<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 October 5, 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
October 31, 1997: 33,228,068.
<PAGE>
 
                           EINSTEIN/NOAH BAGEL CORP.

                                     INDEX
                                        

<TABLE> 
<CAPTION> 

PART I.  FINANCIAL INFORMATION                                              Page No.
<S>     <C>                                                                <C>   
         Item 1.  Financial Statements
 
              Consolidated Balance Sheets as of December 29, 1996 and
              October 5, 1997................................................  3

              Consolidated Statements of Operations for the quarter and three
              quarters ended October 6, 1996 and October 5, 1997.............  4

              Consolidated Statements of Cash Flows for the three quarters
              ended October 6, 1996 and October 5, 1997......................  5

              Notes to Consolidated Financial Statements.....................  6

         Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations.................. 11

PART II. OTHER INFORMATION

         Item 2.  Changes in Securities...................................... 15

         Item 6.  Exhibits and Reports on Form 8-K........................... 15

         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,          October 5,
                                                                         1996                  1997
                                                                  ------------------     -----------------
                                                                                            (unaudited)
<S>                                                               <C>                   <C>
ASSETS
------
Current Assets:
 Cash and cash equivalents..................................      $           50,741     $          30,522
 Accounts receivable........................................                   5,589                14,910
 Prepaid expenses and other current assets..................                     579                   237
 Deferred income taxes......................................                       -                   300
                                                                  ------------------     -----------------
  Total current assets......................................                  56,909                45,969

Property and Equipment, net.................................                  28,213                29,028
Notes Receivable:
 Area developers............................................                 140,754               300,744
 Others.....................................................                   5,333                 3,437
Goodwill, net...............................................                  68,921                65,263
Trademarks, net.............................................                  22,239                22,064
Recipes, net................................................                   4,758                 7,370
Other Assets, net...........................................                   5,291                14,172
                                                                  ------------------     -----------------
  Total assets..............................................      $          332,418     $         488,047
                                                                  ==================     =================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
 Accounts payable...........................................      $            3,873     $           3,483
 Accrued expenses...........................................                   3,615                 8,045
 Deferred franchise revenue.................................                   3,000                 2,000
                                                                  ------------------     -----------------
  Total current liabilities.................................                  10,488                13,528

Convertible Subordinated Debentures.........................                       -               125,000
Deferred Franchise Revenue..................................                   6,105                 6,076
Other Noncurrent Liabilities................................                     308                   296

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 33,293,468
  in October................................................                     323                   333
 Additional paid-in capital.................................                 353,203               365,167
 Accumulated deficit........................................                 (38,009)              (22,353)
                                                                   -----------------       ---------------
   Total stockholders' equity...............................                 315,517               343,147
                                                                   -----------------       ---------------
    Total liabilities and stockholders' equity..............       $         332,418       $       488,047
                                                                   =================       ===============
</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                Three Quarters Ended
                                                 ------------------------------    ------------------------------
                                                   October 6,        October 5,        October 6,      October 5,
                                                     1996              1997              1996             1997
                                                 --------------  --------------    --------------   -------------
<S>                                              <C>             <C>               <C>              <C>
Revenue:
  Royalties and franchise-related fees..........    $ 5,996          $ 7,578            $13,755        $24,904
  Interest income...............................      1,940            6,304              3,277         16,878
  Company-operated stores.......................      2,321                -             33,810          2,103
                                                  ------------   --------------    --------------   -------------
    Total revenue...............................     10,257           13,882             50,842         43,885

