<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
    1934

    For quarterly period ended December 31, 2000

                                     OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from         to

                         Commission file number 0-25886

                               ----------------

                         GARDEN FRESH RESTAURANT CORP.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                <C>
            Delaware                                 33-0028786
  (State or other jurisdiction                    (I.R.S. Employer
of incorporation or organization)               Identification No.)
</TABLE>

<TABLE>
<S>                                            <C>
 17180 Bernardo Center Drive, San Diego, CA                        92128
  (Address of principal executive offices)                       (Zip Code)
</TABLE>

                                 (858) 675-1600
              (Registrant's telephone number, including area code)

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

                               ----------------

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

   The number of shares of Common Stock, $.01 par value, outstanding as of
January 26, 2001 was 5,664,519. There are no other classes of common stock.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                         GARDEN FRESH RESTAURANT CORP.
                                   FORM 10-Q

                                     INDEX

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----

 <C>      <S>                                                             <C>
 PART I:  FINANCIAL INFORMATION

 ITEM 1:  UNAUDITED FINANCIAL STATEMENTS................................    3

          BALANCE SHEETS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 2000....    3

          STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
           DECEMBER 31, 1999 AND DECEMBER 31, 2000......................    4

          STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
           DECEMBER 31, 1999 AND DECEMBER 31, 2000......................    5

          NOTES TO UNAUDITED FINANCIAL STATEMENTS.......................    6

 ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS....................................    7

 ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....   14


 PART II: OTHER INFORMATION

 ITEM 1:  LEGAL PROCEEDINGS.............................................   15

 ITEM 2:  CHANGES IN SECURITIES.........................................   15

 ITEM 3:  DEFAULTS UPON SENIOR SECURITIES...............................   15

 ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........   15

 ITEM 5:  OTHER INFORMATION.............................................   15

 ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K..............................   15
</TABLE>

                                       2
<PAGE>

                         GARDEN FRESH RESTAURANT CORP.

                                 BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                     September 30, December 31,
                                                         2000          2000
                                                     ------------- ------------
                                                                   (Unaudited)
<S>                                                  <C>           <C>
                       ASSETS
                       ------

Cash and cash equivalents...........................   $  2,058      $    215
Inventories.........................................      6,383         6,773
Other current assets................................      1,273         2,723
                                                       --------      --------
  Total current assets..............................      9,714         9,711
Property and equipment, net.........................    135,535       137,886
Intangible and other assets.........................      1,939         1,965
                                                       --------      --------
    Total assets....................................   $147,188      $149,562
                                                       ========      ========

        LIABILITIES AND SHAREHOLDERS' EQUITY
        ------------------------------------

Accounts payable....................................   $  9,701      $  5,026
Revolving line of credit............................     12,000         9,000
Current portion of long-term debt...................      8,942         9,659
Current deferred income taxes.......................        218           218
Accrued liabilities.................................      7,928         9,666
                                                       --------      --------
Total current liabilities...........................     38,789        33,569
Deferred income taxes...............................      3,745         4,115
Long-term debt, net of current portion..............     30,612        36,788
Other liabilities...................................      2,371         2,765
Shareholders' equity:
  Common stock, $.01 par value; 12,000,000 shares
   authorized at September 30, 2000 and December 31,
   2000, respectively; 5,655,645 and 5,664,519
   issued and outstanding at September 30, 2000 and
   December 31, 2000, respectively..................         57            57
  Paid-in capital...................................     59,518        59,601
  Retained earnings.................................     12,096        12,667
                                                       --------      --------
    Total shareholders' equity......................     71,671        72,325
                                                       --------      --------
    Total liabilities and shareholders' equity......   $147,188      $149,562
                                                       ========      ========
</TABLE>


                  See notes to unaudited financial statements.

                                       3
<PAGE>

                         GARDEN FRESH RESTAURANT CORP.

