##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For the quarterly period ended: March 5, 2006

Commission File Number: 001-7323



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FRISCHS RESTAURANTS, INC.

(Exact name of registrant as specified in its
charter)



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



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

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

Not Applicable

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



---

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

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

Large Accelerated Filer ̈Accelerated Filer  x    Non-accelerated filer ̈

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

The total number of shares outstanding of the issuers no par common stock, as of March 24, 2006 was: 5,073,774



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##### Table of Contents

TABLE OF CONTENTS



|                               |  |          |  |                                                                                      |  |        
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------ |  | -------
|                               |  |          |  |                                                                                      |  | Page   
|PART I - FINANCIAL INFORMATION |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Financial Statements:                                                                |  |        
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Earnings                                                   |  | 3      
|                               |  |          | 
|                               |  |          |  | Consolidated Balance Sheet                                                           |  | 4 - 5  
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Shareholders Equity                                       |  | 6      
|                               |  |          | 
|                               |  |          |  | Consolidated Statement of Cash Flows                                                 |  | 7      
|                               |  |          | 
|                               |  |          |  | Notes to Consolidated Financial Statements                                           |  | 8 - 27 
|                               |  |          | 
|                               |  | Item 1A. |  | Risk Factors                                                                         |  | 28     
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operation |  | 29 - 35
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                           |  | 36     
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                              |  | 36     
|                               | 
|PART II -
OTHER INFORMATION    |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                    |  | 36 -37 
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                          |  | 37     
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                      |  | 37     
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                  |  | 37     
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                    |  | 37     
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                             |  | 37 -39 
|                               | 
|SIGNATURE                      |  | 40      



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)



|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|---------------------------------------------------------------- |  | ----------------- | ----------- | - | ------------------------ | - | ----------- | ------------- |  | - | ----------------------- | - |  | - | ---------- | -
|                                                                 |  | Forty weeks ended |             |   | Twelve weeks ended       |  
|                                                                 |  | March 5, 2006     |             |   | March 6, 2005 (restated) |   |             | March 5, 2006 |  |   | March 6, 2005(restated) |  
|Sales                                                            |  | $                 | 220,745,741 |   |                          | $ | 213,608,307 |               |  | $ | 67,259,863              |   |  | $ | 62,798,667 |  
|                                                                 |  |                   |             |  
|Cost of sales                                                    |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Food and paper                                                   |  |                   | 77,317,462  |   |                          |   | 75,144,025  |               |  |   | 23,702,867              |   |  |   | 22,391,288 |  
|Payroll and related                                              |  |                   | 72,969,756  |   |                          |   | 70,983,727  |               |  |   | 22,217,676              |   |  |   | 20,940,581 |  
|Other operating costs                                            |  |                   | 48,715,459  |   |                          |   | 44,021,135  |               |  |   | 14,787,158              |   |  |   | 13,262,928 |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|                                                                 |  |                   | 199,002,677 |   |                          |   | 190,148,887 |               |  |   | 60,707,701              |   |  |   | 56,594,797 |  
|                                                                 |  |                   |             |  
|Gross profit                                                     |  |                   | 21,743,064  |   |                          |   | 23,459,420  |               |  |   | 6,552,162               |   |  |   | 6,203,870  |  
|                                                                 |  |                   |             |  
|Administrative and advertising                                   |  |                   | 11,158,025  |   |                          |   | 10,887,677  |               |  |   | 3,234,766               |   |  |   | 3,222,291  |  
|Franchise fees and other revenue                                 |  |                   | (960,515    | ) |                          |   | (1,026,160  | )             |  |   | (297,764                | ) |  |   | (292,732   | )
|(Gains) on sale of assets                                        |  |                   | (393,595    | ) |                          |   | (88,978     | )             |  |   | (393,595                | ) |  |   |           |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Operating profit                                                 |  |                   | 11,939,149  |   |                          |   | 13,686,881  |               |  |   | 4,008,755               |   |  |   | 3,274,311  |  
|                                                                 |  |                   |             |  
|Interest expense                                                 |  |                   | 2,104,649   |   |                          |   | 2,173,026   |               |  |   | 665,057                 |   |  |   | 726,362    |  
|Life insurance - death benefit in excess of cash surrender value |  |                   |            |   |                          |   | (4,440,000  | )             |  |   |                        |   |  |   | (4,440,000 | )
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Earnings before income taxes                                     |  |                   | 9,834,500   |   |                          |   | 15,953,855  |               |  |   | 3,343,698               |   |  |   | 6,987,949  |  
|                                                                 |  |                   |             |  
|Income taxes                                                     |  |                   | 3,344,000   |   |                          |   | 4,028,000   |               |  |   | 1,138,000               |   |  |   | 803,000    |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Net Earnings                                                     |  | $                 | 6,490,500   |   |                          | $ | 11,925,855  |               |  | $ | 2,205,698               |   |  | $ | 6,184,949  |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Earnings per share (EPS) of common stock:                        |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|                                                                 |  |                   |             |  
|Basic net earnings per share                                     |  | $                 | 1.28        |   |                          | $ | 2.37        |               |  | $ | .43                     |   |  | $ | 1.22       |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  
|Diluted net earnings per share                                   |  | $                 | 1.26        |   |                          | $ | 2.31        |               |  | $ | .43                     |   |  | $ | 1.20       |  
|                                                                 |  |                   |             |   |                          |   |             |               |  |   |                         |   |  |   |            |  



|The | accompanying notes are an integral part of these statements.
|--- | ------------------------------------------------------------



3



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet

ASSETS



|                                                    |  |                          |             |              |   |            
|--------------------------------------------------- |  | ------------------------ | ----------- | ------------ | - | -----------
|                                                    |  | March 5, 2006(unaudited) |             | May 29, 2005
|Current assets                                      |  |                          |             |              |   |            
|Cash                                                |  | $                        | 533,876     |              | $ | 306,300    
|Trade and other receivables                         |  |                          | 2,241,473   |              |   | 1,389,975  
|Inventories                                         |  |                          | 4,668,397   |              |   | 4,592,093  
|Prepaid expenses and sundry deposits                |  |                          | 2,671,548   |              |   | 2,819,762  
|Prepaid and deferred income taxes                   |  |                          | 818,638     |              |   | 942,611    
|                                                    |  |                          |             |              |   |            
|Total current assets                                |  |                          | 10,933,932  |              |   | 10,050,741 
|                                                    |  |                         
|Property and equipment                              |  |                          |             |              |   |            
|Land and improvements                               |  |                          | 60,695,539  |              |   | 56,830,344 
|Buildings                                           |  |                          | 84,554,282  |              |   | 81,434,781 
|Equipment and fixtures                              |  |                          | 88,556,176  |              |   | 84,240,573 
|Leasehold improvements and buildings on leased land |  |                          | 28,232,912  |              |   | 21,590,570 
|Capitalized leases                                  |  |                          | 5,492,872   |              |   | 7,131,603  
|Construction in progress                            |  |                          | 858,494     |              |   | 6,435,214  
|                                                    |  |                          |             |              |   |            
|                                                    |  |                          | 268,390,275 |              |   | 257,663,085
|Less accumulated depreciation and amortization      |  |                          | 114,287,785 |              |   | 109,461,135
|                                                    |  |                          |             |              |   |            
|Net property and equipment                          |  |                          | 154,102,490 |              |   | 148,201,950
|                                                    |  |                         
|Other assets                                        |  |                          |             |              |   |            
|Goodwill                                            |  |                          | 740,644     |              |   | 740,644    
|Other intangible assets                             |  |                          | 1,420,062   |              |   | 1,400,659  
|Investments in land                                 |  |                          | 2,103,745   |              |   | 974,370    
|Property held for sale                              |  |                          | 1,857,244   |              |   | 1,857,244  
|Other                                               |  |                          | 3,918,997   |              |   | 4,239,974  
|                                                    |  |                          |             |              |   |            
|Total other assets                                  |  |                          | 10,040,692  |              |   | 9,212,891  
|                                                    |  |                          |             |              |   |            
|Total assets                                        |  | $                        | 175,077,114 |              | $ | 167,465,582
|                                                    |  |                          |             |              |   |            

The accompanying notes are an integral part of these statements.



4



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##### Table of Contents

LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                           |  |                          |             |              |   |            
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ------------ | - | -----------
|                                                                                                                           |  | March 5, 2006(unaudited) |             | May 29, 2005
|Current liabilities                                                                                                        |  |                          |             |              |   |            
|Long-term obligations due within one year                                                                                  |  |                          |             |              |   |            
|Long-term debt                                                                                                             |  | $                        | 8,960,884   |              | $ | 7,598,182  
|Obligations under capitalized leases                                                                                       |  |                          | 451,309     |              |   | 533,016    
|Self insurance                                                                                                             |  |                          | 922,588     |              |   | 851,737    
|Accounts payable                                                                                                           |  |                          | 11,688,815  |              |   | 12,799,147 
|Accrued expenses                                                                                                           |  |                          | 9,600,810   |              |   | 8,763,971  
|Income taxes                                                                                                               |  |                          | 37,810      |              |   | 416,125    
|                                                                                                                           |  |                          |             |              |   |            
|Total current liabilities                                                                                                  |  |                          | 31,662,216  |              |   | 30,962,178 
|                                                                                                                           |  |                         
|Long-term obligations                                                                                                      |  |                          |             |              |   |            
|Long-term debt                                                                                                             |  |                          | 32,488,023  |              |   | 29,570,481 
|Obligations under capitalized leases                                                                                       |  |                          | 2,690,557   |              |   | 3,136,836  
|Self insurance                                                                                                             |  |                          | 1,818,085   |              |   | 1,981,342  
|Deferred income taxes                                                                                                      |  |                          | 3,860,375   |              |   | 4,830,375  
|Deferred compensation and other                                                                                            |  |                          | 3,988,323   |              |   | 3,583,120  
|                                                                                                                           |  |                          |             |              |   |            
|Total long-term obligations                                                                                                |  |                          | 44,845,363  |              |   | 43,102,154 
|                                                                                                                           |  |                         
|Commitments                                                                                                                |  |                          |            |              |   |           
|                                                                                                                           |  |                         
|Shareholders equity                                                                                                       |  |                          |             |              |   |            
|Capital stock                                                                                                              |  |                          |             |              |   |            
|Preferred stock - authorized, 3,000,000 shares without par value; none issued                                              |  |                          |            |              |   |           
|Common stock - authorized, 12,000,000 shares without par value; issued, 7,521,097 and 7,505,176 shares - stated value - $1 |  |                          | 7,521,097   |              |   | 7,505,176  
|Additional contributed capital                                                                                             |  |                          | 62,531,392  |              |   | 62,226,047 
|                                                                                                                           |  |                          |             |              |   |            
|                                                                                                                           |  |                          | 70,052,489  |              |   | 69,731,223 
|                                                                                                                           |  |                         
|Retained earnings                                                                                                          |  |                          | 61,309,473  |              |   | 56,490,185 
|                                                                                                                           |  |                          |             |              |   |            
|                                                                                                                           |  |                          | 131,361,962 |              |   | 126,221,408
|                                                                                                                           |  |                         
|Less cost of treasury stock (2,447,323 and 2,449,394 shares)                                                               |  |                          | 32,792,427  |              |   | 32,820,158 
|                                                                                                                           |  |                          |             |              |   |            
|Total shareholders equity                                                                                                 |  |                          | 98,569,535  |              |   | 93,401,250 
|                                                                                                                           |  |                          |             |              |   |            
|Total liabilities and shareholders equity                                                                                 |  | $                        | 175,077,114 |              | $ | 167,465,582
|                                                                                                                           |  |                          |             |              |   |            



