##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended September 6, 2004



OR



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



For the transition period from 
to



Commission file number 0-19649



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Checkers Drive-In Restaurants, Inc.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 58-1654960                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification no.)
|                                                               | 
|4300 West Cypress Street Suite 600 Tampa, FL                   |  | 33607                               
|(Address of principal executive offices)                       |  | (Zip code)                          



Registrants
telephone number, including area code: (813) 283-7000



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



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b - 2).    Yes  x    No ̈



The Registrant had 11,342,805 shares of Common
Stock, par value $.001 per share, outstanding as of September 6, 2004 (excludes 1,418,400 shares held in treasury).



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##### Table of Contents

TABLE OF CONTENTS



|        |  |                                                                                                                                                                                                  |  |     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|        |  |                                                                                                                                                                                                  |  | PAGE
|PART I  |  | FINANCIAL INFORMATION                                                                                                                                                                            |  |     
|        |  |                                                                                                                                                                                                 
|Item 1  |  | Financial Statements                                                                                                                                                                             |  |     
|        |  |                                                                                                                                                                                                 
|        |  | Consolidated Balance SheetsSeptember 6, 2004 and December 29, 2003                                                                                                                               |  | 3   
|        |  |                                                                                                                                                                                                 
|        |  | Consolidated Statements of Income and Comprehensive Income for theQuarters ended September 6, 2004 and September 8, 2003 and for theThree Quarters ended September 6, 2004 and September 8, 2003 |  | 4   
|        |  |                                                                                                                                                                                                 
|        |  | Consolidated Statements of Cash FlowsThree Quarters ended September 6, 2004 and September 8, 2003                                                                                                |  | 5   
|        |  |                                                                                                                                                                                                 
|        |  | Notes to Consolidated Financial Statements                                                                                                                                                       |  | 6   
|        |  |                                                                                                                                                                                                 
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                            |  | 10  
|        |  |                                                                                                                                                                                                 
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                       |  | 17  
|        |  |                                                                                                                                                                                                 
|Item 4  |  | Controls and Procedures                                                                                                                                                                          |  | 18  
|        |  |                                                                                                                                                                                                 
|PART II |  | OTHER INFORMATION                                                                                                                                                                                |  |     
|        |  |                                                                                                                                                                                                 
|Item 1  |  | Legal proceedings                                                                                                                                                                                |  | 18  
|        |  |                                                                                                                                                                                                 
|Item 2  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                      |  | 20  
|        |  |                                                                                                                                                                                                 
|Item 3  |  | Defaults Upon Senior Securities                                                                                                                                                                  |  | 21  
|        |  |                                                                                                                                                                                                 
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                                                                                                              |  | 21  
|        |  |                                                                                                                                                                                                 
|Item 5  |  | Other Information                                                                                                                                                                                |  | 21  
|        |  |                                                                                                                                                                                                 
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                                                                                                 |  | 21  



2



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##### Table of Contents

ITEM 1. FINANCIAL STATEMENTS



CHECKERS DRIVE-IN RESTAURANTS, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars
in thousands)

(UNAUDITED)



|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                         |  | September 6,2004 |         |   | December 29,2003 |  
|Current Assets:                                                                                                                          |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                |  | $                | 7,498   |   |                  | $ | 13,566  |  
|Accounts, notes and leases receivable, net                                                                                               |  |                  | 3,346   |   |                  |   | 3,182   |  
|Inventory                                                                                                                                |  |                  | 847     |   |                  |   | 1,112   |  
|Prepaid rent                                                                                                                             |  |                  | 465     |   |                  |   | 1,522   |  
|Deferred income tax assets                                                                                                               |  |                  | 3,562   |   |                  |   | 3,585   |  
|Property and equipment held for sale                                                                                                     |  |                  | 1,027   |   |                  |   | 1,313   |  
|Other current assets                                                                                                                     |  |                  | 668     |   |                  |   | 498     |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|Total current assets                                                                                                                     |  |                  | 17,413  |   |                  |   | 24,778  |  
|                                                                                                                                         |  |                 
|Restricted cash                                                                                                                          |  |                  | 4,429   |   |                  |   | 4,141   |  
|Property and equipment, net                                                                                                              |  |                  | 52,895  |   |                  |   | 47,270  |  
|Notes receivable, net - less current portion                                                                                             |  |                  | 5,051   |   |                  |   | 4,325   |  
|Leases receivable, net - less current portion                                                                                            |  |                  | 4,685   |   |                  |   | 5,371   |  
|Intangible assets, net                                                                                                                   |  |                  | 17,231  |   |                  |   | 20,940  |  
|Deferred income tax assets                                                                                                               |  |                  | 20,665  |   |                  |   | 21,104  |  
|Other assets                                                                                                                             |  |                  | 1,228   |   |                  |   | 1,506   |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|                                                                                                                                         |  | $                | 123,597 |   |                  | $ | 129,435 |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|Current Liabilities:                                                                                                                     |  |                  |         |   |                  |   |         |  
|Current maturities of long-term debt and obligations under capital leases                                                                |  | $                | 2,172   |   |                  | $ | 3,071   |  
|Accounts payable                                                                                                                         |  |                  | 4,299   |   |                  |   | 5,110   |  
|Reserves for restaurant relocations and abandoned sites                                                                                  |  |                  | 1,056   |   |                  |   | 999     |  
|Accrued wages and benefits                                                                                                               |  |                  | 2,481   |   |                  |   | 2,166   |  
|Accrued self insurance                                                                                                                   |  |                  | 931     |   |                  |   | 1,327   |  
|Accrued liabilities                                                                                                                      |  |                  | 6,034   |   |                  |   | 4,832   |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|Total current liabilities                                                                                                                |  |                  | 16,973  |   |                  |   | 17,505  |  
|                                                                                                                                         |  |                 
|Long-term debt, less current maturities                                                                                                  |  |                  | 16,678  |   |                  |   | 19,974  |  
|Obligations under capital leases, less current maturities                                                                                |  |                  | 4,370   |   |                  |   | 4,982   |  
|Long-term reserves for restaurant relocations and abandoned sites                                                                        |  |                  | 4,529   |   |                  |   | 4,602   |  
|Deferred revenue                                                                                                                         |  |                  | 3,548   |   |                  |   | 4,249   |  
|Accrued self insurance                                                                                                                   |  |                  | 3,763   |   |                  |   | 3,366   |  
|Other long-term liabilities                                                                                                              |  |                  | 1,166   |   |                  |   | 1,290   |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|Total liabilities                                                                                                                        |  |                  | 51,027  |   |                  |   | 55,968  |  
|                                                                                                                                         |  |                 
|Stockholders Equity:                                                                                                                    |  |                  |         |   |                  |   |         |  
|Preferred stock, $.001 par value, authorized 2,000,000 shares, none issued at September 6, 2004 and December 29, 2003                    |  |                  |        |   |                  |   |        |  
|Common stock, $.001 par value, authorized 175,000,000 shares, issued 12,761,205 at September 6, 2004 and 12,541,588 at December 29,
2003 |  |                  | 13      |   |                  |   | 12      |  
|Additional paid-in capital                                                                                                               |  |                  | 149,448 |   |                  |   | 147,733 |  
|Accumulated deficit                                                                                                                      |  |                  | (63,274 | ) |                  |   | (70,583 | )
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|                                                                                                                                         |  |                  | 86,187  |   |                  |   | 77,162  |  
|Less: Treasury stock, 1,418,400 shares at September 6, 2004 500,000 shares at December 29, 2003, at cost                                 |  |                  | (13,617 | ) |                  |   | (3,695  | )
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|Total stockholders equity                                                                                                               |  |                  | 72,570  |   |                  |   | 73,467  |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  
|                                                                                                                                         |  | $                | 123,597 |   |                  | $ | 129,435 |  
|                                                                                                                                         |  |                  |         |   |                  |   |         |  



See accompanying notes to the
consolidated financial statements



3



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##### Table of Contents

CHECKERS DRIVE-IN RESTAURANTS, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Dollars in thousands except per share amounts)

(UNAUDITED)



|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | - | -------------------- | - | ------ | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                                                              |  | Quarter Ended    |        |   | Three Quarters Ended |  
|                                                                                                              |  | September 6,2004 |        |   | September 8,2003     |   |        | September 6,2004 |  |   | September 8,2003 |  
|REVENUES:                                                                                                     |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Restaurant sales                                                                                              |  | $                | 40,653 |   |                      | $ | 39,405 |                  |  | $ | 121,209          |   |  | $ | 121,284 |  
|Franchise royalty revenue                                                                                     |  |                  | 3,911  |   |                      |   | 3,584  |                  |  |   | 11,675           |   |  |   | 10,607  |  
|Franchise fees and other income                                                                               |  |                  | 411    |   |                      |   | 17     |                  |  |   | 730              |   |  |   | 201     |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Total revenues                                                                                                |  |                  | 44,975 |   |                      |   | 43,006 |                  |  |   | 133,614          |   |  |   | 132,092 |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|COSTS AND EXPENSES:                                                                                           |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Restaurant food and paper costs                                                                               |  |                  | 13,265 |   |                      |   | 12,397 |                  |  |   | 38,698           |   |  |   | 38,109  |  
|Restaurant labor costs                                                                                        |  |                  | 11,710 |   |                      |   | 12,355 |                  |  |   | 36,014           |   |  |   | 36,903  |  
|Restaurant occupancy expenses                                                                                 |  |                  | 2,351  |   |                      |   | 2,766  |                  |  |   | 7,708            |   |  |   | 8,526   |  
|Restaurant depreciation and amortization                                                                      |  |                  | 1,611  |   |                      |   | 1,360  |                  |  |   | 4,273            |   |  |   | 3,951   |  
|Other restaurant operating expenses                                                                           |  |                  | 5,545  |   |                      |   | 5,434  |                  |  |   | 15,215           |   |  |   | 15,261  |  
|General and administrative expenses                                                                           |  |                  | 3,405  |   |                      |   | 2,955  |                  |  |   | 10,285           |   |  |   | 9,846   |  
|Advertising                                                                                                   |  |                  | 2,510  |   |                      |   | 2,819  |                  |  |   | 7,318            |   |  |   | 7,820   |  
|Bad debt expense                                                                                              |  |                  | 57     |   |                      |   | 51     |                  |  |   | 170              |   |  |   | 267     |  
|Non-cash compensation                                                                                         |  |                  | 544    |   |                      |   |       |                  |  |   | 544              |   |  |   | 46      |  
|Other depreciation and amortization                                                                           |  |                  | 273    |   |                      |   | 192    |                  |  |   | 807              |   |  |   | 568     |  
|Impairment of long lived assets                                                                               |  |                  |       |   |                      |   | 131    |                  |  |   |                 |   |  |   | 196     |  
|Restaurant retirement costs, net                                                                              |  |                  | 101    |   |                      |   | (123   | )                |  |   | (207             | ) |  |   | (91     | )
|Loss/(Gain) on sale of assets, net                                                                            |  |                  | 265    |   |                      |   | (186   | )                |  |   | 10               |   |  |   | (449    | )
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Total costs and expenses                                                                                      |  |                  | 41,637 |   |                      |   | 40,151 |                  |  |   | 120,835          |   |  |   | 120,953 |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Operating income                                                                                              |  |                  | 3,338  |   |                      |   | 2,855  |                  |  |   | 12,779           |   |  |   | 11,139  |  
|OTHER INCOME (EXPENSE):                                                                                       |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Interest income                                                                                               |  |                  | 233    |   |                      |   | 260    |                  |  |   | 698              |   |  |   | 795     |  
|Interest expense                                                                                              |  |                  | (569   | ) |                      |   | (553   | )                |  |   | (1,630           | ) |  |   | (1,892  | )
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Income before minority interest, income tax expense and cumulative effect of a change in accounting principle |  |                  | 3,002  |   |                      |   | 2,562  |                  |  |   | 11,847           |   |  |   | 10,042  |  
|Minority interests in operations of joint ventures                                                            |  |                  |       |   |                      |   | (54    | )                |  |   |                 |   |  |   | (91     | )
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Income before income tax expense and cumulative effect of a change in accounting principle                    |  |                  | 3,002  |   |                      |   | 2,508  |                  |  |   | 11,847           |   |  |   | 9,951   |  
|Income tax expense                                                                                            |  |                  | 1,361  |   |                      |   |       |                  |  |   | 4,538            |   |  |   | 66      |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Income before cumulative effect of a change in accounting principle                                           |  |                  | 1,641  |   |                      |   | 2,508  |                  |  |   | 7,309            |   |  |   | 9,885   |  
|Cumulative effect of a change in accounting principle - net of income tax effect                              |  |                  |       |   |                      |   |       |                  |  |   |                 |   |  |   | (51     | )
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Net income                                                                                                    |  | $                | 1,641  |   |                      | $ | 2,508  |                  |  | $ | 7,309            |   |  | $ | 9,834   |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Comprehensive income                                                                                          |  | $                | 1,641  |   |                      | $ | 2,508  |                  |  | $ | 7,309            |   |  | $ | 9,834   |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Basic net earnings per share                                                                                  |  | $                | 0.14   |   |                      | $ | 0.21   |                  |  | $ | 0.62             |   |  | $ | 0.82    |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Diluted net earnings per share                                                                                |  | $                | 0.13   |   |                      | $ | 0.20   |                  |  | $ | 0.58             |   |  | $ | 0.76    |  
|                                                                                                              |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Weighted average number of common shares outstanding:                                                         |  |                  |        |   |                      |   |        |                  |  |   |                  |   |  |   |         |  
|Basic                                                                                                         |  |                  | 11,440 |   |                      |   | 11,871 |                  |  |   | 11,859           |   |  |   | 12,048  |  
|Diluted                                                                                                       |  |                  | 12,228 |   |                      |   | 12,827 |                  |  |   | 12,654           |   |  |   | 12,872  |  