                            STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                      -------------------------
                                                      December 31, December 31,
                                                          1999         2000
                                                      ------------ ------------
<S>                                                   <C>          <C>
Net sales...........................................    $35,702      $43,359
Costs and expenses:
  Costs of sales....................................      9,077       10,959
Restaurant operating expenses:
  Labor.............................................     11,603       14,339
  Occupancy and other expenses......................      7,937       10,556
  General and administrative expenses...............      2,327        3,234
  Restaurant opening costs..........................        532          586
  Depreciation and amortization expenses............      2,156        2,888
                                                        -------      -------
    Total costs and expenses........................     33,632       42,562
                                                        -------      -------
Operating income....................................      2,070          797
Other income (expense):
  Interest income...................................         29           67
  Interest expense..................................       (724)      (1,151)
  Other income (expense), net.......................        (55)       1,229
                                                        -------      -------
Income before provision for income taxes and
 cumulative Effect of accounting change.............      1,320          942
Provision for income taxes..........................       (519)        (371)
                                                        -------      -------
Income before cumulative effect of accounting
 change.............................................        801          571
Cumulative effect of change in accounting for start-
 up Costs, net of income tax benefit of $800,000 in
 1999...............................................     (1,233)         --
                                                        -------      -------
Net income (loss)...................................    $  (432)     $   571
                                                        =======      =======
Basic net income (loss) per share:
  Income before cumulative effect of accounting
   change...........................................    $  0.14      $  0.10
  Cumulative effect of change in accounting for
   start-up costs...................................    $ (0.22)     $   --
                                                        -------      -------
  Net income (loss).................................    $ (0.08)     $  0.10
                                                        =======      =======
  Shares used in computing basic net income (loss)
   per share........................................      5,638        5,664
                                                        =======      =======
Diluted net income (loss) per share:
  Income before cumulative effect of accounting
   change...........................................    $  0.14      $  0.10
  Cumulative effect of change in accounting for
   start-up costs...................................    $ (0.21)     $   --
                                                        -------      -------
  Net income (loss).................................    $ (0.07)     $  0.10
                                                        =======      =======
Shares used in computing diluted net income (loss)
 per share..........................................      5,870        5,683
                                                        =======      =======
</TABLE>

                  See notes to unaudited financial statements.

                                       4
<PAGE>

                         GARDEN FRESH RESTAURANT CORP.

                            STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                          Three months ended
                                                       -------------------------
                                                       December 31, December 31,
                                                           1999         2000
                                                       ------------ ------------
<S>                                                    <C>          <C>
Cash flow from operating activities:
  Net income (loss)..................................    $  (432)     $   571
  Adjustments to reconcile net income (loss) to net
   cashprovided by (used in) operating activities:
    Cumulative effect of accounting change, net of
     tax benefit.....................................      1,233          --
    Depreciation and amortization....................      2,156        2,888
    Loss on disposal of property and equipment.......         55           61
    Provision for deferred income taxes..............        468          370
    Tax benefits from exercise of common stock
     options.........................................          5          --
    Amortization of deferred gain on sale-leaseback
     of properties...................................        --            (7)
Changes in operating assets and liabilities:
  Increase in inventories............................       (378)        (390)
  Increase in other assets...........................       (306)      (1,450)
  Increase (decrease) in accounts payable............      1,444       (3,807)
  Increase in accrued liabilities....................        172        1,738
  Increase (decrease) in other liabilities...........        159          (11)
                                                         -------      -------
Net cash provided by (used in) operating activities..      4,576          (37)
                                                         -------      -------
Investing Activities:
Acquisition of property and equipment:
  New restaurant development.........................     (6,869)      (7,346)
  Existing restaurant additions......................       (978)        (673)
  Decrease in accounts payable.......................        --        (2,451)
  Increase in intangible and other assets............       (218)         (42)
Proceeds from sale-leaseback transactions............        --         4,730
                                                         -------      -------
Net cash used in investing activities................     (8,065)      (5,782)
                                                         -------      -------
Financing Activities:
  Borrowings (repayments) under line of credit.......      3,509       (3,000)
  Proceeds from long-term debt.......................      4,515        9,353
  Repayment of long-term debt........................     (2,235)      (2,460)
  Net proceeds from issuance of common stock.........        119           83
                                                         -------      -------
  Net cash provided by financing activities..........      5,908        3,976
                                                         -------      -------
  Net increase (decrease) in cash and cash
   equivalents.......................................      2,419       (1,843)
  Cash and cash equivalents at beginning of period...        911        2,058
                                                         -------      -------
  Cash and cash equivalents at end of period.........    $ 3,330      $   215
                                                         =======      =======
Supplemental disclosure of noncash transactions:
  Property and equipment asset purchases in accounts
   payable...........................................    $   739      $ 1,583
</TABLE>

                  See notes to unaudited financial statements.

