<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                 F O R M 10 - Q

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

       For Quarter Ended September 26, 1998 Commission file number 0-4063

                               G&K SERVICES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                         <C>
         MINNESOTA                                              41-0449530
-------------------------------                             -------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                             Identification No.)
</TABLE>

                          5995 OPUS PARKWAY, SUITE. 500
                           MINNETONKA, MINNESOTA 55343
              (Address of principal executive offices and zip code)

                                 (612) 912-5500
               (Registrant's telephone number, including zip code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                           YES  X                    NO
                               ---                      ---

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

<TABLE>
<S>                                                <C>
             CLASS A                               Outstanding November 5, 1998
Common Stock, par value $.50 per share                       19,020,035

             CLASS B                                Outstanding November 5, 1998
Common Stock, par value $.50 per share                        1,474,996
</TABLE>

<PAGE>

                                     PART I.
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
G & K SERVICES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                September 26,
                                                                     1998             June 27,
ASSETS                      (In thousands, except share data)    (Unaudited)            1998
----------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>      
CURRENT ASSETS                                                                                
  Cash and cash equivalents                                      $  17,316           $  11,975
  Accounts receivable, less allowance for doubtful                                            
    accounts of $3,651 and $2,392                                   56,979              56,933
  Inventories                                                       78,106              77,210
  Prepaid expenses                                                   7,650               7,295
----------------------------------------------------------------------------------------------
    Total current assets                                           160,051             153,413
----------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT                                                                 
  Land                                                              25,726              25,801
  Buildings and improvements                                        89,791              89,683
  Machinery and equipment                                          166,608             154,048
  Automobiles and trucks                                            36,665              36,531
  Less accumulated depreciation                                   (124,740)           (118,378)
----------------------------------------------------------------------------------------------
    Total property, plant and equipment                            194,050             187,685
----------------------------------------------------------------------------------------------
OTHER ASSETS                                                                                  
  Goodwill, net                                                    130,944             131,899
  Restrictive covenants and customer lists, net                     41,145              42,310
  Other, principally retirement plan assets                         13,000              16,535
----------------------------------------------------------------------------------------------
    Total other assets                                             185,089             190,744
----------------------------------------------------------------------------------------------
                                                                 $ 539,190           $ 531,842
----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                          
CURRENT LIABILITIES                                                                           
  Accounts payable                                               $  23,832           $  16,103
  Accrued expenses                                                                            
    Salaries and employee benefits                                  18,473              18,077
    Other                                                           18,731              17,849
  Deferred income taxes                                             12,951              13,036
  Current maturities of long-term debt                              20,000              15,000
----------------------------------------------------------------------------------------------
    Total current liabilities                                       93,987              80,065
LONG-TERM DEBT, LESS CURRENT MATURITIES                            222,382             234,843
DEFERRED INCOME TAXES                                                9,188               9,483
OTHER NONCURRENT LIABILITIES                                         9,214               9,331
----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY                                                                          
  Common stock, $.50 par                                                                      
    Class A, 50,000,000 shares authorized, 19,019,035                                         
      and 19,011,952 shares issued and outstanding                   9,510               9,506
    Class B, 10,000,000 shares authorized, 1,474,996                                          
       and 1,474,996 shares issued and outstanding                     738                 738
  Additional paid-in capital                                        23,668              23,644
  Retained earnings                                                182,991             174,660
  Deferred compensation                                             (1,851)             (1,973)
  Accumulated other comprehensive income                           (10,637)             (8,455)
----------------------------------------------------------------------------------------------
    Total stockholders' equity                                     204,419             198,120
----------------------------------------------------------------------------------------------
                                                                 $ 539,190           $ 531,842
----------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.


