SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549

                                 FORM 10-Q

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

              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 12, 1997

                                     OR

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

            FOR TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NO. 1-14040

                     HOST MARRIOTT SERVICES CORPORATION
        -----------------------------------------------------------
           (Exact name of registrant as specified in its charter)


             DELAWARE                               52-1938672
     --------------------------       --------------------------------------
      (State of Incorporation)        (I.R.S. Employer Identification Number)


           6600 ROCKLEDGE DRIVE
            BETHESDA, MARYLAND                             20817
-----------------------------------------              -------------
 (Address of principal executive offices)                (Zip Code)

                                 (301) 380-7000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


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 total number of shares of common stock  outstanding  as of October 10, 1997,
was 34,605,622.




<PAGE>



            HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES


                                    INDEX

                                                                        PAGE NO.
PART I.   FINANCIAL INFORMATION (UNAUDITED):

          Condensed Consolidated Statements of Operations -
           For the Twelve Weeks and Thirty-Six Weeks Ended
           September 12, 1997 and September 6, 1996                            2

          Condensed Consolidated Balance Sheets -
           As of September 12, 1997 and January 3, 1997                        3

          Condensed Consolidated Statements of Cash Flows -
           For the Thirty-Six Weeks Ended September 12, 1997 and
           September 6, 1996                                                   4

          Condensed Consolidated Statement of Shareholders' Deficit -
           For the Thirty-Six Weeks Ended September 12, 1997                   5

          Notes to Condensed Consolidated Financial Statements               6-7

          Management's Discussion and Analysis of  Financial Condition
           and Results of Operations                                        8-17


PART II.  OTHER INFORMATION AND SIGNATURE:

          Legal Proceedings                                                   18

          Changes in Securities                                               18

          Defaults Upon Senior Securities                                     18

          Submission of Matters to a Vote of Security Holders                 18

          Other Information                                                   18

          Exhibits and Reports on Form 8-K                                    18

          Signature                                                           19

          Computations of Earnings Per Common Share                        20-21


                                   1

<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                            TWELVE WEEKS ENDED            THIRTY-SIX WEEKS ENDED
                                                      ------------------------------- -------------------------------
                                                         SEPT. 12,      SEPT. 6,        SEPT. 12,       SEPT. 6,
                                                           1997           1996             1997           1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>             <C>             <C>   

REVENUES                                                     $340.7         $335.1          $896.4          $884.9 
---------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
    Cost of sales                                             100.3           99.6           260.6           263.8 
    Payroll and benefits                                       92.2           89.6           263.5           257.5 
    Occupancy costs                                            70.7           70.6           196.3           194.6 
    General and administrative                                 12.6           11.2            37.1            35.2 
    Other                                                      28.3           29.7            84.4            84.1 
---------------------------------------------------------------------------------------------------------------------

       Total operating costs and expenses                     304.1          300.7           841.9           835.2 
---------------------------------------------------------------------------------------------------------------------

OPERATING PROFIT                                               36.6           34.4            54.5            49.7 

    Interest expense                                           (9.2)          (9.2)          (27.6)          (27.7)
    Interest income                                             0.7            0.7             2.5             1.1 
---------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                     28.1           25.9            29.4            23.1 
Provision for income taxes                                      9.2           10.9             9.7             9.7 
---------------------------------------------------------------------------------------------------------------------

NET INCOME                                                   $ 18.9         $ 15.0          $ 19.7          $ 13.4 
---------------------------------------------------------------------------------------------------------------------


EARNINGS PER COMMON SHARE:
    Primary                                                  $ 0.52         $ 0.42          $ 0.54          $ 0.38 
    Fully-Diluted                                            $ 0.52         $ 0.42          $ 0.54          $ 0.38 

Weighted Average Common Shares Outstanding:
    Primary                                                    36.6           35.2            36.4            35.0 
    Fully-Diluted                                              36.6           35.3            36.6            35.1 

</TABLE>











        See  notes  to  condensed   consolidated  financial statements.


                                   2



<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                  SEPT. 12,           JANUARY 3,
                                                                                     1997                1997
------------------------------------------------------------------------------ ----------------- -- ----------------
<S>                                                                                   <C>                <C>  
                                   ASSETS

Current assets:
   Cash and cash equivalents                                                           $  93.2           $  104.2 
   Accounts receivable, net                                                               29.0               27.4 
   Inventories                                                                            43.2               43.3 
   Deferred income taxes                                                                  18.9               25.4 
   Prepaid rent                                                                            5.8                5.9 
   Other current assets                                                                    3.6                3.3 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total current assets                                                                  193.7              209.5 

Property and equipment, net                                                              286.6              274.2 
Intangible assets                                                                         23.3               23.4 
Deferred income taxes                                                                     46.9               53.3 
Other assets                                                                              20.7               20.1 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total assets                                                                        $ 571.2            $ 580.5 
------------------------------------------------------------------------------ ----------------- -- ----------------


                    LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                                    $  64.3            $  97.3 
   Accrued payroll and benefits                                                           41.8               45.7 
   Accrued interest payable                                                               12.1                4.8 
   Current portion of long-term debt                                                       0.8                0.8 
   Other current liabilities                                                              67.9               62.7 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total current liabilities                                                             186.9              211.3 

Long-term debt                                                                           406.4              407.4 
Other liabilities                                                                         54.0               57.3 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total liabilities                                                                     647.3              676.0 

Common stock, no par value,  100 million shares  authorized,  34,723,417  shares
   issued as of September 12, 1997 and
   34,445,197 shares issued as of January 3, 1997                                         ---                 --- 
Contributed deficit                                                                    (108.5)             (109.8)
Retained earnings                                                                        34.0                14.3 
Treasury stock - 121,000 shares at September 12, 1997                                    (1.6)                --- 
                                                                         
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total shareholders' deficit                                                          (76.1)              (95.5)
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total liabilities and shareholders' deficit                                         $ 571.2            $ 580.5 
------------------------------------------------------------------------------ ----------------- -- ----------------

</TABLE>



        See  notes  to  condensed   consolidated  financial statements.


                                   3

<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                      THIRTY-SIX WEEKS ENDED
                                                                               --------------------------------------
                                                                                  SEPT. 12,            SEPT. 6,
                                                                                    1997                 1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                 <C>  

OPERATING ACTIVITIES
   Net income                                                                          $ 19.7               $ 13.4 

   Adjustments to reconcile net income to cash from operations:
     Depreciation and amortization                                                       37.8                 37.5 
     Amortization of deferred financing costs                                             0.9                  0.8 
     Income taxes                                                                        12.8                 (4.1)
     Other                                                                                2.6                  3.3 
     Working capital changes:
       Increase in accounts receivable                                                   (1.6)                (3.6)
       Increase in inventories                                                           (0.4)                (2.9)
       Increase in other current assets                                                  (1.5)                (3.5)
       Increase (decrease) in accounts payable and accruals                             (25.9)                44.7 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash provided by operations                                                           44.4                 85.6 

INVESTING ACTIVITIES
   Capital expenditures                                                                 (45.0)               (42.6)
   Net proceeds from the sale of assets                                                   ---                  3.9 
   Other, net                                                                            (7.7)                 5.7 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash used in investing activities                                                    (52.7)               (33.0)

FINANCING ACTIVITIES
   Repayments of long-term debt                                                          (1.0)                (1.0)
   Proceeds from stock issuances                                                          2.2                  0.6 
   Payment to HMC for MI options and deferred shares                                     (2.2)                 --- 
   Purchases of treasury stock                                                           (1.6)                 --- 
   Foreign exchange translation adjustments                                              (0.1)                 0.2 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash used in financing activities                                                     (2.7)                (0.2)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        (11.0)                52.4 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          104.2                 47.2 
------------------------------------------------------------------------------ ----------------- -- -----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                               $ 93.2               $ 99.6 
------------------------------------------------------------------------------ ----------------- -- -----------------
</TABLE>







       See  notes  to  condensed   consolidated  financial statements.


