<PAGE>


                                                                   EXHIBIT 13.01


SELECTED FINANCIAL DATA

The following table sets forth, for the periods indicated, selected consolidated
financial data that has been derived from our audited Consolidated Financial
Statements. The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and related notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

<TABLE>
<CAPTION>
                                                                      FISCAL YEARS ENDED
                                               March 26,      March 27,      March 28,      March 30,     March 31,
                                                 2006           2005           2004           2003          2002
                                                 ----           ----           ----           ----          ----
                                                                                                        (53 wk yr)
                                                           (In thousands, except per share information)

<S>                                            <C>            <C>            <C>            <C>           <C>
CONSOLIDATED STATEMENTS
OF EARNINGS DATA:
Total revenues                                 $245,553       $218,331       $202,963       $189,244      $171,507
Cost of food and beverage sales                  59,014         53,372         51,437         46,182        42,754
Restaurant operating expenses                   139,433        126,825        118,183        112,050        99,964
Restaurant opening costs                          1,270          1,304          2,088            501         1,281
Marketing, general and administrative
    expenses                                     22,693         20,939         16,362         15,512        13,373
Impairment charge                                     -          2,668              -              -           438
Interest (income) expense, net                      (88)           298            457            528           990
Income before income taxes and
    minority interest                            23,231         12,925         14,436         14,471        12,707
Income tax provision                              8,491          4,520          4,821          4,725         3,964
Income before minority interest                  14,740          8,405          9,615          9,746         8,743
Minority interest                                   178            585            643            477           100
Net income                                       14,562          7,820          8,972          9,269         8,643
Basic earnings
    per share (1)                                  1.40            .81           1.01           1.06          1.14
Diluted earnings
    per share (1)                                  1.36            .77            .98            .99          1.09

CONSOLIDATED BALANCE SHEET
DATA:
Total assets                                   $191,516       $154,254       $142,643       $129,759       $99,444
Long-term debt including
    current maturities                            6,666         10,000         21,500         22,000         6,000
Stockholders' equity                            125,262        103,207         95,045         83,713        71,999

OTHER FINANCIAL DATA:
Capital expenditures                            $25,834        $22,446        $22,950        $27,418       $13,944
</TABLE>


(1)  On June 7, 2002, the Board of Directors declared a 15% stock dividend in
     Class A stock on both the Class A Shares and Common Shares. The stock
     dividend was paid on August 12, 2002 to holders of record July 15, 2002. As
     a result, basic and diluted earnings per common share are shown as if the
     stock dividend had been in existence for each fiscal year presented.



<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

OUR BUSINESS

We are one of the largest chains of Asian restaurants in the United States. We
have operated "Benihana" teppanyaki-style Japanese restaurants in the United
States for over 40 years, and we believe we are the largest operator of
teppanyaki-style restaurants in the country. Our core concept, the traditional
Benihana restaurant, offers teppanyaki-style Japanese cooking in which fresh
steak, chicken and seafood is prepared by a chef on a steel grill which forms a
part of the table at which the food is served. We also operate other restaurant
concepts offering Asian, predominately sushi, entrees. Our Haru concept offers
an extensive menu of Japanese fusion dishes in an urban atmosphere, as well as
catering to customers seeking take-out or delivery of their meals. In addition
to traditional, high quality sushi and sashimi creations, Haru offers raw bar
items and Japanese cuisine. We believe that Haru is well situated for densely
populated cities with nearby shopping, office and tourist areas. Our RA Sushi
concept offers sushi and a full menu of Pacific-Rim dishes in a high-energy
environment featuring upbeat design elements and contemporary music. RA Sushi
caters to a younger demographic and we believe that it is highly suitable for a
variety of real estate options including life-style centers, shopping centers
and malls.

At March 26, 2006 we:

o      owned and operated 56 Benihana teppanyaki-style Japanese dinnerhouse
       restaurants,
o      franchised 21 additional Benihana restaurants,
o      owned and operated seven Haru restaurants,
o      owned and operated nine RA Sushi restaurants, and
o      owned and operated one Doraku restaurant in Miami Beach, Florida, which
       was sold subsequent to year end.

SUMMARY OF RESULTS

Summary highlights of our fiscal 2006 year compared to the previous year:

o      the fourteenth consecutive year of total sales increases,
o      opened a new Benihana teppanyaki-style restaurant in Tucson, Arizona,
o      opened a new RA Sushi restaurant in Houston, Texas, and
o      opened a new Haru restaurant in Philadelphia, Pennsylvania.


OUTLOOK

In fiscal 2006, we opened one teppanyaki restaurant, one Haru restaurant and one
RA Sushi restaurant. We believe that our revenues will increase next year due to
the newly opened restaurants and from continuing increases in customer counts at
restaurants open for longer than one year. We believe that total revenues will
also increase during fiscal 2007 from the planned openings of two new teppanyaki
restaurants in Coral Gables and Miramar, Florida; and four new RA Sushi
restaurants in Palm Beach Gardens, Florida, Glenview, Illinois, Torrance,
California and Corona, California. We will, however, have to contend with lost
sales due to our renovation and revitalization program, as well as lost sales
from sold units.

We have undertaken a design initiative to develop a prototype Benihana
teppanyaki restaurant to improve the unit-level economics while shortening
construction time and improving decor. The restaurant in Miramar, Florida, which
opened during June 2006, is the first restaurant to feature the new prototype
design. Under a renovation program commenced during 2005, we are also using many
of the design elements of the new prototype to refurbish our older teppanyaki
restaurant units.

During fiscal 2006, management made a strategic decision to accelerate the
renovation and revitalization program. We are committed to revitalizing our
40-plus year old Benihana teppanyaki concept for a new generation, while
simultaneously generating a solid return on invested capital for our
shareholders. The new design reflects the cutting edge of contemporary dining
and entertainment, and places the customer at the center of the Benihana
experience through the visual impact of the exterior, a vibrant waiting area,
and a more dramatic stage setting for our legendary Benihana Chefs. During
fiscal 2006, our restaurant in Short Hills, New Jersey was the first teppanyaki
to be retrofitted with the new design elements. We plan to refurbish
approximately 20-25 of our older teppanyaki restaurants over a thirty month
timeframe. Management is pleased with the initial impact that this enhanced
atmosphere has had on sales at the Short Hills location. While it is still early
in the renovation program, management anticipates similar results at our Memphis
and Cleveland restaurants, which have recently re-opened after similar
renovations were completed in May 2006. We believe that we will complete the
renovation of eight restaurants in fiscal 2007 and have an additional three in
progress by the end of the fiscal year. By beginning the older Benihana
teppanyaki units now, we are opportunistically building a stronger foundation
for our core brand amid



                                       2
<PAGE>

a growing American appetite for Asian cuisine. As we roll out the new design
over fiscal 2007, we will be contending with 175-200 lost restaurant operating
weeks, $1.5-$1.8 million in charges related to shortening the useful lives of
restaurant assets, as well as ongoing expenditures for those locations under
construction, in addition to the capital expenditures of the program, which we
currently estimate to average approximately $2.0 million per unit. Together,
these factors will have an impact on our overall earnings by $0.33-$0.39 per
diluted share for fiscal 2007. We believe that once the renovated restaurants
re-open they will mitigate the gross cost of the program with higher sales and
operating profits. However, we believe the long-term benefits of the
revitalization initiative far outweigh the costs. The program will enhance our
leadership position as the premier choice for Japanese-style dining

The restaurant industry is a highly competitive business, which is sensitive to
changes in economic conditions, trends in lifestyles and fluctuating costs.
Operating margins for the restaurant industry are susceptible to fluctuations in
prices of commodities, which include beef, chicken and seafood as well as other
items necessary to operate, such as electricity or other energy supplies.
Additionally, the restaurant industry is characterized by a significant initial
capital investment, coupled with high labor costs. Our management is focused on
monitoring these costs and increasing same store sales to continue to raise
restaurant operating profit in existing restaurants as well as new restaurants.
Our expansion plans take into account these operational factors and investment
costs to generate sustainable operating results and achieve acceptable returns
of investment from each of our restaurant concepts.


OPERATING RESULTS

REVENUES

Revenues consist of the sales of food and beverages at our restaurants and
royalties and licensing fees from franchised restaurants. Revenues are dependent
upon the number of restaurants in operation, the number of patrons that visit
our restaurants and franchisees' restaurants and the average per person guest
check amounts.

The following table shows revenues and percentage changes for the past three
years:

(Dollar amounts are expressed in thousands)
<TABLE>
<CAPTION>

                                                     Fiscal year ended
                            -----------------------------------------------------------------------
                                     2006                    2005                    2004
                            -----------------------------------------------------------------------
                                        Percentage              Percentage              Percentage
                                        change                  change                  change
                                        from 2005               from 2004               from 2003
 --------------------------------------------------------------------------------------------------
<S>                           <C>            <C>      <C>             <C>     <C>             <C>
 Restaurant sales             $244,032       12.6%    $216,756        7.7%    $201,335        7.1%
 Franchise fees
     and royalties               1,521       (3.4%)      1,575       (3.3%)      1,628       22.3%
 --------------------------------------------------------------------------------------------------
 Total revenues               $245,553       12.5%    $218,331        7.6%    $202,963        7.2%
 ==================================================================================================
</TABLE>


The table below shows the amount of the changes in restaurant sales and the
nature of the changes.

(Amounts are expressed in thousands)
<TABLE>
<CAPTION>

                                                                       Fiscal year ended
                                                            ----------------------------------------
                                                                  2006         2005         2004
 ---------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>             <C>
 Increase in sales from restaurants opened
     or owned longer than one year                              $18,438       $10,139         $ 211
 Increase from restaurants opened less than one year              6,912        11,652         7,062
 Increase from acquired restaurants owned less than
     one year                                                     3,441            83         7,748
 Increase (decrease) from sales at existing units while
     not comparable due to remodeling closures                    1,392        (3,370)          497
 Decrease in sales due to units permanently closed
     or sold                                                     (2,907)       (3,083)       (2,096)
                                                            ----------------------------------------
 Amount of increase from prior year                             $27,276       $15,421       $13,422
                                                            ========================================
</TABLE>


In addition to our Benihana teppanyaki restaurants, we have other concepts that
feature sushi along with other predominately Asian menu choices. Our Haru
concept features an extensive menu of Japanese fusion dishes served in a high
energy, urban setting. Haru's menu offers traditional sushi and sashimi
creations as well as raw bar items and Japanese cuisine. The Haru concept
generates exceptionally high average unit sales volumes from take-out and
delivery and as a result of customer satisfaction and the high population
density that comprises

                                       3
<PAGE>

the concept's primary market, New York City. Approximately 37% of Haru's
revenues are derived from delivery and takeout sales. The RA Sushi concept is a
vibrant, hip restaurant featuring sushi and other Asian menu items in a
high-energy environment featuring upbeat design elements and contemporary music.
RA Sushi's beverage sales represent approximately 33% of restaurant sales. The
RA Sushi units are less expensive to build than the Company's other two concepts
and offer the Company a growth vehicle that we believe can succeed in larger
markets. The Company's sole Doraku restaurant offered sushi and other Japanese
dishes. Subsequent to the end of fiscal 2006, the Company sold its Doraku
restaurant.

Restaurant sales for each of our restaurant concepts are shown in the table
below (amounts are expressed in thousands):


                                             Fiscal year ended
                                 ----------------------------------------------
                                      2006             2005           2004
 ------------------------------------------------------------------------------
 Benihana                            $189,796         $175,045        $166,452
 Haru                                  27,662           22,785          21,871
 RA Sushi                              24,620           17,334          11,574
 Doraku                                 1,954            1,592           1,438
                                 ----------------------------------------------
 Total                               $244,032         $216,756        $201,335
                                 ==============================================



We believe that the Benihana style of presentation makes us a unique choice for
customers. We believe that customers who are seeking greater value for their
dining budget appreciate the entertainment value provided by the chef cooking
directly at their table. We believe that we are the largest restaurant chain
offering sushi to consumers nationwide. Sushi bars have been added to most of
the Benihana restaurants over the past several years.


2006 COMPARED TO 2005

Revenues increased 12.5% in fiscal 2006 when compared to fiscal 2005. Restaurant
sales increased $27.3 million in fiscal 2006 when compared to fiscal 2005. The
increase was mainly attributable to increases in sales from restaurants opened
longer than one year of $18.4 million, sales from new or acquired restaurants of
$10.4 million, and a net increase of $1.4 million in sales from restaurants
closed for remodeling offset by $2.9 million decrease for restaurants
permanently closed.

BENIHANA - Sales for the Benihana teppanyaki restaurants increased $14.8 million
in fiscal 2006 compared to fiscal 2005. The increase is attributable to
increases in sales from restaurants opened longer than one year of $12.2 million
and from sales of new or acquired restaurants prior to becoming comparable
restaurant units of $4.1 million. Sales were positively impacted by $1.4 million
due to the timing of temporary closures during fiscal 2006 when compared to
fiscal 2005. These increases were offset by sales reductions attributable to
permanent restaurant closures. Two restaurants were closed during fiscal 2005 as
a result of lease expirations and one unit was sold to a franchisee during
fiscal 2006. The increase in sales from restaurants opened longer than one year
benefited from a 2-3% menu price increase initiated during the second quarter of
fiscal 2005. Additionally, guest counts increased 4.6% to 7.6 million guests in
fiscal 2006 from fiscal 2005. Comparable restaurant sales growth for teppanyaki
restaurants opened longer than one year increased 7.2%. The average per person
guest check amount was $24.96 in fiscal 2006 compared to $24.15 in fiscal 2005,
representing a 3.4% increase. Guest counts for teppanyaki restaurants opened
longer than one year increased by 4.2%. Sales from new or acquired restaurants
were mainly attributable to the Carlsbad, California restaurant which opened in
June 2005 and the Anchorage, Alaska restaurant and the Tucson, Arizona
restaurant, which were acquired in March 2005 and November 2005, respectively.
We closed two teppanyaki restaurants in fiscal 2005, after their leases expired.
One restaurant was located in Kendall, a suburb of Miami, Florida and the other
was located in New York City. The Kendall restaurant will be replaced by the
Coral Gables, Florida restaurant expected to open in fiscal 2007. We have no
plans to replace the New York City restaurant. During fiscal 2006, we sold the
Monterey, California restaurant to a franchisee.

HARU - Sales for the Haru restaurants increased $4.9 million in fiscal 2006
compared to fiscal 2005. The increase is attributable to increases in sales from
restaurants opened longer than one year of $645,000 and from sales of $4,232,000
from two new Haru restaurants, one restaurant located in Philadelphia,
Pennsylvania, which opened during fiscal 2006, and the other in Manhattan
located in Gramercy Park, which opened during fiscal 2005. Comparable restaurant
sales growth for the Haru restaurants increased 2.8% from fiscal 2005. The
average per person guest check amount was $29.36 in fiscal 2006 compared to
$27.73 in fiscal 2005, representing a 5.9% increase. The increase in average per
person guest checks, however, was offset by a decrease in traffic at restaurants
opened longer than one year totaling 3.2%.


                                       4
<PAGE>


RA SUSHI - Sales for the RA Sushi restaurants increased $7.3 million in fiscal
2006 compared to fiscal 2005. The increase is attributable to increases in sales
from restaurants opened longer than one year of $5.2 million and from sales of
new restaurants of $2.1 million. As a result, during fiscal 2006, total traffic
increased by 39.8%. Comparable restaurant sales growth for the RA Sushi
restaurants was 29.9% for fiscal 2006 compared to fiscal 2005. The average per
person guest check amount was $20.51 in fiscal 2006 compared to $20.19 in fiscal
2005, representing an increase of 1.6%. Additionally, traffic at restaurants
opened longer than one year increased by 24.2% between fiscal years. Sales from
new restaurants were attributable to the opening of a RA Sushi restaurant in
Houston, Texas in February 2006 and the restaurant in Las Vegas, Nevada, which
opened in October 2004.

