32,771,537 | ) |  | $ | 106,890,295 |  
|                                                  |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |             |  

The accompanying notes are an integral part of these statements.



6



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Forty weeks ended March 6, 2007 and March 5, 2006

(unaudited)



|                                                                             |  |               |             |   |               |   |             |  
|---------------------------------------------------------------------------- |  | ------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                             |  | March 6, 2007 |             |   | March 5, 2006 |  
|                                                                             | 
|Cash flows provided by (used in) operating activities:                       |  |               |             |   |               |   |             |  
|Net earnings                                                                 |  | $             | 6,995,223   |   |               | $ | 6,490,500   |  
|Adjustments to reconcile net earnings to net cash from operating activities: |  |               |             |   |               |   |             |  
|Depreciation and amortization                                                |  |               | 10,413,172  |   |               |   | 9,886,424   |  
|Loss (gain) on disposition of assets, including abandonments                 |  |               | (21,234     | ) |               |   | (58,936     | )
|Stock-based compensation expense                                             |  |               | 231,120     |   |               |   |            |  
|                                                                             |  |               |             |   |               |   |             |  
|                                                                             |  |               | 17,618,281  |   |               |   | 16,317,988  |  
|Changes in assets and liabilities:                                           |  |               |             |   |               |   |             |  
|Trade and other receivables                                                  |  |               | (323,264    | ) |               |   | (851,498    | )
|Inventories                                                                  |  |               | (694,321    | ) |               |   | (76,304     | )
|Prepaid expenses and sundry deposits                                         |  |               | (761,592    | ) |               |   | 148,214     |  
|Other assets                                                                 |  |               | 190,060     |   |               |   | 544,982     |  
|Prepaid, accrued and deferred income taxes                                   |  |               | (316,575    | ) |               |   | (1,224,342  | )
|Excess tax benefit from stock-based compensation                             |  |               | (81,157     | ) |               |   |            |  
|Tax benefit from stock options exercised                                     |  |               |            |   |               |   | 32,496      |  
|Accounts payable                                                             |  |               | (62,525     | ) |               |   | (1,110,332  | )
|Accrued expenses                                                             |  |               | (344,435    | ) |               |   | 836,839     |  
|Self insurance                                                               |  |               | (118,210    | ) |               |   | (92,406     | )
|Deferred compensation and other liabilities                                  |  |               | 172,350     |   |               |   | 405,203     |  
|                                                                             |  |               |             |   |               |   |             |  
|                                                                             |  |               | (2,339,669  | ) |               |   | (1,387,148  | )
|                                                                             |  |               |             |   |               |   |             |  
|Net cash provided by operating activities                                    |  |               | 15,278,612  |   |               |   | 14,930,840  |  
|                                                                             |  |              
|Cash flows provided by (used in) investing activities:                       |  |               |             |   |               |   |             |  
|Additions to property and equipment                                          |  |               | (13,123,681 | ) |               |   | (16,084,603 | )
|Proceeds from disposition of property                                        |  |               | 409,035     |   |               |   | 356,575     |  
|Change in other assets                                                       |  |               | (118,437    | ) |               |   | (1,372,783  | )
|                                                                             |  |               |             |   |               |   |             |  
|Net cash (used in) investing activities                                      |  |               | (12,833,083 | ) |               |   | (17,100,811 | )
|                                                                             |  |              
|Cash flows provided by (used in) financing activities:                       |  |               |             |   |               |   |             |  
|Proceeds from borrowings                                                     |  |               | 6,000,000   |   |               |   | 11,000,000  |  
|Payment of long-term debt and capital lease obligations                      |  |               | (7,854,250  | ) |               |   | (7,247,742  | )
|Cash dividends paid                                                          |  |               | (1,677,997  | ) |               |   | (1,671,212  | )
|Proceeds from stock options exercised - new shares issued                    |  |               | 540,113     |   |               |   | 287,397     |  
|Proceeds from stock options exercised - treasury shares re-issued            |  |               | 6,275       |   |               |   |            |  
|Excess tax benefit from stock-based compensation                             |  |               | 81,157      |   |               |   |            |  
|Other treasury shares re-issued                                              |  |               | 28,880      |   |               |   | 51,829      |  
|Employee stock purchase plan                                                 |  |               | 4,088       |   |               |   | (22,725     | )
|                                                                             |  |               |             |   |               |   |             |  
|Net cash (used in) provided by financing activities                          |  |               | (2,871,734  | ) |               |   | 2,397,547   |  
|                                                                             |  |               |             |   |               |   |             |  
|Net (decrease) increase in cash and equivalents                              |  |               | (426,205    | ) |               |   | 227,576     |  
|Cash and equivalents at beginning of year                                    |  |               | 815,346     |   |               |   | 306,300     |  
|                                                                             |  |               |             |   |               |   |             |  
|Cash and equivalents at end of quarter                                       |  | $             | 389,141     |   |               | $ | 533,876     |  
|                                                                             |  |               |             |   |               |   |             |  
|Supplemental disclosures:                                                    |  |               |             |   |               |   |             |  
|Interest paid                                                                |  | $             | 2,223,278   |   |               | $ | 2,394,150   |  
|Income taxes paid                                                            |  |               | 4,913,362   |   |               |   | 4,536,248   |  
|Income taxes refunded                                                        |  |               | 993,787     |   |               |   | 401         |  

The accompanying notes are an integral part of these statements.



7



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Third Quarter Fiscal 2007, Ended March 6, 2007

NOTE A  ACCOUNTING
POLICIES

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

Description of the Business

Frischs Restaurants, Inc. (The Company) is a regional company that operates full service family-style restaurants under the name Frischs Big Boy. The Company also operates grill buffet style restaurants under the
name Golden Corral pursuant to certain licensing agreements. All Big Boy restaurants operated by the Company are currently located in various regions of Ohio, Kentucky and Indiana. Golden Corral restaurants currently operate primarily in
the greater metropolitan areas of Cincinnati, 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.

Consolidation Practices

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

Fiscal Year

The Companys fiscal year is the 52 or 53 week period ending on the Tuesday nearest to the last day of May. The first quarter of each fiscal year contains sixteen
weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, the additional week needed to make a 53 week year is added to the fourth quarter, resulting in a thirteen week fourth quarter. The year that will
begin on Wednesday, May 30, 2007 and end on Tuesday, June 3, 2008 will contain 53 weeks, which will include a thirteen week fourth quarter.

Use of Estimates and Critical Accounting Policies

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

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



8



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents

Highly liquid investments with original maturities of three months or less are considered
to be cash equivalents. Funds in transit from credit card processors are classified as cash.

Receivables

The Company values its trade notes and accounts receivable on the reserve method. The reserve balance was $30,000 as of March 6, 2007 and May 30, 2006. 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 new buildings or components thereof and five to ten years for equipment. Leasehold improvements are depreciated over the shorter of the useful life of the asset or the lease term as lease terms are defined in Statement
of Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases, as amended. Property betterments are capitalized while the cost of maintenance and repairs is expensed as incurred.

The cost of land not yet in service is included in construction in progress if construction has begun or if construction is likely within the next twelve
months. Estimated remaining expenditures for one new Big Boy restaurant that was under construction as of March 6, 2007 totaled approximately $1,766,000. Interest on borrowings is capitalized during active construction periods of new
restaurants. Capitalized interest was $38,000 and $133,000 respectively, for the 40 weeks ended March 6, 2007 and March 5, 2006, and was zero and $46,000 respectively, for the twelve weeks ended March 6, 2007 and March 5, 2006.
No pending agreements to acquire real property were in place as of March 6, 2007.

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.

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



9



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

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 judgment of management based upon its 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. The Company
does not typically receive leasehold incentives from landlords.

SFAS 13 also requires rent to be recognized during that part of the term of the lease when
no rent is paid to the landlord, often referred to as a rent holiday, that generally occurs while the restaurant is being constructed on leased land. 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 operating leases that are incurred during a construction period to be recognized as
rental expense. The capitalization of such rent holidays had to cease upon application of the FSP to the first reporting period beginning after December 15, 2005. Earlier application being permitted, the Company elected to cease
capitalizing rent holidays effective with the fiscal quarter that began September 19, 2005 (the second quarter of fiscal year 2006).

Restaurant Closing Costs

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

Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, is applicable to legal obligations associated with the retirement of certain tangible
long-lived assets. Its application has not materially impacted the Companys financial statements in any of the periods presented. FASB Interpretation No. 47, Accounting for Conditional Asset Obligations (FIN 47), was issued to
clarify that conditional obligations meet the definition of an asset retirement obligation under SFAS 143 and therefore should be recognized currently if fair value is reasonably estimable. The Company adopted FIN 47 in the fourth quarter of fiscal
year 2006. Its adoption had no material impact on the Companys financial statements.



10



---

##### 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 March 6, 2007 and May 30, 2006, the carrying amount of goodwill acquired in prior years was
$741,000.

Intangible assets having a finite useful life are subject to amortization, and are tested annually for impairment. The Companys other
intangible assets consist principally of initial franchise fees paid for each new Golden Corral restaurant the Company opens. Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method
over the 15-year term of each individual restaurants franchise agreement. The fees are ratably amortized at $2,667 per year per restaurant. This equates to $91,000 per year in each of the next five years for the 34 Golden Corral restaurants in
operation as of March 6, 2007. Amortization for the 40 weeks ended March 6, 2007 and March 5, 2006 was $70,000 and $66,000 respectively, and was $21,000 and $21,000 respectively, for the twelve weeks ended March 6, 2007 and
March 5, 2006. The remaining balance of other intangible assets, including fees paid for future Golden Corral restaurants, is not currently being amortized because these assets have indefinite or as yet to be determined useful lives.

An analysis of other intangible assets follows:



|                                                                                |  |                |       |   |              |   |       |  
|------------------------------------------------------------------------------- |  | -------------- | ----- | - | ------------ | - | ----- | -
|                                                                                |  | March 6,2007   |       |   | May 30, 2006 |  
|                                                                                |  | (in thousands) |      
|Golden Corral initial franchise fees subject to amortization                    |  | $              | 1,360 |   |              | $ | 1,360 |  
|Less accumulated amortization                                                   |  |                | (406  | ) |              |   | (336  | )
|                                                                                |  |                |       |   |              |   |       |  
|Carrying amount of Golden Corral initial franchise fees subject to amortization |  |                | 954   |   |              |   | 1,024 |  
|                                                                                |  |               
|Current portion of Golden Corral initial franchise fees subject to amortization |  |                | (91   | ) |              |   | (91   | )
|Golden Corral fees not yet subject to amortization                              |  |                | 320   |   |              |   | 305   |  
|                                                                                |  |               
|Other intangible assets                                                         |  |                | 146   |   |              |   | 146   |  
|                                                                                |  |                |       |   |              |   |       |  
|Total other intangible assets                                                   |  | $              | 1,329 |   |              | $ | 1,384 |  
|                                                                                |  |                |       |   |              |   |       |  

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 other operating costs as incurred.

Revenue Recognition

Revenue from restaurant operations is recognized upon receipt of payment from customers at the time of the sale. 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.