                                   4


<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT (UNAUDITED)
THIRTY-SIX WEEKS ENDED SEPTEMBER 12, 1997
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                 COMMON        CONTRIBUTED       RETAINED       TREASURY
                                                 STOCK           DEFICIT         EARNINGS         STOCK         TOTAL
-------------------------------------------- --------------- ---------------- --------------- -------------- -------------
<S>                                              <C>               <C>              <C>             <C>            <C>

Balance, January 3, 1997                         $    ---          $(109.8)        $  14.3       $    ---       $ (95.5)
   Common stock issued for employee
     stock and option plans                           ---              2.2             ---            ---           2.2 
   Payment to HMC for
     MI options and deferred shares                   ---             (2.2)            ---            ---          (2.2)
   Treasury stock purchases                           ---              ---             ---           (1.6)         (1.6)
   Deferred compensation and other                    ---              1.3             ---            ---           1.3 
   Net income                                         ---              ---            19.7            ---          19.7 
-------------------------------------------- --------------- -------------------------------------------------------------

BALANCE, SEPTEMBER 12, 1997                      $    ---          $(108.5)        $  34.0        $  (1.6)      $ (76.1)
-------------------------------------------- --------------- ---------------- --------------- -------------- -------------

</TABLE>









       See  notes  to  condensed   consolidated  financial statements.



                                   5


<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   The  accompanying  condensed  consolidated  financial  statements of Host 
     Marriott  Services  Corporation and subsidiaries  (the "Company") have been
     prepared  without  audit.  Certain  information  and  footnote  disclosures
     normally  included in financial  statements  presented in  accordance  with
     generally  accepted  accounting  principles have been condensed or omitted.
     The  Company  believes  the  disclosures  made  are  adequate  to make  the
     information presented not misleading.  However, the condensed  consolidated
     financial  statements  should be read in conjunction  with the consolidated
     financial  statements  and notes thereto  included in the Company's  Annual
     Report on Form 10-K for the fiscal year ended January 3, 1997.  Capitalized
     terms not  otherwise  defined  herein have the  meanings  specified  in the
     Annual Report on Form 10-K.

     In the  opinion  of  the  Company,  the  accompanying  unaudited  condensed
     consolidated  financial  statements  reflect all adjustments (which include
     only  normal  recurring   adjustments)  necessary  to  present  fairly  the
     consolidated financial position of the Company as of September 12, 1997 and
     the results of operations and cash flows for the interim periods presented.
     Interim results are not necessarily  indicative of fiscal year  performance
     because of the impact of seasonal and short-term variations.

     The consolidated  financial  statements include the accounts of the Company
     and its subsidiaries and controlled affiliates.  Investments in 50% or less
     owned  affiliates  over  which the  Company  has the  ability  to  exercise
     significant  influence  are  accounted  for using the  equity  method.  All
     material intercompany transactions and balances between the Company and its
     subsidiaries have been eliminated.  Certain  reclassifications were made to
     the prior year financial statements to conform to the 1997 presentation.

2.   Primary and fully-diluted  income per common share for the twelve weeks and
     thirty-six  weeks  ended  September  12,  1997 and  September  6, 1996 were
     computed  by  dividing  net  income  by  the  weighted  average  number  of
     outstanding common shares adjusted for common equivalent shares.

3.   Restricted  shares are issued to certain  officers and key  executives. All
     current  restricted  share  awards  expire at the end of fiscal  year 1998.
     Compensation  expense is  recognized  over the award period and consists of
     time and performance based components. The time-based expense is calculated
     using  the  fair  value  of the  shares  on the  date  of  issuance  and is
     contingent  on  continued  employment.  The  performance-based  expense  is
     calculated  using the fair value of the  Company's  common stock during the
     award  period  and is  contingent  on  attainment  of  certain  performance
     criteria.  During  the first  twelve  weeks of 1996,  all of the  Company's
     executive officers who held restricted shares of Host Marriott  Corporation
     stock elected to convert those restricted  shares into restricted shares of
     the Company's  stock in a manner that preserved the intrinsic  value of the
     restricted  shares to their  holders,  except that the intrinsic  value was
     adjusted to provide a 15% conversion incentive. The Company awarded 445,362
     shares of new  restricted  stock to key  executives  of the  Company in the
     first quarter of 1996.

4.   The  Company is  required to adopt SFAS No. 128, "Earnings  Per Share"  and
     SFAS No. 129, "Disclosure of Information about Capital Structure," no later
     than its fiscal  year  ending  January 2, 1998.  SFAS No.  130,  "Reporting
     Comprehensive  Income," and SFAS No. 131, "Disclosures about Segments of an
     Enterprise  and Related  Information,"  are required to be adopted no later
     than the Company's fiscal year ending January 1, 1999. The adoption of SFAS
     No. 128 and SFAS No. 129 will not have a material  effect on the  Company's
     consolidated financial statements.  As a result of the adoption of SFAS No.
     128, the  Company's  reported  earnings per share for prior periods will be
     restated with an impact of less than one cent per fully-diluted  share. The
     Company is currently  evaluating the financial statement impact of adopting
     SFAS No. 130 and SFAS No.  131.  The Company  adopted  the  disclosure-only
     provisions  of SFAS No. 123,  "Accounting  for  Stock-Based  Compensation,"
     during 1996.

5.   Management  approved a formal  restructuring  plan in October  1995 and the
     Company recorded a pretax restructuring charge to earnings of $14.5 million
     in the  fourth  quarter of 1995.  The  restructuring  charge was  primarily
     comprised of  involuntary  employee  termination  benefits  (related to its
     realignment of operational 


                                        6


<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued


     responsibilities) and lease cancellation penalty fees and related costs  
     resulting  from the Company's  plan to exit certain activities in its 
     entertainment venues.

     The employee  termination  benefits  included in the  restructuring  charge
     reflect the immediate  elimination of approximately 100 corporate and field
     operations  positions and the elimination of  approximately  200 additional
     field operations  positions,  all of which were specifically  identified in
     the restructuring  plan. Certain initiatives of the restructuring plan were
     scheduled to be implemented  throughout the duration of the plan, resulting
     in an  extended  period  over  which the 200  additional  field  operations
     positions  would be eliminated.  Although the Company  expected to complete
     its plan to  involuntarily  terminate  employees  by the end of the  second
     quarter of 1997,  the delay in  implementation  of certain  planned  system
     initiatives  caused the  terminations  to extend beyond the third  quarter.
     Severance  payments are expected to continue beyond fiscal year 1997 due to
     the provisions of the program that allow for extended  severance  payments.
     As of the end of the third quarter of 1997,  the Company had terminated 221
     positions in connection with the restructuring plan.

