<PAGE>
 
                                 UNITED STATES

                       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
     EXCHANGE ACT OF 1934

                 For the quarterly period ended July 13, 1997

                                      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 0-21097

                           EINSTEIN/NOAH BAGEL CORP.
            (Exact name of registrant as specified in its charter)

                 Delaware                     84-1294908
     (State or other jurisdiction of      (IRS Employer
     incorporation or organization)       Identification No.)


                           14123 Denver West Parkway
                               Golden, CO 80401
         (Address of principal executive offices, including zip code)

                                (303) 215-9300
             (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
                                  ----------               ----------

Number of shares of common stock, $.01 par value per share, outstanding as of
August 20, 1997: 33,270,411.

<PAGE>
 
                           EINSTEIN/NOAH BAGEL CORP.

                                     INDEX

<TABLE>
<CAPTION>
 
 
PART I.  FINANCIAL INFORMATION                                                               Page No.
        <S>                                                                                  <C>               
        Item 1.  Financial Statements
 
          Consolidated Balance Sheets as of December 29, 1996 and
          July 13, 1997..............................................................         3
 
          Consolidated Statements of Operations for the quarter
          and two quarters ended July 14, 1996 and July 13, 1997.....................         4

          Consolidated Statements of Cash Flows for the two
          quarters ended July 14, 1996 and July 13, 1997............................          5
 
          Notes to Consolidated Financial Statements................................          6
 
        Item 2.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations.............................          10
 
PART II.  OTHER INFORMATION
 
        Item 2.  Changes in Securities..............................................          14

        Item 4.  Submission of Matters to a Vote of Security Holders................          14

        Item 6.  Exhibits and Reports on Form 8-K...................................          14

        Signature Page..............................................................          16

        Exhibit Index...............................................................          Exhibit - 1

</TABLE>

                                       2
<PAGE>


                   EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                      December 29,              July 13,
                                                                          1996                    1997
                                                                     ---------------          -----------
                                                                                              (Unaudited)
ASSETS
------
Current Assets:
<S>                                                                      <C>                    <C>
   Cash and cash equivalents........................................     $ 50,741               $ 70,169
   Accounts receivable..............................................        5,589                 13,542
   Prepaid expenses and other current assets........................          579                    209
   Deferred income taxes............................................            -                  1,375
                                                                         --------               --------
     Total current assets...........................................       56,909                 85,295

Property and Equipment, net.........................................       28,213                 27,443
Notes Receivable:
   Area developers..................................................      140,754                259,158
   Others...........................................................        5,333                  3,437
Goodwill, net.......................................................       68,921                 65,148
Trademarks, net.....................................................       22,239                 22,115
Recipes, net........................................................        4,758                  7,521
Other Assets, net...................................................        5,291                 12,145
Deferred Income Taxes...............................................            -                    525
                                                                         --------               -------- 
     Total assets...................................................     $332,418               $482,787
                                                                         ========               ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
   Accounts payable.................................................     $  3,873               $  6,205
   Accrued expenses.................................................        3,615                  5,082
   Deferred franchise revenue.......................................        3,000                  3,000
                                                                         --------               --------
     Total current liabilities......................................       10,488                 14,287

Convertible Subordinated Debentures.................................            -                125,000
Deferred Franchise Revenue..........................................        6,105                  5,905
Other Noncurrent Liabilities........................................          308                    305
Commitments and Contingencies
Stockholders' Equity:
   Preferred Stock --$.01 par value; 20,000,000
      shares authorized; no shares issued and outstanding...........            -                      -
   Common Stock --$.01 par value; 200,000,000
     shares authorized; issued and outstanding:
     32,299,756 in December and 33,230,122 in July..................          323                    332
   Additional paid-in capital.......................................      353,203                364,675
   Accumulated deficit..............................................      (38,009)               (27,717)
                                                                         --------               --------
     Total stockholders' equity.....................................      315,517                337,290
                                                                         --------               --------
       Total liabilities and stockholders' equity...................     $332,418               $482,787
                                                                         ========               ========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
part of these statements.

                                       3
<PAGE>
 
                  EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES

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


<TABLE>
<CAPTION>
                                                             Quarter Ended                          Two Quarters Ended
                                                    -------------------------------           ------------------------------
                                                      July 14,            July 13,             July 14,             July 13,
                                                        1996                1997                 1996                 1997
                                                    -----------          ----------           ---------           -----------
<S>                                                 <C>                  <C>                  <C>                  <C>
Revenue:
   Royalties and franchise-related fees.............  $ 4,200              $ 7,988              $ 7,759              $17,326
   Interest income..................................      914                5,287                1,337               10,574
   Company-operated stores..........................   13,092                    -               31,489                2,103
                                                      -------              -------              -------              -------
      Total revenue.................................   18,206               13,275               40,585               30,003

Costs and Expenses:
   Cost of products sold............................    4,588                    -               10,078                  704
   Salaries and benefits............................    5,316                1,750               14,444                4,768
   General and administrative.......................    5,999                3,383               15,030                9,157
                                                      -------              -------              -------              -------
      Total costs and expenses......................   15,903                5,133               39,552               14,629
                                                      -------              -------              -------              -------

Income from Operations..............................    2,303                8,142                1,033               15,374

Other Income (Expense):
   Interest expense, net............................   (2,651)                (794)              (5,984)                (573)
   Other income, net................................      643                    -                1,929                    -
                                                      -------              -------              -------              -------
      Total other income (expense)..................   (2,008)                (794)              (4,055)                (573)
                                                      -------              -------              -------              -------

Income (Loss) Before Income Taxes...................      295                7,348               (3,022)              14,801
Income Taxes........................................        -                2,234                    -                4,509
                                                      -------              -------              -------              -------
Net Income (Loss)...................................  $   295              $ 5,114              $(3,022)             $10,292
                                                      =======              =======              =======              =======
Net Income (Loss) Per Common and
   Equivalent Share.................................    $0.01                $0.15               $(0.23)               $0.30
                                                      =======              =======              =======              =======
 Weighted Average Number of Common
   and Equivalent Shares Outstanding................   20,370               34,725               14,261               34,860
                                                      =======              =======              =======              =======
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
part of these statements.