                                                                              2
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
G & K SERVICES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                  FOR THE THREE MONTHS ENDED
                                               ---------------------------------
                                               SEPTEMBER 26,       SEPTEMBER 27,
      (IN THOUSANDS, EXCEPT PER SHARE DATA)         1998                1997
------------------------------------------------------------------------------
<S>                                              <C>                 <C>      
REVENUES                                                                      
  Rental operations                              $ 122,813           $ 114,728
  Direct sales                                       3,310               3,698
------------------------------------------------------------------------------
    Total revenues                                 126,123             118,426
------------------------------------------------------------------------------
EXPENSES
  Cost of rental operations                         69,056              65,705
  Cost of direct sales                               2,222               2,677
  Selling and administrative                        27,336              24,896
  Depreciation                                       6,559               5,860
  Amortization of intangibles                        2,143               2,473
------------------------------------------------------------------------------
    Total operating expenses                       107,316             101,611
------------------------------------------------------------------------------
INCOME FROM OPERATIONS                              18,807              16,815
  Interest expense                                   4,730               4,767
  Other income, net                                   (321)               (209)
------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                          14,398              12,257
  Provision for income taxes                         5,708               4,812
------------------------------------------------------------------------------
NET INCOME                                       $   8,690           $   7,445
------------------------------------------------------------------------------
  Basic weighted average number
    of shares outstanding                           20,390              20,366
BASIC EARNINGS PER COMMON SHARE                  $    0.43           $    0.37
------------------------------------------------------------------------------
  Diluted weighted average number
    of shares outstanding                           20,494              20,445

DILUTED EARNINGS PER COMMON SHARE                $    0.42           $    0.36
------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                                                              3
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
G & K SERVICES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS ENDED
                                                                    ---------------------------------
                                                                    SEPTEMBER 26,       SEPTEMBER 27,
   (IN THOUSANDS)                                                       1998                1997
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>                 <C>
OPERATING ACTIVITIES:
  Net Income                                                           $   8,690           $   7,445
  Adjustments to reconcile net income to net cash
    provided by operating activities-
    Depreciation and amortization                                          8,703               8,333
    Deferred income taxes                                                   (381)                (37)
    Changes in current operating items-
      Inventories                                                           (878)             (1,778)
      Accounts receivable and prepaid expenses                              (407)             (8,995)
      Accounts payable and other current liabilities                       9,918              10,858
      Other, net                                                             (95)               (630)
-----------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                 25,550              15,196
-----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
  Property, plant and equipment additions, net                           (12,464)             (8,323)
  Business acquisitions                                                     (155)           (279,738)
  Purchase of investments                                                   (159)               (193)
-----------------------------------------------------------------------------------------------------
Net cash used for investing activities                                   (12,778)           (288,254)
-----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
  Proceeds from debt financing                                             1,982             355,843
  Repayments on line of credit and other long-term debt, net              (9,054)            (86,000)
  Cash dividends paid                                                       (359)               (358)
  Sale of common stock                                                         -                   2
-----------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities                       (7,431)            269,487
-----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            5,341              (3,571)

CASH AND CASH EQUIVALENTS:
  Beginning of year                                                        11,975               6,986
-----------------------------------------------------------------------------------------------------
  End of year                                                           $  17,316           $   3,415
-----------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for -
    Interest                                                            $   4,261           $   4,250
-----------------------------------------------------------------------------------------------------
    Income Taxes                                                        $   6,032           $   7,245
-----------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                                                               4
<PAGE>

                       G&K SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in thousands, except per share data.)
       Three month period ended September 26, 1998 and September 27, 1997
                                   (Unaudited)

          The consolidated financial statements included herein, except for 
     the June 27, 1998, balance sheet which was extracted from the audited 
     financial statements of June 27, 1998, have been prepared by the 
     Company, without audit, pursuant to the rules and regulations of the 
     Securities and Exchange Commission. In the opinion of the Company, the 
     accompanying unaudited consolidated financial statements contain all 
     adjustments (consisting of only normal recurring accruals) necessary to 
     present fairly the financial position as of September 26, 1998, and 
     June 27, 1998, and the results of operations and the changes in 
     financial position for the three months ended September 26, 1998 and 
     September 27, 1997. Certain information and footnote disclosures 
     normally included in financial statements prepared in accordance with 
     generally accepted accounting principles have been condensed or omitted 
     pursuant to such rules and regulations, although the Company believes 
     that the disclosures herein are adequate to make the information 
     presented not misleading. It is suggested that these consolidated 
     financial statements be read in conjunction with the financial 
     statements and the notes thereto included in the Company's latest 
     annual report.
     
          The results of operations for the three month period ended 
     September 26, 1998, and September 27, 1997, are not necessarily 
     indicative of the results to be expected for the full year.
     
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Accounting policies followed by the Company are set forth in Note 
     1 to the Company's Annual Consolidated Financial Statements.

     NATURE OF BUSINESS
          G&K Services, Inc. (the Company) is a full service uniform rental 
     provider, including the rental of cleanroom garments. The Company also 
     provides rental of non-uniform items such as floormats, dustmops and 
     cloths, wiping towels and selected linen items. In addition, the 
     Company manufactures uniforms for rental customers as well as uniforms 
     for direct sale.
     