     Also as a part of the restructuring,  the Company committed to exit certain
     operating   units  in   entertainment   venues  which  were  deemed  to  be
     inconsistent with the Company's core operating strategies. As of the end of
     the first  quarter  of 1997,  this  portion of the  restructuring  plan was
     essentially complete.

     The  following  table  sets forth the  restructuring  reserve  and  related
     activity as of September 12, 1997:


<TABLE>
<CAPTION>
-------------------------------------- --------------- -- -------------------------------------- -- -----------------

                                                                    ACTIVITY TO DATE
                                                          --------------------------------------
                                                                                   CHANGES              RESERVE
                                         PROVISION             COSTS                  IN                 AS OF
(IN MILLIONS)                             RECORDED            INCURRED             ESTIMATE             9/12/97
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------
<S>                                          <C>                  <C>                 <C>                  <C>

Employee termination benefits                   $11.6                $ 6.9              $ ---                  $ 4.7
Asset write-downs                                 0.5                  0.8                0.3                    ---
Lease cancellation penalty fees
    and related costs                             2.4                  1.9               (0.3)                   0.2
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------

Total                                           $14.5                $ 9.6              $ ---                  $ 4.9
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------
</TABLE>


6.   Cash and cash equivalents  generally include all highly liquid  investments
     with a  maturity  of three  months or less at the date of  purchase.  These
     investments include money market assets and commercial paper used as a part
     of the Company's cash management activities.

7.   In March 1993,  Host  Marriott  Corporation,  the  Company's  former parent
     corporation,  settled  a class  action  lawsuit  involving  certain  of its
     bondholders  by issuing to the  bondholders  warrants to purchase up to 7.7
     million shares of Host Marriott Corporation common stock, approximately 7.3
     million of which were unissued as of the Distribution  Date. As a result of
     the  Distribution,  such  warrants  are  exercisable  for one share of Host
     Marriott  Corporation's  common  stock  and one  fifth of one  share of the
     Company's common stock.

     As of September 12, 1997, the Company had issued 1,381,668 common shares of
     the  Company  resulting  from the  exercise  of Host  Marriott  Corporation
     warrants.  Proceeds  received from the issuance of these common shares were
     $5.9 million.  As of September 12, 1997, the Company  remains  obligated to
     issue 56,517  shares of common  stock for the  remaining  unexercised  Host
     Marriott  Corporation  warrants at a price of $5.33 per Company share.  The
     warrants expire on October 8, 1998.


                                        7


<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS



RESULTS OF OPERATIONS


REVENUES.  Revenues for the twelve weeks  ("quarter")  ended  September 12, 1997
increased by $5.6 million,  or 1.7%, to $340.7 million compared with revenues of
$335.1 million in the third quarter of 1996.  Revenues for the thirty-six  weeks
("three quarters") ended September 12, 1997 totaled $896.4 million,  an increase
of $11.5 million,  or 1.3%,  from $884.9 million during the same period in 1996.
These increases were driven by solid performance in comparable  domestic airport
concessions operations, minor increases in customer traffic on tollroads and the
opening of the  Ontario  Mills  Mall food  court in the fourth  quarter of 1996.
These  increases were partially  offset by decreased  revenues at  noncomparable
domestic  airport  contracts,  which  include  Chicago,  Dallas/Fort  Worth  and
Columbus.

<TABLE>
<CAPTION>
                                                            TWELVE WEEKS ENDED            THIRTY-SIX WEEKS ENDED
                                                      ------------------------------- -------------------------------
                                                         SEPT. 12,      SEPT. 6,        SEPT. 12,       SEPT. 6,
                                                           1997           1996             1997           1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>              <C>            <C>  

REVENUES BY BUSINESS LINE
    AIRPORTS:
       Domestic                                               $211.6         $211.3          $588.4          $587.0
       International                                            18.4           14.8            46.3            40.1
---------------------------------------------------------------------------------------------------------------------
          Total airports                                       230.0          226.1           634.7           627.1
---------------------------------------------------------------------------------------------------------------------
    TRAVEL PLAZAS                                               97.8           97.2           223.3           220.4
    SHOPPING MALLS AND ENTERTAINMENT                            12.9           11.8            38.4            37.4
---------------------------------------------------------------------------------------------------------------------

    Total revenues                                            $340.7         $335.1          $896.4          $884.9
---------------------------------------------------------------------------------------------------------------------
</TABLE>


AIRPORTS
Airport concession revenues were up $3.9 million, or 1.7%, to $230.0 million for
the third quarter of 1997  compared  with $226.1  million for the same period in
1996.  Domestic airport concession revenues totaled $211.6 million for the third
quarter  of 1997  compared  to  $211.3  million  for the  same  period  in 1996.
International  airport revenues were $18.4 million for the third quarter of 1997
compared  with $14.8  million for the third quarter of last year, an increase of
$3.6  million,  or 24.3%.  The  opening of the  Montreal  International  Airport
-Dorval in Canada during the first quarter of 1997  contributed  to the increase
in international  airport  revenues,  which was partially offset by the negative
impact of exchange rate fluctuations in the third quarter of 1997.

Comparable  domestic airport  contracts exclude the negative impact of contracts
with  significant  changes  in  scope  of  operation  and  contracts  undergoing
significant  construction of new facilities,  as well as, the positive impact of
new contracts.  Revenue growth at comparable  domestic airport locations,  which
excludes  Chicago,  Dallas/Fort Worth and Columbus,  grew a solid 4.7%.  Revenue
growth at comparable domestic airports, which comprise over 90% of total airport
revenues,  was  impacted  during the third  quarter by slower  growth in airline
traffic.  Passenger  enplanements  at  comparable  domestic  airports were up an
estimated 3.0% over last year's third quarter.  Passenger enplanements increased
an estimated 8.6% in the third quarter of 1996 primarily resulting from a period
of elevated  passenger  enplanements that airlines  experienced when the federal
excise tax on airline  tickets  lapsed.  In February  1997,  the FAA  forecasted
annual U.S. passenger  enplanement growth of 4.1% through the year 2008. Revenue
per enplaned  passenger ("RPE") grew 1.7% at the Company's  comparable  domestic
airport  locations  in the  third  quarter  of 1997.  The  growth  in RPE can be
attributed  to the  continued  addition  of branded  locations,  some  selective
moderate increases in menu prices and various real estate maximization  efforts.
RPE  growth of 1.7% was  somewhat  constrained  in the third  quarter of 1997 by
planned construction  projects in several comparable domestic airport locations,
including Cleveland, San Francisco and Phoenix, where the Company is introducing
branded concepts.

                                   8


<PAGE>
HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



Revenues  for the  first  three  quarters  of 1997  in the  airport  concessions
business line totaled $634.7 million, an increase of $7.6 million, or 1.2%, from
the same period in 1996. Domestic airport concessions revenues increased by $1.4
million to $588.4  million for the first three  quarters of 1997  compared  with
$587.0  million for the first  three  quarters  of 1996.  International  airport
revenues totaled $46.3 million and $40.1 million for the first three quarters of
1997 and 1996, respectively. The opening of the Montreal International Airport -
Dorval in Canada during the first quarter of 1997 contributed to the increase in
international  airport  revenues,  which was  partially  offset by the  negative
impact of exchange rate fluctuations in the first three quarters of 1997.