                                       4
<PAGE>
 
                   EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Two Quarters Ended
                                                                        --------------------------------------
                                                                            July 14,              July 13,
                                                                              1996                  1997
                                                                        ----------------      ----------------
<S>                                                                     <C>                   <C>
Cash Flows from Operating Activities:
Net income (loss)......................................................     $  (3,022)            $  10,292
   Adjustments to reconcile net income (loss) to net cash
       from (used in) operating activities:
       Depreciation and amortization...................................         3,087                 3,126
       Gain on sale of marketable equity securities....................        (1,872)                    -
       Warrant and option expense......................................             -                    48
       Deferred income taxes...........................................             -                (1,900)
       Changes in assets and liabilities, net of effect of
       acquisitions:
          Accounts receivable..........................................        (3,731)               (8,009)
          Accounts payable and accrued expenses........................        (5,162)                8,577
          Deferred franchise revenue...................................         7,040                  (200)
          Other assets and liabilities.................................        (4,834)                 (286)
                                                                            ---------             ---------
             Net cash provided by (used in) operating activities.......        (8,494)               11,648
                                                                            ---------             ---------

Cash Flows from Investing Activities:
   Purchase of property and equipment..................................       (27,066)               (6,172)
   Proceeds from sale of assets........................................        42,217                 3,600
   Purchase of other assets............................................        (7,179)               (6,280)
   Acquisition of Noah's New York Bagels, Inc., net of cash
   acquired............................................................      (100,902)                    -
   Issuance of notes receivable........................................      (118,747)             (222,144)
   Repayment of notes receivable.......................................        60,692               103,791
   Proceeds from sales of marketable equity securities, net of
   purchases...........................................................         1,872                     -
                                                                            ---------             ---------
       Net cash used in investing activities...........................      (149,113)             (127,205)
                                                                            ---------             ---------
Cash Flows from Financing Activities:
   Proceeds from issuance of common stock..............................        16,158                 9,985
   Proceeds from issuance of convertible subordinated
   debentures..........................................................             -               125,000
   Borrowings under credit facilities..................................       286,154                62,200
   Repayments under credit facilities..................................      (149,504)              (62,200)
                                                                            ---------             ---------
       Net cash provided by financing activities.......................       152,808               134,985
                                                                            ---------             ---------
Net Increase (Decrease) in Cash and Cash Equivalents...................        (4,799)               19,428
Cash and Cash Equivalents, beginning of period.........................         5,368                50,741
                                                                            ---------             ---------
Cash and Cash Equivalents, end of period...............................     $     569             $  70,169
                                                                            =========             =========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
part of these statements.

                                       5
<PAGE>
 
                   EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

     The consolidated financial statements have been prepared by Einstein/Noah
Bagel Corp. (the "Company") and are unaudited except for the consolidated
balance sheet at December 29, 1996 and notes related thereto. The financial
statements have been prepared in accordance with the instructions for Form 10-Q
and, therefore, do not necessarily include all information and footnotes
required by generally accepted accounting principles. In the opinion of the
Company, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position,
results of operations and cash flows as of July 13, 1997 and for all periods
presented have been made. The statements are subject to year-end audit
adjustment. A description of the Company's accounting policies and other
financial information are included in the audited consolidated financial
statements as filed with the Securities and Exchange Commission in the Company's
Form 10-K/A for the year ended December 29, 1996. The consolidated results of
operations for the quarter and two quarters ended July 13, 1997 are not
necessarily indicative of the results expected for the full year.

2.   Area Developer Financing

     The Company currently offers partial financing to its area developers for
use in expansion of their operations in the form of convertible secured loans.
The maximum loan amount is established to give the Company majority ownership of
the area developer upon conversion (or option exercise, as described further
below) provided the Company exercises its right to participate in any
intervening financing by the area developer. Area developer financing requires
the area developer to expend at least 75% of its contributed capital toward
developing stores prior to drawing on the revolving loan facility provided by
the Company, with draws permitted during a three-year draw period in a
predetermined maximum amount generally equal to four times the amount of the
area developer's contributed capital. Upon expiration of the draw period, the
loan converts to an amortizing term loan payable over five years in periodic
installments, with a final balloon payment. The Company may extend the draw and
repayment periods in connection with the area developer purchasing additional
development rights, contributing additional capital or other amendments to the
loan agreement. Interest is set at the applicable reference rate of Bank of
America Illinois (8.50% at July 13, 1997, an average rate of 8.50% for the
quarter ended July 13, 1997 and an average rate of 8.39% for the two quarters
ended July 13, 1997) plus 1%, and is payable each four-week period. The loan is
secured by a pledge of substantially all of the assets of the area developer.