5



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders Equity

Forty weeks ended March 5, 2006 and March 6, 2005

(Unaudited)



|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|--------------------------------------------------- |  | --------------------------------------------- | --------- | ---------------------------- | - | ---------- | ---------------- |  | - | --------------- | - |  | ----- | ----------- | - |  | - | ---------- | -
|                                                    |  | Common stockat $1 per share -Shares andamount |           | Additionalcontributedcapital |   |            | Retainedearnings |  |   | Treasury shares |   |  | Total |            
|Balance at May 30, 2004                             |  |                                               | 7,490,845 |                              |   | 61,976,027 |                  |  |   | 43,969,077      |   |  |       | (32,920,555 | ) |  |   | 80,515,394 |  
|Net earnings for forty weeks - (restated)           |  |                                               |          |                              |   |           |                  |  |   | 11,925,855      |   |  |       |            |   |  |   | 11,925,855 |  
|Stock options exercised - new shares issued         |  |                                               | 14,331    |                              |   | 205,105    |                  |  |   |                |   |  |       |            |   |  |   | 219,436    |  
|Stock options exercised - treasury shares re-issued |  |                                               |          |                              |   | (3,109     | )                |  |   |                |   |  |       | 95,953      |   |  |   | 92,844     |  
|Tax benefit from stock options exercised            |  |                                               |          |                              |   | 74,501     |                  |  |   |                |   |  |       |            |   |  |   | 74,501     |  
|Other treasury shares re-issued                     |  |                                               |          |                              |   | 39,965     |                  |  |   |                |   |  |       | 34,935      |   |  |   | 74,900     |  
|Treasury shares acquired                            |  |                                               |          |                              |   |           |                  |  |   |                |   |  |       | (30,491     | ) |  |   | (30,491    | )
|Employee stock purchase plan                        |  |                                               |          |                              |   | (32,612    | )                |  |   |                |   |  |       |            |   |  |   | (32,612    | )
|Cash dividends - $.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,663,582      | ) |  |       |            |   |  |   | (1,663,582 | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at March 6, 2005 (restated)                 |  |                                               | 7,505,176 |                              |   | 62,259,877 |                  |  |   | 54,231,350      |   |  |       | (32,820,158 | ) |  |   | 91,176,245 |  
|Net earnings for twelve weeks (restated)            |  |                                               |          |                              |   |           |                  |  |   | 2,814,970       |   |  |       |            |   |  |   | 2,814,970  |  
|Employee stock purchase plan                        |  |                                               |          |                              |   | (33,830    | )                |  |   |                |   |  |       |            |   |  |   | (33,830    | )
|Cash dividends - $.11 per share                     |  |                                               |          |                              |   |           |                  |  |   | (556,135        | ) |  |       |            |   |  |   | (556,135   | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|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     |  
|Other treasury shares re-issued                     |  |                                               |          |                              |   | 24,098     |                  |  |   |                |   |  |       | 27,731      |   |  |   | 51,829     |  
|Employee stock purchase plan                        |  |                                               |          |                              |   | (22,725    | )                |  |   |                |   |  |       |            |   |  |   | (22,725    | )
|Cash dividends - $.33 per share                     |  |                                               |          |                              |   |           |                  |  |   | (1,671,212      | ) |  |       |            |   |  |   | (1,671,212 | )
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  
|Balance at March 5, 2006                            |  | $                                             | 7,521,097 |                              | $ | 62,531,392 |                  |  | $ | 61,309,473      |   |  | $     | (32,792,427 | ) |  | $ | 98,569,535 |  
|                                                    |  |                                               |           |                              |   |            |                  |  |   |                 |   |  |       |             |   |  |   |            |  

The accompanying notes are an integral part of these statements.



6



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Forty weeks ended March 5, 2006 and March 6, 2005

(unaudited)



|                                                                             |  |      |             |   |                 |   |             |  
|---------------------------------------------------------------------------- |  | ---- | ----------- | - | --------------- | - | ----------- | -
|                                                                             |  | 2006 |             |   | 2005 (restated) |  
|Cash flows provided by (used in) operating activities:                       |  |      |             |   |                 |   |             |  
|Net earnings                                                                 |  | $    | 6,490,500   |   |                 | $ | 11,925,855  |  
|Adjustments to reconcile net earnings to net cash from operating activities: |  |      |             |   |                 |   |             |  
|Life insurance benefit                                                       |  |      |            |   |                 |   | (4,440,000  | )
|Depreciation and amortization                                                |  |      | 9,886,424   |   |                 |   | 9,015,021   |  
|Loss (gain) on disposition of assets, including abandonments                 |  |      | (58,936     | ) |                 |   | (55,426     | )
|                                                                             |  |      |             |   |                 |   |             |  
|                                                                             |  |      | 16,317,988  |   |                 |   | 16,445,450  |  
|Changes in assets and liabilities:                                           |  |      |             |   |                 |   |             |  
|Trade and other receivables                                                  |  |      | (851,498    | ) |                 |   | (348,334    | )
|Inventories                                                                  |  |      | (76,304     | ) |                 |   | (330,059    | )
|Prepaid expenses and sundry deposits                                         |  |      | 148,214     |   |                 |   | (407,497    | )
|Other assets                                                                 |  |      | 544,982     |   |                 |   | 111,104     |  
|Prepaid, accrued and deferred income taxes                                   |  |      | (1,224,342  | ) |                 |   | 464,368     |  
|Tax benefit from stock options exercised                                     |  |      | 32,496      |   |                 |   | 74,501      |  
|Accounts payable                                                             |  |      | (1,110,332  | ) |                 |   | 940,795     |  
|Accrued expenses                                                             |  |      | 836,839     |   |                 |   | 61,484      |  
|Self insurance                                                               |  |      | (92,406     | ) |                 |   | (487,036    | )
|Deferred compensation and other liabilities                                  |  |      | 405,203     |   |                 |   | 693,684     |  
|                                                                             |  |      |             |   |                 |   |             |  
|                                                                             |  |      | (1,387,148  | ) |                 |   | 773,010     |  
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash provided by operating activities                                    |  |      | 14,930,840  |   |                 |   | 17,218,460  |  
|                                                                             |  |     
|Cash flows provided by (used in) investing activities:                       |  |      |             |   |                 |   |             |  
|Additions to property and equipment                                          |  |      | (16,084,603 | ) |                 |   | (18,595,237 | )
|Proceeds from disposition of property                                        |  |      | 356,575     |   |                 |   | 242,360     |  
|Proceeds from disposition of franchise rights                                |  |      |            |   |                 |   | 168,982     |  
|Change in other assets                                                       |  |      | (1,372,783  | ) |                 |   | (345,888    | )
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash (used in) investing activities                                      |  |      | (17,100,811 | ) |                 |   | (18,529,783 | )
|                                                                             |  |     
|Cash flows provided by (used in) financing activities:                       |  |      |             |   |                 |   |             |  
|Proceeds from borrowings                                                     |  |      | 11,000,000  |   |                 |   | 9,500,000   |  
|Payment of long-term debt and capital lease obligations                      |  |      | (7,247,742  | ) |                 |   | (5,960,237  | )
|Cash dividends paid                                                          |  |      | (1,671,212  | ) |                 |   | (1,663,582  | )
|Proceeds from stock options exercised - new shares issued                    |  |      | 287,397     |   |                 |   | 219,436     |  
|Proceeds from stock options exercised - treasury shares re-issued            |  |      |            |   |                 |   | 92,844      |  
|Other treasury shares re-issued                                              |  |      | 51,829      |   |                 |   | 74,900      |  
|Treasury shares acquired                                                     |  |      |            |   |                 |   | (30,491     | )
|Employee stock purchase plan                                                 |  |      | (22,725     | ) |                 |   | (32,612     | )
|                                                                             |  |      |             |   |                 |   |             |  
|Net cash provided by financing activities                                    |  |      | 2,397,547   |   |                 |   | 2,200,258   |  
|                                                                             |  |      |             |   |                 |   |             |  
|Net increase in cash and equivalents                                         |  |      | 227,576     |   |                 |   | 888,935     |  
|Cash and equivalents at beginning of year                                    |  |      | 306,300     |   |                 |   | 294,410     |  
|                                                                             |  |      |             |   |                 |   |             |  
|Cash and equivalents at end of quarter                                       |  | $    | 533,876     |   |                 | $ | 1,183,345   |  
|                                                                             |  |      |             |   |                 |   |             |  
|Supplemental disclosures:                                                    |  |      |             |   |                 |   |             |  
|Interest paid                                                                |  | $    | 2,394,150   |   |                 | $ | 2,433,556   |  
|Income taxes paid (net of refunds, if any)                                   |  |      | 4,536,248   |   |                 |   | 3,489,131   |  
|Life insurance receivable, net of beneficiary liability                      |  |      |            |   |                 |   | 9,150,000   |  
|Lease transactions capitalized                                               |  |      |            |   |                 |   | 537,777     |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Third Quarter Fiscal 2006, Ended March 5, 2006

NOTE A  ACCOUNTING POLICIES

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

Description of the Business

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

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

Restatement of Financial Statements

In early December 2005, the Companys actuarial consulting firm informed the Company of a formula error in the software program it created in 1995, which caused the
software program to not properly pro-rate the benefit for service for plan participants in the Companys defined benefit pension plan for managers, office employees and commissary employees with less than 28 years of service before normal
retirement. The actuarial formula error caused the Companys net periodic pension cost (and related accounts in the consolidated balance sheet and the consolidated statement of earnings) to be overstated. The financial statement effects of the
error have previously been restated for all prior annual and quarterly periods. The details of the restatement for the 40 and twelve weeks ended March 6, 2005 are presented herein. See Note B  Restatement.

Consolidation Practices

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

Fiscal Year

The Companys fiscal year is the 52 or 53 week period ending on the Sunday nearest to the last day of May. The first quarter of each fiscal year contains sixteen
weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, the additional week needed to make a 53 week year is added to the fourth quarter, resulting in a thirteen week fourth quarter.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Use of Estimates and Critical Accounting Policies

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

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

Cash and Cash Equivalents

Highly
liquid investments with original maturities of three months or less are considered to be cash equivalents. Outstanding checks totaling $933,000 were included in accounts payable as of May 29, 2005.

Receivables

The Company values its
trade notes and accounts receivable on the reserve method. The reserve balance was $30,000 as of March 5, 2006 and May 29, 2005. The reserve is monitored for adequacy based on historical collection patterns and write-offs, and current
credit risks.

Inventories

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

Accounting for Rebates

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

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided principally on the straight-line method over the estimated service lives, which range from ten to 25
years for buildings or components thereof and five to ten years for equipment. Leasehold improvements are depreciated over the shorter of the useful life of the asset or the lease term as lease terms are defined in Statement of Financial Accounting
Standards No. 13 (SFAS 13), Accounting for Leases, as amended. Interest on borrowings is capitalized during active construction periods of new restaurants. Capitalized interest was $133,000 and $89,000 respectively, for the 40 weeks
ended March 5, 2006 and March 6, 2005, and was $46,000 and zero respectively, for the twelve weeks ended March 5, 2006 and March 6, 2005. Property betterments are capitalized while the cost of maintenance and repairs is expensed
as incurred.

The cost of land not yet in service is included in construction in progress if construction has begun or if construction is
likely within the next twelve months. No new unit construction was in progress as of March 5, 2006. 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.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

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 amortized on the straight-line method over the
estimated service lives, which range from three to ten years. The Companys cost capitalization policy with respect to computer software complies with the American Institute of Certified Public Accountants Statement of Position 98-1 (SOP
98-1), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The installation of an enterprise information system was completed in September 2004. Preliminary project stage costs were expensed as incurred
in fiscal years 2002 and 2003. Software acquisition costs, installation, configuration, implementation and testing costs were capitalized during the application development stage. The capitalization of the project included interest costs together
with payroll and payroll related costs for certain employees who worked on the implementation. Capitalized interest for the 40 and twelve weeks ended March 6, 2005 was $15,000 and zero, respectively. Capitalized payroll and payroll related
costs for the 40 and twelve weeks ended March 6, 2005 was $96,000 and zero, respectively. Net of accumulated depreciation and amortization, the capitalized cost of the enterprise information system was $4,022,000 and $4,400,000, respectively,
as of March 5, 2006 and May 29, 2005.

Impairment of Assets

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

No impairment losses were recorded during any of the periods presented in the accompanying consolidated
financial statements.

Leases

Minimum scheduled lease payments on operating leases, including escalating rental payments, are recognized as rent expense on a straight-line basis over the term of the lease, including option periods considered to be part of the lease
term, as defined by SFAS 13, as amended. Contingent rentals, typically based on a percentage of restaurant sales in excess of a fixed amount, are expensed as incurred. SFAS 13 also requires rent to be recognized during that part of the term of the
lease when no rent is paid to the landlord, often referred to as a rent holiday, that generally occurs while a restaurant is being constructed on leased land. Effective September 19, 2005, the capitalization of rent recognized
during rent holiday periods was discontinued and is now charged to expense.