See accompanying notes to consolidated
financial statements.



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##### Table of Contents

CHECKERS DRIVE-IN RESTAURANTS, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(UNAUDITED)



|                                                                                |  |                      |         |   |                   |   |        |  
|------------------------------------------------------------------------------- |  | -------------------- | ------- | - | ----------------- | - | ------ | -
|                                                                                |  | Three Quarters Ended |        
|                                                                                |  | September 6, 2004    |         |   | September 8, 2003 |  
|Cash flows from operating activities:                                           |  |                      |         |   |                   |   |        |  
|Net income                                                                      |  | $                    | 7,309   |   |                   | $ | 9,834  |  
|Adjustments to reconcile net earnings to cash provided by operating activities: |  |                      |         |   |                   |   |        |  
|Cumulative effect of a change in accounting principle                           |  |                      |        |   |                   |   | 51     |  
|Deferred income tax expense                                                     |  |                      | 4,036   |   |                   |   |       |  
|Income tax effect of exercise of options                                        |  |                      | 284     |   |                   |   |       |  
|Depreciation and amortization                                                   |  |                      | 5,080   |   |                   |   | 4,519  |  
|Amortization of deferred loan costs                                             |  |                      | 69      |   |                   |   | 127    |  
|Impairment of long-lived assets                                                 |  |                      |        |   |                   |   | 196    |  
|Bad debt expense                                                                |  |                      | 170     |   |                   |   | 267    |  
|Non-cash compensation                                                           |  |                      | 544     |   |                   |   | 46     |  
|Loss/(Gain) on sale of assets                                                   |  |                      | 10      |   |                   |   | (449   | )
|Minority interest in operations of joint ventures                               |  |                      |        |   |                   |   | 91     |  
|Change in assets and liabilities:                                               |  |                      |         |   |                   |   |        |  
|Increase in receivables                                                         |  |                      | (708    | ) |                   |   | (339   | )
|Decrease (increase) in inventory                                                |  |                      | 244     |   |                   |   | (143   | )
|Decrease in prepaid expenses and other current assets                           |  |                      | 673     |   |                   |   | 891    |  
|Decrease (increase) in other assets                                             |  |                      | 146     |   |                   |   | (28    | )
|Decrease in accounts payable                                                    |  |                      | (814    | ) |                   |   | (1,917 | )
|Increase (decrease) in accrued liabilities                                      |  |                      | 45      |   |                   |   | (2,140 | )
|                                                                                |  |                      |         |   |                   |   |        |  
|Net cash provided by operating activities                                       |  |                      | 17,088  |   |                   |   | 11,006 |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Cash flows from investing activities:                                           |  |                      |         |   |                   |   |        |  
|Capital expenditures                                                            |  |                      | (12,472 | ) |                   |   | (8,233 | )
|Acquisitions of restaurants and equity interests                                |  |                      | (815    | ) |                   |   | (200   | )
|Proceeds from sale of property and equipment                                    |  |                      | 4,259   |   |                   |   | 711    |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Net cash used in investing activities                                           |  |                      | (9,028  | ) |                   |   | (7,722 | )
|                                                                                |  |                      |         |   |                   |   |        |  
|Cash flows from financing activities:                                           |  |                      |         |   |                   |   |        |  
|Principal payments on long-term debt and capital lease obligations              |  |                      | (4,807  | ) |                   |   | (2,264 | )
|Increase in restricted cash                                                     |  |                      | (288    | ) |                   |   | (319   | )
|Proceeds from exercise of stock options and warrants                            |  |                      | 889     |   |                   |   | 1,121  |  
|Purchase of treasury stock                                                      |  |                      | (9,922  | ) |                   |   | (4,236 | )
|Repayment of note receivable - officer                                          |  |                      |        |   |                   |   | 67     |  
|Distributions to minority interests                                             |  |                      |        |   |                   |   | (59    | )
|                                                                                |  |                      |         |   |                   |   |        |  
|Net cash used in financing activities                                           |  |                      | (14,128 | ) |                   |   | (5,690 | )
|                                                                                |  |                      |         |   |                   |   |        |  
|Net decrease in cash                                                            |  |                      | (6,068  | ) |                   |   | (2,406 | )
|Cash at beginning of period                                                     |  |                      | 13,566  |   |                   |   | 14,323 |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Cash at end of period                                                           |  | $                    | 7,498   |   |                   | $ | 11,917 |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Supplemental disclosures of cash flow information                               |  |                      |         |   |                   |   |        |  
|Interest paid                                                                   |  | $                    | 1,774   |   |                   | $ | 2,016  |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Issuance of capital lease obligation for equipment                              |  | $                    |        |   |                   | $ | 203    |  
|                                                                                |  |                      |         |   |                   |   |        |  
|Issuance of treasury stock                                                      |  | $                    |        |   |                   | $ | (115   | )
|                                                                                |  |                      |         |   |                   |   |        |  
|Income tax paid                                                                 |  | $                    | 251     |   |                   | $ |       |  
|                                                                                |  |                      |         |   |                   |   |        |  



See accompanying notes to the
consolidated financial statements.



5



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##### Table of Contents

CHECKERS DRIVE-IN RESTAURANTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Note 1: Summary of Significant Accounting
Policies



(a) Basis of Presentation - The accompanying
unaudited consolidated financial statements include the accounts of Checkers Drive-In Restaurants, Inc., its wholly-owned subsidiaries collectively referred to as the Company. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the information set forth therein have been included, and all adjustments were of a normal and recurring
nature.



The Company reports on a fiscal year which will end on
the Monday closest to December 31st. Each quarter consists of three 4-week periods, with the exception of the fourth quarter which typically consists of four 4-week periods. The fourth quarter of 2004 will consist of three four week periods and one
five week period ending January 3, 2005.



The operating results
for the first three quarters ended September 6, 2004 are not necessarily an indication of the results that may be expected for the fiscal year ending January 3, 2005. Except as disclosed herein, there has been no material change in the information
disclosed in the notes to the consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 29, 2003. Therefore, the accompanying consolidated financial statements should be read in
conjunction with the Companys December 29, 2003 consolidated financial statements.



(b) Purpose and Organization Our principal business is the operation and franchising of Checkers® and Rallys Hamburgers® (Rallys) restaurants. At September 6, 2004, there were 375 Rallys restaurants operating in 17 different states and there were 416 Checkers
restaurants operating in 20 different states, the District of Columbia, Mexico and the West Bank. Ten states have both Checkers and Rallys restaurants. Of the 791 total restaurants, 210 are operated by the Company and 581 are operated by
franchisees.



Our restaurants offer high quality food, serving
primarily the drive-thru and take-out segments of the quick-service restaurant industry. Checkers commenced operations in April 1986 and began offering franchises in January 1987. Rallys opened its first restaurant in January 1985 and began
offering franchises in November 1986.



(c) Pro forma Diluted Earnings per
Share  Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Diluted computations are based on the treasury stock method and
include assumed conversions of stock options, net of shares assumed to be repurchased from the proceeds, when outstanding and dilutive. Options to purchase 664,973 and 641,428 shares of common stock were not included in the computation of diluted
earnings per common share for the third quarter of 2004 and 2003, respectively. These options were excluded from the calculation because the exercise price of these options was greater than the average market price in the quarter, and therefore,
they are antidilutive.