     (a) Loan Conversion Option

     All or any portion of the loan amount may be converted, at the Company's
election at any time after the expiration of a specified moratorium period
(generally two years) and after the area developer has completed not less than
80% of its area development commitment or in the event of certain defaults, into
equity in the area developer at the conversion price set forth in such loan
agreement, which is at a premium over the per unit price paid by the investors
in the area developer for their equity investment made concurrently with the
execution of the loan agreement. Default provisions contained in the area
developer loans typically include default in payment of principal and interest,
breach of a representation or warranty or of any covenant contained in the loan
agreement or security instruments, bankruptcy or bankruptcy-related act of the
borrower, resignation or termination of key management personnel, default under
the area development agreement, termination of three or more franchise
agreements, dissolution or liquidation, material adverse change in financial
condition, default of other indebtedness, sublease or any real estate lease, a
judgment in excess of $100,000 (not satisfied, vacated or covered by insurance)
and the invalidity or termination of any security instrument. The conversion
price is negotiated at arms' length with each area developer and is set at a
premium over the per unit price paid by the investors in the area developer for
their equity investment made concurrently with the execution of the loan
agreement or subsequent amendments thereto. On average, upon conversion, the
Company would own approximately a 70% interest in each of its area developers
on a fully diluted basis. To the extent such loan is not fully drawn or has been
drawn and repaid, the Company has a corresponding option to acquire at the loan
conversion price the amount of additional equity it could have acquired by
conversion of the loan had it been fully drawn.

                                       6
<PAGE>
 
     There can be no assurance the Company will convert any loan amount or
exercise its option at such time as it may be permitted to do so and, if it does
convert or exercise its option, that such conversion or option exercise will
result in a majority interest in the area developer.

     (b)  Commitments to Extend Area Developer Financing
 
     The following table summarizes credit commitments for area developer
financing (in thousands of dollars, except number of area developers):

<TABLE>
<CAPTION>
                                                               December 29,                July 13,
                                                                   1996                      1997
                                                               ------------              ------------
<S>                                                            <C>                       <C>
Number of area developers receiving financing..................          11                       8
Loan commitments...............................................   $ 283,200               $ 359,900
Loan availability..............................................    (142,446)               (100,742)
                                                                  ---------               ---------
Loans outstanding..............................................   $ 140,754               $ 259,158
                                                                  =========               =========
Contributed capital............................................   $  75,765               $ 109,621
                                                                  =========               =========
</TABLE>

     During the first two quarters of 1997, one area developer was formed and
several area developers merged reducing the number of area developers receiving
financing from 11 to eight.

     The following table summarizes area developer financing activity (in
thousands of dollars):

<TABLE>
<CAPTION>
                                                                          Two Quarters Ended
                                                                       July 14,         July 13,
                                                                         1996             1997
                                                                      ----------       ----------
<S>                                                                 <C>               <C>
Area developer loan balances, beginning of period...................    $  3,538       $ 140,754
Loan advances.......................................................      77,017         222,144
Loan repayments.....................................................     (21,234)       (103,740)
                                                                        --------       ---------
Area developer loan balances, end of period.........................    $ 59,321       $ 259,158
                                                                        ========       =========
</TABLE>
                                        
     The majority of the loan advance and repayment activity reflects the
revolving nature of the loans; that is, area developers draw and repay amounts
to optimize cash management.

     (c)  Credit Risk and Allowance for Loan Losses

     Six of the Company's area developers accounted for approximately 17%, 16%,
14%, 14%, 12% and 10% of the area developer notes receivable balance at July 13,
1997, and no other area developer of the Company individually accounted for 10%
or more of such notes receivable balance as of such date.

     The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for estimated possible loan losses.
The amount of the allowance is based on management's review of each area
developer's use of loan proceeds, stage of development, adherence to its store
development schedule, store performance trends, type and amount of collateral
securing the loan, prevailing economic conditions, and other factors which
management deems relevant at the time. Based upon this review and analysis, no
allowance was required as of December 29, 1996 or July 13, 1997.

                                       7
<PAGE>

     The following table sets forth certain combined audited financial
information, as of the dates indicated, provided annually to the Company by its
area developers. During 1995, two area developers were formed, and their data
have been included in the table for 1995 from the dates of their respective
formation. During 1996, ten area developers were formed, and their data have
been included in the table for 1996 from the dates of their respective
formations. In addition, two area developers with geographically contiguous
territories combined in 1996.

<TABLE>
<CAPTION>
                                                                                       December 31,           December 29,
                                                                                           1995                   1996
                                                                                   ------------------     ------------------
<S>                                                                                <C>                   <C>
                                                                                      (in thousands, except number of area
                                                                                           developers and store data)
          Total number of area developers.....................................                      2                     11
          Total number of area developer
            stores open.......................................................                     13                    301


          Balance sheet data:                                                   
            Total gross assets................................................     $            9,262     $          221,156
            Total debt:
               To the Company.................................................                  3,538                140,754
               To third parties...............................................                      -                      -
            Total other liabilities (including trade payables)................                  3,011                 37,033
            Total partner/member equity.......................................     $            2,676     $           33,847
</TABLE> 

<TABLE>
<CAPTION>
                                                                                                Fiscal Period Ended
                                                                                   -----------------------------------------
                                                                                       December 31,            December 29,
                                                                                           1995                    1996
                                                                                   ------------------     ------------------
<S>                                                                                <C>                    <C>
                                                                                                  (in thousands)
          Statement of operations data:
            Gross revenue......................................................    $              768     $          109,940
            Loss from continuing operations....................................                (1,324)               (40,592)

          Statement of cash flows data:                                        
            Cash flows from (used in) operating activities.....................    $            1,616     $          (16,382)
            Cash flows used in investing activities............................                (8,064)              (187,955)
            Cash flows from financing activities...............................                 7,038                205,756
                                                                                   ------------------     ------------------
               Net change in cash..............................................    $              590     $            1,419
                                                                                   =================      ==================
</TABLE>

