----

----

**FORM        10-Q**

| THE                  STEAK N SHAKE COMPANY                                                             |
|--------------------------------------------------------------------------------------------------------|
| (Exact                  name of registrant as specified in its charter)                                |
| INDIANA(State                  or other jurisdictionof                  incorporation or organization) | 37-0684070(I.R.S.                  EmployerIdentification                  No.) |
| 36                  S. Pennsylvania Street, Suite 500Indianapolis,Indiana                         |  46204 |
| (                  Address of principal executive offices)                                             | (Zip                  Code) |
|  (317)                  633-4100                                                                  |
| (Registrant’s                  telephone number, including area code)                            |
|                                                                                                   |

----

----

**THE        STEAK N SHAKE COMPANY**

**FORM        10-Q**

**INDEX**

| **PART I.                  FINANCIAL INFORMATION**  | Page                  No.                                                                                                                           |
|---------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                          | **ITEM                    1. FINANCIAL STATEMENTS**                                                                                            |   |
|                                                          |                                                                                                                                                | Condensed                    Consolidated Statements of Financial Position (Unaudited) as                    of April                    11, 2007 and September 27, 2006  | 3  |
|                                                          |                                                                                                                                                | Condensed                    Consolidated Statements of Earnings (Unaudited) for the Sixteen and                    Twenty-Eight Weeks Ended April 11, 2007 and April 12,                    2006  | 4  |
|                                                          |                                                                                                                                                | Condensed                    Consolidated Statements of Cash Flows (Unaudited) for                    the Twenty-Eight Weeks Ended April 11, 2007 and April 12,                    2006  | 5  |
|                                                          |                                                                                                                                                | Notes                    to Condensed Consolidated Financial Statements                    (Unaudited)  | 6  |
|                                                          | **ITEM                    2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS                    OF OPERATIONS**  | 9  |
|                                                          | **ITEM                    3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                    RISK**                                   | 14 |
|                                                          | **ITEM                    4. CONTROLS AND PROCEDURES**                                                                                         | 14 |
| **PART                    II. OTHER INFORMATION**        |                                                                                                                                                |
|                                                          | **ITEM                    2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF                    PROCEEDS**                        | 15 |
|                                                          | **ITEM                    4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY                    HOLDERS**                               | 15 |
|                                                          | **ITEM                    6. EXHIBITS**                                                                                                        | 15 |
|                                                          | **SIGNATURES**                                                                                                                                      | 16 |