     PRINCIPLES OF CONSOLIDATION
          The accompanying consolidated financial statements include the 
     accounts of the Company and its subsidiaries, all of which are wholly 
     owned. Significant intercompany balances and transactions have been 
     eliminated in consolidation.
     
     DERIVATIVE FINANCIAL INSTRUMENTS
          Derivative financial instruments are used by the Company in the 
     management of its interest rate exposure. Amounts to be paid or 
     received under interest rate swap agreements are accrued as interest 
     rates change and are recognized over the life of the swap agreements as 
     an adjustment to interest expense. The related amounts payable to, or 
     receivable from, the counter-parties are included in other accrued 
     expenses. The fair value of the swap agreements is not recognized in 
     the Consolidated Financial Statements, since they are accounted for as 
     hedges.

     PER SHARE DATA
          In the second quarter of fiscal 1998, the Company adopted SFAS No. 
     128, "Earnings per Share," which is effective for interim periods 
     ending after December 15, 1997. As a result, all prior period earnings 
     per share data has been restated. The adoption of SFAS No. 128 did not 
     have a significant 


                                                                               5
<PAGE>

     impact on previously reported earnings per share. Basic earnings per 
     common share was computed by dividing net income by the weighted average 
     number of shares of common stock outstanding during the year. Diluted 
     earnings per common share was computed similar to the computation of basic
     earnings per share, except that the denominator is increased for the 
     assumed exercise of dilutive options and other dilutive securities 
     (including nonvested restricted stock) using the treasury stock method.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                  ------------------------------
                                                  SEPTEMBER 26,    SEPTEMBER 27,
                                                      1998             1997
                                                  ------------------------------
          <S>                                        <C>              <C>
          Weighted average number of common
          shares outstanding                          20,390          20,366
                                                  ------------------------------
          Shares used in computation of
          basic earnings per share                    20,390          20,366

          Weighted average effect of
          non-vested restricted stock grants              63              42

          Weighted average common shares
          issuable upon the exercise of
          stock options                                   41              37
                                                  ------------------------------
          Shares used in computation of
          diluted earnings per share                  20,494          20,445
                                                  ------------------------------
                                                  ------------------------------
</TABLE>

     RECENT ACCOUNTING PRONOUNCEMENTS
          SFAS No. 131, "Disclosures about Segments of an Enterprise and 
     Related Information," will be effective for fiscal years beginning 
     after December 15, 1997. SFAS No. 131 requires disclosure of business 
     and geographic segments in the consolidated financial statements of the 
     Company. The Company will adopt SFAS No. 131 in fiscal 1999 and is 
     currently analyzing the impact it will have on the disclosures in its 
     financial statements.

     RECLASSIFICATIONS
          Certain prior period amounts have been reclassified to conform to 
     the 1999 presentation. These reclassifications have no effect on net 
     income or total stockholders' equity as previously reported.

2.   ACQUISITION OF CERTAIN NATIONAL LINEN SERVICE ASSETS

          On July 14, 1997, the Company purchased the uniform rental assets 
     and selected linen rental assets of National Linen Service (NLS) for 
     approximately $283,400 in cash. The acquisition was accounted for using 
     the purchase method and the purchase price was allocated to the 
     acquired assets and assumed liabilities based on the fair values of the 
     assets purchased and the liabilities assumed. The purchase price and 
     related acquisition costs exceeded the fair values assigned to tangible 
     assets by approximately $160,600, which was assigned to restrictive 
     covenants ($1,100) to be amortized over the contract life of five 
     years, purchased customer list ($41,600) to be amortized over eleven 
     years and goodwill ($117,900) to be amortized over thirty-five years.
     
          In connection with the asset purchase from NLS, nine linen rental 
     facilities purchased were identified as assets held for sale. The net 
     cash flows from (i) operations of these facilities from the date of 
     acquisition until the date of sale (holding period, not to exceed one 
     year), (ii) interest on incremental debt incurred during the holding 
     period to finance the purchase of these facilities, and (iii) proceeds 
     from the 


                                                                               6
<PAGE>

     sale were considered in the allocation of the purchase price to the 
     acquired assets and liabilities. Accordingly, earnings or losses from 
     these nine facilities have been excluded from the consolidated 
     statement of income. For the period ended September 27, 1997, earnings 
     excluded from the Company's consolidated statement of income totaled 
     $447, including allocated interest expense of $976.
     