If the compensation cost for all option
grants to employees and directors had been determined consistent with SFAS No. 123, as amended by SFAS No. 148, the Companys net income and earnings per share would have been adjusted to the following pro forma amounts:



(Dollars in thousands, except per share amounts)



|                                                                                                                                        |  |                   |       |   |                      |   |        |                   |  |   |                   |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----- | - | -------------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                                                                                                        |  | Quarter Ended     |       |   | Three Quarters Ended |  
|                                                                                                                                        |  | September 6, 2004 |       |   | September 8, 2003    |   |        | September 6, 2004 |  |   | September 8, 2003 |  
|Net income, as reported                                                                                                                 |  | $                 | 1,641 |   |                      | $ | 2,508  |                   |  | $ | 7,309             |   |  | $ | 9,834  |  
|Deduct: Additional stock-based compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                   | (308  | ) |                      |   | (1,413 | )                 |  |   | (1,678            | ) |  |   | (1,347 | )
|                                                                                                                                        |  |                   |       |   |                      |   |        |                   |  |   |                   |   |  |   |        |  
|Pro forma net income                                                                                                                    |  | $                 | 1,333 |   |                      | $ | 1,095  |                   |  | $ | 5,631             |   |  | $ | 8,487  |  
|                                                                                                                                        |  |                   |       |   |                      |   |        |                   |  |   |                   |   |  |   |        |  
|Earnings per share:                                                                                                                     |  |                   |       |   |                      |   |        |                   |  |   |                   |   |  |   |        |  
|Basic - as reported                                                                                                                     |  |                   | 0.14  |   |                      |   | 0.21   |                   |  |   | 0.62              |   |  |   | 0.82   |  
|Basic - pro forma                                                                                                                       |  |                   | 0.12  |   |                      |   | 0.09   |                   |  |   | 0.47              |   |  |   | 0.70   |  
|                                                                                                                                        |  |                   |       |  
|Diluted - as reported                                                                                                                   |  |                   | 0.13  |   |                      |   | 0.20   |                   |  |   | 0.58              |   |  |   | 0.76   |  
|Diluted - pro forma                                                                                                                     |  |                   | 0.11  |   |                      |   | 0.09   |                   |  |   | 0.44              |   |  |   | 0.66   |  



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##### Table of Contents

For purposes of the proforma disclosures, assuming the use of the fair value method of accounting, the
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



|                         |  |                   |   |  |                   |  
|------------------------ |  | ----------------- | - |  | ----------------- | -
|Assumptions              |  | September 6, 2004 |   |  | September 8, 2003 |  
|Risk-free interest rates |  | 1.43              | % |  | 1.01              | %
|Volatility               |  | 52                | % |  | 73                | %
|Expected lives (months)  |  | 48                |   |  | 48                |  



The Company accrues
compensation costs as if all instruments granted are expected to vest. The effect of actual forfeitures is recognized as they occur. An expected dividend yield of zero percent was used for all periods based on the Companys history without any
dividend payments.



The Company granted 8,335 stock options on
December 30, 2003 at an exercise price of $10.47 and 150,000 on February 25, 2004 at an exercise price of $11.70 to members of the Board of Directors under the 1994 Directors Plan for Non-Employee Directors. On May 25, 2004, the Company granted
580,000 stock options to certain employees at an exercise price of $10.14 under the 2001 Stock Option Plan. On May 25, 2004, the Company also granted 125,000 stock options to members of the Board of Directors at an exercise price of $10.14 under the
1994 Directors Plan for Non-Employee Directors.



(d) Advertising Costs
- The Company expenses advertising costs as incurred. To the extent we participate in independent advertising cooperatives, we expense our contributions as incurred.



(e) Use of Estimates-The preparation of the financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.



(f) Reclassifications - Certain amounts in the 2003 financial statements have been reclassified to conform to the current quarter 2004 presentation.



Note 2: Liquidity and Capital Resources



The restaurant industry, in general, operates with a working capital deficit because most investments are in long-term restaurant operating assets. We do
not normally require large amounts of working capital to maintain operations since sales are for cash, purchases are on open accounts and meat and produce inventories are limited to a three-to-five day supply to assure freshness. We do not have
significant levels of accounts receivable or inventory, and we receive credit from our trade suppliers.



We had working capital of $0.4 million on September 6, 2004 compared to $7.3 million on December 29, 2003. The factors decreasing liquidity are capital
additions of $12.5 million, principal payments on debt and capital leases of $4.8 million and the purchase of treasury shares of $9.9 million, while the factors increasing liquidity are cash provided by operating activities of $17.1 million and
proceeds from the sale of property and equipment of $4.3 million,



The Company is subject to certain restrictive financial and non-financial covenants under certain of its debt agreements, including EBITDA and a Fixed Charge Coverage ratio, each as defined in the agreements. We were in compliance with all
of the covenants as of September 6, 2004.



Note 3: Leases Receivable



As a result of the sale of Company-owned restaurants in
1999 and 2000, we have recorded capital leases receivable for those restaurants sold which are subject to capital lease and mortgage obligations. The amount of capital leases receivable as of September 6, 2004 was approximately $5.1 million. As of
September 6, 2004, we have deferred gains of $3.2 million from these sales since we continue to be responsible for the payment of these obligations to the original lessors and mortgagors. The gains are being recognized over the life of the related
capital leases. The deferred gains relating to these sales are included in the consolidated balance sheet on September 6, 2004, under the captions accrued liabilities and deferred revenue for $0.4 million and $2.8 million, respectively.



We have subleased the property associated with the sale of Company-owned
restaurants under operating leases. The revenue from these subleases is offset against rent expense, as we continue to be responsible for the rent payments to the original lessors. Sublease rental income totaled $6.3 million and $5.3 million for the
three quarters ended September 6, 2004 and September 8, 2003, respectively.



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##### Table of Contents

Note 4: Valuation of Intangible Assets and Goodwill



We assess the impairment of intangible assets with an indefinite life on an annual basis (tradename and goodwill), or
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include, but are not limited to, the following:



| |  | significant underperformance relative to expected historical or projected future operating results;
| | - | ---------------------------------------------------------------------------------------------------



| |  | significant negative industry or economic trends;
| | - | -------------------------------------------------



| |  | significant decline in our stock price for a sustained period; and
| | - | ------------------------------------------------------------------



| |  | our market capitalization relative to net book value.
| | - | -----------------------------------------------------



In accordance with SFAS No. 142 Goodwill and Other Intangible Assets we ceased to amortize approximately $24 million of goodwill and $17.5
million for the intangible value of our tradename in fiscal 2002. During fiscal year 2003, the Company reversed $29.7 million of the valuation allowance against deferred tax assets. As a result, $23.5 million was recorded as a reduction of goodwill.
During the quarter ended June 14, 2004, the Company identified an unrecognized deferred tax asset of approximately $3.5 million which resulted in the reduction of goodwill by $0.7 million and tradename by $2.8 million.



In lieu of amortization, we performed an initial impairment review of our
goodwill and tradename as of January 1, 2002. Subsequently, we performed annual impairment reviews on December 30, 2002 and December 29, 2003. Based upon these reviews, no adjustment was required, and we do not believe circumstances have changed
since the 2003 review date which would make it necessary to reassess their values subsequent to the balance sheet date. We will continue our annual evaluation, unless circumstances call for us to perform an evaluation prior to then.



Intangible assets consist of the following:



(Dollars in thousands)



|                              |  |                   |        |                   |   |       
|----------------------------- |  | ----------------- | ------ | ----------------- | - | ------
|                              |  | September 6, 2004 |        | December 29, 2003
|Goodwill                      |  | $                 |       |                   | $ | 744   
|Tradename                     |  |                   | 14,767 |                   |   | 17,548
|Amortizable intangible assets |  |                   | 2,464  |                   |   | 2,648 
|                              |  |                   |        |                   |   |       
|Intangible assets, net        |  | $                 | 17,231 |                   | $ | 20,940
|                              |  |                   |        |                   |   |       



Amortizable intangible
assets:



|                            |  |                   |       |                   |   |        |     |  |              |       |              |   |       |     |   |                |   |  |   |       |  |           
|--------------------------- |  | ----------------- | ----- | ----------------- | - | ------ | --- |  | ------------ | ----- | ------------ | - | ----- | --- | - | -------------- | - |  | - | ----- |  | ----------
|                            |  | September 6, 2004 |       | December 29, 2003 |   |       
|                            |  | Gross Amount      |       | Accum Amount      |   |        | Net |  | Gross Amount |       | Accum Amount |   |       | Net |   | EstimatedLives
|Reacquired franchise rights |  | $                 | 1,237 |                   | $ | (623   | )   |  | $            | 614   |              | $ | 1,237 |     | $ | (570           | ) |  | $ | 667   |  | 8 years   
|Other intangibles           |  |                   | 4,191 |                   |   | (2,341 | )   |  |              | 1,850 |              |   | 4,191 |     |   | (2,210         | ) |  |   | 1,981 |  | 7-15 years
|                            |  |                   |       |                   |   |        |     |  |              |       |              |   |       |     |   |                |   |  |   |       |  |           
|                            |  | $                 | 5,428 |                   | $ | (2,964 | )   |  | $            | 2,464 |              | $ | 5,428 |     | $ | (2,780         | ) |  | $ | 2,648 |  |           
|                            |  |                   |       |                   |   |        |     |  |              |       |              |   |       |     |   |                |   |  |   |       |  |           



Amortization for amortizable
intangible assets, for each of the next five fiscal years is as follows:



|     |  |       |    
|---- |  | ----- | ---
|     |  | Total
|2004 |  | $     | 268
|2005 |  |       | 251
|2006 |  |       | 251
|2007 |  |       | 251
|2008 |  |       | 251



Note 5: Line of Credit



The Company obtained a credit facility with U.S. Bancorp
Equipment Finance, Inc. in 2003 that allows it to borrow up to $3.0 million, which is available through December 31, 2004. The agreement allows the Company to borrow at the 7-year interest rate swap published in the Federal Reserve Statistical
Release plus 2.2%. There were no borrowings under this facility as of September 6, 2004.



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##### Table of Contents

Note 6: Long-term debt and Obligations under Capital Leases



Long-term debt and obligations under capital leases consist of the following:



(Dollars in thousands)



|                                                                                                                                                                                                                                                            |  |                   |        |   |                   |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                                                                                                                                                                                            |  | September 6, 2004 |        |   | December 29, 2003 |  
|Note payable (Loan A) to GE Capital Franchise Finance Corporation payable in 120 monthly installments, maturing July 1, 2010, including
interest at LIBOR plus 3.7% (5.19% at September 6, 2004) secured by property and equipment.                         |  | $                 | 6,338  |   |                   | $ | 8,791  |  
|Mortgages payable to GE Capital Franchise Finance Corporation secured by thirty-two Company-owned restaurants, payable in 240 aggregate
monthly installments of $133, maturing January 1, 2019, including interest at 9.5%.                                 |  |                   | 11,707 |   |                   |   | 12,754 |  
|Obligations under capital leases, maturing at various dates through December 1, 2019, secured by property and equipment, bearing interest
ranging from 7.0% to 10%. The leases are payable in monthly principal and interest installments averaging $73.    |  |                   | 2,498  |   |                   |   | 2,923  |  
|Obligations under capital leases, maturing at various dates through January 1, 2016, secured by property and equipment, bearing interest
ranging from 10.4% to 16.4%. The leases are payable in monthly principal and interest installments averaging $102. |  |                   | 2,657  |   |                   |   | 3,358  |  
|Notes payable to a former Rallys franchise owner for acquisition of markets, secured by the related assets acquired, with maturities
through May 1, 2004, bearing interest at 7.8%.                                                                        |  |                   |       |   |                   |   | 75     |  
|Other notes payable, maturing at various dates through September 17, 2004, secured by property and equipment, bearing interest at 7.70%. The
notes are payable in monthly principal and interest installments of $18.                                       |  |                   | 20     |   |                   |   | 126    |  
|                                                                                                                                                                                                                                                            |  |                   |        |   |                   |   |        |  
|Total long-term debt and obligations under capital leases                                                                                                                                                                                                   |  |                   | 23,220 |   |                   |   | 28,027 |  
|Less current installments                                                                                                                                                                                                                                   |  |                   | (2,172 | ) |                   |   | (3,071 | )
|                                                                                                                                                                                                                                                            |  |                   |        |   |                   |   |        |  
|Long-term debt, less current maturities                                                                                                                                                                                                                     |  | $                 | 21,048 |   |                   | $ | 24,956 |  
|                                                                                                                                                                                                                                                            |  |                   |        |   |                   |   |        |  



Although we continue to be obligated,
approximately $5.1 million of the mortgage and capital lease obligations noted above pass directly through to franchisees (See Note 3).