----

**PART I.        FINANCIAL INFORMATION**

**ITEM        1. FINANCIAL STATEMENTS**

| **Condensed                    Consolidated Statements of Financial Position**      |   |                             |        |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------|-------------|--------|
| The                    Steak n Shake Company                                        |   |                             |        |   |   |   |
| (Unaudited)                                                                         |   |                             |        |   |   |   |
| (Amounts                    in $000s except share and per share data)               |   |                             |        |   |   |   |
|                                                                                |   | **April                    11,** |        |   | September                    27, |   |
|                                                                                |   | **2007**                         |        |   | 2006 |   |
| Assets:                                                                             |   |                             |        |   |   |   |
| Current                    Assets                                                   |   |                             |        |   |   |   |
| Cash                                                                                |   | **$**                            | **2,311**   |   |   | $ | 4,820 |   |
| Receivables,                    net                                                 |   | ** **                       | **5,226**   |   |   |   | 5,858 |   |
| Inventories                                                                         |   | ** **                       | **7,482**   |   |   |   | 7,018 |   |
| Deferred                    income taxes                                            |   | ** **                       | **3,378**   |   |   |   | 3,873 |   |
| Assets                    held for sale                                             |   | ** **                       | **2,426**   |   |   |   | 4,514 |   |
| Other                    current assets                                             |   | ** **                       | **8,952**   |   |   |   | 4,837 |   |
| Total                    current assets                                             |   | ** **                       | **29,775**  |   |   |   | 30,920 |   |
|                                                                                |   |                             |        |   |   |   |   |   |
| Net                    property and equipment                                       |   | ** **                       | **508,312** |   |   |   | 490,142 |   |
| Goodwill                                                                            |   | ** **                       | **14,516**  |   |   |   | 14,485 |   |
| Other                    intangible assets, net                                     |   | ** **                       | **2,048**   |   |   |   | 2,152 |   |
| Other                    assets                                                     |   | ** **                       | **7,978**   |   |   |   | 4,822 |   |
| Total                    assets                                                     |   | **$**                            | **562,629** |   |   | $ | 542,521 |   |
|                                                                                |   |                             |        |   |   |   |   |   |
| Liabilities                    and Shareholders' Equity:                            |   |                             |        |   |   |   |   |   |
| Current                    Liabilities                                              |   |                             |        |   |   |   |   |   |
| Accounts                    payable                                                 |   | **$**                            | **28,914**  |   |   | $ | 28,262 |   |
| Accrued                    expenses                                                 |   | ** **                       | **32,332**  |   |   |   | 38,023 |   |
| Line                    of credit                                                   |   | ** **                       | **23,595**  |   |   |   | 10,065 |   |
| Current                    portion of long-term debt                                |   | ** **                       | **2,512**   |   |   |   | 2,512 |   |
| Current                    portion of obligations under leases                      |   | ** **                       | **4,428**   |   |   |   | 4,221 |   |
| Total                    current liabilities                                        |   | ** **                       | **91,781**  |   |   |   | 83,083 |   |
| Deferred                    income taxes                                            |   | ** **                       | **5,300**   |   |   |   | 5,800 |   |
| Other                    long-term liabilities                                      |   | ** **                       | **4,407**   |   |   |   | 3,805 |   |
| Obligations                    under leases                                         |   | ** **                       | **142,220** |   |   |   | 143,996 |   |
| Long-term                    debt                                                   |   | ** **                       | **17,761**  |   |   |   | 18,802 |   |
|                                                                                |   |                             |        |   |   |   |   |   |
| Commitments                    and Contingencies                                    |   |                             |        |   |   |   |   |   |
| Shareholders'                    Equity                                             |   |                             |        |   |   |   |   |   |
| Common                    stock -- $.50 stated value, 50,000,000 shares             |   |                             |        |   |   |   |   |   |
| authorized                    -- shares issued:  30,332,839               |   | ** **                       | **15,166**  |   |   |   | 15,166 |   |
| Additional                    paid-in capital                                       |   | ** **                       | **123,892** |   |   |   | 123,860 |   |
| Retained                    earnings                                                |   | ** **                       | **183,373** |   |   |   | 173,216 |   |
| Treasury                    stock -- at cost, 1,889,477 shares as of April 11, 2007 |   | ** **                       | **(21,271** | **)**  |   |   | (25,207 | ) |
| 2,170,332                    shares at September 27, 2006                           |   |                             |        |   |   |   |   |   |
| Total                    shareholders' equity                                       |   | **$**                            | **301,160** |   |   | $ | 287,035 |   |
| Total                    liabilities and shareholders' equity                       |   | **$**                            | **562,629** |   |   | $ | 542,521 |   |
|                                                                                |   |                             |        |   |   |   |   |   |
| *See                    accompanying notes.*                                        |   |                             |        |   |   |   |   |   |
|                                                                                |   |                             |        |   |   |   |   |   |