3. Convertible Subordinated Debentures

     On May 29, 1997, the Company issued in a private offering $125.0 million
aggregate principal amount of 7 1/4% convertible subordinated debentures due
June 1, 2004. Interest is payable semi-annually on June 1 and December 1 of each
year beginning December 1, 1997. The debentures are convertible at any time
prior to maturity into shares of the Company's common stock at a conversion rate
of $21.25 per share, subject to adjustments under certain conditions. The
debentures may be redeemed at the option of the Company beginning June 1, 2000,
initially at 104.14% of their principal amount and at declining prices
thereafter, plus accrued interest. In addition, the Company is required, as of
40 business days after the occurrence of a Change in Control (as defined in the
indenture relating to the debentures) to purchase all or any part of any
debenture at the option of the debenture holder. The Company's registration
statement registering for resale the debentures and the shares of the Company's
common stock issuable upon conversion of the debentures became effective on June
18, 1997.


                                       8
<PAGE>
 
4. Royalties and Franchise-Related Fees

     The components of royalties and franchise-related fees are comprised of the
following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                    Quarter Ended                       Two Quarters Ended
                                                             ------------------------------         -----------------------------
                                                             July 14,            July 13,           July 14,           July 13,
                                                               1996                1997               1996               1997
                                                             -----------         ----------         ----------         ----------
<S>                                                          <C>                 <C>                <C>                <C>
Royalties.........................................              $    995           $  3,950           $  1,674          $   8,173
Initial franchise and area developer fees.........                 3,060              3,280              5,660              7,440
Real estate fees and lease income.................                     -                647                  -              1,491
Other.............................................                   145                111                425                222
                                                                --------           --------           --------          ---------
                                                                $  4,200           $  7,988           $  7,759          $  17,326
                                                                ========           ========           ========          =========
</TABLE>

5. Earnings Per Share

     In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share".  SFAS No. 128 requires disclosure of basic and
dilutive earnings per share.  Basic earnings per share excludes dilution and is
computed by dividing income available to common shareholders by the weighted-
average number of common shares outstanding for the reporting period.  Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.  SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997.  The pro forma earnings per share
utilizing the requirements of SFAS No. 128 are as follows:
 
<TABLE>
<CAPTION>
                                                 Quarter Ended                                Two Quarters Ended
                                  ------------------------------------------     -------------------------------------------
                                     July 14, 1996           July 13, 1997           July 14, 1996           July 13, 1997
                                  -------------------     ------------------     ------------------      -------------------
<S>                                <C>                      <C>                    <C>                     <C>
Basic earnings (loss) per share...        $0.01                  $0.15                  $(0.26)                   $0.31
Diluted earnings (loss) per share.        $0.01                  $0.15                  $(0.26)                   $0.30
</TABLE>
 
6. Commitments

     As of July 13, 1997, Bagel Store Development Funding, L.L.C. ("Bagel
Funding") had invested approximately $89.5 million in the common equity of the
Company's area developers. As of July 13, 1997, the Company was the manager of
Bagel Funding. Bagel Funding has the right to require each area developer to
redeem Bagel Funding's equity interest in an area developer at a pre-determined
formula price based on the store level cash flow of the area developer in the
event that (i) the Company acquires a majority equity interest in the area
developer pursuant to the exercise of its conversion or option rights under the
area developer's secured loan agreement; (ii) the Company does not consent to
the area developer's request to undertake a firm commitment underwritten public
offering after the Company's conversion and option rights under its loan
agreement with the area developer have expired unexercised; or (iii) the Company
does not consent to the area developer's request to terminate the area
developer's area development and franchise agreements with the Company after the
Company's conversion and option rights under its loan agreement with the area
developer have expired unexercised. In the event the area developer does not
redeem Bagel Funding's equity interest when required to do so, the Company will
be obligated to purchase from Bagel Funding its equity interest in the area
developer at the same price applicable to the area developer.

7. Contingencies

     Three actions have been filed in the United States District Court for the
District of Colorado, one on July 25, 1997 and two on August 8, 1997, against
the Company and certain of its executive officers and directors. The complaints
allege, among other things, that the Company and such officers and directors
violated Sections 11, 12(2) and 15 of the Securities Act of 1933, as amended,
and Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule
10b-5 promulgated thereunder. In each case, the plaintiffs are seeking, among
other things, (i) to certify their complaint as a class action on behalf of all
persons who purchased the common stock of the Company during the purported class
period, (ii) an award of unspecified compensatory damages, interest and costs to
all members of the purported class, and (iii) equitable relief permitted by law,
equity or federal or state statutes. The Company believes the complaints are
without merit and intends to vigorously defend against the allegations made in
the complaints.
 
     The Company is subject to various other lawsuits, claims and other legal
matters in the course of conducting its business, including its business as a
franchisor.  The Company believes that the outcome of such lawsuits, claims, and
other legal matters will not have a material impact on the Company's financial
position or results of operations.