Costs and Expenses:
  Cost of products sold.........................        793                -             10,871            704
  Salaries and benefits.........................      1,842            1,390             16,286          6,158
  General and administrative....................      3,387            3,225             18,417         12,382
                                                  ------------   --------------    --------------   -------------
    Total costs and expenses....................      6,022            4,615             45,574         19,244
                                                  ------------   --------------    --------------   -------------
Income from Operations..........................      4,235            9,267              5,268         24,641
Other Income (Expense):
  Interest expense, net.........................       (282)          (1,493)            (6,266)        (2,066)
  Other income, net.............................          -                -              1,929              -
                                                  -----------    --------------    --------------   -------------
    Total other expense.........................       (282)          (1,493)            (4,337)        (2,066)
                                                  -----------    --------------    --------------   -------------
Income Before Income Taxes......................      3,953            7,774                931         22,575
Income Taxes....................................          -            2,410                  -          6,919
                                                  -----------    --------------    --------------   -------------
Net Income......................................    $ 3,953          $ 5,364            $   931        $15,656
                                                  ===========    ==============    ==============   =============
Net Income Per Common and
  Equivalent Share..............................    $  0.13          $  0.16            $  0.04        $  0.45
                                                  ===========    ==============    ==============   =============
Weighted Average Number of Common
  and Equivalent Shares Outstanding.............     30,377           34,578             19,225         34,776        
                                                  ===========    ==============    ==============   =============
</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>
 
                                                                        Three Quarters Ended
                                                                    ----------------------------
                                                                      October 6,       October 5,
                                                                        1996             1997
                                                                    -------------    -------------
<S>                                                                <C>                 <C>
Cash Flows from Operating Activities:
  Net income................................................         $    931            $ 15,656
  Adjustments to reconcile net income to net cash
    from (used in) operating activities:
    Depreciation and amortization...........................            4,205               4,646
    Gain on sale of marketable equity securities............           (1,824)                  -
    Deferred income taxes...................................                -                (300)
    Changes in assets and liabilities, net of effect of
      acquisitions:
      Accounts receivable...................................           (3,065)            (10,021)
      Accounts payable and accrued expenses.................           (8,497)              8,341
      Deferred franchise revenue............................            7,745              (1,030)
      Other assets and liabilities..........................           (6,268)               (107)
                                                                 ---------------      ---------------
        Net cash provided by (used in) operating activities.           (6,773)             17,185
                                                                 ---------------      ---------------
Cash Flows from Investing Activities:
  Purchase of property and equipment........................          (33,951)             (6,588)
  Proceeds from sale of assets..............................           54,198               3,600
  Purchase of other assets..................................           (5,672)             (9,827)
  Acquisition of Noah's New York Bagels, Inc., net of cash
  acquired..................................................         (100,902)                  -
  Issuance of notes receivable..............................         (150,012)           (299,808)
  Repayment of notes receivable.............................           51,266             139,869
  Purchase of marketable equity securities..................          (66,778)                  -
  Proceeds from sales of marketable equity securities.......           68,602                   -
                                                                 ---------------      ---------------
    Net cash used in investing activities...................         (183,249)           (172,754)
                                                                 ---------------      ---------------
Cash Flows from Financing Activities:
  Proceeds from issuance of common stock....................          103,691              10,350
  Proceeds from issuance of convertible subordinated
  debentures................................................                -             125,000
  Borrowings under credit facilities........................          312,572              62,200
  Repayments under credit facilities........................         (231,372)            (62,200)
                                                                 ---------------      ---------------
    Net cash provided by financing activities...............          184,891             135,350
                                                                 ---------------      ---------------
Net Decrease in Cash and Cash Equivalents...................           (5,131)            (20,219)
Cash and Cash Equivalents, beginning of period..............            5,368              50,741
                                                                 ---------------      ---------------
Cash and Cash Equivalents, end of period....................         $    237            $ 30,522
                                                                 ===============      ===============
</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 October 5, 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 three quarters ended October 5, 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 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 National Trust and Savings Association (8.50% at October 5, 1997, an
average rate of 8.50% for the quarter ended October 5, 1997 and an average rate
of 8.42% for the three quarters ended October 5, 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. The Company has announced a proposal by the
Company's management to convert its loans into a majority equity interest in
each of its area developers. See Note 8 -- Subsequent Events.