----

| **Condensed                    Consolidated Statements of Earnings**  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------|----------------|--------|----------------------------------|--------|------------|-------------------------------------------|--------|------------|----------------------------------|--------|
| The                    Steak n Shake Company                          |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
| (Unaudited)                                                           |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
| (Amounts                    in 000s, except share and per share data) |   |                                       |           |   |                             |   |       |                                      |   |       |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
|                                                                  |   |                                       |           |   |                             |   |       | **Twenty-Eight                    Weeks** |   |
|                                                                  |   | **Sixteen                    Weeks Ended** |           |   | **Ended**                        |   |
|                                                                  |   | **April                    11,**           |           |   | **April                    12,** |   |       | **April                    11,**          |   |       | **April                    12,** |   |
|                                                                  |   | **2007**                                   |           |   | **2006**                         |   |       | **2007**                                  |   |       | **2006**                         |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
| **Revenues**                                                          |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |
| Net                    Sales                                          |   | **$**                                      | **201,055**    |   |                             | $      | 196,520    |                                      |   | **$**      | **347,513**                      |   |   | $ | 334,372 |   |
| Franchise                    fees                                     |   | ** **                                 | **1,096**      |   |                             |   | 1,137      |                                      |   | ** ** | **1,904**                        |   |   |   | 2,026 |   |
| Total                    revenues                                     |   | ** **                                 | **202,151**    |   |                             |   | 197,657    |                                      |   | ** ** | **349,417**                      |   |   |   | 336,398 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Costs                    and Expenses**                             |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| Cost                    of sales                                      |   | ** **                                 | **46,188**     |   |                             |   | 44,601     |                                      |   | ** ** | **79,258**                       |   |   |   | 76,121 |   |
| Restaurant                    operating costs                         |   | ** **                                 | **101,783**    |   |                             |   | 98,283     |                                      |   | ** ** | **177,251**                      |   |   |   | 168,074 |   |
| General                    and administrative                         |   | ** **                                 | **17,551**     |   |                             |   | 16,303     |                                      |   | ** ** | **31,106**                       |   |   |   | 28,775 |   |
| Depreciation                    and amortization                      |   | ** **                                 | **9,825**      |   |                             |   | 8,715      |                                      |   | ** ** | **17,051**                       |   |   |   | 15,112 |   |
| Marketing                                                             |   | ** **                                 | **9,148**      |   |                             |   | 9,154      |                                      |   | ** ** | **15,574**                       |   |   |   | 15,006 |   |
| Interest                                                              |   | ** **                                 | **4,242**      |   |                             |   | 3,106      |                                      |   | ** ** | **7,375**                        |   |   |   | 5,893 |   |
| Rent                                                                  |   | ** **                                 | **4,255**      |   |                             |   | 3,873      |                                      |   | ** ** | **7,303**                        |   |   |   | 6,407 |   |
| Pre-opening                    costs                                  |   | ** **                                 | **812**        |   |                             |   | 977        |                                      |   | ** ** | **1,746**                        |   |   |   | 2,156 |   |
| Provision                    for restaurant closing                   |   | ** **                                 | **(127**       | **)**  |                             |   | (103       | )                                         |   | ** ** | **(193**                         | **)**  |   |   | (103 | ) |
| Other                    income, net                                  |   | ** **                                 | **(539**       | **)**  |                             |   | (438       | )                                         |   | ** ** | **(944**                         | **)**  |   |   | (1,094 | ) |
| Total                    costs and expenses                           |   | ** **                                 | **193,138**    |   |                             |   | 184,471    |                                      |   | ** ** | **335,527**                      |   |   |   | 316,347 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Earnings                    Before Income Taxes**                   |   | ** **                                 | **9,013**      |   |                             |   | 13,186     |                                      |   | ** ** | **13,890**                       |   |   |   | 20,051 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Income                    Taxes**                                   |   | ** **                                 | **3,021**      |   |                             |   | 4,655      |                                      |   | ** ** | **3,733**                        |   |   |   | 6,861 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Net                    Earnings**                                   |   | **$**                                      | **5,992**      |   |                             | $      | 8,531      |                                      |   | **$**      | **10,157**                       |   |   | $ | 13,190 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Net                    Earnings Per Common and**                    |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Common                    Equivalent Share:**                       |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| Basic                                                                 |   | **$**                                      | **0.21**       |   |                             | $      | 0.31       |                                      |   | **$**      | **0.36**                         |   |   | $ | 0.48 |   |
| Diluted                                                               |   | ** **                                 | **0.21**       |   |                             |   | 0.30       |                                      |   | ** ** | **0.36**                         |   |   |   | 0.47 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| **Weighted                    Average Shares and Equivalents:**       |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |
| Basic                                                                 |   | ** **                                 | **28,025,019** |   |                             |   | 27,730,296 |                                      |   | ** ** | **27,974,493**                   |   |   |   | 27,687,806 |   |
| Diluted                                                               |   | ** **                                 | **28,230,461** |   |                             |   | 28,077,224 |                                      |   | ** ** | **28,191,845**                   |   |   |   | 28,019,211 |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
| *See                    accompanying notes.*                          |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |
|                                                                  |   |                                       |           |   |                             |   |       |                                      |   |       |                             |   |   |   |   |   |

