<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                    FORM 10-K
                                    -----------

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [NO FEE REQUIRED]

       For the fiscal year ended December 28, 1999

                     OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                         Commission file number 333-4578
                                                --------
                            CAFETERIA OPERATORS, L.P.
                            -------------------------

             (Exact name of Registrant as specified in its charter)

              DELAWARE                               75-2186655
              --------                               ----------
              (State or other jurisdiction of        (I.R.S. Employer
              incorporation or organization)         Identification No.)

3001 E. PRESIDENT GEORGE BUSH HIGHWAY, RICHARDSON, TX           75082
-----------------------------------------------------         ---------
(Address of principal executive office)                       (Zip Code)

       Registrant's telephone number, including area code   (972) 808-2923

       Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                     Name of each exchange
       Title of each class                           on which registered
       -------------------                           -------------------
       <S>                                         <C>
       12% Senior Secured Notes                    New York Stock Exchange
         due December 31, 2001
</TABLE>

       Securities registered pursuant to Section 12(g) of the Act:   None

       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
filing requirements for the past 90 days.

                                Yes  X   No
                                    ---     ---
       Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]

       Portions of the definitive proxy statement of the Managing General
Partner relating to it's 2000 annual meeting of stockholders are incorporated by
reference in Part III.


                                      1
<PAGE>

                            CAFETERIA OPERATORS, L.P.
                                    FORM 10-K
                                  ANNUAL REPORT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                                     PART I

Item 1.   Business...........................................................3
Item 2.   Properties.........................................................6
Item 3.   Legal Proceedings..................................................7
Item 4.   Submission of Matters to a Vote of Security Holders................8

                                     PART II

Item 5.   Market for Registrant's Common Equity and
               Related Stockholder Matters...................................8
Item 6.   Selected Financial Data............................................8
Item 7.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations...........................9
Item 8.   Financial Statements and Supplementary Data.......................13
Item 9.   Changes In and Disagreements With Accountants on
               Accounting and Financial Disclosure..........................15

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant................15
Item 11.  Executive Compensation............................................15
Item 12.  Security Ownership of Certain Beneficial
               Owners and Management........................................15
Item 13.  Certain Relationships and Related Transactions....................15

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports
               on Form 8-K..................................................15

Signatures..................................................................20
</TABLE>


                                       2
<PAGE>

                                     PART I

Item 1.       BUSINESS

GENERAL

       Cafeteria Operators, L.P. (the "Company" or "Furr's") was organized
as a Delaware limited partnership and is one of the largest operators of
family-style cafeteria restaurants in the United States. The Parent and
Managing General Partner is Furr's Restaurant Group, Incorporated (the
"Parent".) We believe that our cafeterias and buffet, which are operated
under the "Furr's" and "Bishop's" names, are well recognized in their
regional markets for their value, convenience, food quality and friendly
service. Our 97 cafeterias and one buffet are located in twelve states in the
Southwest, West and Midwest. In addition, we operate Dynamic Foods, our food
preparation, processing and distribution division, in Lubbock, Texas. Dynamic
Foods provides in excess of 85% of the food and supply requirements of our
cafeteria and buffet restaurants. Dynamic Foods also sells bakery items and
various prepared foods to the restaurant, food service and retail markets.

FAMILY DINING DIVISION

       The Family Dining Division consists of 97 cafeterias and one
pay-at-the-door buffet-style restaurant operated by Cafeteria Operators, L.P.,
an indirect wholly owned partnership subsidiary of Furr's ("Cafeteria
Operators").

       CAFETERIAS. Cafeterias occupy a long standing niche in the food service
industry, providing the customer with a pleasant, moderately-priced alternative
to fast-food chains and conventional full-service restaurants. Our cafeterias
offer a wide variety of meals appealing to a broad range of personal tastes,
including chicken, beef, fish and pasta entrees; soup, salad and vegetable
choices; non-alcoholic beverages; and freshly baked pies and cakes. The food is
prepared for serving by the individual cafeteria. The Company's cafeterias are
generally characterized by quick service and modest prices per guest. Guest
tickets for the fiscal years ended December 28, 1999, December 29, 1998 and
December 30, 1997 averaged approximately $5.91, $5.79 and $5.62 respectively.
Our cafeterias average approximately 10,000 square feet in size and have average
seating capacity for approximately 300 guests. Virtually all of our cafeterias
feature "All-You-Can-Eat" at a fixed price all day, every day, as well as the
traditional "a la carte" pricing alternative, which allows customers to choose
the pricing and dining format which they find the most attractive.

       Management believes that the "Furr's" and "Bishop's" names are widely
recognized in their regional markets. Management's emphasis on consistent food
quality, variety, cleanliness and service has led to a loyal guest base. Our
customer base consists principally of people over 45 years of age, shoppers,
working people and young families.

       BUFFET. Our buffet-style restaurant features traditional American and
ethnic foods at a fixed price that entitles each guest to unlimited servings of
all menu items and beverages. Food items are served in a "scatter bar" format at
buffet islands centrally located in the restaurant's food service area. The
"scatter-bar" buffet format emphasizes customer choice by allowing customers to
select at their own pace in self selected portions, thereby improving the
restaurant experience for the guest. The buffet unit is approximately 10,000
square feet in size and has seating capacity for approximately 300 guests. Guest
tickets for the fiscal years ended December 28, 1999, December 29, 1998 and
December 30, 1997 averaged approximately $6.06, $6.05 and $5.80, respectively.

MARKETING AND ADVERTISING

       Our marketing program utilizes a variety of media to attract customers to
our restaurants and to create a targeted image for our restaurants. We utilize
point of sale advertising within our restaurants to focus customers on the
various food items and promotions being offered at the restaurant. Television
advertisements are used to enhance our image with respect to food quality and
value pricing. Also, billboard advertising, newspaper and direct mail programs
within the communities in which we have a large presence are used to direct
customers to our restaurants and to promote specific programs, including the
one-price "All-You-Can-Eat" concept. We frequently use all of our marketing
tools together to promote the concept. In addition, store managers and other
personnel are encouraged to participate in local public relations and
promotional efforts.


                                    3
<PAGE>

DYNAMIC FOODS

       We operate Dynamic Foods, a food purchasing, processing and distribution
facility in Lubbock, Texas that supplies in excess of 85% of the food and supply
requirements of our family dining restaurants, providing us with uniform quality
control and the ability to make volume purchases. In addition, management
believes that there is significant potential for utilizing the available excess
capacity at Dynamic Foods by increasing sales to third parties. In fiscal 1999,
third party sales by Dynamic Foods aggregated $1.2 million.

       Dynamic Foods has approximately 140 separate food items available under
the "Dynamic Foods" label for distribution to our restaurants and for sale to
third parties. Currently, approximately 97% of Dynamic Food's manufacturing
output is used at our restaurants and the remainder is sold to third parties.

RESTAURANT MANAGEMENT

       The success of each restaurant's operation is largely dependent upon the
quality of in-store management and mid-level supervisory management. Experienced
and well trained in-store management is important to assure good service,
quality food and the cleanliness of each restaurant, to control costs, and to
monitor local eating habits and traffic.

       Each cafeteria and buffet is operated under the supervision of a general
manager, an assistant general manager and one or two assistant managers. Each
cafeteria generally employs between 40 and 70 workers, of whom approximately 20%
are part-time workers. The buffet-style restaurant typically employs fewer
persons as the "scatter-bar" concept reduces service staffing requirements.

       The general managers of our family dining restaurants report to eleven
regional managers who, in turn, report to the Vice President of Operations. The
general managers have responsibility for day-to-day operations, including food
ordering, labor scheduling, menu planning, customer relations and personnel
hiring and supervision. The regional managers visit each restaurant regularly
and work with the in-store managers to evaluate and maintain overall operating
standards. They also make quality control checks, train personnel in operating
procedures and evaluate procedures developed by cafeteria and buffet personnel
for possible use in all company-owned family dining units.

SERVICE MARKS AND TRADEMARKS

       We utilize and are dependent upon certain registered service marks,
including "Furr's Cafeterias," "Bishop's Buffets" and "Dynamic Foods," and a
stylized "F" trademarked by Furr's. These and other trademarks are current and
are renewable on various dates through February 2008. We are not aware of any
party who could prevail in a contest of the validity of such service marks and
trademarks.

SEASONALITY

       Customer volume on a company-wide basis at most established restaurants
is generally somewhat lower in the winter months, due primarily to weather
conditions in certain of the markets for our restaurants. As a consequence, the
first and fourth quarters of the year historically produce lower sales. A harsh
winter season has a negative effect on our revenues, results of operations.

WORKING CAPITAL REQUIREMENTS

       Our restaurants are a cash business. Funds available from cash sales are
not needed to finance receivables and are generally not needed immediately to
pay for food, supplies and certain other expenses of the restaurants. Therefore,
our business and operations have not historically required proportionately large
amounts of working capital, which is generally common among similar restaurant
companies. Should Dynamic Foods expand its sales to third parties, the accounts
receivables and inventory related to such sales could require it to maintain
additional working capital. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."


                                    4
<PAGE>

COMPETITION

       The food service business is highly competitive in each of the markets in
which our restaurants operate and is often affected by changes in consumer
tastes, economic conditions and demographic and local traffic patterns. In each
area in which our restaurants operate, there is a large number of other food
service outlets including other cafeterias, buffets and fast-food and
limited-menu restaurants which compete directly and vigorously with our
restaurants in all aspects, including quality and variety of food, price,
customer service, location and the quality of the overall dining experience.

       Neither Furr's nor any of its competitors has a significant share of the
total food service market in any area in which we compete. We believe that our
principal competitors are other cafeterias and buffets, moderately-priced,
conventional restaurants, fast-food outlets and eat-at-home alternatives. Many
of our competitors, including our primary cafeteria and buffet competitors, have
greater financial resources and lower total debt-to-equity ratios than Furr's.
We compete with other food service outlets for management personnel based on
salary, opportunity for advancement and stability of employment. We believe we
offer existing and prospective management personnel an attractive compensation
and benefits package with opportunity for advancement in a stable segment of the
food service industry.

       The food manufacturing and distribution business is highly competitive
and many of Dynamic Foods' competitors are large regional or national food
processors and distributors with significantly greater financial resources than
Furr's. Accordingly, there can be no assurance that Dynamic Foods will be able
to generate significantly higher revenue or increase our profitability.

CAPITAL EXPENDITURE PROGRAM

       During the fiscal years ended December 28, 1999, December 29, 1998 and
December 30, 1997, Furr's expended $19.9 million, $7.7 million and $5.6 million,
respectively, principally to maintain and remodel existing cafeterias, upgrade
its computer and information systems, construct two new units and improve the
facility operated by Dynamic Foods. The increase in capital expenditures in 1998
and 1999 was primarily due to a significant reimaging program. We expect to
continue this program in the year 2000. Our capital expenditure program is
necessary to enable us and our subsidiaries to increase our revenue and
profitability.

       Subject to our ability to generate necessary funds from operations or to
obtain funds from other sources, we intend to pursue a program of remodeling
existing restaurants and opening new restaurants. We anticipate expending
approximately $10 million in fiscal year 2000 to remodel existing cafeterias,
open new restaurants and make other capital expenditures. No assurance can be
given that we will generate sufficient funds from operations or obtain
alternative financing to enable us to fully implement the desired capital
expenditures. Our ability to open new restaurants will also depend, among other
things, upon our ability to secure appropriate store locations on favorable
terms and to identify, hire and train personnel for expansion. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

EMPLOYEES

       As of March 7, 2000, we employed approximately 5,600 persons, of whom
approximately 4,600 were employed on a full-time basis. We employed
approximately 340 persons as managers or assistant managers of restaurants,
11 persons as regional managers and approximately 65 persons in executive,
administrative or clerical positions in the corporate office. None of our
employees is covered by collective bargaining agreements. We believe we maintain
good relations with our employees.