     (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 as set forth in the loan agreements was 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. Upon
conversion, the Company would own, on average, approximately 77% of the
outstanding equity interest in each of its area developers. 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. See Note 8 -- Subsequent Events.

                                       6
<PAGE>

 
     (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,     October 5,
                                                                 1996            1997
                                                             ------------     ----------
<S>                                                          <C>              <C>
     Number of area developers receiving financing.....                11              5
     Loan commitments..................................         $ 283,200       $359,900
     Unused loans......................................          (142,446)       (59,156)
                                                             ------------     ----------
     Loans outstanding.................................         $ 140,754       $300,744
                                                             ============     ==========
     Contributed capital...............................         $  75,765       $109,126
                                                             ============     ==========
</TABLE>

     During the first three quarters of 1997, one area developer was formed and
several area developers merged, reducing the number of area developers receiving
financing from eleven to five.

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

<TABLE>
<CAPTION>
                                                                Three Quarters Ended
                                                              October 6,      October 5,
                                                                 1996            1997
                                                             ------------     ----------
<S>                                                          <C>              <C>
     Area developer loan balances, beginning of year...          $  3,538      $ 140,754
     Loan advances.....................................           147,668        299,808
     Loan repayments...................................           (50,476)      (139,818)
                                                             ------------     ----------
     Area developer loan balances, end of quarter......          $100,730      $ 300,744
                                                             ============     ==========
</TABLE>

     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.

     (c) Credit Risk and Allowance for Loan Losses

     The Company's five area developers accounted for approximately 26%, 24%,
20%, 16% and 14% of the area developers' notes receivable balance at October 5,
1997.

     The allowance for area developer 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 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 for loan losses was required as of December 29, 1996 or October 5,
1997.

                                       7
<PAGE>

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


<TABLE>
<CAPTION>
                                                                  December 31,            December 29,
                                                                      1995                    1996
                                                                  ------------            ------------
                                                                  (in thousands, except number of area 
                                                                       developers and store data)
<S>                                                               <C>                     <C>
     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
<CAPTION> 
                                                                         Fiscal Period Ended
                                                                  ---------------------------------
                                                                  December 31,            December 29,
                                                                      1995                    1996
                                                                  ------------            ------------
                                                                            (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 $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 of 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.

                                       8
<PAGE>
 

4. Royalties and Franchise-Related Fees

     The following table sets forth the components of royalties and franchise-
related fees (in thousands of dollars):

<TABLE>
<CAPTION>
                                                              Quarter Ended              Three Quarters Ended
                                                      ----------------------------    ----------------------------
                                                       October 6,       October 5,     October 6,       October 5,
                                                         1996             1997           1996              1997
                                                      -----------      -----------    -----------     ------------
<S>                                                   <C>              <C>            <C>            <C>
Royalties.........................................    $     1,994      $     4,386    $     3,669      $    12,559
Initial franchise and area developer fees.........          3,480            2,440          9,140            9,880
Real estate fees and lease income.................            364              585            364            2,076
Other.............................................            158              167            582              389
                                                      -----------      -----------    -----------      -----------
                                                      $     5,996      $     7,578    $    13,755      $    24,904
                                                      ===========      ===========    ===========      ===========
</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 diluted
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 potential dilution if derivative 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, calculated in
accordance with the requirements of SFAS No. 128, are as follows:

<TABLE>
<CAPTION>
                                                     Quarter Ended                   Three Quarters Ended
                                             -----------------------------      ------------------------------
                                             October 6,         October 5,      October 6,          October 5,
                                               1996               1997            1996                1997
                                             ----------         ----------      ----------          ----------
<S>                                          <C>                <C>             <C>                 <C>
Basic earnings per share............          $0.14                $0.16          $0.05               $0.48
Diluted earnings per share..........           0.13                 0.16           0.04                0.45
</TABLE>

6. Commitments

     As of October 5, 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. The Company is the manager of Bagel Funding but owns
no equity interest in 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
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 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. See Note 8 -
Subsequent Events.