Restaurant Closing Costs

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



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

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. Also, see the discussion under New Accounting Pronouncements elsewhere in Note A  Accounting Policies.

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 5, 2006 and May 29, 2005, the carrying amount of goodwill acquired in prior years was $741,000, which is net of $308,000 amortized in prior years.

Intangible assets having a finite useful life are subject to amortization, and are tested annually for impairment. The Companys other intangible assets consist principally of initial franchise fees paid for each
new Golden Corral restaurant the Company opens. Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method over the 15-year term of each individual restaurants franchise agreement.
The fees are ratably amortized at $2,667 per year per restaurant, or approximately $91,000 per year in each of the next five years for the 34 Golden Corral restaurants in operation as of March 5, 2006. Amortization for the 40 weeks ended
March 5, 2006 and March 6, 2005 was $66,000 and $57,000 respectively, and was $21,000 and $18,000 respectively, for the twelve weeks ended March 5, 2006 and March 6, 2005. 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 5,2006   |       |   | May 29,2005 |  
|                                                                                |  | (in thousands) |      
|Golden Corral initial franchise fees subject to amortization                    |  | $              | 1,360 |   |             | $ | 1,200 |  
|Less accumulated amortization                                                   |  |                | (315  | ) |             |   | (249  | )
|                                                                                |  |                |       |   |             |   |       |  
|Carrying amount of Golden Corral initial franchise fees subject to amortization |  |                | 1,045 |   |             |   | 951   |  
|                                                                                |  |               
|Current portion of Golden Corral initial franchise fees subject to amortization |  |                | (91   | ) |             |   | (83   | )
|Golden Corral fees not yet subject to amortization                              |  |                | 305   |   |             |   | 365   |  
|                                                                                |  |               
|Other intangible assets                                                         |  |                | 161   |   |             |   | 168   |  
|                                                                                |  |                |       |   |             |   |       |  
|Total other intangible assets                                                   |  | $              | 1,420 |   |             | $ | 1,401 |  
|                                                                                |  |                |       |   |             |   |       |  

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



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

Revenue from restaurant operations is recognized upon receipt of payment from customers. Revenue
from the sale of gift cards is deferred for recognition until redeemed by the customer. Revenue from the sale of commissary products to Big Boy restaurants licensed to other operators is recognized upon shipment of product. Revenue from franchise
fees, based on sales of Big Boy restaurants licensed to other operators, is recorded on the accrual method as earned. Initial franchise fees are recognized as revenue when the fees are deemed fully earned and non-refundable, ordinarily upon the
execution of the license agreement, in consideration of the Companys services to that time.

New Store Opening
Costs

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



|              |  |                |       |                |   |             |  |             |     |  |   |   
|------------- |  | -------------- | ----- | -------------- | - | ----------- |  | ----------- | --- |  | - | --
|              |  | 40 weeks ended |       | 12 weeks ended
|              |  | Mar. 5,2006    |       | Mar. 6,2005    |   | Mar. 5,2006 |  | Mar. 6,2005
|              |  | (in thousands)
|Golden Corral |  | $              | 1,117 |                | $ | 881         |  | $           | 147 |  | $ | 95
|Big Boy       |  |                | 263   |                |   | 265         |  |             | 102 |  |   | 1 
|              |  |                |       |                |   |             |  |             |     |  |   |   
|              |  | $              | 1,380 |                | $ | 1,146       |  | $           | 249 |  | $ | 96
|              |  |                |       |                |   |             |  |             |     |  |   |   

Benefit Plans

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

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



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##### 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 F  Pension Plans.)

Prepaid pension benefit costs (see Note F  Pension Plans) and FESP assets are the principal components of Other long-term assets in the balance sheet.
The current portion of prepaid pension benefit costs is included in Prepaid expenses and sundry deposits in the 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. Claims experience has historically been reviewed each quarter, with a more comprehensive annual review being
performed during the first quarter of each fiscal year. The annual review would typically result in adjustments to the self-insurance liabilities to more closely match claims experience. Because active claims management and post accident drug
testing in recent years have effected vast improvements in claims experience, management determined that a comprehensive review should be performed every quarter and that adjustments to the self-insurance liabilities should be recorded as needed
based on claims experience, beginning with the third quarter of fiscal 2005 that ended March 6, 2005. A summary of adjustments to lower self-insured liabilities:



|               |     |                |   |              |  |              |     |  |   |    
|-------------- | --- | -------------- | - | ------------ |  | ------------ | --- |  | - | ---
|40 weeks ended |     | 12 weeks ended
|Mar. 5, 2006   |     | Mar. 6, 2005   |   | Mar. 5, 2006 |  | Mar. 6, 2005
|(in thousands)
|$              | 616 |                | $ | 963          |  | $            | 242 |  | $ | 349
|               |     |                |   |              |  |              |     |  |   |    

A lower rate is being used in the current fiscal year to accrue initial self-insurance liabilities, which should
reduce the size of future quarterly adjustments.

Fair Value of Financial Instruments

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

Income Taxes

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



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Stock Based Compensation

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



|                                                                                                                                        |  |                                       |       |                       |   |             |  |                       |       |  |   |      
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ----- | --------------------- | - | ----------- |  | --------------------- | ----- |  | - | -----
|                                                                                                                                        |  | 40 weeks ended                        |       | 12 weeks ended       
|                                                                                                                                        |  | Mar. 5,2006                           |       | (restated)Mar. 6,2005 |   | Mar. 5,2006 |  | (restated)Mar. 6,2005
|                                                                                                                                        |  | (in thousands, except per share data)
|Net earnings, as reported                                                                                                               |  | $                                     | 6,491 |                       | $ | 11,926      |  | $                     | 2,206 |  | $ | 6,185
|Deduct: total stock-based employee compensation expense determined under fair value based method for all grants (a), net of tax
effects |  |                                       | 239   |                       |   | 308         |  |                       | 46    |  |   | 50   
|                                                                                                                                        |  |                                       |       |                       |   |             |  |                       |       |  |   |      
|Pro forma net earnings                                                                                                                  |  | $                                     | 6,252 |                       | $ | 11,618      |  | $                     | 2,160 |  | $ | 6,135
|                                                                                                                                        |  |                                       |       |                       |   |             |  |                       |       |  |   |      
|Earnings per share                                                                                                                      |  |                                       |       |                       |   |             |  |                       |       |  |   |      
|                                                                                                                                        |  |                                       |       |                      
|Basic  as reported                                                                                                                     |  | $                                     | 1.28  |                       | $ | 2.37        |  | $                     | .43   |  | $ | 1.22 
|Basic  pro forma                                                                                                                       |  | $                                     | 1.23  |                       | $ | 2.30        |  | $                     | .43   |  | $ | 1.21 
|                                                                                                                                        |  |                                       |       |                      
|Diluted  as reported                                                                                                                   |  | $                                     | 1.26  |                       | $ | 2.31        |  | $                     | .43   |  | $ | 1.20 
|Diluted  pro forma                                                                                                                     |  | $                                     | 1.21  |                       | $ | 2.25        |  | $                     | .42   |  | $ | 1.19 

---

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

The estimated total stock-based employee compensation expense was determined using the modified Black-Scholes option pricing model with the following weighted average assumptions (no options were granted during either
of the twelve weeks ended March 5, 2006 or March 6, 2005):



|                                               |  |                |         |   |             |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ----------- | - | ------- | -
|                                               |  | 40 weeks ended |        
|                                               |  | Mar. 5,2006    |         |   | Mar. 6,2005 |  
|Dividend yield                                 |  |                | 1.80    | % |             |   | 1.61    | %
|Expected volatility                            |  |                | 26      | % |             |   | 29      | %
|Risk free interest rate                        |  |                | 3.87    | % |             |   | 3.82    | %
|Expected lives                                 |  |                | 5 years |   |             |   | 5 years |  
|Weighted average fair value of options granted |  | $              | 6.19    |   |             | $ | 8.13    |  



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements

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

Statement of Financial Accounting Standards No. 151 (SFAS 151), Inventory Costs, clarifies accounting for abnormal amounts of
idle facility expense, freight, handling costs and spoilage. SFAS 151 is effective for inventory costs incurred during fiscal years that begin after June 15, 2005. Earlier application is permitted. Its adoption on the first day of fiscal year
2007 is not expected to have any material impact on the Companys earnings.

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

FASB interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), is effective no later than the end of fiscal years ending
after December 15, 2005. FIN 47 clarifies that conditional obligations meet the definition of an asset retirement obligation under Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement
Obligations and therefore should be recognized now if fair value is reasonably estimable. The Company currently believes the impact of FIN 47 upon adoption in the fourth quarter of fiscal year 2006 will be immaterial, but the formal evaluation
now underway has not been completed.

Statement of Accounting Standards No. 154 (SFAS 154), Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement No. 3 was issued in May 2005, effective for fiscal years beginning after December 15, 2005. The Company will comply with the provisions of SFAS 154 for any accounting changes
or error corrections that may occur in fiscal year 2007 and thereafter.

The Company reviewed all other significant newly issued accounting pronouncements,
including the following Statements of Financial Accounting Standards: No. 152 Accounting for Real Estate Time Sharing Transactions; No. 153 Exchanges of Nonmonetary Assets; No. 155 Accounting for Certain
Hybrid Financial Instruments  an amendment of FASB Statements No. 133 and 140 and No. 156 Accounting for Servicing of Financial Assets  an amendment of FASB Statement No. 140 and concluded that they are
either not applicable to the Companys business or that no material impact is anticipated on the financial statements as a result of future adoption.



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE B  RESTATEMENT (for error in actuarial calculation relating to defined benefit pension plan)

In early December 2005, the Companys actuarial consulting firm informed the Company of an error in the software program created by the consultant in June 1995, to
calculate certain items in connection with the Companys defined benefit pension plan for managers, office employees and commissary employees. The error was in a formula the consultant used to calculate the proration of an individuals
benefits between pre- and post- 1993 accounts. According to the actuarial consultant, its formula failed to properly prorate the benefit for service for plan participants with less than 28 years of service before normal retirement. Given the nature
of the error, the Company could not have identified this error through its review of the actuarial information provided by the actuarial consultant. The actuarial consultant has confirmed to the Company that the error has had no effect on any
benefits paid to plan participants.

The formula error impacted the calculation (computed under Statement of Financial Accounting Standards No. 87,
Employers Accounting for Pensions) of the Companys net periodic pension cost (and related accounts in the consolidated balance sheet and the consolidated statement of earnings) for that defined benefit pension plan, resulting
in a series of annual overstatements of the net periodic pension cost for each of the previous ten fiscal years. The overstatement in each period is deemed by the Company to be immaterial for that period. The financial statement effects of the error
have previously been restated for all prior annual and quarterly periods. The details of the restatement for the 40 and twelve weeks ended March 6, 2005 are presented herein.