       The majority of our restaurants pay average wages in excess of the
current minimum wage standards. However, any future increase in the federal
minimum wage could have the effect of increasing our labor costs. In recent
years, the market for those employees who have traditionally been employed in
the restaurant industry has become increasingly competitive due to fewer persons
entering this category of wage earner and the increased government regulation of
immigrants entering and working in the United States. In response to this
decrease in the available labor pool, we have increased our average hourly wage
and expanded our hiring and training efforts.


                                  5
<PAGE>

REGULATION

        Our restaurants are subject to numerous federal, state and local laws
affecting health, sanitation, waste water, fire and safety standards. We believe
that we are in substantial compliance with applicable laws and regulations
governing our operations.

        The Federal Americans With Disabilities Act, which became effective
as to public accommodations and employment in 1992, prohibits discrimination
on the basis of disability. As we proceed with remodeling existing
restaurants, we could be required to expend funds to modify our restaurants
in order to provide service to, or make reasonable accommodations for the
employment of, disabled persons.

Item 2. PROPERTIES

        RESTAURANT LOCATIONS. The following table sets forth the number of
restaurants operated by the Company in certain states as of March 7, 2000.

<TABLE>
<CAPTION>
       STATE                                       NUMBER OF RESTAURANTS
       -----                                       ---------------------
       <S>                                         <C>
       Arizona                                     6
       Arkansas                                    2
       California                                  2
       Colorado                                    8
       Illinois                                    1
       Iowa                                        5
       Kansas                                      7
       Missouri                                    2
       Nevada                                      2
       New Mexico                                  15
       Oklahoma                                    10
       Texas                                       38
                                                   --
                                                   98
                                                   ==
</TABLE>

       SITE SELECTION. We generally intend to reposition existing restaurants or
open new restaurants in markets in which our restaurants are presently located
and in adjacent markets, in order to improve our competitive position and
increase operating margins by obtaining economies of scale in merchandising,
advertising, distribution, purchasing and supervision. The primary criteria
considered in selecting new locations are a high level of customer traffic,
convenience to both lunch and dinner customers in demographic groups that tend
to favor our restaurants and the occupancy cost of the proposed restaurant. Our
ability to open new restaurants depends on a number of factors, including our
ability to find suitable locations and negotiate acceptable leases, our ability
to attract and retain a sufficient number of qualified restaurant managers and
the availability of sufficient financing.

       PROPERTIES. Forty-four of our restaurants are leased from third parties,
another 34 are subleased under a master sublease agreement, 12 are owned and are
situated on land leased from third parties and nine are owned in fee simple.
Most of the leases have initial terms of from 10 to 20 years and contain
provisions permitting renewal for one or more specified terms at specified
rental rates. Some leases provide for fixed annual rent plus rent based on a
percentage of sales. The average restaurant contains approximately 10,000 square
feet and seats approximately 300 guests.

       Dynamic Foods' food manufacturing and distribution facility contains
approximately 175,000 square feet and is situated on approximately 24 acres
owned by Furr's in fee simple in Lubbock, Texas. In addition, a grocery
warehouse of approximately 36,000 square feet and a truck terminal of
approximately 7,200 square feet are located adjacent to the distribution
facility.


                                    6
<PAGE>

       Our executive offices are located in approximately 28,000 square feet of
leased office space in Richardson, Texas. We believe that the space will be
adequate to conduct our current operations for the foreseeable future.


       The Company leases eight properties under a master sublease, owns seven
buildings situated on land leased from third parties and owns two buildings on
land owned in fee simple, which are not used in the Company's restaurant
business and are leased to third parties or placed on the market for sale.


Item 3.       LEGAL PROCEEDINGS

       (1) During 1999 we settled on favorable terms an outstanding dispute with
the Internal Revenue Service (the "Service") relating to the federal income tax
returns of certain subsidiaries of the Parent, including (i) Cavalcade Holdings,
Inc. ("Holdings") (for each of the tax years ended June 30, 1985 through June
30, 1990), (ii) Cavalcade Foods, Inc. ("Foods") as successor in interest to
Bishop Buffets, Inc. (for the tax period ended December 27, 1986), and (iii)
Foods as successor in interest to Furr's Cafeterias, Inc. (for the tax period
ended December 27, 1986). We paid $125 thousand to settle these claims, and
recognized a tax benefit in the fourth quarter of 1999 of $2.9 million relating
to reserves that had previously been established with respect to this dispute.

       (2) In July 1998, we filed a declaratory judgment lawsuit in State
District Court in Lubbock, Texas, in which we ask the Court to find that we are
not obligated to make severance payments that have been demanded by Theodore
Papit, the former President and Chief Executive Officer of Furr's. Mr. Papit
resigned effective May 29, 1998, following the election at the annual meeting of
stockholders of Furr's of a slate of directors proposed by Teacher's Insurance
and Annuity Association of America ("TIAA"), our largest stockholder at that
time. He subsequently demanded payment of more than $500,000 of severance and
other amounts that he claimed were owing to him under a President and Chief
Executive Officer Agreement dated March 23, 1998. This agreement was approved by
a split vote of the Board of Directors after TIAA had publicly announced that it
might take action affecting the control of the Company. We have requested a jury
trial and believe that there are a number of grounds that will support the Court
in granting the requested relief, among them being that the Agreement is void as
an interested party transaction that did not receive the necessary approval of
independent, disinterested directors, the terms of the Agreement are not fair to
Furr's and the Agreement was entered into by Furr's without the benefit of full
disclosure by Mr. Papit and consideration by the Board of Directors of material
information regarding his management of the Company.

       (3) Furr's and certain of our subsidiaries, the Cavalcade Pension Plan,
the Cavalcade Pension Plan Committee, Kmart Corporation and our pension plan and
Michael Levenson were defendants in a lawsuit brought against us in U.S.
District Court in Denver, Colorado by Robert H. Aull ("Plaintiff"), a former
employee of Furr's and a participant in the Cavalcade Pension Plan. The
Plaintiff's allegations (all of which were disputed by the defendants in the
case) included: (i) that accrued benefits under the Cavalcade Pension Plan were
improperly reduced during the period from 1988 to 1993, (ii) the "freeze" of the
Plan on June 30, 1989 was improper, (iii) an insufficient amount of assets was
transferred from the Kmart Corporation pension plan to the Cavalcade Pension
Plan in connection with the acquisition of Furr's from Kmart effected by Mr.
Levenson and his affiliates in 1988 and (iv) rent concessions allowed to Furr's
by Kmart commencing in 1993 constituted prohibited transactions that bestowed
illegal benefits upon Furr's and Mr. Lewis.

       In 1998, Furr's, the Cavalcade Pension Plan, the members of the Cavalcade
Pension Plan Committee, Kmart Corporation and our pension plan entered into a
definitive settlement agreement (the "Agreement") with the plaintiff and his
counsel to resolve all outstanding claims among them. The court hearing the case
in December 1999 approved the settlement as "fair" to all members of the
plaintiff class by the court after notice to all purported class members.
Pursuant to the settlement, the litigation has been dismissed with prejudice.

       As a result of the settlement of the Aull litigation and the concurrent
resolution of an IRS audit of the Plan that focused on substantially identical
issues, we recognized a special charge of $5.8 million in the fourth quarter of
1998, of which $2.2 million related to resolution of the IRS audit. The
anticipated cash impact of the settlement on Furr's includes payment in 2000 of
approximately $1.5 million of expenses for legal and professional fees, with the
remainder of the settlement to be paid to the Plan in future years to fund
increased benefit payments to former and current employees. The settlement is
not expected to require any additional funding payments to the Plan by Furr's


                                    7
<PAGE>

in 2000 based upon the current value of Plan assets, but may require additional
payments by Furr's to the Plan in future years. Pursuant to the settlement,
Kmart Corporation's pension plan transferred $700,000 to the Cavalcade Pension
Plan to fund a portion of the additional benefits required by the Agreement.
Management does not believe that payment of amounts required of Furr's under the
settlement will have a material adverse effect on our planned operations.

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

              None.


                                     PART II

Item 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS

MARKET INFORMATION

        The partnership units of the Company are not traded on any exchange.

HOLDERS

        The Parent owns all of the 1% general partner interest and owns all
of the 99% limited partner interest (4% is owned indirectly and 95% is owned
directly.)"

Item 6.       SELECTED FINANCIAL DATA  (in thousands)

<TABLE>
<CAPTION>

Fiscal Years Ended
---------------------------------------------------------------------------------------
                              Dec 28,     Dec 29,     Dec 30,      Dec 31,     Jan 2,
                               1999        1998        1997         1996        1996
                               ----        ----        ----         ----        ----
<S>                         <C>         <C>         <C>          <C>         <C>
Sales (1)                   $ 188,060   $ 188,208   $ 193,530    $ 197,196   $ 209,769

Net income (loss) before        8,066         113      (4,740)       8,550     (37,154)
    extraordinary item

Total assets                   79,163      81,371      77,314       86,342      86,066

Long term obligations (2)      70,931      81,791      78,877       82,824      88,019
</TABLE>

(1)    The Company closed two restaurants in 1999, four restaurants in 1998,
       eight restaurants in 1997, five restaurants in 1996 and fourteen
       restaurants in 1995. The Company opened one restaurant in 1999 and one
       restaurant in 1997.

(2)    Includes $12,389, $17,882, $23,374, $28,867 and $33,413 of interest
       accrued to maturity on long-term debt in fiscal year ended December 28,
       1999, December 29, 1998, December 30, 1997, December 31, 1996 and
       January 2, 1996, respectively.


                                     8
<PAGE>

Item 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

       The Company's fiscal year is a 52-53 week year. Each of the last three
fiscal years included 52 weeks.

The following table sets forth certain statement of operations data and
restaurant data for the fiscal years indicated (dollars in thousands, except
sales per unit):

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                            ----          ----          ----
<S>                                                       <C>           <C>           <C>
Statement of operations data:
Sales                                                     $ 188,060     $ 188,208     $ 193,530
Costs and expenses:
   Cost of sales (excluding depreciation)                    56,036        55,801        58,292
   As a percent of sales                                      29.80%        29.65%        30.12%
   Selling, general and administrative                      112,735       114,022       118,262
   As a percent of sales                                      59.95%        60.58%        61.11%

   Depreciation and amortization                             10,335        10,081        10,873
   Special charges (credits)                                    566         7,941        10,554
                                                          ---------     ---------     ---------

   Total costs and expenses                                 179,672       187,845       197,981
                                                          ---------     ---------     ---------
Operating income (loss)                                       8,388           363        (4,451)
Interest expense                                                322           250           289
                                                          ---------     ---------     ---------
Net Income (loss)                                         $   8,066     $     113     $  (4,740)
                                                          =========     =========     =========
Restaurant units in operation:
   Beginning of year                                             99           103           110
   Opened                                                         1            --             1
   Closed                                                        (2)           (4)           (8)
                                                          ---------     ---------     ---------

   End of year                                                   98            99           103
                                                          ---------     ---------     ---------

Year over year comparable store sales change
     (for units open at year end and
     which operated the full year)                             1.98%         2.98%         0.31%
                                                          =========     =========     =========

Average weekly sales per restaurant unit (for units
     open at year end and which operated the full year)   $  36,701     $  35,621     $  34,426
                                                          =========     =========     =========
</TABLE>


                                         9
<PAGE>

FIFTY-TWO WEEKS ENDED DECEMBER 28, 1999 COMPARED TO FIFTY-TWO WEEKS ENDED
DECEMBER 29, 1998

       RESULTS OF OPERATIONS. Sales for the fifty-two week fiscal year ended
December 28, 1999 were $188.1 million, a decrease of $.1 million from the fiscal
year ended December 29, 1998. Comparable store sales increased by $3.4 million
or 1.98% in 1999 compared to 1998.

       Our net income was $8.1 million for fiscal 1999 compared to $113 thousand
for the prior year. The operating results for 1999 and 1998 included special
charges aggregating $.6 million and $7.9 million, respectively. Before special
charges, net income for 1999 was $9.0 million compared to $8.3 million for
fiscal 1998.