          The pro forma results of operations for the periods ended 
     September 26, 1998 and September 27, 1997 are not materially different 
     from the actual results of operations.

3.   COMPREHENSIVE INCOME

          In the first quarter of fiscal 1999, the Company adopted SFAS No. 130,
     "Reporting Comprehensive Income." SFAS No. 130 requires the Company to
     report and display comprehensive income and its components. For the three
     month periods ended September 26, 1998 and September 27, 1997, the
     components of comprehensive income were as follows:

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                        (IN THOUSANDS)
                                                                ------------------------------
                                                                SEPTEMBER 26,    SEPTEMBER 27,
                                                                   1998             1997
                                                                ------------------------------
          <S>                                                    <C>               <C>
          Net income                                             $ 8,690           $ 7,445
          Other comprehensive income, net of tax
               Foreign currency translation adjustments           (1,918)             (355)
               Unrealized gain (loss) on
               investments held for sale                            (264)              285
                                                                ------------------------------
          Comprehensive income                                   $ 6,508           $ 7,375
                                                                ------------------------------
</TABLE>


                                                                               7
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The percentage relationships to net sales of certain income and expense 
items for the three month periods ended September 26, 1998 and September 27, 
1997, and the percentage changes in these income and expense items between 
periods are contained in the following table:

<TABLE>
<CAPTION>
                                                   PERCENTAGE OF NET SALES                    PERCENTAGE 
                                                      THREE MONTHS ENDED                        CHANGE
                                        -----------------------------------------------------------------------
                                                                                             FY Q1 1999 vs. FY
                                           September 26, 1998       September 27, 1997            Q1 1998
                                        -----------------------------------------------------------------------
<S>                                              <C>                     <C>                       <C>
Revenues:
  Rental                                          97.4%                   96.9%                      7.0%
  Direct                                           2.6                     3.1                     (10.5)
                                        ----------------------------------------------
    Total Revenues                               100.0                   100.0                       6.5

Expenses:                                                                                               
  Cost of Rental Sales                            56.2                    57.3                       5.1
  Cost of Direct Sales                            67.1                    72.4                     (17.0)
                                        ----------------------------------------------
    Total Cost of Sales                           56.5                    57.7                       4.3

    Selling and Administrative                    21.7                    21.0                       9.8
    Depreciation                                   5.2                     5.0                      11.9
    Amortization of Intangibles                    1.7                     2.1                     (13.3)
                                        ----------------------------------------------
Income from Operations                            14.9                    14.2                      11.8

Interest Expense                                   3.8                     4.0                      (0.8)
Other (Income) Expense, net                       (0.3)                   (0.2)                     53.6
                                        ----------------------------------------------
Income Before Income Taxes                        11.4                    10.4                      17.5
Provision for Income Taxes                         4.5                     4.1                      18.6
                                        ----------------------------------------------
Net Income                                         6.9%                    6.3%                     16.7
                                        ----------------------------------------------
                                        ----------------------------------------------
</TABLE>

     Total revenues for the first quarter of fiscal 1999 increased 6.5% to 
$126.1 million from $118.4 million in the first quarter of fiscal 1998. The 
first quarter of fiscal 1998 included only eleven weeks of revenues from 
assets acquired from NLS on July 14, 1997, including three industrial 
locations that were later sold in the fourth quarter of fiscal 1998. 
Adjusting for these two transactions, total revenue growth for the first 
quarter of fiscal 1999 was 5.0%.

     Rental revenue growth for the first quarter accounted for $8.1 million, 
or a 7.0% increase. U.S. and Canadian rental revenues increased 5.9% 
(adjusted for the NLS asset purchase and the sale of industrial plants) and 
2.1%, respectively. The growth in rental revenue, which is below historical 
growth patterns, was influenced by several factors, including lower growth 
rates in the southeastern part of the U.S. that were impacted by continuing 
NLS acquisition integration activities, a sharp downturn in the 
semi-conductor industry and an accelerated decline in the value of the 
Canadian dollar.

     Total direct sales to outside customers decreased 10.5% to $3.3 million 
for the first quarter of fiscal 1999 compared to $3.7 million in the same 
period of fiscal 1998. This decrease is primarily the result of shifting 
garment manufacturing capacity from sales to external customers to internal 
use by the Company for rental customers. Cost of direct sales, as a 
percentage of direct sales, decreased to 67.1% from 72.4% in the same period 
of fiscal 1998.