                                       9
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Special Note Regarding Forward-Looking Statements

     CERTAIN STATEMENTS IN THIS FORM 10-Q UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONSTITUTE "FORWARD-
LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.  SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF EINSTEIN/NOAH BAGEL CORP. (THE "COMPANY"), ITS
AREA DEVELOPERS, AND EINSTEIN BROS.(R)BAGELS AND NOAH'S NEW YORK BAGELS(R)
STORES TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.  SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: COMPETITION; SUCCESS OF OPERATING
INITIATIVES; DEVELOPMENT AND OPERATING COSTS; AREA DEVELOPERS' ADHERENCE TO
DEVELOPMENT SCHEDULES; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS;
ADVERSE PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS; THE COMPANY'S
RELATIONSHIP WITH, AND THE CONTINUED SUCCESS OF, BOSTON CHICKEN, INC. ("BOSTON
CHICKEN"), THE COMPANY'S MAJORITY STOCKHOLDER; AVAILABILITY, LOCATIONS AND TERMS
OF SITES FOR STORE DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT
PLANS; AVAILABILITY AND TERMS OF CAPITAL; FOOD, LABOR AND EMPLOYEE BENEFIT
COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL WEATHER CONDITIONS; AND OTHER
FACTORS REFERENCED IN THIS FORM 10-Q.  THE SUCCESS OF THE COMPANY IS DEPENDENT
ON ITS AREA DEVELOPERS AND THE MANNER IN WHICH THEY OPERATE AND DEVELOP EINSTEIN
BROS. BAGELS AND NOAH'S NEW YORK BAGELS STORES.  IN ADDITION TO STATEMENTS THAT
EXPLICITLY DESCRIBE SUCH RISKS AND UNCERTAINTIES, READERS ARE URGED TO CONSIDER
STATEMENTS THAT INCLUDE THE TERMS "BELIEVES", "BELIEF", "EXPECTS", "PLANS",
"ANTICIPATES", "INTENDS" OR THE LIKE TO BE UNCERTAIN AND FORWARD-LOOKING.  ALL
CAUTIONARY STATEMENTS MADE HEREIN SHOULD BE READ AS BEING APPLICABLE TO ALL
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR.

General

     The Company commenced operations in March 1995 through the acquisition of
three regional bagel retailers, with subsequent acquisitions in August 1995 and
February 1996. The Company has sold all of the stores operated by it to area
developers financed in part by the Company. Current revenue is derived
principally from royalties, franchise-related fees and interest income from its
area developers. Additionally, due to the sale of Company stores to its area
developers, costs of goods sold, salaries, benefits and general and
administrative expenses from store operations have been eliminated, which has
and will continue to impact the overall costs and expenses of the Company. See
"Special Note Regarding Forward-Looking Statements" above. Consequently,
comparisons of operating results to date may not be meaningful.

     The Company and its area developers have commenced their annual development
planning process for 1998, which will take into account various factors,
including changes in the competitive environment and the effect of the current
pace of development on store operations and performance. As a result of such
review, the rate of store development for 1998 relative to the current pace of
store development may be reduced. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ABOVE.

    Area developer store revenue is not as high in the first periods following
opening as it is in later periods and revenue for any new store is also highly
dependent on the proximity of other franchise stores and those of competitors,
the size of the store and its visibility.  Consequently, the rate of royalty
income increases may not be commensurate with the rate of store openings.
Moreover, in order to support its expansion program, the Company is continuing
to develop its corporate support center, and accordingly, certain related
expenditures will be higher as a percentage of revenue in earlier periods than
in later comparable periods.  In addition, the Company's systemwide rapid
expansion significantly affects its liquidity and capital requirements. See 
"--Liquidity and Capital Resources".
 
      The Company and Boston Chicken, the Company's majority stockholder, are
parties to various agreements, pursuant to which Boston Chicken has agreed to
provide to the Company certain accounting and administration, and computer and
communications services.  In addition, Boston Chicken has made available to the
Company a non-convertible loan facility of up to $50.0 million, none of which
was outstanding as of July 13, 1997.

                                       10
<PAGE>
 
Results of Operations

     Revenue. Royalty and franchise-related fees increased to $8.0 million for
the quarter ended July 13, 1997 from $4.2 million for the prior comparable
quarter. Royalty and franchise-related fees increased to $17.3 million for the
two quarters ended July 13, 1997 from $7.8 million for the prior comparable
period. The increases were due to an increase in royalties and initial franchise
and area development fees attributable to the larger base of franchise stores
operating systemwide. The number of franchise stores increased to an average of
451 stores for the second quarter of 1997 from an average of 108 stores for the
comparable 1996 period, and increased to an average of 394 stores for the first
two quarters of 1997 from an average of 68 stores for the comparable 1996
period.
 
     Interest income from loans to area developers increased to $5.3 million for
the quarter ended July 13, 1997 from $914,000 for the prior comparable quarter.
Interest income from loans to area developers increased to $10.6 million for the
two quarters ended July 13, 1997 from $1.3 million for the prior comparable
period. These increases were due to higher outstanding loan balances associated
with the increase in stores opened by the Company's area developers.
 
     Revenue from Company-operated stores decreased from $13.1 million for the
quarter ended July 14, 1996 to $-0- for the quarter ended July 13, 1997. Revenue
from Company-operated stores decreased from $31.5 million for the two quarters
ended July 14, 1996 to $2.1 million for the two quarters ended July 13, 1997.
The decreases were due to the sale of Company-operated stores to the Company's
area developers. There was an average of 60 Company-operated stores for the two
quarters ended July 14, 1996 compared to an average of seven Company-operated
stores for the two quarters ended July 13, 1997.

     Total systemwide net revenue was $69.9 million for the second quarter of
1997 compared to $29.9 million for the second quarter of 1996. Total systemwide
net revenue was $146.4 million for the two quarters ended July 13, 1997 compared
to $58.7 million for the two quarters ended July 14, 1996. The increase in
systemwide net revenue was primarily due to an increase in the number of
EINSTEIN BROS.(R) BAGELS and NOAH'S NEW YORK BAGELS(R) stores in operation
systemwide.