----

| **Condensed                    Consolidated Statements of Cash Flows**                                                    |   |                                            |        |   |                         |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-------------|--------|------------------------------|--------|
| The                    Steak n Shake Company                                                                              |   |                                            |        |   |                         |   |
| (Unaudited)                                                                                                               |   |                                            |        |   |                         |   |
| (Amounts                    in 000's)                                                                                     |   | **Twenty-Eight                    Weeks Ended** |        |
|                                                                                                                      |   | **April                    11,**                |        |   | April                    12, |   |
|                                                                                                                      |   | **2007**                                        |        |   | 2006                         |   |
| **Operating                    Activities**                                                                               |   |                                            |        |   |                         |   |
| Net                    earnings                                                                                           |   | **$**                                           | **10,157**  |   |                         | $      | 13,190 |   |
| Adjustments                    to reconcile net earnings to net cash provided by operating                    activities: |   |                                            |        |   |                         |   |   |   |
| Depreciation                    and amortization                                                                          |   | ** **                                      | **17,051**  |   |                         |   | 15,112 |   |
| Provision                    for deferred income taxes                                                                    |   | ** **                                      | **(5**      | **)**  |                         |   | 3,514 |   |
| Provision                    for restaurant closings                                                                      |   | ** **                                      | **(193**    | **)**  |                         |   | (103 | ) |
| Loss                    on disposal of property and equipment                                                             |   | ** **                                      | **291**     |   |                         |   | 301 |   |
| Non-cash                    expense for stock-based compensation and deferred rent                                        |   | ** **                                      | **2,206**   |   |                         |   | 2,271 |   |
| Changes                    in receivables and inventories                                                                 |   | ** **                                      | **168**     |   |                         |   | (1,706 | ) |
| Changes                    in other assets                                                                                |   | ** **                                      | **(4,769**  | **)**  |                         |   | (782 | ) |
| Changes                    in accounts payable and accrued expenses                                                       |   | ** **                                      | **(5,196**  | **)**  |                         |   | 7,750 |   |
| Net                    cash provided by operating activities                                                              |   | ** **                                      | **19,710**  |   |                         |   | 39,547 |   |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| **Investing                    Activities**                                                                               |   |                                            |        |   |                         |   |   |   |
| Additions                    of property and equipment                                                                    |   | ** **                                      | **(41,412** | **)**  |                         |   | (47,898 | ) |
| Proceeds                    from property and equipment disposals                                                         |   | ** **                                      | **5,638**   |   |                         |   | 1,755 |   |
| Net                    cash used in investing activities                                                                  |   | ** **                                      | **(35,774** | **)**  |                         |   | (46,143 | ) |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| **Financing                    Activities**                                                                               |   |                                            |        |   |                         |   |   |   |
| (Payments)                    proceeds on the line of credit facility, net                                                |   | ** **                                      | **(1,470**  | **)**  |                         |   | 9,000 |   |
| Proceeds                    from long-term debt                                                                           |   | ** **                                      | **15,000**  |   |                         |   | - |   |
| Principal                    payments on long-term debt                                                                   |   | ** **                                      | **(1,041**  | **)**  |                         |   | (1,060 | ) |
| Proceeds                    from equipment and property leases                                                            |   | ** **                                      | **800**     |   |                         |   | 700 |   |
| Principal                    payments on lease obligations                                                                |   | ** **                                      | **(1,690**  | **)**  |                         |   | (2,172 | ) |
| Excess                    tax benefit from stock-based awards                                                             |   | ** **                                      | **62**      |   |                         |   | 50 |   |
| Proceeds                    from exercise of stock options                                                                |   | ** **                                      | **660**     |   |                         |   | 146 |   |
| Proceeds                    from Employee Stock Purchase Plan                                                             |   | ** **                                      | **1,234**   |   |                         |   | 1,344 |   |
| Net                    cash provided by financing activities                                                              |   | ** **                                      | **13,555**  |   |                         |   | 8,008 |   |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| **(Decrease)                    Increase in Cash**                                                                        |   | ** **                                      | **(2,509**  | **)**  |                         |   | 1,412 |   |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| **Cash                    at Beginning of Period**                                                                        |   | ** **                                      | **4,820**   |   |                         |   | 3,063 |   |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| **Cash                    at End of Period**                                                                              |   | **$**                                           | **2,311**   |   |                         | $      | 4,475 |   |
|                                                                                                                      |   |                                            |        |   |                         |   |   |   |
| *See                    accompanying notes.*                                                                              |   |                                            |        |   |                         |   |   |   |