Note 7: Accounting Charges and Loss Provisions



As of the quarter ended September 6, 2004, we had established reserves for restaurant relocations and abandoned sites of $5.6 million. These reserves
represent managements estimate of the Companys ultimate obligations under the related operating leases, and is reviewed and adjusted periodically, as more information becomes available related to our ability to sublease, assign or
terminate our obligations under the leases. During the three quarters ended September 6, 2004, the Company made lease and other payments of $0.8 million against this reserve. The Company terminated leases for surplus sites which were negotiated for
less than the contractual obligation, further reducing the reserve by approximately $148,000. The Company also increased the reserve by approximately $950,000 for closed restaurants located in Jacksonville, Florida which were acquired with seven
operating restaurants during the second quarter of 2004.



We
measure impairment of long-lived assets under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 addresses financial accounting and reporting for the
impairment of long-lived assets and for long-lived assets to be disposed of. The Company regularly prepares an evaluation of long-lived assets during the year. The Company assesses the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. The events we considered during our impairment review included individual restaurant performance relative to historical and projected future operating results and the negative
economic trends that have taken place for these locations. Based on our review, there were no locations that required additional impairment charges as of September 6, 2004.



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Note 8: Equity



On May 25, 2004, the shareholders approved the 2004 Stock Award Plan for Non-Employee Directors. The purpose of the 2004 Plan is to attract and retain the
best available individuals to serve as independent directors to the Company. Under the terms of the 2004 Plan, the Company is authorized to grant (i) automatic, non-discretionary stock awards and (ii) stock options or shares of restricted stock that
may be awarded in such amounts and with such terms and conditions as determined under the 2004 Plan. All options granted under the 2004 Plan will be non-qualified stock options that do not qualify as incentive stock options, as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the Code).



Each Non-Employee director who is currently serving on the Companys Board of Directors will be automatically granted a stock award annually, on the effective date of the 2004 Plan, of 10,000 shares of common
stock; subject, however, to such restrictions as to vesting, forfeiture, resale or other terms and conditions as may be imposed by the Committee at the time of the award. Each non-employee director that is elected to the Board of Directors after May
25, 2004 will be awarded annually, on the effective date of the 2004 Plan, 7,000 shares of common stock; subject, however, to such restrictions as to vesting, forfeiture, resale or other terms and conditions as may be imposed by the Committee at the
time of such award. The first stock grant took place on June 17, 2004, with the five Non-Employee directors each receiving 10,000 shares of stock at $10.87 per share, resulting in non-cash compensation expense in the third quarter 2004 of $0.5
million.



On May 25, 2004, the Companys Board of
Directors approved a 500,000 share increase to the 1,300,000 share Stock Repurchase Program announced on March 19, 2003, bringing the total of shares available for repurchase to 1,800,000.



Note 9: Income Taxes



The Company accounts for income taxes in accordance with the provisions of SFAS No. 109, Accounting for Income
Taxes. SFAS No. 109 requires the Company to recognize income tax assets and liabilities based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax
reporting purposes. Deferred tax assets must be evaluated for realizability and if necessary reduced by a valuation allowance. Realization of the deferred tax assets is dependant upon the Companys ability to generate sufficient taxable income
in future years. The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are adjusted as necessary.



Income tax expense for the three quarters ended September 6, 2004 was $4.5 million. Through the quarter ended September 8, 2003, the Company recognized
income tax expense of $66,000. Although management is recording tax expense at an estimated effective tax rate of 38%, we expect tax payments for 2004 to be limited to the federal alternative minimum tax and certain state income taxes.



During the quarter ended June 14, 2004, the Company identified an
unrecognized deferred tax asset of approximately $3.5 million which resulted in the reduction of goodwill by $0.7 million and tradename by $2.8 million. This deferred tax asset is related to intangible assets arising from acquisitions prior to the
merger on August 9, 1999 whose tax deductibility was deemed uncertain at the time of the acquisitions.



Note 10: Subsequent events



Subsequent to September 6, 2004, the Company repurchased 178,200 shares of its outstanding common stock under the Stock Repurchase Program announced on March 19, 2003 for approximately $2.0 million. On October 12, 2004, the Company
announced the conclusion of its Stock Repurchase Program publicly announced on March 19, 2003, and subsequently amended and increased by the Board of Directors on May 27, 2004. On October 12, 2004, the Company also announced that the Board of
Directors had approved a new share repurchase program, authorizing the Company to repurchase up to 1,200,000 shares of its common stock from time to time in open market or in privately negotiated block purchase transactions.



On September 10, 2004, the Company completed a collateral exchange in which
the land on three operating properties was exchanged for three surplus properties. The Company is currently by reviewing the proper accounting for the exchange.



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



Introduction



Checkers Drive-In Restaurants, Inc. (Checkers), a Delaware corporation and its wholly-owned subsidiaries (collectively, the
Company) is the largest chain of double drive-thru restaurants in the United States. Our Company is a combination of two separate quick-service restaurant chains, Checkers® and Rallys Hamburgers® (Rallys). At September 6, 2004, there were 375 Rallys restaurants operating
in 17 different states and 416 Checkers restaurants operating in 20 different states, the District of Columbia, Mexico and the West Bank. Of the 791 total restaurants, 210 are operated by the Company and 581 are operated by



10



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##### Table of Contents

franchisees. Ten states have both Checkers and Rallys restaurants. Our restaurants offer high quality food, serving
primarily the drive-thru and take-out segments of the quick-service restaurant industry. Checkers commenced operations in April 1986 and began offering franchises in January 1987. Rallys opened its first restaurant in January 1985 and began
offering franchises in November 1986.



We receive revenues from
restaurant sales, franchise fees and royalties. Restaurant food and paper costs, labor costs, occupancy expense, other operating expenses, restaurant depreciation and amortization, and advertising relate directly to Company-owned restaurants.
Expenses such as other depreciation and amortization, and general and administrative expenses relate to Company-owned restaurant operations and the Companys franchise sales and support functions. Our revenues and expenses are affected by the
number and timing of additional restaurant openings, closings and the sales volume of both existing and new restaurants.



Special Note Regarding Forward-Looking Statements



Certain statements in this Form 10-Q under Part I, Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations, Part II, Item 1. Legal Proceedings and elsewhere in this Form 10-Q constitute forward-looking statements which we believe are within the meaning of the Securities Act of 1933, as amended and the Securities
Exchange Act of 1934, as amended. Also, when we use words such as believes, expects, anticipates or similar expressions, we are making forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such
forward-looking statements. Some of the risks that should be considered include:



(i) The fact that we compete with numerous well established competitors who have substantially greater financial resources and longer operating histories than us, which enables them to engage in heavy and sustained
discounting as well as substantial advertising and promotion. While this competition is already intense, if it increases, it could have an even greater adverse impact on revenues and profitability of company and franchise restaurants.



(ii) The fact that we anticipate the need to continue the improvement in same
store sales if we are to achieve improved profitability. Sales increases will depend, among other things, on the success of our advertising and promotion efforts and the success of other operating and training initiatives, all of which are
speculative.



We may also be negatively impacted by other
factors common to the restaurant industry such as changes in consumer tastes away from red meat and fried foods; consumer acceptance of new products; consumer frequency; increases in the costs of food, paper, labor, health care, workers
compensation or energy; an inadequate number of available hourly paid employees; decreases in the availability of affordable capital resources; and/or development and operating costs. Other factors which may negatively impact the Company include,
among others, adverse publicity; general economic and business conditions; availability, locations, and terms of sites for restaurant development; changes in business strategy or development plans; quality of management; availability, terms and
deployment of capital; the results of financing efforts; business abilities and judgment of personnel; availability of qualified personnel; changes in, or failure to comply with, government regulations; continued NASDAQ listing; weather conditions;
construction schedules; uninterrupted product supply; results of existing and future litigation and other risk factors referenced in this Form 10-Q and in our annual report on Form 10-K for the year ended December 29, 2003.



Restaurants Operating in the System

For the Quarters Ended



|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|---------------------- |  | ------------ | - |  | ------------- | - |  | ------------ | - |  | ------------ | - |  | ------------ | - |  | ------------- |  | ------------ | - |  | ------------- | -
|                       |  | Dec. 30,2002 |   |  | March 24,2003 |   |  | June 16,2003 |   |  | Sept. 8,2003 |   |  | Dec. 29,2003 |   |  | March 22,2004 |  | June 14,2004 |   |  | Sept. 6, 2004 |  
|Company-operated:      |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|Beginning of quarter   |  | 248          |   |  | 248           |   |  | 242          |   |  | 242          |   |  | 242          |   |  | 222           |  | 222          |   |  | 221           |  
|Openings/transfers in  |  |             |   |  |              |   |  |             |   |  | 1            |   |  | 5            |   |  |              |  | 7            |   |  | 2             |  
|Closings/transfers out |  |             |   |  | (6            | ) |  |             |   |  | (1           | ) |  | (25          | ) |  |              |  | (8           | ) |  | (13           | )
|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|End of quarter         |  | 248          |   |  | 242           |   |  | 242          |   |  | 242          |   |  | 222          |   |  | 222           |  | 221          |   |  | 210           |  
|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|Franchise:             |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|Beginning of quarter   |  | 541          |   |  | 536           |   |  | 536          |   |  | 539          |   |  | 540          |   |  | 562           |  | 565          |   |  | 566           |  
|Openings/transfers in  |  | 3            |   |  | 2             |   |  | 4            |   |  | 2            |   |  | 31           |   |  | 3             |  | 10           |   |  | 15            |  
|Closings/transfers out |  | (8           | ) |  | (2            | ) |  | (1           | ) |  | (1           | ) |  | (9           | ) |  |              |  | (9           | ) |  |              |  
|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|End of quarter         |  | 536          |   |  | 536           |   |  | 539          |   |  | 540          |   |  | 562          |   |  | 565           |  | 566          |   |  | 581           |  
|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  
|                       |  | 784          |   |  | 778           |   |  | 781          |   |  | 782          |   |  | 784          |   |  | 787           |  | 787          |   |  | 791           |  
|                       |  |              |   |  |               |   |  |              |   |  |              |   |  |              |   |  |               |  |              |   |  |               |  