       SALES. Restaurant sales in comparable units were 1.98% higher in fiscal
1999 than 1998. Sales in 1999 were lower than the prior year by $.1 million.
Revenues in fiscal year 1999 included $1.2 million of Dynamic Foods sales to
third parties compared to $1.0 million in fiscal 1998.

       COST OF SALES. Cost of sales was 29.8% of sales for fiscal year 1999
compared to 29.7% for fiscal year 1998.

       SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense was lower in the aggregate by $1.3 million in fiscal year 1999. Of the
decrease, $3.0 million was due to fewer units being included in operating
results. SG&A expense includes increases of $1.7 million in labor and related
expense, $608 thousand in marketing expense and $421 thousand in rent
expense. SG&A expense includes decreases of $488 thousand in utility expense,
$740 thousand in casualty insurance and $642 thousand in legal and
professional expenses.

       SPECIAL CREDITS AND CHARGES. The operating results for fiscal 1999
include a special charge of $566 thousand for expenses related to the relocation
of the corporate offices from Lubbock, Texas to Richardson, Texas. The operating
results for fiscal 1998 include special charges aggregating $8.6 million.
Included in the total are charges of $6.2 million for the estimated costs of
litigation settlements, $1.5 million for expenses related to closed stores and
the write down of certain properties, $610 thousand related to the proxy contest
and the election of the Board of Directors and $291 thousand for the write
off of the deferred costs associated with warrants.

       DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$254 thousand higher than the prior year, due to the depreciation on capital
expenditures in the prior and current year principally related to our ongoing
remodeling program.

       INTEREST EXPENSE. Interest expense was $322 thousand, which was higher
than the prior year by $72 thousand. As discussed in note 2 to the consolidated
financial statements, in accordance with SFAS 15, certain debt was recorded at
the sum of all future principal and interest payments and there is no
recognition of interest expense thereon. Cash payments of interest not recorded
as expense in 1999 and 1998 amounted to $5.5 million each year.

FIFTY-TWO WEEKS ENDED DECEMBER 29, 1998 COMPARED TO FIFTY-TWO WEEKS ENDED
DECEMBER 30, 1997

       RESULTS OF OPERATIONS. Sales for the fifty-two week fiscal year ended
December 29, 1998 were $188.2 million, a decrease of $5.3 million from the
fiscal year ended December 30, 1997. The operating income for the 1998 fiscal
year was $363 thousand compared to a loss of $4.5 million in fiscal year 1997.
The operating results of fiscal 1998 included special charges of $7.9 million
compared to net special charges of $10.5 million in the prior year. The net
income for fiscal 1998 was $113 thousand, compared to a net loss of $4.7 million
for fiscal 1997.

       SALES. Restaurant sales in comparable units were 2.98% higher in fiscal
1998 than 1997. Sales in 1998 were lower than the prior year by $9.7 million as
a result of the closure of four units in 1998 and eight units in 1997. Revenues
in fiscal year 1998 included $1.0 million of Dynamic Foods sales to third
parties.

       COST OF SALES. Cost of sales was 29.6% of sales for fiscal year 1998
compared to 30.1% for fiscal year 1997. The decrease in the percentage of sales
was principally the result of lower product costs that were partially offset by
changes in the menu mix.

                                10
<PAGE>

       SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense was lower in the aggregate by $4.2 million in fiscal year 1998. Of the
decrease, $6.1 million was due to operating results including fewer units. SG&A
expense includes increases of $813 thousand in labor and related expense, $560
thousand in legal and professional expense, $452 thousand in marketing expense
and $308 thousand in rent expense. SG&A expense includes a decrease of $355
thousand in utility expense.

       SPECIAL CREDITS AND CHARGES. The operating results for fiscal 1998
include special charges aggregating $7.9 million. Included in the total are
charges of $6.2 million for the estimated costs of litigation settlements, $1.5
million for expenses related to closed stores and the writeoff of certain
properties and $259 thousand for the writeoff of the deferred costs associated
with warrants.

       DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$792 thousand lower than the prior year, due to the reduction in carrying value
of certain depreciable assets in 1997 in accordance with statement of Financial
Accounting Standards ("SFAS") 121 partially offset by the depreciation on
capital expenditures in the current year.

       INTEREST EXPENSE. Interest expense was $250 thousand, which was lower
than the prior year by $39 thousand. In accordance with SFAS 15, the
restructured debt was recorded at the sum of all future principal and interest
payments and there is no recognition of interest expense thereon. Cash payments
of interest not recorded as expense in 1998 and 1997 amounted to $5.5 million.

NEW ACCOUNTING PRONOUNCEMENTS

       The Company is assessing the reporting and disclosure requirements of
SFAS No. 133, Accounting For Derivative Instruments and Hedging Activities.
This statement establishes accounting and reporting standards for derivative
instruments and hedging activities. This statement, as amended by SFAS No. 137,
is effective for financial statements for fiscal years beginning after
June 15, 2000. The Company has not yet determined the impact SFAS No. 133
will have on its financial statements. The Company will adopt the provisions
of SFAS No. 133 in the first quarter of Fiscal 2001.

LIQUIDITY AND CAPITAL RESOURCES:

       During fiscal 1999, cash provided from our operating activities was $15.4
million compared to $20.3 million in 1998. Cash used for the payment of interest
was approximately $5.8 million in 1999 and $5.7 million 1998. We made capital
expenditures of $19.9 million during 1999 compared to $7.7 million during 1998.
Cash, temporary investments and marketable securities were $5.2 million at
December 28, 1999 compared to $11.5 million at December 29, 1998. The current
ratio of the Company was .47:1 at December 28, 1999 compared to .70:1 at
December 29, 1998. Our total assets at December 28, 1999 aggregated $79.2
million compared to $81.4 million at December 29, 1998.

       Our restaurants are a cash business. Funds available from cash sales are
not needed to finance receivables and are not generally needed immediately to
pay for food, supplies and certain other expenses of the restaurants. Therefore,
our business and operations have not historically required proportionately large
amounts of working capital, which is generally common among similar restaurant
companies. Should Dynamic Foods expand its sales to third parties, the accounts
receivable and inventory related to such sales could require us to maintain
additional working capital.

       Cafeteria Operators has outstanding $58.2 million of 12% Notes due
December 31, 2001, including $12.4 million of accrued interest. Under the terms
of the 12% Notes, a semi-annual cash interest payment of approximately $2.7
million is due on each March 31 and September 30. The obligations of Cafeteria
Operators under the 12% Notes are secured by a security interest in and a lien
on all of the personal property of Cafeteria Operators and mortgages on all fee
and leasehold properties of Cafeteria Operators (to the extent such properties
are mortgageable).


                                  11
<PAGE>

       Cafeteria Operators has outstanding $2.6 million of 10.5% Notes due
December 31, 2001. Under the terms of the 10.5% Notes, a semi-annual cash
interest payment of approximately $133 thousand is due on each June 30 and
December 31. These notes were issued as payment of a portion of the
indemnification obligation related to the Levenson litigation discussed in note
8 to the consolidated financial statements.

       We intend to continue a program of remodeling existing cafeterias and
opening new restaurants. We anticipate expending approximately $10 million in
fiscal year 2000 to remodel existing cafeterias and open new restaurants and to
make other capital expenditures. No assurance can be given that we will generate
sufficient funds from operations or obtain alternative financing sources to
enable us to fully implement the anticipated capital expenditures.

       From time to time, we consider whether disposition of certain of our
assets, including our food processing and distribution operations, real estate
owned in fee simple and leasehold interests or potential acquisitions of assets
would be beneficial or appropriate for our long-term goals and in order to
increase stockholder value.

       In 1993, we entered into an amendment of a master sublease agreement
pursuant to which we leased 43 properties from Kmart Corporation ("Kmart").
Pursuant to the amendment, the aggregate monthly rent was reduced by 25 percent
for the period from the effective date of the amendment through and including
December 31, 1997, and by 20 percent following that date and until December 31,
2001. The reductions in rent were made subject to termination by Kmart if Mr.
Kevin Lewis ceased to be Chairman of the Board of Directors of Furr's. Mr. Lewis
was not nominated for reelection at our Annual Meeting of Stockholders on May
28, 1998. In June 1998, Kmart demanded that we pay increased rents, which we
have done while reserving our right to dispute Kmart's right to receive the
increased rental. As a result of the increased rents, we will pay additional
rent of approximately $1.8 million through December 31, 2001, including $1.2
million additional rent paid in 1999. Because we account for our rental payments
under the straight-line method, the purported increase in rent through December
31, 1999 is being amortized over the remaining life of the leases, which run
through December 31, 2003, December 31, 2007, June 29, 2008 and December 31,
2008. The increase in annual rent expense amounted to approximately $288
thousand for fiscal 1999 and for the fiscal 2000 will amount to approximately
$288 thousand.

       Furr's and certain of our subsidiaries and other defendants entered
into a definitive settlement agreement that resolved all outstanding claims
among us related to the litigation and IRS audit involving our pension plan.
The calculations included in the agreement have been confirmed by an
independent actuary and the settlement approved as "fair" to all members of
the plaintiff class by the court. The cash impact of the settlement on Furr's
includes payment in 2000 of $1.5 million of expenses for legal and
professional fees, with the remainder of the settlement to be paid to the
Plan in future years to fund increased benefit payments to former and current
employees. The settlement will not require any funding payments to the Plan
by Furr's in 2000 but is expected to require payments by Furr's to the Plan
of approximately $1.7 million in 2001 and approximately $850 thousand in
2002, with additional funding payments required in subsequent years in
amounts that are expected to decline over time, subject to the overall
funding status of the Plan.

YEAR 2000 DISCLOSURE

       As of the date of this Report, we have not experienced any significant
disruptions in our operations during the transition into the Year 2000 ("Y2K").
In the fourth quarter of 1999, we completed our assessment of Y2K risks and had
formulated contingency plans to mitigate potential adverse effects which might
have arisen from noncompliant systems or third parties who had not adequately
addressed the Y2K issue. To date, we have not incurred any significant costs
related to Y2K issues. We will continue to monitor our operations and systems
and address any date-related problems that may arise as the year progresses.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

       We are exposed to market risk from changes in commodity prices. We
purchase certain commodities used in food preparation. These commodities are
generally purchased based upon market prices established with vendors. These
purchase arrangements may contain contractual features that limit the price paid
by establishing certain price floors or caps. We do not use financial
instruments to hedge commodity prices because these purchase arrangements help
control the ultimate cost paid and any commodity price aberrations are generally
short term in nature.


                                  12
<PAGE>

       Our long term debt does not expose us to market risk as all interest
accrues at fixed rates. We do not use derivative financial instruments to manage
overall borrowing costs.

       This market risk discussion contains forward-looking statements. Actual
results may differ materially from this discussion based upon general market
conditions and changes in domestic and global financial markets.


Item 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       The Parent' fiscal year is a 52-53 week year. Each of the 1999, 1998 and
1997 Fiscal years included 52 weeks.

Index to Consolidated Financial Statements and Financial Schedule

<TABLE>
<CAPTION>
                                                                                Page
                                                                                 No.
                                                                                ----
<S>                                                                             <C>
Independent Auditors' Report                                                    F-1

Consolidated Balance Sheets--
December 28, 1999 and December 29, 1998                                         F-2

Consolidated Statements of Operations--
Years ended December 28, 1999, December 29, 1998 and December 30, 1997          F-4

Consolidated Statements of Changes in Stockholders' Deficit--
Years ended December 28, 1999, December 29, 1998 and December 30, 1997          F-5

Consolidated Statements of Cash Flows--
Years ended December 28, 1999, December 29, 1998 and December 30, 1997          F-6

Notes to Consolidated Financial Statements--
Years ended December 28, 1999, December 29, 1998 and December 30, 1997          F-8

Financial Statement Schedule--
         The Financial Statement Schedule filed as a part of this report is
         listed in "Index to Financial Statement Schedules" at Item 14           22
</TABLE>


                                      13
<PAGE>

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     Comprising Item 8 of the Annual Report
                               on Form 10-K to the

                       SECURITIES AND EXCHANGE COMMISSION

                            CAFETERIA OPERATORS, L.P.
 Fiscal Years Ended December 28, 1999, December 29, 1998 and December 30, 1997


                                  14
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Cafeteria Operators, L.P.:

We have audited the accompanying consolidated financial statements of Cafeteria
Operators, L.P. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cafeteria Operators,
L.P. and subsidiaries as of December 28, 1999 and December 29, 1998 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 28, 1999, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.