----

**Notes        to Condensed Consolidated Financial Statements**

**Basis        of Presentation**

**Seasonal        Aspects**

**Earnings        Per Share**

*, Earnings Per Share*

|                                                                                                                                                                                                                                                                                    |   | **Sixteen                    Weeks Ended** |           |   | **Twenty-eight                    Weeks Ended** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|----------------|--------|-------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                    |   | **April                    11,**           |           |   | April                    12,                    |   |   | **April                    11,** |   |   | April                    12, |   |
|                                                                                                                                                                                                                                                                                    |   | **2007**                                   |           |   | 2006                                            |   |   | **2007** |   |   | 2006 |   |
| Basic                    earnings per share:                                                                                                                                                                                                                                            |   |                                       |           |   |                                            |   |   |   |   |   |   |   |
| Weighted                    average common shares                                                                                                                                                                                                                                       |   | ** **                                 | **28,025,019** |   |                                            |   | 27,730,296 |   |   | ** ** | **27,974,493** |   |   |   | 27,687,806 |   |
|                                                                                                                                                                                                                                                                                    |   |                                       |           |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                    earnings per share:                                                                                                                                                                                                                                          |   |                                       |           |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                    average common shares                                                                                                                                                                                                                                       |   | ** **                                 | **28,025,019** |   |                                            |   | 27,730,296 |   |   | ** ** | **27,974,493** |   |   |   | 27,687,806 |   |
| Diluted                    effect of share-based awards                                                                                                                                                                                                                                 |   | ** **                                 | **205,442**    |   |                                            |   | 346,928 |   |   | ** ** | **217,352** |   |   |   | 331,405 |   |
| Weighted                    average common and incremental shares                                                                                                                                                                                                                       |   | ** **                                 | **28,230,461** |   |                                            |   | 28,077,224 |   |   | ** ** | **28,191,845** |   |   |   | 28,019,211 |   |
|                                                                                                                                                                                                                                                                                    |   |                                       |           |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Number                    of share-based awards excluded from the calculation of earnings                    per share                    as the award's exercise prices were greater than the average                    market price                    of the Company's common stock |   | ** **                                 | **1,116,845**  |   |                                            |   | 362,833 |   |   | ** ** | **821,295** |   |   |   | 407,259 |   |

----

**Net        Property and Equipment**

|                                                              |   | **April                    11,** |     |   | September                    27, |   |
|-------------------------------------------------------------------|--------|----------------------------------|----------|--------|----------------------------------|--------|
|                                                              |   | **2007**                         |     |   | 2006                             |   |
|                                                              |   |                             |     |   |                             |   |
| Land                                                              |   | $                                | 189,041  |   |                             | $      | 184,741 |   |
| Buildings                                                         |   |                             | 169,872  |   |                             |   | 165,411 |   |
| Land                    and leasehold improvements                |   |                             | 151,238  |   |                             |   | 139,603 |   |
| Equipment                                                         |   |                             | 201,472  |   |                             |   | 184,223 |   |
| Construction                    in progress                       |   |                             | 8,980    |   |                             |   | 15,460 |   |
|                                                              |   |                             | 720,603  |   |                             |   | 689,438 |   |
| Less                    accumulated depreciation and amortization |   |                             | (212,291 | )      |                             |   | (199,296 | ) |
| **Net                    property and equipment**                 |   | $                                | 508,312  |   |                             | $      | 490,142 |   |

**Assets        Held for Sale**

**Goodwill**

**Other        Intangibles**

|                                                                        |   | **April                    11,** |   |   | September                    27, |   |
|-----------------------------------------------------------------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                                                                        |   | **2007**                         |   |   | 2006                             |   |
| Gross                    value of intangible assets subject to amortization |   | $                                | 2,291  |   |                             | $      | 2,291 |   |
| Accumulated                    amortization                                 |   |                             | (743   | )      |                             |   | (639 | ) |
| Intangible                    assets subject to amortization, net           |   |                             | 1,548  |   |                             |   | 1,652 |   |
| Intangible                    assets with indefinite lives                  |   |                             | 500    |   |                             |   | 500 |   |
| **Total                    intangible assets**                              |   | $                                | 2,048  |   |                             | $      | 2,152 |   |