                                       5
<PAGE>

                         GARDEN FRESH RESTAURANT CORP.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS

1. Unaudited Financial Statements

   The accompanying financial statements have been prepared by Garden Fresh
Restaurant Corp. (the "Company") without audit and reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair statement of financial position and the
results of operations for the interim periods. The statements have been
prepared in accordance with the regulations of the Securities and Exchange
Commission and do not necessarily include certain information and footnote
disclosures necessary to present the statements in accordance with generally
accepted accounting principles. For further information, refer to the financial
statements and notes thereto for the fiscal year ended September 30, 2000
included in the Company's Form 10-K.

2. Net Income (Loss) Per Share

   Basic net income (loss) per share is computed based on the weighted average
number of common shares outstanding during the period. Diluted net income
(loss) per share is computed on the weighted average number of common shares
and dilutive potential common shares, which includes options under the
Company's stock option plans computed using the treasury stock method and
common shares expected to be issued under the Company's Employee Stock Purchase
Plan.

   Potential issuances of common stock of 232,000 and 19,000 shares for the
three month periods ended December 31, 1999 and 2000, respectively, were used
to calculate diluted earnings per share. There were no reconciling items in
calculating the numerator for basic and diluted earnings per share for either
of the periods presented. For the three months ended December 31, 1999 and
2000, respectively, shares related to stock options of 53,000 and 947,000,
respectively, were excluded from the calculation of diluted net income (loss)
per share, as the effect of their inclusion would be anti-dilutive.

3. Settlement of Insurance Claim

   The Company recorded other income of $1,284,000 during the three months
ended December 31, 2000 related to the settlement of an insurance claim for the
loss of assets in a fire at the company's Point Loma restaurant in December
1999.

4. Preparation of Financial Statements

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

                                       6
<PAGE>

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

Introduction

   The statements contained in this Form 10-Q that are not purely historical
are forward looking statements, including statements regarding the Company's
expectations, hopes, beliefs, intentions or strategies regarding the future.
Statements which use the words "expects," "will," "may," "anticipates,"
"believes," "intends," "attempts," and "seeks" are forward looking statements.
These forward looking statements, including statements regarding the Company's
(i) plans to open new restaurants, (ii) plans to increase operational
efficiency, (iii) budgeted capital expenditures for new restaurant openings and
improvements at existing sites, and (iv) timing for implementation of its new
accounting software program, are based on information available to the Company
on the date hereof, and the Company assumes no obligation to update any such
forward looking statements. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements.
Among the factors that could cause actual results to differ materially are the
factors set forth under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Business Risks." In particular,
the Company's expansion efforts and plans to open new restaurants could be
affected by the Company's ability to locate suitable restaurant sites,
construct new restaurants in a timely manner and obtain additional funds, while
the Company's plans to increase operational efficiency could be affected by
difficulties in assimilating new accounting software as well as escalating
utilities costs and fuel, and labor cost for the distribution center.

Quarterly Results

   The following table sets forth the percentage of net sales certain items
included in the Company's statement of operations for the periods indicated.

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                     -------------------------
                                                     December 31, December 31,
                                                         1999         2000
                                                     ------------ ------------
                                                            (Unaudited)
<S>                                                  <C>          <C>
Net sales...........................................    100.0 %      100.0 %
                                                        -----        -----
Costs and expenses:
  Costs of sales....................................     25.4 %       25.3 %
Restaurant operating expenses:
  Labor.............................................     32.5 %       33.1 %
  Occupancy and other expenses......................     22.2 %       24.3 %
  General and administrative expenses...............      6.5 %        7.4 %
  Restaurant opening costs..........................      1.5 %        1.4 %
  Depreciation and amortization expenses............      6.1 %        6.7 %
                                                        -----        -----
    Total costs and expenses........................     94.2 %       98.2 %
                                                        -----        -----
Operating income:                                         5.8 %        1.8 %
  Interest income...................................      0.1 %        0.2 %
  Interest expense..................................     (2.0)%       (2.7)%
  Other income (expenses), net......................     (0.2)%        2.8 %
                                                        -----        -----
Income before provision for income taxes and
 cumulative effect of accounting change.............      3.7 %        2.2 %
Provision for income taxes..........................     (1.5)%       (0.9)%
                                                        -----        -----
Income before cumulative effect of accounting
 change.............................................      2.2 %        1.3 %
Cumulative effect of accounting for startup costs,
 net of income tax benefit..........................     (3.4)%        --
                                                        -----        -----
Net income (loss)...................................     (1.2)%        1.3 %
                                                        =====        =====
</TABLE>

                                       7
<PAGE>

Results of Operations

 Three Months Ended December 31, 2000 Compared to Three Months Ended December
 31, 1999

   Net Sales. Net sales for the three months ended December 31, 2000 increased
21.4% to $43.4 million from $35.7 million for the comparable 1999 period. This
increase was primarily due to the opening of fifteen restaurants since the
comparable 1999 period and the increase in comparable restaurant sales of 3.4%.
The same store sales increase is due to higher prices offset by decreased guest
counts by 1.4% versus the comparable 1999 period. See "Business Risks--Certain
Operating Results and Considerations."