The table below shows the financial statement effects of the error on the Companys consolidated statement of earnings for the 40 and twelve weeks ended March 6, 2005 (in thousands, except per share
amounts):



|                                           |  |               |        |          |   |       
|------------------------------------------ |  | ------------- | ------ | -------- | - | ------
|                                           |  | March 6, 2005
|                                           |  | 40 Weeks      |        | 12 Weeks
|Payroll and related expense  as reported  |  | $             | 71,197 |          | $ | 21,005
|Payroll and related expense  as restated  |  |               | 70,984 |          |   | 20,941
|                                           |  |              
|Gross profit  as reported                 |  |               | 23,246 |          |   | 6,140 
|Gross profit  as restated                 |  |               | 23,459 |          |   | 6,204 
|                                           |  |              
|Operating profit  as reported             |  |               | 13,474 |          |   | 3,210 
|Operating profit  as restated             |  |               | 13,687 |          |   | 3,274 
|                                           |  |              
|Earnings before income taxes  as reported |  |               | 15,741 |          |   | 6,924 
|Earnings before income taxes  as restated |  |               | 15,954 |          |   | 6,988 
|Income taxes  as reported                 |  |               | 3,955  |          |   | 781   
|Income taxes  as restated                 |  |               | 4,028  |          |   | 803   
|                                           |  |              
|Net earnings  as reported                 |  |               | 11,786 |          |   | 6,143 
|Net earnings  as restated                 |  |               | 11,926 |          |   | 6,185 
|                                           |  |              
|Diluted EPS  as reported                  |  |               | 2.29   |          |   | 1.19  
|Diluted EPS  as restated                  |  |               | 2.31   |          |   | 1.20  



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

The table below shows the financial statement effects of the error on the Companys consolidated statement of cash flows for the forty weeks March 6, 2005 (in
thousands):



|                                                         |  |              |        |  
|-------------------------------------------------------- |  | ------------ | ------ | -
|                                                         |  | March 6,2005 |       
|Net earnings  as reported                               |  | $            | 11,786 |  
|Net earnings  as restated                               |  |              | 11,926 |  
|                                                         | 
|Changes in assets and liabilites:                        |  |              |        |  
|Prepaid expenses and sundry deposits  as reported       |  |              | 177    |  
|Prepaid expenses and sundry deposits  as restated       |  |              | (407   | )
|                                                         | 
|Other assets  as reported                               |  |              | (261   | )
|Other assets  as restated                               |  |              | 111    |  
|                                                         | 
|Prepaid, accrued and deferred income taxes  as reported |  |              | 391    |  
|Prepaid, accrued and deferred income taxes  as restated |  |              | 464    |  
|                                                         | 
|Cash and equivalents at end of quarter
 as reported     |  |              | 1,183  |  
|Cash and equivalents at end of quarter  as restated     |  |              | 1,183  |  

NOTE C - LONG-TERM DEBT



|                             |  |                       |       |                       |   |                       |  |                       |       |  |   |       
|---------------------------- |  | --------------------- | ----- | --------------------- | - | --------------------- |  | --------------------- | ----- |  | - | ------
|                             |  | March 5, 2006         |       | May 29, 2005         
|                             |  | Payablewithinone year |       | Payableafter one year |   | Payablewithinone year |  | Payableafter one year
|                             |  | (in thousands)       
|Construction Draw Facility - |  |                       |       |                       |   |                       |  |                       |       |  |   |       
|Construction Phase Loans     |  | $                     |      |                       | $ | 1,000                 |  | $                     |      |  | $ | 2,000 
|Term Loans                   |  |                       | 8,961 |                       |   | 28,488                |  |                       | 7,598 |  |   | 24,570
|Bullet Loan                  |  |                       |      |                       |   | 3,000                 |  |                       |      |  |   | 3,000 
|Revolving Credit Loan        |  |                       |      |                       |   |                      |  |                       |      |  |   |      
|                             |  |                       |       |                       |   |                       |  |                       |       |  |   |       
|                             |  | $                     | 8,961 |                       | $ | 32,488                |  | $                     | 7,598 |  | $ | 29,570
|                             |  |                       |       |                       |   |                       |  |                       |       |  |   |       

The portion payable after one year matures as follows:



|                      |  |                |        |             |   |       
|--------------------- |  | -------------- | ------ | ----------- | - | ------
|                      |  | March 5,2006   |        | May 29,2005
|                      |  | (in thousands)
|Period ending in 2008 |  | $              | 9,380  |             | $ | 9,363 
|2009                  |  |                | 10,079 |             |   | 9,726 
|2010                  |  |                | 4,824  |             |   | 5,161 
|2011                  |  |                | 4,069  |             |   | 2,780 
|2012                  |  |                | 2,687  |             |   | 2,058 
|Subsequent to 2012    |  |                | 1,449  |             |   | 482   
|                      |  |                |        |             |   |       
|                      |  | $              | 32,488 |             | $ | 29,570
|                      |  |                |        |             |   |       



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C  LONG TERM DEBT (CONTINUED)

On September 27, 2005, the Company amended and restated all of its loan agreements with its lender. The Construction Draw Facility (the Facility), an unsecured draw credit line intended to finance new restaurant construction, was
amended to increase the maximum that may be borrowed from $61,500,000 to $76,500,000. As $57,500,000 had already been cumulatively drawn, the amount available to be borrowed was effectively increased from $4,000,000 to $19,000,000. The expiration
for borrowing under the Facility was extended from September 1, 2006 to September 1, 2008.

The Facility is subject to a .25 percent unused
commitment fee. As of March 5, 2006, $11,000,000 was unused and available to be borrowed. Under the terms of the Facility, funds borrowed are initially governed as a Construction Phase Loan, with interest determined by a pricing matrix that
uses changeable basis points, determined by certain of the Companys financial ratios. The basis points are added to or subtracted from one of various indices chosen by the Company. Interest is payable at the end of each specific rate period
selected by the Company, which may be monthly, bi-monthly or quarterly. Within six months of the completion and opening of each restaurant, the balance outstanding under each Construction Phase Loan must be converted to a Term Loan amortized over a
period not to exceed seven years. Upon conversion, the Company may select a fixed interest rate over the chosen term or may choose among various adjustable rate options.

Fixed interest rates have been chosen for all of the Term Loans (original notes for $64,500,000), the weighted average of which is 6.09 percent, and all of the Term Loans are being repaid in 84 equal monthly
installments of principal and interest aggregating $958,000, expiring in various periods ranging from May 2006 through December 2012. Prepayments of the Term Loans are permissible upon payment of sizeable prepayment fees and other amounts. As of
March 5, 2006, $1,000,000 remained in the Construction Phase of the Facility. Any outstanding Construction Phase Loan that has not been converted into a Term Loan shall mature and be payable in full on September 1, 2008, unless extended.

The Bullet Loan bears interest at a fixed rate of 5.57 percent. It matures and is payable in one installment on December 31, 2007. On
September 27, 2005, four of six mortgages that had been held as collateral for the Bullet Loan were released pursuant to the amended and restated loan agreements. The approximate book value of the real property secured by the two remaining
mortgages is $4,266,000 as of March 5, 2006.

The Revolving Credit Loan allows for borrowing of up to $5,000,000 to fund temporary working capital
needs. The loan, none of which was outstanding as of March 5, 2006, is subject to a 30 consecutive day out-of-debt period each year. The amended and restated loan agreements extended its maturity from September 1, 2006 to September 1,
2008. Interest is determined by the same pricing matrix used for Construction Phase Loans under the Construction Draw Facility, the basis points from which are added to or subtracted from one of various indices chosen by the Company. The loan is
subject to a .25 percent unused commitment fee. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly.

These loan agreements contain covenants relating to tangible net worth, cash flow, debt levels, capitalization changes, asset dispositions, investments and restrictions on pledging certain restaurant operating assets.
The Company was in compliance with all loan covenants as of March 5, 2006. Compensating balances are not required by any of these loan agreements.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C  LONG TERM DEBT (CONTINUED)

Being variable rated interest loans, the fair values of any outstanding balances in the Construction Phase of the Construction Draw Facility or the Revolving Credit Loan approximate carrying value as of March 5, 2006 and May 29,
2005. The fair value of the Bullet Loan also approximates carrying value. The fair values of the fixed rate Term Loans shown in the following table are based on fixed rates that would be available for loans with identical terms and maturities, if
borrowed at March 5, 2006 and May 29, 2005.



|                           |  |                |        |              |   |               |  |           |        |  |   |       
|-------------------------- |  | -------------- | ------ | ------------ | - | ------------- |  | --------- | ------ |  | - | ------
|                           |  | March 5, 2006  |        | May 29, 2005
|                           |  | CarryingValue  |        | Fairvalue    |   | CarryingValue |  | Fairvalue
|                           |  | (in thousands)
|Term Loans  under         |  |                |        |              |   |               |  |           |        |  |   |       
|Construction Draw Facility |  | $              | 36,449 |              | $ | 36,952        |  | $         | 32,169 |  | $ | 31,715

NOTE D - LEASED PROPERTY

Although it is the Companys policy to own its restaurant locations whenever possible, the Company occupies certain of its restaurants pursuant to lease agreements.
Most of the leases are for fifteen or twenty years and contain renewal options for ten to fifteen years, and/or have favorable purchase options. As of March 5, 2006, 32 restaurants were in operation on leased premises, consisting of seven
capital leases, 22 operating leases and three month-to-month arrangements. Eight of the 22 operating leases are ground leases for Golden Corral restaurants. All of the other 24 leased properties are for Big Boy operations.

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 5,2006      |        |   | May 29,2005 |  
|                              |  | (in thousands)    |       
|Restaurant facilities (7)     |  | $                 | 4,328  |   |             | $ | 5,967  |  
|Delivery equipment            |  |                   | 1,165  |   |             |   | 1,165  |  
|                              |  |                   |        |   |             |   |        |  
|                              |  |                   | 5,493  |   |             |   | 7,132  |  
|Less accumulated amortization |  |                   | (4,621 | ) |             |   | (5,841 | )
|                              |  |                   |        |   |             |   |        |  
|                              |  | $                 | 872    |   |             | $ | 1,291  |  
|                              |  |                   |        |   |             |   |        |  

Two of the month-to-month rentals (both of which were previously classified as capitalized leases) are for
restaurant facilities that reached their normal lease expiration on February 28, 2006 which are continuing to be occupied pending the execution of the Companys right to purchase the facilities from the landlord. The purchase price for the
acquisition of these two properties has yet to be determined, but is not expected to exceed $2,500,000. The other month-to-month arrangement resulted from the early termination of a capitalized lease pursuant to an eminent domain proceeding. Office
space is occupied under an operating lease that expires during 2013, with renewal options available through 2023.

During the quarter ended March 6,
2005, the Company undertook a review of its accounting for leases. The review determined that the Company had erred by not accounting for escalating rental payments on a straight-line basis over the terms of the applicable leases, including option
periods considered to be part of the lease under SFAS 13, as amended. In addition, rent had not been recorded for rent holiday periods that often occur during construction of buildings on leased land, when no rent is payable. As a
result, the Company determined that its balance sheet had a $615,000 understatement for accrued rent, comprised of $433,000 of under accrued escalating rental payments and $182,000 for rent holidays. The impact of this issue on the
Companys financial statements was evaluated and it was determined that the errors were not material to any of the applicable prior periods. Thus, the cumulative $615,000 adjustment was charged against Other operating costs during
the twelve weeks ended March 6, 2005 ($400,000 after tax), $182,000 of which was subsequently capitalized in the fourth quarter of fiscal 2005.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D - LEASED PROPERTY (CONTINUED)

Rent expense under operating leases:



|                                             |  |                |       |                |   |            |  |             |     |  |   |    
|-------------------------------------------- |  | -------------- | ----- | -------------- | - | ---------- |  | ----------- | --- |  | - | ---
|                                             |  | 40 weeks ended |       | 12 weeks ended
|                                             |  | Mar. 5,2006    |       | March 6,2005   |   | Mar 5,2006 |  | Mar. 6,2005
|                                             |  | (in thousands)
|Minimum rentals                              |  | $              | 1,501 |                | $ | 1,182      |  | $           | 476 |  | $ | 345
|Contingent payments                          |  |                | 39    |                |   | 43         |  |             | 11  |  |   | 11 
|Cumulative rent adjustment (discussed above) |  |                |      |                |   | 615        |  |             |    |  |   | 615
|                                             |  |                |       |                |   |            |  |             |     |  |   |    
|                                             |  | $              | 1,540 |                | $ | 1,840      |  | $           | 487 |  | $ | 971
|                                             |  |                |       |                |   |            |  |             |     |  |   |    

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 5,       |  | Capitalizedleases |       |   | Operatingleases
|                             |  | (in thousands)   
|2007                         |  | $                 | 604   |   |                 | $ | 1,785 
|2008                         |  |                   | 2,625 |   |                 |   | 1,787 
|2009                         |  |                   | 154   |   |                 |   | 1,750 
|2010                         |  |                   | 106   |   |                 |   | 1,674 
|2011                         |  |                   | 81    |   |                 |   | 1,425 
|2012 to 2025                 |  |                   | 115   |   |                 |   | 16,966
|                             |  |                   |       |   |                 |   |       
|Total                        |  |                   | 3,685 |   |                 | $ | 25,387
|                             |  |                   |       |   |                 |   |       
|Amount representing interest |  |                   | (543  | ) |                 |   |       
|                             |  |                   |       |   |                 |   |       
|Present value of obligations |  |                   | 3,142 |   |                 |   |       
|Portion due within one-year  |  |                   | (451  | ) |                 |   |       
|                             |  |                   |       |   |                 |   |       
|Long-term obligations        |  | $                 | 2,691 |   |                 |   |       
|                             |  |                   |       |   |                 |   |       

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



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E - CAPITAL STOCK

2003 Stock Option and Incentive Plan

Shareholders approved the 2003 Stock Option and Incentive Plan (the 2003
Incentive Plan or Plan) on October 6, 2003. The 2003 Incentive Plan provides for several forms of awards including stock options, stock appreciation rights, stock awards including restricted and unrestricted awards of stock,
and performance awards. The Plan will continue in effect until terminated by the Board of Directors. Subject to adjustment for changes in capitalization, the maximum number of shares of common stock that the Plan may issue is 800,000. The Plan
provides that the total number of shares of common stock covered by options plus the number of stock appreciation rights granted to any one individual may not exceed 80,000 during any fiscal year. Additionally, no more than 80,000 shares of common
stock may be issued in payment of performance awards denominated in shares, and no more than $1,000,000 in cash (or fair market value, if paid in shares) may be paid pursuant to performance awards denominated in dollars, granted to any one
individual during any fiscal year if the awards are intended to qualify as performance based compensation. Employees of the Company and non-employee directors of the Company are eligible to be selected to participate in the Plan. Participation is
based on selection by the Compensation Committee (the Committee) of the Board of Directors. Although there is no limit to the number of participants in the Plan, there are approximately 40 persons currently participating in the Plan.