Franchise fees and royalties decreased slightly in fiscal 2006 when compared to
fiscal 2005. There was a net decrease of one restaurant in the franchise
portfolio. The net decrease reflected one new opening offset by the closure of
two franchise locations.


2005 COMPARED TO 2004

Revenues increased 7.6% in fiscal 2005 when compared to fiscal 2004. Restaurant
sales increased $15.4 million in fiscal 2005 when compared to fiscal 2004. The
increase was mainly attributable to sales from new restaurants of $11.7 million
and from increases in sales from restaurants opened longer than one year of
$10.1 million offset by $3.4 million for restaurants temporarily closed for
remodeling and $3.1 million for restaurants permanently closed.

BENIHANA - Sales for the Benihana teppanyaki restaurants increased $8.6 million
in fiscal 2005 compared to fiscal 2004. The increase is attributable to
increases in sales from restaurants opened longer than one year of $8.0 million
and from sales from new restaurants prior to becoming comparable restaurant
units of $7.1 million offset by sales reductions attributable to two permanent
restaurant closures in fiscal 2005 as a result of lease expirations and sales
reductions attributable to two temporary restaurant closures due to major
refurbishings. The increase in sales from restaurants opened longer than one
year is a result of a 2-3% menu price increase instituted during the second
quarter of fiscal 2005. Additionally, guest counts increased 2.9% to 7 million
guests in fiscal 2005 from fiscal 2004. Comparable restaurant sales growth for
teppanyaki restaurants opened longer than one year increased 5.0%. The average
per person guest check amount was $24.15 in fiscal 2005 compared to $23.61 in
fiscal 2004. Sales from new restaurants were mainly attributable to the
Carlsbad, California restaurant which opened in June 2005. During fiscal 2005,
we temporarily closed two restaurants; the San Francisco, California and
Manhasset, New York restaurants for major refurbishing with a negative impact on
sales of $3.4 million. We closed two teppanyaki restaurants in fiscal 2005; one
in Kendall a suburb of Miami, Florida and one in New York City after their
leases expired. The Kendall restaurant will be replaced by the Coral Gables,
Florida restaurant expected to open in fiscal 2007. We have no plans to replace
the New York City restaurant.

HARU - Sales for the Haru restaurants increased $914,000 in fiscal 2005 compared
to fiscal 2004. The increase is attributable to increases in sales from
restaurants opened longer than one year of $545,000 and from sales of $369,000
from a new restaurant located in the Gramercy Park section of Manhattan. The
increase from restaurants opened longer than one year was a result of increased
traffic of 1.7%. In addition, take-out and delivery sales increased by 4.7%
compared to the prior year. Comparable restaurant sales growth for the Haru
restaurants increased 2.5% from fiscal 2004. The average per person guest check
amount was $27.73 in fiscal 2005 compared to $27.15 in fiscal 2004.

RA SUSHI - Sales for the RA Sushi restaurants increased $5.8 million in fiscal
2005 compared to fiscal 2004. The increase is attributable to increases in sales
from restaurants opened longer than one year of $1.5 million and from sales of
new restaurants of $4.3 million. The increase from restaurants opened longer
than one year is a result of increased traffic of 8.8% and from the maturation
of recently opened restaurants in new markets. Comparable restaurant sales
growth for the RA Sushi restaurants was 12.8% for fiscal 2005 compared to fiscal
2004. The average per person guest check amount was $20.19 in fiscal 2005
compared to $19.06 in fiscal 2004. Sales from new restaurants was attributable
to the opening of a RA Sushi restaurant in Las Vegas, Nevada in October 2004 and
from three other RA Sushi restaurants opened in the latter part of fiscal 2004.

Franchise fees and royalties decreased slightly in fiscal 2005 when compared to
fiscal 2004. There were no new franchised locations opened during fiscal 2005.


OPERATING COSTS AND EXPENSES


Cost of restaurant food and beverages sold represents the direct cost of the
ingredients for the prepared food and beverages sold. Restaurant operating
expenses consist of direct and indirect labor, occupancy costs, advertising and
other costs that are directly attributed to each restaurant location. Restaurant
opening costs include rent paid during the development period, as well as labor,
training expenses and certain other pre-opening charges which are expensed as
incurred.


                                       5
<PAGE>


Operating costs and expenses are largely dependent on the number of customers
that visit our restaurants and the cost of commodities, the number of employees
that are necessary to provide a high quality of service to our customers, rents
we pay for our restaurant properties, utilities and other necessary operating
costs. Expenses are additionally dependent upon average wage rates, marketing
costs and the costs of administering restaurant operations.

The following table shows the amount of change in our restaurant operating
costs, costs as a percentage of restaurant sales, and the percentages of change
from the preceding years.

<TABLE>
<CAPTION>
                                                                   Fiscal year ended
                                                        -----------------------------------------
                                                            2006          2005          2004
                                                        ------------- ------------- -------------
<S>                                                            <C>           <C>           <C>
 COST AS A PERCENTAGE OF RESTAURANT SALES:
 Cost of food and beverage sales                               24.2%         24.6%         25.5%
 Restaurant operating expenses                                 57.1%         58.5%         58.7%
 Restaurant opening costs                                        .5%           .6%          1.0%
 Marketing, general and administrative expenses                 9.3%          9.7%          8.1%

 AMOUNT OF INCREASE (DECREASE) FROM PRIOR YEAR:
 Cost of food and beverage sales                             $ 5,642       $ 1,935       $ 5,255
 Restaurant operating expenses                                12,608         8,642         6,133
 Restaurant opening costs                                        (34)         (784)        1,587
 Marketing, general and administrative expenses                1,754         4,577           850
 Interest (income) expense, net                                 (386)         (159)          (71)

 PERCENTAGE INCREASE (DECREASE) FROM PRIOR YEAR:
 Cost of food and beverage sales                               10.6%          3.8%         11.4%
 Restaurant operating expenses                                  9.9%          7.3%          5.5%
 Restaurant opening costs                                      (2.6%)       (37.6%)       316.8%
 Marketing, general and administrative expenses                 8.4%         28.0%          5.5%
 Interest (income) expense, net                              (129.5%)       (34.8%)       (13.4%)
</TABLE>


2006 COMPARED TO 2005

Cost of food and beverage sales increased in absolute amount but decreased when
expressed as a percentage of restaurant sales in fiscal 2006 when compared to
fiscal 2005. The increase in absolute amount is directly attributable to the
increase in restaurant sales. The decrease when expressed as a percentage of
sales during the current fiscal year can be attributed to menu price increases
taken during the prior year's second fiscal quarter coupled with relatively
stable commodity prices.

Restaurant operating expenses increased in absolute amount but decreased when
expressed as a percentage of restaurant sales in fiscal 2006 when compared to
fiscal 2005. The increase in absolute amount was primarily attributable to
increases in variable costs directly related to restaurant sales and new
restaurant units. Also, the Company recognized additional depreciation expense
totaling approximately $1.1 million during fiscal 2006, which resulted from the
Company reevaluating the remaining useful lives of assets at restaurants to be
renovated as part of its renovation program. The decrease when expressed as a
percentage of sales was primarily attributable to gains in labor productivity in
fiscal 2006 when compared to fiscal 2005.

Restaurant opening expenses decreased slightly in absolute amount and when
expressed as a percentage of restaurant sales in fiscal 2006. A comparable
number of restaurants were under active development in fiscal 2006 compared to
fiscal 2005.

Marketing, general and administrative expenses increased in absolute amount but
decreased slightly when expressed as a percentage of restaurant sales in fiscal
2006 when compared to fiscal 2005. The increase in absolute amount is primarily
attributable to increased administration headcount. Additional corporate
personnel have been hired to accommodate the Company's growth plans and
renovation program. The Company's expansion and renovation programs have also
resulted in increased travel expenses between the corporate office and
restaurant locations. Advertising and promotional costs have also increased
during fiscal 2006 as a result of increased advertising related to new store
openings and entrance into new markets. The Company did realize a decrease in
professional fees during fiscal 2006 attributable to Benihana of Tokyo, Inc.
litigation fees primarily incurred during fiscal 2005, as the trial was held
during fiscal 2005. This decrease was partially offset by increased costs
associated with professional fees incurred by the Company in order to remediate
its material weakness identified during fiscal 2005.


                                       6
<PAGE>


Interest (income) expense, net, decreased in fiscal 2006 when compared to fiscal
2005. The decrease in expense was a result of a decrease in the average
outstanding bank debt in fiscal 2006 compared to fiscal 2005 offset by
increasing interest rates between fiscal years. Additionally, the Company's
invested cash balances were higher during fiscal 2006 due to the completion of
the second tranche of the Series B Preferred Stock sale during the current
fiscal year, as well as greater cash provided by operating activities than cash
used in investing activities during 2006, which resulted in increased interest
income.

Our effective tax rate was 36.6% for fiscal 2006 compared to 35.0% for fiscal
2005. The increase was a direct result of increasing marginal tax rates caused
by increased sales, as well as sales and profitability increasing at a greater
rate than tax credits earned during the current year.

Net income for fiscal 2006 was $14.6 million, an increase of 86.2% over net
income of $7.8 million in fiscal 2005. Basic earnings per common share increased
to $1.40 for fiscal 2006 from basic earnings per share of $.81 for fiscal 2005.
Basic average weighted shares outstanding increased by approximately 210,000
shares to 9,364,000 shares at March 26, 2006 from 9,154,000 shares at March 27,
2005. Diluted earnings per common share increased to $1.36 for fiscal 2006 from
diluted earnings per common share of $.77 in fiscal 2005. Average diluted
weighted shares outstanding increased by approximately 524,000 shares to
10,671,000 shares at March 26, 2006 from 10,147,000 shares at March 27, 2005.
The increase in both basic and diluted average weighted shares outstanding
during fiscal 2006 compared to fiscal 2005 was due to the issuance of shares for
stock option exercises and the issuance of convertible preferred stock in fiscal
2006 and 2005.


2005 COMPARED TO 2004

During fiscal 2005, an impairment charge of $2,668,000 was recorded ($0.16 per
diluted share net of income taxes) and is related to the write-down of equipment
and leasehold improvements to estimated fair market value at four existing
restaurants: the Georgetown and Monterey Benihana teppanyaki restaurants, the
Doraku restaurant and the RA Sushi restaurant located in Chicago. We review our
long-lived assets for impairment whenever events or changes in circumstances
indicate the carrying value amount of an asset or group of assets may not be
recoverable. We consider a history of relatively small operating gains or
consistent and significant operating losses to be a primary indicator of
potential asset impairment. Assets are grouped and evaluated for impairment at
the lowest levels for which there are identifiable cash flows, primarily the
individual restaurants. A restaurant is deemed to be impaired if a forecast of
future operating cash flows directly related to the restaurant is less than its
carrying amount. While each of the four restaurants was cash flow positive, the
amount of projected cash flows was insufficient to cover our investments in
them. If a restaurant is determined to be impaired, the loss is measured as the
amount by which the carrying amount of the restaurant exceeds its fair value.
Fair value is an estimate based on the best information available, including
multiples of cash flow derived from recent purchases and sales in the restaurant
industry.

Cost of food and beverage sales increased in absolute amount and decreased when
expressed as a percentage of restaurant sales in fiscal 2005 when compared to
fiscal 2004. The increase in absolute amount is attributable to the increase in
sales. Beef and lobster costs, which comprise approximately 40% and 15%,
respectively, of our total commodity costs slightly increased in fiscal 2005
compared to fiscal 2004. The decrease when expressed as a percentage of sales is
attributable to menu price increases coupled with stable commodity costs in
fiscal 2005 compared to fiscal 2004.

Restaurant operating expenses increased in absolute amount but decreased
slightly when expressed as a percentage of restaurant sales in fiscal 2005 when
compared to fiscal 2004. The increase in absolute amount was mainly attributable
to the aforementioned increase in sales. The decrease when expressed as a
percentage of sales was attributable to continued gains in labor productivity in
fiscal 2005 when compared to fiscal 2004.

Restaurant opening expenses decreased in absolute amount and when expressed as a
percentage of restaurant sales in fiscal 2005. The decrease is attributable to
fewer restaurants under active development in fiscal 2005 compared to fiscal
2004.

Marketing, general and administrative expenses increased in absolute amount and
when expressed as a percentage of restaurant sales in fiscal 2005 when compared
to fiscal 2004. The increase in absolute amount is attributable to increased
administration headcount and professional fees. Additional corporate personnel
were hired to accommodate the Company's growth plans. The increase in
professional fees is attributable to the Benihana of Tokyo, Inc. litigation of
$2,100,000 and to professional fees relating to Sarbanes-Oxley Section 404
compliance.

Interest expense, net, decreased in fiscal 2005 when compared to fiscal 2004.
The decrease was a result of a decrease in the average outstanding bank debt in
fiscal 2005 compared to fiscal 2004.

Our effective tax rate was 35.0% for fiscal 2005 compared to 33.4% for fiscal
2004. The increase was primarily a result of increased state income taxes and
changes in estimates made in the computation of the current year tax provision.


                                       7
<PAGE>

Net income for fiscal 2005 was $7.8 million, a decrease of 12.8% over net income
of approximately $9.0 million in fiscal 2004. Basic earnings per common share
decreased to $.81 for fiscal 2005 from basic earnings per share of $1.01 for
fiscal 2004. Basic average weighted shares outstanding increased by
approximately 267,000 shares to 9,154,000 shares at March 27, 2005 from
8,887,000 shares at March 28, 2004. Diluted earnings per common share decreased
to $.77 for fiscal 2005 from diluted earnings per common share of $.98 in fiscal
2004. Average diluted weighted shares outstanding increased by approximately
992,000 shares to 10,147,000 shares at March 27, 2005 from 9,155,000 shares at
March 28, 2004. The increase in both basic and diluted average weighted shares
outstanding during fiscal 2005 compared to fiscal 2004 was due to the issuance
of shares for stock option exercises and the issuance of convertible preferred
stock in fiscal 2005.

OUR FINANCIAL RESOURCES

Cash flow from operations has historically been the primary source to fund our
capital expenditures. Since the Company has accelerated its building program,
the Company will be relying more upon financing obtained from financial
institutions. The Company has financed acquisitions principally through the use
of borrowed funds.

The Company presently has borrowings from Wachovia Bank, National Association
("Wachovia") under a term loan. At March 26, 2006, the Company had $6,666,000
outstanding under the term loan which is payable in quarterly installments of
$833,333 until the term loan matures in December 2007. Additionally, the Company
maintains a revolving line of credit facility. The line of credit facility
allows the Company to borrow up to $15,000,000 through December 31, 2007. At
March 26, 2006, the Company had a $2,306,000 letter of credit outstanding
against the credit facility in connection with its workers compensation
insurance program. Accordingly, at March 26, 2006, the Company had $12,694,000
available for borrowing under the line of credit facility, as no amounts were
outstanding. The interest rate at March 26, 2006 of both the line of credit and
the term loan was 5.53%. The Company has the option to pay interest at
Wachovia's prime rate plus 1% or at libor plus 1%. The interest rate may vary
depending upon the ratio of the sum of earnings before interest, taxes,
depreciation and amortization, as defined in the agreement, to our indebtedness.
The loan agreements limit capital expenditures to certain amounts, require that
the Company maintain certain financial ratios and profitability amounts and
limit the payment of cash dividends.

On July 1, 2004, the Company received net proceeds of $9,253,000, after
transaction costs, representing the funding of the first $10,000,000 tranche of
its sale of $20,000,000 aggregate principal amount of Series B Convertible
Preferred Stock ("Series B Preferred Stock") to BFC Financial Corporation
("BFC"). In connection with the first tranche, the Company issued and sold
400,000 shares of its Series B Preferred Stock. John E. Abdo, a director of the
Company, is a director and Vice Chairman of the Board of BFC and is a
significant shareholder of BFC.