11



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

Under the provisions of the Financial Accounting Standards Boards Emerging Issues Task Force (EITF) Issue No. 06-3, How Taxes Collected from Customers and Remitted to Government Authorities Should be
Presented in the Income Statement, the Company may either present sales in the consolidated statement of earnings on a gross (include tax collections in revenue and remittances in costs) or a net (exclude taxes from revenue and costs) basis.
The Companys policy has always been to report on a net basis, which excludes taxes from revenue and costs.

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

New Store Opening Costs

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



|              |  |                |     |                |   |              |  |              |   |  |   |    
|------------- |  | -------------- | --- | -------------- | - | ------------ |  | ------------ | - |  | - | ---
|              |  | 40 weeks ended |     | 12 weeks ended
|              |  | Mar. 6,2007    |     | Mar. 5,2006    |   | Mar. 6, 2007 |  | Mar. 5, 2006
|              |  |                |     | (in thousands) |   |             
|Golden Corral |  | $              |    |                | $ | 1,117        |  | $            |  |  | $ | 147
|Big Boy       |  |                | 241 |                |   | 263          |  |              |  |  |   | 102
|              |  |                |     |                |   |              |  |              |   |  |   |    
|              |  | $              | 241 |                | $ | 1,380        |  | $            |  |  | $ | 249
|              |  |                |     |                |   |              |  |              |   |  |   |    

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 E  Pension Plans.) Hourly restaurant employees hired after December 31, 1998 are ineligible to participate in the qualified defined benefit pension plans.
Instead, these employees are offered participation in a 401(k) savings plan (the hourly plan), a defined contribution plan, with a matching 40 percent employer cash contribution. The Companys match vests on a scale based on length of service.

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



12



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

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 E  Pension Plans.)

Prepaid pension benefit costs (see Note E  Pension Plans) and FESP assets are the principal components of Other long-term assets in the
consolidated balance sheet. The current portion of prepaid pension benefit costs is included in Prepaid expenses and sundry deposits in the consolidated balance sheet.

Self Insurance

The Company self-insures its Ohio workers compensation claims up to $300,000 per claim. Initial
self-insurance liabilities are accrued based on prior claims history, including an amount developed for incurred but unreported claims. Active claims management and post accident drug testing in recent years has effected vast improvements in claims
experience. Management performs a comprehensive review each fiscal quarter and adjusts the self-insurance liabilities as deemed appropriate based on claims experience. Below is a summary of reductions to the self-insurance liabilities that were
credited to earnings:



| |  |                |  |                |     |              |   |              |  |   |    
| |  | -------------- |  | -------------- | --- | ------------ | - | ------------ |  | - | ---
| |  | 40 weeks ended |  | 12 weeks ended
| |  | Mar. 6, 2007   |  | Mar. 5,2006    |     | Mar. 6, 2007 |   | Mar. 5, 2006
| |  |                |  | (in thousands) |     |             
| |  | $554           |  | $              | 616 |              | $ | 127          |  | $ | 242
| |  |                |  |                |     |              |   |              |  |   |    

Fair Value of Financial Instruments

With the exception of long-term debt (see Note B - 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.



13



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements

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. Its adoption on
May 31, 2006 had no material impact on the Companys consolidated financial statements.

Statement of Financial Accounting Standards No. 154
(SFAS 154), Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3, is 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 may occur in the fiscal year that will end May 29, 2007 and thereafter.

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

Statement of Financial Accounting Standards No. 158
(SFAS 158), Employers Accounting for Defined Benefit Pension and Other Post Retirement Plans  an amendment of FASB Statements No. 87, 88, 106 and 132 (R), was issued September 30, 2006. SFAS 158 will be effective as
of the end of the Companys current fiscal year that will end May 29, 2007. It will require recognition of the overfunded or underfunded status of defined benefit pension plans as an asset or liability in the consolidated balance sheet.
Funded status is measured as the difference between plan assets at fair value and projected benefit obligations, which includes future salary increases. Current estimates indicate that a liability approximating $1,450,000 will need to be recorded at
May 29, 2007, reflecting underfunded status under SFAS 158. Establishing the liability will require a reduction in the Companys equity by an estimated $3,200,000, net of tax, effected through a charge to accumulated other comprehensive
income.

FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
(FIN 48), is effective for fiscal years beginning after December 15, 2006 (the Companys fiscal year that will end June 3, 2008). FIN 48 provides guidance for recognition and measurement on financial statements of tax positions taken
in tax returns or expected to be taken on a future tax return. The Company is currently evaluating the effect of applying FIN 48.

FASBs Emerging
Issues Task Force (EITF) Issue No. 06-3 How Taxes Collected from Customers and Remitted to Government Authorities Should be Presented in the Income Statement is effective for interim and annual reporting periods beginning after
December 15, 2006. Earlier application being permitted, the Companys policy is disclosed elsewhere in Note A under Revenue Recognition.

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



14



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE A  ACCOUNTING POLICIES (CONTINUED)

The Company reviewed all other significant newly issued accounting pronouncements, including:



| |  |  | SFAS 152 Accounting for Real Estate Time Sharing Transactions
| | - |  | ---------------------------------------------------------------



| |  |  | SFAS 153 Exchanges of Nonmonetary Assets
| | - |  | ------------------------------------------



| |  |  | SFAS 155 Accounting for Certain Hybrid Financial Statements  an Amendment of FASB Statements No. 133 and 140
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | SFAS 156 Accounting for Servicing of Financial Assets  an Amendment of FASB Statement No. 140,
| | - |  | -------------------------------------------------------------------------------------------------

and concluded that, other than those disclosed herein, no material impact is anticipated on the consolidated financial statements as a result of future adoption.

NOTE B  LONG-TERM DEBT



|                             |  |                       |        |                       |   |                        |  |                        |       |  |   |       
|---------------------------- |  | --------------------- | ------ | --------------------- | - | ---------------------- |  | ---------------------- | ----- |  | - | ------
|                             |  | March 6, 2007         |        | May 30, 2006         
|                             |  | Payablewithinone year |        | Payableafter one year |   | Payablewithin one year |  | Payable after one
year
|                             |  |                       |        | (in thousands)        |   |                       
|Construction Draw Facility - |  |                       |        |                       |   |                        |  |                        |       |  |   |       
|Construction Phase Loans     |  | $                     |       |                       | $ | 3,000                  |  | $                      |      |  | $ |      
|Term Loans                   |  |                       | 8,618  |                       |   | 21,739                 |  |                        | 8,926 |  |   | 27,992
|Bullet Loan                  |  |                       | 859    |                       |   | 2,141                  |  |                        |      |  |   | 3,000 
|Revolving Credit Loan        |  |                       | 2,000  |                       |   |                       |  |                        |      |  |   |      
|                             |  |                       |        |                       |   |                        |  |                        |       |  |   |       
|                             |  | $                     | 11,477 |                       | $ | 26,880                 |  | $                      | 8,926 |  | $ | 30,992
|                             |  |                       |        |                       |   |                        |  |                        |       |  |   |       

The portion payable after one year matures as follows:



|                      |  |                |        |              |   |       
|--------------------- |  | -------------- | ------ | ------------ | - | ------
|                      |  | March 6, 2006  |        | May 30, 2006
|                      | 
|                      |  | (in thousands)
|Period ending in 2009 |  | $              | 11,329 |              | $ | 11,390
|2010                  |  |                | 6,161  |              |   | 6,937 
|2011                  |  |                | 4,466  |              |   | 4,673 
|2012                  |  |                | 3,003  |              |   | 4,076 
|2013                  |  |                | 1,788  |              |   | 2,633 
|Subsequent to 2013    |  |                | 133    |              |   | 1,283 
|                      |  |                |        |              |   |       
|                      |  | $              | 26,880 |              | $ | 30,992
|                      |  |                |        |              |   |       

The Construction Draw Facility (the Facility) is an unsecured draw credit line intended to finance new restaurant
construction, under which $7,000,000 remained available to be borrowed as of March 6, 2007. Availability for borrowing under the Facility expires September 1, 2008, unless extended.

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.



15



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE B  LONG TERM DEBT (CONTINUED)

The maximum amount that may borrowed under the Facility is $76,500,000, of which $69,500,000 had been cumulatively borrowed as of March 6, 2007. The aggregate outstanding balance under the Facility is
$33,357,000, consisting of $3,000,000 in the Construction Phase and $30,357,000 remaining due on original Term Loans of $66,500,000. (Five of the original Term Loans totaling $8,000,000 have now been retired.) All of the outstanding Term Loans are
subject to fixed interest rates, the weighted average of which is 6.03 percent, all of which are being repaid in 84 equal monthly installments of principal and interest aggregating $863,000, expiring in various periods ranging from October 2007
through October 2013. Prepayments of the Term Loans are permissible upon payment of sizeable prepayment fees and other amounts. The $3,000,000 outstanding balance in the Construction Phase is currently subject to variably rated interest of 6.56
percent per annum through May 15, 2007. Any outstanding amount in the Construction Phase of the Facility that has not been converted into a Term Loan on September 1, 2008 shall mature and be payable at that time, unless the Facility is
extended.

The Bullet Loan was converted into a term loan to be effective March 15, 2007. The provisions of the term loan call for 36 equal monthly
installments of $92,000 including principal and interest at a fixed 6.13 percent rate. The real property of two Golden Corral restaurants having an approximate book value of $4,160,000 is encumbered by mortgages to secure the Bullet Loan.

The Revolving Credit Loan allows for borrowing of up to $5,000,000 to fund temporary working capital needs through September 1, 2008. The loan
agreement requires a 30 consecutive day out-of-debt period each year. As of March 6, 2007, $2,000,000 had been borrowed against the Loan. Interest, currently payable at a variable rate of 6.56 percent through April 26, 2007, is determined
by the same pricing matrix used for Construction Phase Loans under the Construction Draw Facility, the basis points from which are added to or subtracted from one of various indices chosen by the Company. The loan is subject to a .25 percent unused
commitment fee. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly.

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 March 6, 2007. As discussed in Other New Accounting Pronouncements in Note A  Accounting Policies, the adoption of SFAS 158 on May 29, 2007 will reduce the Companys equity by an estimated $3,200,000,
net of tax. The reduction in equity is not expected to violate the tangible net worth covenant. Compensating balances are not required by these loan agreements.