Options to purchase shares of the Companys common stock permit the holder to purchase a fixed number of shares at a fixed price. When options are granted, the
Committee determines the number of shares subject to the option, the term of the option which may not exceed 10 years, the time or times when the option will become exercisable and the price per share that a participant must pay to exercise the
option. No option will be granted with an exercise price that is less than 100 percent of fair market value on the date of the grant.

Stock appreciation
rights (SARs) are rights to receive payment, in cash, shares of common stock or a combination of the two, equal to the excess of (1) the fair market value of a share of common stock on the date of exercise over (2) the price per
share of common stock established in connection with the grant of the SAR (the reference price). 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 5, 2006, options to purchase 84,500 shares had been granted under the Plan, including 20,000 that belong to the President and Chief
Executive Officer. The Committee has determined that outstanding options belonging to the President and Chief Executive Officer vest six months from the date of grant. The Committee has further determined that outstanding options granted to other
key employees vest in three equal annual installments and that outstanding options granted to non-employee members of the Board of Directors vest one year from the date of grant. As of March 5, 2006, 726,000 shares remain available to be
optioned, including 10,500 shares granted that were subsequently forfeited, which are again available for grants in accordance with the Re-Use of Shares provision of the Plan.

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



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E - CAPITAL STOCK (CONTINUED)

Other Stock Option Plans

The 1993 Stock Option Plan was not affected by the adoption of the 2003 Stock Option and
Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for changes in capitalization in earlier years) of the common stock of the Company for a ten-year period beginning
May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the availability of options to be granted to October 4, 2008. As of March 5, 2006, 6,204 shares remained
available to be optioned. Of the 556,228 cumulative shares optioned to date, 340,321 remain outstanding as of March 6, 2006, 211,478 of which belong to the President and Chief Executive Officer.

All outstanding options under the 1993 Plan were granted at fair market value and expire 10 years from the date of grant. Outstanding options to the President and Chief
Executive Officer generally vest in six months, while options granted to non-employee members of the Board of Directors vest after one year. Outstanding options granted to other key employees vest in three equal annual installments.

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



|                                 |  |                |   |               |                               |       |               |         |   |                               |   |      
|-------------------------------- |  | -------------- | - | ------------- | ----------------------------- | ----- | ------------- | ------- | - | ----------------------------- | - | -----
|                                 |  | 40 weeks ended
|                                 |  | March 5, 2006  |   | March 6, 2005
|                                 |  | No. of shares  |   |               | Weighted avg. price per share |       | No. of shares |         |   | Weighted avg. price per share
|Outstanding at beginning of year |  | 376,577        |   |               | $                             | 18.90 |               | 319,993 |   |                               | $ | 15.97
|Granted during the 40 weeks      |  | 77,500         |   |               | $                             | 24.50 |               | 81,000  |   |                               | $ | 29.37
|Exercised during the 40 weeks    |  | (15,921        | ) |               | $                             | 18.05 |               | (21,497 | ) |                               | $ | 14.53
|Expired during the 40 weeks      |  |               |   |               | $                             |      |               |        |   |                               | $ |     
|Forfeited during the 40 weeks    |  | (23,835        | ) |               | $                             | 25.81 |               | (2,919  | ) |                               | $ | 20.83
|                                 |  |                |   |               |                               |       |               |         |   |                               |   |      
|Outstanding at end of quarter    |  | 414,321        |   |               | $                             | 19.58 |               | 376,577 |   |                               | $ | 18.90
|                                 |  |                |   |               |                               |       |               |         |   |                               |   |      
|Exercisable at beginning of year |  | 283,903        |   |               | $                             | 17.04 |               | 227,314 |   |                               | $ | 14.94
|                                 |  |                |   |               |                               |       |               |         |   |                               |   |      
|Exercisable at end of quarter    |  | 330,819        |   |               | $                             | 18.19 |               | 283,903 |   |                               | $ | 17.04
|                                 |  |                |   |               |                               |       |               |         |   |                               |   |      

Stock options outstanding and exercisable as of March 5, 2006 for the 1993 Stock option Plan and the 2003
Stock option and Incentive Plan:



|                                   |  |               |  |                                  |       |                                          |           
|---------------------------------- |  | ------------- |  | -------------------------------- | ----- | ---------------------------------------- | ----------
|Range of Exercise Prices per Share |  | No. of shares |  | Weighted average price per share |       | Weighted average remaining life in years
|Outstanding:                       |  |               |  |                                  |       |                                          |           
|$ 8.31 to $13.00                   |  | 72,229        |  | $                                | 10.62 |                                          | 4.11 years
|$13.01 to $18.00                   |  | 58,085        |  | $                                | 13.74 |                                          | 5.30 years
|$18.01 to $24.20                   |  | 158,507       |  | $                                | 19.73 |                                          | 7.02 years
|$24.21 to $30.13                   |  | 125,500       |  | $                                | 27.26 |                                          | 8.72 years
|                                   |  |               |  |                                  |       |                                          |           
|$ 8.31 to $30.13                   |  | 414,321       |  | $                                | 19.58 |                                          | 6.79 years
|                                   |  |               | 
|Exercisable:                       |  |               |  |                                  |       |                                          |           
|$ 8.31 to $13.00                   |  | 72,229        |  | $                                | 10.62 |                                          |          
|$13.01 to $18.00                   |  | 58,085        |  | $                                | 13.74 |                                          |          
|$18.01 to $24.20                   |  | 133,998       |  | $                                | 19.39 |                                          |          
|$24.21 to $30.13                   |  | 66,507        |  | $                                | 27.88 |                                          |          
|                                   |  |               |  |                                  |       |                                          |           
|$ 8.31 to $30.13                   |  | 330,819       |  | $                                | 18.19 |                                          |          



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Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E - CAPITAL STOCK (CONTINUED)

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee Stock Purchase Plan) in 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to purchase shares of the
Companys common stock through payroll deduction. Immediately following the end of each semi-annual offering period, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair market value of shares at
the beginning of the offering period or at the end of the offering period. The Plan authorizes a maximum of 1,000,000 shares that may be purchased on the open market or from the Companys treasury. As of October 31, 2005 (latest available
data), 109,868 shares had been purchased through the plan. Shares purchased through the Plan are held by the Plans custodian until withdrawn or distributed. As of October 31, 2005, the custodian held 37,371 shares on behalf of employees.
Under the provisions of Statement of Financial Accounting Standards No. 123(R), Share Based Payment (see New Accounting Pronouncements in Note A  Accounting Policies), effective with the beginning of fiscal year 2007 the
employee purchase discount described above will be charged as compensation cost. The present treatment of the discount is to charge the cost through additional paid in capital.

A total of 58,492 common shares (as adjusted for changes in capitalization in earlier years) were reserved for issuance under the non-qualified Executive Savings Plan (see Note A  Accounting Policies) when it
was established in 1993. As of March 5, 2006, 48,315 shares remained in the reserve, including 9,010 shares allocated but not issued to participants.

There are no other outstanding options, warrants or rights.

Treasury Stock

As of March 5,
2006, the Companys treasury held 2,447,323 shares of the Companys common stock. From September 1998 through January 2002, 1,135,286 shares of the Companys common stock were repurchased at a cost of $12,162,000 pursuant to
repurchase programs authorized by the Companys Board of Directors. No shares were repurchased under the two-year authorization that expired October 7, 2004.

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

Earnings Per Share

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



|                         |  |                                     |  |                   |      |                            |                                     |  |           |  |   |     
|------------------------ |  | ----------------------------------- |  | ----------------- | ---- | -------------------------- | ----------------------------------- |  | --------- |  | - | ----
|                         |  | Basic earnings per share            |  | Stock equivalents |      | Diluted earnings per share
|                         |  | Weighted average shares outstanding |  | EPS               |      |                            | Weighted average shares outstanding |  | EPS      
|40 weeks ended:          |  |                                     |  |                   |      |                            |                                     |  |           |  |   |     
|                         |  |                                     |  |                   |     
|March 5, 2006            |  | 5,065,117                           |  | $                 | 1.28 |                            | 95,824                              |  | 5,160,941 |  | $ | 1.26
|March 6, 2005 (restated) |  | 5,041,246                           |  | $                 | 2.37 |                            | 114,833                             |  | 5,156,079 |  | $ | 2.31
|                         |  |                                     |  |                   |     
|12 weeks ended:          |  |                                     |  |                   |      |                            |                                     |  |           |  |   |     
|                         |  |                                     |  |                   |     
|March 5, 2006            |  | 5,073,774                           |  | $                 | 0.43 |                            | 86,319                              |  | 5,160,093 |  | $ | .43 
|March 6, 2005 (restated) |  | 5,051,894                           |  | $                 | 1.22 |                            | 111,263                             |  | 5,163,157 |  | $ | 1.20



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE F - PENSION PLANS

As discussed more
fully in Note A  Accounting Policies, the Company sponsors two qualified defined benefit pension plans plus an unfunded non qualified Supplemental Executive Retirement Plan (SERP) for highly compensated employees (HCEs). 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. 5,2006    |        |   | (restated) Mar. 6,2005 |   |        | Mar. 5,2006 |  |   | (restated) Mar. 6,2005 |  
|                                                                  |  | (in thousands) |       
|Service cost                                                      |  | $              | 1,299  |   |                        | $ | 1,155  |             |  | $ | 391                    |   |  | $ | 350  |  
|Interest cost                                                     |  |                | 1,165  |   |                        |   | 1,049  |             |  |   | 351                    |   |  |   | 318  |  
|Expected return on plan assets                                    |  |                | (1,561 | ) |                        |   | (1,432 | )           |  |   | (470                   | ) |  |   | (434 | )
|Amortization of prior service cost                                |  |                | 56     |   |                        |   | 54     |             |  |   | 17                     |   |  |   | 16   |  
|Amortization of loss                                              |  |                | 362    |   |                        |   | 460    |             |  |   | 109                    |   |  |   | 140  |  
|                                                                  |  |                |        |   |                        |   |        |             |  |   |                        |   |  |   |      |  
|Net periodic pension cost                                         |  | $              | 1,321  |   |                        | $ | 1,286  |             |  | $ | 398                    |   |  | $ | 390  |  
|                                                                  |  |                |        |   |                        |   |        |             |  |   |                        |   |  |   |      |  
|Weighted average discount rate                                    |  |                | 6.0    | % |                        |   | 6.5    | %           |  |   | 6.0                    | % |  |   | 6.5  | %
|Weighted average rate of compensation increase                    |  |                | 4.5    | % |                        |   | 5.0    | %           |  |   | 4.5                    | % |  |   | 5.0  | %
|Weighted average expected long-term rate of return on plan assets |  |                | 8.5    | % |                        |   | 8.5    | %           |  |   | 8.5                    | % |  |   | 8.5  | %

The Company anticipates making contributions to the two qualified defined benefit pension plans sufficient to
satisfy legal funding requirements for the year ending May 28, 2006 plus additional tax-deductible amounts that may be deemed advisable. As of March 5, 2006, $300,000 had been contributed to the plans and $300,000 remained to be
contributed before May 28, 2006.