     Cost of rental operations increased 5.1% to $69.1 million for the first 
quarter of fiscal 1999 from $65.7 million in the same period of fiscal 1998. 
As a percentage of rental revenues, these costs decreased to 56.2% for 


                                                                              8
<PAGE>

the first quarter of fiscal 1999 from 57.3% in the same period of fiscal 
1998. The Company attributes this decrease as a percent of revenue to 
improvements in all components of rental operations (merchandise, production 
and delivery costs), primarily at locations acquired in the NLS transaction.

     Selling and administrative expenses increased 9.8% to $27.3 million in 
the first quarter of fiscal 1999 from $24.9 million in the same period of 
fiscal 1998. As a percentage of revenues, selling and administrative expenses 
increased to 21.7% in the first quarter of fiscal 1999 from 21.0% in the same 
period of fiscal 1998. The increase as a percent of revenue is due to several 
factors, including higher selling expenses in the locations acquired in 
fiscal 1998, increased information technology costs, expenses associated with 
Year 2000 solutions and other corporate initiatives.

     Depreciation expense increased 11.9% to $6.6 million in the first 
quarter of fiscal 1999 from $5.9 million in the same period of fiscal 1998. 
As a percentage of revenues, depreciation expense increased to 5.2% in the 
first quarter of fiscal 1999 from 5.0% in the same period of 1998. This 
increase is primarily the result of continued investment in locations 
acquired in fiscal 1998 and the construction of new locations. Capital 
expenditures, excluding acquisition of businesses, was $12.5 million in the 
first quarter of fiscal 1999 compared to $8.3 million in the prior year's 
quarter.

     Amortization expense decreased 13.3% to $2.1 million in the first 
quarter of fiscal 1999 from $2.5 million in the first quarter of fiscal 1998. 
This decrease is attributable to the sale of eleven linen and industrial 
facilities and the related intangible assets during the third and fourth 
quarters of fiscal 1998.

     Income from operations increased 11.8% to $18.8 million in the first 
quarter of fiscal 1999 from $16.8 million in the same period of fiscal 1998. 
Operating margins increased to 14.9% in fiscal 1999 from 14.2% in fiscal 
1998. U.S. operating margins increased to 13.3% in fiscal 1999 from 12.7% in 
the same period of fiscal 1998.

     Interest expense was $4.7 million for the first quarter of fiscal 1999, 
down from $4.8 million in the same period of fiscal 1998. The Company's 
effective tax rate increased to 39.6% in the first quarter of fiscal 1999 
from 39.3% in the same period of fiscal 1998.

     Net income rose 16.7% to $8.7 million in the first quarter of fiscal 
1999 from $7.4 million in the same period of fiscal 1998. Basic and diluted 
earnings per share for the first quarter of fiscal 1999 were $.43 per share 
and $.42 per share, respectively, compared to $.37 and $.36, respectively, 
for the prior year quarter. Net income margins increased to 6.9% for the 
first quarter of fiscal 1999 compared with 6.3% in the first quarter of 
fiscal 1998.

LIQUIDITY AND FINANCIAL RESOURCES

     Cash flow from operating activities was $25.6 million in the first 
quarter of fiscal 1999 and $15.2 million in the same period of fiscal 1998. 
The fiscal 1999 increase resulted from increases in net income and accounts 
payable when compared to the first quarter of 1998, which included the impact 
of the NLS asset acquisition. Working capital at September 26, 1998 was $66.1 
million, down 9.9% from $73.3 million at June 27, 1998.

     Cash used for financing activities was $7.4 million in the first quarter 
of fiscal 1999 and cash provided by financing activities was $269.5 million 
in the same period of fiscal 1998. $355.8 million of cash was obtained by 
issuing debt primarily for the acquisition of selected assets of NLS in the 
first quarter of fiscal 1998. The Company's ratio of debt to total 
capitalization decreased to 54.2% at the end of the first quarter of fiscal 
1999 from 55.8% at June 27, 1998.

     Cash used in investing activities was $12.8 million in the first quarter 
of fiscal 1999 and $288.3 million in the first quarter of fiscal 1998. The 
decrease is primarily due to the acquisition of the NLS assets in the first 
quarter of fiscal 1998.