7. Contingencies

     The Company, certain of its executive officers and directors and the
underwriters in the Company's initial public offering are defendants in a class
action lawsuit filed in the United States District Court for the District of
Colorado. The lawsuit is comprised of separate actions that have been
consolidated into one action for pre-trial purposes. In addition, an action was
filed in state court in Jefferson County, Colorado, against the Company and the
other defendants. The complaints in such actions allege, among other things,
that the Company and the other defendants 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, as well
as certain similar provisions of Colorado state law. 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 Company's common stock
during the purported class period, (ii) an

                                       9
<PAGE>
 
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 also subject to various 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 other lawsuits, claims
and legal matters will not have a material impact on the Company's financial
position or results of operations.

8.   Subsequent Events

     On October 29, 1997, the Company announced that its board of directors
recommended that the Company seek to acquire a majority interest in its five
area developers and appointed a special committee in connection with such
proposed transaction. Among other things, the special committee will consider a
proposal by the Company's management to convert the secured loans made by the
Company to the area developers into majority ownership of each area developer
and then to merge the area developers into a single entity. The proposed loan
conversions and area developer merger would result in the Company owning
approximately 77% of the outstanding equity interest in the surviving area
developer with the remaining equity interest continuing to be owned by area
developer management and Bagel Funding. In connection with such proposed
transactions, the Company would request modification of Bagel Funding's right to
require the area developers to purchase Bagel Funding's interest in the area
developers in certain circumstances. See Note 6 -- Commitments. If required
approvals are obtained, including approval of the special committee and the
Company's board of directors, and approval of the equity owners of the Fund and
the area developers, the Company expects that the conversion of its loans to,
and the merger of, the area developers would be completed by the end of 1997.

     Also on October 29, 1997, the Company signed a commitment letter with
respect to new credit facilities consisting of a $30 million secured term loan
facility and a $40 million secured revolving credit facility (the "New Credit
Facilities") with Bank of America National Trust and Savings Association,
LaSalle National Bank and General Electric Capital Corporation. The New Credit
Facilities will replace the Company's current secured revolving credit facility,
which had no balance outstanding as of October 5, 1997. The closing of the New
Credit Facilities is subject to the negotiation of definitive documentation and
certain other customary terms and conditions.

                                      10
<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 business 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. The Company cannot predict which
factors would cause actual results to differ materially from those indicated by
the forward-looking statements. 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.

     All forward-looking statements relating to the Company's proposed
conversion of its loans into a majority equity interest in its area developers
and the merger of the area developers into a single entity are subject to, among
other things, various board, special committee and other approvals and
conditions, and negotiation of definitive agreements on acceptable terms. There
can be no assurance that such transactions will be consummated.

General

     On October 29, 1997, the Company announced that its board of directors had
recommended that the Company seek to acquire a majority equity interest in its
five area developers and had appointed a special committee (the "Special
Committee") in connection with such proposed transaction. Among other things,
the Special Committee of independent directors will consider a proposal by the
Company's management to convert the secured loans made by the Company to the
area developers into majority ownership of each area developer (the "Loan
Conversions") and then to merge the area developers into a single entity (the
"Area Developer Merger"). The proposed Loan Conversions and Area Developer
Merger would result in the Company owning approximately 77% of the outstanding
equity interest in the surviving area developer with the remaining equity
interest continuing to be owned by area developer management and Bagel Store
Development Funding, L.L.C. 

     The board of directors' recommendation that the Company seek to acquire a
majority equity interest in its area developers was based primarily on the
board's determination that such a transaction would promote a number of business
objectives, including (i) enhancing the Company's focus on store operations,
(ii) unifying store operations to strengthen the Company's brands and offer its
customers a more consistent experience, (iii) enhancing performance incentives
of area developer personnel, (iv) reducing systemwide overhead, (v) facilitating
debt financing and (vi) improving systemwide tax efficiency. See "Special Note
Regarding Forward-Looking Statements" above.