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 March 6, 2007 and May 30, 2006, as the provisions of the loan
agreements call for variable rated interest. 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 March 6, 2007 and May 30, 2006.



|                             |  |               |        |                |   |               |  |           |        |  |   |       
|---------------------------- |  | ------------- | ------ | -------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                             |  | March 6, 2007 |        | May 30, 2006  
|                             |  | Carryingvalue |        | Fairvalue      |   | Carryingvalue |  | Fairvalue
|                             |  |               |        | (in thousands) |   |              
|Construction Draw Facility - |  |               |        |                |   |               |  |           |        |  |   |       
|Term Loans                   |  | $             | 30,357 |                | $ | 30,121        |  | $         | 36,918 |  | $ | 36,173



16



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE C  LEASED PROPERTY

The Companys policy is to own its restaurant locations whenever possible, however, the Company occupies certain of its restaurants pursuant to lease agreements. Most of the leases are for fifteen or twenty years and contain renewal
options for ten to fifteen years, and/or have favorable purchase options. As of March 6, 2007, 28 restaurants were in operation on non-owned premises, consisting of five capital leases (all of which are for Big Boy operations) and 23 operating
leases (fifteen are for Big Boy operations and eight are for Golden Corral operations). On September 27, 2006, the Company completed acquisitions in fee simple of three Big Boy restaurant locations pursuant to purchase option rights granted
under leasing arrangements. The aggregate cost was approximately $2,620,000. In addition, another Big Boy restaurant facility occupied pursuant to an operating lease was acquired in fee simple for $733,000 on December 27, 2006. Three of the
five capital leases identified above will expire on October 31, 2007, after which the Company intends to exercise its options to purchase the properties in fee simple. The purchase prices have yet to be determined.

Office space is occupied under an operating lease that expires during fiscal year 2013, which has renewal options available through fiscal year 2023. A purchase option
is available in 2023 to acquire the office property in fee simple. Certain delivery equipment is held under capitalized lease expiring during periods through fiscal year 2013.

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



|                              |  |                   |        |   |              |   |        |  
|----------------------------- |  | ----------------- | ------ | - | ------------ | - | ------ | -
|                              |  | Asset balances at |       
|                              |  | March 6,2007      |        |   | May 30, 2006 |  
|                              |  | (in thousands)    |       
|Restaurant facilities         |  | $                 | 3,496  |   |              | $ | 3,942  |  
|Equipment                     |  |                   | 1,315  |   |              |   | 1,315  |  
|                              |  |                   |        |   |              |   |        |  
|                              |  |                   | 4,811  |   |              |   | 5,257  |  
|Less accumulated amortization |  |                   | (3,812 | ) |              |   | (3,977 | )
|                              |  |                   |        |   |              |   |        |  
|                              |  | $                 | 999    |   |              | $ | 1,280  |  
|                              |  |                   |        |   |              |   |        |  

Rent expense under operating leases:



|                    |  |                |       |                |   |             |  |             |     |  |   |    
|------------------- |  | -------------- | ----- | -------------- | - | ----------- |  | ----------- | --- |  | - | ---
|                    |  | 40 weeks ended |       | 12 weeks ended
|                    |  | Mar. 6,2007    |       | Mar. 5,2006    |   | Mar. 6,2007 |  | Mar. 5,2006
|                    |  |                |       | (in thousands) |   |            
|Minimum rentals     |  | $              | 1,607 |                | $ | 1,501       |  | $           | 438 |  | $ | 476
|Contingent payments |  |                | 37    |                |   | 39          |  |             | 11  |  |   | 11 
|                    |  |                |       |                |   |             |  |             |     |  |   |    
|                    |  | $              | 1,644 |                | $ | 1,540       |  | $           | 449 |  | $ | 487
|                    |  |                |       |                |   |             |  |             |     |  |   |    



17



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE C  LEASED PROPERTY (CONTINUED)

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 March 6,       |  | Capitalized leases |        |   | Operating leases
|                             |  | (in thousands)    
|2008                         |  | $                  | 2,148  |   |                  | $ | 1,868 
|2009                         |  |                    | 785    |   |                  |   | 1,875 
|2010                         |  |                    | 230    |   |                  |   | 1,753 
|2011                         |  |                    | 205    |   |                  |   | 1,405 
|2012                         |  |                    | 132    |   |                  |   | 1,428 
|2013 to 2027                 |  |                    | 34     |   |                  |   | 16,054
|                             |  |                    |        |   |                  |   |       
|Total                        |  |                    | 3,534  |   |                  | $ | 24,383
|                             |  |                    |        |   |                  |   |       
|Amount representing interest |  |                    | (314   | ) |                  |   |       
|                             |  |                    |        |   |                  |   |       
|Present value of obligations |  |                    | 3,220  |   |                  |   |       
|Portion due within one-year  |  |                    | (1,944 | ) |                  |   |       
|                             |  |                    |        |   |                  |   |       
|                             |  |                   
|Long-term obligations        |  | $                  | 1,276  |   |                  |   |       
|                             |  |                    |        |   |                  |   |       

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

NOTE D  CAPITAL STOCK

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

2003 Stock Option and Incentive Plan

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

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



18



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

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. The option price and obligatory withholding taxes may be paid pursuant to a cashless exercise/sale procedure involving the simultaneous sale by a broker of
shares covered by the option.

Stock appreciation rights (SARs) are rights to receive payment, in cash, shares of common stock or a combination of
the two, equal to the excess of (1) the fair market value of a share of common stock on the date of exercise over (2) the price per share of common stock established in connection with the grant of the SAR (the reference price).

The reference price must be at least 100 percent of the common stocks fair market value on the date the SAR is granted. SARs may be granted by
the Committee in its discretion to any participant, and may have terms no longer than 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 March 6, 2007, options to purchase 129,750 shares had been cumulatively granted under the Plan, including 20,000 that belong to the President
and Chief Executive Officer (CEO). The Committee has determined that outstanding options belonging to the CEO vest six months from the date of grant, while outstanding options granted to other key employees vest in three equal annual installments.
The Committee has further determined that outstanding options granted to non-employee members of the Board of Directors vest one year from the date of grant. The Committee may, in its sole discretion, accelerate the vesting of all or any part of any
awards held by a terminated participant, excluding, however, any participant who is terminated for cause. As of March 6, 2007, 690,167 shares remain available to be optioned, including 19,917 shares granted that were subsequently forfeited,
which are again available for grants in accordance with the Re-Use of Shares provision of the Plan. There were 107,500 options outstanding as of March 6, 2007.

No other awards - stock appreciation rights, restricted stock award, unrestricted stock award or performance awardhave been granted under the 2003 Stock Option and Incentive Plan.

1993 Stock Option Plan

The 1993 Stock Option Plan was not affected
by the adoption of the 2003 Stock Option and Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for changes in capitalization in earlier years) of the common stock of the
Company for a ten-year period beginning May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the availability of options to be granted to October 4, 2008. In
addition, the Board of Directors adopted certain amendments in December 2006 to bring the Plan into compliance with the American Jobs Creation Act of 2004 and section 409A of the Internal Revenue Code. As of March 6, 2007, 6,204 shares remained
available to be optioned. Of the 556,228 cumulative shares optioned to date, 310,066 remain outstanding as of March 6, 2007, 211,478 of which belong to the President and Chief Executive Officer.



19



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

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 CEO vested in six months, while options granted to non-employee
directors vested after one year. Outstanding options granted to other key employees vest in three equal annual installments. Stock appreciation rights are not provided for under the Amended Plan.

The changes in outstanding and exercisable options involving both the 1993 Stock Option Plan and the 2003 Stock Option and Incentive Plan are shown below as of
March 6, 2007:



|                                 |  |              |   |  |                              |       |                                        |      |                                         |   |      
|-------------------------------- |  | ------------ | - |  | ---------------------------- | ----- | -------------------------------------- | ---- | --------------------------------------- | - | -----
|                                 |  | No. ofshares |   |  | Weighted avg.price per share |       | Weighted avg.RemainingContractual Term |      | Aggregate Intrinsic Value(in thousands)
|Outstanding at beginning of year |  | 412,988      |   |  | $                            | 19.58 |                                        |      |                                         |   |      
|Granted                          |  | 45,250       |   |  | $                            | 24.62 |                                        |      |                                         |   |      
|Exercised                        |  | (30,255      | ) |  | $                            | 18.06 |                                        |      |                                         |   |      
|Forfeited or expired             |  | (10,417      | ) |  | $                            | 24.79 |                                        |      |                                         |   |      
|                                 |  |              |   |  |                              |       |                                        |      |                                         |   |      
|Outstanding at end of quarter    |  | 417,566      |   |  | $                            | 20.10 |                                        | 6.11 |                                         | $ | 3,848
|                                 |  |              |   |  |                              |       |                                        |      |                                         |   |      
|                                 |  |              |   | 
|Exercisable at end of quarter    |  | 341,567      |   |  | $                            | 18.95 |                                        | 5.53 |                                         | $ | 3,538
|                                 |  |              |   |  |                              |       |                                        |      |                                         |   |      

The intrinsic value of stock options exercised during the 40 weeks ended March 6, 2007 and March 5, 2006
was $239,000 and $96,000, respectively.

Stock options outstanding and exercisable as of March 6, 2007 for the 1993 Stock Option Plan and the 2003
Stock Option and Incentive Plan are shown below:



|                                   |  |              |  |                                 |       |                                         |           
|---------------------------------- |  | ------------ |  | ------------------------------- | ----- | --------------------------------------- | ----------
|Range of Exercise Prices per Share |  | No. ofshares |  | Weighted averageprice per share |       | Weighted averageremaining life in years
|Outstanding:                       |  |              |  |                                 |       |                                         |           
|$ 8.31 to $13.00                   |  | 69,479       |  | $                               | 10.62 |                                         | 3.14 years
|$13.01 to $18.00                   |  | 55,501       |  | $                               | 13.76 |                                         | 4.30 years
|$18.01 to $24.20                   |  | 129,336      |  | $                               | 19.70 |                                         | 5.95 years
|$24.21 to $30.13                   |  | 163,250      |  | $                               | 26.62 |                                         | 8.12 years
|                                   |  |              |  |                                 |       |                                         |           
|$ 8.31 to $30.13                   |  | 417,566      |  | $                               | 20.10 |                                         | 6.11 years
|                                   |  |              | 
|Exercisable:                       |  |              |  |                                 |       |                                         |           
|$ 8.31 to $13.00                   |  | 69,479       |  | $                               | 10.62 |                                         | 3.14 years
|$13.01 to $18.00                   |  | 55,501       |  | $                               | 13.76 |                                         | 4.30 years
|$18.01 to $24.20                   |  | 127,586      |  | $                               | 19.65 |                                         | 5.91 years
|$24.21 to $30.13                   |  | 89,001       |  | $                               | 27.68 |                                         | 7.63 years
|                                   |  |              |  |                                 |       |                                         |           
|$ 8.31 to $30.13                   |  | 341,567      |  | $                               | 18.95 |                                         | 5.53 years



20



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

Employee Stock Purchase Plan

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee
Stock Purchase Plan) in 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to purchase shares of the Companys common stock through payroll deduction. Immediately following the end of each
semi-annual offering period, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair market value of shares at the beginning of the offering period or at the end of the offering period. The Plan authorizes
a maximum of 1,000,000 shares that may be purchased on the open market or from the Companys treasury. As of October 31, 2006 (latest available data), 118,699 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, 2006, the custodian held 34,475 shares on behalf of employees.

Frischs Executive Savings Plan

A total of 58,492 common shares (as adjusted for changes in capitalization in earlier years) were
reserved for issuance under the non-qualified Executive Savings Plan (FESP) (see Benefit Plans in Note A  Accounting Policies) when it was established in 1993. As of March 6, 2007, 48,315 shares remained in the FESP reserve, including
10,878 shares allocated but not issued to participants.