     Cost of Products Sold.    Cost of products sold decreased from $4.6 million
for the quarter ended July 14, 1996 to $-0- for the quarter ended July 13, 1997.
Cost of products sold decreased from $10.1 million for the two quarters ended
July 14, 1996 to $704,000 for the two quarters ended July 13, 1997.  The
decreases were primarily due to the decrease in the number of Company-operated
stores.  Cost of products sold as a percent of store revenue increased to 33.5%
for the two quarters ended July 13, 1997 from 32% for the prior comparable
period.  The increase was primarily due to changing product mix and bagel
production methods.
 
     Salaries and Benefits.  Salaries and benefits decreased to $1.8 million for
the quarter ended July 13, 1997 from $5.3 million for the prior comparable
quarter.  Salaries and benefits decreased to $4.8 million for the two quarters
ended July 12, 1997, from $14.4 million for the prior comparable period.  The
decreases were due to the sale of Company-operated stores to area developers in
1997, offset by increases in employees at the Company's support center necessary
to support systemwide expansion.

     General and Administrative. General and administrative expenses decreased
to $3.4 million for the quarter ended July 13, 1997 from $6.0 million for the
quarter ended July 14, 1996. General and administrative expenses decreased to
$9.2 million for the two quarters ended July 13, 1997 from $15.0 million for the
prior comparable period. The decreases were due to the sale of Company-operated
stores in 1997, offset by increases in expenditures necessary to support
systemwide expansion.

     Other Income (Expense).  Other Income (Expense) consists primarily of
interest expense, net of interest income. Interest expense, net was $794,000 for
the quarter ended July 13, 1997 compared to $2.7 million for the prior
comparable quarter. Interest expense, net was $573,000 for the two quarters
ended July 13, 1997 compared to $6.0 million for the prior comparable period.
These decreases were due to the lower levels of outstanding debt during the
periods and a lower interest rate on the Company's convertible subordinated
debentures in relation to its credit facilities. Interest expense, net was
offset in 1996 by other income from gains on the sale of marketable equity
securities.
 
     Income Taxes.  The provision for income taxes for the two quarters ended
July 13, 1997 reflects the Company's expected effective tax rate.

Liquidity and Capital Resources

     Liquidity.  Cash provided by operating activities for the two quarters
ended July 13, 1997 was $11.6 million, an increase of $20.1 million from cash
used in operating activities of $8.5 million for the two quarters ended July 14,

                                      11
<PAGE>
 
1996. Net income increased to $10.3 million for the first two quarters of 1997
compared to a net loss of $3.0 million for the first two quarters of 1996. Cash
provided by working capital increased to $82,000 for the two quarters ended July
13, 1997, compared to cash used to fund working capital of $6.7 million for the
two quarters ended July 14, 1996. This change in working capital was
attributable to increases in accounts payable and accrued expenses experienced
as a result of the general growth of the business in 1997 and the impact of the
working capital reduction incurred from the sale of Company-operated stores to
area developers in 1996.
 
     Cash provided by financing activities decreased to $135.0 million for the
two quarters ended July 13, 1997 compared to $152.8 million for the first two
quarters of 1996. In 1997, the Company issued $125.0 million aggregate principal
amount of 7 1/4% convertible subordinated debentures. During the first two
quarters of 1996, the Company's primary financing consisted of $136.7 million of
net borrowing under its revolving credit facilities. Proceeds from the issuance
of common stock provided $10.0 million for the first two quarters of 1997,
compared with $16.2 million for the first two quarters of 1996.

     The Company's primary use of capital reflects its goal of establishing
brand awareness and market leadership by providing partial financing to its area
developers for their use in store development and to finance their working
capital needs. The Company anticipates that it and its area developers will have
a continuing need for additional capital for such purposes, as more fully
described below. As of July 13, 1997, the Company had secured loan commitments
to its area developers aggregating $359.9 million, of which $259.2 million had
been advanced. Net loan advances to area developers were $118.4 million
(consisting of $222.1 million of loan advances, net of $103.7 million of loan
repayments) for the two quarters ended July 13, 1997 compared to $55.8 million
(consisting of $77.0 million of loan advances, net of $21.2 million of loan
repayments) for the two quarters ended July 14, 1996. The majority of the loan
advance and repayment activity reflects the revolving nature of the loans; that
is, amounts are drawn and repaid on a regular basis to optimize cash management.
The increase in net loan advances in 1997 compared to 1996 was attributable to
the increase in the number of stores opened by area developers in 1997 compared
to 1996.
 