On August 4, 2005, the Company completed the second and final tranche consisting
of $10,000,000 aggregate principal amount of its Series B Preferred Stock sold
to BFC. In connection with the second tranche, the Company issued and sold
400,000 shares of its Series B Preferred Stock. The Company received net
proceeds of $9,884,000, after transaction costs, from the sale.

The Series B Preferred Stock has a liquidation preference of $20,000,000, or
$25.00 per share, (subject to anti-dilution provisions). The Series B Preferred
Stock is convertible into Common Stock of the Company at a conversion price of
$19.00 per share, that is 1.32 shares of Common Stock for each share of Series B
Preferred Stock (subject to anti-dilution provisions), carries a dividend at the
annual rate of $1.25 per share (or 5% of the purchase price) payable in cash or
additional Series B Preferred Stock, and votes on an "as if converted" basis
together with the Company's Common Stock on all matters put to a vote of the
holders of Common Stock. In addition, under certain circumstances, the approval
of a majority of the Series B Preferred Stock is required for certain events
outside the ordinary course of business, principally acquisitions or disposition
of assets having a value in excess of 25% of the total consolidated assets of
the Company.

The Company pays quarterly dividends on the Series B Preferred Stock, and at
March 26, 2006, accrued but unpaid dividends on the Series B Preferred Stock
totaled $233,000.

The Company is obligated to redeem the Series B Preferred Stock at its original
issue price on July 2, 2014, which date may be extended by the holders of a
majority of the then-outstanding shares of Series B Preferred Stock to a date no
later than July 2, 2024. The Company may pay the redemption in cash or, at its
option, in shares of Common Stock valued at then-current market prices unless
the aggregate market value of the Company's Common Stock and any other common
equity is below $75.0 million. In addition, the Series B Preferred Stock may, at
the Company's option, be redeemed in cash at any time beginning three years from
the date of issue if the volume-weighted average price of the Common Stock
exceeds $38.00 per share for sixty consecutive trading days.

The holders of a majority of the outstanding Series B Preferred Stock are
entitled to nominate one individual to the Company's board of directors. In the
event that dividends are not paid for two consecutive quarters, the holders of
the majority of the Series B Preferred Stock are entitled to elect one
additional director.

As further discussed in Item 3. Legal Proceedings, the sale of the Series B
Preferred Stock is the subject of pending litigation. While the Delaware Court
of Chancery (the "Chancery Court") has rejected all claims asserted against the
Company and certain directors, the decision has been appealed. The Company and
its Board of Directors believe

                                       8
<PAGE>

that the financing was and is in the best interests of the Company and all of
its shareholders, that there is no merit to the pending legal action, and intend
to continue to vigorously defend and oppose the action. The appeal has been
briefed and argued to the Delaware Supreme Court, and the parties are awaiting a
decision from that court. The Company has not recorded a liability for this
lawsuit, but legal expenses are being incurred and recognized to defend the
Company and members of the Board of Directors. There can be no assurance that an
adverse result from an appeal that overturns the Chancery Court's ruling will
not have a material adverse effect on the Company and its financial position.

The Company has entered into supply agreements for the purchase of beef, chicken
and seafood, in the normal course of business, at fixed prices for twelve- and
six-month terms, respectively, beginning on January 1, 2006. These supply
agreements will eliminate volatility in the cost of the commodities over the
terms of the agreements. These supply agreements are not considered derivative
contracts.

Since restaurant businesses do not have large amounts of inventory and accounts
receivable, there is generally no need to finance such items. As a result, many
restaurant businesses, including our own, operate with negative working capital.

The following table summarizes the sources and uses of cash and cash equivalents
(in thousands):

                                                           Fiscal year ended
                                                       ------------------------
                                                           2006         2005
                                                       ------------------------
    Cash provided by operating activities                $ 29,440     $ 25,414
    Cash used in investing activities                     (25,119)     (22,172)
    Cash provided by (used in) financing activities        11,539       (2,160)
                                                       ------------------------
    Increase in cash                                     $ 15,860     $  1,082
                                                       ========================

We have undertaken a design initiative to develop a prototype Benihana
teppanyaki restaurant to improve the unit-level economics while shortening
construction time and improving decor. The restaurant in Miramar, Florida, which
opened during June 2006, is the first restaurant to feature the new prototype
design. Under a renovation program commenced during 2005, we are also using many
of the design elements of the new prototype to refurbish our older teppanyaki
restaurant units.

During fiscal 2006, management made a strategic decision to accelerate the
renovation and revitalization program. We are committed to revitalizing our
40-plus year old Benihana teppanyaki concept for a new generation, while
simultaneously generating a solid return on invested capital for our
shareholders. The new design reflects the cutting edge of contemporary dining
and entertainment, and places the customer at the center of the Benihana
experience through the visual impact of the exterior, a vibrant waiting area,
and a more dramatic stage setting for our legendary Benihana Chefs. We plan to
refurbish approximately 20-25 of our older teppanyaki restaurants over a thirty
month timeframe. By beginning the transformation of our 20-25 older Benihana
teppanyaki units now, we are opportunistically building a stronger foundation
for our core brand amid a growing American appetite for Asian cuisine. During
fiscal 2006, our restaurant in Short Hills, New Jersey was the first teppanyaki
to be retrofitted with the new design elements. Management is pleased with the
initial impact that this enhanced atmosphere has had on sales at the Short Hills
location. While it is still early in the renovation program, management
anticipates similar results at our Memphis and Cleveland restaurants, which have
recently re-opened after renovations were completed in May 2006. We believe
that we will complete the renovation of eight restaurants in fiscal 2007 and
have an additional three in progress by the end of the fiscal year. As we roll
out the new design over fiscal 2007, we currently estimate the capital
expenditures of the program to average approximately $2.0 million per unit. We
believe the long-term benefits of the revitalization initiative far outweigh the
costs. The program will enhance our leadership position as the premier choice
for Japanese-style dining.

Other future capital requirements depend on numerous factors, including market
acceptance of products, the timing and rate of expansion of the business,
acquisitions, and other factors. The Company has experienced increases in its
expenditures commensurate with growth in its operations and management
anticipates that expenditures will continue to increase in the foreseeable
future. The Company currently has ten restaurants under development, consisting
of four Benihana teppanyaki restaurants, five RA Sushi restaurants, and one Haru
restaurant.

In addition to the renovation program, the Company will use its capital
resources to settle the outstanding liability incurred when the Minority
Stockholders exercised their put option in Haru Holding Corp. On July 1, 2005,
the Minority Stockholders exercised the put option to sell their respective
shares to the Company. Currently, there is a dispute between the Company and the
former Minority Stockholders concerning the price at which the former Minority
Stockholders exercised their put option to sell the remaining interest in Haru
to the Company. The Company believes that the proper application of the put
option price formula would result in a payment to the former Minority
Stockholders of approximately $3.7 million. Under the former Minority
Stockholders' interpretation of the put option price formula, they claim to be
entitled to a greater payment. There can be no assurance that this matter will
not result in a legal proceeding or that the Company's interpretation of the put
option price formula will prevail in any such proceeding. The Company has
recorded a $3.7 million liability for the payment of the put option.

                                       9
<PAGE>

Management believes that the Company's cash from operations and the funds
available under the term loan and line of credit and the proceeds from the
issuances of the Series B Preferred Stock will provide sufficient capital to
fund operations, the restaurant renovation program and restaurant expansion for
at least the next twelve months.

Contractual obligations and commitments (in thousands):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                    Total        2007         2008        2009        2010        2011    Thereafter
--------------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>        <C>         <C>         <C>         <C>
Long-term debt obligations(1)       $  6,666     $ 4,166      $ 2,500           -           -          -           -
Operating lease obligations          148,487      11,013       10,968      11,016      10,910     10,860      93,720
RA Sushi contingent payment              228         228            -           -           -          -           -
Haru put option                        3,718       3,718            -           -           -          -           -
--------------------------------------------------------------------------------------------------------------------
  Total                             $159,099     $19,125      $13,468     $11,016     $10,910    $10,860     $93,720
====================================================================================================================
</TABLE>

(1)  Long-term debt obligations do not include interest. We have the option to
     pay interest at Wachovia's prime rate plus 1% or at libor plus 1%. The
     interest rate may vary depending upon the ratio that ebitda has to our
     total indebtedness as defined in the loan agreement. Estimated interest
     payments are $281,000 and $75,000 for fiscal year ending 2007 and 2008,
     respectively.

OPERATING ACTIVITIES

Cash provided by operations increased during the year when compared to fiscal
2005. The increase resulted mainly from the increase in net income, adjusted for
depreciation and amortization, offset by the changes in working capital during
the current fiscal year when compared to the prior fiscal year.

INVESTING ACTIVITIES

Expenditures for property and equipment increased during fiscal 2006 when
compared to the prior year. The Company continues to pursue its new construction
and renovation programs. Capital expenditures are expected to increase, as the
Company accelerates the pace of its programs. The Company currently has ten
restaurants under development, consisting of four Benihana teppanyaki
restaurants, five RA Sushi restaurants and one Haru restaurant.

Additionally, during fiscal 2006, the Company acquired a teppanyaki restaurant
facility in Tucson, Arizona. The purchase price, which was paid in cash, totaled
$1.9 million. The restaurant facility has been converted to a Benihana
restaurant.

During fiscal 2006, the Company also sold a Benihana restaurant facility located
in Monterey, California, to a new franchisee. The restaurant facility was sold
for $522,000, of which $147,000 was paid in cash and $375,000 is payable with
interest over three years.

FINANCING ACTIVITIES

During fiscal 2006, there were stock option exercises with cash proceeds to the
Company of $5,720,000 as compared to $612,000 in the prior year. Our total
indebtedness decreased by $3,360,000 during fiscal 2006. We paid down $3,334,000
of the term loan and paid $26,000 under leases that are considered to be capital
in nature. Additionally, as discussed above, on August 4, 2005, the Company
completed the take down of the second and final tranche consisting of
$10,000,000 aggregate principal amount of its Series B Preferred Stock sold to
BFC. In connection with the second tranche, the Company issued and sold 400,000
shares of its Series B Preferred Stock. The Company received net proceeds of
$9,884,000, after transaction costs, from the sale.

THE IMPACT OF INFLATION

The Company does not believe that inflation has had a material effect on sales
or expenses during the last three years other than labor costs. The Company's
restaurant operations are subject to federal and state minimum wage laws
governing such matters as working conditions, overtime and tip credits.
Significant numbers of the Company's food service and preparation personnel are
paid at rates related to the federal minimum wage and, accordingly, increases in
the minimum wage have increased the Company's labor costs in recent years. To
the extent permitted by competition, the Company has mitigated increased costs
by increasing menu prices and may continue to do so if deemed necessary in
future years.


                                       10
<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are exposed to certain risks of increasing interest rates and commodity
prices. The interest on our indebtedness is largely variable and is benchmarked
to the prime rate in the United States or to libor. We may protect ourselves
from interest rate increases from time-to-time by entering into derivative
agreements that fix the interest rate at predetermined levels. We have a policy
not to use derivative agreements for trading purposes. We have no derivative
agreements as of March 26, 2006.

We purchase commodities such as chicken, beef, lobster, fish and shrimp for our
restaurants. The prices of these commodities may be volatile depending upon
market conditions. We do not purchase forward commodity contracts because the
changes in prices for them have historically been short-term in nature and, in
our view, the cost of the contracts is in excess of the benefits.

We have, however, entered into supply agreements for the purchase of beef,
chicken and seafood, in the normal course of business, at fixed prices for
twelve- and six-month terms, respectively, beginning on January 1, 2006. These
supply agreements will eliminate volatility in the cost of the commodities over
the terms of the agreements. These supply agreements are not considered
derivative contracts.

SEASONALITY OF OUR BUSINESS

We have a 52/53-week fiscal year. Our fiscal year ends on the Sunday within the
dates of March 26 through April 1. We divide the fiscal year into 13 four-week
periods. Because of the odd number of periods, our first fiscal quarter consists
of 4 periods totaling 16 weeks and each of the remaining three quarters consists
of 3 periods totaling 12 weeks each. In the event of a 53-week year, the
additional week is included in the fourth quarter of the fiscal year. This
operating calendar provides us a consistent number of operating days within each
period, as well as ensures that certain holidays significant to our operations
occur consistently within the same fiscal quarters. Because of the differences
in length of fiscal quarters, however, results of operations between the first
quarter and the later quarters of a fiscal year are not comparable.

Our business is not highly seasonal although we do have more diners coming to
our restaurants for special holidays such as Mother's Day, Valentine's Day and
New Year's Eve. Mother's Day falls in our first fiscal quarter, New Year's Eve
in the third fiscal quarter and Valentine's Day in the fourth fiscal quarter of
each year.

Each of fiscal years 2006, 2005 and 2004 consisted of 52 weeks.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities during the reported period. Actual amounts
could differ from those estimates. (See Note 1 of Notes to Consolidated
Financial Statements included in this Annual Report).

Critical accounting policies are those that we believe are most important to
portraying our financial condition and results of operations and also require
the greatest amount of subjective or complex judgments by management. Judgments
or uncertainties regarding the application of these policies may result in
materially different amounts being reported under different conditions or using
different assumptions. We consider the following policies to be the most
critical in understanding the judgments that are involved in preparing our
consolidated financial statements.

We record all property and equipment at cost. Improvements are capitalized while
repairs and maintenance costs are expensed as incurred. Depreciation and
amortization of long-lived assets are calculated using the straight-line method
over the estimated useful life of the assets or the lease terms of the
respective leases. The useful life of property and equipment and the
determination as to what constitutes a capitalized cost versus a repair and
maintenance expense involves judgments by management. These judgments may
produce materially different amounts of depreciation and amortization expense
and repairs and maintenance expense if different assumptions were used.

We periodically assess the potential impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Recoverability of assets is measured by comparing the carrying
value of the assets to the future cash flows to be generated by the asset. If
the total estimated future cash flows are less than the carrying amount of the
asset, the carrying amount is written down to the estimated fair value, and an
impairment charge is taken against results of operations. In fiscal 2005 we
recorded such an impairment charge resulting in a write down of long-lived
assets of approximately $2.7 million. (See Note 3 of Notes to Consolidated
Financial Statements). No impairment charges were recognized during fiscal 2006
or 2004.


                                       11
<PAGE>

We review the recoverability of goodwill annually based primarily upon an
estimation of the fair market value based upon an analysis of cash flows of the
related investment assets in comparison to cash flows of similar restaurant
businesses that were bought and sold within a reasonable time frame to our own
evaluation. Our annual evaluation is made during the third fiscal quarter of
each year. We also would make a similar evaluation whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable. The
analysis involves judgments by management which could produce materially
different results if different assumptions are used in the analysis.

The Company is obligated under various lease agreements for certain restaurant
facilities. For operating leases, the Company recognizes rent expense on a
straight-line basis over the expected lease term. Capital leases are recorded as
an asset and an obligation at an amount equal to the present value of the
minimum lease payments during the lease term. Under the provisions of certain of
the Company's leases, there are rent holidays and/or escalations in payments
over the base lease term, as well as options for renewal for additional periods.
The effects of the rent holidays and escalations have been reflected in rent
expense on a straight-line basis over the expected lease term, which includes
option periods when management determines that the Company will exercise such
option periods due to the fact that the Company would incur an economic penalty
for not doing so. The lease term commences on the date when the Company becomes
legally obligated for the rent payments. The leasehold improvements and property
held under capital leases for each restaurant facility are amortized on the
straight-line method over the shorter of the estimated life of the asset or the
same expected lease term used for lease accounting purposes. For each restaurant
facility, the consolidated financial statements reflect the same lease term for
amortizing leasehold improvements as the Company uses to determine capital
versus operating lease classifications and in calculating straight-line rent
expense. Percentage rent expense is generally based upon sales levels and is
accrued at the point in time the Company determines that it is probable that
such sales levels will be achieved. Leasehold improvements paid for by the
lessor are recorded as leasehold improvements and deferred rent.