**Borrowings        **

----

**Common        Stock Plans**

**Income        Taxes**

**Supplemental        Cash Flow Information**

**Commitments        and Contingencies**

**New        Accounting Standards**

**Subsequent        Event**

----

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

**Overview**

| ·   | Total                  revenues increased $4,494 or 2.3% to $202,151 for the sixteen weeks                  ended                  April 11, 2007 as compared to the same period in the prior                  year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                  earnings were $5,992 as compared to $8,531 in the same period in                  the prior                  year. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Diluted                  earnings per share was $0.21 for the sixteen weeks ended April                  11, 2007                  compared to $0.30 per share in the prior                  year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Same                  store sales decreased by 4.7% for the                  quarter. |
|--------------------|---------------------------------------------------------------------------------------|

**2007        Full Year Guidance**

----

**Critical        Accounting Policies**

*Impairment        of Long-lived Assets*

*Insurance        Reserves*

*Income        Taxes*

*Goodwill        and Other Intangible Assets*

*Leases*

----

**Results        of Operations**

|                                                                                                                                                  |   |                                       |   |   |                             |   |   | **Twenty-Eight                    Weeks** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------------|--------|
|                                                                                                                                                  |   | **Sixteen                    Weeks Ended** |   |   | **Ended**                        |   |
|                                                                                                                                                  |   | **April                    11,**           |   |   | **April                    12,** |   |   | **April                    11,**          |   |   | **April                    12,** |   |
|                                                                                                                                                  |   | **2007**                                   |   |   | **2006**                         |   |   | **2007**                                  |   |   | **2006** |   |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |
| **Revenues**                                                                                                                                          |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |
| Net                    Sales                                                                                                                          |   |                                       | 99.5   | %      |                             |   | 99.4   | %                                         |   |   | 99.5 | % |   |   | 99.4 | % |
| Franchise                    fees                                                                                                                     |   |                                       | 0.5    | %      |                             |   | 0.6    | %                                         |   |   | 0.5 | % |   |   | 0.6 | % |
|                                                                                                                                                  |   |                                       | 100.0  | %      |                             |   | 100.0  | %                                         |   |   | 100.0 | % |   |   | 100.0 | % |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| **Costs                    and Expenses**                                                                                                             |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| Cost                    of sales (1)                                                                                                                  |   |                                       | 23.0   | %      |                             |   | 22.7   | %                                         |   |   | 22.8 | % |   |   | 22.8 | % |
| Restaurant                    operating costs (1)                                                                                                     |   |                                       | 50.6   | %      |                             |   | 50.0   | %                                         |   |   | 51.0 | % |   |   | 50.3 | % |
| General                    and administrative                                                                                                         |   |                                       | 8.7    | %      |                             |   | 8.2    | %                                         |   |   | 8.9 | % |   |   | 8.6 | % |
| Depreciation                    and amortization                                                                                                      |   |                                       | 4.9    | %      |                             |   | 4.4    | %                                         |   |   | 4.9 | % |   |   | 4.5 | % |
| Marketing                                                                                                                                             |   |                                       | 4.5    | %      |                             |   | 4.6    | %                                         |   |   | 4.5 | % |   |   | 4.5 | % |
| Interest                                                                                                                                              |   |                                       | 2.1    | %      |                             |   | 1.6    | %                                         |   |   | 2.1 | % |   |   | 1.8 | % |
| Rent                                                                                                                                                  |   |                                       | 2.1    | %      |                             |   | 2.0    | %                                         |   |   | 2.1 | % |   |   | 1.9 | % |
| Pre-opening                    costs                                                                                                                  |   |                                       | 0.4    | %      |                             |   | 0.5    | %                                         |   |   | 0.5 | % |   |   | 0.6 | % |
| Provision                    for restaurant closing                                                                                                   |   |                                       | -0.1   | %      |                             |   | -0.1   | %                                         |   |   | -0.1 | % |   |   | 0.0 | % |
| Other                    income, net                                                                                                                  |   |                                       | -0.3   | %      |                             |   | -0.2   | %                                         |   |   | -0.3 | % |   |   | -0.3 | % |
|                                                                                                                                                  |   |                                       | 95.5   | %      |                             |   | 93.3   | %                                         |   |   | 96.0 | % |   |   | 94.0 | % |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| **Earnings                    Before Income Taxes**                                                                                                   |   |                                       | 4.5    | %      |                             |   | 6.7    | %                                         |   |   | 4.0 | % |   |   | 6.0 | % |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| **Income                    Taxes**                                                                                                                   |   |                                       | 1.5    | %      |                             |   | 2.4    | %                                         |   |   | 1.1 | % |   |   | 2.0 | % |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| **Net                    Earnings**                                                                                                                   |   |                                       | 3.0    | %      |                             |   | 4.3    | %                                         |   |   | 2.9 | % |   |   | 3.9 | % |
|                                                                                                                                                  |   |                                       |   |   |                             |   |   |                                      |   |   |   |   |   |   |   |   |
| (1)                    Cost of sales and restaurant operating costs are expressed as                    a percentage                    of net sales. |   |