   Costs of Sales. Costs of sales for the three months ended December 31, 2000
increased 20.7% to $11.0 million from $9.1 million for the comparable 1999
period. This increase was due to the addition of fifteen restaurants opened
since the comparable 1999 period. As a percentage of net sales, cost of sales
decreased to 25.3% from 25.4% as a result of leveraged purchasing price
variances across all regions and the utilization of our own delivery and
distribution center for the West Coast restaurants beginning in April 2000. See
"Business Risks--Reliance on Key Suppliers and Distributors."

   Labor Expense. Labor expense for the three months ended December 31, 2000
increased 23.6% to $14.3 million from $11.6 million for the comparable 1999
period. This increase was due primarily to an increase in the minimum wage in
California and the addition of fifteen restaurants opened since the comparable
1999 period, which require higher labor usage during the first ninety days. As
a percentage of net sales, the labor expense increased 0.6% to 33.1% from 32.5%
in the comparable 1999 period due primarily to an increase in the employee
hourly wage rates. See "Business Risks--Minimum Wage."

   Occupancy and Other Expenses. Occupancy and other operating costs for the
three months ended December 31, 2000 increased 33.0% to $10.6 million from $7.9
million for the comparable 1999 period. Occupancy and other operating costs as
a percentage of net sales increased 2.1% to 24.3% from 22.2% for the comparable
1999 period. This was due primarily to planned marketing expenses, higher
utility costs in California, base rent associated with sale-lease backs not
originally planned, and repair and maintenance costs for aging restaurants. See
"Business Risks--Planned Operating Expenditures."

   General and Administrative Expenses. General and administrative expenses for
the three months ended December 31, 2000 increased 39.0% to $3.2 million from
$2.3 million for the comparable 1999 period. As a percentage of net sales,
general and administrative expenses increased 0.9% to 7.4% from 6.5% for the
comparable 1999 period. These increases were primarily due to personnel costs
to support the additional fifteen restaurants in the current and future new
regions.

   Restaurant Opening Costs. Restaurant opening costs for the three months
ended December 31, 2000 increased 10.2% to $0.6 million from $0.5 million for
the comparable 1999 period. Restaurant opening costs as a percentage of net
sales decreased 0.1% to 1.4% from 1.5% for the comparable 1999 period.

   Depreciation and Amortization Expenses. Depreciation and amortization
expenses for the three months ended December 31, 2000 increased 34.0% to $2.9
million from $2.2 million for the comparable 1999 period. Depreciation and
amortization expense as a percentage of net sales increased 0.6% to 6.7% from
6.1% for the comparable 1999 period. This was due to additional depreciation
for the fifteen restaurants opened since the comparable 1999 period.

   Interest Income. Interest income for the three months ended December 31,
2000 increased 131.0% to $67,000 from $29,000 for the comparable 1999 period.
The increase in interest income was due to increased investments of cash on
hand during the 2000 period.

   Interest Expense. Interest expense for the three months ended December 31,
2000 increased 59.0% to $1.2 million from $.7 million for the comparable 1999
period as a result of higher interest rates, and increased debt to support
higher capital expenditures for existing stores and new stores during the 2000
period.

                                       8
<PAGE>

   Other Income (Expense), net. Other income (expense), net for the three
months ended December 31, 2000 was $1.2 million compared to ($0.5 million) for
the comparable 1999 period. This increase was primarily due to the insurance
settlement related to the loss of assets in a fire at a restaurant in San
Diego, California.