Judgments made by the Company related to the probable term for each restaurant's
lease affect the classification and accounting for a lease as capital or
operating, the rent holidays and/or escalations in payments that are taken into
consideration when calculating straight-line rent, and the term over which
leasehold improvements for each restaurant facility are amortized. These
judgments may produce materially different amounts of depreciation, amortization
and rent expense than would be reported if different lease term assumptions were
used.

We are self-insured for a significant portion of our employee health and
workers' compensation programs. The Company maintains stop-loss coverage with
third party insurers to limit its total claims exposure. The accrued liability
associated with these programs is based on our estimate of the ultimate costs to
be incurred to settle known claims and an estimate of claims incurred but not
reported to the Company as of the balance sheet date. Our estimated liability is
not discounted and is based on a number of assumptions and factors, including
historical trends, actuarial assumptions and economic conditions. If actual
trends, including the severity or frequency of claims, differ from our
estimates, our financial results could be impacted.

We estimate certain components of our provision for income taxes. These
estimates include, but are not limited to, effective state and local income tax
amounts, allowable tax credits for items such as FICA taxes paid on reported tip
income and estimates related to depreciation expense allowable for tax purposes.
Our estimates are made based on the best available information at the time that
we prepare the provision. We usually file our income tax returns many months
after our fiscal year-end. All tax returns are subject to audit by federal and
state governments, usually years after the returns are filed, and could be
subject to differing interpretations of the tax laws or the Company's
application of such laws to its business (see Note 12 of Notes to Consolidated
Financial Statements). During fiscal 2004, the Internal Revenue Service
completed an examination of the Company's fiscal 2000, 2001 and 2002 Federal
Income Tax returns. The examination did not result in any material adverse tax
or financial consequences.

NEW ACCOUNTING PRONOUNCEMENTS THAT MAY AFFECT OUR FINANCIAL REPORTING

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which replaces SFAS
No. 123, "Accounting for Stock-Based Compensation", ("SFAS 123") and supersedes
APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123R
requires compensation costs related to share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on their fair values. With limited exceptions, the amount of
compensation cost will be measured based on the fair market value on the grant
date of the equity or liability instruments issued. Compensation cost will be
recognized over the period that an employee provides service for that award,
resulting in a decrease in net earnings. As of March 27, 2006, the beginning of
fiscal 2007, the Company has adopted this new standard, as amended.

As permitted by SFAS 123, prior to March 27, 2006, the Company accounted for
share-based payments to employees using the intrinsic value method and, as such,
generally recognized no compensation cost for employee stock options.
Accordingly, the adoption of SFAS 123R's fair value method will impact the
Company's results of operations, although it will have no impact on the
Company's overall financial position. The estimated impact of adopting SFAS 123R
for fiscal 2007, relating to prior year grants only, will be approximately
$161,000, net of tax. However, had the Company adopted SFAS 123R in prior years,
the impact of that standard would have approximated the impact of SFAS 123 as
presented in the disclosure of pro forma net income and earnings per share in
Note 1 of the consolidated financial statements. SFAS 123R also requires the
benefits of tax deductions

                                       12
<PAGE>

in excess of recognized compensation cost to be reported as financing cash flow,
rather than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in the periods after adoption. While the Company cannot estimate what
those amounts will be in the future, the amount of operating cash flows
recognized in fiscal years 2006, 2005 and 2004 for such excess tax deductions
were $2,677,000, $145,000 and $162,000, respectively.


FORWARD LOOKING STATEMENTS


This Annual Report contains various "forward-looking statements" which represent
our expectations or beliefs concerning future events, including unit growth,
future capital expenditures, and other operating information. A number of
factors could, either individually or in combination, cause actual results to
differ materially from those included in the forward-looking statements,
including changes in consumer dining preferences, fluctuations in commodity
prices, availability of qualified employees, changes in the general economy,
industry cyclicality, and in consumer disposable income, competition within the
restaurant industry, availability of suitable restaurant locations, or
acquisition opportunities, harsh weather conditions in areas in which the
Company and its franchisees operate restaurants or plan to build new
restaurants, acceptance of the Company's concepts in new locations, changes in
governmental laws and regulations affecting labor rates, employee benefits, and
franchising, ability to complete new restaurant construction and obtain
governmental permits on a reasonably timely basis, the possibility of an adverse
outcome in the lawsuit against the Company brought by Benihana of Tokyo, Inc. or
in the Company's dispute with the former Minority Stockholders of Haru Holding
Corp., unstable economic and conditions in foreign countries where we franchise
restaurants and other factors that we cannot presently foresee.






                                       13
<PAGE>



CONSOLIDATED FINANCIAL STATEMENTS

BENIHANA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share information)
<TABLE>
<CAPTION>
                                                                               Fiscal year ended
                                                                ----------------------------------------------
                                                                    March 26,       March 27,       March 28,
                                                                      2006            2005            2004
--------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>             <C>
REVENUES

Restaurant sales                                                   $ 244,032       $ 216,756       $ 201,335
Franchise fees and royalties                                           1,521           1,575           1,628
--------------------------------------------------------------------------------------------------------------
Total revenues                                                       245,553         218,331         202,963
--------------------------------------------------------------------------------------------------------------

COSTS AND EXPENSES

Cost of food and beverage sales                                       59,014          53,372          51,437
Restaurant operating expenses                                        139,433         126,825         118,183
Restaurant opening costs                                               1,270           1,304           2,088
Marketing, general and administrative expenses                        22,693          20,939          16,362
Impairment charge                                                          -           2,668               -
--------------------------------------------------------------------------------------------------------------
Total operating expenses                                             222,410         205,108         188,070
--------------------------------------------------------------------------------------------------------------

Income from operations                                                23,143          13,223          14,893
Interest (income) expense, net                                           (88)            298             457
--------------------------------------------------------------------------------------------------------------

Income before income taxes and minority interest                      23,231          12,925          14,436
Income tax provision                                                   8,491           4,520           4,821
--------------------------------------------------------------------------------------------------------------

Income before minority interest                                       14,740           8,405           9,615
Minority interest                                                        178             585             643
--------------------------------------------------------------------------------------------------------------

NET INCOME                                                            14,562           7,820           8,972
Less:  accretion of issuance costs and preferred
   stock dividends                                                     1,430             422               -
--------------------------------------------------------------------------------------------------------------

Net Income attributable to common stockholders                     $  13,132       $   7,398       $   8,972
==============================================================================================================

EARNINGS PER SHARE

Basic earnings per share                                           $    1.40       $     .81       $    1.01
Diluted earnings per share                                         $    1.36       $     .77       $     .98
==============================================================================================================
</TABLE>


See notes to consolidated financial statements.

                                                               14
<PAGE>



<TABLE>
<CAPTION>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
                                                                                      March 26,      March 27,
                                                                                        2006            2005
----------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>          <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                         $  19,138    $   3,278
     Receivables, net                                                                      2,437          910
     Inventories                                                                           6,528        6,571
     Income tax receivable                                                                 1,634          -
     Prepaid expenses and other current assets                                             1,517        1,727
     Deferred income tax asset, net                                                          805          417
----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                      32,059       12,903

PROPERTY AND EQUIPMENT, NET                                                              123,578      108,132
GOODWILL                                                                                  29,900       28,131
OTHER ASSETS                                                                               5,979        5,088
----------------------------------------------------------------------------------------------------------------
                                                                                       $ 191,516    $ 154,254
================================================================================================================
LIABILITIES, MINORITY INTEREST, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                                  $   8,044    $   6,414
     Accrued expenses                                                                     20,821       15,667
     Accrued put option liability                                                          3,718            -
     Income tax payable                                                                        -        1,001
     Current maturity of bank debt                                                         4,166        3,333
     Current maturities of obligations under capital leases                                    -           26
----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                 36,749       26,441

LONG-TERM DEBT - BANK                                                                      2,500        6,667
DEFERRED OBLIGATIONS UNDER OPERATING LEASES                                                7,059        6,479
DEFERRED INCOME TAX LIABILITY, NET                                                           673          156
----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                         46,981       39,743
----------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (NOTES 10, 11 AND 13)
MINORITY INTEREST                                                                              -        1,999
CONVERTIBLE PREFERRED STOCK - $1.00 par value; authorized - 5,000,000 shares;
         Series B Mandatory Redeemable Convertible Preferred Stock - authorized
         - 800,000 shares; issued and outstanding - 800,000 and 400,000 shares
         in 2006 and 2005, respectively, with a liquidation preference of $20
         million plus
         accrued and unpaid dividends as of March 26, 2006 (Note 14)                      19,273        9,305
STOCKHOLDERS' EQUITY:
     Common stock - $.10 par value; convertible into Class A Common stock;
         authorized - 12,000,000 shares; issued and outstanding
         - 2,649,953 and 2,975,978 shares in 2006 and 2005, respectively                     265          298
     Class A Common stock - $.10 par value; authorized -
         20,000,000 shares; issued and outstanding -
         7,111,671 and 6,198,475 shares in 2006 and 2005, respectively                       711          620
     Additional paid-in capital                                                           60,393       51,528
     Retained earnings                                                                    64,036       50,904
     Treasury stock - 10,828 shares of Common and Class A Common
         stock at cost                                                                      (143)        (143)
----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                               125,262      103,207
----------------------------------------------------------------------------------------------------------------
                                                                                       $ 191,516    $ 154,254
================================================================================================================
See notes to consolidated financial statements
</TABLE>

                                                      15
<PAGE>


BENIHANA INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share information)
<TABLE>
<CAPTION>
                                                                   Class A  Additional                         Total
                                                       Common      Common    Paid-in    Retained  Treasury  Stockholders'
                                                        Stock       Stock    Capital    Earnings   Stock       Equity
--------------------------------------------------------------------------------------------------------------------------
<S>            <C> <C>                                    <C>        <C>     <C>        <C>        <C>         <C>
BALANCE, MARCH 30, 2003                                   $318       $560    $48,444    $34,534    $(143)      $83,713
     Net income                                                                           8,972                  8,972
     Issuance of 207,000 shares of Class A
         Common stock from exercise of warrants                        21      1,420                             1,441
     Issuance of 85,943 shares of Class A
         Common stock from exercise of options                          8        532                               540
     Issuance of 30,000 shares of Common stock
         from exercise of options                            3                   214                               217
     Conversion of 79,500 shares of Common
         stock into 79,500 shares of Class A Common
         stock                                              (8)         8                                            -
     Tax benefit from stock option exercises                                     162                               162
-----------------------------------------------------------------------------------------------------------------------

BALANCE, MARCH 28, 2004                                    313        597     50,772     43,506     (143)       95,045
     Net income                                                                           7,820                  7,820
     Issuance of 71,598 shares of Class A Common
        stock from exercise of options                                  8        604                               612
     Conversion of 159,000 shares of Common
         stock into 159,000 shares of Class A
         Common stock                                      (15)        15                                            -
     Issuance of 350 shares of Class A Common stock
         for incentive compensation                                                7                                 7
     Dividends declared on Series B Preferred Stock                                        (370)                  (370)
     Accretion of issuance costs on Series B
     Preferred Stock                                                                        (52)                   (52)
     Tax benefit from stock option exercises                                     145                               145
-----------------------------------------------------------------------------------------------------------------------

BALANCE, MARCH 27, 2005                                    298        620     51,528     50,904     (143)      103,207
     Net income                                                                          14,562                 14,562
     Issuance of 571,670 shares of Class A Common
         stock from exercise of options                                57      5,532                             5,589
     Issuance of 15,500 shares of Common stock
         from exercise of options                            1                   130                               131
     Conversion of 341,526 shares of Common
         stock into 341,526 shares of Class A
         Common stock                                      (34)        34                                            -
     Dividends declared on Series B Preferred Stock                                        (820)                  (820)
     Accretion of issuance costs on Series B
Preferred Stock                                                                             (84)                   (84)
     Deemed dividend on Series B Preferred Stock
         beneficial conversion feature                                           526       (526)                     -
     Tax benefit from stock option exercises                                   2,677                             2,677
-----------------------------------------------------------------------------------------------------------------------

BALANCE, MARCH 26, 2006                                   $265       $711    $60,393    $64,036    $(143)     $125,262
=======================================================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                        16
<PAGE>

<TABLE>
<CAPTION>
BENIHANA INC. AND SUBSIDIARIES                                                          Fiscal year ended
                                                                               ------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share information)                                        March 26,    March 27,   March 28,
                                                                                  2006         2005        2004
-------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>         <C>
OPERATING ACTIVITIES:
     Net income                                                                 $ 14,562     $  7,820    $  8,972
     Adjustments to reconcile net income to net cash provided by operating
        activities, net of business acquisitions
        Depreciation and amortization                                             11,896        9,837       8,657
        Minority interest                                                            178          585         643
       Tax benefit from stock option exercises                                     2,677          145         162
        Loss on disposal of assets                                                   149          327         154
        Deferred income taxes                                                        129          (76)      2,265
        Impairment charge                                                              -        2,668           -
        Issuance of Class A Common stock for incentive compensation                    -            7           -
        Change in operating assets and liabilities that provided (used) cash:
          Receivables                                                             (1,402)         (28)       (256)
          Inventories                                                                 22         (424)       (819)
          Income taxes                                                            (2,635)       1,897          73
          Prepaid expenses and other current assets                                  210         (197)       (263)
          Other assets                                                            (1,163)        (716)        (59)
          Accounts payable                                                           988          771          81
          Accrued expenses                                                         3,829        2,798       1,913
-----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                         29,440       25,414      21,523
 ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
     Expenditures for property and equipment                                     (25,486)     (18,978)    (22,950)
     Business acquisition, net of cash acquired                                        -       (2,816)          -
     Payment of contingent consideration on RA Sushi acquisition                    (348)        (652)          -
     Cash proceeds from sales of property and equipment                              715          274           -
     Other                                                                             -            -          (4)
-----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                            (25,119)     (22,172)    (22,954)
-----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
     Repayment of long-term debt and obligations under capital leases             (3,360)     (19,773)    (18,270)
     Proceeds from issuance of Series B Preferred stock, net                       9,884        9,253           -
     Proceeds from issuance of long-term debt                                          -        8,000      17,400
     Proceeds from issuance of Common stock and Class A
         Common stock from exercise of options and warrants                        5,720          612       2,198
     Dividends paid on preferred stock                                              (705)        (252)          -
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                               11,539       (2,160)      1,328
-----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                              15,860        1,082        (103)
Cash and cash equivalents, beginning of year                                       3,278        2,196       2,299
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                          $ 19,138     $  3,278    $  2,196
=================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE FISCAL YEAR FOR:
     Interest                                                                   $    387     $    386    $    484
     Income taxes                                                               $  8,331     $  3,380    $  2,305
BUSINESS ACQUISITIONS, NET OF CASH ACQUIRED:
     Fair value of assets acquired, other than cash                                    -     $  2,816           -
=================================================================================================================
</TABLE>

NONCASH INVESTING AND FINANCING ACTIVITIES:
During fiscal 2006, 2005 and 2004, the Company acquired property and equipment
     totaling $3,635,000, $1,083,000 and $244,000, respectively, for
     which cash payments had not yet been made.
During fiscal 2006, 2005 and 2004, $228,000, $348,000 and $652,000 of goodwill
     was recorded related to contingent payments accrued for the RA Sushi
     acquisition, respectively.
During fiscal 2006, the Company accrued $3,718,000 related to the Haru put
     option liability.
During fiscal 2006, the Company received a note receivable for $375,000 as
     partial consideration for the sale of a Benihana restaurant located in
     Monterey, California.
As of the end of fiscal years 2006, 2005 and 2004, accrued but unpaid dividends
     on the Series B Preferred Stock totaled $233,000, $118,000 and $-0-,
     respectively.

See notes to consolidated financial statements.