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RESULTS OF OPERATIONS



The table below sets forth the percentage relationship to total revenues, unless otherwise indicated, of items included in the
Companys consolidated statements of income for the periods indicated:



|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|------------------------------------------------------------------------------------------------------------- |  | ------------- | -- |  | -------------------- | -- |  | ------------ | -- |  | ------------ | --
|                                                                                                              |  | Quarter Ended |    |  | Three Quarters Ended |   
|                                                                                                              |  | Sept. 6,2004  |    |  | Sept.8, 2003         |    |  | Sept. 6,2004 |    |  | Sept.8, 2003 |   
|REVENUES:                                                                                                     |  |               |    |  |                      |    |  |              |    |  |              |   
|Restaurant sales                                                                                              |  | 90.4          | %  |  | 91.6                 | %  |  | 90.7         | %  |  | 91.8         | % 
|Franchise royalty revenue                                                                                     |  | 8.7           | %  |  | 8.3                  | %  |  | 8.7          | %  |  | 8.0          | % 
|Franchise fees and other income                                                                               |  | 0.9           | %  |  | 0.1                  | %  |  | 0.6          | %  |  | 0.2          | % 
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Total revenues                                                                                                |  | 100.0         | %  |  | 100.0                | %  |  | 100.0        | %  |  | 100.0        | % 
|                                                                                                              |  |               |    | 
|COSTS AND EXPENSES:                                                                                           |  |               |    |  |                      |    |  |              |    |  |              |   
|Restaurant food and paper costs (1)                                                                           |  | 32.6          | %  |  | 31.5                 | %  |  | 31.9         | %  |  | 31.4         | % 
|Restaurant labor costs (1)                                                                                    |  | 28.8          | %  |  | 31.4                 | %  |  | 29.7         | %  |  | 30.4         | % 
|Restaurant occupancy expenses (1)                                                                             |  | 5.8           | %  |  | 7.1                  | %  |  | 6.4          | %  |  | 7.0          | % 
|Restaurant depreciation and amortization (1)                                                                  |  | 4.0           | %  |  | 3.5                  | %  |  | 3.5          | %  |  | 3.3          | % 
|Other restaurant operating expenses (1)                                                                       |  | 13.6          | %  |  | 13.8                 | %  |  | 12.6         | %  |  | 12.6         | % 
|General and administrative expenses                                                                           |  | 7.6           | %  |  | 6.9                  | %  |  | 7.7          | %  |  | 7.5          | % 
|Advertising (1)                                                                                               |  | 6.2           | %  |  | 7.2                  | %  |  | 6.0          | %  |  | 6.4          | % 
|Bad debt expense                                                                                              |  | 0.1           | %  |  | 0.1                  | %  |  | 0.1          | %  |  | 0.2          | % 
|Non-cash compensation                                                                                         |  | 1.2           | %  |  | 0.0                  | %  |  | 0.4          | %  |  | 0.0          | % 
|Other depreciation and amortization                                                                           |  | 0.6           | %  |  | 0.4                  | %  |  | 0.6          | %  |  | 0.4          | % 
|Impairment of long-lived assets                                                                               |  | 0.0           | %  |  | 0.3                  | %  |  | 0.0          | %  |  | 0.1          | % 
|Restaurant retirement costs, net                                                                              |  | 0.2           | %  |  | (0.3                 | )% |  | (0.2         | )% |  | (0.1         | )%
|Loss/(Gain) on sale of assets                                                                                 |  | 0.6           | %  |  | (0.4                 | )% |  | 0.0          | %  |  | (0.3         | )%
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Total costs & expenses                                                                                        |  | 92.6          | %  |  | 93.4                 | %  |  | 90.4         | %  |  | 91.6         | % 
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Operating income                                                                                              |  | 7.4           | %  |  | 6.6                  | %  |  | 9.6          | %  |  | 8.4          | % 
|                                                                                                              |  |               |    | 
|OTHER INCOME (EXPENSE):                                                                                       |  |               |    |  |                      |    |  |              |    |  |              |   
|Interest income                                                                                               |  | 0.5           | %  |  | 0.6                  | %  |  | 0.5          | %  |  | 0.6          | % 
|Interest expense                                                                                              |  | (1.3          | )% |  | (1.3                 | )% |  | (1.2         | )% |  | (1.4         | )%
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Income before minority interest, income tax expense and cumulative effect of a change in accounting principle |  | 6.6           | %  |  | 5.9                  | %  |  | 8.9          | %  |  | 7.6          | % 
|Minority interests in operations of joint ventures                                                            |  | 0.0           | %  |  | (0.1                 | )% |  | 0.0          | %  |  | (0.1         | )%
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Income before income tax expense and cumulative effect of a change in accounting principle                    |  | 6.6           | %  |  | 5.8                  | %  |  | 8.9          | %  |  | 7.5          | % 
|Income tax expense                                                                                            |  | 3.0           | %  |  | 0.0                  | %  |  | 3.4          | %  |  | 0.0          | % 
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Income before cumulative effect of a change in accounting principle                                           |  | 3.6           | %  |  | 5.8                  | %  |  | 5.5          | %  |  | 7.5          | % 
|Cumulative effect of change in accounting principle - net of income tax effect                                |  | 0.0           | %  |  | 0.0                  | %  |  | 0.0          | %  |  | (0.1         | )%
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   
|Net income                                                                                                    |  | 3.6           | %  |  | 5.8                  | %  |  | 5.5          | %  |  | 7.4          | % 
|                                                                                                              |  |               |    |  |                      |    |  |              |    |  |              |   

---

|(1) | As a percentage of restaurant sales
|--- | -----------------------------------



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Comparison of Historical Results - Quarter Ended September 6, 2004 and Quarter Ended September 8, 2003



Total Revenues



Total revenues, which consist of restaurant sales and franchise royalty and fee income, were $45.0 million for the quarter ended September
6, 2004, compared to $43.0 million for the quarter ended September 8, 2003.



Restaurant Sales



Company-owned restaurant sales increased by
$1.3 million for the quarter ended September 6, 2004 to $40.7 million compared to $39.4 million for the same quarter last year. This increase was primarily due to same-store sales growth of 15.3% for the third quarter ended September 6, 2004,
partially offset by a net reduction of 32 Company-owned restaurants since the third quarter of last year.



Franchise Royalty Revenue



Franchise
royalties increased by $0.3 million in the third quarter of 2004, to $3.9 million, primarily due to an increase of 41 franchise restaurants comprised mainly of the sale of Company-owned restaurants to franchisees. In addition, royalties for the
quarter increased due to a same-store sales improvement of 8.4% at franchise restaurants.



Franchise Fees



Franchise fees and
other income for the third quarter of 2004 were $411,000 as compared to $17,000 for the same quarter of 2003. The increase is attributable primarily to franchise fees collected for the sale of twelve Atlanta restaurants to a franchisee.



Restaurant Food and Paper Costs



Restaurant food and paper costs were $13.3 million or 32.6% of restaurant sales for the
quarter ended September 6, 2004 compared with 31.5% of restaurant sales in the same quarter of 2003. The increase in these costs, as a percentage of restaurant sales, was primarily due to increased prices of beef and cheese relative to the same
quarter a year ago.



Restaurant Labor Costs



Restaurant labor costs, which include restaurant employees salaries, wages, benefits,
workers compensation costs, bonuses and related taxes, totaled $11.7 million or 28.8% of restaurant sales for the quarter ended September 6, 2004 compared with $12.4 million or 31.4% for the quarter ended September 8, 2003. The decrease in
restaurant labor costs was primarily due to the net reduction of 32 restaurants since the same quarter last year and a decrease in health insurance costs during the current year. A reduction in workers compensation costs also contributed to
lower restaurant labor costs during the third quarter of 2004. The decrease in labor costs as a percentage of sales was primarily due to increased same store sales leverage.



Restaurant Occupancy Expense



Restaurant occupancy expense, which includes rent, property taxes, licenses and insurance, was $2.4 million or 5.8% of restaurant sales in the third quarter of 2004
compared with $2.8 million or 7.1% of restaurant sales for the quarter ended September 8, 2003. The decrease in restaurant occupancy expense is due primarily to the sale of 41 restaurants to franchisees since the third quarter of 2003.



Restaurant Depreciation and Amortization



Restaurant depreciation and amortization totaled $1.6 million or 4.0% of restaurant sales
for the third quarter of 2004 and $1.4 or 3.5% of restaurant sales for the third quarter of 2003. The net increase was primarily due to depreciation on $19.3 million of capital additions and restaurant assets acquired since September 8, 2003,
partially offset by the sale of Company-owned restaurants assets.



Other Restaurant Operating Expenses



Other restaurant
operating expenses includes utilities, repairs and maintenance and other costs. These expenses totaled $5.5 million, or 13.6% of restaurant sales for the quarter ended September 6, 2004 compared with $5.4 million or 13.8% of restaurant sales for the
quarter ended September 8, 2003. Repairs and maintenance increased to 3.9% as a percentage of restaurant sales for 2004 compared to 3.8% for the same quarter of 2003. Utilities decreased to 5.3% for the third quarter of 2004 as a percentage of
restaurant sales compared to 5.4% for the same quarter last year. Other costs in this category decreased to 4.4% as a percentage of restaurant sales for the quarter ended September 6, 2004 relative to 4.6% for the same quarter one year ago.



General and Administrative Expenses



General and administrative expenses were $3.4 million, or 7.6% of total revenues for the
quarter ended September 6, 2004 compared to $3.0 million, or 6.9% of total revenues for the third quarter of 2003. This increase in expense reflects the prior year recovery of reserves relating to a legal settlement and other legal matters.



Advertising



Advertising expense was $2.5 million or 6.2% of restaurant sales for the quarter ended
September 6, 2004 compared to $2.8 million, or 7.2% of restaurant sales for the quarter ended September 8, 2003. The decrease in expense is attributable to 32 fewer



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restaurants during the third quarter of 2004 verses the same quarter of 2003. As a percentage of restaurant sales, the
decrease was attributable to the increase in same store sales and the sale of the restaurants in the California market to a franchisee in the fourth quarter of 2003, which incurred higher advertising expenses than the company average.



Non-Cash Compensation



Non-cash compensation expense in the third quarter of 2004 of $0.5 million was incurred for the issuance of 50,000 shares of stock granted
to the Board of Directors under the 2004 Stock Award Plan for Non-Employee Directors on June 17, 2004 at $10.87 per share.



Loss/Gain on Sale of Assets



During the third quarter of 2004, the Company recognized a loss of $0.3 million due to the sale of twelve Atlanta locations to a franchisee and the disposal of assets
related, in large part, to the remodeling of restaurants in the Indianapolis and New Orleans markets. The loss was partially offset by the recognition of deferred gains on restaurant market sales recorded in 1999 and 2000.



Income Tax



Income tax expense for the quarter ended September 6, 2004 is $1.4 million. Although the Company is recording tax expense at an estimated
effective tax rate of 38%, we expect tax payments for 2004 to be limited to the federal alternative minimum tax and certain state income taxes.



Comparison of Historical Results  Three Quarters Ended September 6, 2004 and Three Quarters Ended September 8, 2003



Total Revenues



Total revenues, which consist of restaurant sales and franchise royalty and fee income, were $133.6 million for the three quarters ended
September 6, 2004, compared to $132.1 million for the three quarters ended September 8, 2003.