Revenue growth at comparable  domestic airport locations grew 5.8% for the first
three  quarters of 1997 and  reflects  an  estimated  4.0%  growth in  passenger
enplanements  and 1.7% growth in RPE.  Airport revenue growth in the first three
quarters of 1997 was achieved despite the aforementioned  construction projects,
and the  benefit  of severe  winter  weather in 1996  which  caused air  traffic
delays, increasing the Company's airport sales.

During the third quarter of 1997,  the Company  announced  lease  extensions for
both the food and  beverage  and retail  concessions  at the  Charlotte  Douglas
International  Airport until April 2010.  In addition,  an agreement was reached
with the Chicago  Department of Aviation to renew the Company's  largest airport
food and  beverage  concessions  contract  at the Chicago  O'Hare  International
Airport for at least ten years after completion of a construction period. A vote
for final  approval of the Chicago  contract  from the City  Council is expected
during the fourth  quarter of 1997.  The  Company  also  submitted a proposal to
enter  into a  long-term  lease  agreement  for  70% of the  food  and  beverage
concessions at the Miami International Airport. This agreement would replace the
current management agreement between the Company and Dade County.

TRAVEL PLAZAS
Travel  plaza  concession  revenues  for the third  quarter  of 1997 were  $97.8
million,  an increase of $0.6  million or 0.6%,  compared to the same  quarter a
year ago.  This growth was the result of minimal  increases in tollroad  traffic
and  moderate  price  increases.  Third  quarter  results  were also  negatively
impacted due to a calendar shift (first quarter 1997 began January 4 while first
quarter 1996 began December 30, 1995).  Consequently,  the third quarter of 1997
had only ten weeks of peak summer  season  vehicle  traffic on tollroads  versus
eleven weeks in the third quarter of 1996.

Travel plaza  concession  revenues for the first three quarters of 1997 and 1996
totaled $223.3  million and $220.4  million,  respectively,  an increase of $2.9
million, or 1.3%. The calendar shift referred to above negatively impacted sales
growth when comparing the first three quarters of 1997 and 1996.

SHOPPING MALLS AND ENTERTAINMENT
Shopping malls and entertainment  concession  revenues,  primarily consisting of
merchandise, food and beverage sales at food courts in shopping malls, stadiums,
arenas,  and other  tourist  attractions,  increased by $1.1 million or 9.3%, to
$12.9  million for the third  quarter of 1997,  from $11.8  million for the same
period in 1996.  This  increase can be  attributed to the opening of the Ontario
Mills  Mall food  court in the  fourth  quarter  of 1996,  offset by two  exited
contracts at stadium facilities.

Shopping malls and entertainment  concession  revenues totaled $38.4 million and
$37.4 million for the first three  quarters of 1997 and 1996,  respectively,  an
increase of $1.0 million,  or 2.7%.  The strong  performance  of the new Ontario
Mills Mall food court was offset by two expired contracts at stadium  facilities
and the Company's  planned exit from certain  retail  operations in the business
line that were deemed to be inconsistent with the Company's core strategies.

Subsequent  to the end of the third quarter of 1997,  the Company  announced its
first mall food court project with General Growth  Properties,  Inc. The Company
will master lease 6,300  square feet of the  existing  food court in addition to
1,145  square feet of specialty  restaurant  concepts at the Vista Ridge Mall in
Lewisville,  Texas,  located  just  outside of the  Dallas/Ft.  Worth  area.  In
addition,  the Company  will design and  renovate  the food court  common  area.
Operations are scheduled to commence in November,  1997. This project represents
the 


                                   9


<PAGE>
HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



Company's  second agreement with an existing mall undergoing  renovation,  a
key  component  of  the  Company's   expansion   strategy,   and  establishes  a
relationship with a third mall developer.

During the third quarter of 1997, the Company  announced a third  mega-mall food
court  agreement  with  The  Mills  Corporation.   This  agreement  is  for  the
development  and  operation  of the food court at a new 1.4 million  square foot
mega mall, opening in mid-1999,  near Charlotte,  North Carolina. This mall will
be  similar  in size and scope to the first two mall  agreements  with The Mills
Corporation  at Ontario Mills in Southern  California  (opened in November 1996)
and at Grapevine Mills in Dallas, Texas (scheduled to open in October, 1997).

During the second  quarter of 1997, the Company  announced a ten-year  agreement
with Simon Debartolo Group,  the nation's  largest  shopping mall developer,  to
operate  and manage the 6,100  square  foot food court and one food kiosk at the
Independence  Center  Mall in Kansas  City,  Missouri  beginning  in late  1998.
Independence Center is an existing mall undergoing renovation.


OPERATING  COSTS AND EXPENSES.  The Company's total operating costs and expenses
were $304.1  million for the third quarter of 1997, or 89.3% of total  revenues,
compared  with $300.7  million for the third  quarter of 1996, or 89.7% of total
revenues.  Operating  costs and expenses  totaled  $841.9  million for the first
three  quarters  of  1997,  or 93.9% of total  revenues,  compared  with  $835.2
million,  or 94.4% of total  revenues for the same period in 1996.  The improved
operating profit margins  quarter-to-quarter and year-to-date of 40 basis points
and 50 basis points,  respectively,  reflect operating leverage benefits derived
from revenue  growth and an improvement in the  cost-of-sales  margin  resulting
from the implementation of several operating initiatives, as discussed below.

Cost of sales for the third quarter of 1997 was $100.3  million,  an increase of
$0.7 million,  or 0.7%, above the third quarter of last year. Cost of sales as a
percentage of total revenues  decreased 30 basis points during the third quarter
of 1997.  Cost of sales for the first  three  quarters  of 1997  decreased  $3.2
million,  or 1.2%,  below the first three  quarters of 1996.  Cost of sales as a
percentage  of total  revenues  decreased 70 basis points during the first three
quarters of 1997.  The most notable cause of these  decreases  were various cost
controlling  initiatives  implemented during the year. These initiatives include
the roll out of the Store Manager concept intended to move management  closer to
the customer to improve  customer  satisfaction;  the creation of the Store Card
reporting  system where emphasis is placed on tracking and measuring store level
performance and the implementation of Labor Pro software which provides managers
with a new automated  labor  scheduling  report to manage service  standards and
control  labor;  the  renegotiation  of  distributor  agreements  for  books and
magazines in May 1996 in the  Company's  airports  and travel  plazas to improve
in-stock  availability and cost margins;  as well as a program under which brand
experts  ("Brand  Champions")  are assigned to certain of the Company's  largest
selling  branded  concepts.   The  Brand  Champions'   function  is  to  promote
operational  excellence  and  create  operating  efficiencies  across all of the
Company's  locations of a particular  brand.  To date,  the Company has assigned
brand  champions to each of the Burger King, PS Airpub,  Sbarro,  Roy Rogers and
Starbucks brands.