There are no other outstanding options, warrants or rights.

Share-Based Payment (Compensation Cost)

The Company adopted
Statement of Financial Accounting Standards No. 123 (R) (SFAS 123 (R)), Share-Based Payment on May 31, 2006. SFAS 123 (R) requires the fair value of stock options granted to be recognized as compensation cost. It
applies to all awards granted on or after the adoption date, with compensation cost based on the fair value of the award on the date of the grant. The cost is recognized in the consolidated statement of earnings on a straight-line basis over the
vesting period of the award. In addition, because the Company elected the modified prospective application transition method in adopting SFAS 123 (R), compensation cost is also recognized in the 40 and twelve weeks ended March 6, 2007 for the
portion of outstanding options vesting in the period that were granted prior to, but not yet vested as of the adoption date, based on the fair value of those awards as was calculated under the original provisions of SFAS 123 and the pro forma
disclosures under Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock Based Compensation  Transition and Disclosure.

The financial impact of adopting SFAS 123 (R) was mitigated by the Board of Directors approval of an amendment to the employment contract of the CEO to delete the provision for annual awards of stock
options to be granted when certain levels of pretax earnings are achieved. In its place, a provision was added allowing additional annual contributions to be made to the trust established for the benefit of the CEO under the Companys
Nondeferred Cash Balance Plan (see Benefit Plans in Note A  Accounting Policies and Note E  Pension Plans) when certain levels of pretax earnings are achieved. In addition, stock options granted in June 2006 to certain key employees were
one-half the level granted during each of the previous two years, commensurate with lower pretax earnings achievements in the year ended May 30, 2006.



21



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

As a result of adopting SFAS 123 (R), compensation costs arising from stock options granted are shown below. Prior period results have not been restated.



|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                       |         |                       |   |    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ------- | --------------------- | - | ---
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 40 weeksMarch 6, 2007 |         | 12 weeksMarch 6, 2007
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | (in thousands)       
|Charged to administrative and advertising expense                                                                                                                                                                                                                                                                                                                                                                                                    |  | $                     | 231     |                       | $ | 87 
|Tax benefit                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                       | 79      |                       |   | 30 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                       |         |                       |   |    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      
|Total share-based compensation cost, net of tax                                                                                                                                                                                                                                                                                                                                                                                                      |  | $                     | 152     |                       | $ | 57 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                       |         |                       |   |    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      
|Effect on basic earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $                     | .03     |                       | $ | .01
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                       |         |                       |   |    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      
|Effect on diluted earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $                     | .03     |                       | $ | .01
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                       |         |                       |   |    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The fair value of each option award is estimated on the date of the grant using the modified Black-Scholes option pricing model, the same method used to value options granted prior
to May 31, 2006 for pro forma disclosures. No options were granted during the twelve weeks ended March 6, 2007. The weighted average fair value of options granted during the 40 weeks ended March 6, 2007 was $6.38, developed with the
following assumptions:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 40 weeksMar. 6, 2007  |         |                      
|Dividend yield                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                       | 1.80%   |                       |   |    
|Expected volatility                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                       | 25%     |                       |   |    
|Risk free interest rate                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                       | 4.56%   |                       |   |    
|Expected lives                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                       | 5 years |                       |   |    

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

As of March 6, 2007, there was $273,000 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be
recognized over a weighted average period of .79 years.

SFAS 123 (R) also requires that compensation cost be recognized in connection with the
Companys Employee Stock Purchase Plan (described earlier). The Company recognizes compensation cost on these shares ratably over the offering period based on the fair value of the anticipated number of shares that will be issued at the end of
each offering period. Compensation expensed is trued-up at the end of each period to reflect the actual number of shares issued. During the 40 weeks ended March 6, 2007, $29,000 was charged to expense related to the Plan.



22



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

Prior to May 31, 2006, the Company accounted for stock options using the intrinsic value method of measuring compensation expense prescribed by Accounting Principles Board Opinion No. 25 (APB 25), as
permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based Compensation. No stock based employee compensation cost was included in net income, as all options granted had an exercise price
equal to the market value of the stock on the date of the grant. In accordance with SFAS 148, the following table presents the pro forma 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 for the 40 and twelve weeks ended March 5, 2006:



|                                                                                                                                    |  |                                       |       |                       |   |      
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ----- | --------------------- | - | -----
|                                                                                                                                    |  | 40 weeks Mar. 5, 2006                 |       | 12 weeks Mar. 5, 2006
|                                                                                                                                    | 
|                                                                                                                                    |  | (in thousands, except per share data)
|Net Income, as reported                                                                                                             |  | $                                     | 6,491 |                       | $ | 2,206
|Deduct: total stock-based employee compensation expense determined under fair value based method for all grants, net of tax
effects |  |                                       | 239   |                       |   | 46   
|                                                                                                                                    |  |                                       |       |                       |   |      
|Pro forma net income                                                                                                                |  | $                                     | 6,252 |                       | $ | 2,160
|                                                                                                                                    |  |                                       |       |                       |   |      
|Earnings per share                                                                                                                  |  |                                       |       |                       |   |      
|Basic  as reported                                                                                                                 |  | $                                     | 1.28  |                       | $ | .43  
|Basic  pro forma                                                                                                                   |  | $                                     | 1.23  |                       | $ | .43  
|                                                                                                                                    |  |                                      
|Diluted  as reported                                                                                                               |  | $                                     | 1.26  |                       | $ | .43  
|Diluted  pro forma                                                                                                                 |  | $                                     | 1.21  |                       | $ | .42  

The estimated pro forma stock-based employee compensation expense used in the above table was determined using the
modified Black-Scholes option pricing model with the following weighted average assumptions:



|                                               |  |                       |         |   |                       |   |         |  
|---------------------------------------------- |  | --------------------- | ------- | - | --------------------- | - | ------- | -
|                                               |  | 40 weeks Mar. 5, 2006 |         |   | 12 weeks Mar. 5, 2006 |  
|Dividend yield                                 |  |                       | 1.80    | % |                       |   | 1.80    | %
|Expected volatility                            |  |                       | 26      | % |                       |   | 26      | %
|Risk free interest rate                        |  |                       | 3.87    | % |                       |   | 3.87    | %
|Expected lives                                 |  |                       | 5 years |   |                       |   | 5 years |  
|Weighted average fair value of options granted |  | $                     | 6.19    |   |                       | $ | 6.19    |  

Treasury Stock

As of March 6, 2007, the Companys treasury held 2,445,764 shares of the Companys common stock. Most of the shares were acquired in a series of repurchase programs authorized by the Board of Directors from 1998 through
January 2002, and through a modified Dutch Auction self-tender offer in 1997.



23



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE D  CAPITAL STOCK (CONTINUED)

Earnings Per Share

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



|                                                                                                                                                                                                                                         |  |                                    |  |                   |      |                            |                                    |  |           |  |   |     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- |  | ----------------- | ---- | -------------------------- | ---------------------------------- |  | --------- |  | - | ----
|                                                                                                                                                                                                                                         |  | Basic earnings per share           |  | Stock equivalents |      | Diluted earnings per share
|                                                                                                                                                                                                                                         |  | Weighted averageshares outstanding |  | EPS               |      |                            | Weighted averageshares outstanding |  | EPS      
|40 weeks ended:                                                                                                                                                                                                                          |  |                                    |  |                   |      |                            |                                    |  |           |  |   |     
|                                                                                                                                                                                                                                         |  |                                    |  |                   |     
|March 6, 2007                                                                                                                                                                                                                            |  | 5,085,488                          |  | $                 | 1.38 |                            | 107,791                            |  | 5,193,279 |  | $ | 1.35
|March 5, 2006                                                                                                                                                                                                                            |  | 5,065,117                          |  | $                 | 1.28 |                            | 95,824                             |  | 5,160,941 |  | $ | 1.26
|                                                                                                                                                                                                                                        
|Stock options to purchase 33,500 shares during the forty weeks ended March 6, 2007 and 143,500 shares during the forty weeks ended March 5, 2006 were excluded from the
calculation of diluted EPS because the effect was anti-dilutive.
|                                                                                                                                                                                                                                         |  |                                    |  |                   |     
|12 weeks ended:                                                                                                                                                                                                                          |  |                                    |  |                   |      |                            |                                    |  |           |  |   |     
|                                                                                                                                                                                                                                         |  |                                    |  |                   |     
|March 6, 2007                                                                                                                                                                                                                            |  | 5,102,058                          |  | $                 | .38  |                            | 132,573                            |  | 5,234,631 |  | $ | .37 
|March 5, 2006                                                                                                                                                                                                                            |  | 5,073,774                          |  | $                 | .43  |                            | 86,319                             |  | 5,160,093 |  | $ | .43 

Stock options to purchase 33,500 shares during the twelve weeks ended March 6, 2007 and 143,500 shares during
the twelve weeks ended March 5, 2006 were excluded from the calculation of diluted EPS because the effect was anti-dilutive.

NOTE E  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). The following table shows the components of net periodic pension cost for all periods presented in these consolidated financial
statements:



|                                                                  |  |                |        |   |                |   |        |             |  |   |              |   |  |   |      |  
|----------------------------------------------------------------- |  | -------------- | ------ | - | -------------- | - | ------ | ----------- |  | - | ------------ | - |  | - | ---- | -
|                                                                  |  | 40 weeks ended |        |   | 12 weeks ended |  
|Net periodic pension cost components                              |  | Mar. 6,2007    |        |   | Mar. 5,2006    |   |        | Mar. 6,2007 |  |   | Mar. 5, 2006 |  
|                                                                  |  |                |        |   | (in thousands) |   |        |             | 
|Service cost                                                      |  | $              | 1,172  |   |                | $ | 1,299  |             |  | $ | 352          |   |  | $ | 391  |  
|Interest cost                                                     |  |                | 1,272  |   |                |   | 1,165  |             |  |   | 381          |   |  |   | 351  |  
|Expected return on plan assets                                    |  |                | (1,504 | ) |                |   | (1,561 | )           |  |   | (451         | ) |  |   | (470 | )
|Amortization of prior service cost                                |  |                | 23     |   |                |   | 56     |             |  |   | 7            |   |  |   | 17   |  
|Amortization of loss                                              |  |                | 348    |   |                |   | 362    |             |  |   | 104          |   |  |   | 109  |  
|                                                                  |  |                |        |   |                |   |        |             |  |   |              |   |  |   |      |  
|Net periodic pension cost                                         |  | $              | 1,311  |   |                | $ | 1,321  |             |  | $ | 393          |   |  | $ | 398  |  
|                                                                  |  |                |        |   |                |   |        |             |  |   |              |   |  |   |      |  
|                                                                  |  |                |        |  
|Weighted average discount rate                                    |  |                | 6.25   | % |                |   | 6.00   | %           |  |   | 6.25         | % |  |   | 6.00 | %
|Weighted average rate of compensation increase                    |  |                | 4.50   | % |                |   | 4.50   | %           |  |   | 4.50         | % |  |   | 4.50 | %
|Weighted average expected long-term rate of return on plan assets |  |                | 8.00   | % |                |   | 8.50   | %           |  |   | 8.00         | % |  |   | 8.50 | %



24



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE E  PENSION PLANS (CONTINUED)

The Company is not required to make any contributions to the two qualified defined benefit pension plans for the year ending May 29, 2007. As tax deductible contributions are nevertheless permissible and are
often deemed advisable, it is likely that the Company will contribute at least $1,000,000 to the Plans, including $300,000 contributed through March 6, 2007. Obligations to participants in the SERP are satisfied in the form of lump sum
distributions upon the retirement of participants.