Compensation expense (not included in the net periodic pension cost described above) relating to the Nondeferred
Cash Balance Plan (see Note A  Accounting Policies) was $268,000 and $275,000 respectively, during the 40 weeks ended March 5, 2006 and March 6, 2005, and was $109,000 and $124,000 respectively, for the twelve weeks ended
March 5, 2006 and March 6, 2005. Contributions of $367,000 and $521,000 respectively, were made to the Plan in December 2005 and December 2004.

The Company sponsors two 401(k) plans (see Note A  Accounting Policies). In addition, a non-qualified Executive Savings Plan is sponsored for certain HCEs who have been disqualified from participation in the 401(k) plans (see
Note A  Accounting Policies). In the 40 weeks ended March 5, 2006 and March 6, 2005, matching contributions to the 401(k) plans amounted to $120,000 and $127,000 respectively, and were $35,000 and $36,000 respectively, during the
twelve weeks ended March 5, 2006 and March 6, 2005. Matching contributions to the Executive Savings Plan were $17,000 and $16,000 respectively, during the 40 weeks ended March 5, 2006 and March 6, 2005, and were $5,000 and $4,000
respectively, during the twelve weeks ended March 5, 2006 and March 6, 2005.

The Company does not sponsor post
retirement health care benefits.



24



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G  SEGMENT INFORMATION

The
Company has two reportable segments within the family dining sector of 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. 5, 2006   |         |   | (restated) Mar. 6,2005 |   |         | Mar. 5, 2006 |  |   | (restated) Mar. 6,2005 |  
|                                 |  | (in thousands) |        
|Sales                            |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 142,287 |   |                        | $ | 142,427 |              |  | $ | 42,759                 |   |  |   | 41,834 |  
|Golden Corral                    |  |                | 78,459  |   |                        |   | 71,181  |              |  |   | 24,501                 |   |  |   | 20,965 |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 220,746 |   |                        | $ | 213,608 |              |  | $ | 67,260                 |   |  | $ | 62,799 |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Earnings before income taxes     |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 17,165  |   |                        | $ | 16,445  |              |  | $ | 5,132                  |   |  | $ | 4,147  |  
|Opening expense                  |  |                | (263    | ) |                        |   | (265    | )            |  |   | (102                   | ) |  |   | (1     | )
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Total Big Boy                    |  |                | 16,902  |   |                        |   | 16,180  |              |  |   | 5,030                  |   |  |   | 4,146  |  
|                                 |  |                |         |  
|Golden Corral                    |  |                | 841     |   |                        |   | 3,174   |              |  |   | 97                     |   |  |   | 673    |  
|Opening expense                  |  |                | (1,117  | ) |                        |   | (881    | )            |  |   | (147                   | ) |  |   | (95    | )
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Total Golden Corral              |  |                | (276    | ) |                        |   | 2,293   |              |  |   | (50                    | ) |  |   | 578    |  
|                                 |  |                |         |  
|Total restaurant level profit    |  |                | 16,626  |   |                        |   | 18,473  |              |  |   | 4,980                  |   |  |   | 4,724  |  
|                                 |  |                |         |  
|Administrative expense           |  |                | (6,042  | ) |                        |   | (5,901  | )            |  |   | (1,663                 | ) |  |   | (1,742 | )
|Franchise fees and other revenue |  |                | 961     |   |                        |   | 1,026   |              |  |   | 298                    |   |  |   | 292    |  
|Gain on asset sales              |  |                | 394     |   |                        |   | 89      |              |  |   | 394                    |   |  |   |       |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Operating profit                 |  |                | 11,939  |   |                        |   | 13,687  |              |  |   | 4,009                  |   |  |   | 3,274  |  
|                                 |  |                |         |  
|Interest expense                 |  |                | (2,105  | ) |                        |   | (2,173  | )            |  |   | (665                   | ) |  |   | (726   | )
|Life insurance benefit           |  |                |        |   |                        |   | 4,440   |              |  |   |                       |   |  |   | 4,440  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Earnings before income taxes     |  | $              | 9,834   |   |                        | $ | 15,954  |              |  | $ | 3,344                  |   |  | $ | 6,988  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Depreciation                     |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 5,836   |   |                        | $ | 5,679   |              |  | $ | 1,764                  |   |  | $ | 1,795  |  
|Golden Corral                    |  |                | 4,050   |   |                        |   | 3,336   |              |  |   | 1,261                  |   |  |   | 990    |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 9,886   |   |                        | $ | 9,015   |              |  | $ | 3,025                  |   |  | $ | 2,785  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Capital expenditures             |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|Big Boy                          |  | $              | 8,546   |   |                        | $ | 6,023   |              |  | $ | 2,542                  |   |  | $ | 50     |  
|Golden Corral                    |  |                | 7,539   |   |                        |   | 12,572  |              |  |   | 234                    |   |  |   | 5,406  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  
|                                 |  | $              | 16,085  |   |                        | $ | 18,595  |              |  | $ | 2,776                  |   |  | $ | 5,456  |  
|                                 |  |                |         |   |                        |   |         |              |  |   |                        |   |  |   |        |  



|                    |  |              |         |              |   |        
|------------------- |  | ------------ | ------- | ------------ | - | -------
|                    |  | As of       
|                    |  | Mar. 5, 2006 |         | May 29, 2005
|Identifiable assets |  |              |         |              |   |        
|Big Boy             |  | $            | 86,872  |              | $ | 84,943 
|Golden Corral       |  |              | 88,205  |              |   | 82,523 
|                    |  |              |         |              |   |        
|                    |  | $            | 175,077 |              | $ | 167,466
|                    |  |              |         |              |   |        



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE H  CONTINGENCIES

Litigation

The construction of a Golden Corral restaurant in Canton, Ohio was halted in August 2001 in order to
assess structural concerns. In March 2002, a final assessment of the defects resulted in the Companys decision to construct a new building on another part of the lot. (The restaurant finally opened for business in January 2003.) On
July 30, 2002, the general contractor that built the defective building filed a demand for arbitration against the Company seeking $294,000 plus interest, fees, and costs it claims is owed by the Company under the construction contract. The
Company denies the claim and has filed a counterclaim against the general contractor alleging defective construction and claiming damages, lost profits, interest and costs in an amount exceeding $1,000,000. The Company is vigorously prosecuting this
claim and believes that it will ultimately prevail in the matter, which is currently before the American Arbitration Association.

On August 29, 2002,
the Company filed a separate lawsuit against the architect that designed the defective building alleging negligent design and claiming damages, lost profits, interest and costs exceeding $2,500,000. In July 2003, the Company resolved all claims,
counterclaims and cross claims against the trial court defendants, including the architect and the architects structural engineering consultant. The defendants agreed to pay the Company the sum of $1,700,000 in full and final settlement of all
claims. The Company received the settlement funds in full in July 2004 and the case was dismissed.

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

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

Other Contingencies

The Company is contingently liable for the performance of a ground lease that has been assigned to a third party. The
annual obligation of the lease approximates $48,000 through 2020. Should the third party default, the Company has the right to re-assign the lease.

As of
March 5, 2006, the Company has two outstanding letters of credit totaling $164,000 in support of its self- insurance program (See Note A  Accounting Policies). The Company also has an outstanding letter of credit for $162,000 that
supports an environmental remediation plan for the restoration of certain land that the Company no longer owns, which was contaminated by a previous owner who can not be located. There are no other outstanding letters of credit issued by the
Company.



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##### Table of Contents

Frischs Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE I  LIFE INSURANCE BENEFIT

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

NOTE J - RELATED PARTY TRANSACTIONS

A Big Boy licensed restaurant owned by an officer and director of the Company and two
Big Boy licensed restaurants owned by children and other family members of another director of the Company pay to the Company franchise and advertising fees, employee leasing and other fees, and make purchases from the Companys commissary. The
total paid to the Company by these three restaurants amounted to $3,784,000 and $3,802,000 respectively, during the 40 weeks ended March 5, 2006 and March 6, 2005, and was $1,122,000 and $1,097,000 respectively, during the twelve weeks
ended March 5, 2006 and March 6, 2005. The amount owed to the Company from these restaurants was $190,000 and $106,000 respectively, as of March 5, 2006 and May 29, 2005. Amounts due are generally settled within 28 days of
billing.

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

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

The former Chairman
of the Board had an employment agreement that 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. Monthly payments of $17,838 to the Chairmans widow, a director of the Company, commenced on March 1, 2005. On March 1,
2006, the payment increased to $217,692 ($18,141 per month) in accordance with provisions in the agreement to adjust the payment annually to reflect 50 percent of the annual percentage change in the Consumer Price Index. The present value of the
long-term portion of the obligation approximating $1,456,000 is reflected in the balance sheet under the caption Deferred compensation and other. The present value of the current portion of the obligation approximating $126,000 is
included in current liabilities.



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##### Table of Contents

ITEM 1A. RISK FACTORS

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

Food Safety

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

Economic Factors

The Companys
operations are predominantly located in Ohio, Indiana and Kentucky, where consumer confidence has been weakened by a soft economy and the steep cost of gasoline. The effects of higher gasoline prices in particular may impact 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 these 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 on food costs and labor can also negatively impact the
operation of the business.

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, is presently dominate the family-style sector of the
restaurant industry in the Companys operating markets. That could change at any time due to changes in economic conditions, demographics, consumer perceptions of value and consumer preferences. New competitors enter the Companys markets
from time to time and competition continues to increase from supermarkets and other non-traditional competitors, as home meal replacement continues to grow in popularity. Proper staffing levels and employee training have also become competitive
factors in recent years. In addition to competition for customers, sharp competition exists for qualified restaurant managers and hourly restaurant workers, which increases costs.

Development Plans

The
Companys business strategy and development plans also face risks and uncertainties. These include the inherent risk of poor management 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. Lower than expected revenue from the operation of Golden Corral restaurants has resulted in the Companys decision to slow down
expansion plans. Golden Corral same-store sales declines have been experienced for ten consecutive quarters. During the forty weeks ended March 5, 2006, four Golden Corrals are cash flow negative. The ability of the Company to identify
the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth, poses a significant risk that could ultimately result in charges to earnings to record impairment
of assets.



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##### Table of Contents

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

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

Certain statements contained in this Managements
Discussion and Analysis of Financial Condition and Results of Operation (MD&A) are forward-looking statements (as that item is defined in the Private Securities Litigation Reform Act of 1995) that are subject to risks, uncertainties
and other factors that could cause actual results and performance to differ materially from those expressed or implied by those statements. Factors that could cause such differences to occur include, but are not limited to, those discussed in this
Form 10-Q under Item 1A. Risk Factors, as well as other risks and factors described from time to time in the Companys reports filed with the Securities and Exchange Commission. Forward-looking statements can generally
be identified in sentences that contain words such as should, would, could, may, plan, anticipate, project, believe, will,
expect, estimate, intend, continue, assumptions, goals, target, and similar words (or derivatives thereof) that may be used to convey forward-looking
statements that are contained in this MD&A.

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

CORPORATE OVERVIEW

The Companys Third Quarter of Fiscal 2006 consists of the twelve weeks ended March 5, 2006, and compares with the twelve weeks ended March 6, 2005, which constituted the Third Quarter of Fiscal 2005. The First Three Quarters
of Fiscal 2006 consist of the 40 weeks ended March 5, 2006, and compares with the 40 weeks ended March 6, 2005, which constituted the First Three Quarters of Fiscal 2005. Operations consist of two reportable segments within the family
dining sector of the restaurant industry: Big Boy restaurants and Golden Corral restaurants. As of March 5, 2006, the Company operated 90 Big Boy restaurants and 34 Golden Corral restaurants.

Record sales of $67,260,000 were achieved during the Third Quarter of Fiscal 2006, an increase of $4,461,000, or 7.1 percent higher than the Third Quarter of Fiscal
2005. The sales improvement was achieved on:



| |  | Golden Corrals sales increase of 16.9 percent, the result of more units in operation
|- |  | -------------------------------------------------------------------------------------



| |  | Golden Corrals same store sales decrease of only 1.5 percent
|- |  | -------------------------------------------------------------



| |  | Big Boys same store sales increase of 1.8 percent
|- |  | --------------------------------------------------

That Golden
Corral same store sales decreased only 1.5 percent is especially noteworthy because it follows three consecutive quarters of double digit same store sales declines. Although some of the same store sales improvement can be attributed to moderate
winter weather in most of the Companys operating regions, Golden Corrals improvement can also be traced to the marketing campaign Everyone Deserves a Good Meal, Every Day.