Payroll and benefits  totaled $92.2 million  during the third quarter of 1997, a
2.9%,  or $2.6 million,  increase  over the third  quarter of 1996.  Payroll and
benefits  as a  percentage  of total  revenues  for the  third  quarter  of 1997
increased to 27.1% from the 26.7% reported for the same period in 1996.  Payroll
and benefits  totaled  $263.5  million for the first three  quarters of 1997, an
increase of $6.0 million,  or 2.3% when compared to the same period in 1996. The
payroll and  benefits  margin  increased  by 30 basis points for the first three
quarters  of 1997 to 29.4% as a result of  initiatives  put in place to increase
revenues and decrease other cost areas.

Occupancy costs consist of rent,  royalties and  depreciation  and  amortization
expenses.  Occupancy  costs were $70.7 million for the third quarter of 1997, up
$0.1 million or 0.1%  compared to the third  quarter of 1996. As a percentage of
total revenues, occupancy costs decreased to 20.8% for the third quarter of 1997
compared to 21.1% for the third quarter of 1996.  Occupancy  costs for the first
three  quarters of 1997 and 1996  totaled  $196.3  million  and $194.6  million,
respectively.  As a percentage of total  revenues,  occupancy costs decreased to
21.9% for the first three quarters of 1997 compared to 22.0% for the same period
in 1996.


                                   10


<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



Rent expense totaled $51.0 million for the third quarter of 1997, an increase of
$0.3 million,  or 0.6%,  above the third  quarter of 1996.  Rent expense for the
first three  quarters  of 1997 was $141.1  million,  or 15.7% of total  revenues
compared to $141.1  million,  or 15.9% of total  revenues for the same period in
1996.  Contract rent expense  determined  as a percentage of revenues  decreased
during the first three quarters of 1997, offset by increased rent from equipment
rentals.  Increased  equipment  rent  is due to the  continued  roll-out  of new
technology to the Company's airport operating units.

Royalties  expense  for the  third  quarter  of 1997  increased  by 7.4% to $7.3
million from $6.8 million for the third quarter of last year. As a percentage of
total  revenues,  royalties  expense  increased to 2.1% for the third quarter of
1997 compared to 2.0% for the third quarter of 1996.  Royalties  expense totaled
$18.7 million and $16.9  million for the first three  quarters of 1997 and 1996,
respectively,  an increase of $1.8 million, or 10.7%.  Royalties as a percentage
of total revenues increased 20 basis points for the first three quarters of 1997
to 2.1%. These increases reflect the Company's continued introduction of branded
concepts  to  its  airport  concessions  operations.   Royalties  expense  as  a
percentage of branded sales totaled 6.4% and 6.5% in the third quarter and first
three  quarters  of 1997,  down  from the  7.0% and 7.0%  reported  for the same
periods in 1996,  respectively.  These margin  decreases are attributable to the
addition  of  branded  concepts  with  lower-than-average  royalty  percentages.
Branded  facilities  generate higher sales per square foot and contribute toward
increased RPE, which offset royalty  payments  required to operate the concepts.
Branded  concepts in all of the Company's venues have grown at a compound annual
growth rate of 12.2% over the last five fiscal years.  No single branded concept
accounts for more than 10% of total revenues. Branded food and beverage revenues
increased  11.2% and 13.2% for the third  quarter  and first  three  quarters of
1997, respectively, when compared with the same periods in 1996, the majority of
which related to branded sales at airports.

Branded  food and  beverage  revenues in airports  increased  14.9% in the third
quarter  of 1997  compared  to the same  period in 1996.  This  increase  can be
attributed  to  development  projects at  Cleveland,  San Francisco and Phoenix.
Airport branded food and beverage sales in the third quarter  increased to $63.4
million,  or 27.6% of total airport  revenues,  compared with $55.2 million,  or
24.4% of total airport revenues, in the third quarter of 1996.

Branded food and  beverage  revenues in airports  increased  18.2% for the first
three quarters of 1997 compared to the same period in 1996. This increase can be
attributed to large new branded concept  developments in San Diego International
Airport, Los Angeles  International Airport and Hartsfield Atlanta International
Airport,  as well as,  development  projects at  Cleveland,  San  Francisco  and
Phoenix.  Branded  food and  beverage  sales in  airports  increased  to  $171.5
million,  or 27.0% of total airport  revenues during the first three quarters of
1997,  compared with $145.1 million,  or 23.1% of total airport revenues for the
same period in 1996.

Depreciation  and  amortization  expense,  excluding  $0.5  million of corporate
depreciation  on property  and  equipment  which is  included as a component  of
general and administrative  expenses, was $12.4 million for the third quarter of
1997,   compared  to  $13.1   million,   excluding  $0.2  million  of  corporate
depreciation  on  property  and  equipment,  for  the  third  quarter  of  1996.
Depreciation  and  amortization  expense,  excluding  $1.3  million of corporate
depreciation  on property and  equipment,  was $36.5 million for the first three
quarters  of 1997,  a decrease of $0.1  million,  or 0.3%,  compared  with $36.6
million,  excluding  $0.9  million of  corporate  depreciation  on property  and
equipment, for the same period in 1996.

General and administrative  expenses were $12.6 million for the third quarter of
1997,  an increase of $1.4  million,  or 12.5%,  over the $11.2  million for the
third quarter of 1996. General and administrative expenses totaled $37.1 million
and $35.2 million for the first three  quarters of 1997 and 1996,  respectively,
an increase of $1.9 million, or 5.4%. These increases are primarily attributable
to  the  addition  of  corporate  resources  in  operations,  finance,  business
development and strategic  planning and marketing to focus on growth initiatives
in the  Company's  core markets and new venues.  Higher  corporate  depreciation
expense   associated  with  the  new  headquarters  and  financial  system  also
contributed to the increases in general and administrative expenses.


                                   11


<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



Other  operating  expenses,   which  includes  utilities,   casualty  insurance,
equipment  maintenance,  trash removal and other  miscellaneous  expenses,  were
$28.3 million for the third  quarter of 1997, a $1.4  million,  or 4.7% decrease
from the $29.7 million reported in the third quarter of 1996. As a percentage of
total revenues, other operating expenses decreased 60 basis points for the third
quarter of 1997 when compared with the same period in 1996. The majority of this
decrease  was due to a  reduction  in  casualty  insurance  premiums  and  lower
utilities and trash removal expenses. Other operating expenses increased 0.4% to
$84.4  million for the first three  quarters of 1997 from $84.1  million for the
first three quarters of 1996. As a percentage of total revenues, other operating
expenses  decreased  10 basis  points for the first three  quarters of 1997 when
compared with the same period in 1996.

OPERATING PROFIT. As a result of the changes in revenues and operating costs and
expenses discussed above,  operating profit increased to $36.6 million, or 10.7%
of revenues,  for the third  quarter of 1997,  from $34.4  million,  or 10.3% of
revenues,  for the third quarter of 1996.  Operating  profit  increased to $54.5
million,  or 6.1% of revenues,  for the first three quarters of 1997, from $49.7
million, or 5.6% of revenues, for the same period in 1996.