Liquidity and Capital Resources

   The Company finances its cash requirements principally from cash flow from
operating activities, bank debt, mortgage and capital lease financing, sale-
lease back of owned properties and sale of Company stock. The Company does not
have significant receivables or inventory, and receives trade credit based upon
negotiated terms when purchasing food and supplies. For the three months ended
December 31, 2000, the Company used $37,000 for operating activities, repaid
$3.0 million under its bank line of credit, and obtained $9.4 million from
equipment and mortgage financing (with repayments of $2.5 million). The
Company's principal capital requirement has been for funding the development of
restaurants. Historically the Company has primarily leased the land and
buildings for its restaurant operations. The Company does purchase land or land
and buildings when favorable conditions are available. The Company currently
owns the land or land and buildings for 26 restaurants, including the land for
certain sites the Company expects to open during the balance of fiscal 2001.
During the first three months of fiscal 2001 the Company opened two leased
sites, reopened one leased site and completed sale-lease backs for two sites.
Capital expenditures totaled $5.8 million (net of $4.7 million in proceeds from
sale-lease backs) during the first three months of fiscal 2001 and $8.1 million
for the comparable period in fiscal 1999. As of December 31, 2000, the Company
operated 86 salad buffet restaurants, and 1 Ladles restaurant.

   The cash investment required for the two restaurants opened and one re-
opened during the three month period ending December 31, 2000 was $7.3 million
including land and buildings, and excluding restaurant opening costs. The
restaurant opening costs incurred during the three month period ending December
31, 2000 for the two restaurants opened and the one re-opened was $586,000. The
Company has signed 10 leases, and purchased 4 sites planned to open in fiscal
2001 and 2002. In addition, the Company has signed 1 lease for a fiscal 2001
site for a small restaurant concept. The cash investment to open a new
restaurant typically includes the purchase or installation of furniture,
fixtures, equipment and leasehold improvements, and in the case of an owned
site, the purchase of land and a building. In addition to remaining budgeted
capital expenditures for fiscal 2001 of $22.0 million for new restaurant
openings, the Company has a remaining budgeted $4.4 million in expenditures for
fiscal 2001 for capital improvements at existing sites. See "Business Risks--
Expansion Risks."

   In addition to funds generated from operations, sale-lease back of owned
properties and public stock offerings, the Company will need to obtain external
financing to complete its expansion plans for fiscal year 2001 and beyond.
There can be no assurance that such funds will be available when needed.
Additionally, should the Company's results of operations decrease or should
costs or capital expenditures rise, the Company may not have the ability to
open new restaurants at its desired pace or at all because capital may not be
available. See "Business Risks--Capital Requirements."

Impact of Inflation

   The primary inflationary factors affecting the Company's operations include
food and beverage and labor costs. Minimum wage increases have affected
earnings during the current fiscal year. Substantial increases in costs and
expenses, particularly food, supplies, labor and operating expenses, could have
a significant impact on the Company's operating results to the extent that such
increases cannot be passed along to guests.

Business Risks

   The Company's business is subject to a number of risks. A comprehensive
summary of such risks can be found in the Company's Form 10-K. In addition to
other information in this form 10-Q, shareholders and prospective investors
should consider carefully the following factors in evaluating the Company and
its business.

                                       9
<PAGE>

 Certain Operating Results and Considerations

   In fiscal 1999 and 2000, the Company experienced an increase of 3.7% and
3.1%, respectively, in comparable restaurant sales. In the first three months
of fiscal 2000 and 2001, the Company's comparable restaurant sales increased
2.4% and 3.4% respectively. The Company's restaurants have not historically
experienced significant increases in guest volume following their initial
opening period (15 months) due to the fact that most sites open immediately at
average or greater than average guest volume. In addition, the Company does not
believe it has significant latitude to achieve comparable restaurant sales
growth through price increases. As a result, the Company does not believe that
recent comparable restaurant sales are indicative of future trends in
comparable restaurant sales. The Company believes that it may from time to time
in the future experience declines in comparable restaurant sales, and that any
future increases in comparable restaurant sales would be modest. In July 2000,
the Company increased prices in most of its markets. To date, this increase has
resulted in fewer guests.

 Expansion Risks

   The Company opened ten salad buffet restaurants in fiscal 1999, seventeen in
fiscal 2000, and has opened two restaurants to date in fiscal 2001, all of
which are in existing regions (Northern California, Missouri). A location in
San Diego, California was reopened subsequent to being rebuilt after the
December 31, 1999 fire. The Company currently intends to open nine additional
restaurants in fiscal 2001. Subsequent to December 31, 1999 the Company opened
and closed its first "Ladles, A Soup and Salad Takery," a take-out restaurant
concept targeted for on-the-go families and busy professionals located in San
Diego, California. During fiscal 2000 the Company opened its second "Ladles, A
Soup and Salad Takery," restaurant located in San Diego, California. The
Company's ability to achieve its expansion plans will depend on a variety of
factors, many of which may be beyond the Company's control, including the
Company's ability to locate suitable restaurant sites, negotiate acceptable
lease or purchase terms, obtain required governmental approvals, construct new
restaurants in a timely manner, attract, train and retain qualified and
experienced personnel and management, operate its restaurants profitably and
obtain additional capital, as well as general economic conditions and the
degree of competition in the particular region of expansion. The Company has
experienced, and expects to continue to experience, delays in restaurant
openings from time to time. Since its inception the Company has closed three
non-performing salad buffet restaurants. Given the number of restaurants in
current operation and the Company's projected expansion rate there can be no
assurances that the Company will not close restaurants in the future. Any
closure could result in a significant write off of assets, which could
adversely affect the Company's business, financial condition and results of
operations.