     The proposed Loan Conversions will significantly impact the Company's
results of operations and financial position. As a result of the board of
directors' actions, the Company will no longer recognize the initial franchise
and area developer fees for new stores opened by its area developers unless the
Company determines not to acquire a majority equity interest in the area
developers. If the Loan Conversions are completed, the Company would become

                                      11
<PAGE>
 
the majority equity owner of each area developer, and the Company would
consolidate the area developers' operations in its financial statements.
Consequently, the franchise and related fees earned by the Company (including
interest, royalties, real estate-related fees and software fees) from the area
developers would be eliminated from the Company's financial statements in
consolidation. The operating results of the area developers (primarily store
revenue, less expenses) would be included in the Company's financial results.
Such results would be adjusted for the remaining minority interest in the
surviving area developer after completion of the Area Developer Merger. If the
proposed transactions are completed, the Company would expect to report positive
consolidated earnings before interest, taxes, depreciation and amortization
expenses ("EBITDA") in 1998; however, due primarily to significant depreciation
charges associated with the acquisition of a Company-store base and significant
goodwill amortization charges resulting from the transactions, the Company would
expect to report a net loss in 1998.

     Consolidated EBITDA is dependent upon a number of factors, including the
number of stores in operation systemwide, the net weekly per store average
revenue and cash flow of such stores, and systemwide overhead expenses. The
Company's financed area developers have incurred net losses to date, including
$1.3 million in 1995 and $40.6 million in 1996. Such amounts include (a)
approximately $13.9 million in royalties, interest and related fees charged by
the Company to its area developers, and (b) approximately $10.5 million in
depreciation and amortization charges. Although royalties, interest and related
fees are eliminated in consolidation and the Company and its area developers
have recently taken steps to reduce systemwide overhead, there can be no
assurance that the Company will achieve positive consolidated EBITDA.

     If approved by the board of directors, the consummation of the Loan
Conversions and the Area Developer Merger will be subject to various approvals
and other conditions and negotiation of definitive agreements on acceptable
terms. If such approvals are obtained and such conditions satisfied, the Company
expects that the Loan Conversions and the Area Developer Merger would be
completed by the end of 1997. There can be no assurance, however, that such
transactions will be consummated. See "Special Note Regarding Forward-Looking
Statements" on page 11.

Results of Operations

     Revenue. Royalty and franchise-related fees increased to $7.6 million for
the quarter ended October 5, 1997 from $6.0 million for the prior comparable
quarter. Royalty and franchise-related fees increased to $24.9 million for the
three quarters ended October 5, 1997 from $13.8 million for the prior comparable
period. The increases were primarily due to an increase in royalties, real
estate fees and lease income attributable to the larger base of franchise stores
operating systemwide. The number of franchise stores increased to an average of
510 stores for the third quarter of 1997 from an average of 200 stores for the
prior comparable quarter, and increased to an average of 428 stores for the
first three quarters of 1997 from an average of 106 stores for the prior
comparable period. 

     Interest income from loans to area developers increased to $6.3 million for
the quarter ended October 5, 1997 from $1.9 million for the prior comparable
quarter. Interest income from loans to area developers increased to $16.9
million for the three quarters ended October 5, 1997 from $3.3 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 $2.3 million for the
quarter ended October 6, 1996 to $-0- for the quarter ended October 5, 1997 and
decreased from $33.8 million for the three quarters ended October 6, 1996 to
$2.1 million for the three quarters ended October 5, 1997. The decreases were
due to the sale of Company-operated stores to the Company's area developers.
There was an average of 48 Company-operated stores for the three quarters ended
October 6, 1996 compared to an average of five Company-operated stores for the
three quarters ended October 5, 1997.