                                    KPMG LLP

Dallas, Texas
February 25, 2000


                                      F-1
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1999 AND DECEMBER 29, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            December 28,    December 29,
                                                                                   1999            1998
                                                                            -----------     -----------
<S>                                                                        <C>             <C>
ASSETS
CURRENT ASSETS:
         Cash and cash equivalents                                         $      5,163    $     11,478
         Accounts and notes receivable (net of allowance for doubtful
             accounts of $14 and $14, respectively)                                 894             623
         Inventories                                                              6,544           7,014

         Prepaid expenses and other                                                 861             442
                                                                           ------------    ------------

                          Total current assets                                   13,462          19,557
                                                                           ------------    ------------

PROPERTY, PLANT AND EQUIPMENT:
         Land                                                                     7,322           9,119
         Buildings                                                               31,374          30,779
         Leasehold improvements                                                  28,427          21,040
         Equipment                                                               42,515          40,433

         Construction in progress                                                 4,024           2,144
                                                                           ------------    ------------


                                                                                113,662         103,515

         Less accumulated depreciation and amortization                         (59,076)        (55,195)
                                                                           ------------    ------------

                        Property, plant and equipment, net                       54,586          48,320

RECEIVABLE FROM AFFILIATES, NET                                                  10,563          12,991
OTHER ASSETS                                                                        552             503

                                                                           ------------    ------------
                        TOTAL ASSETS                                       $     79,163    $     81,371
                                                                           ============    ============
</TABLE>
                                                                     (Continued)


                                     F-2
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1999 AND DECEMBER 29, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                         December 28,    December 29,
                                                                 1999           1998
                                                          -----------     -----------
<S>                                                      <C>             <C>

LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
         Current maturities of long-term debt            $      5,493   $      5,493
         Trade accounts payable                                 5,233          3,990
         Other payables and accrued expenses                   17,058         17,199
         Reserve for store closings, current                      804          1,316
                                                         ------------   ------------

                             Total current liabilities         28,588         27,998
                                                         ------------   ------------

RESERVE FOR STORE CLOSINGS, NET OF CURRENT MATURITIES           2,558          3,280

LONG-TERM DEBT, NET OF CURRENT PORTION                         55,220         60,712

OTHER PAYABLES                                                 10,218         15,586

EXCESS OF FUTURE LEASE PAYMENTS OVER FAIR VALUE,
         NET OF AMORTIZATION                                    1,919          2,330

COMMITMENTS AND CONTINGENCIES


PARTNERS'  DEFICIT                                            (19,340)       (28,535)
                                                         ------------   ------------

TOTAL LIABILITIES AND PARTNERS' DEFICIT                  $     79,163   $     81,371
                                                         ============   ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                   F-3
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 28, 1999, DECEMBER 29, 1998 AND DECEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                  ----------------------------------------------------------
                                                  DECEMBER 28, 1999   DECEMBER 29, 1998    DECEMBER 30, 1997
                                                  -----------------   -----------------    -----------------
<S>                                               <C>                 <C>                  <C>
Sales                                             $         188,060   $         188,208    $         193,530
Costs and expenses:
         Cost of sales (excluding depreciation)              56,036              55,801               58,292
         Selling, general and administrative                112,735             114,022              118,262
         Depreciation and amortization                       10,335              10,081               10,873

         Special charges                                        566               7,941               10,554
                                                  -----------------   -----------------    -----------------

                                                            179,672             187,845              197,981
                                                  -----------------   -----------------    -----------------

Operating income (loss)                                       8,388                 363               (4,451)

         Interest expense                                       322                 250                  289
                                                  -----------------   -----------------    -----------------
Net income (loss)                                 $           8,066   $             113    $          (4,740)
                                                  =================   =================    =================
</TABLE>


See accompanying notes to consolidated financial statements.


                                   F-4
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FISCAL YEARS ENDED DECEMBER 28, 1999, DECEMBER 29, 1998 AND DECEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                      GENERAL         LIMITED   OTHER COMPREHENSIVE
                                      PARTNERS        PARTNERS          LOSS            TOTAL
                                    ------------    ------------    ------------    ------------
<S>                                <C>              <C>             <C>             <C>
BALANCE, DECEMBER 30, 1996          $    (36,085)   $     14,972    $     (2,854)   $    (23,967)
Distributions                                 62                                              62
Comprehensive income (loss):
     Net loss                             (4,740)                                         (4,740)
     Pension liability adjustment                                            350             350
                                                                                    ------------
Total comprehensive loss                                                                  (4,390)
                                    ------------    ------------    ------------    ------------

BALANCE, DECEMBER 30, 1997               (40,763)         14,972          (2,504)        (28,295)
Comprehensive income (loss):
     Net income                              113                                             113
     Pension liability adjustment                                           (353)           (353)
                                                                                    ------------

Total comprehensive loss                                                                    (240)
                                    ------------    ------------    ------------    ------------

BALANCE, DECEMBER 29, 1998               (40,650)         14,972          (2,857)        (28,535)
Comprehensive income:
     Net income                                                                            8,066
     Pension liability adjustment                                          1,129           1,129
                                                                                    ------------

Total comprehensive income                                                                 9,195
                                    ------------    ------------    ------------    ------------

BALANCE, DECEMBER 28, 1999          $    (32,584)   $     14,972    $     (1,728)   $    (19,340)
                                    ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-5
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED DECEMBER 28, 1999, DECEMBER 29, 1998 AND DECEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         DECEMBER 28, 1999    DECEMBER 29, 1998    DECEMBER 30, 1997
                                                         -----------------    -----------------    -----------------
<S>                                                      <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                     $           8,066    $             113    $          (4,740)
   Adjustments to reconcile net income
          to net cash provided by
          operating activities:
               Depreciation and amortization                        10,335               10,081               10,873
               Loss (gain) on sale of property,
                  plant and equipment and other assets                 (62)                 (50)                  76
               Special charges                                       7,835                5,567                    -
               Deferred charges (credits)                               75                  (48)                 495

Changes in operating assets and liabilities:
          Accounts and notes receivable                               (146)                 233                  329
          Inventories                                                  470                 (976)                (317)
          Prepaid expenses
             and other                                                (420)                 681                 (815)
          Trade accounts payable                                     1,243                 (222)              (1,286)
          Provision for closed store reserves                       (1,234)              (1,086)                (832)
          Other payables and accrued expenses                       (1,765)               2,191                  112

          Other liabilities including accrued pension
             costs                                                  (1,154)               1,545                  142
                                                         -----------------    -----------------    -----------------
          Net cash provided by operating
             activities                                             15,408               20,297                9,604
                                                         -----------------    -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                      (19,850)              (7,718)              (5,638)
   Proceeds from the sale of property, plant and
          equipment and other assets                                 2,776                1,205                  199
   Other, net                                                          276                   16                   15
                                                         -----------------    -----------------    -----------------
               Net cash used in investing
                  activities                                       (16,798)              (6,497)              (5,424)
                                                         -----------------    -----------------    -----------------
</TABLE>


                                                                     (Continued)


                                      F-6
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED DECEMBER 28, 1999, DECEMBER 29, 1998 AND DECEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          DECEMBER 28, 1999    DECEMBER 29, 1998    DECEMBER 30, 1997
                                                          -----------------    -----------------    -----------------
<S>                                                       <C>                  <C>                  <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
          Payment of indebtedness                         $          (5,493)   $          (5,493)   $          (5,493)
          Issuance of indebtedness                                       --                   --                2,551
          Proceeds (payments) to affiliates                             602               (1,387)                (476)
          Other, net                                                    (34)                 163                  (35)
                                                          -----------------    -----------------    -----------------
                  Net cash used in financing activities              (4,925)              (6,717)              (3,453)
                                                          -----------------    -----------------    -----------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     (6,315)               7,083                  727

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                      11, 478                4,395                3,668
                                                          -----------------    -----------------    -----------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                  $           5,163    $          11,478    $           4,395
                                                          =================    =================    =================

SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION:
   Interest paid, including $5,493
          of interest classified as payment of
          indebtedness during the fiscal years
          ended December 28, 1999, December 29, 1998
          and December 30, 1997 respectively              $           5,815    $           5,736    $           5,500
                                                          =================    =================    =================

         Income tax refunded                              $              --    $              --    $             (60)
                                                          =================    =================    =================

         Pension liability adjustment                     $           1,129    $             353    $            (350)
                                                          =================    =================    =================
         Non-cash investing activity:

                  Note receivable for sale of asset       $             125    $              --    $              --
                                                          =================    =================    =================
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
(a Delaware Limited Partnership wholly owned by Furr's Restaurant Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1999, DECEMBER 29, 1998 AND DECEMBER 30, 1997
(DOLLARS IN THOUSANDS)

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - Cafeteria Operators, L.P. (the "Company"), a Delaware
limited partnership is wholly owned by Furr's Restaurant Group, Incorporated
(the "Parent") , operates cafeterias and a buffet. The financial statements
presented herein are the consolidated financial statements of Cafeteria
Operators, L.P. and its subsidiaries. All material intercompany transactions and
account balances have been eliminated in consolidation.

The financial statements reflect the results of a series of transactions
relating to the financial restructuring of the Company on January 2, 1996, as
described in Note 2.

FISCAL YEAR - The Company operates on a 52-53 week fiscal year ending on the
Tuesday nearest December 31. Each of the fiscal years presented represents a
52-week year.

BUSINESS SEGMENTS - The Company operates in two vertically integrated operating
segments, namely the operation of food purchasing, processing, warehousing and
distribution of products and the operation of cafeterias, including food
preparation and retail sales, in twelve states in the Southwest, West and
Midwest areas of the United States.

CASH AND CASH EQUIVALENTS - The Company has a cash management program which
provides for the investment of excess cash balances in short-term investments.
These investments have original or remaining maturities of three months or less
at date of acquisition, are highly liquid and are considered to be cash
equivalents for purposes of the consolidated balance sheets and consolidated
statements of cash flows.

INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out
method) or market.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is generally
recorded at cost, while certain assets considered to be impaired are recorded at
estimated fair value. All property, plant and equipment is depreciated at
annual rates based upon the estimated useful lives of the assets using the
straight-line method. Restaurant equipment is generally depreciated over a
period of 1 to 5 years, while the useful life of manufacturing equipment is
considered to be 5 to 10 years. Buildings are depreciated over a 30 year
useful life, while improvements to owned buildings have estimated useful lives
of 3 to 5 years. Provisions for amortization of leasehold improvements are
made at annual rates based upon the estimated useful lives of the assets or
terms of the leases, whichever is shorter.

VALUATION OF LONG-LIVED ASSETS - Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company groups and evaluates its assets for impairment at the
individual restaurant level. The Company considers a restaurant's assets to be
impaired if a forecast of undiscounted future cash flows directly related to the
assets, including disposal value, if any, is less than the carrying amount.
Charges of $392 for the year ended December 28, 1999, $419 for the year ended
December 29, 1998 and $2,139 for the year ended December 30, 1997 were
recorded to recognize the write-down of certain property, plant and equipment
to estimated fair value, based on expected future cash flows.

START-UP AND CLOSING COST OF RESTAURANTS - Start-up and preopening costs
incurred in connection with a new restaurant becoming operational are expensed
as incurred.