The Pension Protection Act (PPA) that was recently signed into law is not anticipated to have a major
impact on the two qualified defined benefit plans maintained by the Company. The minimum funding rules have changed under PPA, but management does not anticipate needing to change its funding policy (see Benefit Plans in Note A  Accounting
Policies). At this time, the discount rate and mortality table that will ultimately determine the lump sum are not known. In the short run, it is anticipated that lump sums may increase due to a new mortality table and then decline as the new
interest rate feature of PPA is phased in over the next five years.

Compensation expense (not included in the net periodic pension cost described above)
relating to the Non Deferred Cash Balance Plan (see Benefit Plans in Note A  Accounting Policies) was $261,000 and $329,000 respectively, during the 40 weeks ended March 6, 2007 and March 5, 2006, and was $46,000 and $61,000
respectively, for the twelve weeks ended March 6, 2007 and March 5, 2006. Contributions of $308,000 and $367,000 respectively, were made to the Plan in December 2006 and December 2005. In addition, the President and Chief Executive Officer
(CEO) has an employment contract that allows additional annual contributions to be made for the CEOs benefit under the Non Deferred Cash Balance Plan when certain levels of annual pretax earnings are achieved. Based accordingly on the
Companys pretax earnings, $46,000 was included in the CEOs incentive compensation for the fiscal year that ended May 30, 2006.

The
Company also sponsors two 401(k) defined contribution plans and a non-qualified Executive Savings Plan (FESP) for certain HCEs who have been disqualified from participation in the 401(k) plans (see Benefit Plans in Note A  Accounting
Policies). In the 40 weeks ended March 6, 2007 and March 5, 2006, matching contributions to the 401(k) plans amounted to $120,000 and $120,000 respectively, and were $36,000 and $35,000 respectively, during the twelve weeks ended
March 6, 2007 and March 5, 2006. Matching contributions to FESP were $19,000 and $17,000 respectively, during the 40 weeks ended March 6, 2007 and March 5, 2006, and were $5,000 and $5,000 respectively, during the twelve weeks
ended March 6, 2007 and March 5, 2006.

The Company does not sponsor post retirement health care benefits.



25



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE F  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:



|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|-------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                 |  | 40 weeks ended |         |   | 12 weeks ended |  
|                                 |  | Mar. 6,2007    |         |   | Mar. 5, 2006   |   |         | Mar. 6, 2007 |  |   | Mar. 5, 2006 |  
|                                 |  |                |         |   | (in thousands) |   |         |              | 
|Sales                            |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Big Boy                          |  | $              | 144,760 |   |                | $ | 142,287 |              |  | $ | 42,751       |   |  |   | 42,759 |  
|Golden Corral                    |  |                | 77,208  |   |                |   | 78,459  |              |  |   | 22,701       |   |  |   | 24,501 |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  | $              | 221,968 |   |                | $ | 220,746 |              |  | $ | 65,452       |   |  | $ | 67,260 |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  |                |         |  
|Earnings before income taxes     |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Big Boy                          |  | $              | 17,779  |   |                | $ | 17,165  |              |  | $ | 4,952        |   |  | $ | 5,132  |  
|Opening expense                  |  |                | (241    | ) |                |   | (263    | )            |  |   |             |   |  |   | (102   | )
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Total Big Boy                    |  |                | 17,538  |   |                |   | 16,902  |              |  |   | 4,952        |   |  |   | 5,030  |  
|                                 |  |                |         |  
|Golden Corral                    |  |                | (151    | ) |                |   | 841     |              |  |   | 231          |   |  |   | 97     |  
|Opening expense                  |  |                |        |   |                |   | (1,117  | )            |  |   |             |   |  |   | (147   | )
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Total Golden Corral              |  |                | (151    | ) |                |   | (276    | )            |  |   | 231          |   |  |   | (50    | )
|                                 |  |                |         |  
|Total restaurant level profit    |  |                | 17,387  |   |                |   | 16,626  |              |  |   | 5,183        |   |  |   | 4,980  |  
|                                 |  |                |         |  
|Administrative expense           |  |                | (5,958  | ) |                |   | (6,042  | )            |  |   | (1,941       | ) |  |   | (1,663 | )
|Franchise fees and other revenue |  |                | 965     |   |                |   | 961     |              |  |   | 276          |   |  |   | 298    |  
|Gain on asset sales              |  |                | 250     |   |                |   | 394     |              |  |   |             |   |  |   | 394    |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Operating profit                 |  |                | 12,644  |   |                |   | 11,939  |              |  |   | 3,518        |   |  |   | 4,009  |  
|                                 |  |                |         |  
|Interest expense                 |  |                | (2,046  | ) |                |   | (2,105  | )            |  |   | (617         | ) |  |   | (665   | )
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Earnings before income taxes     |  | $              | 10,598  |   |                | $ | 9,834   |              |  | $ | 2,901        |   |  | $ | 3,344  |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  |                |         |  
|Depreciation and amortization    |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Big Boy                          |  | $              | 5,951   |   |                | $ | 5,836   |              |  | $ | 1,880        |   |  | $ | 1,764  |  
|Golden Corral                    |  |                | 4,462   |   |                |   | 4,050   |              |  |   | 1,369        |   |  |   | 1,261  |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  | $              | 10,413  |   |                | $ | 9,886   |              |  | $ | 3,249        |   |  | $ | 3,025  |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  |                |         |  
|Capital expenditures             |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Big Boy                          |  | $              | 10,865  |   |                | $ | 8,546   |              |  | $ | 2,929        |   |  | $ | 2,542  |  
|Golden Corral                    |  |                | 2,259   |   |                |   | 7,539   |              |  |   | 1,264        |   |  |   | 234    |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  | $              | 13,124  |   |                | $ | 16,085  |              |  | $ | 4,193        |   |  | $ | 2,776  |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  |                |        
|                                 |  | As of          |         |   |                |   |         |              | 
|                                 |  | Mar. 6,2007    |         |   | May 30,2006    |   |         |              |  |   |              |  
|Identifiable assets              |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|Big Boy                          |  | $              | 93,013  |   |                | $ | 87,709  |              |  |   |              |   |  |   |        |  
|Golden Corral                    |  |                | 85,170  |   |                |   | 87,574  |              |  |   |              |   |  |   |        |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  
|                                 |  | $              | 178,183 |   |                | $ | 175,283 |              |  |   |              |   |  |   |        |  
|                                 |  |                |         |   |                |   |         |              |  |   |              |   |  |   |        |  



26



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE G  COMMITMENTS AND CONTINGENCIES

Commitments

In the ordinary course of business, purchase commitments are entered with certain of the Companys
suppliers. Most of these agreements are typically for periods of one year or less in duration, however, longer term agreements are also in place. Future minimum payments under these arrangements are $2,502,000, $2,244,000, $2,244,000, $2,244,000 and
$2,244,000 respectively, for the periods ending March 7, 2008, 2009, 2010, 2011 and 2012, with $2,806,000 to be paid thereafter. These agreements are intended to secure favorable pricing while ensuring availability of desirable products.
Management does not believe such agreements expose the Company to any significant risk.

Litigation

The construction of a Golden Corral restaurant in Canton, Ohio was halted in August 2001 in order to assess structural concerns. In March 2002, a final assessment of the
defects resulted in the Companys decision to construct a new building on another part of the lot. (The restaurant finally opened for business in January 2003.) In July 2002, the general contractor that built the defective building filed a
demand for arbitration against the Company seeking $294,000 plus interest, fees, and costs it claims is owed by the Company under the construction contract. The Company denied the claim and 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. In August 2006, the arbitration panel that heard the case awarded the Company $538,000 and denied the general contractors
claim against the Company. The Company filed a Motion to Modify the award to increase the time period for which the Company is entitled to damages, including interest, believing the arbitration panel inadvertently failed to consider the full range
of time that was required for investigation and to obtain building permits and other approvals associated with the replacement structure. The general contractor also filed a Motion to Modify, alleging that the panel misinterpreted the testimony as
to the calculation of lost profits. The arbitration panel rejected both Motions in November 2006. The Company immediately filed an application in the Cuyahoga County (Ohio) Common Pleas Court to confirm the arbitration panels original award.
The general contractor responded by filing an application with the same court to vacate the award. The court has yet to rule on these outstanding motions.

In August 2002, the Company filed a lawsuit against the architect that designed the defective restaurant 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. The resolution between the Company and the trial court defendants is separate and apart from the on-going dispute
between the general contractor and the Company.

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 that alleged multiple violations of the Fair Labor Standards Act. The last of the claimants accepted the Companys settlement offers in October 2006, bringing the entire case to a close.
The financial resources required to resolve the matter did not materially impact the Companys earnings, cash flows or financial position.

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



27



---

##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE G  COMMITMENTS AND CONTINGENCIES (CONTINUED)

Other Contingencies

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

As of March 6, 2007, the Company has two outstanding letters of credit totaling $164,000 in
support of its self- insurance program. There are no other outstanding letters of credit issued by the Company. An outstanding letter of credit for $162,000 was cancelled in November 2006. It had supported 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. The Company expects to complete the remediation plan over the next fifteen months.

As of March 6, 2007, the Company operated 28 restaurants on non-owned properties. (See Note C  Leased Properties.) Certain of the leases provide for
contingent rent payments, typically based on a percentage of the leased restaurants sales in excess of a fixed amount.

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. Since there is no reason to believe that the third party will default, no provision has been
made in the consolidated financial statements for amounts that would be payable by the Company. In addition, the Company has the right to re-assign the lease in the event of the third partys default.

NOTE H  RELATED PARTY TRANSACTIONS

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

These three restaurants pay to the Company franchise and advertising fees, employee leasing and other fees, and make purchases from the Companys commissary. The
total paid to the Company by these three restaurants amounted to $3,753,000 and $3,784,000 respectively, during the 40 weeks ended March 6, 2007 and March 5, 2006, and was $1,096,000 and $1,122,000 respectively, during the twelve weeks
ended March 6, 2007 and March 5, 2006. The amount owed to the Company from these restaurants was $93,000 and $121,000 respectively, as of March 6, 2007 and May 30, 2006. Amounts due are generally settled within 28 days of
billing.