     As a result of executing the systemwide rapid expansion strategy, the
Company's area developers have incurred aggregate net losses of $1.3 million in
1995 (during which period most stores were operated by the Company) and $40.6
million in 1996, which amounts included (a) approximately $10.5 million of
depreciation and amortization charges, (b) approximately $26.0 million
attributable to investment overhead, scale inefficiencies in operating overhead,
and other start-up costs which the Company believes are necessary to establish
the Einstein Bros. Bagels and Noah's New York Bagels brands in new territories
and open stores at a rate sufficient to gain a competitive advantage over
similar concepts, and (c) royalties, interest, and other franchise-related fees
that would no longer be incurred in the event the Company acquired, or converted
its convertible secured loans to its area developers. As a result of the
foregoing factors, as well as ongoing improvements to store operating
performance and increases in scale efficiencies, the Company does not consider
these start-up losses to be a meaningful financial measure during this rapid
expansion phase (i.e., that period during which new stores constitute a
significant percentage of the store base). The Company believes the rapid
expansion phase for most of its area developers should last approximately three
to four years from the time significant development commences in an area
developer's primary markets. As the rapid expansion phase ends, the size of an
area developer's store base should enable the area developer to gradually reduce
and eventually recover start-up losses. The reduction in and recovery of losses
are expected to be driven primarily by lower investment overhead, increased
operational and advertising efficiencies, greater economies of scale, and
increases in store revenue through continued product and service enhancements.
The point at which losses may be recovered will vary by area developer depending
primarily upon the size and timing of the area developer's store development
schedule, the achievement of advertising efficiency, the level of debt and
interest charges, the intensity of competition and the quality of management;
however, there can be no assurance that such losses will be recovered. Because a
majority of the Company's area developers are approximately one year into
significant store development in their respective market areas, the Company
believes they will remain in the rapid expansion phase during 1998. Subsequent
to the completion of the rapid expansion phase, the Company expects area
developer profitability to be a more meaningful factor in assessing loan
recoverability and the Company's decision to make any future loan commitments.
Although the Company believes its current area developers will achieve
profitability, in the event the foregoing strategy does not come to fruition or
an area developer otherwise fails to achieve a sufficient level of profitability
subsequent to the completion of its rapid expansion phase, such event could have
a material adverse impact on the Company's financial position and results of
operations. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 10.
 
                                      12
<PAGE>

     The allowance for area developers' loan losses is maintained at a level
that in management's judgment is adequate to provide for estimated possible loan
losses. The amount of the allowance is based on management's review of the use
of loan proceeds, adherence to store development schedules, store performance
trends, type and amount of collateral securing the loan, prevailing economic
conditions, and other factors that management deems relevant at the time. Based
upon this review and analysis, no allowance for loan losses was required as of
December 29, 1996 and July 13, 1997.
 
     Area developer loans are convertible into a majority equity interest in the
area developer at a conversion price set forth in the loan agreement, which is
at a premium over the per unit price paid by investors in the area developer for
their equity investments, after the expiration of a moratorium period (generally
two years), provided that the area developer has completed not less than 80% of
its area development commitment, or in the event of certain defaults. Any
determination to convert any area developer loan or otherwise acquire an equity
interest in any area developer would involve a variety of economic and
operational considerations, including the projected financial impact of
converting the loan, the status of the area developer's market penetration, the
performance of the area developer's stores, the Company's desire to own such
stores and the willingness of the Company to incur the risk of owning such
stores versus receiving income as a franchisor, lender and service provider, the
Company's ability to manage stores, if necessary, the future capital
requirements of the area developer and its ability to raise a portion of such
capital, and the demand on Company resources. However, factors and circumstances
unique to a specific transaction may also impact the Company's decision. In
addition, any loan conversion or other acquisition of an equity interest in an
area developer by the Company would not be indicative of whether the Company
intended to, or would, convert or otherwise acquire an equity interest in any
other area developer. There can be no assurance that the Company will exercise
its future rights to acquire an equity interest in any area developer to which
it provides financing or that such exercise will result in control of the area
developer. At July 13, 1997, the Company had not converted (nor did it have the
right to convert) any loan to any area developer or otherwise acquired any
equity interest in any area developer.
 
     In addition to providing funding to its area developers, the Company's
capital requirements have consisted of development of its corporate
infrastructure, which supports systemwide expansion, and investments in food
production facilities. During the first two quarters of 1997, the Company
expended $6.2 million related to its corporate infrastructure and investments in
food production facilities. During the first two quarters of 1996, the Company
expended $27.1 million on its corporate infrastructure, investments in food
production facilities and store development, as well as $100.9 million for the
acquisition of all of the capital stock of Noah's New York Bagels, Inc. These
capital expenditures have been offset with proceeds from selling Company stores.
The Company generated $3.6 million in 1997 and $42.2 million in 1996 from the
sale of stores to newly-formed area developers. There were no material gains or
losses recognized as a result of these sales. The Company completed the sale of
its remaining stores to newly-formed area developers during the first quarter of
1997. Consequently, the Company does not anticipate it will realize cash
proceeds from the sale of stores in the future.
 
     The Company anticipates that it and its area developers will have a
continuing need for additional financing to continue systemwide expansion,
primarily for use by the Company in providing partial financing to its area
developers for their use in store development and to finance their working
capital needs. The timing of the Company's capital requirements will be affected
by the number of stores opened, operational results of the stores, and the
amount and timing of borrowings under the loan agreements between the Company
and its area developers. As the Company's capital requirements increase, the
Company will seek additional funds from debt financing and/or public or private
offerings of equity securities. There can be no assurance that the Company will
be able to raise such capital on satisfactory terms when needed. SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 10.


                                      13
 
<PAGE>
 
PART II - OTHER INFORMATION

Item 2.  Changes in Securities.

     (c)  During the second quarter of 1997, the Company issued 143,103 shares
          of the Company's common stock upon the exercise of certain warrants
          for an aggregate purchase price of $925,876. All of such shares were
          issued and sold without registration under the Securities Act of 1933,
          as amended (the "Securities Act"), in reliance on Section 4(2) of the
          Securities Act and Rule 506 of Regulation D promulgated under the
          Securities Act. 