When the decision to close a restaurant is made, the present value of all fixed
and determinable costs to be incurred after operations cease is accrued. These
fixed and determinable costs consist primarily of obligations defined in lease
agreements such as rent and common area maintenance, reduced by sublease income,
if any.

ADVERTISING COSTS - Advertising costs are expensed as incurred. Total
advertising expense was $4,257, $3,777 and $3,455 for the years ended December
28, 1999, December 29, 1998 and December 30, 1997, respectively.

                               F-8
<PAGE>

UNFAVORABLE LEASES - For leases acquired through purchase, the net excess of
future lease payments over the fair value of these payments is being amortized
over the terms of the leases to which the differences relate.

INCOME TAXES - For state and federal income tax purposes, the Company is not a
tax-paying entity. As a result, the taxable income or loss, which may vary
substantially from income or loss reported for financial reporting purposes,
should be included in the state and federal tax returns of the individual
partners. Accordingly, no provision for income taxes is reflected in the
accompanying financial statements.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of certain assets, liabilities,
revenues and expenses as of and for the reporting periods and actual results may
differ from such estimates.

RECLASSIFICATION - Certain amounts in the prior year financial statements have
been reclassified to conform with current year classification.

2.     RESTRUCTURING

On January 25, 1995, the Parent announced that it had entered into an Agreement
in Principle dated as of January 24, 1995 (the "Agreement in Principle") among
the Parent, its subsidiaries, the holders of the 11% Notes of the Partnership
(the "11% Noteholders"), the holder of the 9% Note of Cavalcade Foods (both as
defined below), the Trustees of General Electric Pension Trust ("GEPT"), and
Kmart Corporation ("Kmart").

The Agreement in Principle provided for (i) the exchange of an aggregate of
approximately $249,344 of debt of the Company for the issuance of $40,000
principal amount of new senior secured notes of the Company due 2001
pursuant to a new indenture and 95% of the limited partner interest of the
Company, (ii) the exchange of warrants to purchase an aggregate of approximately
21.5% of the Parent's common stock for options to acquire an aggregate of 95% of
a new class of common stock of the Parent ("Common Stock") and new five year
warrants to purchase an aggregate of 1% of the fully diluted Common Stock, (iii)
the exchange of $6,117 of other obligations of the Company for the issuance of
$1,700 principal amount of new senior secured notes of the Company due 2001
pursuant to a new indenture, (iv) the exchange of $11,737 of debt of Cavalcade
Foods, Inc., an indirect subsidiary of the Parent ("Foods"), for options to
acquire 2.5% of the Common Stock and an interest in certain land owned by a
subsidiary of the Parent and (v) the exchange of the Parent's outstanding
shares of Class A Common, Class B Common and Convertible Preferred Stock for an
aggregate of 2.5% of the Common Stock and five year warrants to purchase an
aggregate of 4% of the fully diluted Common Stock (together, the
"Restructuring").

The Restructuring became effective upon approval of the stockholders at a
meeting held January 2, 1996.

The Restructuring has been accounted for in accordance with Statement of
Financial Accounting Standards No. 15 "Accounting by Debtors and Creditors for
Troubled Debt Restructurings" ("SFAS 15"), under which the transactions include
both a partial settlement and modification of terms. The fair value of the
Common Stock and warrants issued in connection with the Restructuring was
estimated based upon discounted cash flows anticipated from the reorganized
business and was recorded as partial settlement of the indebtedness. The
remaining indebtedness was recorded at the sum of all future principal and
interest payments and, accordingly, interest expense is no longer recognized on
the restructured debt. The amounts of indebtedness subject to modification in
excess of the amount recorded in accordance with SFAS 15 was recorded in the
1995 fiscal year as an extraordinary gain, net of all expenses associated with
the Restructuring.

                               F-9
<PAGE>

3.     OTHER PAYABLES AND ACCRUED EXPENSES

Included in other payables and accrued expenses are the following:

<TABLE>
<CAPTION>
                                                  December 28,       December 29,
                                                          1999               1998
                                                          ----               ----
<S>                                               <C>                 <C>
     Taxes other than income taxes                $      3,556        $     4,065
     Salaries, wages and commissions                     4,472              4,048
     Insurance                                           3,777              3,980
     Legal and accounting expenses                       1,535              2,040
     Rent                                                  988              1,056
     Gift certificates outstanding                       1,077              1,031
     Utilities                                             870                534

     Other payables and accrued expenses                   783                445
                                                  ------------       ------------
                                                  $     17,058       $     17,199
                                                  ============       ============
</TABLE>

4.     LONG-TERM DEBT

Effective January 2, 1996, as part of the series of financial restructuring
transactions described in Note 2, the Company issued $41,700 of 12% Senior
Secured Notes, due December 31, 2001 (the "12% Notes"), to replace $40,000 of
11% Senior Secured Notes, due June 30, 1998 (the "11% Notes") and the interest
accrued thereon and to terminate a $5,408 judgment and the interest accrued
thereon. In January 1996, the Company also issued $4,073 of 12% Notes as payment
in kind for all interest accrued as of January 23, 1996. All of the assets of
the Company are pledged as collateral security on behalf of the holders of the
12% Notes. The Company also issued limited partner interests equal to 95% of the
outstanding partnership interests in exchange for and in full satisfaction of
the remaining $152,854 of 11% Notes, together with all interest accrued thereon.

Payments of interest on the 12% Notes are due each March 31 and September 30.
However, for financial accounting reporting purposes, no interest expense will
be recorded under SFAS 15, as all of the interest through maturity has been
recorded as a liability.

Effective December 30, 1997, as part of the payment of the cost of
indemnification related to the litigation described in Note 8, the Company
recorded $2,551 of 10.5% Notes, due December 31, 2001. Payments of interest on
these notes are due each June 30 and December 31.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                Stated
                                                               Maturity          December 28,         December 29,
                                                                 Date                    1999                 1998
                                                                 ----                    ----                 ----
<S>                                                            <C>               <C>                  <C>
     12% Notes, including interest accrued through
     maturity of $12,389 and $17,882, respectively               2001                 $58,161              $63,654
     10.5% Notes                                                 2001                   2,551                2,551
                                                                                        -----                -----
                                                                                       60,712               66,205

     Current maturities of long-term debt                                              (5,493)              (5,493)
                                                                                       -------              -------
     Long-term debt                                                                   $55,219              $60,712
                                                                                      =======              =======
</TABLE>


                                       F-10
<PAGE>

At December 28, 1999, the scheduled aggregate amount of all maturities of
long-term debt and interest classified as long-term debt are as follows:

<TABLE>
                               <S>      <C>
                               2000      $ 5,493
                               2001       55,219
                                         -------
                                         $60,712
                                         -------
                                         -------
</TABLE>

5.     PARTNERS' CAPITAL

On January 2, 1996, the Company issued an aggregate 95% limited partner interest
to the 11% Noteholders in exchange for reductions of debt and interest thereon,
as described in Note 2. Subsequent thereto, the holders of the 95% limited
partner interest exercised their option to put the limited partner interest to
the Parent in exchange for common stock of the Parent. As a result of a series
of financial restructuring transactions, the Parent owns a 1% general partner
interest and 95% limited partner interest and indirectly owns the remaining 4%
limited partner interest through the Holding Partnership.

The Company made a distribution to the Holding Partnership during 1996 by
issuing 12% Notes in the amount of $1,700. The liability for the notes was
recorded as $3,041, including interest accrued through maturity of the notes in
accordance with SFAS 15.

Each item of income, gain, loss and deduction is allocated in accordance with
the Partnership Agreement based on the partners' respective percentage interest.
The allocation of losses and deductions, including those of subsidiary
partnerships, are limited to the respective partners' bases.

6.     INCOME TAXES

The Company is currently a nontaxable entity, for federal and state income tax
purposes. Any taxable income or loss should be included in the federal and state
income tax returns of the individual partners. No provision for income tax
expense is reflected in the accompanying financial statements.

7.   EMPLOYEE BENEFIT PLANS

The Company has a noncontributory defined benefit pension plan for which benefit
accruals were frozen effective June 30, 1989. The funding policy is to make the
minimum annual contribution required by applicable regulations.

The Company is subject to the additional minimum liability requirements of
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions" ("SFAS 87"). SFAS 87 requires the recognition of an additional pension
liability in the amount of the Parent's unfunded accumulated benefit obligation
in excess of accrued pension cost with an equal amount to be recognized as
either an intangible asset or a reduction of equity. Based upon plan actuarial
and asset information as of December 28, 1999, December 29, 1998 and
December 30, 1997, the Company recorded a decrease of $1,129 in 1999, an
increase of $353 in 1998 and a decrease of $350 in 1997 to the noncurrent
pension liability with corresponding charges or credits to partners' deficit.


                                   F-11
<PAGE>

The funded status of the plan amounts recognized in the balance sheets and major
assumptions used to determine these amounts are as follows:

<TABLE>
<CAPTION>
                                                                                         Years Ended
                                                                        ----------------------------------------------
                                                                        December 28,     December 29,     December 30,
                                                                                1999             1998             1997
                                                                                ----             ----             ----
<S>                                                                     <C>              <C>              <C>
Accumulated benefit obligation at end of year                           $     16,218     $     18,207     $     12,603
                                                                        ============     ============     ============
Change in benefit obligation
         Benefit obligation at beginning of year                        $     18,207     $     12,603     $     11,948
         Service cost                                                             --               --               --
         Interest cost                                                         1,066              832              859
         Actuarial (gain) loss                                                (2,099)           1,027              891
         Benefits paid                                                        (1,031)          (1,170)          (1,095)
         Cost of IRS and litigation settlements                                   75            4,915
                                                                        ------------     ------------     ------------
         Benefit obligation at end of year                                    16,218           18,207           12,603
                                                                        ------------     ------------     ------------

Change in plan assets
         Fair value of plan assets at beginning of year                       12,795           11,808           10,803
         Actual return on plan assets                                            (39)           1,407            1,848
         Employer contribution                                                    --               50              251
         Kmart contribution to IRS and
            litigation settlement                                                 75              700               --
         Benefits paid                                                        (1,031)          (1,170)          (1,094)
                                                                        ------------     ------------     ------------
         Fair value of plan assets at end of year                             11,800           12,795           11,808
                                                                        ------------     ------------     ------------

Funded status                                                                 (4,418)          (5,412)            (795)

Unrecognized net loss from past experience different
     from that assumed and effects of changes in
        assumptions                                                            1,728            2,857            2,504
Unrecognized prior service cost                                                   --               --               --
                                                                        ------------     ------------     ------------
Net amount recognized                                                   $     (2,690)    $     (2,555)    $      1,709
                                                                        ============     ============     ============

Amounts recognized in the consolidated balance sheet consist of:
         Accrued benefit cost                                           $     (4,418)    $     (5,412)    $       (795)
         Accumulated other comprehensive loss                                  1,728            2,857            2,504
                                                                        ------------     ------------     ------------
         Net amount recognized                                          $     (2,690)    $     (2,555)    $      1,709
                                                                        ============     ============     ============

Major assumptions:

Discount rate                                                                   7.25%            6.50%            7.00%
Expected long-term rate of return on plan assets                                9.00%            9.00%            9.00%
</TABLE>


                                       F-12
<PAGE>

The components of net periodic pension cost for the years ended December 28,
1999, December 29, 1998 and December 30, 1997 are as follows:

<TABLE>
<CAPTION>
                                                         1999            1998            1997
                                                         ----            ----            ----
<S>                                                  <C>             <C>             <C>
Service cost-benefits earned during the period       $         --    $         --    $         --
Interest cost on projected benefit obligation               1,066             832             859
Expected return on plan assets                             (1,035)           (886)           (806)
Amortization of prior service cost                             --              --              --
Amortization of transition asset                               --              --              --
Recognized actuarial loss                                     125             150             197
                                                     ------------    ------------    ------------

Net periodic pension cost                                     156              96             250

Cost of IRS and litigation settlements
         (net of Kmart contribution)                           --           4,215              --
                                                     ------------    ------------    ------------
Total pension cost                                   $        156    $      4,311    $        250
                                                     ============    ============    ============
</TABLE>

The Company also has a voluntary savings plan (the "401(k) plan") covering all
eligible employees of the Company and its subsidiaries through which it may
contribute discretionary amounts as approved by the Board of Directors.
Administrative expenses paid by the Company for the years ended December 28,
1999, December 29, 1998 and December 30, 1997 amounted to $19, $8 and $8,
respectively.