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

The Chairman of the Board of Directors (Jack C. Maier, deceased February 2005) from 1970 to 2005 had an employment agreement which
contained a provision for deferred compensation. The agreement provided that upon its expiration or upon the Chairmans retirement, disability, death or other termination of employment, the Company would become obligated to pay the Chairman or
his survivors for each of the next ten years the amount of $214,050, adjusted annually to reflect 50 percent of the annual percentage change in the Consumer Price Index (CPI). Monthly payments of $17,838 to the Chairmans widow (Blanche F.
Maier), a director of the Company, commenced in March 2005. Payments were increased to $18,141 and $18,368 respectively in March 2006 and March 2007 to reflect the change in CPI. The present value of the long-term portion of the obligation
approximating $1,311,000 is included in the consolidated balance sheet under the caption Deferred compensation and other. The present value of the current portion of the obligation approximating $137,000 is included in current
liabilities in the consolidated balance sheet.



28



---

##### Table of Contents

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

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

Statements included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) that are not historical facts are forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks, uncertainties and other factors that could cause actual results and performance to differ materially from anticipated results that may be expressed or implied by those statements. Factors that could cause such differences to occur
include, but are not limited to, those discussed in this Form 10-Q under Part II, Item 1A. Risk Factors. Forward-looking statements can generally be identified in sentences that contain words such as should,
would, could, may, plan(s), anticipate(s), project(s), believe(s), will, expect(s), estimate(s), intend(s), continue,
assumption(s), goal(s), target and similar words that are used to convey forward-looking statements that are not historical or present facts.

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

CORPORATE OVERVIEW

The operations of Frischs Restaurants, Inc. and Subsidiaries (the Company)
consist of two reportable segments within the restaurant industry: full service family-style Big Boy restaurants and grill buffet-style Golden Corral restaurants. As of March 6, 2007, 89 Big Boy restaurants and 34 Golden
Corral restaurants were owned and operated by the Company, located in various regions of Ohio, Kentucky and Indiana, plus smaller areas in Pennsylvania and West Virginia.

The Companys Third Quarter of Fiscal 2007 consists of the twelve weeks ended March 6, 2007, and compares with the twelve weeks ended March 5, 2006, which constituted the Third Quarter of
Fiscal 2006. The First Three Quarters of Fiscal 2007 consists of the 40 weeks ended March 6, 2007, and compares with the 40 weeks ended March 5, 2006, which constituted the First Three Quarters of Fiscal 2006. References
to Fiscal 2007 refer to the 52 week year that will end on May 29, 2007.

Sales during the Third Quarter of Fiscal 2007 were $65,452,000, a decline of
$1,808,000 or 2.7 percent below the record sales that were posted in the Third Quarter of Fiscal 2006. The root cause of the sales decline was a series of winter storms in most of the Companys markets, particularly during the month of February
2007. Moderate winter weather was experienced during most of the Third Quarter of Fiscal 2006. During the Third Quarter of Fiscal 2007:



| |  |  | Big Boy same store sales were .8 percent below the Third Quarter of Fiscal 2006.
| | - |  | --------------------------------------------------------------------------------



| |  |  | Golden Corral same store sales were 5.8 percent below the Third Quarter of Fiscal 2006.
| | - |  | ---------------------------------------------------------------------------------------

Despite the sales declines in the Third Quarter of Fiscal 2007, record sales of $221,968,000 were achieved for the First Three Quarters of Fiscal 2007, as sales
increased $1,222,000 or .6 percent above the First Three Quarters of Fiscal 2006. During the First Three Quarters of Fiscal 2007:



| |  |  | Big Boy same store sales were .4 percent higher than the First Three Quarters of Fiscal 2006.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Golden Corral same store sales were 2 percent lower than the First Three Quarters of Fiscal 2006.
| | - |  | -------------------------------------------------------------------------------------------------



29



---

##### Table of Contents

Net earnings for the Third Quarter of Fiscal 2007 were $1,915,000, or diluted earnings per share (EPS) of $.37, which
compares with $2,206,000, or EPS of $.43 in the Third Quarter of Fiscal 2006. EPS in the Third Quarter of Fiscal 2006 would have been $.38 without the benefit of a $394,000 pretax gain from the disposal of property. In fact, in spite of lower sales,
gross profit for the Third Quarter of Fiscal 2007 was $178,000 or 2.7 percent higher than the Third Quarter of Fiscal 2006, equating to $.02 higher EPS. Factors contributing to the higher gross profit in the Third Quarter of Fiscal 2007:



| |  |  | Food cost as a percentage of sales fell to 34.9 percent from 35.2 percent in the Third Quarter of Fiscal 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | New store opening costs were $249,000 lower than the Third Quarter of Fiscal 2006.
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Maintenance, utilities and certain other operating costs were $486,000 lower than the Third Quarter of Fiscal 2006.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Net earnings for the First Three Quarters of Fiscal 2007 were $6,995,000, or EPS of $1.35, which compares with $6,490,000, or EPS of $1.26 in the First Three Quarters of
Fiscal 2006. Noteworthy factors that impacted net earnings included:



| |  |  | Food cost as a percentage of sales fell to 34.8 percent from 35.8 percent in the First Three Quarters of Fiscal 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | New store opening costs were $1,139,000 less than the First Three Quarters of Fiscal 2006.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | The sale of certain property in October 2006 yielded a pretax gain of $250,000, helping to compensate for the effect of a $394,000 pretax gain in the First Three
Quarters of Fiscal 2006.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Compensation expense associated with SFAS 123(R) is included in administrative and advertising expense in the consolidated statement of earnings. As
a result, earnings before income taxes were $87,000 and $231,000 respectively lower during the Third Quarter of Fiscal 2007 and the First Three Quarters of Fiscal 2007 than if the Company were permitted to continue accounting for stock options using
the intrinsic method of measuring stock based compensation as had been prescribed by APB 25. Basic and diluted earnings per share were $.01 and $.03 respectively lower for the Third Quarter of Fiscal 2007 and the First Three Quarters of Fiscal 2007
than if expensing of stock options were not required.

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 158 (SFAS 158) Employers Accounting for Defined Benefit Pension and Other Post Retirement Plans  an amendment to FASB Statements No. 87, 88, 106 and 131(R) on September 30, 2006. SFAS 158 will be effective
as of the end of Fiscal 2007. It will require the overfunded or underfunded status of defined benefit pension plans to be recognized as an asset or liability in the Companys consolidated balance sheet. Funded status is measured as the
difference between plan assets at fair value and projected benefit obligations, which includes future salary increases. Current estimates indicate that a liability approximating $1,450,000 will need to be recorded at May 29, 2007 to reflect
underfunded status under SFAS 158. To establish the liability, a $3,200,000 reduction in the Companys equity, net of tax, will be required, effected through a charge to accumulated other comprehensive income.

On November 7, 2006, Ohio voters approved a mandate to annually increase the states minimum wage by amending the Ohio Constitution. Known as Issue 2, the
following mandates were added to the Ohio Constitution effective January 1, 2007:



|1 | The minimum wage increased 33 percent from $5.15 per hour to $6.85 per hour.
|- | ----------------------------------------------------------------------------



|2 | The minimum wage for tipped employees increased 61 percent from $2.13 per hour to $3.43 per hour.
|- | -------------------------------------------------------------------------------------------------



|3 | All minimum wage rates will be automatically adjusted annually for inflation, based on changes in the consumer price index.
|- | ---------------------------------------------------------------------------------------------------------------------------



30



---

##### Table of Contents

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

Both the U.S. House
of Representatives and the U.S Senate have passed legislation to increase the federal minimum wage to $7.25 per hour over a 26 month period. Differences in the two versions of the legislation relating to small business tax relief have yet to be
reconciled and it is unclear how long the stalemate will continue. Once the differences are resolved and the legislation is enacted, 60 days later the starting wage will increase to $5.85 per hour from the current $5.15 per hour, then one year later
to $6.55 per hour, finally increasing to $7.25 per hour after an additional year passes. Under both versions of the legislation, the cash wage for tipped employees will remain at $2.13 per hour and neither bill calls for indexing the minimum wage to
the consumer price index. Notwithstanding the federal legislation, in March 2007 the Governor of Kentucky signed legislation into law increasing the states minimum wage to $5.85 per hour beginning June 27, 2007. The legislation increases
the minimum wage to $6.55 an hour beginning July 1, 2008 and then to $7.25 per hour on July 1, 2009. Basically mirroring the pending federal legislation, the Kentucky legislation does not increase the cash wage for tipped employees above
the current $2.13 per hour, nor does it index for inflation. The Company is currently studying whether another round of price increases will be needed.

RESULTS OF OPERATIONS

Sales

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



|                              |  |               |        |                      |   |             |  |              |         |  |   |        
|----------------------------- |  | ------------- | ------ | -------------------- | - | ----------- |  | ------------ | ------- |  | - | -------
|                              |  | Third Quarter |        | First Three Quarters
|                              |  | Mar. 6,2007   |        | Mar. 5,2006          |   | Mar. 6,2007 |  | Mar. 5, 2006
|                              |  |               |        | (in thousands)       |   |            
|Big Boy restaurant sales      |  | $             | 40,399 |                      | $ | 40,424      |  | $            | 137,100 |  | $ | 134,805
|Wholesale sales to licensees  |  |               | 1,974  |                      |   | 1,993       |  |              | 6,888   |  |   | 6,792  
|Other wholesale sales         |  |               | 378    |                      |   | 342         |  |              | 772     |  |   | 691    
|                              |  |               |        |                      |   |             |  |              |         |  |   |        
|Total Big Boy Sales           |  |               | 42,751 |                      |   | 42,759      |  |              | 144,760 |  |   | 142,288
|                              |  |               |        |                     
|Golden Corral sales           |  |               | 22,701 |                      |   | 24,501      |  |              | 77,208  |  |   | 78,458 
|                              |  |               |        |                      |   |             |  |              |         |  |   |        
|Consolidated restaurant sales |  | $             | 65,452 |                      | $ | 67,260      |  | $            | 221,968 |  | $ | 220,746
|                              |  |               |        |                      |   |             |  |              |         |  |   |        

Big Boy same store sales declined .8 percent during the Third Quarter of Fiscal 2007. Higher menu prices were not
enough to offset the effects of a series of winter storms during the month of February, ultimately resulting in a 4.7 percent drop in customer counts for the quarter. Big Boy same store sales for the First Three Quarters of Fiscal 2007 were .4
higher than the First Three Quarters of Fiscal 2006. The modest increase was primarily the result of higher menu prices, which offset a 2.0 percent reduction in customer counts. Menu prices were increased 1.1 percent in September 2006, 1.1 percent
in February 2006 and 1.4 percent in September 2005. In addition, prices were increased 2.4 percent in January 2007 to offset higher costs associated with minimum wage increases. Higher Big Boy sales during the First Three Quarters of Fiscal 2007
also includes the effect of a 27 percent boost in sales from two restaurants that were relocated to superior sites.