<TABLE>
<CAPTION>
                                                            TWELVE WEEKS ENDED            THIRTY-SIX WEEKS ENDED
                                                      ------------------------------- -------------------------------
                                                         SEPT. 12,      SEPT. 6,        SEPT. 12,       SEPT. 6,
                                                           1997           1996             1997           1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>              <C>            <C>  

OPERATING PROFIT BY BUSINESS LINE (1)
    AIRPORTS:
       Domestic                                               $ 28.9         $ 26.7          $ 65.7          $ 62.6
       International                                             2.3            1.0             3.5             0.7
---------------------------------------------------------------------------------------------------------------------
          Total airports                                        31.2           27.7            69.2            63.3
---------------------------------------------------------------------------------------------------------------------
    TRAVEL PLAZAS                                               17.1           16.3            19.4            18.1
    SHOPPING MALLS AND ENTERTAINMENT                             0.9            1.6             3.0             3.5
---------------------------------------------------------------------------------------------------------------------

    Total operating profit                                    $ 49.2         $ 45.6          $ 91.6          $ 84.9
---------------------------------------------------------------------------------------------------------------------

<FN>
(1)  Before general and administrative expenses
</FN>
</TABLE>


Airport operating profit, before general and administrative  expenses, was $31.2
million, or 13.6% of airport revenues, for the third quarter of 1997 as compared
with $27.7 million, or 12.3% of airport revenues, for the third quarter of 1996.
Several strategic  initiatives,  including the Store Manager concept, Store Card
concept,  Labor Pro software  and the Brand  Champion  program in the  Company's
largest selling branded  concepts have  contributed  toward the improved margin.
Travel plaza  operating  profit,  before  general and  administrative  expenses,
increased $0.8 million to $17.1 million, or 17.5% of travel plaza revenues,  for
the third quarter of 1997  compared with 16.8% of travel plaza  revenues for the
same period in 1996.  Operating  profit for  shopping  malls and  entertainment,
excluding general and administrative expenses, was $0.9 million and $1.6 million
for the third  quarter of 1997 and 1996,  respectively.  The shopping  malls and
entertainment  operating profit margin was 7.0%, down from the comparable period
in 1996,  partially  constrained by non-recurring  start-up costs related to the
opening of the Ontario  Mills Mall and  Grapevine  Mills Mall food courts and to
decreased  operating  profit  at  an  entertainment   facility.   Excluding  the
non-recurring   start  up  costs  and  the  decreased  operating  profit  at  an
entertainment   facility,   the   operating   profit  for  shopping   malls  and
entertainment would have been level for the third quarter of 1997.

Operating profit for airports,  before general and administrative  expenses, was
$69.2  million,  or 10.9% of airport  revenues,  for the first three quarters of
1997 as compared with $63.3 million, or 10.1% of airport revenues, for the first
three quarters of 1996. The strategic  initiatives referred to above contributed
toward the improved  margin during the first three  quarters of 1997.  Operating
profit for the travel plaza business line,  excluding general and administrative
expenses,  increased  $1.3  million to $19.4  million,  or 8.7% of travel  plaza
revenues,  for the first  three  quarters of 1997  compared  with 8.2% of travel
plaza revenues for the same period in 1996.  Operating profit 


                                   12

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


for  shopping  malls  and  entertainment,   before  general  and  administrative
expenses,  totaled $3.0 million and $3.5 million for the first three quarters of
1997 and 1996, respectively.  The operating profit margin for shopping malls and
entertainment  was 7.8% and 9.4% in the first  three  quarters of 1997 and 1996,
respectively. The non-recurring start-up costs and decreased operating profit at
an  entertainment  facility  referred to above  reduced the  shopping  malls and
entertainment  operating  profit  margin for the first  three  quarters of 1997.
Excluding these items, the operating profit for shopping malls and entertainment
would have increased by $1.1 million.

INTEREST  EXPENSE.  Interest expense remained flat at $9.2 million for the third
quarters of 1997 and 1996.  Interest  expense  totaled  $27.6  million and $27.7
million for the first three quarters of 1997 and 1996, respectively.  The slight
decrease in interest expense reflects the continuing principal reductions on the
Company's other long-term debt.

INTEREST INCOME.  Interest income totaled $0.7 million for the third quarters of
1997 and 1996,  respectively.  Interest  income for the first three  quarters of
1997 and 1996 totaled $2.5 million and $1.1 million, respectively. Cash balances
during the first quarter of 1997 were temporarily  higher due to a transition to
a new financial  system at year-end 1996. This transition  resulted in beginning
cash balances being higher than the Company's  normal seasonal level. The second
quarter of 1997 included $0.4 million of non-recurring  interest income relating
to a recently  negotiated  agreement with an Airport  Authority which reimburses
the  Company  for  the  cost  of  funding  certain  capital  improvements.  Also
contributing  to the increase in interest income during the first three quarters
of 1997  were  slightly  higher  short-term  interest  rates  and the  Company's
increased cash balances in interest-bearing accounts during 1997.

INCOME  TAXES.  The provision for income taxes for the third quarter of 1997 and
1996 was $9.2 million and $10.9 million,  respectively. The provision for income
taxes for the first three  quarters of 1997 totaled $9.7 million  compared  with
$9.7  million  for the first  three  quarters  of 1996.  The  Company's  overall
effective  tax rate declined in the third quarter of 1997 to 32.7% from 42.1% in
the third quarter of 1996. The lower  effective tax rate reflects a reduction in
the  state  income  tax rate and a $1.9  million  reduction  in the  income  tax
provision to recognize  certain tax credits that  previously were not considered
realizable.

NET INCOME AND EARNINGS PER COMMON SHARE. The Company's net income for the third
quarter of 1997  increased  26.0% to $18.9  million,  or $0.52 per common share,
compared  with net income of $15.0  million  for the third  quarter of 1996,  or
$0.42 per common share.  Net income for the first three quarters of 1997 totaled
$19.7 million, or $0.54 per common share,  compared with $13.4 million, or $0.38
per common  share for the same period in 1996.  The  increases in net income for
the third quarter and first three  quarters of 1997 reflect  improved  operating
performance,  an increase in interest  income and the reduction in the Company's
effective tax rate.

WEIGHTED  AVERAGE  SHARES  OUTSTANDING.  The weighted  average  number of common
shares  outstanding  for the third  quarters of 1997 and 1996 used to  calculate
primary   earnings  per  common  share  was  36.6  million  and  35.2   million,
respectively,  including  1.9 million and 2.0 million,  respectively,  of common
equivalent  shares. The weighted average number of common shares outstanding for
the third quarters of 1997 and 1996 used to calculate fully-diluted earnings per
common  share was 36.6 million and 35.3  million,  respectively,  including  1.9
million and 2.1 million, respectively, of common equivalent shares.

The weighted  average  number of common shares  outstanding  for the first three
quarters of 1997 and 1996 used to  calculate  primary  earnings per common share
equaled 36.4 million and 35.0 million, respectively, respectively, including 1.8
million and 2.0 million common  equivalent  shares,  respectively.  The weighted
average  number of common  shares  outstanding  used to calculate  fully-diluted
earnings per common share for the first three  quarters of 1997 and 1996 equaled
36.6  million  and 35.1  million,  respectively,  including  2.0 million and 2.1
million common equivalent shares, respectively.

During the first three  quarters of 1997,  common shares issued and  outstanding
increased by approximately  0.2 million and totaled 34.6 million as of September
12,  1997,  primarily  reflecting  the  issuance of shares  under the  


                                   13

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



Company's  Employee Stock Purchase Plan during the first quarter of 1997, offset
by shares purchased under the Company's share repurchase program.