Restaurant Sales



Restaurant sales
decreased by $0.1 million for the three quarters ended September 6, 2004 to $121.2 million compared to $121.3 million for the same three quarters last year. This decrease was primarily due to a net reduction of 32 Company-owned restaurants since
September 8, 2003, mostly offset by same-store sales growth of 10.8% for the first three quarters ended September 6, 2004.



Franchise Royalty Revenue



Franchise royalties increased by $1.1 million in the first three quarters of 2004, to $11.7 million, primarily due to a net increase of 41 franchise restaurant locations
comprised mainly of the sale of Company-owned restaurants to franchisees. In addition, royalties for the first three quarters increased due to a same-store sales improvement of 6.8% at franchise restaurants.



Restaurant Food and Paper Costs



Restaurant food and paper costs were $38.7 million or 31.9% of restaurant sales for the
three quarters ended September 6, 2004 compared with $38.1 million or 31.4% for the same three quarters of 2003. The increase in these costs, as a percentage of restaurant sales, was primarily due to increased beef and cheese prices.



Restaurant Labor Costs



Restaurant labor costs, which include restaurant employees salaries, wages, benefits, workers compensation costs, bonuses and
related taxes, totaled $36.0 million or 29.7% of restaurant sales for the three quarters ended September 6, 2004 compared with $36.9 million or 30.4% of restaurant sales for the three quarters ended September 8, 2003. The decrease in restaurant
labor costs was primarily due to the net reduction of 32 restaurants since September 8, 2003, while the decrease in costs as a percentage of restaurant sales was due primarily to increase in same store sales for the three quarters ended September 6,
2004.



Restaurant Occupancy Expense



Restaurant occupancy expense, which includes rent, property taxes, licenses and insurance,
was $7.7 million or 6.4% of restaurant sales in the first three quarters of 2004 compared with $8.5 million or 7.0% of restaurant sales for the three quarters ended September 8, 2003. The decrease in restaurant occupancy expense for the three
quarters this year compared to the three quarters last year is due to the sale of Company-owned restaurants to franchisees during the fourth quarter of 2003 and the second quarter of 2004.



Restaurant Depreciation and Amortization



Restaurant depreciation and amortization totaled $4.3 million or 3.5% of restaurant sales
for the first three quarters of 2004 compared to $4.0 million or 3.3% of restaurant sales for the first three quarters of 2003. The net increase was primarily due to depreciation on $19.3 million of capital additions and restaurant assets acquired
since September 8, 2003, partially offset by the sale of Company-owned restaurants assets.



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Other Restaurant Operating Expenses



Other restaurant operating expense includes all other restaurant level operating expenses, and specifically includes utilities, repairs and
maintenance and other costs. These expenses totaled $15.2 million, or 12.6% of restaurant sales for the three quarters ended September 6, 2004 compared with $15.3 million, or 12.6% of restaurant sales for the three quarters ended September 8, 2003.
Repairs and maintenance decreased to 3.4% as a percentage of restaurant sales for 2004 compared to 3.5% for the same quarters of 2003. Utilities remained constant at 4.9% as a percentage of restaurant sales. Other costs in this category increased to
4.3% for the first three quarters of 2004 as a percentage of restaurant sales compared to 4.2% for the first three quarters of 2003.



General and Administrative Expenses



General and administrative expenses were $10.3 million, or 7.7% of total revenues for the three quarters ended September 6, 2004 compared to $9.8 million, or 7.5% of
total revenues for the first three quarters of 2003. This increase in expense reflects the prior year recovery of reserves relating to a legal settlement and other legal matters.



Advertising



Advertising expense was $7.3 million or 6.0% of restaurant sales for the three quarters ended September 6, 2004 compared to $7.8 million, or 6.4% of restaurant sales for
the three quarters ended September 8, 2003. The decrease was due primarily to increased same store sales leverage, as well as a net reduction of 32 Company-owned restaurants since September 8, 2003.



Loss/Gain on Sale of Assets



During the first three quarters of 2004, the Company recognized a net loss of $10,000
consisting of the gain of $148,000 on the sale of eight Atlanta restaurants recognized during the second quarter of 2004, the loss of $161,000 on the sale of twelve Atlanta locations during the third quarter of 2004, the gain of $113,000 due to the
recognition of deferred gains on restaurant market sales recorded in 1999 and 2000, and the loss of $110,000 on disposal of assets related in large part to the remodeling of restaurants in the Indianapolis and New Orleans markets. The Company
recognized a gain of $449,000 from the sale of assets during the same three quarters of 2003 due to the recognition of deferred gains on restaurant market sales recorded in 1999 and 2000 and the gain on the sale of one modular building sold in the
second quarter of 2003.



Income Tax



Income tax expense of $4.5 million for the first three quarters of 2004 is based on the
estimated effective federal and state tax rate of 38%. Although the Company is recording tax expense at an estimated effective tax rate of 38%, we expect tax payments for 2004 to be limited to the federal alternative minimum tax and certain state
income taxes.



Liquidity and Capital Resources



We had working capital of $0.4 million on September 6, 2004 compared to $7.3
million on December 29, 2003. Cash and cash equivalents decreased $6.1 million to $7.5 million since the fiscal year ended December 29, 2003. Cash flow provided by operating activities was $17.1 million compared to $11.0 million for the same three
quarters last year. Current year cash flows are attributable to net income and a decrease in prepaid expenses, partially offset by a decrease in accounts payable and an increase in receivables.



Cash flow used for investing activities was $9.0 million relating primarily
to capital expenditures of $12.5 million for restaurant level renovations and technology enhancements company-wide as well as $0.8 million for the acquisition of seven restaurants in Jacksonville, Florida. These expenditures were partially offset by
proceeds of $4.3 million from the sale of restaurants and other capital assets.



Cash used for financing activities was $14.1 million. The most significant activities were principal payments of $4.8 million on our debt and capital lease obligations, purchase of treasury shares of $9.9 million and
an increase in restricted cash of $0.3 million. These outlays were partially offset by the receipt of $0.9 million from the exercise of stock options through September 6, 2004.



Capital expenditures for fiscal 2004 are expected to total $20 million. These expenditures include the development of new
restaurants, the remodeling of existing restaurants, and capital equipment and improvements on other operating restaurants. Although there can be no assurance, we believe that our existing cash as of September 6, 2004, the expected cash provided
from operations and the available $3.0 million credit facility with U.S. Bancorp Equipment Finance, Inc. will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months.



The Company is subject to financial and non-financial covenants under certain
of its debt agreements, including EBITDA and a Fixed Charge Coverage ratio, each as defined in the agreements. We were in compliance with all of the covenants as of September 6, 2004.



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##### Table of Contents

Critical Accounting Policies:



Our critical accounting policies are as follows:



Revenue Recognition- Franchise fees and area development franchise fees are generated from the sale of rights to
develop, own and operate restaurants. Such fees are based on the number of potential restaurants in a specific area which the franchisee agrees to develop pursuant to the terms of the franchise agreement between the Company and the franchisee and
are recognized as income on a pro rata basis when substantially all of the Companys obligations per location are satisfied (generally at the opening of the restaurant). Franchise fees are nonrefundable. Franchise fees and area development
franchise fees received prior to substantial completion of the Companys obligations are deferred. The Company receives royalty fees from franchisees based on a percentage of each restaurants gross revenues. Royalty fees are recognized as
earned.



Gains associated with the sale of certain
Company-owned restaurants to franchisees with associated mortgages and capital leases are recognized over the life of the related capital leases. During fiscal years 1999 and 2000, several Company-owned restaurants were sold to franchisees with
associated mortgages and capital leases. As a result of the sales, we have recorded lease receivables for those restaurants sold which are subject to capital lease and mortgage obligations. The amount of capital lease receivables as of September 6,
2004 was approximately $5.1 million. We have remaining deferred gains of $3.2 million from these sales since we continue to be responsible for the payment of the obligations to the original lessors and mortgagors. The deferred gains are included in
the September 6, 2004 balance sheet under the captions accrued liabilities and deferred revenues for $0.4 million and $2.8 million, respectively and will be recognized over the next 16 years. Additionally, the Company has remaining deferred gains of
approximately $0.4 million as of September 6, 2004, relating to notes receivable that were accepted as consideration for sales of certain Company-owned restaurants. These notes as well as the associated deferred gains are scheduled to be collected
and recognized over the term of the notes, which are due over the next 6 years.



Valuation of Long-Lived Assets We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment review include, but are not limited to, the following:



| |  | offers from current or potential franchisees for restaurants below carrying value;
| | - | ----------------------------------------------------------------------------------



| |  | significant underperformance relative to expected historical or projected future operating results; and
| | - | -------------------------------------------------------------------------------------------------------



| |  | significant negative industry or economic trends.
| | - | -------------------------------------------------



Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. In applying SFAS No. 144, we reviewed historical and projected cash flows of all restaurants and performed a discounted
cash flow analysis where indicated for each restaurant based upon such results projected over a ten year period. This period of time was selected based upon the lease term and the age of the related buildings. Impairments are recorded to adjust the
asset values to the amount recoverable under the discounted cash flow analysis, in accordance with SFAS No. 144. The Company regularly completes an evaluation of long-lived assets during the year. Based on our review, there were no locations that
required additional impairment charges as of September 6, 2004.



Valuation
of Intangible Assets and Goodwill - We assess the impairment of intangible assets with an indefinite life on an annual basis (tradename and goodwill), or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Factors we consider important which could trigger an impairment review include, but are not limited to, the following:



| |  | significant underperformance relative to expected historical or projected future operating results;
| | - | ---------------------------------------------------------------------------------------------------



| |  | significant negative industry or economic trends;
| | - | -------------------------------------------------



| |  | significant decline in our stock price for a sustained period; and
| | - | ------------------------------------------------------------------



| |  | our market capitalization relative to net book value.
| | - | -----------------------------------------------------



In accordance with SFAS No. 142 Goodwill and Other Intangible Assets we ceased to amortize approximately $24.2 million of goodwill and $17.5
million for the intangible value of our tradename in fiscal 2002. The Company recorded an adjustment to goodwill in fiscal 2003 of $23.5 million, reducing goodwill to $0.7 million in conjunction with the reduction to the valuation allowance on net
deferred tax assets. During the quarter ended June 14, 2004, the Company identified an unrecognized deferred tax asset of approximately $3.5 million which resulted in the reduction of goodwill by the remaining $0.7 million and a reduction of
tradename by $2.8 million.



In lieu of amortization, we
performed an initial impairment review of our goodwill and tradename as of January 1, 2002.



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##### Table of Contents

Subsequently, we performed annual impairment reviews on December 30, 2002 and December 29, 2003. Based upon these
reviews, no adjustment was required, and we do not believe circumstances have changed since the 2003 review date which would make it necessary to reassess their values subsequent to the balance sheet date. We will continue our annual evaluation,
unless circumstances call for us to perform an evaluation prior to then.



Allowance for doubtful receivables - Management must make estimates of the collectability of our accounts receivable. Management specifically analyzes accounts and notes receivable and related historical
bad debts, franchise concentrations, franchise credit-worthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. The current portion of accounts, notes and leases receivable totaled $3.3 million, or
$6.9 million net of bad debt allowances of $3.6 million, as of September 6, 2004.