   The Company incurs substantial costs in opening a new restaurant and, in the
Company's experience, new restaurants experience fluctuating operational levels
for some time after opening. Owned restaurants generally require significantly
more up-front capital than leased restaurants, as a result of which an increase
in the percentage of owned restaurant openings as compared to historical
practice would increase the overall capital required to meet the Company's
growth plans. There can be no assurance that the Company will successfully
expand or that the Company's existing or new restaurants will be profitable.
The Company has encountered intense competition for restaurant sites, and in
many cases has had difficulty buying or leasing desirable sites on terms that
are acceptable to the Company. In many cases, the Company's competitors are
willing and able to pay more than the Company for sites. The Company expects
these difficulties in obtaining desirable sites to continue for the foreseeable
future.

 Restaurant Industry and Competition

   The restaurant industry is highly competitive. Key competitive factors in
the industry include the quality and value of the food products offered,
quality of service, price, dining experience, restaurant location and the
ambiance of the facilities. The Company's primary competitors include mid-
priced, full-service casual dining restaurants, as well as traditional self-
service buffet and other soup and salad restaurants and healthful and

                                       10
<PAGE>

nutrition-oriented restaurants. The Company competes with national and regional
chains, as well as individually owned restaurants. The number of buffet and
casual restaurants with operations generally similar to the Company's has grown
substantially in the last several years and the Company believes competition
among buffet-style and casual restaurants has increased and will continue to
increase as the Company's competitors expand operations in various geographic
areas. Such increased competition could increase the Company's operating costs
or adversely affect its revenues. The Company believes it competes favorably in
the industry, although many of the Company's competitors have been in existence
longer than the Company, have more established market presence and have
substantially greater financial, marketing and other resources than the
Company, which may give them certain competitive advantages. In addition, the
restaurant industry has few non-economic barriers to entry. Therefore, there
can be no assurance that third parties will not be able to successfully imitate
and implement the Company's concept. The Company has encountered intense
competition for restaurant sites, and in many cases has had difficulty buying
or leasing desirable sites on terms that are acceptable to the Company. In many
cases, the Company's competitors are willing and able to pay more than the
Company for sites. The Company expects these difficulties in obtaining
desirable sites to continue for the foreseeable future.

 Capital Requirements

   In addition to funds generated from operations, sale-lease back of owned
properties and public stock offerings, the Company will need to obtain external
financing to complete its expansion plans for fiscal year 2001 and beyond.
There can be no assurance that such funds will be available when needed.
Additionally, should the Company's results of operations decrease or should
costs or capital expenditures rise, the Company may not have the ability to
open new restaurants at its desired pace or at all, because capital may not be
available.

 Cost Sensitivity

   The Company's profitability is highly sensitive to increases in food, labor
and other operating costs. The Company's dependence on frequent deliveries of
fresh produce and groceries subjects it to the risk that shortages or
interruptions in supply caused by adverse weather or other conditions could
materially adversely affect the availability, quality and cost of ingredients.
In addition, unfavorable trends or developments concerning factors such as
inflation, food, labor, and employee benefit costs (including increases in
hourly wage and minimum unemployment tax rates--See "Business Risks--Minimum
Wage"), rent increases resulting from the rent escalation provisions in the
Company's leases, and the availability of experienced management and hourly
employees may also adversely affect the Company. The Company believes recent
relatively favorable inflation rates and part-time labor supplies in its
principal market area have contributed to relatively stable food and labor
costs in recent years. However, there can be no assurance that these conditions
will continue or that the Company will have the ability to control costs in the
future. See "Business Risks--Reliance on Key Suppliers and Distributors".