                                                        17
<PAGE>


BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 26, 2006, MARCH 27, 2005 AND MARCH 28, 2004
-------------------------------------------------------------

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         OPERATIONS - Benihana Inc., including its majority owned subsidiaries
         (the "Company"), owned and operated 56 teppanyaki theme and 17 Japanese
         theme restaurants featuring sushi, as of March 26, 2006. The Company
         also has 21 franchised teppanyaki theme restaurants as of March 26,
         2006. The Company has the rights to open, license and develop
         restaurants using the Benihana name and trademarks in the United
         States, Central and South America and the Caribbean islands.

         BASIS OF PRESENTATION - The consolidated financial statements include
         the assets, liabilities and results of operations of the Company's
         majority-owned subsidiaries. The ownership of other interest holders
         including attributable income is reflected as minority interest. All
         intercompany accounts and transactions have been eliminated in
         consolidation.

         The Company has a 52/53-week fiscal year. The Company's fiscal year
         ends on the Sunday within the dates of March 26 through April 1. The
         Company divides the fiscal year into 13 four-week periods. Because of
         the odd number of periods, the Company's first fiscal quarter consists
         of 4 periods totaling 16 weeks and each of the remaining three quarters
         consists of 3 periods totaling 12 weeks each. In the event of a 53-week
         year, the additional week is included in the fourth quarter of the
         fiscal year. This operating calendar provides the Company a consistent
         number of operating days within each period, as well as ensures that
         certain holidays significant to the Company occur consistently within
         the same fiscal quarters. Because of the differences in length of
         fiscal quarters, however, results of operations between the first
         quarter and the later quarters of a fiscal year are not comparable.
         Each of fiscal years 2006, 2005 and 2004 consisted of 52 weeks.

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America
         ("generally accepted accounting principles") requires that management
         make estimates and assumptions that affect the reported amounts of
         assets and liabilities at the date of the financial statements and the
         reported amounts of revenue and expenses during the reporting period.
         Actual amounts could differ from those estimates.

         Certain amounts shown in the consolidated balance sheet as of March 27,
         2005 have been reclassified to conform to the current year consolidated
         balance sheet presentation. Specifically, accounts payable and income
         tax payable have been presented as separate items in the current year
         presentation. Corresponding changes have been made to the consolidated
         statements of cash flows for fiscal 2005 and 2004.

         Additionally, in the accompanying consolidated statements of cash flows
         for fiscal 2005 and 2004, respectively, the Company has changed the
         classification of the following items:

               o    The tax benefit from stock option exercises to present such
                    as an operating activity. The Company previously presented
                    such amount as a financing activity.
               o    Contingent payment of $652,000 made during fiscal 2005
                    related to its RA Sushi acquisition as a use of cash related
                    to investing activities in the accompanying consolidated
                    statement of cash flows for fiscal 2005. The payment had
                    been previously presented within the change in operating
                    liabilities and was reducing the net cash provided by
                    operating activities during 2005.
               o    Additions to property and equipment for which payments had
                    not been made as of the respective period end. These amounts
                    were previously presented within the change in operating
                    liabilities and as expenditures for property and equipment
                    instead of as noncash investing activities.

         These changes resulted in:

               o    a net decrease of $42,000 in fiscal 2005 and a net increase
                    of $1,074,000 in fiscal 2004 in net cash provided by
                    operating activities;
               o    a net decrease of $187,000 in fiscal 2005 and a net increase
                    of $912,000 in fiscal 2004 in net cash used in investing
                    activities; and
               o    an increase of $145,000 in fiscal 2005 in net cash used in
                    financing activities and a decrease of $162,000 in fiscal
                    2004 in net cash provided by financing activities from
                    amounts previously presented.


                                       18
<PAGE>

         REVENUE RECOGNITION - RESTAURANT SALES - Revenues from food and
         beverage sales are recognized as products are sold. FRANCHISE FEES AND
         ROYALTIES - The Company recognizes initial franchise fees as income
         when substantially all of its obligations are satisfied, which
         generally coincides with the opening of the franchised restaurants. The
         Company also receives continuing royalties based upon a percentage of
         each franchised restaurant's gross revenues. Royalties are recognized
         as income when earned.

         CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
         investment instruments purchased with an initial maturity of three
         months or less to be cash equivalents. Amounts receivable from
         third-party credit card processors are also considered cash equivalents
         because they are both short-term and highly liquid in nature and are
         typically converted to cash within three days of the sales transaction.

         INVENTORIES - Inventories, which consist principally of restaurant
         operating supplies and food and beverage, are stated at the lower of
         cost (first-in, first-out method) or market.

         ACCOUNTING FOR LONG-LIVED ASSETS - Property and equipment are stated at
         cost. The Company capitalizes all direct costs incurred to construct
         restaurants. Upon opening, these costs are depreciated and charged to
         expense based upon their useful life classification. Rent expense
         incurred during the construction period is not capitalized but is
         charged to restaurant opening costs. The amount of interest capitalized
         in connection with restaurant construction was approximately $213,000
         in fiscal 2006, $127,000 in fiscal 2005 and $92,000 in fiscal 2004.

         The Company evaluates its net investment in restaurant properties for
         impairment when events or changes in circumstances that indicate the
         carrying amounts of an asset may not be recoverable. During fiscal
         2005, the Company recorded an impairment charge of $2,668,000 for the
         write-down to fair value of property and equipment at two teppanyaki
         restaurants, one RA Sushi restaurant and its sole Doraku restaurant.
         (See Note 3). No impairment charges were recognized during fiscal years
         2006 or 2004.

         DEPRECIATION AND AMORTIZATION - Depreciation and amortization are
         computed by the straight-line method over the estimated useful life
         (buildings - 30 years; restaurant furniture, fixtures and equipment - 8
         years; office equipment - 8 years; personal computers, software and
         related equipment - 3 years; and leasehold improvements - lesser of the
         underlying lease terms, including renewal options, or their useful
         lives). Depreciation expense associated with property and equipment,
         including property under capital leases, totaled $11,386,000,
         $9,452,000, and $8,145,000, for fiscal years 2006, 2005, and 2004,
         respectively. During fiscal 2006, the Company incurred an incremental
         $1.1 million in depreciation expense related to the Company's review of
         estimated useful lives of assets at restaurants to be remodeled.

         ACCOUNTING FOR GOODWILL AND INTANGIBLES - Goodwill represents the
         residual purchase price after allocation of the purchase price of
         assets acquired. Goodwill and intangible assets deemed to have
         indefinite lives are not amortized, but are subject to annual
         impairment tests. Intangible assets deemed to have definite lives are
         amortized over their estimated useful lives.

         The Company annually reviews goodwill for recoverability based
         primarily on a multiple of earnings analysis comparing the fair value
         to the carrying value. The Company performs its annual assessment for
         impairment during the third quarter of its fiscal year and more
         frequently if impairment indicators are identified during the year. The
         Company reviewed goodwill for possible impairment during fiscal 2006,
         2005 and 2004 and determined that there was no impairment of goodwill.

         The following table reflects the changes in the carrying amount of
         goodwill for the fiscal years 2006 and 2005 (in thousands):

              Balance as of March 28, 2004                         $27,783
                   RA Sushi contingent payment                         348
                                                                  ---------

              Balance as of March 27, 2005                          28,131
                   RA Sushi contingent payment                         228
                   Haru put option exercise                          1,541
                                                                  ---------

              Balance as of March 26, 2006                         $29,900
                                                                  =========

         Intangible assets consist of premiums on liquor licenses, lease
         acquisition costs, and capitalized computer software costs and are
         classified as other assets. Premiums on liquor licenses are indefinite
         lived intangible assets. Lease acquisition costs are amortized over the
         remaining life of the acquired lease. Capitalized computer software
         costs are amortized over three years. Amortization of intangibles
         totaled $438,000, $324,000 and $367,000 during fiscal years 2006, 2005
         and 2004, respectively.


                                       19
<PAGE>


         Estimated amortization expense for the five succeeding fiscal years is
         as follows (in thousands):

              Fiscal year ending:
              2007                                                 $   382
              2008                                                     355
              2009                                                     181
              2010                                                     181
              2011                                                     180
              Thereafter                                               583
                                                                   -------
              Total                                                $ 1,862
                                                                   =======



         ACCOUNTING FOR LEASES - OPERATING LEASES - Rent expense for the
         Company's operating leases, which generally have escalating rentals
         over the term of the lease, is recorded on a straight-line basis over
         the lease term, as defined in SFAS No. 13, "Accounting for Leases." The
         lease term begins when the Company has the right to control the use of
         the leased property, which is typically before rent payments are due
         under the terms of most of the Company's leases. The difference between
         rent expense and rent paid is recorded as deferred rent obligation and
         is included in the consolidated balance sheets. CAPITAL LEASES are
         recorded as an asset and an obligation is recorded at an amount equal
         to the present value of the minimum lease payments during the lease
         term.

         ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
         INTERNAL USE - The Company capitalizes and records in other assets the
         cost of computer software obtained for internal use and amortizes such
         costs over a three-year period.

         SELF-INSURANCE - The Company is self-insured for certain losses related
         to health, general liability and workers' compensation. The Company
         maintains stop loss coverage with third party insurers to limit its
         total exposure. The self-insurance liability represents an estimate of
         the ultimate cost of claims incurred and unpaid as of the balance sheet
         date. The estimated liability is not discounted and is established
         based upon analysis of historical data and actuarial estimates, and is
         reviewed by the Company on a quarterly basis to ensure that the
         liability is appropriate. If actual trends, including the severity or
         frequency of claims, differ from our estimates, our financial results
         could be impacted.

         INCOME TAXES - The Company uses the asset and liability method which
         recognizes the amount of current and deferred taxes payable or
         refundable at the date of the financial statements as a result of all
         events that have been recognized in the consolidated financial
         statements as measured by the provisions of enacted law. Recognition of
         deferred tax assets is limited to amounts considered by management to
         be more likely than not of realization in future periods.

         DERIVATIVE INSTRUMENTS - The Company does not currently utilize
         instruments to hedge exposure to fluctuations in variable interest
         rates, currency fluctuations or fluctuations in the prices of
         commodities used in its products.

         STOCK-BASED COMPENSATION - The Company accounts for stock-based
         compensation for employees and directors under the intrinsic value
         method of accounting for stock-based compensation. Therefore, the
         Company generally recognizes no compensation expense with respect to
         such awards because options are generally granted at the fair market
         value of the underlying shares on the date of the grant. The Company
         does not issue stock-based compensation to non-employees. The Company
         has disclosed pro forma net income and earnings per share amounts using
         the fair value method.


                                       20
<PAGE>


         Had the Company accounted for its stock-based awards under the fair
         value method, the table below shows the pro forma effect on net income
         and earnings per share for the three most recent fiscal years.

<TABLE>
<CAPTION>
                                                        March 26,   March 27,   March 28,
                                                          2006        2005        2004
                                                        --------    --------    --------
<S>                                                     <C>         <C>         <C>
          Net Income
                As reported                             $ 14,562    $  7,820    $  8,972
          Less:  Accretion of issuance costs
                and preferred stock dividends             (1,430)       (422)          -
                                                        --------    --------    --------
          Net income attributable
                to common stockholders                    13,132       7,398       8,972
          Add:  Stock-based compensation cost
                included in net income                         -           7           -
          Less:  Total stock-based employee
                compensation expense
                determined under fair value
                based method for all awards                  263         248         564
                                                        --------    --------    --------
          Pro forma income for computation of basic       12,869       7,157       8,408
                earnings per share
          Add:  Accretion of issuance costs
                and preferred stock dividends              1,430         422           -
                                                        --------    --------    --------
          Pro forma income for computation of diluted   $ 14,299    $  7,579    $  8,408
                earnings per share                      ========    ========    ========

          Basic earnings per share:
                As reported                             $   1.40    $    .81    $   1.01
                                                        ========    ========    ========
                Pro forma                               $   1.37    $    .78    $    .95
                                                        ========    ========    ========
          Diluted earnings per share:
                As reported                             $   1.36    $    .77    $    .98
                                                        ========    ========    ========
                Pro forma                               $   1.34    $    .75    $    .92
                                                        ========    ========    ========
</TABLE>

         The following weighted average assumptions were used in the
         Black-Scholes option-pricing model used in developing the above pro
         forma information: a risk-free interest rate of 4.3% for fiscal year
         2006, 3.6% for fiscal year 2005 and 1.9% for fiscal year 2004,
         respectively, an expected life of three years, no expected dividend
         yield and a volatility factor of 37% for fiscal 2006, 36% for fiscal
         2005 and 50% for fiscal 2004, respectively.


                                       21
<PAGE>

         SEGMENT REPORTING - The Company accounts for its segments in accordance
         with SFAS No. 131, "Disclosure about Segments of an Enterprise and
         Related Information" ("SFAS 131"). SFAS 131 requires that a public
         company report annual and interim financial and descriptive information
         about its reportable operating segments. Operating segments, as
         defined, are components of an enterprise about which separate financial
         information is available that is evaluated regularly by the chief
         operating decision maker in deciding how to allocate resources and in
         assessing performance. As of March 26, 2006, the Company operated 73
         Benihana, Haru, RA Sushi and Doraku restaurants in North America as a
         single reporting segment. The restaurants operate in the United States
         within the casual dinner industry, providing similar products to
         similar customers. Revenues from external customers are derived
         principally from food and beverage sales. We do not rely on any major
         customers as a source of revenue. The Company believes it meets the
         criteria for aggregating its operating segments into a single reporting
         segment.

         RESTAURANT OPENING COSTS - Restaurant opening costs include incremental
         out-of-pocket costs that are directly related to the opening of new
         restaurants and are not capitalizable and an amortization of rentals
         under lease agreements for accounting purposes. Restaurant opening
         costs include costs to recruit and train hourly restaurant employees;
         wages, travel and lodging costs for the Company's opening training team
         and other support employees, costs for practice service activities; and
         straight-line minimum base rent during the restaurant preopening
         period. The Company expenses restaurant opening costs as incurred.

         ADVERTISING - Advertising costs are expensed as incurred. Advertising
         costs were $7.4 million, $6.7 million, and $6.7 million in fiscal 2006,
         2005 and 2004, respectively and are included in Marketing, General and
         Administrative expenses in the Consolidated Statements of Earnings.

         EARNINGS PER SHARE - Basic earnings per share is computed by dividing
         net income available to common shareholders by the weighted average
         number of common shares outstanding during each period. The diluted
         earnings per share computation includes dilutive share equivalents
         issued under the Company's various stock option plans and the dilutive
         convertible preferred stock outstanding during fiscal 2006 and 2005.

         The computation of basic earnings per share and diluted earnings per
         share for each fiscal year is shown below (in thousands):

<TABLE>
<CAPTION>
                                                           March 26,   March 27,   March 28,
                                                             2006        2005        2004
                                                           --------    --------    --------
<S>                                                        <C>         <C>         <C>
          Net income                                       $ 14,562    $  7,820    $  8,972
          Less:  Accretion of issuance costs and
               preferred stock dividends                     (1,430)       (422)          -
                                                           --------    --------    --------
          Income for computation of basic
               earnings per share                            13,132       7,398       8,972
          Add:  Accretion of issuance costs and
               preferred dividends (See Note 14)              1,430         422           -
                                                           --------    --------    --------
          Income for computation of diluted
               earnings per share                          $ 14,562    $  7,820    $  8,972
                                                           ========    ========    ========

          Weighted average number of common
               shares in basic earnings per share             9,364       9,154       8,887
          Effect of dilutive securities:
               Stock options and warrants                       429         483         268
               Convertible preferred shares                     878         510
                                                           --------    --------    --------
          Weighted average number of common
               shares and dilutive potential common
               shares used in diluted earnings per share     10,671      10,147       9,155
                                                           ========    ========    ========
</TABLE>

                                       22
<PAGE>


         During fiscal years 2006, 2005 and 2004, stock options to purchase
         60,000, 222,750 and 439,000 shares, respectively, of common stock were
         excluded from the calculation of diluted earnings per share since the
         effect would be considered antidilutive.