                                                                               9
<PAGE>

     Stockholders' equity grew 3.2% to $204.4 million at September 26, 1998, 
compared with $198.1 million at the end of fiscal 1998. G&K's return on 
average equity remained at 4.3% for the first quarters of both fiscal 1999 
and fiscal 1998.

     Management believes that cash flows generated from operations and its 
credit facilities should provide adequate funding for its current businesses 
and planned expansion of operations or any future acquisitions.

YEAR 2000 COMPLIANCE

     The Company utilizes both information technology ("IT") and non-IT 
systems and assets throughout its U.S. and Canadian operations that will be 
affected by the date change in the year 2000. The Company began an extensive 
review of its business in January, 1998, to determine whether or not its IT 
and non-IT systems and assets were year 2000 compliant, as well as the 
remedial action and related costs associated with required modifications or 
replacements. The Company's goal is to ensure current business operations 
will continue to function accurately with minimal disruption through the 
millennium change. The Company has also had discussions with its significant 
suppliers to determine the readiness of those suppliers to correct year 2000 
issues where their systems and products interface with the Company's systems 
or otherwise impact its operations. The Company is assessing the extent to 
which its operations are vulnerable should those suppliers not succeed to 
properly remedy their computer systems. The Company believes that its actions 
with key suppliers will minimize these risks. The scope of the year 2000 
readiness effort includes (i) information technology such as software and 
hardware, (ii) non-information systems or embedded technology such as micro 
controllers contained in various equipment, safety systems, facilities and 
utilities and (iii) readiness of key third-party suppliers. If needed 
modifications and conversions are not made on a timely basis, the year 2000 
issue could have a material adverse effect on the Company's business, 
financial condition and results of operations. The Company hopes to achieve 
these objectives by committing resources and leveraging previous investments 
in existing technologies.

     The Company has a documented process through which all IT and non-IT 
systems and assets are being reviewed with reference to year 2000 date 
issues. This methodology takes each system and asset through the following 
lifecycle:

     -    Awareness - Educate employees about year 2000 issues.
     -    Assessment - Conduct an inventory and impact analysis of the business,
          operations, and systems. Identify priorities and plan.
     -    Analysis - Analyze the asset(s) to determine the tasks, resources and
          duration required to ensure compliance.
     -    Contingency Planning - Identify alternative solutions to the
          recommended solution.
     -    Conversion - Renovation plan is finalized, approved and implemented.
     -    Testing - Approved validation plans are implemented and testing
          occurs.
     -    Rollout - Implementation plan is approved, and tested compliance
          solution is fully implemented into production.

     The Company's key systems and assets are as follows:
     -    Financial systems software - SAP financial systems were implemented
          and operational as of June 28, 1998. The Company will be completing
          year 2000 testing of this system by January 1, 1999.
     -    Revenue recognition system - Renovation of this internally developed
          system is completed. Testing is in process and rollout will be
          completed by March 31, 1999.
     -    Other IT software, hardware and communications - Other vendor software
          and G&K applications have been assessed and are currently being
          renovated and tested. Expected completion date is March 31, 1999, for
          all IT systems and assets, except for vendor supplied solutions, which
          have an anticipated completion date of July 1, 1999.
     -    Non-IT plant and related equipment - The Company has completed the
          assessment phase. Anticipated completion date for all non-IT systems
          and assets is March 31, 1999.
     -    Business processes and procedures - All process flows are being
          analyzed for risk with appropriate contingency plans put into place.
          The anticipated completion date is March 31, 1999.


                                                                             10
<PAGE>

     -    Third Parties - The Company's supply chain is being assessed to ensure
          all significant vendors will have the ability to meet the Company's
          needs. This assessment and contingency planning will be completed by
          December 31, 1998. Currently, no disclosures of non-compliant
          suppliers have been discovered.

     The Company will not be deferring any other significant IT projects to 
address the year 2000 issues. Because the year 2000 issue is of short 
duration, the Company has retained experts and advisors to evaluate year 2000 
readiness; assist in analysis, renovation, and contingency planning; and 
complete independent testing when renovations are completed. The Company's 
core IT staff will continue to stay focused on the Company's business needs, 
as well as assist with year 2000 analysis and renovation.