LIQUIDITY AND CAPITAL RESOURCES

The Company funds its capital  requirements  with a combination of existing cash
balances,  operating  cash  flow and  debt and  equity  financing.  The  Company
believes  that cash flow  generated  from  ongoing  operations  and current cash
balances are more than adequate to finance ongoing capital expenditures, as well
as, meet debt service requirements. The Company also has the ability to fund its
planned growth  initiatives from existing credit facilities and from the sources
identified above;  however,  should significant growth opportunities arise, such
as  business  combinations  or  contract  acquisitions,   alternative  financing
arrangements will be evaluated and considered.

The Company is required to make semi-annual cash interest payments on its Senior
Notes at a fixed  interest  rate of 9.5%.  The  Company is not  required to make
principal payments on the Senior Notes until maturity except in the event of (i)
certain changes in control or (ii) certain asset sales in which the proceeds are
not invested in other properties  within a specified period of time.  Management
does  not  expect  either  of  these  events  to occur  and  therefore  does not
anticipate  that the  principal  payments on the Senior Notes will be due before
maturity.

The Senior Notes mature in 2005 and are fully and unconditionally  guaranteed on
a joint and several basis by certain  subsidiaries  (the  "Guarantors")  of Host
International,  Inc. ("Host International").  Host International is an operating
subsidiary of the Company.  The Senior Notes are also secured by a pledge of the
capital stock of the Guarantors.  The indenture  governing the Senior Notes (the
"Indenture")  contains covenants that, among other things,  limit the ability of
Host   International  and  certain  of  its  subsidiaries  to  incur  additional
indebtedness   and  issue   preferred   stock,   pay  dividends  or  make  other
distributions,  repurchase  capital stock or subordinated  indebtedness,  create
certain liens,  enter into certain  transactions  with affiliates,  sell certain
assets,  issue or sell capital stock of the  Guarantors,  and enter into certain
mergers and consolidations.

During the third  quarter of 1997,  the  Company  announced  a share  repurchase
program of up to $15.0  million of the  Company's  stock on the open market over
the next two years.  The shares may be used in connection  with  employee  stock
ownership plans or for general corporate  purposes.  The Company expects to fund
the repurchase  program with available  cash. As of the end of the third quarter
of 1997,  the  Company had  repurchased  121  thousand  shares at a cost of $1.6
million.

The  First  National  Bank of  Chicago,  as agent  for a group of  participating
lenders,   has  provided   credit   facilities   (the   "Facilities")   to  Host
International.  During the first quarter of 1997 the Company  negotiated several
enhancements  to  the  Facilities.  The  enhancements  increased  the  aggregate
principal  amount and extended the maturity of the Facilities from $75.0 million
through 2001 to $100.0 million through April 2002 (the "Total Commitment").  The
Total  Commitment  consists of (i) a letter of credit  facility in the amount of
$25.0 million for the issuance of financial and non-financial  letters of credit
and (ii) a  revolving  credit  facility  in the  amount  of $75.0  million  (the
"Revolver  Facility") for working capital and general  corporate  purposes other
than  hostile  acquisitions.  All  borrowings  under the  Facilities  are senior
obligations of Host  International  and are secured by the Company's  pledge of,
and a first  perfected  security  interest in, all of the capital  stock of Host
International and certain of its subsidiaries.

The loan  agreements  relating  to the  Facilities  contain  dividend  and stock
retirement  covenants that are  substantially  similar to those set forth in the
Indenture,  provided that dividends payable to the Company are limited to 25% of
Host  International's  consolidated  net income and provided,  further,  that no
dividends could have been declared by Host International prior to June 20, 1997.
The loan agreements also contain certain financial ratio and capital expenditure
covenants.  The  enhancements  to the Facility  during the first quarter of 1997
eliminated  the Revolver  Facility's  annual  30-day  repayment  provision.  Any
indebtedness  outstanding  under 


                                   14

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


the  Facilities  may be declared due and payable upon the  occurrence of certain
events of default,  including the  Company's  failure to comply with the several
covenants  noted above, or the occurrence of certain events of default under the
Indenture.  As of  September  12,  1997 and  throughout  the  twelve  weeks  and
thirty-six weeks ended September 12, 1997, there was no outstanding indebtedness
under the Revolver Facility and the Company was in compliance with the covenants
described above.

The Company's cash flows from operating  activities are affected by seasonality.
Cash from  operations  generally is the strongest in the summer  months  between
Memorial  Day and Labor Day.  Cash  provided by  operations,  before  changes in
working  capital,  totaled  $73.8 million for the first three quarter of 1997 as
compared with $50.7 million for the same period in 1996.

The primary uses of cash in investing activities consist of capital expenditures
and  acquisitions.  The Company  incurs  capital  expenditures  to build out new
facilities,  expand or  re-concept  existing  facilities,  and to  maintain  the
quality and improve  operations of existing  facilities.  The Company's  capital
expenditures in the first three quarters of 1997 and 1996, totaled $45.0 million
and $42.6 million, respectively. For the entire fiscal year of 1997, the Company
presently expects to make capital expenditure investments of approximately $55.0
million  in its core  domestic  airport  and  travel  plaza  business  lines and
approximately $15.0 million in growth markets in international airports and food
courts in domestic shopping malls. The timing of actual capital expenditures can
vary from expected  timing due to project  scheduling and delays inherent in the
construction and approval process. The Company expects to fund 1997 expenditures
with  its  operating  cash  flow.  The  fiscal  year  1997  capital  expenditure
projections are  "forward-looking  statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.

The Company's  cash used in financing  activities in the first three quarters of
1997 was $2.7 million,  compared with cash used in financing  activities of $0.2
million  for the same  period  in 1996.  In the  second  quarter  of 1997 and in
accordance  with the  Distribution  Agreement,  the Company  paid Host  Marriott
Corporation  $2.2 million in partial  settlement of the Company's  obligation to
pay for the 1996 exercise of nonqualified  stock options and the 1996 release of
deferred  stock  incentive  shares  held by  certain  former  employees  of Host
Marriott Corporation. The Company also purchased treasury stock during the third
quarter of 1997 totaling $1.6 million pursuant to its share repurchase  program.
Offsetting these cash payments was proceeds received in 1997 for the issuance of
common shares  relating to the Company's  Employee  Stock Purchase Plan totaling
$1.6 million and other employee stock plans of $0.5 million.

Working  capital is managed  throughout  the year to  effectively  maximize  the
financial  returns to the Company.  If needed,  the Company's  Revolver Facility
provides  funds for  liquidity,  seasonal  borrowing  needs  and  other  general
corporate purposes. In the fourth quarter of 1996, the Company transitioned to a
new financial system,  which included the centralization of the accounts payable
function.  As a result of the transition,  the Company  experienced  temporarily
high balances in cash and cash  equivalents and current  liabilities at year-end
1996.  During the first  three  quarters  of 1997,  the  Company has reduced the
temporarily high cash and cash equivalents and current  liabilities  balances to
seasonal levels.