         NEW ACCOUNTING PRONOUNCEMENTS THAT MAY AFFECT OUR FINANCIAL REPORTING -
         In December 2004, the Financial Accounting Standards Board ("FASB")
         issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS
         123R"), which replaces SFAS No. 123, "Accounting for Stock-Based
         Compensation", ("SFAS 123") and supersedes APB Opinion No. 25,
         "Accounting for Stock Issued to Employees". SFAS 123R requires
         compensation costs related to share-based payments to employees,
         including grants of employee stock options, to be recognized in the
         financial statements based on their fair values. With limited
         exceptions, the amount of compensation cost will be measured based on
         the fair market value on the grant date of the equity or liability
         instruments issued. Compensation cost will be recognized over the
         period that an employee provides service for that award, resulting in a
         decrease in net earnings. As of March 27, 2006, the beginning of fiscal
         2007, the Company has adopted this new standard, as amended.

         As permitted by SFAS 123, prior to March 27, 2006, the Company
         accounted for share-based payments to employees using the intrinsic
         value method and, as such, generally recognized no compensation cost
         for employee stock options. Accordingly, the adoption of SFAS 123R's
         fair value method will impact the Company's results of operations,
         although it will have no impact on the Company's overall financial
         position. The estimated impact of adopting SFAS 123R for fiscal 2007,
         relating to prior year grants only that will vest during fiscal 2007
         and later, will be approximately $161,000, net of tax. However, had the
         Company adopted SFAS 123R in prior years, the impact of that standard
         would have approximated the impact of SFAS 123 as presented in the
         disclosure of pro forma net income and earnings per share presented
         above. SFAS 123R also requires the benefits of tax deductions in excess
         of recognized compensation cost to be reported as financing cash flow,
         rather than as an operating cash flow as required under current
         literature. This requirement will reduce net operating cash flows and
         increase net financing cash flows in the periods after adoption. While
         the Company cannot estimate what those amounts will be in the future,
         the amount of operating cash flows recognized in fiscal years 2006,
         2005 and 2004 for such excess tax deductions were $2,677,000, $145,000
         and $162,000, respectively.


2.       PURCHASE AND SALE OF RESTAURANT FACILITIES

         During November 2005, the Company completed the acquisition of a
         teppanyaki restaurant facility in Tucson, Arizona. The purchase price
         totaled $1.9 million payable in cash. The restaurant facility has been
         converted to a Benihana restaurant. The cash expenditure for this asset
         purchase is included in expenditures for property and equipment in the
         consolidated statement of cash flows for the year ended March 26, 2006.

         During December 2005, the Company sold its Benihana restaurant facility
         located in Monterey, California to a new franchisee. The restaurant
         facility was sold for $522,000, of which $147,000 was paid in cash and
         $375,000 is payable with interest over three years. The franchisee has
         entered into a 15-year franchise agreement for the operation of the
         Monterey location. The cash receipt is included in cash proceeds from
         sale of property and equipment in the consolidated statement of cash
         flows for the year ended March 26, 2006.

         During March 2005, the Company acquired a Benihana restaurant from a
         franchisee in Anchorage, Alaska. The restaurant was acquired for $2.8
         million.

3.       IMPAIRMENT CHARGE

         The Company reviews it's long-lived assets for impairment whenever
         events or changes in circumstances indicate the carrying value amount
         of an asset or group of assets may not be recoverable. The Company
         considers a history of relatively small operating gains or consistent
         and significant operating losses to be a primary indicator of potential
         asset impairment, after the individual restaurant locations have been
         operating for 2 years. Assets are grouped and evaluated for impairment
         at the lowest level for which there is identifiable cash flows,
         primarily the individual restaurant units. A restaurant unit is deemed
         to be impaired if a forecast of future operating cash flows directly
         related to the restaurant is less than the carrying amount of the
         restaurant's long-lived assets. If a restaurant unit is determined to
         be impaired, the loss is measured as the amount by which the carrying
         amount of the restaurant's long-lived assets exceeds its fair value.
         Fair value is an estimate based on the best information available,
         including multiples of cash flow derived from recent purchases and
         sales of restaurant businesses in the restaurant industry.

         In fiscal 2005, the Company recorded a $2,668,000 expense for the
         impairment of long-lived assets. The loss on impairment of long-lived
         assets primarily related to the write-down of equipment and leasehold
         improvements at four restaurant units. No impairment charges were
         recognized during fiscal 2006 or 2004.


                                       23
<PAGE>

         The Company will continue to review its restaurants for potential asset
         impairment. As of March 26, 2006, the Company believes that all of its
         restaurant units have sufficient estimated future cash flows to support
         the carrying value of their long-lived assets. However, if an
         individual restaurant unit's estimated future cash flows decline below
         its carrying value of long-lived assets, it could result in additional
         impairment charges.


4.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of cash and cash equivalents, accounts receivable
         and payable, and accrued liabilities approximate fair value because of
         the short-term nature of the items. The carrying amounts of the
         Company's debt and other payables approximate fair value either due to
         their short-term nature or the variable rates associated with these
         debt instruments.


5.       INVENTORIES

              Inventories consist of (in thousands):
<TABLE>
<CAPTION>
                                                              March 26,      March 27,
                                                                2006            2005
                                                               ------          ------
<S>                                                            <C>             <C>
               Food and beverage                               $3,152          $2,834
               Supplies                                         3,376           3,737
                                                               ------          ------

                                                               $6,528          $6,571
                                                               ======          ======
</TABLE>


6.       PROPERTY AND EQUIPMENT

              Property and equipment consist of (in thousands):

<TABLE>
<CAPTION>
                                                             March 26,       March 27,
                                                               2006            2005
                                                             --------        --------
<S>                                                          <C>             <C>
          Land                                               $ 12,975        $ 12,975
          Buildings                                            30,511          29,146
          Leasehold improvements                               98,204          88,411
          Restaurant furniture, fixtures, and equipment        29,804          28,348
          Restaurant facilities and equipment under
               capital leases                                   7,040           7,040
                                                             --------        --------
                                                              178,534         165,920

          Less: Accumulated depreciation and amortization
               (including accumulated amortization of
               restaurant facilities and equipment under
               capital leases of $7,040 and $7,030 in 2006
               and 2005, respectively)                         69,949          64,553
                                                             --------        --------
                                                              108,585         101,367
          Construction in progress                             14,993           6,765
                                                             --------        --------

                                                             $123,578        $108,132
                                                             ========        ========
</TABLE>


                                       24
<PAGE>


7.       OTHER ASSETS

              Other assets consist of (in thousands):
<TABLE>
<CAPTION>
                                                              March 26,       March 27,
                                                                2006            2005
                                                               ------          ------
<S>                                                            <C>             <C>
         Lease acquisition costs, net of accumulated
               amortization of $904 and $725, respectively     $1,478          $1,657
          Premium on liquor licenses                            1,308           1,220
          Security deposits                                     2,018             957
          Computer software costs, net of accumulated
               amortization of $1,010 and $750, respectively      384             636
          Cash surrender value of
               life insurance policy                              391             395
          Deferred financing charges, net of accumulated
               amortization of $643 and $571, respectively        127             188
          Long-term receivables                                   273              35
                                                               ------          ------

                                                               $5,979          $5,088
                                                               ======          ======
</TABLE>


8.       ACCRUED EXPENSES

              Accrued expenses consist of (in thousands):
<TABLE>
<CAPTION>

                                                            March 26,        March 27,
                                                              2006              2005
                                                             -------          -------
<S>                                                          <C>              <C>
          Accrued payroll, incentive
               compensation and related taxes                $ 4,824          $ 4,157
          Unredeemed gift certificates                         2,521            2,036
          Accrued workers compensation claims                  1,325            1,193
          Sales taxes payable                                  1,287            1,264
          Accrued percentage rent                              1,248              935
          Deferred compensation                                  861              719
          Accrued property taxes                                 682              698
          Accrued health insurance costs                         608              955
          Straight-line rent accrual                             130              121
          Other accrued operating expenses                     7,335            3,589
                                                             -------          -------

                                                             $20,821          $15,667
                                                             =======          =======
</TABLE>

9.       RESTAURANT OPERATING EXPENSES

              Restaurant operating expenses are those costs that are directly
              attributed to the operation of individual restaurant locations and
              consist of (in thousands):

                                               March 26,   March 27,  March 28,
                Fiscal year ended                2006         2005      2004
         ---------------------------------------------------------------------
          Labor and related costs               $ 81,398   $ 76,026   $ 71,812
          Occupancy costs                         14,204     12,830     11,910
          Depreciation and amortization           11,467      9,607      8,313
          Utilities                                6,084      5,239      4,854
          Restaurant supplies                      5,065      4,313      3,945
          Credit card discounts                    4,450      3,871      3,465
          Other restaurant operating expenses     16,765     14,939     13,884
          --------------------------------------------------------------------

          Total restaurant operating expenses   $139,433   $126,825   $118,183
          ====================================================================



                                       25
<PAGE>



10.      LEASES

              The Company is obligated under various lease agreements for most
              of its restaurant units, as well as its corporate office. For
              operating leases, the Company recognizes rent expense on a
              straight-line basis over the expected lease term. Capital leases
              are recorded as an asset and an obligation at an amount equal to
              the present value of the minimum lease payments during the lease
              term.

              Under the provisions of certain of the Company's leases, there are
              rent holidays and/or escalations in payments over the base lease
              term, as well as renewal periods. The effects of the rent holidays
              and escalations have been reflected in rent expense on a
              straight-line basis over the expected lease term, which includes
              option periods when it is deemed to be reasonably assured that the
              Company will exercise such option periods due to the fact that the
              Company would incur an economic penalty for not doing so. The
              lease term commences on the date when the Company gains access to
              the leased property. Percentage rent expense is generally based
              upon sales levels and is accrued at the point in time the Company
              determines that it is probable that such sales levels will be
              achieved. Leasehold improvements paid for by the lessor are
              recorded as leasehold improvements and deferred rent.

              Judgments made by the Company related to the probable term for
              each restaurant unit lease affect the classification and
              accounting for a lease as capital or operating, the rent holidays
              and/or escalations in payments that are taken into consideration
              when calculating straight-line rent, and the term over which
              leasehold improvements for each restaurant unit are amortized.

              These judgments may produce materially different amounts of
              depreciation, amortization and rent expense than would be reported
              if different lease term assumptions were used.

              The Company generally operates its restaurant units in leased
              premises. The typical restaurant premises lease is for a term of
              between 15 to 25 years with renewal options ranging from 5 to 25
              years. The leases generally provide for the obligation to pay
              property taxes, utilities, and various other use and occupancy
              costs. Rentals under certain leases are based on a percentage of
              sales in excess of a certain minimum level. Certain leases provide
              for increases based upon the changes in the consumer price index.
              The Company is also obligated under various leases for restaurant
              equipment and for office space and equipment.

              Minimum payments under lease commitments are summarized below for
              operating leases.

              The amounts of operating lease obligations are as follows (in
              thousands):

                                                                  Operating
                                                                    Leases
                                                                  ---------
              Fiscal year ending:
              2007                                                $ 11,013
              2008                                                  10,968
              2009                                                  11,016
              2010                                                  10,910
              2011                                                  10,860
              Thereafter                                            93,720
                                                                  --------

              Total minimum lease payments                        $148,487
                                                                  ========


              Rental expense consists of the following (in thousands):

                                       March 26,     March 27,    March 28,
                                         2006          2005         2004
                                      -------------------------------------

          Minimum rentals             $10,304        $ 9,948        $ 9,144
          Contingent rentals            3,293          2,454          2,330
                                      -------------------------------------
                                      $13,597        $12,402        $11,474
                                      =====================================


                                       26
<PAGE>

11.      LONG-TERM DEBT

         Long-term debt consists of (in thousands):

                                     March 26,       March 27,
                                       2006            2005
                                      -------        -------
          Term loan - bank            $ 6,666        $10,000
          Less current portion          4,166          3,333
                                      -------        -------
                                      $ 2,500        $ 6,667
                                      =======        =======

         The Company presently has borrowings from Wachovia Bank, National
         Association ("Wachovia") under a term loan. At March 26, 2006, the
         Company had $6,666,000 outstanding under the term loan which is payable
         in quarterly installments of $833,333 until the term loan matures in
         December 2007. Additionally, the Company maintains a revolving line of
         credit facility. The line of credit facility allows the Company to
         borrow up to $15,000,000 through December 31, 2007. At March 26, 2006,
         the Company had a $2,306,000 letter of credit outstanding against such
         facility in connection with its workers' compensation insurance
         program. Accordingly, at March 26, 2006, the Company had $12,694,000
         available for borrowing under the line of credit facility, as no
         amounts were outstanding. The interest rate at March 26, 2006 of both
         the line of credit and the term loan was 5.53%. The Company has the
         option to pay interest at Wachovia's prime rate plus 1% or at the
         London interbank offering rate plus 1%. The interest rate may vary
         depending upon the ratio of the sum of earnings before interest, taxes,
         depreciation and amortization, as defined in the agreement, to its
         indebtedness. The loan agreements limit capital expenditures to certain
         amounts, require that the Company maintain certain financial ratios and
         profitability amounts and limit the payment of cash dividends. As of
         March 26, 2006, the Company was in compliance with all covenants of the
         Company's credit agreement with Wachovia.

         Principal maturities of long-term debt obligations at March 26, 2006
         are as follows:

              Fiscal year ending
              2007                                      $4,166
              2008                                       2,500
                                                        ------
              Total                                     $6,666
                                                        ======

12.      INCOME TAXES

         Deferred tax assets and liabilities reflect the tax effect of temporary
         differences between amounts of assets and liabilities for financial
         reporting purposes and the amounts of such assets and liabilities as
         measured by income tax law. A valuation allowance is recognized to
         reduce deferred tax assets to the amounts that are more likely than not
         to be realized.

         The income tax effects of temporary differences that give rise to
         deferred tax assets and liabilities are as follows (in thousands):

                                              March 26,     March 27,
                                                2006          2005
                                               ------        ------
          Deferred tax assets:
             Straight-line rent expense        $1,715        $1,569
             Tax credit carryforward                -         1,017
             Gift certificate liability         1,031           870
             Amortization of gain                 784           807
             Employee benefit accruals            302           308
             Other                                396           148
                                               ------        ------
                                                4,228         4,719
                                               ------        ------

          Deferred tax liabilities:
             Property and equipment             1,741         2,501
             Inventories                          853           839
             Goodwill                           1,502         1,118
                                               ------        ------
                                                4,096         4,458
                                               ------        ------
          Net deferred tax asset               $  132        $  261
                                               ======        ======


                                       27
<PAGE>

        The net deferred tax asset is classified on the balance sheet as follows
        (in thousands):

                                   March 26,   March 27,
                                     2006        2005
                                   --------    --------
          Current asset              $805        $417
          Long-term liability         673         156
                                   --------    --------
                                     $132        $261
                                   ========    ========


         The income tax provision consists of (in thousands):

                                      March 26,    March 27,     March 28,
         Fiscal year ended              2006         2005          2004
                                      ------------------------------------
          Current:
              Federal                  $ 5,823      $ 3,037       $ 1,876
              State                      2,539        1,559           680
          Deferred:
              Federal and State            129          (76)        2,265
                                       ----------------------------------

          Income tax provision         $ 8,491      $ 4,520       $ 4,821
                                       ==================================


         The income tax provision differed from the amount computed at the
         statutory rate as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 March 26,      March 27,      March 28,
         Fiscal year ended                                         2006           2005            2004
         ------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>              <C>
         Federal income tax provision at statutory rate of 35%   $ 8,131        $ 4,524          $ 5,053
         Benefit of graduated rates                                    -            (86)            (140)
         State income taxes, net of federal benefit                1,519            963              899
         Tax credits, net                                         (1,226)        (1,222)          (1,026)
         Other                                                        67            341               35
                                                                 ---------------------------------------

         Income tax provision                                    $ 8,491        $ 4,520          $ 4,821
                                                                 =======================================

         Effective income tax rate                                  36.6%         35.0%            33.4%
                                                                 =======================================
</TABLE>

13.      COMMITMENTS AND CONTINGENCIES

         ACQUISITIONS - In December 1999, the Company completed the acquisition
         of 80% of the equity of Haru Holding Corp. ("Haru"). The acquisition
         was accounted for using the purchase method of accounting. Pursuant to
         the purchase agreement, at any time during the period from July 1, 2005
         through September 30, 2005, the holders of the balance of Haru's equity
         (the "Minority Stockholders") had a one-time option to sell their
         remaining shares to the Company (the "put option"). The exercise price
         under the put option was to be calculated as four and one-half (4 1/2)
         times Haru's consolidated cash flow for the fiscal year ended March 27,
         2005 less the amount of Haru's debt (as that term is defined in the
         purchase agreement) at the date of the computation.