     The Company is implementing solutions and began to incur expenses 
during fiscal 1998 to resolve the year 2000 issue. These expenses will 
continue through the year 2000. Maintenance or modification costs are 
expensed as incurred, while costs of any new software and equipment are being 
capitalized over the asset's useful life, consistent with the Company's 
financial policies. The Company has spent approximately $2.6 
million related to the year 2000 analysis; $1.7 million of these costs were 
capitalized. The Company has budgeted $7.3 million of total expenditures for 
the year 2000 compliance activities, of which $4.1 million will be 
capitalized, although there can be no assurance that year 2000 related 
expenditures will not be materially higher. The Company's current estimates 
of the amount of time and costs necessary to modify and test its computer 
systems are based upon assumptions regarding future events, including the 
continued availability of certain resources, year 2000 modification plans and 
other factors. New developments may occur that could affect the Company's 
estimates of the amount of time and costs necessary to modify and test its 
systems for year 2000 compliance. These developments include, but are not 
limited to (i) the availability and cost of personnel trained in this area, 
(ii) the ability to locate and correct all relevant computer codes and 
equipment and (iii) the year 2000 compliance success that key suppliers 
attain.

     Contingency plans are being developed and implemented where the level of 
risk has been determined to be unsatisfactory. The Company is using a 
weighted system to evaluate and determine this level of risk in each of five 
areas: Operational, Facility Safety, Financial Management, Legal Implication 
and Organizational Implication. Where necessary, the Company is implementing 
various contingency plans that will include, but are not limited to, the 
following:

     -    Secondary vendors for garments and other significant non-uniform
          inventories
     -    Stockpile of certain other inventories, soap, thread, etc.
     -    Manual work-around for less critical computerized systems

     While the Company has exercised its best efforts to identify and remedy 
any potential year 2000 exposures within its control, the largest risks are 
expected with utilities in the form of water and power which, to a 
significant extent, are beyond the immediate control of the Company. To date, 
the Company has not identified any suppliers who will not be year 2000 
compliant; however, this analysis is still in process. If non-compliant 
vendors are identified, the Company intends to develop appropriate 
contingency plans.

     While the Company believes its planning efforts are adequate to address 
its year 2000 concerns, the year 2000 readiness of the Company's suppliers 
and business partners may lag behind the Company's efforts. Although the 
Company does not believe that the year 2000 matters discussed above will have 
a material impact on its business, financial condition and results of 
operations, it is uncertain as to what extent the Company may be affected by 
such matters.

MARKET RISK SENSITIVITY

     The Company uses financial instruments, including fixed and variable 
rate debt, as well as swaps, to finance operations and to hedge interest rate 
exposures. The swap contracts are entered into for periods consistent with 
related underlying exposures and do not constitute positions independent of 
those exposures. The Company does not enter into contracts for speculative 
purposes, nor is it a party to any leveraged instrument. There has been 


                                                                             11
<PAGE>

no material change in the Company's market risks associated with debt and 
interest rate swap obligations during the quarter ended September 26, 1998.

     Statements in this document regarding ongoing trends and expectations 
constitute "forward-looking statements" as defined in the Private Securities 
Litigation Reform Act of 1995. Forward-looking statements involve known and 
unknown risks, which may cause the Company's actual results in the future to 
differ materially from expected results. These risks and uncertainties 
include, but are not limited to, those expectations related to the 
acquisition of assets from NLS; unforeseen operating risks; the availability 
of capital to finance planned growth; competition within the uniform leasing 
industry; and the effects of economic conditions.



                                                                             12
<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders

         None

ITEM 6.  Exhibits and Reports on Form 8-K

         a.  Exhibits

<TABLE>
              <S>   <C>
              10.1  1998 Stock Option and Compensation Plan (incorporated herein
                    by reference to Exhibit A of the Registrant's definitive
                    proxy statement for the 1998 Annual Meeting of Shareholders
                    filed October 5, 1998) *

              27    Financial Data Schedule (for SEC use only)

              *  Compensatory plan or arrangement
</TABLE>

         b. Reports on Form 8-K.

                  None




                                                                             13
<PAGE>

                                   SIGNATURES

     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.

                                                  G&K SERVICES, INC.
                                                  (Registrant)













      Date:   November 10, 1998                   /s/Timothy W. Kuck
                                                  -----------------------------
                                                  Timothy W. Kuck
                                                  Chief Financial Officer
                                                  (Principal Financial Officer)




                                                  /s/Michael F. Woodard
                                                  -----------------------------
                                                  Michael F. Woodard
                                                  Controller
                                                  (Principal Accounting Officer)



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