Contingencies - Managements current estimated range of liability related to some of the pending litigation is based on claims for which we can estimate the amount and range of loss. We have
recorded the minimum estimated liability related to those claims, where there is a range of loss. Because of the uncertainties related to both the amount and range of loss on the remaining pending litigation, management is unable to make a
reasonable estimate of the liability that could result from an unfavorable outcome. As additional information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates accordingly. Such
revisions in our estimates of the potential liability could materially impact our results of operation and financial position.



Restaurant retirement costs - Reserves for restaurant relocations and abandoned sites consist of our estimates for the ongoing costs
of each location which has been closed or was never developed. Those costs include rent, property taxes, and in some cases, the cost to relocate the modular restaurant to a storage facility. The cash outlays for these costs have been estimated for
the remaining terms of the lease obligations, ranging from less than 1 year to 15 years. Although the Company has negotiated out of several of these sites, the current economic outlook and lack of alternative investment opportunities have hindered
the Companys ability to successfully negotiate out of the remaining sites. As a result, management believes that cash outlays for these sites will continue through lease maturity, and the reserve reflects this.



Accounting for income taxes - The Company accounts for income
taxes in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires the Company to recognize income tax benefits and liabilities for loss carryforwards and other income tax assets and liabilities.
The tax benefits must be reduced by a valuation allowance in certain circumstances. Realization of the deferred tax benefits is dependant on generating sufficient taxable income prior to expiration of any net operating loss carryforwards
(NOLs). The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are provided for as necessary. During 2003, the Company reversed $29.7 million of the valuation allowance. As of September 6, 2004, the
Company has approximately $56.6 million of net deferred tax assets available to reduce future income taxes partially offset by a valuation allowance of $32.3 million.



Self Insurance  The Company is partially self-insured for workers compensation claims up to $250,000 per
occurrence on the first two claims and $150,000 per occurrence thereafter. We utilize third party actuarial experts estimates of expected losses based on statistical analyses of historical industry data as well as our own estimates based on
our actual historical data. These assumptions are adjusted when warranted by changing circumstances. Should a greater number of claims occur compared to what was estimated or the cost of those claims is higher than anticipated, reserves might not be
sufficient and additional expense may be recorded. Should the actual experience be more favorable than estimated, a resulting expense reduction may be recorded. The Company is partially self-insured for general liability up to $100,000 per claim and
automotive liability losses subject to per occurrence and aggregate annual liability limitations as well. The Company maintains $3.9 million in restricted cash as collateral securing self-insured workers compensation claims until they are
settled. The Company is also self-insured, subject to umbrella policies, for health care claims for eligible participating employees subject to certain deductibles and limitations.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Interest rate and foreign exchange rate fluctuations:



Our exposure to financial market risks is the impact that interest rate changes and availability could have on our debt. Borrowings under our primary debt facilities and capital lease obligations bear interest ranging
from 5.2% to 16.4%. An increase in short-term and long-term interest rates would result in a reduction of pre-tax earnings. Substantially all of our business is transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have not had
a significant impact on the Company and are not expected to in the foreseeable future.



17



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##### Table of Contents

Commodity Price Risk:



We purchase certain products which are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions
and other factors which are not considered predictable or within our control. Although many of the products purchased are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques
designed to minimize price volatility. Typically, we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to
address commodity cost increases, which are significant and appear to be long-term in nature, by adjusting our menu pricing or changing our product delivery strategy. However, increases in commodity prices could result in lower restaurant-level
operating margins.



ITEM 4. CONTROLS AND PROCEDURES



(a) Disclosure Controls and Procedures. The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in recording, processing, summarizing and reporting information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act within the time periods specified in the Commissions rules and forms.



(b) Internal Control Over Financial Reporting. There have not been any changes in the Companys internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.



PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



Jonathan Mittman
et al. v. Rallys Hamburgers, Inc., et al.In January and February 1994, two putative class action lawsuits were filed, purportedly on behalf of the stockholders of Rallys, in the United States District Court for the Western
District of Kentucky, Louisville division, against Rallys, Burt Sugarman and GIANT GROUP, LTD. and certain of Rallys former officers and directors and its auditors. The cases were subsequently consolidated under the case name Jonathan
Mittman et. al. vs. Rallys Hamburgers, Inc., et. al. The complaints allege that the defendants violated the Securities Exchange Act of 1934, among other claims, by issuing inaccurate public statements about Rallys in order to arbitrarily
inflate the price of its common stock. The plaintiffs seek compensatory and other damages, and costs and expenses associated with the litigation. On April 15, 1994, Rallys filed a motion to dismiss and a motion to strike. On April 5, 1995, the
Court struck certain provisions of the complaint but otherwise denied Rallys motion to dismiss. In addition, the Court denied plaintiffs motion for class certification; the plaintiffs renewed this motion, and despite opposition by the
defendants, the Court granted such motion for class certification on April 16, 1996, certifying a class from July 20, 1992 to September 29, 1993. On August 22, 2003, the court ruled for the Company on all counts, and subsequently the plaintiffs
filed an appeal.



Greenfelder et al. v. White, Jr., et al.On
August 10, 1995, a state court complaint was filed in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida, Civil Division, entitled Gail P. Greenfelder and Powers Burgers, Inc. v. James F. White, Jr., Checkers
Drive-In Restaurants, Inc., Herbert G. Brown, James E. Mattei, Jared D. Brown, Robert G. Brown and George W. Cook, Case No. 95-4644-CI-20. A companion complaint was also filed in the same Court on May 21, 1997, entitled Gail P. Greenfelder, Powers
Burgers of Avon Park, Inc., and Power Burgers of Sebring, Inc. v. James F. White, Jr., Checkers Drive-In Restaurants, Inc., Herbert G. Brown, James E. Mattei, Jared D. Brown, Robert G. Brown and George W. Cook.



The original complaint alleged, generally, that certain officers of the Company intentionally
inflicted severe emotional distress upon Ms. Greenfelder, who is the sole stockholder, president and director of Powers Burgers, Inc., a Checkers franchisee. The present versions of the amended complaints in the two actions assert a number of claims
for relief, including claims for breach of contract, fraudulent inducement to contract, post-contract fraud, breaches of implied duties of good faith and fair dealings in connection with various franchise agreements and an area
development agreement, battery, defamation, negligent retention of employees, and violation of Floridas Franchise Act.



The Company believes that this lawsuit is without merit, and intends to continue to defend it vigorously. No estimate of possible loss or range of loss resulting from the
lawsuit can be made at this time.



Checkers Drive-In Restaurants, Inc. v.
Tampa Checkmate Food Services, Inc., et al. On August 10, 1995, a state court



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counterclaim and third party complaint was filed in the Circuit Court of the Thirteenth Judicial Circuit in and for
Hillsborough County, Florida, Civil Division, entitled Tampa Checkmate Food Services, Inc., Checkmate Food Services, Inc. and Robert H. Gagne v. Checkers Drive-In Restaurants, Inc., Herbert G. Brown, James E. Mattei, James F. White, Jr., Jared D.
Brown, Robert G. Brown and George W. Cook.



A complaint was originally filed by
the Company in July of 1995 against Mr. Gagne (Gagne) and Tampa Checkmate Food Services, Inc. (Tampa Checkmate), a company controlled by Mr. Gagne, to collect on a promissory note in the original principal amount of
$1,007,295 (the promissory note) and foreclose on a mortgage securing the promissory note issued by Tampa Checkmate, enforce the terms of a personal guaranty executed by Mr. Gagne, and obtain declaratory relief regarding the rights of
the respective parties under Tampa Checkmates franchise agreement with the Company. The counterclaim and third party complaint, as amended, generally alleged that Mr. Gagne, Tampa Checkmate and Checkmate Food Services, Inc.
(Checkmate) were induced into entering into various franchise agreements with personal guarantees to the Company based upon misrepresentations by the Company and the named individuals and alleged violations of Floridas Franchise
Act, Floridas Deceptive and Unfair Trade Practices Act, and breaches of implied duties of good faith and fair dealings in connection with a settlement agreement and franchise agreement between various of the parties.



The action was tried before a jury in August of 1999. The Companys action against Tampa
Checkmate to collect the promissory note was stayed by virtue of Tampa Checkmates bankruptcy filing (see discussion below). The Court entered a directed verdict and an involuntary dismissal as to all claims alleged against Jared D. Brown,
Robert G. Brown, and George W. Cook and also entered a directed verdict and an involuntary dismissal as to certain other claims asserted against the Company and the remaining individual counterclaim defendants, Herbert G. Brown (H.
Brown), James E. Mattei (Mattei), James F. White, Jr. (White). The jury rendered a verdict in favor of the Company, H. Brown, Mattei, and White as to all claims asserted by Checkmate and in favor of Mattei as to all
claims asserted by Tampa Checkmate and Gagne. In response to certain jury interrogatories, however, the jury made the following determinations: (i) That Gagne was fraudulently induced to execute a certain Unconditional Guaranty and that the Company
was therefore not entitled to enforce its terms; (ii) That Tampa Checkmate was fraudulently induced to execute a certain franchise agreement by the actions of the Company, H. Brown, and White, jointly and severally, and that Tampa Checkmate was
damaged as a result thereof in the amount of $151, 330; (iii) That the Company, H. Brown, and J. White, jointly and severally, violated § 817.416(2)(a)(1) of the Florida Franchise Act relating to the franchise agreement and that Tampa Checkmate
was damaged as a result thereof in the amount of $151, 330 and that Gagne was damaged as a result thereof in the amount of $151,330; and (iv) That the Company, H. Brown, and J. White did not violate Floridas Deceptive and Unfair Trade
Practices Act relating to the Ehrlich Road franchise agreement.



The foregoing
judgments were appealed to the Second District Court of Appeal and on November 14, 2001, the Appeals Court (i) affirmed the $151,330 judgment, plus statutory interest from August of 1999, entered in favor of Tampa Checkmate and against the Company
and White for fraudulent inducement, but reversed as to Brown and that portion of the judgment awarding Tampa Checkmate statutory interest prior to the jurys verdict in August of 1999; (ii) affirmed the $151,330 judgment, plus statutory
interest from August of 1999, entered in favor of Tampa Checkmate and against the Company and White for violation of § 817.416(2)(a)(1) of the Florida Franchise Act, but reversed as to Brown; and (iii) reversed, in toto, the judgment
entered in favor of Gagne.



On February 4, 2002, the state trial court granted
a motion filed by Tampa Checkmate and entered summary judgment as to the Companys affirmative defenses of setoff and recoupment. In lieu of filing a supercedes bond, the Company satisfied the foregoing two judgments and appealed the
summary judgment to the Second District Court of Appeal. That appeal was decided adversely to the Company.



Reciprocal motions for attorney fees also remain pending in the state court. On December 17, 2003, the trial court entered an order awarding Tampa Checkmate attorney fees in the amount of $153,285. Tampa Checkmate has
moved for reconsideration of the December 17, 2003 order. Tampa Checkmates motion for reconsideration and the Companys motion for attorney fees against Gagne remain pending.