         On July 1, 2005, the Minority Stockholders exercised the put option.
         Since that time the parties have been engaged in negotiations over the
         calculation of the put option price.

         The Company believes that the proper application of the put option
         price formula would result in a payment to the former Minority
         Stockholders of approximately $3.7 million. The former Minority
         Stockholders claim to be entitled to a greater payment. There can be no
         assurance that this matter will not result in a legal proceeding or
         that the Company's interpretation of the put option price formula will
         prevail in any such proceeding. The Company has recorded a $3.7 million
         liability for the payment of the put option, based upon its calculation
         under the put option price formula, resulting in an increase to
         goodwill totaling $1.5 million and a decrease to minority interest
         totaling $2.2 million.

         In December 2002, the Company completed the acquisition of RA Sushi, a
         privately owned Arizona chain which operated four restaurants. Pursuant
         to the purchase agreement of RA Sushi, the Company is required to pay
         the seller contingent purchase price payments

                                       28
<PAGE>

         based on certain operating results of the acquired business for fiscal
         years ending 2004, 2005 and 2006. The contingent purchase price
         payments are based upon the achievement of stipulated levels of
         operating earnings and revenues by the acquired restaurants over a
         three-year period commencing with the end of fiscal 2004 and such
         payments are not contingent on the continued employment of the sellers
         of the restaurants. The minimum contingent payment levels were met in
         fiscal 2006, 2005 and 2004. The Company recorded $228,000, $348,000 and
         $652,000 in fiscal 2006, 2005 and 2004, respectively, as additional
         goodwill for the contingent purchase price payments due for fiscal
         2006, 2005 and 2004.

         LITIGATION - On July 2, 2004, Benihana of Tokyo, Inc. ("BOT"), a
         significant holder of the Company's Common Stock, commenced a lawsuit
         in the Court of Chancery of the State of Delaware (the "Chancery
         Court") against the Company, individuals who were then members of the
         Company's Board of Directors and BFC Financial Corporation ("BFC"). The
         action, which purported to be brought both individually and
         derivatively on behalf of the Company, sought temporary and permanent
         injunctive relief, monetary damages of $14.2 million for loss of value
         of the Company's Common Stock and from $9.5 million to $10.8 million
         for loss of an alleged control premium, and recovery of costs and
         expenses, in connection with the closing of the $20.0 million sale of a
         new class of Series B Preferred Stock of the Company to BFC, a
         diversified holding company with operations in banking, real estate and
         other industries (see Note 14). John E. Abdo, a director of the
         Company, serves as a Vice Chairman, director, and is a significant
         shareholder of BFC. Among other relief sought, the action sought
         rescission of the sale of the Series B Preferred Stock to BFC.

         The action alleged that the director defendants breached their
         fiduciary duties in approving the financing transaction with BFC by
         diluting the voting power represented by BOT's Common Stock holding in
         the Company. The trial of the action was completed on November 15,
         2004.

         On December 8, 2005, the Chancery Court rejected all claims asserted
         against the Company and its directors in the suit brought by BOT. In
         rejecting BOT's claims, the Chancery Court found that "the directors
         who approved the transaction did so, on an informed basis, acting in
         good faith and believing that they were acting in the best interests of
         Benihana." Thereafter, BOT filed an appeal with respect to the decision
         of the Chancery Court. The Company and its Board of Directors believe
         that the BFC financing was and is in the best interests of the Company
         and all of its shareholders, that there is no merit to the action
         brought by BOT, and intend to continue to vigorously defend and oppose
         the action. The appeal has been briefed and argued to the Delaware
         Supreme Court, and the parties are awaiting a decision from that court.
         The Company has not recorded a liability for this lawsuit, but legal
         expenses are being incurred and recognized to defend the Company and
         members of the Board of Directors. There can be no assurance that an
         adverse result from an appeal that overturns the Chancery Court's
         ruling will not have a material adverse effect on the Company's results
         of operations or financial position.

         The Company is not subject to any other pending legal proceedings,
         other than ordinary routine claims incidental to its business.

         The Company has entered into supply agreements for the purchase of
         beef, chicken and seafood, in the normal course of business, at fixed
         prices for twelve- and six-month terms, respectively, beginning on
         January 1, 2006. These supply agreements will eliminate volatility in
         the cost of the commodities over the terms of the agreements. These
         supply agreements are not considered derivative contracts.


14.      CONVERTIBLE PREFERRED STOCK

         On July 1, 2004, the Company received net proceeds of $9,253,000, after
         transaction costs, representing the funding of the first $10,000,000
         tranche of its sale of $20,000,000 aggregate principal amount of Series
         B Convertible Preferred Stock ("Series B Preferred Stock") to BFC
         Financial Corporation ("BFC"). In connection with the first tranche,
         the Company issued and sold 400,000 shares of its Series B Preferred
         Stock. John E. Abdo, a director of the Company, is a director and Vice
         Chairman of the Board of BFC and is a significant shareholder of BFC.

         On August 4, 2005, the Company completed the second and final tranche
         consisting of $10,000,000 aggregate principal amount of its Series B
         Preferred Stock sold to BFC. In connection with the second tranche, the
         Company issued and sold 400,000 shares of its Series B Preferred Stock.
         The Company received net proceeds of $9,884,000, after transaction
         costs, from the sale.

         The Series B Preferred Stock has a liquidation preference of
         $20,000,000, or $25.00 per share, (subject to anti-dilution provisions)
         plus accrued and unpaid dividends. The Series B Preferred Stock is
         convertible into Common Stock of the Company at a conversion price of
         $19.00 per share that is 1.32 shares of Common Stock for each share of
         Series B Preferred Stock (subject to anti-dilution provisions). The
         800,000 shares of Series B Preferred Stock outstanding at March 26,
         2006 are convertible into an aggregate 1,052,632 shares of Common
         Stock. The Series B Preferred Stock carries a dividend at the annual
         rate of $1.25 per share (or 5% of the purchase price) payable in cash
         or additional Series B Preferred Stock, and votes on an "as if
         converted" basis together with the Company's Common Stock on all
         matters put to a vote of the holders of Common Stock. In addition,
         under certain circumstances, the



                                       29
<PAGE>

         approval of a majority of the Series B Preferred Stock is required for
         certain events outside the ordinary course of business, principally
         acquisitions or disposition of assets having a value in excess of 25%
         of the total consolidated assets of the Company.

         The Company pays quarterly dividends on the Series B Preferred Stock,
         and at March 26, 2006, accrued but unpaid dividends on the Series B
         Preferred Stock totaled $233,000 or $0.29 per share of the Series B
         Preferred Stock.

         Since the Series B Preferred Stock is convertible into Common Stock at
         a conversion price of $19.00 per share and the Common Stock was trading
         at $20.00 per share on August 4, 2005 when the second tranche was
         completed, a deemed dividend was recognized on the beneficial
         conversion feature, in connection with the second tranche, totaling
         $526,000. The deemed dividend will not result in any cash payments to
         the holders of the Series B Preferred Stock.

         The Company is obligated to redeem the Series B Preferred Stock at its
         original issue price on July 2, 2014, which date may be extended by the
         holders of a majority of the then-outstanding shares of Series B
         Preferred Stock to a date no later than July 2, 2024. The Company may
         pay the redemption in cash or, at its option, in shares of Common Stock
         valued at then-current market prices unless the aggregate market value
         of the Company's Common Stock and any other common equity is below
         $75.0 million. In addition, the Series B Preferred Stock may, at the
         Company's option, be redeemed in cash at any time beginning three years
         from the date of issue if the volume-weighted average price of the
         Common Stock exceeds $38.00 per share for sixty consecutive trading
         days.

         The holders of a majority of the outstanding Series B Preferred Stock
         are entitled to nominate one individual to the Company's board of
         directors. In the event that dividends are not paid for two consecutive
         quarters, the holders of the majority of the Series B Preferred Stock
         are entitled to elect one additional director.

         Consistent with SFAS No. 133, "Accounting for Derivative Instruments
         and Hedging Activities" and EITF 00-19, "Accounting for Derivative
         Financial Instruments Indexed to, and Potentially Settled in, a
         Company's Own Stock," the conversion option of the Series B Preferred
         Stock is not a derivative liability that must be fair valued.


15.      STOCKHOLDERS' EQUITY

         COMMON AND CLASS A COMMON STOCK - The Company's Common Stock is
         convertible into Class A Common stock on a one-for-one basis. The Class
         A Common stock is identical to the Common stock except that it gives
         the holder one-tenth (1/10) vote per share, voting together with the
         Company's Common Stock as a single class on all matters except the
         election of directors. For election of directors, the Class A common
         stockholders vote as a class to elect 25% of the members of the Board
         of Directors.

         STOCK OPTIONS - The Company has various stock option plans: a 1996
         Class A Stock Option Plan (1996 Plan), a 1997 Class A Stock Option Plan
         (1997 Plan), a 2000 Class A Stock Option Plan (2000 Plan), a Directors'
         Stock Option Plan (Directors' Plan), Directors' Class A Stock Option
         Plan (Directors' Class A Plan) and a 2003 Directors' Stock Option Plan
         (2003 Directors' Plan), under all of which a maximum of 3,085,000
         shares of the Company's Common Stock and Class A Common Stock were
         authorized for grant and for all of which options for 981,994 shares
         remain available for grant.

         Options granted under the 1996, 1997 and 2000 Plans have a term of ten
         years from date of issuance, and are exercisable ratably over a
         three-year period commencing with the date of the grant. Options
         granted under these plans require that the exercise price be at market
         value on the date of the grant, or for optionees that own more than 10%
         of the combined voting rights of the Company, at 110% of market value
         for incentive stock options.

         There are 17,500 shares of Common stock available for grant under the
         Directors Plan. There are no shares available for grant under the
         Directors Class A Plan. There are 126,667 shares of Class A Common
         Stock available for grant under the 2003 Directors' Plan. Under the
         2003 Directors' Plan, options to purchase 10,000 shares of Class A
         Common Stock are automatically granted to each of the Company's
         non-employee directors on the date of the Company's annual meeting.
         Options granted under the 2003 Directors' Plan are exercisable ratably
         as to one-third of the shares on the date which is six months after the
         date of grant, one-third of the shares on the first anniversary of the
         grant of such option and as to the balance of such shares on the second
         anniversary of grant of such option.

                                       30
<PAGE>


         The following table summarizes information about fixed-price stock
         options outstanding at March 26, 2006:
<TABLE>
<CAPTION>

                                                  Options Outstanding                      Options Exercisable
                                       ------------------------------------------      -----------------------------
                                                       Weighted-
                                                        Average          Weighted                          Weighted
         Ranges of                                     Remaining         Average                            Average
         Exercise                                     Contractual        Exercise                          Exercise
         Prices                             Number        Life             Price             Number          Price
         -----------------------------------------------------------------------------------------------------------
          <S>              <C>               <C>          <C>             <C>                <C>             <C>
          $6.14     -      $7.99             149,184      3.8             $ 7.25             149,184         $ 7.25
           9.89     -      10.65             264,750      3.5              10.42             264,750          10.42
          11.03     -      13.48             481,500      5.2              12.11             468,166          12.14
          15.00     -      16.78             217,750      6.3              16.74             216,083          16.76
          22.36                               60,000      9.9              22.36                   -              -
                                          ----------                                      ----------
                                           1,173,184                                       1,098,183
                                          ==========                                      ==========
</TABLE>

         Transactions under the above plans for the years ended are as follows:
<TABLE>
<CAPTION>
                                               March 26, 2006          March 27, 2005          March 28, 2004
                                           ------------------------------------------------------------------------
                                                         Weighted                Weighted                Weighted
                                                         Average                  Average                 Average
                                                         Exercise                Exercise                Exercise
                                              Shares      Price       Shares       Price      Shares       Price
         ----------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>        <C>          <C>        <C>          <C>
         Balance, beginning of year           1,710,855     $11.20     1,727,453    $11.07     1,762,709    $10.72
         Granted                                 60,000      22.36        70,000     11.87        85,000     11.93
         Canceled/Expired                       (10,501)     11.02       (15,000)    12.04        (4,313)     8.32
         Exercised                             (587,170)      9.74       (71,598)     8.55      (115,943)     6.54
                                           ------------------------------------------------------------------------

         Balance, end of year                 1,173,184     $12.49     1,710,855    $11.20     1,727,453    $11.07
                                           ========================================================================

         Weighted average fair value of
             options granted during year          $6.67                    $3.37                   $4.15
                                           ========================================================================
</TABLE>

         STOCK RIGHTS - The Company has a Shareholder Rights Plan under which a
         Preferred Share Purchase Right (Right) is represented by outstanding
         shares of the Company's Common and Class A Common Stock. The Rights
         operate to create substantial dilution to a potential acquirer who
         seeks to make an acquisition, the terms of which the Company's Board of
         Directors believes is inadequate or structured in a coercive manner.

         The Rights become exercisable on the tenth day (or such later date as
         the Board of Directors may determine) after public announcement that a
         person or a group (subject to certain exceptions) has acquired 20% or
         more of the outstanding Common Stock or an announcement of a tender
         offer that would result in beneficial ownership by a person or a group
         of 20% or more of the Common Stock.


16.      RELATED PARTY TRANSACTIONS

         As discussed in Note 14, the Company sold an aggregate 800,000 shares
         of its Series B Preferred Stock to BFC for $20,000,000. John E. Abdo, a
         director of the Company, is a director and Vice Chairman of the Board
         of BFC and is a significant shareholder of BFC. The sale of Series B
         Preferred Stock was completed in two tranches between during fiscal
         years 2005 and 2006. The sale of Series B Preferred Stock resulted in
         net aggregate proceeds of $19,137,000 ($9,253,000 in fiscal 2005 and
         $9,884,000 in fiscal 2006).

         As discussed in Note 13, BOT, a significant holder of the Company's
         Common Stock, commenced a lawsuit in the Chancery Court against the
         Company, individuals who were then members of the Company's Board of
         Directors and BFC, in connection with the closing of the $20.0 million
         sale of Series B Preferred Stock of the Company to BFC. While the
         Chancery Court has rejected all claims asserted against the Company and
         its directors in the suit brought by BOT, BOT has filed an appeal with
         respect to the decision of the Chancery Court. The appeal has been
         briefed and argued to the Delaware Supreme Court, and the parties are
         awaiting a decision from that court.

         BOT owns a Benihana restaurant in Honolulu, Hawaii (the "Honolulu
         Restaurant") and all rights to the Benihana name and trade names,
         service marks and proprietary systems outside the territory served by
         the Company which consists of the United States (except for rights
         related to the State of Hawaii) and Central

                                       31
<PAGE>

         and South America and the islands of the Caribbean Sea. The Company
         also granted to BOT a perpetual license to operate the Honolulu
         Restaurant and an exclusive license to own and operate Benihana
         restaurants in Hawaii. This license is royalty free with respect to any
         Hawaiian restaurant beneficially owned by Rocky H. Aoki. The Company
         has a right of first refusal to purchase any Hawaiian restaurant or any
         joint venture or sublicensing thereof proposed to be made by BOT with
         an unaffiliated third party; and, in the event any Hawaiian restaurant
         is sold, sublicensed or transferred to a third party not affiliated
         with Rocky H. Aoki, the Company will be entitled to receive royalties
         from such restaurant equal to 6% of gross revenues.