 Minimum Wage

   The Company has experienced increases in the hourly wage rate due to
increases in the federal minimum wage and in the California minimum wage and
due to the tight part-time labor market resulting from historically low
unemployment levels. These increases have resulted in a decrease in the
Company's profitability. The Company expects to continue to be impacted by
increasing wage costs in California where the minimum wage rate increased by
$0.75 per hour on January 2, 2001. While there can be no assurance that the
Company will be able to manage and absorb these increases in the future, the
Company is exploring strategic ideas on how to better manage labor utilization
in order to minimize the impact.


                                       11
<PAGE>

 Planned Operating Expenditures

   The Company has incurred planned marketing expenditures during the first
quarter of fiscal 2001 in order to implement strategic marketing programs
designed to benefit the Company in subsequent quarters. Expenditures related to
these programs include advertising production costs, media expenses, and
research. There can be no assurance these programs will be successful and will
benefit the Company by increasing guest counts and revenues in the future.

   The Company may continue to experience increased utility costs and repair
and maintenance expenditures in its existing stores. Such increases may affect
store profitability. There can be no assurance that the increases in utilities
and repair and maintenance will not continue to impact the Company's ability to
control costs in the future.

 Importance of Key Employees

   The Company is heavily dependent upon the services of its officers and key
management personnel involved in restaurant operations, purchasing, expansion
and administration. In particular, the Company is dependent upon the management
and leadership of its four executive officers, Michael P. Mack, David W.
Qualls, R. Gregory Keller and Kenneth J. Keane. The loss of any of these four
individuals could have a material adverse effect on the Company's business,
financial condition and results of operations. The success of the Company and
its individual restaurants depends upon the Company's ability to attract and
retain highly motivated, well-qualified restaurant operations and other
management personnel. The Company faces significant competition in the
recruitment of qualified employees.

 Computer Information System

   The core component of the Company's cost management program is the Company's
computer information system. The Company has developed a proprietary computer
accounting and management information system that is fully integrated
throughout the Company, including in each restaurant. The Company believes
that, as compared to off-the-shelf software applications, this system provides
significantly greater access to restaurant operating data and a much shorter
management reaction time. The system is used as a critical planning tool by
corporate and restaurant managers in four primary areas: production, labor,
food cost and financial and accounting controls. The system generates forecasts
of estimated guest volumes and other predictive data, which assist restaurant
managers in developing automated production reports that detail the daily
quantity and timing of batch production of various menu offerings and food
preparation requirements. The computerized system also acts as a scheduling
tool for the general managers, producing automated daily labor reports
outlining the restaurant's staffing needs based on changing trends and guest
volume forecasts. Corporate management, through daily information updates, has
complete access to restaurant data and can react quickly to changing trends.
The Company can quickly analyze the cost of its menu and make corporate-wide
menu adjustments to minimize the impact of shifting food prices and food waste.
Weekly computer-generated profit and loss statements and monthly accounting
department-generated profit and loss statements are reviewed at the corporate,
regional and restaurant management levels.

   Because of the Company's growth and additional needs in the areas of
distribution, construction and regional management reporting, the component of
the system that provides the Company's formal accounting reports is in the
process of being replaced with a commercial software package. The selection has
been made. The implementation has begun in the Company's second quarter of
fiscal 2001 and is anticipated to end during the fourth quarter of fiscal 2001.

 Seasonality and Quarterly Fluctuations

   The Company's business experiences seasonal fluctuations, as a
disproportionate amount of the Company' net income is generally realized in the
second, third and fourth fiscal quarters due to higher average sales and

                                       12
<PAGE>

lower average costs. Quarterly results have been and are expected to continue
to fluctuate as a result of a number of factors, including the timing of new
restaurant openings. As a result of these factors, net sales and net income on
a quarterly basis may fluctuate and are not necessarily indicative of the
results that may be achieved for a full fiscal year.

 Geographic Concentration: Restaurant Base

   Thirty-five of the Company's eighty-six existing salad buffet restaurants
are located in California, and eighteen are located in Florida. Accordingly,
the Company is susceptible to fluctuations in its business caused by adverse
economic or other conditions in these regions, including natural disasters or
other acts of God. In addition, in California, higher utility costs will
continue to affect the Company's profitability in this region. As a result of
the Company's continued concentration in California and Florida, adverse
economic or other conditions in either state could have a material adverse
effect on the Company's business. The Company's significant investment in, and
long-term commitment to, each of its restaurant sites limits its ability to
respond quickly or effectively to changes in local competitive conditions or
other changes that could affect the Company's operations. In addition, the
Company has a small number of restaurants relative to some of its competitors.
Consequently, a decline in the profitability of an existing restaurant or the
introduction of an unsuccessful concept could have a more significant effect on
the Company's result of operations than would be the case in a company with a
larger number of restaurants.