On or about July 15, 1997, Tampa Checkmate filed a Chapter 11 petition in the United States Bankruptcy Court for the Middle District of
Florida, Tampa Division entitled In re: Tampa Checkmate Food Services, Inc., as noted above, the bankruptcy filing stayed the Companys claim against Tampa Checkmate to collect the promissory note. Subject to the execution of a written
agreement and the approval of the Bankruptcy Court supervising Tampa Checkmate Food Services, Inc. bankruptcy proceedings, the Company has reached a settlement of all remaining issues arising from the litigation between the Company and Tampa
Checkmate Food Services, Inc., Robert Gagne, and Checkmate Food Services, Inc.. All claims against the Company will be released in return for the payment to the bankruptcy estate of Tampa Checkmate Food Services, Inc. of $213,244 payable upon
execution of the settlement agreement and approval of the Bankruptcy Court. While the Company believes the parties will agree to the terms of a written settlement agreement and that the settlement will be approved by the Bankruptcy Court, no
definitive assurances can be given.



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Suncheck X, Inc. and Executive Restaurant Management, Inc. v. Checkers Drive-In Restaurants, Inc., Suncheck
Corporation and Checkers of Puerto Rico, Inc. The case was filed October 25, 2001, and is before the American Arbitration Association, Tampa, Florida. The Claimants seek undisclosed damages under contract and tort theories.
This arbitration is subject to the outcome of a lawsuit filed by Checkers Drive-In Restaurants, Inc. in the Circuit Court for the Thirteenth Judicial Circuit, Hillsborough County, Florida now on appeal to disqualify Claimants counsel based on
conflict of interest. Checkers Drive-In Restaurants, Inc. is defending the proceedings and vigorously denies the allegations set forth in the complaint.



Checkers Drive-In Restaurants, Inc. and Checkers of Puerto Rico, Inc. v. Suncheck I, Inc., Suncheck III, Inc., Suncheck IV, Inc., Suncheck X, Inc., Swaincheck,
Inc., Starcheck Corporation, A&E Burgers, Inc., Suncheck Ponce II, Inc., Mooncheck of Puerto Rico, Inc., Villanueve, Inc., Executive Restaurant Management, Inc., Cerex Investments, Inc., Ratito, Inc., Antunez & Sons Produce, Inc., Mark
Antunez, Mario Rivera, Raul Ramirez, a/k/a Raul Ramirez Fernandez, a/k/a Raul Jose Ramirez Fernandez, Ronald Rivas, Carlos Del Pozo, a/k/a Carlos Del Pozo Carafa, Robert E. Swain, Benedetto A. Cerilli Family Trust, Raul Cal, Jorge Tirado, Jose Toro,
Jerry Algarin, Jimmie Algarin, Liliana Agarin, Angel Sanchez, Rene Mercado, Marisol Mercado, Ingacio Arias, Carmen Martinez, Juan Carrion, Luis Cortez, Sr., Luis Cortez, Jr., Alfredo Ramirez, Miquel Perez Comas, a/k/a Miquel Perez, James Dooley,
Ruben Lugo, Edgar Ortiz, Benigno Contreras, Jr., and Sebastian Estarellas. In November 2000, Checkers initiated this arbitration proceeding to recover unpaid royalties and advertising fees from former franchisees in Puerto Rico and the
respective personal guarantors. Some of the respondents filed a counterclaim seeking undisclosed damages under contract and tort theories. On February 20, 2004, the arbitration tribunal entered an Order on Checkers Amended Motion to Dismiss
Amended Counterclaim (the Order). In the Order, the tribunal: (1) dismissed two of the seven counts asserted against Checkers in the Counterclaim; and (2) granted Checkers Motion to Dismiss with respect to portions of each of the
remaining counts in the Counterclaim. The tribunal also ruled that there is no basis for imposing liability on Checkers for the acts or omissions of Suncheck of Puerto Rico, Inc. The counterclaimants voluntarily dismissed a third count, and filed a
motion seeking to amend the Counterclaim to replead the count, which was denied.



This case was consolidated with Suncheck X, Inc. and Executive Restaurant Management, Inc., Claimants v. Checkers Drive-In Restaurants, Inc., Suncheck Corporation and Checkers of Puerto Rico, Inc. Checkers denies the allegations of the
counterclaims and is vigorously defending the proceedings. On July 16, 2004, the American Arbitration Association (AAA) informed the Company that proceedings were suspended due to non-payment by the former franchisees.



We are involved in various other claims and legal actions arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.



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



Sales of Unregistered Securities



On
June 17, 2004, the Company issued 10,000 shares of its common stock to each non-employee director pursuant to the Companys 2004 Stock Award Plan for Non-Employee Directors, resulting in the issuance of 50,000 shares of the Companys
common stock. The issuances by the Company were not registered under the Securities Act of 1933, as amended, pursuant to the exemption contemplated by Section 4(2) thereof for transactions not involving a public offering. The shares were issued in
exchange for services to be provided to the Company as members of the Board of Directors and were valued at $10.87 per share, the closing price of the Companys shares on June 17, 2004, or an aggregate of $543,500.



Stock Repurchases



The following table provides information about stock purchased by the Company during the quarter ended September 6, 2004, of equity
securities that are registered by the Company pursuant to Section 12 of the Exchange Act.



|                           |  |                                |  |                             |       |                                                                              |         |                                                                                                          |        
|-------------------------- |  | ------------------------------ |  | --------------------------- | ----- | ---------------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------------------------------------- | -------
|Period                     |  | Total Numberof SharesPurchased |  | Average Price Paidper Share |       | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms |         | Maximum Number (orApproximate Dollar Value) ofShares that May Yet BePurchased Under the Plansor Programs
|Period 7 (6/15/04-7/12/04) |  | 330,300                        |  | $                           | 11.44 |                                                                              | 330,300 |                                                                                                          | 322,333
|Period 8 (7/13/04-8/9/04)  |  | 30,000                         |  | $                           | 10.26 |                                                                              | 30,000  |                                                                                                          | 292,333
|Period 9 (8/10/04-9/6/04)  |  | 114,100                        |  | $                           | 10.41 |                                                                              | 114,100 |                                                                                                          | 178,233
|                           |  |                                |  |                            
|Total                      |  | 474,400                        |  | $                           | 11.12 |                                                                              | 474,400 |                                                                                                          | 178,233



During the third
quarter of 2004, the Company repurchased an aggregate of 474,400 shares of its common stock pursuant to the Stock Repurchase Program, publicly announced on March 19, 2003, and subsequently amended and increased by the Board of Directors on May 25,
2004, which authorized the Company to repurchase up to 1,800,000 shares of its common stock.



Subsequent to September 6, 2004, the Company repurchased 178,200 shares of its outstanding common stock under the Stock Repurchase Program announced on March 19, 2003 for approximately $2.0 million. On October 12,
2004, the Company announced the conclusion of this Stock Repurchase Program and also announced that the Board of Directors had approved a new share repurchase program, authorizing the Company to repurchase up to 1,200,000 shares of the common stock
from time to time in the open market or in privately negotiated block purchase transactions.



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ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) | Exhibits:
| | --- | ---------



|   |  |      |  |                                                                                                                                                                                             
|-- |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** |  | 31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated October 18,
2004.             
|   |  |     
|** |  | 31.2 |  | Certification of Chief Financial (Accounting) Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated October 18,
2004.
|   |  |     
|** |  | 32.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated October 18, 2004.                                                                 
|   |  |     
|** |  | 32.2 |  | Certification of Chief Financial (Accounting) Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated October 18, 2004.                                                    

---

|** | Filed electronically herewith
|-- | -----------------------------



| | (b) | Reports on 8-K:
| | --- | ---------------



The following reports on Form 8-K were filed during the quarter covered by this report:



On July 15, 2004, the Registrant issued a news release entitled Checkers Drive-In Restaurants, Inc. to Announce 2004
Fiscal Second Quarter Financial Results.



On July 19,
2004, the Registrant issued a news release entitled Checkers®/Rallys® Offers Chance to Wave Green Flag at NASCARs® Brickyard 400® - Sweepstakes & Instant Win Game brings racing excitement to double drive- thrus.



On July 22, 2004, the Registrant issued a news release entitled Checkers Drive-In Restaurants, Inc. Reports Second Quarter 2004 Earnings.



On July 21, 2004, the Registrant issued a news release
entitled Checkers ®/Rallys ® Managers Awards Nearing $40,000 in Prizes -
Circuit City ® Bonanzas Part of Companys
Award-Winning Incentive Programs.



On July 23, 2004, the
Registrant issued an 8-K announcing Sean OHara, the Registrants Assistant Treasurer and Corporate Controller, has accepted an offer of employment from HB Sealing Products, Inc., a distributor of hydraulic seals and seal kits for
all heavy equipment brands and premium replacement engine and transmission gasket kits based in Clearwater, Florida. Mr. OHara will serve that company as its Chief Financial Officer. His resignation has been reluctantly accepted by the
Registrant effective as of July 23, 2004.



On July 26,
2004, the Registrant issued a news release entitled Checkers Drive-In Restaurants, Inc.  Appoints

Gary Lieberthal to Board of
Directors.



On August 2, 2004, the Registrant issued a
news release entitled Checkers Drive-In Restaurants, Inc. Scores Again  Double Drive-Thru Joins Miami Dolphins ® as Official Burger.



On August 9, 2004, the Registrant issued a news release entitled Checkers Drive-In Restaurants, Inc. Announces Extension of Growth Incentive
Plan.



On August 11, 2004, the Registrant issued a news
release entitled Checkers ®/Rallys
® Records Victories at Convention and Brickyard
400(R) Race - 500 Franchisees, Employees, and Vendor Partners Attend the Events.



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On August 12, 2004, the Registrant Issued a News Release entitled Checkers Drive-In Restaurants
Inks Another Sponsorship - Rallys Now Official Burger of the Indianapolis Colts ®.



On August 19,
2004, the Registrant Issued a News Release entitled Checkers ® Official Burger Sponsor of Gators and Seminoles Brings Rivalry to Drive-thrus, Scholarship and Educational Funding to University of Florida and Florida State University.



On August 27, 2004, the Registrant issued a news release entitled
Checkers ® Feeds 20,000 in Hurricane Relief
Effort Double Drive-thru Chain Partners with American Red Cross in Southeast Florida.



On August 30, 2004, the Registrant issued a news release entitled Checkers ® Franchisee to Open Five New Restaurants in Atlanta - Market Agreement Expected to Increase Franchisees Total Checkers to 17 by 2009.



On September 1, 2004, the Registrant issued a news release entitled
Checkers ®/Rallys ® Franchisee to Open 20 New Restaurants, Acquire 12
Locations - Agreement to Increase Franchisees Total to 54 by 2009.



SIGNATURE



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



|                       |  |                                     |  |                                      
|---------------------- |  | ----------------------------------- |  | -------------------------------------
|                       |  | Checkers Drive-In Restaurants, Inc.
|                       |  | (Registrant)                       
|                       |  |                                    
|Date: October 18, 2004 |  | By:                                 |  | /s/ S. Patric Plumley                
|                       |  |                                     |  | Treasurer and Chief Financial Officer



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