Record sales of $220,746,000 were also achieved during the First Three Quarters of Fiscal 2006, an increase of $7,137,000 or 3.3 percent higher than the First Three
Quarters of Fiscal 2005. However, it should be noted that substantially all of the increase is due to more Golden Corral units in operation this year:



| |  | Big Boy same store sales decreased .3 percent.
|- |  | ----------------------------------------------



| |  | Golden Corral same store sales declined 7.8 percent.
|- |  | ----------------------------------------------------

The results for the
Third Quarter of Fiscal 2005 profited significantly from a $4,440,000 non-taxable life insurance benefit amounting to $.86 diluted EPS. The benefit resulted from filing death claims on several life insurance policies owned by the Company that
insured the life of Jack C. Maier, Chairman of the Board and formerly President and Chief Executive Officer, who died in February 2005. The non-taxable $4,440,000 benefit was derived principally from subtracting the estimated cash surrender value of
the policies that was previously recorded in the balance sheet as Net cash surrender value  life insurance policies, from the aggregate death benefit of approximately $9,659,000.

Net earnings for the Third Quarter of Fiscal 2006 were $2,206,000, or diluted earnings per share (EPS) of $.43. Comparable net earnings from the Third Quarter of Fiscal
2005, excluding the non-taxable life insurance benefit, were $1,745,000, or $.34 diluted EPS (as restated). Actual net earnings from the Third quarter of Fiscal 2005 (including the non-taxable life insurance benefit) were $6,185,000,
or $1.20 diluted EPS (as restated).

Net earnings for the First Three Quarters of Fiscal 2006 were $6,491,000, or $1.26 diluted EPS. Comparable net
earnings from the First Three Quarters of Fiscal 2005, excluding the non-taxable life insurance benefit, were $7,486,000, or $1.45 diluted EPS (as restated). Actual net earnings from the First Three Quarters of Fiscal 2005 (including
the non-taxable life insurance benefit) were $11,926,000, or $2.31 diluted EPS (as restated).



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##### Table of Contents

RESULTS OF OPERATION

Sales

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



|                              |  |                |        |                      |   |              |  |              |         |  |   |        
|----------------------------- |  | -------------- | ------ | -------------------- | - | ------------ |  | ------------ | ------- |  | - | -------
|                              |  | Third Quarter  |        | First Three Quarters
|                              |  | Mar. 5, 2006   |        | Mar. 6, 2005         |   | Mar. 5, 2006 |  | Mar. 6, 2005
|                              |  | (in thousands)
|Big Boy restaurant sales      |  | $              | 40,424 |                      | $ | 39,484       |  | $            | 134,805 |  | $ | 135,478
|Wholesale sales to licensees  |  |                | 1,993  |                      |   | 1,934        |  |              | 6,792   |  |   | 6,211  
|Other wholesale sales         |  |                | 342    |                      |   | 415          |  |              | 691     |  |   | 738    
|                              |  |                |        |                      |   |              |  |              |         |  |   |        
|Total Big Boy Sales           |  |                | 42,759 |                      |   | 41,833       |  |              | 142,288 |  |   | 142,427
|                              |  |                |        |                     
|Golden Corral sales           |  |                | 24,501 |                      |   | 20,966       |  |              | 78,458  |  |   | 71,181 
|                              |  |                |        |                      |   |              |  |              |         |  |   |        
|Consolidated restaurant sales |  | $              | 67,260 |                      | $ | 62,799       |  | $            | 220,746 |  | $ | 213,608
|                              |  |                |        |                      |   |              |  |              |         |  |   |        

As always, sales in third quarter are heavily dependent on upon winter weather. In recent years, at least one
major snowstorm has typically occurred during the third quarter. This years major snowstorm arrived in the second quarter rather than the third quarter. In addition, it was in the Third Quarter of Fiscal 2005 when the economy weakened in the
Companys Midwest markets. For both these reasons, same store sales increased 1.8 percent in Big Boy restaurants, halting three consecutive quarters of declines. While still down .3 percent for the First Three Quarters of Fiscal 2006,
management believes the difference can be made up by the end of the year. Menu prices were increased 1.1 percent in February 2006, 1.4 percent in September 2005, 1 percent in February 2005 and 1.5 percent in September 2004.

The Company currently operates 90 Big Boy restaurants. This count includes a brand new Big Boy that opened in February 2006 along with one that re-opened in August 2005
following its reconstruction. It had been temporarily closed since May 2005. No other new Big Boy restaurants have opened during the last twelve months. One older, low volume Big Boy restaurant ceased operations in November 2004. Two existing Big
Boy restaurants are planned for relocation to better sites within the same markets (during calendar year 2006). Little or no interruption of sales is expected during construction.

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



|                                    |  |               |  |                      |  |       |  |      
|----------------------------------- |  | ------------- |  | -------------------- |  | ----- |  | -----
|                                    |  | Third Quarter |  | First Three Quarters
|                                    |  | 2006          |  | 2005                 |  | 2006  |  | 2005 
|In operation at beginning of period |  | 34            |  | 29                   |  | 30    |  | 26   
|Opened during the period            |  | 0             |  | 0                    |  | 4     |  | 3    
|In operation at end of period       |  | 34            |  | 29                   |  | 34    |  | 29   
|Total sales weeks during period     |  | 408           |  | 348                  |  | 1,300 |  | 1,111

There were no Golden Corral restaurants under construction as of March 5, 2006. Current plans now call for
only one Golden Corral restaurant to open in calendar year 2006 with construction of one more to begin late in the year.

For the Third Quarter of Fiscal
2006, Golden Corral same store sales were 1.5 percent below the Third Quarter of Fiscal 2005, reflecting a 2.8 percent decrease in customer counts. Although the decline is the tenth consecutive quarter of same store sales decreases, management is
encouraged by the fact that the decrease was only 1.5 percent, ending three consecutive quarters of double digit sales and customer count declines. Although mild winter weather played its part, management believes the improvement in the significant
reduction of the same store sales decrease is also a signal that the initial stages of certain strategies designed to grow sales have been effective, including the marketing campaign Everyone Deserves a Good Meal, Every Day. For the
First Three Quarters of Fiscal 2006, same store sales decreased 7.8 percent on a 9.8 percent drop in customer counts. Prices were increased .5 percent in February 2006 and 1.8 percent in May 2005.



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Gross Profit

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



|                           |  |                |       |                        |   |             |  |                        |        |  |   |       
|-------------------------- |  | -------------- | ----- | ---------------------- | - | ----------- |  | ---------------------- | ------ |  | - | ------
|                           |  | 3rd Quarter    |       | First Three Quarters  
|                           |  | Mar. 5,2006    |       | (restated) Mar. 6,2005 |   | Mar. 5,2006 |  | (restated) Mar. 6,2005
|                           |  | (in thousands)
|Big Boy gross profit       |  | $              | 6,065 |                        | $ | 5,154       |  | $                      | 20,321 |  | $ | 19,613
|Golden Corral gross profit |  |                | 487   |                        |   | 1,050       |  |                        | 1,422  |  |   | 3,846 
|                           |  |                |       |                        |   |             |  |                        |        |  |   |       
|Total gross profit         |  | $              | 6,552 |                        | $ | 6,204       |  | $                      | 21,743 |  | $ | 23,459
|                           |  |                |       |                        |   |             |  |                        |        |  |   |       

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



|                                                |  |                   |  |                              |  |                   |  |                              |  |         |  |       |  |       |  |         |  |       |  |       |  |         |  |      
|----------------------------------------------- |  | ----------------- |  | ---------------------------- |  | ----------------- |  | ---------------------------- |  | ------- |  | ----- |  | ----- |  | ------- |  | ----- |  | ----- |  | ------- |  | -----
|                                                |  | 12 weeks 03/05/06 |  | 12 weeks 03/06/05 (restated) |  | 40 weeks 03/05/06 |  | 40 weeks 03/06/05 (restated)
|                                                |  | 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                                  |  | 35.2              |  | 32.7                         |  | 39.7              |  | 35.7                         |  | 33.3    |  | 40.3  |  | 35.0  |  | 32.6    |  | 39.4  |  | 35.2  |  | 32.9    |  | 39.7 
|Payroll and Related                             |  | 33.0              |  | 34.6                         |  | 30.2              |  | 33.3                         |  | 34.9    |  | 30.3  |  | 33.1  |  | 34.3    |  | 30.8  |  | 33.2  |  | 34.5    |  | 30.8 
|Other Operating Costs (including opening costs) |  | 22.0              |  | 18.5                         |  | 28.1              |  | 21.1                         |  | 19.5    |  | 24.4  |  | 22.1  |  | 18.8    |  | 28.0  |  | 20.6  |  | 18.9    |  | 24.1 
|Gross Profit                                    |  | 9.8               |  | 14.2                         |  | 2.0               |  | 9.9                          |  | 12.3    |  | 5.0   |  | 9.8   |  | 14.3    |  | 1.8   |  | 11.0  |  | 13.7    |  | 5.4  

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. The improved food cost percentages for all periods presented in both operating segments reflects cost stabilization of certain commodities combined with the effects of higher menu prices.

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

The reviews of self-insured reserves resulted in favorable adjustments of $242,000 and $349,000, respectively, during the Third Quarters of Fiscal 2006 and Fiscal 2005.
Favorable adjustments of $616,000 and $963,000 were recorded in the First Three Quarters of Fiscal 2006 and Fiscal 2005, respectively. A lower rate, as a percentage of payroll, is being used in the current fiscal year to accrue initial
self-insurance reserves, which should reduce the size of future quarterly adjustments.



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

Net periodic pension cost (computed under Statement of Financial Accounting Standards No. 87) was $398,000 in the Third Quarter of Fiscal 2006 and was $390,000 (as restated) in the Third Quarter of Fiscal 2005.
Net periodic pension cost was $1,321,000 for the First Three Quarters of Fiscal 2006 and was $1,286,000 (as restated) for the First Three Quarters of Fiscal 2005. The Company anticipates making contributions to the two qualified defined pension
plans that it sponsors that will satisfy legal funding requirements for the year ending May 28, 2006 plus additional tax-deductible amounts that may be deemed advisable. As of March 5, 2006, $300,000 had been contributed to the plans and
$300,000 remained to be contributed before May 28, 2006.

Other operating costs include occupancy costs such as maintenance, rent, depreciation,
property tax, insurance and utilities; field supervision; accounting and payroll preparation costs; franchise fees for Golden Corral restaurants; opening costs and many other restaurant operating expenses. The nature of most of these expenses tends
to be fixed; therefore, same store sales decreases cause these costs to be a higher percentage of sales, as reflected in the above table for the Golden Corral segment. Lower opening costs over the remainder of fiscal 2006 can be expected, as no new
restaurants will be opened in the fourth quarter.

Other operating expenses in the Third Quarter of Fiscal 2005 were adversely affected by a $615,000
charge to correct the Companys accounting for leases to conform the recognition of rent expense on a straight line basis over the term of the lease, including any option periods considered to be part of the lease term, as lease terms are
defined by Statement of Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases, as amended.

Operating Profit

To arrive at the measure of operating profit, administrative and advertising expense is subtracted from gross profit and
other revenue is added to it. Gains and losses from sale of real property, if any, are then respectively added or subtracted. Administrative and advertising expense did not appreciably change during any of the periods presented.

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. There were 28 Big Boy restaurants licensed to other operators and paying fees to the Company as of March 5, 2006 compared with 30 licensed restaurants as of
March 6, 2005. Other revenue also includes certain other fees from licensed restaurants along with miscellaneous rent and investment income.

Gains
and losses on the sale of assets consist of transactions involving real property and sometimes may include restaurant equipment that is sold together with real property as a package when closed restaurants are sold. Gains and losses reported on this
line do not include abandonment losses that often arise when certain equipment is replaced before it reaches the end of its expected life. Abandonment losses are instead reported in other operating costs. The amount reported on the line (Gain)
on sale of assets in the Third Quarter of Fiscal 2006 resulted principally from a gain in connection with an eminent domain proceeding. The gain in the First Three quarters of Fiscal 2005 resulted from the sale of an undeveloped tract of land.