 Reliance on Key Suppliers and Distributors

   Beginning April 2000 the Company began utilization of its delivery and
distribution center for the West Coast restaurants. In addition, the Company
utilizes sole source suppliers for certain produce and grocery items. In order
to minimize price fluctuations, the Company enters into fixed price supply
contracts that generally have terms of two months to one year and generally do
not have minimum purchase requirements. However, in the event that the
distribution center or the Company's suppliers are unable to make the required
deliveries due to shortages or interruptions caused by adverse weather or other
conditions, or are relieved of their contract obligations due to an invocation
of an act of God provision, the Company would need to renegotiate these
contracts or purchase such products elsewhere. In addition to the West Coast
distribution center, the Company has several local produce distributors that
are governed by one program and one main grocery distributor. All produce and
groceries purchased by the Company are channeled from the growers and other
suppliers to the Company's restaurants and central kitchen through these
distributors. In the event that any of these distributors were to cease
distribution on behalf of the Company, the Company would be required to make
alternate arrangements for produce and grocery distribution. There can be no
assurance that the Company's distribution expense would not be greater under
such alternate arrangements. See "Business Risks--Cost Sensitivity."

 Volatility of Stock Price

   The market price of the Company's common stock has fluctuated since the
initial public offering of its common stock in May 1995. Quarterly operating
results of the Company and other restaurant companies, daily transactional
volume, changes in general conditions in the economy, the financial markets or
the restaurant industry, natural disasters or other developments affecting the
Company or its competitors could cause the market price of the common stock to
fluctuate substantially. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations. This volatility has had a
significant effect on the market price of securities issued by many companies
for reasons unrelated to the operating performance of these companies.

                                       13
<PAGE>

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Market risks relating to the Company's operations result primarily from
changes in short-term interest rates as the Company's line of credit is tied to
the prime rate, or LIBOR rounded to the nearest whole 1/8 of 1% plus 2%. As of
December 31, 2000, the Company had $9.0 million in debt outstanding under these
credit facilities, a decrease of $3.0 million since September 30, 2000. Based
on a hypothetical 50 basis point adverse change in prime rates, net interest
expense would increase by approximately $45,000 on an annual basis, and
likewise would decrease earnings and cash flows. The Company cannot predict
market fluctuations in interest rates and their impact on debt, nor can there
be any assurance that long-term fixed rate debt will be available at favorable
rates, if at all. Consequently, future results may differ materially from the
estimated results due to adverse changes in interest rates or debt
availability.

   The Company did not have any foreign currency or other market risk or any
derivative financial instruments at December 31, 2000.

                                       14
<PAGE>

                           PART II--OTHER INFORMATION

Item 1. Legal Proceedings

   The Company is from time to time the subject of complaints, threat letters
or litigation from guests alleging illness, injuries or other food quality,
health or operational concerns. The Company is also the subject of complaints
or allegations from former or prospective employees from time to time. The
Company believes that the lawsuits, claims and other legal matters to which it
has become subject in the course of its business are not material to the
Company's financial position. Nevertheless, future lawsuits or claims could
result in an adverse decision against the Company that could adversely affect
the Company or its business. Additionally, adverse publicity resulting from
such allegations may materially adversely affect the Company and its
restaurants, regardless of whether such allegations are valid or whether the
Company is liable.

Item 2. Changes in Securities

   Not Applicable

Item 3. Defaults Upon Senior Securities

   Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

   Not Applicable

Item 5. Other Information

   Not Applicable

Item 6. Exhibits and Reports on Form 8-K

   (a) Exhibits:

   The Exhibits required by Item 6(a) of the report are listed in the Exhibit
Index on page 18 herewith.

   (b) Reports on Form 8-K:

   No reports on Form 8-K have been filed by the Company during the fiscal
quarter ended December 31, 2000.

                                       15
<PAGE>

                                   SIGNATURES

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

Dated: February 14, 2001                  GARDEN FRESH RESTAURANT CORP.
                                          (Registrant)

                                                 /s/ Michael P. Mack
                                          -------------------------------------
                                                     Michael P. Mack
                                            Chief Executive Officer/President
                                              (Principal Executive Officer)

                                                 /s/ David W. Qualls
                                          -------------------------------------
                                                     David W. Qualls
                                                 Chief Financial Officer
                                           (Principal Accounting and Financial
                                                         Officer)

                                       16