8.     COMMITMENTS AND CONTINGENCIES

The Company leases restaurant properties under various noncancelable operating
lease agreements which expire on various dates through 2015 and require various
minimum annual rentals. Certain leases contain escalation clauses. Further, many
leases have renewal options ranging from one five-year period to ten five-year
periods. Certain of the leases also require the payment of property taxes,
maintenance charges, advertising charges, insurance and parking lot charges,
and additional rentals based on percentages of sales in excess of specified
amounts.

In 1993, the Company entered into an amendment of a master sublease agreement
pursuant to which it leased 43 properties from Kmart Corporation ("Kmart").
Pursuant to the amendment, the aggregate monthly rent was reduced by 25
percent for the period from the effective date of the amendment through and
including December 31, 1997, and by 20 percent following that date and until
December 31, 2001. The reductions in rent were made subject to termination by
Kmart, if Mr. Kevin Lewis ceased to be Chairman of the Board of Directors of
the Company. Mr. Lewis was not nominated for reelection at the Company's
Annual Meeting of Stockholders on May 28, 1998. In June 1998, Kmart demanded
that the Company pay increased rents, which the Company has done while
reserving its right to dispute Kmart's right to receive the increased rental.
As a result of the increased rents, the Company will pay additional rent of
approximately $1,800 through December 31, 2001, including $1,200 additional
rent paid in 1999. Because the Company accounts for its rental payments under
the straight-line method, the purported increase in rent through December 31,
1999 is being amortized over the remaining life of the leases, which run
through December 31, 2003, December 31, 2007, June 29, 2008 and December 31,
2008.The increase in annual rent expense amounted to approximately $288 for
fiscal 1999 and for the fiscal 2000 will amount to approximately $288.

                          F-13
<PAGE>

The total minimum annual rental commitment and future minimum sublease rental
income under noncancelable operating leases are as follows as of December 28,
1999:

<TABLE>
<CAPTION>
                                                              Minimum              Sublease
                                                                Rent                Income
                                                                ----                ------
               <S>                                           <C>                  <C>
                               2000                          $    10,771          $      927
                               2001                               10,262                 850
                               2002                                9,832                 650
                               2003                                7,423                 501
                               2004                                6,992                 492
               For the remaining terms of the leases              26,559               1,238
</TABLE>


       Total rental expense included in the statements of operations is $10,881,
$10,659 and $11,036, which includes $980, $1,075 and $1,029 of additional rent
based on net sales, for the years ended December 28, 1999, December 29, 1998 and
December 30, 1997, respectively. The results of operations include sublease rent
income of $904, $899 and $800 for the years ended December 28, 1999, December
29, 1998 and December 30, 1997, respectively.

       The Company, in the ordinary course of business, is a party to various
legal actions. In the opinion of management, these actions ultimately will be
disposed of in a manner which will not have a material adverse effect upon the
Company's equity, results of operations, and liquidity and capital resources
after consideration of the applicable amounts previously accrued.

       On August 11, 1995, a complaint was filed in the District Court of Travis
County, Texas by the former Chairman of the Board of the Company, Michael J.
Levenson, both individually and on behalf of his minor son Jonathan Jacob
Levenson, James Rich Levenson, Benjamin Aaron Levenson, S.D. Levenson, General
Consulting Group, Inc. and Cerros Morado. The complaint named as defendants the
Parent, the Company, Furr's/Bishop's Cafeterias, L.P., Cavalcade & Co., Inc.
("Cavalcade"), individual members of the Board of Directors, Houlihan, Lokey,
Howard & Zukin, Inc., KL Park Associates, L.P. ("KL Park"), KL Group, Inc.
("KL Group"), Skadden, Arps, Slate, Meagher & Flom, certain of the then
current and former 11% Noteholders, Deloitte & Touche LLP, Kmart and certain
partners and employees of the foregoing, alleging, among other things, that
the Company and certain defendants conspired to wrest control of the Company
away from the Levensons by fraudulently inducing them to transfer their
working control of the Company through a series of transactions in which the
Levensons transferred Class B Common Stock and stock options in the Company to
KL Park and KL Group.

       In July 1997, the Parent reached a settlement of the litigation, in
which all settling defendants, including its current and former directors and
officers, the Company, Furr's/Bishop's Cafeterias, L.P. and Cavalcade,
received mutual releases with respect to all matters alleged in the litigation
and the Company made a payment to the plaintiffs of a net amount of
approximately $275.

       The Company was required to indemnify certain of the defendants
originally named in the Levensons' complaint, including the individual members
of the Board of Directors of the Parent and certain of their affiliated
entities, pursuant to the Parent's Certificate of Incorporation and otherwise,
for any and all damages resulting from such complaint. As part of the
restructuring of the 11% Notes, the Company also agreed to indemnify certain
parties named as defendants in the Levensons' complaint, including the holders
of the 11% Notes, KL Group, KL Park and Kmart, from and against all claims,
actions, suits and other legal proceedings, damages, costs, interest, charges,
counsel fees and other expenses and penalties which such entity may sustain or
incur to any person whatsoever (excluding judgments in the case of KL Group
and KL Park) by reason of or arising out of the Levenson litigation. Under no
circumstances was the Company to be obligated to indemnify any party for any
liability resulting from such party's willful misconduct or bad faith. During
1997, the Company recorded special charges against results of operations
aggregating $4,900 to recognize the estimated cost of such indemnification. The
Company negotiated agreements with each of the parties whose indemnity claim was
outstanding at the end of 1997 and during fiscal 1998 either made cash payments
or issued 10.5% unsecured notes (see Note 4) in satisfaction of such claims.

       The Company, the Parent and certain of its subsidiaries, the Cavalcade
Pension Plan, the Cavalcade Pension Plan Committee, Kmart Corporation and its
pension plan and Michael Levenson have since 1996 been defendants in a lawsuit
brought against them in U.S. District Court in Denver, Colorado by Robert H.
Aull ("Plaintiff"), a former employee of the Company and a participant in the
Cavalcade Pension Plan. The Plaintiff's allegations (all of which are disputed
by the defendants in the case) included: (i) that accrued benefits under the
Cavalcade Pension Plan were improperly reduced during the period from 1988 to
1993, (ii) the "freeze" of the Plan on June 30, 1989 was improper, (iii) an
insufficient amount of assets was transferred from the Kmart Corporation
pension plan to the Cavalcade Pension Plan in

                               F-14
<PAGE>

connection with the acquisition of the Company from Kmart effected by Mr.
Levenson and his affiliates in 1988 and (iv) rent concessions allowed to the
Company by Kmart commencing in 1993 constituted prohibited transactions that
bestowed illegal benefits upon the Company and Mr. Lewis.

       In 1998 the Company, the Parent, the Cavalcade Pension Plan, the
members of the Cavalcade Pension Plan Committee, Kmart Corporation and its
pension plan agreed to settle the litigation (the "Settlement"). In December
1999 the Settlement was approved by the court as "fair" to all members of the
plaintiff class after notice to all purported class members, and the
litigation was dismissed with prejudice.

       As a result of the settlement of the Aull litigation and the concurrent
resolution of an IRS audit of the Plan that focused on substantially identical
issues, the Company recognized a special charge of $5,786 in the fourth quarter
of 1998, of which approximately $2,200 related to resolution of the IRS audit.

       The anticipated cash impact of the settlement on the Company includes
payment in 2000 of approximately $1,500 of expenses for legal and professional
fees, with the remainder of the settlement to be paid to the Plan in future
years to fund increased benefit payments to former and current employees. The
settlement will not require any funding payments to the Plan by the Company in
2000 but is expected to require payments by the Company to the Plan of
approximately $1,700 in 2001 and approximately $850 in 2002, with additional
funding payments required in subsequent years in amounts that are expected to
decline over time, subject to the overall funding status of the Plan. Kmart
Corporation's pension plan has transferred $700 to the Cavalcade Pension Plan to
fund a portion of the additional benefits required by the Agreement. Management
does not believe that payment of these amounts in 2000 and subsequent years will
have a material adverse effect on the Company's planned operations.

       The Company, in July 1998, filed a declaratory judgment lawsuit in State
District Court in Lubbock, Texas, in which it asks the Court to find that the
Company is not obligated to make severance payments that have been demanded by
Theodore Papit, the former President and Chief Executive Officer of the Company.
Mr. Papit resigned effective May 29, 1998, following the election at the
Company's annual meeting of stockholders of a slate of directors proposed by
Teacher's Insurance and Annuity Association of America ("TIAA"), the Company's
largest stockholder at that time. He subsequently demanded payment of more than
$500 of severance and other amounts that he claimed were owing to him under a
President and Chief Executive Officer Agreement dated March 23, 1998. This
agreement was approved by a split vote of the Board of Directors after TIAA had
publicly announced that it might take action affecting the control of the
Company. The Company has requested a jury trial and believes that there are a
number of grounds that will support the Court in granting the requested relief,
among them being that the Agreement is void as an interested party transaction
that did not receive the necessary approval of independent, disinterested
directors, the terms of the Agreement are not fair to the Company and the
Agreement was entered into by the Company without the benefit of full disclosure
by Mr. Papit and consideration by the Board of Directors of material information
regarding his management of the Company.


                                F-15
<PAGE>

9.     QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Thirteen Weeks Ended
                                            -------------------------------------------------------------
                                            March 30         June 29       September 28       December 28
                                            --------         -------       ------------       -----------
<S>                                         <C>              <C>           <C>                <C>
Year ended December 28, 1999:
         Sales                               $46,003         $47,196            $47,788           $47,073
         Gross profit (1)                     32,103          33,008             33,000            32,938
         Net income (2)                        1,432           1,378              2,491             2,765

<CAPTION>
                                                                Thirteen Weeks Ended
                                            -------------------------------------------------------------
                                            March 31         June 30       September 29       December 29
                                            --------         -------       ------------       -----------
<S>                                         <C>              <C>           <C>                <C>
Year ended December 29, 1998:
Sales                                        $46,212         $48,032            $48,011           $45,953
Gross profit (1)                              32,461          33,606             33,655            31,847
Net income (loss) (2)                          2,175           2,325              2,177            (6,564)
</TABLE>

       (1)    Gross profit is computed using cost of sales including
              depreciation expense.
       (2)    See Note 13 Special Charges and Credits

10.    OTHER RELATED PARTY TRANSACTIONS

       On June 7, 1996, the Company, Cafeteria Operators, L.P. and Kevin E.
Lewis entered into the Consulting and Indemnity Agreement and General Release
(the "Consulting Agreement") pursuant to which, among other things, Mr. Lewis
would resign as President and Chief Executive Officer effective September 30,
1996 and would resign his position as Chairman of the Board on December 31,
1996, unless requested by the Board of Directors to continue until December 31,
1997. In September 1996, at the request of the Board of Directors, Mr. Lewis
agreed to remain President and Chief Executive Officer beyond September 30, 1996
with no change to the financial terms of the Consulting Agreement. Mr. Lewis
subsequently resigned as President and Chief Executive Office effective December
31, 1996 and the Board requested Mr. Lewis to continue as Chairman of the Board
into 1997. After his resignation as President and Chief Executive Officer, Mr.
Lewis served as a consultant to the Company until December 31, 1997. In October
1997, Mr. Lewis agreed to remain Chairman of the Board beyond December 31, 1997
until at least may 31, 1998 and in November 1997, Mr. Lewis was paid $50 in
consideration for his agreement to remain Chairman of the Board through at least
May 31, 1998. In addition, the Company agreed to pay Mr. Lewis $7.5 per month
during the period after December 31, 1997 that he acted as Chairman of the
Board. At the request of Mr. Lewis, this payment was reduced to $2.5 per month
effective April 1, 1998.