          In addition, on May 29, 1997, the Company issued and sold to the
          Initial Purchasers (defined below) $125.0 million aggregate principal
          amount of 7 1/4% convertible subordinated debentures due June 1, 2004
          as more fully described below under Item 6.B. The Initial Purchasers
          purchased the debentures from the Company at a 2.75% discount, or
          $3,435,500, from the aggregate offering price of $125.0 million. The
          debentures were issued and sold without registration under the
          Securities Act in reliance on Section 4(2) of the Securities Act. The
          Company has been advised that the Initial Purchasers subsequently
          resold the debentures in the United States to (i) "qualified
          institutional buyers" in reliance on Rule 144A under the Securities
          Act and (ii) other institutional "accredited investors" (as defined in
          Rule 501(a)(1), (2), (3) or (7) under the Securities Act). In
          addition, the Initial Purchasers sold debentures to non-U.S. persons
          outside the United States, pursuant to Regulation S under the
          Securities Act.

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

     The Company's Annual Meeting was held on May 13, 1997. Each of the
Company's then current directors was re-elected. The votes cast for and withheld
from each director were as follows:


<TABLE>
<CAPTION>
                Director                      For                  Withheld
           -----------------               ----------              --------
           <S>                            <C>                     <C>
           Scott A. Beck                   26,568,153                 9,865
           Kyle T. Craig                   26,571,148                 6,870
           Mark R. Goldston                26,568,093                 9,925
           M. Laird Koldyke                26,078,545               499,473
           Gail A. Lozoff                  26,568,093                 9,925
           John H. Muhlstein               26,568,093                 9,925
           John A. Offerdahl               26,568,053                 9,965
           Lloyd D. Ruth                   26,567,153                10,865
           David A. Stanchak               26,568,153                 9,865
</TABLE>

Since the date of the Company's Annual Meeting, Mr. Offerdahl resigned as a
director of the Company, effective August 12, 1997.

Item 6.  Exhibits and Reports on Form 8-K.
 
     A.  Exhibits:  See Exhibit Index appearing elsewhere herein, which is
         incorporated herein by reference.

     B.  Reports on Form 8-K: The Company filed one report on Form 8-K during
         the quarter ended July 13, 1997, which report was dated May 30, 1997
         (the "Form 8-K"). The Form 8-K reported under Item 5. (Other Events)
         the consummation on May 29, 1997 of (i) the issuance and sale by the
         Company to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
         Incorporated, Alex. Brown & Sons Incorporated and Morgan Stanley & Co.
         Incorporated (the "Initial Purchasers") of $125,000,000 aggregate
         principal amount of the Company's 7 1/4% Convertible Subordinated
         Debentures due 2004 (the "Debentures") and (ii) the entering into by
         the Company and the Initial Purchasers of a Registration Rights
         Agreement, pursuant to which the Company agreed, within 60 days of May
         29, 1997, to file with the Securities and Exchange Commission, and to
         use all reasonable efforts to cause to become effective, a shelf
         registration statement with respect to the resale of the Debentures and
         the shares of the Company's common stock, $.01 par value (the "Common
         Stock"), issuable upon conversion of the Debentures. Such registration
         statement (Reg. No. 333-29841) became effective on June 18, 1997.


                                      14
<PAGE>
 
         The Form 8-K also included under Item 7. (Exhibits) the Purchase
         Agreement related to the issuance and sale of the Debentures by the
         Company and the Registration Rights Agreement, in each case, between
         the Company and the Initial Purchasers, the Indenture related to the
         Debentures between the Company and Bankers Trust Company, as Trustee,
         and the Company's press releases in connection with the issuance and
         sale of the Debentures. In addition, the Form 8-K reported under Item
         9. (Sales of Equity Securities Pursuant to Regulation S) that, in
         connection with the issuance and sale of the Debentures, the Company
         sold $6,250,000 aggregate principal amount of Debentures to non-U.S.
         persons in a transaction pursuant to Regulation S under the Securities
         Act, with the Initial Purchasers acting as distributors for the Company
         in such transaction.



                                      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.


                                                EINSTEIN/NOAH BAGEL CORP.


                                                   /s/ Mark R. Goldston
Date:  August 22, 1997                  --------------------------------------
                                                       Mark R. Goldston
                                         President and Chief Executive Officer


Date:  August 22, 1997                             /s/ W. Eric Carlborg
                                        --------------------------------------
                                                       W. Eric Carlborg
                                                    Chief Financial Officer

                                      16
<PAGE>
 
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 
Exhibit
Number                                  
------                                  
 
<S>       <C>
  4.1     Indenture dated as of May 29, 1997 by and between the Company and
          Bankers Trust Company, as Trustee, which includes as Exhibits the
          forms of Debenture for the Company's 7 1/4% Convertible Subordinated
          Debentures due 2004 (the "Debenture Indenture") (incorporated by
          reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
          dated as of May 30, 1997).

  4.2     Registration Rights Agreement dated May 22, 1997 by and between the
          Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
          Incorporated, Alex. Brown & Sons Incorporated and Morgan Stanley & Co.
          Incorporated (incorporated by reference to Exhibit 4.2 to the
          Company's Current Report on Form 8-K dated as of May 30, 1997).

  10.1    Debenture Indenture (included in Exhibit 4.1).

  10.2    Third Amendment dated May 20, 1997 to Secured Credit Agreement dated 
          May 17, 1996 by and among the Company, the Lenders referenced therein
          and Bank of America Illinois, as Agent (the "Secured Credit
          Agreement") (incorporated by reference to the Company Quarterly Report
          on Form 10-Q for the quarter ended April 20, 1997).

  10.3    Fourth Amendment dated August 11, 1997 to Secured Credit Agreement.

  11      Statement re: Computation of Earnings (Loss) Per Share.

  27      Financial Data Schedule.
</TABLE>

                                   Exhibit-1