         Subsequent to fiscal 2006, the Company sold the assets of its sole
         Doraku restaurant to Kevin Aoki, the Company's former Vice President of
         Marketing and a current member of the Board of Directors. The assets
         were sold for $536,000, based on arm's length negotiations. The
         transaction was approved by the Board of Directors. Pursuant to the
         sale agreement, Kevin Aoki extended the non-competition provision of
         his employment agreement through August 31, 2008, but Mr. Aoki is
         permitted (i) to own, operate and manage Sushi Doraku restaurants in
         Hawaii and in Miami-Dade County, Florida, provided any such restaurants
         in Miami-Dade County are not within a seven mile radius of any existing
         or proposed restaurants then being operated by the Company or any of
         its subsidiaries or franchisees and (ii) to have an interest in any
         other additional Sushi Doraku restaurants with the prior written
         consent, not to be unreasonably withheld, of a committee of Benihana's
         Board of Directors. Additionally, the Company paid Mr. Aoki
         approximately $56,000 upon his resignation from the Company,
         representing the remainder of his unearned salary under an employment
         agreement. Consistent with SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities," these items will be
         reflected in the Company's fiscal 2007 results. The financial impact of
         this transaction will be nominal.

         While the assets of the Doraku restaurant meet the definition of
         "discontinued operations," as defined in SFAS No. 144, "Accounting for
         the Impairment or Disposal of Long-Lived Assets," the Company has not
         segregated Doraku's assets and results of operations, as the amounts
         are immaterial. Assets held for sale totaled $499,000, and results of
         operations (net of taxes) were approximately $24,000, $(296,000), and
         $(105,000) for fiscal years 2006, 2005 and 2004 respectively.

         Darwin C. Dornbush, the Company's Secretary and a retired Director of
         the Company, is a partner in Dornbush Schaeffer Strongin & Weinstein,
         LLP, formerly known as Dornbush Mensch Mandelstam & Schaeffer, LLP, a
         law firm. In the fiscal years 2006, 2005 and 2004, the Company incurred
         approximately $660,000, $650,000 and $670,000, respectively, in legal
         fees and expenses to Dornbush Schaeffer Strongin & Weinstein, LLP.


17.      INCENTIVE AND DEFERRED COMPENSATION PLANS

         The Company has an incentive compensation plan whereby bonus awards are
         made if the Company attains a certain targeted return on its equity at
         the beginning of each fiscal year or at the discretion of the
         Compensation Committee. The purpose of the plan is to improve the
         long-term sustainable results of operations of the Company by more
         fully aligning the interests of management and key employees with the
         shareholders of the Company.

         The Company's annual incentive compensation plan ties key employees'
         bonus earning potential to individually-designed performance
         objectives. Under the plan, each plan participant is provided a range
         of potential annual cash incentive awards based on his or her
         individually-designed performance objectives. Actual awards paid under
         the plan are based on exceeding goals tied to certain budgeted results
         of the Company. A portion of awards is also determined by achieving
         other performance and management goals.

         For fiscal 2006, the maximum incentive awards that could be awarded to
         the Company's named executive officers pursuant to the incentive
         compensation plan are as follows: for the president and chief executive
         officer; executive vice president of operations; senior vice president
         - finance; vice president - marketing; senior vice president - chief
         operating administrative officer; and the vice president - sushi
         division: their annual base salary multiplied by 30%. The controller
         and the other senior directors are eligible to receive their annual
         base salary multiplied by 20%. Incentive compensation earned during
         fiscal 2006 is payable in a lump sum payment.

         For fiscal 2005 and 2004, the amount of the awards is capped at 50% of
         the eligible salary of the employee. One-third of the amounts awarded
         are immediately made available to the employee and the remaining
         two-thirds become available ratably over the succeeding two years.
         Amounts allocated under the plan may be taken in cash or stock deferred
         in a non-qualified deferred compensation plan.

         Target rates are approved annually based upon a review of the rates of
         return on equity of other publicly traded restaurant businesses by the
         Compensation Committee of the Board of Directors.

         The Company recorded $461,000, $75,000 and $125,000 of corporate
         incentive compensation expense for


                                       32
<PAGE>

         fiscal years 2006, 2005 and 2004, respectively.

         The Company has an executive retirement plan whereby certain key
         employees may elect to defer up to 20% of their salary and 100% of
         their bonus until retirement or age 55, whichever is later, or due to
         disability or death. Employees may select from various investment
         options for their available account balances. Investment earnings are
         credited to their accounts.


18.      QUARTERLY FINANCIAL DATA (UNAUDITED)

         Fiscal quarter ended (in thousands except for per share information)

<TABLE>
<CAPTION>
                                           March 26, 2006                                  March 27, 2005
         ---------------------------------------------------------------  ------------------------------------------
                                Fourth     Third      Second     First        Fourth    Third      Second     First
         <S>                   <C>        <C>        <C>        <C>         <C>        <C>        <C>       <C>
         Revenues              $61,222    $55,644    $54,622    $74,065     $54,779    $50,051    $48,110   $65,391
         Gross profit           46,104     41,869     41,384     55,661      41,649     37,931     36,149    47,655
         Net income              3,919      3,300      2,845      4,498       2,230      2,017      1,661     1,912
         Basic earnings
             per share           $ .38      $ .33      $ .22      $ .47       $ .23      $ .21      $ .17     $ .21
         Diluted earnings
             per                 $ .35      $ .30      $ .21      $ .44       $ .22      $ .20      $ .16     $ .20
         share
</TABLE>


                                       33
<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
Benihana Inc.
Miami, Florida

We have audited the accompanying consolidated balance sheets of Benihana Inc.
and subsidiaries (the "Company") as of March 26, 2006 and March 27, 2005, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended March 26, 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of March 26, 2006
and March 27, 2005, and the results of its operations and its cash flows for
each of the three years in the period ended March 26, 2006, in conformity with
accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of March 26, 2006, based on the
criteria established in INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated June 20, 2006 expressed an unqualified opinion on management's assessment
of the effectiveness of the Company's internal control over financial reporting
and an unqualified opinion on the effectiveness of the Company's internal
control over financial reporting.



Deloitte & Touche LLP
Certified Public Accountants

Fort Lauderdale, Florida
June 20, 2006




                                       34
<PAGE>



         EVALUATION DISCLOSURE CONTROLS AND PROCEDURES

         We have established and maintain disclosure controls and procedures
         that are designed to ensure that material information relating to the
         Company and our subsidiaries required to be disclosed by us in the
         reports that we file or submit under the Securities Exchange Act of
         1934 is recorded, processed, summarized, and reported within the time
         periods specified in the SEC's rules and forms, and that such
         information is accumulated and communicated to our management,
         including our Chief Executive Officer and Chief Financial Officer, as
         appropriate to allow timely decisions regarding required disclosure. In
         designing and evaluating the disclosure controls and procedures,
         management recognized that any controls and procedures, no matter how
         well designed and operated, can provide only a reasonable assurance of
         achieving the desired control objectives, and management was
         necessarily required to apply its judgment in evaluating the
         cost-benefit relationship of possible controls and procedures. We
         carried out an evaluation, under the supervision and with the
         participation of our management, including our Chief Executive Officer
         and Chief Financial Officer, of the effectiveness of the design and
         operation of our disclosure controls and procedures as of the end of
         the period covered by this report. Based on that evaluation, the Chief
         Executive Officer and Chief Financial Officer concluded that our
         disclosure controls and procedures were effective as of the date of
         such evaluation.

         MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         Our management is responsible for establishing and maintaining adequate
         internal control over financial reporting. As defined in Exchange Act
         Rule 13a-15(f) and 15d-15(f), internal control over financial reporting
         is a process designed by, or under the supervision of, our principal
         executive and principal financial officer and effected by our Board of
         Directors, management and other personnel, to provide reasonable
         assurance regarding the reliability of financial reporting and the
         preparation of financial statements for external purposes in accordance
         with generally accepted accounting principles and includes those
         policies and procedures that (i) pertain to the maintenance of records
         that in reasonable detail accurately and fairly reflect the
         transactions and dispositions of the assets of the Company; (ii)
         provide reasonable assurance that transactions are recorded as
         necessary to permit preparation of financial statements in accordance
         with generally accepted accounting principles, and that receipts and
         expenditures of the Company are being made only in accordance with
         authorizations of management and directors of the Company; and (iii)
         provide reasonable assurance regarding prevention or timely detection
         of unauthorized acquisition, use or disposition of the Company's assets
         that could have a material effect on the financial statements. Because
         of its inherent limitations, internal control over financial reporting
         may not prevent or detect misstatements. Projections of any evaluation
         of effectiveness to future periods are subject to the risk that
         controls may become inadequate because of changes in conditions or that
         the degree of compliance with the policies or procedures may
         deteriorate.

         Under the supervision and with the participation of our management,
         including our Chief Executive Officer and Chief Financial Officer, we
         carried out an evaluation of the effectiveness of our internal control
         over financial reporting as of March 26, 2006 based on the criteria in
         "Internal Control - Integrated Framework" issued by the Committee of
         Sponsoring Organizations of the Treadway Commission ("COSO"). Based
         upon this evaluation, our management concluded that the Company's
         internal control structure and consequently, the Company's internal
         control over financial reporting were effective as of March 26, 2006.


         Deloitte & Touche LLP, the independent registered public accounting
         firm that audited our financial statements included in this Annual
         Report on Form 10K, has also audited our management's assessment of the
         effectiveness of the Company's internal control over financial
         reporting and the effectiveness of the Company's internal control over
         financial reporting as of March 26, 2006. Deloitte & Touche LLP
         expressed an unqualified opinion on the effectiveness of our internal
         control over financial reporting as of March 26, 2006 as stated in
         their report included herein.


                                                        /s/ Joel A. Schwartz
                                                        ------------------------
                                                        Joel A. Schwartz
                                                        President

                                                        /s/ Michael R. Burris
                                                        ------------------------
                                                        Michael R. Burris
                                                        Chief Financial Officer


                                       35
<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Benihana Inc.
Miami, Florida

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that Benihana
Inc. and subsidiaries (the "Company") maintained effective internal control over
financial reporting as of March 26, 2006, based on criteria established in
INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by,
or under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our opinion, management's assessment that the Company maintained effective
internal control over financial reporting as of March 26, 2006, is fairly
stated, in all material respects, based on the criteria established in INTERNAL
CONTROL--INTEGRATED FRAMEWORK issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of March 26, 2006, based on the criteria established in INTERNAL
CONTROL--INTEGRATED FRAMEWORK issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended March 26, 2006 of the Company and our
report dated June 20, 2006 expressed an unqualified opinion on those financial
statements.


Deloitte & Touche LLP
Certified Public Accountants

Fort Lauderdale, Florida
June 20, 2006


                                       36
<PAGE>


OFFICERS AND DIRECTORS




CORPORATE OFFICERS

Joel A. Schwartz - CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER

Taka Yoshimoto - EXECUTIVE VICE PRESIDENT, OPERATIONS

Michael R. Burris - SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

Juan C. Garcia - SENIOR VICE PRESIDENT, CHIEF OPERATING ADMINISTRATIVE OFFICER

Darwin C. Dornbush - SECRETARY



DIRECTORS

Joel A. Schwartz

Taka Yoshimoto

John E. Abdo - VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHAIRMAN OF THE
         EXECUTIVE COMMITTEE, BFC FINANCIAL CORPORATION; VICE CHAIRMAN OF THE
         BOARD AND CHAIRMAN OF THE EXECUTIVE COMMITTEE, BANKATLANTIC BANCORP.,
         INC.; VICE CHAIRMAN AND PRESIDENT, LEVITT CORPORATION; AND VICE
         CHAIRMAN OF THE BOARD, BLUEGREEN CORPORATION.

Kevin Aoki - PRESIDENT, AOKI GROUP LLC

Norman Becker - INDEPENDENT CONSULTANT, CERTIFIED PUBLIC ACCOUNTANT

J. Ronald Castell - REELRON LLC

Lewis Jaffe - CEO, OXFORD MEDIA INC.

Robert B. Sturges - INDEPENDENT CONSULTANT

Joseph J. West - DEAN, SCHOOL OF HOSPITALITY AND TOURISM MANAGEMENT, FLORIDA
          INTERNATIONAL UNIVERSITY


                                       37
<PAGE>



CORPORATE INFORMATION


COMMON STOCK
NASDAQ Symbols
Common Stock                        BNHN
Class A Common Stock                BNHNA

GENERAL COUNSEL
Dornbush Schaeffer Strongin & Weinstein, LLP
747 Third Avenue
New York, New York 10017

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 East Las Olas Boulevard
Suite 1400
Fort Lauderdale, Florida 33301


10-K REPORT AVAILABILITY
A copy of the Benihana Inc. Form 10-K, filed with the U.S. Securities and
Exchange Commission, is available on our corporate website at WWW.BENIHANA.COM
or can be obtained by writing us at:
8685 N.W. 53rd Terrace
Miami, Florida 33166

TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
Shareholder Services Group
10150 Mallard Creek Drive, Suite 307
Charlotte, North Carolina 28262
(800) 937-5449

CORPORATE HEADQUARTERS
8685 Northwest 53rd Terrace
Miami, Florida 33166
(305) 593-0770


                                       38
<PAGE>



COMMON STOCK INFORMATION

The Company's Common Stock and Class A Common Stock are traded on the Nasdaq
National Market System. There were 199 holders of record of the Company's Common
Stock and 446 holders of record of the Class A Common Stock at March 26, 2006.

The table below sets forth high and low prices for the Company's Common Stock
and Class A Common Stock for the periods indicated.

<TABLE>
<CAPTION>
                                                                   FISCAL YEAR ENDED
                                                    March 26, 2006                  March 27, 2005
                                           -----------------------------------------------------------------
              COMMON STOCK                       HIGH             LOW            HIGH            LOW
              ----------------------------------------------------------------------------------------------
              <S>                                <C>              <C>           <C>              <C>
              1st Quarter                        $16.05           $13.00        $18.25           $14.09
              2nd Quarter                         21.66            14.25         16.25            11.62
              3rd Quarter                         23.73            16.97         16.60            12.90
              4th Quarter                         30.53            21.60         16.50            14.25
</TABLE>


<TABLE>
<CAPTION>

                                                                   FISCAL YEAR ENDED
              CLASS A                               March 26, 2006                  March 27, 2005
                                           -----------------------------------------------------------------
              COMMON STOCK                       HIGH             LOW            HIGH            LOW
              ----------------------------------------------------------------------------------------------
              <S>                                <C>              <C>            <C>             <C>
              1st Quarter                        $16.10           $13.07         $18.12          $14.26
              2nd Quarter                         20.64            14.20          15.43           11.25
              3rd Quarter                         23.20            16.23          16.70           12.48
              4th Quarter                         30.50            20.89          16.60           14.30
</TABLE>


The Class A Common Stock is identical to the Common Stock except that it gives
the holder one-tenth (1/10) vote per share, voting together with the Company's
Common Stock as a single class on all matters except the election of directors.
For election of directors, the Class A Common stockholders vote as a class to
elect 25% of the members of the Board of Directors.

The Company has not declared or paid a cash dividend on common equity since its
organization and has no present intention of paying any such dividend in the
foreseeable future. The Company intends to retain all available cash for the
operation and expansion of its business. In addition, the Company's present loan
agreement restricts the payment of cash dividends on common stock.




                                       39