       Effective January 1, 1997, Kenneth Reimer, a director of the Company from
January 1996 to May 1998, assumed the duties of President and Chief Executive
Officer of the Company on an interim basis. Mr. Reimer received $100 for serving
in this capacity until March 27, 1997, at which time the Board named Theodore J.
Papit as his replacement.

       In 1996 and 1997, Cactus Enterprises, Inc., a company wholly owned by
Kenneth Reimer, performed certain management consulting services for the Board.
Total fees and expenses paid were approximately $8, $4 and $68 in 1998, 1997 and
1996, respectively.

       Pursuant to an Interim Manager Agreement, as amended, (the "Hopgood
Agreement") effective June 1, 1998, between Suzanne Hopgood, Chairman of the
Board of Directors, and the Company, Ms. Hopgood agreed to serve as Interim
Chief Executive Officer. Ms. Hopgood received $90 during 1999 and $320 in
1998 for serving in this capacity until September 27, 1998 and providing
other management consulting services relating to management transition, real
estate and finance matters through December 29, 1998.

       In settlement of the Company's indemnification obligations to the persons
listed below (the "Affiliated Indemnitees") with respect to the Affiliated
Indemnitees' Levenson litigation expenses, the Company entered into release
agreements with, and made the additional payments noted below to, each of the
Affiliated Indemnities. The Company (i) delivered to Teachers Insurance and
Annuity Association of America as payee a promissory note dated January 14, 1998
in the principal sum of $756, (ii) delivered to The Northwestern Mutual Life
Insurance Company as payee a promissory note dated February 24, 1998 in the
principal sum of $488 and made a cash payment to The Northwestern Mutual Life
Insurance Company of $6, (iii) delivered to John Hancock Mutual Life Insurance
Company as payee a promissory note dated March 4, 1998 in the principal sum of
$476, (iv) made a cash payment to the Mutual Life Insurance Company of


                               F-16
<PAGE>

New York of $218, (v) made a cash payment to Principal Mutual Life Insurance
Company of $175 and (vi) delivered to the Equitable Life Assurance Society of
the United States ("Equitable") as payee a promissory note dated March 23,
1998 in the principal sum of $830. Each of the promissory notes is due on
December 31, 2001 and bears interest at the rate of 10.5% per annum. Except
for Equitable, each of the Affiliated Indemnitees owned more than five
percent of the Common Stock at the time the agreements were signed. Equitable
is an affiliate of EQ Asset Trust 1993, a business trust that owns more than
five percent of the outstanding Common Stock.

11.    FAIR VALUE OF FINANCIAL INSTRUMENTS

       The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments" ("SFAS 107"). The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is necessarily required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

       At December 28, 1999 and December 29, 1998, the carrying amount and the
fair value of the Company's financial instruments, as determined under SFAS 107,
were as follows:

<TABLE>
<CAPTION>
                                                       December 28,    December 29,
                                                           1999            1998
                                                           ----            ----
<S>                                                    <C>             <C>
Long-term debt, including current portion and
Interest accrued through maturity:
         Carrying amount                               $     60,712    $     66,205
         Estimated fair value                                48,324          48,324
</TABLE>

The Company's long-term debt is held by a limited number of holders and is not
actively traded, and as a result, market quotes are not readily available. The
fair value of the long-term debt at December 28, 1999 and December 29, 1998 is
based upon the face amount of the debt resulting from the Restructuring
described in Note 2, as management believes that this is most indicative of the
fair value. The carrying values of accounts receivable and accounts payable
approximate fair value due to the short maturity of these financial instruments.

12.    BUSINESS SEGMENTS

The Company has two reportable segments: the operation of cafeterias, including
food preparation and retail sales, and the operation of Dynamic Foods, which
purchases, processes, warehouses and distributes food products and supplies to
the cafeterias and external customers. These reportable segments are vertically
integrated business units that offer different products and services.

The accounting policies of the segments are the same as those in the summary of
significant accounting policies. The Company evaluates performance based on
profit or loss from operations before non-recurring special charges or credits.


                                F-17
<PAGE>

Following is a summary of segment information of the Company for the fiscal
years ended December 28, 1999, December 29, 1998 and December 30, 1997:

<TABLE>
<CAPTION>
                                                 Cafeterias         Dynamic Foods             Total
                                                 ----------         -------------             -----
<S>                                              <C>                <C>                    <C>
1999:
External revenues                                $   186,866           $    1,194          $   188,060
         Intersegment revenues                             -               59,731               59,731
         Depreciation and amortization                 9,360                  975               10,335
         Segment profit                                8,110                  844                8,954
         Segment assets                               65,493               13,670               79,163
         Expenditures for segment assets              19,164                  686               19,850

1998:
         External revenues                           187,162                1,046              188,208
         Intersegment revenues                             -               58,380               58,380
         Depreciation and amortization                 9,244                  837               10,081
         Segment profit                                7,015                1,289                8,304
         Segment assets                               67,319               14,052               81,371
         Expenditures for segment assets               6,839                  879                7,718

1997:
         External revenues                           191,783                1,747              193,530
         Intersegment revenues                             -               58,877               58,877
         Depreciation and amortization                 9,854                1,019               10,873
         Segment profit                                5,352                  751                6,103
         Segment assets                               64,294               13,020               77,314
         Expenditures for segment assets               5,466                  172                5,638
</TABLE>

Following is a reconciliation of reportable segments to the Company's
consolidated totals for the fiscal years ended December 28, 1999, December 29,
1998 and December 30, 1997:

<TABLE>
<CAPTION>
                                                 December 28,    December 29,    December 30,
                                                     1999            1998            1997
                                                     ----            ----            ----
<S>                                              <C>             <C>             <C>
Revenues
         Total revenues of reportable segments   $    247,791    $    246,588    $    252,407
         Elimination of inter-segment revenue         (59,731)        (58,380)        (58,877)
                                                 ------------    ------------    ------------
                  Total consolidated revenues    $    188,060    $    188,208    $    193,530
                                                 ============    ============    ============
Profit
         Total profit of reportable segments     $      8,954    $      8,304    $      6,103
         Elimination of inter-segment profit               --              --              --
                                                 ------------    ------------    ------------
                  Total consolidated profit      $      8,954    $      8,304    $      6,103
                                                 ============    ============    ============
Assets
         Total assets of reportable segments     $     79,163    $     81,371    $     77,314
         Elimination of inter-segment assets               --              --              --
                                                 ------------    ------------    ------------
                  Total consolidated assets      $     79,163    $     81,371    $     77,314
                                                 ============    ============    ============
</TABLE>

                                    F-18
<PAGE>

13.    SPECIAL CHARGES AND CREDITS

       The operating results for fiscal 1999 include a special charge of $566
thousand for expenses related to the relocation of the corporate offices from
Lubbock, Texas to Richardson, Texas. The operating results for fiscal 1998
include special charges aggregating $8,600. Included in the total are
charges of $6,200 for the estimated costs of litigation settlements, $1,500
for expenses related to closed stores and the write down of certain
properties, $610 related to the proxy contest and the election of the
Board of Directors and $291 write off of the deferred costs associated
with warrants. The operating results for fiscal 1997 include net special charges
of $10,500. Included in the total are charges of $6,900 of property,
plant and equipment write downs and closed store reserves and $4,900
related to the Levenson litigation and related indemnity, which were partially
offset by a credit of $1,300 related to the settlement of a lawsuit.


                                   ******



                                    F-19

<PAGE>

Item 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

       None.


                                    PART III


Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       Pursuant to General Instruction G(3) of Form 10-K, information required
by this item is furnished by incorporation by reference of information in the
definitive Proxy Statement for the 2000 Annual Meeting of Stockholders of Furr's
under the captions "Proposal 1 - Election of Directors," "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Executive Officers."

Item 11.      EXECUTIVE COMPENSATION

       Pursuant to General Instruction G(3) of Form 10-K, information required
by this item is furnished by incorporation by reference of information found in
the Definitive Proxy Statement for the 2000 Annual Meeting of Stockholders of
Furr's under the caption "Executive Compensation," subcaptions "Summary
Compensation Table," "Option Plan," "Option Grants," "Director Options,"
"Director Fees," "Employment Contracts and Termination of Employment and Change
of Common Agreements," "Compensation Committee Interlocks," "Board Compensation
Committee Report on Executive Compensation" and "Comparison of Cumulative Total
Return of Company Stock, Industry Index and Broad Market."

Item 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       Pursuant to General Instruction G(3) of Form 10-K, information required
by this item is furnished by incorporation by reference of all information under
the caption "Executive Compensation," subcaption "Transactions with Management
and Others" in the Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders of Furr's.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       Pursuant to General Instruction G(3) of Form 10-K, information required
by this item is furnished by incorporation by reference of all information under
the caption "Executive Compensation," subcaption "Transactions with Management
and Others" in the Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders of Furr's.

                                     PART IV

Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

       (a) The following documents are filed as a part of this Annual Report on
Form 10-K:

              (1)    Financial Statements

                     The financial statements filed as part of this report are
                     listed in the "Index to Consolidated Financial Statements"
                     at Item 8.

              (2)    FINANCIAL STATEMENT SCHEDULE
                     Cafeteria Operators, L.P.


                                  15
<PAGE>

<TABLE>
<CAPTION>
                                                                            Page
Schedule      Description                                                    No.
--------      -----------                                                   ----
<S>           <C>                                                           <C>
II-           Consolidated Valuation and Qualifying Accounts                 22
</TABLE>

       Schedules not listed above have been omitted because they are either not
applicable, not material or the required information has been given in the
financial statements or in notes to the financial statements.

(b)           REPORTS ON FORM 8-K

              No reports on Form 8-K were filed during fiscal 1999 ended
              December 28, 1999.

(c)           EXHIBITS

Exhibit No.                Description

3.1    Second Amended and Restated Agreement of Limited Partnership of
       Cafeterias Operators, L.P. (included as Exhibit I to the Exchange
       Agreement filed as Exhibit 10.1 and incorporated by reference from the
       Registration Statement on Form S-4 of Furr's/Bishop's, Incorporated (File
       No. 33-92236)).

3.2    Certificate of Amendment to the Certificate of Limited Partnership of
       Cafeteria Operators, L.P. dated as of July 11, 1995, incorporated by
       reference from the Registration Statement of Form S-1 of Cafeteria
       Operators, L.P. (File No. 333-4578).

4.1    Amended and Restated Indenture, dated as of November 15, 1995, between
       Cafeteria Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a
       Shawmut Bank, N.A.), incorporated by reference from the Registration
       Statement on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.2    First Supplemental Indenture, dated as of January 24, 1996, between
       Cafeteria Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a
       Shawmut Bank, N.A.), incorporated by reference from the Registrant's Form
       10-K for the year ended January 2, 1996.

4.3    General Security Agreement, dated as of March 27, 1992, between Cafeteria
       Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a Shawmut
       Bank, N.A.), incorporated by reference from the Registration Statement on
       Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.4    Security Agreement, dated as of March 27, 1992, between Cafeteria
       Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a Shawmut
       Bank, N.A.), incorporated by reference from the Registration Statement on
       Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.5    Form of Assignment and Security Agreements relating to deposits at
       Amarillo National Bank and Carlsbad National Bank, dated as of March 27,
       1992, between Cafeteria Operators, L.P. and Fleet National Bank of
       Massachusetts (f/k/a Shawmut Bank, N.A.), incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.6    General Security Agreement, dated as of March 27, 1992, between
       Furr's/Bishop's Specialty Group, L.P. and Fleet National Bank of
       Massachusetts (f/k/a Shawmut Bank, N.A.), incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.7    Assignment for Security (Trademarks), dated as of March 27, 1992, by
       Cafeteria Operators, L.P., filed with the Patent and Trademark Office,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).