Other Expense

Interest expense decreased $61,000 during the Third quarter of Fiscal 2006 or 8.4 percent lower than the Third Quarter of Fiscal 2005. Interest expense was $68,000 lower than the First Three Quarters of Fiscal 2005. Much lower debt levels
have been enjoyed throughout fiscal 2006, which is the result of life insurance proceeds being used to reduce debt in the fourth quarter of fiscal 2005. However, the rate of decrease in interest expense has been offset by higher interest rates that
have been experienced in fiscal 2006 on funds held in the construction phase of a Construction Draw Facility, before conversion into term loans. Finally, interest expense associated with the payment of a deferred compensation arrangement has been
recognized through the First Three Quarters of 2006.



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Last years $4,440,000 non-taxable life insurance benefit was also classified as Other expense (income), not
included in operating profit.

Income Taxes

As a percentage of pre-tax earnings, the estimated annual effective tax rate was 34 percent for the Third Quarter of Fiscal 2006 and the First Three Quarters of Fiscal 2006. For the First Three Quarters of Fiscal
2005, the tax rate applied to earnings before income tax, exclusive of the $4,440,000 non-taxable life insurance benefit, was 35 percent. The rate was 31.5 percent for the Third Quarter of Fiscal 2005, which included the effect of lowering the
estimated annual rate from 36 percent to 35 percent during the quarter. These rates have been kept consistently low through the Companys use of tax credits, principally the federal credit allowed for Employer Social Security and Medicare Taxes
Paid on Certain Employee Tips.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Funds

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

Working Capital Practices

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

Aggregated Information about Contractual Obligations and Commercial Commitments

March 5, 2006



|                                         |  |                                       |  |        |  |        |  |        |  |        |  |        |  |                  
|---------------------------------------- |  | ------------------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------ |  | -----------------
|                                         |  | Payments due by period (in thousands)
|                                         |  | Total                                 |  | year 1 |  | year 2 |  | year 3 |  | year 4 |  | year 5 |  | more than 5 years
|Long-Term Debt                           |  | 41,449                                |  | 8,961  |  | 9,380  |  | 10,079 |  | 4,824  |  | 4,069  |  | 4,136            
|Rent due under Capital Lease Obligations |  | 3,685                                 |  | 604    |  | 2,625  |  | 154    |  | 106    |  | 81     |  | 115              
|1 Rent due under Operating Leases        |  | 25,387                                |  | 1,785  |  | 1,787  |  | 1,750  |  | 1,674  |  | 1,425  |  | 16,966           
|2 Unconditional Purchase Obligations     |  | 8,067                                 |  | 8,067  |  |        |  |        |  |        |  |        |  |                  
|3 Other Long-Term Obligations            |  | 2,077                                 |  | 218    |  | 221    |  | 224    |  | 227    |  | 231    |  | 956              
|Total Contractual Cash Obligations       |  | 80,665                                |  | 19,635 |  | 14,013 |  | 12,207 |  | 6,831  |  | 5,806  |  | 22,173           

---

|1 | Not included in the table is a contingent liability for the performance of a ground lease that has been assigned to a third party. The annual obligation of the lease approximates
$48,000 through 2020. Should the third party default, the Company has the right to re-assign the lease. Operating leases include option periods considered to be part of the lease term under the provisions of Statement of Financial Accounting
Standards No. 13, Accounting for Leases, as amended.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

The working capital deficit was
$20,728,000 as of March 5, 2006, down from $23,198,000 as of December 11, 2005. The improvement is largely attributable to lower accounts payable reflecting scaled back construction of new restaurants. The deficit was $20,911,000 as of
May 29, 2005. The working capital deficit is expected to neutralize or continue improving in the near term as new construction debt remains in scaled back status reflecting the reduction in expected new restaurant openings. As of March 5,
2006, $11,000,000 remained available to be borrowed under the terms of a Construction Draw Facility, which expires September 1, 2008, unless extended. Additionally, a $5,000,000 working capital revolving line of credit (currently unused) is
readily available through September 1, 2008, if needed.



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##### Table of Contents

Operating Activities

Operating cash flows were $14,931,000 in the First Three Quarters of Fiscal 2006, or $2,288,000 lower than the First Three Quarters of Fiscal 2005. However, management
believes a more reliable gauge to measure cash flows from the operation of the business is to use the simple method of net earnings plus depreciation, which eliminates changes in accounts payable due to payables for construction related costs. Using
this method, $16,318,000 in cash flows from operating activities was generated during the First Three Quarters of Fiscal 2006 versus $16,445,000 during the First Three Quarters of Fiscal 2005 (which excludes a $4,440,000 life insurance benefit that
was included in last years net earnings).

Investing Activities

Capital spending is the principal component of the Companys investing activities. Additions to property and equipment were $16,085,000 during the First Three
Quarters of Fiscal 2006, or $2,511,000 below the First Three Quarters of Fiscal 2005. The additions for the First Three Quarters of Fiscal 2006 include $7,539,000 for Golden Corral restaurants and $8,546,000 for Big Boy restaurants. These additions
were for new restaurant construction, site acquisitions, remodeling costs, routine equipment replacements and other capital outlays.

Financing Activities

Borrowing against credit lines amounted to $11,000,000 during the First Three Quarters of
Fiscal 2006, including $2,500,000 borrowed during the Third Quarter of Fiscal 2006. Scheduled and other payments of long-term debt and capital lease obligations amounted to $7,248,000 during the First Three Quarters of Fiscal 2006. Regular quarterly
cash dividends paid to shareholders totaled $1,671,000. The Company expects to continue its 45 year practice of paying regular quarterly cash dividends, including its 181stconsecutive quarterly dividend that was declared on March 14, 2006 and paid on April 10, 2006.

During the First Three Quarters of Fiscal 2006, employees acquired nearly 16,000 shares of the Companys common stock pursuant to the exercise of stock options, yielding proceeds to the Company of approximately
$287,000. As of March 5, 2006, 414,321 shares granted under the Companys two stock option plans remain outstanding including 330,819 fully vested shares at a weighted average price per share of $18.19. As of March 5, 2006, 732,204
shares are available to be granted under these plans.

Other Information

The Company reached a new agreement with Golden Corral Franchising Systems, Inc. (Franchisor) in July 2004. The new agreement added 22 Golden Corrals to the development
schedule, bringing to 63, the total number of restaurants planned to be in operation by December 31, 2011. The development agreement, which had called for five new restaurants to open in each calendar year through 2010 with the final four
scheduled for 2011, was modified in June 2005 to permit the opening of only three restaurants in calendar year 2006. With the concurrence of the Franchisor, it now appears likely that only one Golden Corral restaurant will open in 2006 with
construction of one more to begin late in the year. As of March 5, 2006, 34 Golden Corral restaurants were in operation. No Golden Corral restaurants were under construction. Five Golden Corral restaurants are being remodeled in Fiscal 2006 at
an approximate cost of $150,000 per restaurant.

Plans are currently being made to relocate two existing Big Boy restaurants (during calendar year 2006) to
better sites within the same market areas. Approximately one-fifth of the Big Boy restaurants are routinely renovated or decoratively updated each year at an average cost of $75,000 per restaurant. In addition, certain high volume Big Boy
restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies. A typical kitchen redesign costs approximately $125,000.

Including land and land improvements, the cash required to build and equip each new restaurant ranges from $2,600,000 to $3,500,000 for a Golden Corral, and from $2,200,000 to $2,900,000 for a Big Boy. The actual cost
depends greatly on the price paid for the land and the cost of land improvements, which can vary widely from location to location, and whether the land is purchased or leased.

It is the Companys policy to own the land on which it builds new restaurants; however, it is becoming more frequently necessary to enter ground leases to obtain desirable land on which to build. Eight of the 34
Golden Corral restaurants now in operation were constructed on leased land. A Big Boy restaurant that opened in February 2006 was also built on leased land. All of these leases have been accounted for as operating leases pursuant to Statement of
Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases, as amended. As of March 5, 2006, the Company occupied a total of 32 restaurants pursuant to leases, seven of which are capital leases under the provisions
SFAS 13.



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APPLICATION of CRITICAL ACCOUNTING POLICIES

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

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

Self Insurance

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

Pension Plans

Pension plan accounting requires rate assumptions for future compensation increases and the long term return on plan assets. A discount rate is also applied to the
calculations of net periodic pension cost and projected benefit obligations. An informal committee consisting of executives from the Finance Department and the Human Resources Department, with guidance provided by the Companys actuarial
consulting firm, develops these assumptions each year. The consulting firm also provides services in calculating estimated future obligations and net periodic pension cost. The plan assets are targeted to be invested 70 percent in equity securities,
as these investments have historically provided the greatest long-term returns. The Company has used an 8.5 percent expected long-term rate of return on plan assets for many years, and will likely continue with that rate for the foreseeable future.
Management believes that 8.5 percent is a fair rate over the long term, despite poor market performance in the early years of the current decade which has adversely impacted net periodic pension cost in recent years, after many years of steady, low
costs.

Long-Lived Assets

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

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

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

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



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##### Table of Contents

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES about MARKET RISKS

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

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

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

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

ITEM 4. CONTROLS and PROCEDURES

a) Evaluation of Disclosure Controls and Procedures. The Companys Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) reviewed and evaluated the Companys disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 240.15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act)) as of March 5, 2006. 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 5, 2006 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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



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On July 30, 2002, Fortney filed a Demand for Arbitration against the Company which seeks recovery of its
outstanding contract balance, in the sum of $293,638, plus interest, fees, and costs. Fortney contends that it is owed this money by the Company under the terms of the General Construction Contract. The Company has denied that it owes
these monies to Fortney, and has filed a counterclaim against Fortney alleging defective construction and claiming damages, lost profits, interest and costs, in an amount exceeding $1,000,000. The Company is vigorously prosecuting this claim and
believes that it will ultimately prevail in the matter, which is currently before the American Arbitration Association.

On August 29, 2002, the
Company filed a lawsuit in the Stark County, Ohio Court of Common Pleas against its former architect, LMH&T, alleging negligent design as a causal factor in the demise of the original structure. The Company sought damages including lost profits,
interest, and costs exceeding $2,500,000. LMH &T brought into the lawsuit its structural engineering consultant, Maverick, as well as the Companys soils consultant, Cowherd Banner Carlson Engineering (CBC). In July 2003, the
Company resolved all claims, counterclaims, and cross-claims, against and involving the trial court defendants. The trial court defendants, including LMH&T and Maverick, agreed to pay to the Company the sum of $1,700,000 in full and final
settlement of all claims. The Company received the settlement funds in full and the case was dismissed.

The resolution between the Company and the trial
court defendants (design team) is separate and apart from the dispute between Fortney and the Company, which is continuing before the American Arbitration Association.

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

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

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

Not applicable

ITEM 3. DEFAULTS upon SENIOR SECURITIES

Not applicable

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

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

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

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

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



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3 (d) Amendments to the Code of Regulations adopted October 24, 1996, filed as Exhibit
(3) (c) to the Registrants Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.

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

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

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

10 (d) 1) Amendment No. 1 to First Amended and
Restated Loan Agreement (Golden Corral Construction Facility and Exhibit 10 (d) 2) Amendment No. 1 to Second Amended and Restated Loan Agreement (Revolving and Bullet Loans) between the Registrant and US Bank NA effective
September 27, 2005, are incorporate herein by reference.

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

10 (f) Employment Agreement between the Registrant and Jack C. Maier effective May 29, 2000, filed as Exhibit (10) (d) to the
Registrants Form 10-Q Quarterly Report for September 17, 2000, is incorporated herein by reference. *

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

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

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

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

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



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

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

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

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

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



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



| | 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.
| | ---- | ------------------------------------------------------------------------



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SIGNATURE

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



|                    |  |                            |  |                                           
|------------------- |  | -------------------------- |  | ------------------------------------------
|                    |  | FRISCHS RESTAURANTS, INC.
|                    |  |                            |  | (registrant)                              
|DATE April 10, 2006 |  |                            |  |                                           
|                    |  | BY                         |  | /s/ Donald H. Walker                      
|                    |  |                            |  | Donald H. Walker                          
|                    |  |                            |  | Vice President  Finance, Treasurer and   
|                    |  |                            |  | Principal Financial and Accounting Officer



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