31



---

##### Table of Contents

The Company operated 89 Big Boy restaurants as of March 6, 2007. This count includes one that opened in July 2006
which relocated a restaurant lost in an eminent domain proceeding, plus one which opened in October 2006 that relocated an older facility within the same market, minus an older, low-volume restaurant which was permanently closed in January 2007.
Current plans call for two new Big Boy restaurants to open during the summer of 2007, one each in the Dayton and Springfield, Ohio markets. An aging restaurant facility in Cincinnati will be razed in the spring of 2007 to make way for a replacement
structure on the same site. It should be ready to re-open in August 2007.

For the first time ever, Golden Corral total sales are lower than the comparable
period a year ago. No new Golden Corral restaurants have been opened since November 2005 and same store sales continue to decline. Prior to the Third Quarter of Fiscal 2007, the effects of having more Golden Corral restaurants in operation than the
corresponding year ago periods would result in a sales increase, despite same store sales decreases. Absolute sales decreased for the First Three Quarters of Fiscal 2007, despite the fact that it had 60 more sales weeks than did the First Three
Quarters of Fiscal 2006.



|                                    |  |               |  |                      |  |       |  |      
|----------------------------------- |  | ------------- |  | -------------------- |  | ----- |  | -----
|                                    |  | Third Quarter |  | First Three Quarters
|                                    |  | 2007          |  | 2006                 |  | 2007  |  | 2006 
|In operation at beginning of period |  | 34            |  | 34                   |  | 34    |  | 30   
|Opened during the period            |  | 0             |  | 0                    |  | 0     |  | 4    
|In operation at end of period       |  | 34            |  | 34                   |  | 34    |  | 34   
|Total sales weeks during period     |  | 408           |  | 408                  |  | 1,360 |  | 1,300

Same store sales at Golden Corral restaurants decreased 5.8 percent in the Third Quarter of Fiscal 2007 and a 2.0
percent same store sales decrease was experienced for the First Three Quarters of Fiscal 2007. Same store sales decreases have now been experienced in thirteen of the last fourteen quarters. Same store customer counts were 11.5 percent lower than
the Third Quarter of Fiscal 2006, largely the result of foul winter weather during the month of February 2007. Same store customer counts during the First Three Quarters of Fiscal 2007 were 5.5 percent lower than the First Three Quarters of Fiscal
2006. A 3.2 percent menu price increase was put into place in late September 2006 and a .5 percent increase was implemented in February 2006. Prices were further increased by 2.1 percent in January 2007 to offset the effects of higher costs that
have resulted from minimum wage increases.

Current plans call for one Golden Corral restaurant to open during the summer of 2007.

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 F (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:



|                           |  |               |       |                      |   |              |  |              |        |  |   |       
|-------------------------- |  | ------------- | ----- | -------------------- | - | ------------ |  | ------------ | ------ |  | - | ------
|                           |  | Third Quarter |       | First Three Quarters
|                           |  | Mar. 6,2007   |       | Mar. 5,2006          |   | Mar. 6, 2007 |  | Mar. 5, 2006
|                           |  |               |       | (in thousands)       |   |             
|Big Boy gross profit       |  | $             | 5,988 |                      | $ | 6,065        |  | $            | 21,020 |  | $ | 20,321
|Golden Corral gross profit |  |               | 742   |                      |   | 487          |  |              | 1,586  |  |   | 1,422 
|                           |  |               |       |                      |   |              |  |              |        |  |   |       
|                           |  |               |       |                     
|Total gross profit         |  | $             | 6,730 |                      | $ | 6,552        |  | $            | 22,606 |  | $ | 21,743
|                           |  |               |       |                      |   |              |  |              |        |  |   |       

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.



32



---

##### Table of Contents

|                                                |  |                   |  |                   |  |                   |  |                   |  |         |  |       |  |       |  |         |  |       |  |       |  |         |  |      
|----------------------------------------------- |  | ----------------- |  | ----------------- |  | ----------------- |  | ----------------- |  | ------- |  | ----- |  | ----- |  | ------- |  | ----- |  | ----- |  | ------- |  | -----
|                                                |  | 12 weeks 03/06/07 |  | 12 weeks 03/05/06 |  | 40 weeks 03/06/07 |  | 40 weeks 03/05/06
|                                                |  | Total             |  | Big Boy           |  | GC                |  | Total             |  | Big Boy |  | GC    |  | Total |  | Big Boy |  | GC    |  | Total |  | Big Boy |  | 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                                  |  | 34.9              |  | 32.9              |  | 38.6              |  | 35.2              |  | 32.7    |  | 39.7  |  | 34.8  |  | 32.4    |  | 39.2  |  | 35.0  |  | 32.6    |  | 39.4 
|Payroll and Related                             |  | 33.5              |  | 35.2              |  | 30.3              |  | 33.0              |  | 34.6    |  | 30.2  |  | 33.1  |  | 34.7    |  | 30.0  |  | 33.1  |  | 34.3    |  | 30.8 
|Other Operating Costs (including opening costs) |  | 21.4              |  | 18.0              |  | 27.8              |  | 22.0              |  | 18.5    |  | 28.1  |  | 22.0  |  | 18.3    |  | 28.8  |  | 22.1  |  | 18.8    |  | 28.0 
|Gross Profit                                    |  | 10.2              |  | 13.9              |  | 3.3               |  | 9.8               |  | 14.2    |  | 2.0   |  | 10.1  |  | 14.6    |  | 2.0   |  | 9.8   |  | 14.3    |  | 1.8  

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.Improvements in food cost percentages shown in the above table in both operating segments largely reflect the effects of higher menu prices. However, the market for beef remains highly volatile. Harsh
winter storms in the nations central plains adversely affected feedlot inventories, resulting in much higher beef prices during the Third Quarter of Fiscal 2007. Golden Corral beef supplies were protected during the same time frame, as
delivery of a major beef supply was received in December. Higher beef prices are anticipated to continue through the summer, as supplies are expected to remain weakened.

Higher payroll and related cost percentages in the above table are mostly the result of higher pay rates imposed by the state of Ohios minimum wage increase that went into effect on January 1, 2007, offset
to a fair extent by a menu price increase. The Golden Corral segment continues to benefit from a significant reduction in labor hours.

Net periodic
pension cost (computed under Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions) was $393,000 and $398,000 respectively, in the Third Quarter of Fiscal 2007 and the Third Quarter of Fiscal 2006.
Net periodic pension cost was $1,311,000 and $1,321,000 respectively, in the First Three Quarters of Fiscal 2007 and the First Three Quarters of Fiscal 2006. The discount rate used to measure net periodic pension cost for all periods in Fiscal 2007
was 6.25 percent, up from 6.0 percent for all periods in Fiscal 2006. The expected rate of return on assets was 8.0 percent for all periods in Fiscal 2007, down from 8.5 percent for all periods in Fiscal 2006. The Company currently anticipates
making a series of contributions totaling $1,000,000 to the pension trust for the plan year ending May 29, 2007, including $300,000 contributed through March 6, 2007.

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; new restaurant opening costs and many other operating costs. As most of these expenses tend to be fixed costs, same store sales decreases cause these costs to be a higher percentage of sales. However, the improvement in
percentages during the Third Quarter of Fiscal 2007 were the result of lower costs expended for maintenance, utilities and certain other operating costs.

Other operating costs are a much higher percentage of sales for the Golden Corral segment. It is difficult to recover occupancy costs in these facilities when sales volumes remain below expectation. A Golden Corral building contains roughly
75 percent more square footage than the average Big Boy facility. The Golden Corral percentages in the above table would have been even higher if any new restaurants had been opened in Fiscal 2007. Last year, Golden Corral opening costs were
$147,000 and $1,117,000 respectively, in the Third Quarter of Fiscal 2006 and the First Three Quarters of Fiscal 2006.



33



---

##### Table of Contents

Operating Profit

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

Administrative and advertising expense increased $253,000 and $19,000 respectively, in the Third Quarter of Fiscal 2007 and the First
Three Quarters of Fiscal 2007 when compared with comparable periods a year ago. The increase for the Third Quarter of Fiscal 2007 is attributed primarily to recognition of stock based compensation expense and higher accruals for other executive
remuneration costs. The increase for the First Three Quarters of Fiscal 2007 was higher because of costs associated with stock based compensation expense and other executive remuneration, and was largely offset by non-recurring costs incurred last
year associated with the hiring of a now former Chief Operating Officer (COO) and a charge to accrue for settlement of a legal matter.

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
March 6, 2007 and March 5, 2006, 28 Big Boy restaurants were operating pursuant to licenses granted by the Company in exchange for which fees are paid to the Company. Other revenue also includes certain other fees earned 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 sale of an older Big Boy restaurant was completed shortly after the restaurant ceased operating in October 2006. The
$250,000 gain from the sale that is shown in the First Three Quarters of Fiscal 2007 was recorded in the quarter ended December 12, 2006. The restaurant closed in order to allow a new restaurant to be opened on a superior site within the same
neighborhood. During the Third Quarter of Fiscal 2006, $394,000 was reported as a gain in connection with an eminent domain proceeding.

Interest
Expense

Interest expense did not change appreciably during any of the periods presented for Fiscal 2007 when compared with corresponding periods in
Fiscal 2006.

Income Tax Expense

Income tax expense as
a percentage of pretax earnings was estimated at 34 percent throughout the First Three Quarters of Fiscal 2007. The effective rate was lowered from 35 percent to 34 percent during the Second Quarter of Fiscal 2006. It remained at 34 percent
throughout the Third Quarter of Fiscal 2006. These rates have been kept consistently low through the Companys use of tax credits, especially the federal credit allowed for Employer Social Security and Medicare Taxes Paid on Certain Employee
Tips.

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 supply the primary source of cash provided by operating activities. Other sources of
cash may include borrowing against credit lines, proceeds received when stock options are exercised and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for discretionary objectives, including capital
projects (principally restaurant expansion) and dividends.