4.8    Assignment for Security (Trademarks), dated as of December 28, 1995, by
       Cafeteria Operators, L.P., filed with the Patent and Trademark Office,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).


                                     16
<PAGE>

4.9    Assignment for Security (Trademarks), dated as of December 28, 1995, by
       Furr's/Bishop's Specialty Group, L.P., filed with the Patent and
       Trademark Office, incorporated by reference from the Registration
       Statement on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.10   Amended and Restated Security Agreement and Mortgage-Trademarks and
       Patents, dated as of December 31, 1995, among Cafeteria Operators, L.P.,
       Furr's/Bishop's Specialty Group, L.P. and Fleet National Bank of
       Massachusetts (f/k/a Shawmut Bank, N.A.), incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.11   Special Power of Attorney, dated as of March 27, 1992, by Cafeteria
       Operators, L.P., incorporated by reference from the Registration
       Statement on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.12   Special Power of Attorney, dated as of December 28, 1995, by Cafeteria
       Operators, L.P., incorporated by reference from the Registration
       Statement on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.13   Special Power of Attorney, dated as of December 28, 1995, by
       Furr's/Bishop's Specialty Group, L.P., incorporated by reference from the
       Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File No.
       333-4578).

4.14   Omnibus Agreement, dated as of November 15, 1995, among Cafeteria
       Operators, L.P., Furr's/Bishop's Specialty Group, L.P. and Fleet National
       Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) (included as Exhibit E
       to the Exchange Agreement filed as Exhibit 10.1) and incorporate by
       reference from the Registrant's Registration Statement on Form S-4 (File
       No. 33-92236)).

4.15   First Amendment to Deed of Trust, dated as of November 15, 1995, between
       Cafeteria Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a
       Shawmut Bank, N.A.) for premises located at Pima County, Arizona,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).

4.16   First Amendment to Deed of Trust, dated as of November 15, 1995, between
       Cafeteria Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a
       Shawmut Bank, N.A.) for premises located at Jefferson County, Colorado,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).

4.17   First Amendment to Deed of Trust, dated as of November 15, 1995, between
       Cafeteria Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a
       Shawmut Bank, N.A.) for premises locate at Clark County, Nevada,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).

4.18   First Amendment to Deed of Trust, Security Agreement, Financing
       Statement, Fixture Filing and Assignment of Rents and Leases, dated as of
       November 15, 1995, between Cafeteria Operators, L.P. and Fleet National
       Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises located at
       San Bernardino County, California, incorporated by reference from the
       Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File No.
       333-4578).

4.19   First Amendment to Mortgage, Security Agreement and Assignment of Leases
       and Rents, dated as of November 15, 1995, between Cafeteria Operators,
       L.P. and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
       for premises located at Johnson County, Kansas, incorporated by reference
       from the Registration Statement on Form S-1 of Cafeteria Operators, L.P.
       (File No. 333-4578).

4.20   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases and Rents, dated as of November 15, 1995, between Cafeteria
       Operators, L.P. and Fleet National Bank of Massachusetts (f/k/a Shawmut
       Bank, N.A.) for premises located at St. Louis County, Missouri,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).


                                  17
<PAGE>

4.21   First Amendment to New Mexico Deed of Trust, dated as of November 15,
       1995, between Cafeteria Operators, L.P. and Fleet National Bank of
       Massachusetts (f/k/a Shawmut Bank, N.A.). for premises located at
       Bernalillo County, New Mexico, incorporated by reference from the
       Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File No.
       333-4578).

4.22   First Amendment to Mortgage with Power of Sale, dated as of November 15,
       1995, between Cafeteria Operators, L.P. and Fleet National Bank of
       Massachusetts (f/k/a Shawmut Bank, N.A.) for premises located at Tulsa
       County, Oklahoma, incorporated by reference from the Registration
       Statement on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

4.23   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15, 1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Taylor County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.24   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15, 1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Cameron County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.25   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15, 1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Dallas County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.26   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15, 1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Lubbock County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.27   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15,1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Grayson County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

4.28   First Amendment to Deed of Trust, Security Agreement and Assignment of
       Leases, dated as of November 15, 1995, between Cafeteria Operators, L.P.
       and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
       premises located at Hopkins County, Texas, incorporated by reference from
       the Registration Statement on Form S-1 of Cafeteria Operators, L.P. (File
       No. 333-4578).

10.1   Exchange Agreement, dated as of November 15, 1995, among Furr's/Bishop's,
       Incorporated, Cafeteria Operators, L.P. and holders of 11% Senior Secured
       Notes, incorporated by reference from the Registrant's Registration
       Statement on Form S-4 (File No. 33-92236).

10.2   Warrant Agreement dated as of July 10, 1995, between Furr's/Bishop's,
       Incorporated and Chemical Bank, incorporated by reference from the
       Registrant's Registration Statement on Form S-4 (File No. 33-92236).

10.3   General Release, entered into as of December 31, 1997, among Kevin E.
       Lewis, Cafeteria Operators, L.P. and Furr's/Bishop's, Incorporated,
       incorporated by reference from the Registration Statement on Form S-1 of
       Cafeteria Operators, L.P. (File No. 333-4578).

10.4   Master Sublease Agreement, dated as of December 1, 1986, between Kmart
       Corporation and Cafeteria Operators, L.P. (as successor in interest to
       Furr's Cafeterias, Inc.), incorporated by reference from the Registration
       Statement on Form S-1 of Cavalcade Foods, Inc., Furr's Cafeterias, Inc.
       and Bishop Buffets, Inc. (File No. 33-11842).


                                 18
<PAGE>

10.5   Amendment, with respect to the Master Sublease Agreement, dated as of
       December 1, 1993, between Kmart Corporation and Cafeteria Operators,
       L.P., incorporated by reference from the Registrant's Form 8-K dated
       November 15, 1993.

10.6   1995 Stock Option Plan of Furr's/Bishop's, Incorporated, incorporated by
       reference from Annex B of the Prospectus included in the Registrant's
       Registration Statement on Form S-4 (File No. 33-92236).

10.7   President and Chief Executive Officer Agreement, effective as of March,
       1998, between Theodore J. Papit and Furr's/Bishop's, Incorporated.

10.8   Chairman of the Board Extension Agreement, effective January 1, 1998,
       among Kevin E. Lewis, Cafeteria Operators, L.P. and Furr's/Bishop's,
       Incorporated, incorporated by reference from the Registration Statement
       on Form S-1 of Cafeteria Operators, L.P. (File No. 333-4578).

10.9   Interim Manager Agreement, effective as of June 1, 1998, between Suzanne
       Hopgood and Furr's/Bishop's, Incorporated, incorporated by reference from
       Furr's/Bishop's, Incorporated's Form 10-Q for the fiscal quarter ended
       June 30, 1998.

10.10  First Amendment to 1995 Stock Option Plan, dated as of June 18, 1998,
       incorporated by reference from Furr's/Bishop's, Incorporated's Form 10-Q
       for the fiscal quarter ended June 30, 1998.

10.11  Employment Agreement, dated as of September 27, 1998, between Phillip
       Ratner and Furr's/Bishop's, Incorporated, incorporated by reference from
       Furr's/Bishop's, Incorporated's Form 8-K dated October 2, 1998.

10.12  Indemnification Agreement, dated as of September 27, 1998, between
       Phillip Ratner and Furr's/Bishop's, Incorporated, incorporated by
       reference from Furr's/Bishop's, Incorporated's Form 8-K dated October 2,
       1998.

10.13  Nonqualified Stock Option Agreement, effective as of September 16, 1998,
       between Phillip Ratner and Furr's/Bishop's, Incorporated, incorporated by
       reference from Furr's/Bishop's, Incorporated's Form 8-K dated October 2,
       1998.

21.0   Subsidiaries of the Registrant.

27.0   Financial Data Schedule.



                                     19
<PAGE>

SIGNATURES

       Pursuant to the requirements of Section 13 or 15 (d) 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.

<TABLE>
<S>                                    <C>
                                       CAFETERIA OPERATORS, L.P.
                                       By: Furr's Restaurant, Incorporated
                                       Managing General Partner


DATE:    March 21, 2000                /s/ Phillip Ratner
                                       ---------------------------------
                                       Phillip Ratner
                                       President and
                                       Chief Executive Officer
</TABLE>

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Cafeteria Operators, L.P. and on the dates indicated.

<TABLE>
<S>                                    <C>
DATE:    March 21, 2000                /s/ Suzanne Hopgood
                                       ---------------------------------
                                       Suzanne Hopgood
                                       Director, Chairman of
                                       the Board

DATE:    March 21, 2000                /s/ Jacob C. Baum
                                       ---------------------------------
                                       Jacob C. Baum
                                       Director

DATE:    March 21, 2000                /s/ Ben Evans
                                       ---------------------------------
                                       Ben Evans
                                       Director

DATE:    March 21, 2000                /s/ Margaret Bertelsen Hampton
                                       ---------------------------------
                                       Margaret Bertelsen Hampton
                                       Director

DATE:    March 21, 2000                /s/ Damien Kovary
                                       ---------------------------------
                                       Damien Kovary
                                       Director

DATE:    March 21, 2000                /s/ William J. Nightingale
                                       ---------------------------------
                                       William J Nightingale
                                       Director

DATE:    March 21, 2000                /s/ Gilbert C. Osnos
                                       ---------------------------------
                                       Gilbert C. Osnos
                                       Director
</TABLE>

                                     20
<PAGE>

<TABLE>
<S>                                    <C>
DATE:    March 21, 2000                /s/ Max Pine
                                       ---------------------------------
                                       Max Pine
                                       Director

DATE:    March 21, 2000                /s/ Barry W. Ridings
                                       ---------------------------------
                                       Barry W. Ridings
                                       Director

DATE:    March 21, 2000                /s/ Paul G. Hargett
                                       ---------------------------------
                                       Paul G. Hargett
                                       Chief Financial Officer
</TABLE>


                                       21
<PAGE>

                                                                     SCHEDULE II

CAFETERIA OPERATORS, L.P.
(a Delaware Limited Partnership wholly owned by Furr's/Bishop's, Incorporated)
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              Additions
                                                      ---------------------------
                                      Balance at      Charged to       Charged to                      Balance at
                                      Beginning       Costs and        Other                           End of
Description                           of Period       Expenses         Accounts      Deductions        Period
-----------                           ---------       --------         --------      ----------        ------
<S>                                   <C>             <C>              <C>           <C>               <C>
YEAR ENDED DECEMBER 31, 1999:
Reserve for store closing              $ 4,596         $     41        $     --      $  1,275          $  3,362
                                       -------         --------        --------      --------          --------

Allowance for doubtful
Accounts receivable                    $    14         $     --        $     --      $     --          $     14
                                       -------         --------        --------      --------          --------

YEAR ENDED DECEMBER 29, 1998:

Reserve for store closing              $ 4,675         $  1,292        $     --      $  1,371 (1)      $  4,596
                                       -------         --------        --------      --------          --------

Allowance for doubtful
Accounts receivable                    $    29         $     (9)(2)    $     --      $      6 (3)      $     14
                                       -------         --------        --------      --------          --------

YEAR ENDED DECEMBER 30, 1997:
Reserve for store closing              $ 3,548         $  2,150        $    117      $  1,140 (1)      $  4,675
                                       -------         --------        --------      --------          --------

Allowance for doubtful
Accounts receivable                    $    20         $     12        $     --      $      3 (3)      $     29
                                       -------         --------        --------      --------          --------
</TABLE>

(1)    Includes costs and expenses incurred during the year on closed units and
       severance payments.
(2)    Net adjustments reflects $9 reversal of expense in 1998.
(3)    Related asset account was written off.


                                         22