The  Company's   consolidated   earnings   before   interest   expense,   taxes,
depreciation,  amortization and other non-cash items  ("EBITDA")  increased $2.3
million,  or 4.8%, to $50.4 million in the third quarter of 1997. EBITDA totaled
$96.0 million and $88.8  million for the first three  quarters of 1997 and 1996,
respectively,  an increase of $7.2 million,  or 8.1%.  These increases in EBITDA
reflect the impact of improved  operating  results in 1997. The Company believes
that EBITDA is one meaningful  measure of its operating  performance and is used
by certain  investors  to estimate  the  Company's  ability to meet debt service
requirements  and fund capital  investments.  EBITDA  information  should not be
considered  an  alternative  to net income,  operating  profit,  cash flows from
operations,  or any other operating or liquidity  performance measure recognized
by Generally Accepted Accounting Principles ("GAAP").  The calculation of EBITDA
for the Company may not be comparable to the same calculation by other companies
because the definition of EBITDA varies throughout the industry.


                                   15

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



The following is a reconciliation of EBITDA to net income:


<TABLE>
<CAPTION>
                                                   TWELVE WEEKS ENDED                  THIRTY-SIX WEEKS ENDED
                                            ----------------------------------     --------------------------------
                                               SEPT. 12,         SEPT. 6,            SEPT. 12,        SEPT. 6,
(IN MILLIONS)                                     1997             1996                 1997            1996
------------------------------------------- ----------------- ---------------- --- --------------- ----------------
<S>                                                 <C>              <C>                 <C>              <C>  

EBITDA                                              $ 50.4           $ 48.1              $ 96.0           $ 88.8 
Interest expense (1)                                  (9.2)            (9.2)              (27.6)           (27.7)
Provision for income taxes                            (9.2)           (10.9)               (9.7)            (9.7)
Depreciation and amortization                        (12.9)           (13.3)              (37.8)           (37.5)
Other non-cash items                                  (0.2)             0.3                (1.2)            (0.5)
------------------------------------------- ----------------- ---------------- --- --------------- ----------------

NET INCOME                                          $ 18.9           $ 15.0              $ 19.7           $ 13.4 
------------------------------------------- ----------------- ---------------- --- --------------- ----------------
<FN>

(1) Amortization  of deferred  financing  costs of $0.3 million and $0.2 million
    for the third  quarter  of 1997 and 1996,  respectively,  is  included  as a
    component of interest  expense.  Amortization  of deferred  financing  costs
    included as a component  of interest  expense  totaled $0.9 million and $0.8
    million for the first three quarters of 1997 and 1996, respectively.
</FN>
</TABLE>


IMPAIRMENTS OF LONG-LIVED ASSETS

Effective  September 9, 1995,  the Company  adopted SFAS No. 121, which requires
that an  impairment  loss be  recognized  when the  carrying  amount of an asset
exceeds the sum of the estimated undiscounted future cash flows of the asset. In
adopting SFAS No. 121 (and thereby  changing its method of measuring  long-lived
asset  impairments  from a business-line  basis to an individual  operating-unit
basis), the Company wrote down the assets (primarily leasehold  improvements and
equipment) of 15 individual  operating units to the extent the carrying value of
the assets exceeded the fair value of the assets in 1995.  Twelve of the fifteen
units had projected cash flow  deficits,  and,  accordingly  the assets of these
units  were  written  off in their  entirety.  The  remaining  three  units  had
projected  positive  cash flows and the assets were  partially  written  down to
their estimated fair values.

During 1996, 5 of the original 15 impaired units were either  disposed of or the
lease term  expired.  As of  September  12,  1997,  the total cash flow  deficit
(including  operating cash flows and necessary  capital  expenditures)  from the
remaining 10 operating  units was  projected to be  approximately  $25.3 million
during the remaining  terms of the lease  agreements.  Substantially  all of the
remaining  deficit is attributable to three operating  units,  which include two
airport units and one tollroad unit. This remaining cash flow deficit projection
is a  "forward-looking  statement" within the meaning of the Private  Securities
Litigation Reform Act of 1995.


DEFERRED INCOME TAXES

Realization  of the  net  deferred  tax  assets  totaling  $65.8  million  as of
September  12, 1997, is dependent on the  Company's  ability to generate  future
taxable income.  Management believes that it is more likely than not that future
taxable  income  will be  sufficient  to  realize  the net  deferred  tax assets
recorded at September 12, 1997. Management anticipates that increases in taxable
income  will  arise in future  periods  primarily  as a result of the  Company's
growth  strategies and reduced  operating costs resulting from several strategic
initiatives and ongoing  improvements to the Company's business  processes.  The
anticipated improvement in operating results is expected to increase the taxable
income  base to a level  which  would  allow  realization  of the  existing  net
deferred  tax assets  within nine to twelve  years.  These are  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  During the third quarter of 1997, the Company  recorded a $1.9 million
benefit  to  recognize  certain  tax  credits  that were  previously  considered
unrealizable.


                                   16



<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


Future levels of operating  income and other  taxable  gains are dependent  upon
general  economic  and  industry  conditions,  including  airport  and  tollroad
traffic,  inflation,  competition,  demand for development of concepts and other
factors  beyond  the  Company's  control,  and no  assurance  can be given  that
sufficient  taxable  income will be generated  for full  utilization  of the tax
credits and deductible temporary differences giving rise to the net deferred tax
asset.  Management has considered  these factors in reaching its conclusion that
it is more likely than not that  operating  income will be sufficient to utilize
these tax credits and temporary deferred deductions fully. The amount of the net
deferred  tax  assets  considered  realizable,  however,  could  be  reduced  if
estimates of future taxable income are not achieved.


FORWARD LOOKING STATEMENTS

Certain  matters  discussed  and  statements  made  within  this  Form  10-Q are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995 and as such may involve known and unknown  risks,
uncertainties,  and other factors that may cause the actual results, performance
or  achievements  of the  Company  to be  different  from  any  future  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  These risks  encompass  general  economic and industry  conditions,
including  airline  passenger  enplanements  and  tollroad  traffic,  inflation,
competition and demand for development of concepts, and other factors beyond the
Company's control.  Although the Company believes the expectations  reflected in
such forward-looking statements are based on reasonable assumptions, it can give
no assurance that its expectations will be attained.


                                   17



<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
PART II.  OTHER INFORMATION AND SIGNATURE



ITEM 1.  LEGAL PROCEEDINGS

LITIGATION

     The Company and its subsidiaries  are involved in litigation  incidental to
     their  businesses.  Such  litigation is not  considered by management to be
     significant and its resolution  would not have a material adverse effect on
     the  financial  condition  or results of  operations  of the Company or its
     subsidiaries.

ITEM 2.  CHANGES IN SECURITIES

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5.  OTHER INFORMATION

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     EXHIBIT NO.  DESCRIPTION
         11       Computations of Earnings Per Common Share
         27       Financial Data Schedule (EDGAR Filing Only)

(b) Reports on Form 8-K:

     Form 8-K dated July 15, 1997  announcing  second  quarter and first half of
        1997 results and containing forward-looking statements.
     Form 8-K dated July 15,  1997  announcing  a stock  repurchase  program and
        containing forward-looking statements.


                                   18

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
PART II.  OTHER INFORMATION AND SIGNATURE, continued


                                SIGNATURE

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



                                           HOST MARRIOTT SERVICES CORPORATION



   OCTOBER 24, 1997                          /S/  BRIAN W. BETHERS
----------------------         -------------------------------------------------
        Date                                    Brian W. Bethers
                               Senior Vice President and Chief Financial Officer






                                   19