Working Capital Practices

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



34



---

##### Table of Contents

Aggregated Information about Contractual Obligations and Commercial Commitments

March 6, 2007



|  |  |                                          |  |       |        |                                       |   |        |  |        |        |        |   |        |  |                 |       |  |   |       |  |   |       
|- |  | ---------------------------------------- |  | ----- | ------ | ------------------------------------- | - | ------ |  | ------ | ------ | ------ | - | ------ |  | --------------- | ----- |  | - | ----- |  | - | ------
|  |  |                                          |  |       |        | Payments due by period (in thousands) |   |       
|  |  |                                          |  | Total |        | year 1                                |   | year 2 |  | year 3 |        | year 4 |   | year 5 |  | morethan 5years
|  |  | Long-Term Debt                           |  | $     | 38,357 |                                       | $ | 11,477 |  | $      | 11,329 |        | $ | 6,162  |  | $               | 4,466 |  | $ | 3,003 |  | $ | 1,920 
|  |  | Rent due under Capital Lease Obligations |  |       | 3,534  |                                       |   | 2,148  |  |        | 785    |        |   | 230    |  |                 | 205   |  |   | 132   |  |   | 34    
|1 |  | Rent due under Operating Leases          |  |       | 24,383 |                                       |   | 1,868  |  |        | 1,875  |        |   | 1,753  |  |                 | 1,405 |  |   | 1,428 |  |   | 16,054
|2 |  | Unconditional Purchase Obligations       |  |       | 16,050 |                                       |   | 4,268  |  |        | 2,244  |        |   | 2,244  |  |                 | 2,244 |  |   | 2,244 |  |   | 2,806 
|3 |  | Other Long-Term Obligations              |  |       | 1,745  |                                       |   | 221    |  |        | 224    |        |   | 227    |  |                 | 231   |  |   | 234   |  |   | 608   
|  |  | Total Contractual Cash Obligations       |  |       | 84,069 |                                       |   | 19,982 |  |        | 16,457 |        |   | 10,616 |  |                 | 8,551 |  |   | 7,041 |  |   | 21,422

---

|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 through 2020. Should the third party default, the Company has the right to re-assign the lease. Operating leases include option periods considered to be part of the lease term under the provisions of Statement of Financial Accounting Statement
No. 13, Accounting for Leases, as amended.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

The working capital deficit was
$21,379,000 as of March 6, 2007, up from $18,519,000 as of May 30, 2006. The increase primarily reflects borrowing of $2,000,000 near the end of September 2006 against a working capital revolving line of credit, which must be repaid in
full no later than August 31, 2007. The borrowed funds were used to acquire in fee three Big Boy restaurants that had been previously leased. As of March 6, 2007, $7,000,000 remained available to be drawn upon a Construction Draw Credit
Facility, which expires on September 1, 2008, unless extended. Additionally, $3,000,000 remains available under the working capital revolving line of credit through September 1, 2008, unless extended.

Operating Activities

Operating cash flows were $15,279,000 in the
First Three Quarters of Fiscal 2007, which compares with $14,931,000 in the First Three Quarters of Fiscal 2006. Included in operating cash flows are normal changes in assets and liabilities such as prepaid expenses, inventories and accounts
payable, all of which can and often do fluctuate widely. Management believes a better, more reliable gauge to measure cash flows from the operation of the business is to use the simple method of net earnings plus non cash expenses such as
depreciation, losses on dispositions of assets and stock based compensation expense. This method yields $17,618,000 in cash flows from operating activities for the First Three Quarters of Fiscal 2007. The comparable amount in the First Three
Quarters of Fiscal 2006 was $16,318,000.

Investing Activities

Capital spending is the principal component of the Companys investing activities. Capital spending was $13,124,000 during the First Three Quarters of Fiscal 2007, a decrease of $2,961,000 from the First Three Quarters of Fiscal 2006.
This years capital spending includes $10,865,000 for Big Boy restaurants and $2,259,000 for Golden Corral restaurants. These capital expenditures consisted of new restaurant construction, site acquisitions for expansion, the acquisition in fee
simple of existing restaurant facilities pursuant to purchase option provisions in lease agreements, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.



35



---

##### Table of Contents

Proceeds from the disposition of property during the First Three Quarters of Fiscal 2007 amounted to $409,000, including
$398,000 from the sale of a Big Boy restaurant that closed in October 2006. The closed restaurant was replaced with a new restaurant on a superior site within the same market. A Big Boy restaurant that permanently closed in January 2007 is expected
to be sold in the near term.

Financing Activities

Borrowing against credit lines amounted to $6,000,000 during the First Three Quarters of Fiscal 2007, including $3,000,000 borrowed in February 2007. Scheduled and other payments of long-term debt and capital lease obligations amounted to
$7,854,000 during the First Three Quarters of Fiscal 2007. In March 2007, the Company converted its long-standing $3,000,000 bullet loan, which would have been due in full on December 31, 2007, into a 36 month term loan.

Regular quarterly cash dividends paid to shareholders totaled $1,678,000. The Company expects to continue its 46
year practice of paying regular quarterly cash dividends, including its 185thconsecutive quarterly dividend, which
was declared on March 14, 2007 and paid on April 10, 2007 totaling $562,000.

During the First Three Quarters of Fiscal 2007, employees acquired
approximately 30,250 shares of the Companys common stock pursuant to the exercise of stock options, yielding proceeds to the Company of approximately $546,000. As of March 6, 2007, 418,000 shares granted under the Companys two stock
option plans remain outstanding, including 342,000 fully vested shares at a weighted average exercise price per share of $18.95. As of March 6, 2007, 696,000 shares remained available to be granted under these plans.

Other Information

As of March 6, 2007, 34 Golden Corral restaurants were in operation. Expansion plans were suspended in November 2005, with the concurrence of the Golden Corral Franchising Systems, Inc., in order to use cash flows and credit facilities
in a manner that strengthens the balance sheet and keeps interest costs in check, while allowing operations to focus on re-building declining same store sales. The Company continues to possess development rights for up to 29 more Golden Corral
restaurants. To that end, construction began in mid-March 2007 on the Companys 35thGolden Corral restaurant,
which is scheduled to open in July 2007 near Columbus, Ohio. Current plans call for continuing to search for cost-effective sites for future development. Six existing Golden Corral restaurants are being remodeled in Fiscal 2007 at an average cost
approaching $200,000 each.

A Big Boy restaurant that opened for business in October 2006 was the relocation to a superior site of an older facility within
the same market. A Big Boy restaurant that opened in July 2006 was the relocation, also to a superior site, of a restaurant that was lost in an eminent domain proceeding. One new Big Boy restaurant was under construction as of March 6, 2007. It
is scheduled to open in June 2007. Current plans call for construction to begin in the spring of 2007 for a new Big Boy restaurant that is scheduled to open in July 2007. Also, construction of a building to replace an aging restaurant in the
Cincinnati market should be underway in May 2007 and re-opened in August 2007. Approximately one-fifth of the Companys Big Boy restaurants are routinely renovated or decoratively updated each year at an average cost of $75,000 per restaurant.
In addition, certain high-volume Big Boy restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies and whether a dining room expansion is warranted. A typical kitchen redesign costs
approximately $125,000 and a dining room expansion can cost up to $500,000.

Including land and land improvements, the cash required to build and equip
each new restaurant currently ranges from $3,200,000 to $4,000,000 for a Golden Corral, and from $2,200,000 to $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. No pending agreements to acquire real property were in place as of March 6, 2007.

It is the Companys policy to own the land on which it builds new restaurants; however, it is becoming more frequently necessary to enter ground leases to obtain desirable land on which to build. Eight of the 34
Golden Corral restaurants now in operation were built on leased land. All of these leases are being accounted for as operating leases pursuant to Statement of Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases as
amended. As of March 6, 2007, the Company occupied a total of 28 restaurants pursuant to leases, five of which are capital leases under the provisions of SFAS 13. Three Big Boy restaurants that had been occupied on a month-to-month arrangement
were acquired in fee on September 27, 2006 pursuant to the Companys right to purchase the properties from the landlord. The aggregate purchase price was $2,620,000. In addition, a Big Boy restaurant facility that had been occupied
pursuant to an operating lease was acquired in fee for $733,000 on December 27, 2006.



36



---

##### Table of Contents

APPLICATION of CRITICAL ACCOUNTING POLICIES

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

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

Self Insurance

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

Pension Plans

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

Assets of the pension plans are targeted to be invested 70 percent in equity securities, as these investments
have historically provided the greatest long-term returns. To determine the long-term rate of return on plan assets, the committee looks at the target asset allocation of plan assets and determines the expected return on each asset class. The
expected returns for each asset class are combined and rounded to the nearest 25 basis points to determine the overall expected return on assets. The Company has used an 8.5 percent expected long-term rate of return on plan assets for many years.
The expected rate of return has been lowered by the committee to 8.0 percent for purposes of determining net periodic pension cost in fiscal 2007. The committee determines the discount rate by looking at the projected future benefit payments and
matching them to spot rates based on yields of high-grade corporate bonds. A single discount rate is selected, rounded to the nearest 25 basis points, that produces the same present value as the various spot rates.

Long-Lived Assets

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

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



37



---

##### Table of Contents

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.



38



---

##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

Big Boy restaurants utilize
centralized purchasing and food preparation provided 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 creates efficiencies that ultimately result in lower food and supply costs. The commissary operation does not supply Golden Corral restaurants.

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

Except for items such as beef, 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 in its
operations. Deliveries are made two to three times per week. Other vendors could be 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 March 6, 2007. Based on that evaluation, the CEO and CFO concluded that the Companys disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports
that the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

b) Changes in Internal Control over Financial Reporting. The CEO and CFO have concluded that there were no changes in the Companys internal control over financial reporting (as defined in Rule 13a-15(f)
of the Exchange Act) during the fiscal quarter ended March 6, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



39



---

##### Table of Contents

PART II  OTHER INFORMATION

ITEM 1. LEG
AL 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.

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

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

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 that alleged multiple violations of the Fair Labor Standards Act. The last of the claimants accepted
the Companys settlement offers in October 2006 and the entire case was closed, as reported in the Companys Form 10-Q for the quarterly period ended December 12, 2006.

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



40



---

##### Table of Contents

ITEM 1A. RISK FACTORS

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

Food Safety

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

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

Economic Factors

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

Competition

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



| |  |  | changing economic conditions,
| | - |  | -----------------------------



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



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



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



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



| |  |  | competition continuing to increase from supermarkets and other non-traditional competitors
| | - |  | ------------------------------------------------------------------------------------------



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



41



---

##### Table of Contents

Development Plans

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

The Supply and Cost of Food

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

Litigation

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

Governmental and Other Rules and Regulations

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



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



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



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



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



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



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



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

Catastrophic Events

Unforeseen
catastrophic events could disrupt the Companys operations, the operations of the Companys suppliers and the lives of customers. Such events include but are not limited to:



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



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



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



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



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



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



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



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

Golden Corral Operations

The Company plans to continue expanding its Golden Corral operations. However, lower than expected revenue from
the operation of Golden Corral restaurants has resulted in the Companys decision to temporarily slow down expansion plans. Golden Corral same-store sales declines have been experienced for thirteen of the last fourteen quarters, during which
cash flows from Golden Corral operations have deteriorated. The ability of the Company to identify the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth,
poses a significant risk to the Company.



42



---

##### Table of Contents

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

Not applicable

ITEM 3. DEFAULTS upon SENIOR SECURITIES

Not applicable

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

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

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

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

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

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

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

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

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



43



---

##### Table of Contents

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

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

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

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

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

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

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

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

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

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

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

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

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

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



44



---

##### Table of Contents

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

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

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

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

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

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

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

* Denotes a compensatory plan or agreement



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

SIGNATURE

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



|                   |  |  |  |                            |  |                                                                                  
|------------------ |  |  |  | -------------------------- |  | ---------------------------------------------------------------------------------
|                   |  |  |  | FRISCHS RESTAURANTS, INC.
|                   |  |  |  |                            |  | (Registrant)                                                                     
|DATE April 9, 2007 |  |  |  |                            |  |                                                                                  
|                   |  |  |  | BY                         |  | /s/ Donald H. Walker                                                             
|                   |  |  |  |                            |  | Donald H. Walker                                                                 
|                   |  |  |  |                            |  | Vice President  Finance, Treasurer andPrincipal Financial and Accounting Officer



45