**Comparison        of Sixteen Weeks Ended April 11, 2007 to Sixteen Weeks Ended April 12,        2006**

*Net        Earnings*

*Revenues*

*Costs        and Expenses*

----

*Income        Taxes*

**Comparison        of Twenty-eight Weeks Ended April 11, 2007 to Twenty-eight Weeks Ended        April 12, 2006**

*Net        Earnings*

*Revenues*

*Costs        and Expenses*

*Income        Taxes*

----

**Liquidity        and Capital Resources**

**New        Accounting Standards**

----

**Effects        of Governmental Regulations and Inflation**

**Risks        Associated with Forward-Looking Statements**

**ITEM        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET        RISK**

**ITEM        4. CONTROLS AND PROCEDURES**

----

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

| **Period**                                                    |   | **Total                  Number of Shares Purchased** | **Average                  Price Paid per Share** |   | **Total                  Number of Shares Purchased as Part of Publicly Announced Plans                  or                  Programs** |   | **Maximum                  Number of Shares that May Yet Be Purchased Under the Plans or                  Programs** |   |
|---------------------------------------------------------------|--------|-------------------------------------------------------|---------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                          |   |                                                  |                                              |   |                                                                                                                                    |   |                                                                                                                 |   |
| December                    21, 2006 – January 17, 2007 |   | --                                                    | --                                                |   | --                                                                                                                                      |   | 2,979,600                                                                                                            |   |
| January                    18 – February 14, 2007       |   | --                                                    | --                                                |   | --                                                                                                                                      |   | 2,979,600                                                                                                            |   |
| February                    15 - March 14, 2007               |   | --                                                    | --                                                |   | --                                                                                                                                      |   | 2,979,600                                                                                                            |   |
| March                    15 – April 11, 2007            |   | --                                                    | --                                                |   | --                                                                                                                                      |   | 2,979,600                                                                                                            |   |

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

| Name                                | Votes                for | Withheld  |
|-------------------------------------|--------------------------|-----------|
| Peter                M Dunn         | 17,629,868               | 6,425,665 |
| Alan                B Gilman        | 17,535,587               | 6,519,946 |
| Wayne                L Kelley       | 17,155,875               | 6,899,658 |
| Ruth                J Person        | 22,797,452               | 1,258,081 |
| John                W Ryan          | 22,358,916               | 1,696,617 |
| Steven                M Schmidt     | 22,860,403               | 1,195,130 |
| Edward                W Wilhelm     | 22,853,473               | 1,202,060 |
| James                Williamson Jr. | 17,411,100               | 6,644,433 |

| Votes                for | Votes                Against/Withheld | Abstentions/Brokers                Non-Votes |
|--------------------------|---------------------------------------|----------------------------------------------|
| 18,133,287               | 2,245,380                             | 100,524                                      |

| Votes                for | Votes                Against/Withheld | Abstentions/Brokers                Non-Votes |
|--------------------------|---------------------------------------|----------------------------------------------|
| 23,841,674               | 189,492                               | 24,367                                       |

**ITEM      6. EXHIBITS**

| 10.1 | 2007                Non-Employee Director Restricted Stock Plan (incorporated by reference                to                Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February                9, 2007) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1 | Rule                13a - 14(a) / 15d – 14(a) Certification of Chief Executive                Officer.                                                                                                                         |
| 31.2 | Rule                13a - 14(a) / 15d – 14(a) Certification of Chief Financial                Officer.                                                                                                                         |
| 32   | Section                1350 Certifications.                                                                                                                                                                                          |

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**SIGNATURE**