     Total systemwide net revenue increased to $77.0 million for the third
quarter of 1997 compared to $37.1 million for the prior comparable quarter and
increased to $223.4 million for the three quarters ended October 5, 1997
compared to $95.8 million for the prior comparable period. The increase in
systemwide net revenue was primarily due to an increase in the number of stores
in operation systemwide.

     Cost of Products Sold. Because there were no Company-operated stores during
the quarter ended October 5, 1997, there was no cost of products sold. Cost of
products sold was $793,000 for the prior comparable quarter. Cost of products
sold decreased to $704,000 for the three quarters ended October 5, 1997 from
$10.9 million for the prior comparable period. The decrease for the three
quarters ended October 5, 1997 was 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

                                      12
<PAGE>
 
three quarters ended October 5, 1997 from 32.2% for the prior comparable period.
The increase was primarily due to changing product mix.

     Salaries and Benefits. Salaries and benefits decreased to $1.4 million for
the quarter ended October 5, 1997 from $1.8 million for the prior comparable
quarter and decreased to $6.2 million for the three quarters ended October 5,
1997 from $16.3 million for the prior comparable period. The decreases were
primarily due to the sale of Company-operated stores to area developers in 1997.

     General and Administrative. General and administrative expenses decreased
to $3.2 million for the quarter ended October 5, 1997 from $3.4 million for the
prior comparable quarter and decreased to $12.4 million for the three quarters
ended October 5, 1997 from $18.4 million for the prior comparable period. The
decreases were primarily due to the sale of Company-operated stores to its area
developers in 1997.

     Other Income (Expense). Other Income (Expense) consists primarily of
interest expense, net of interest income. Net interest expense was $1.5 million
for the quarter ended October 5, 1997 compared to $282,000 for the prior
comparable quarter. Net interest expense was $2.1 million for the three quarters
ended October 5, 1997 compared to $6.3 million for the prior comparable period.
The increase in the quarter was due to the interest on the Company's convertible
subordinated debentures. The decrease for the three quarters was due to lower
levels of outstanding debt, on average, in 1997 compared to 1996. Net interest
expense 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 three quarters ended
October 5, 1997 reflects the Company's expected effective tax rate.

Liquidity and Capital Resources

     Liquidity.  The Company's primary sources of capital in 1997 have been from
issuances of debt securities and internally generated cash from operations. For
the three quarters ended October 5, 1997, the Company completed the issuance of
$125.0 million of 7 1/4% convertible subordinated debentures due 2004. Cash
generated from operations totaled $17.2 million for the three quarters ended
October 5, 1997.

     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. As of October 5, 1997, the Company had secured loan commitments
to its area developers aggregating $359.9 million, of which $300.7 million had
been advanced. Net loan advances to area developers were $160.0 million for the
three quarters ended October 5, 1997.

     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 three quarters of 1997, the Company
expended $6.6 million related to its corporate infrastructure and investments in
food production facilities.

     On October 29, 1997 the Company signed a commitment letter with respect to
new credit facilities consisting of a $30 million secured term loan facility
(the "Secured Term Loan Facility") and a $40 million secured revolving credit
facility (the "Revolving Credit Facility" and together with the Secured Term
Loan Facility, the "New Credit Facilities") with Bank of America National Trust
and Savings Association ("Bank of America"), LaSalle National Bank and General
Electric Capital Corporation, maturing October 31, 2000. The New Credit
Facilities will replace the Company's existing secured revolving credit facility
with Bank of America, as agent, which had no balance outstanding as of October
5, 1997. Availability of the New Credit Facilities will be subject to certain
financial covenants. The closing of the New Credit Facilities is subject to the
negotiation of definitive documentation and certain other customary terms and
conditions. The New Credit Facilities and the Company's cash from operations are
expected to finance development of between 150-200 new stores in 1998. There can
be no assurance that the Company will be able to negotiate definitive loan
documents with respect to the New Credit Facilities on satisfactory

                                      13
<PAGE>
 
terms or that the New Credit Facilities will be consummated on terms consistent
with the commitment letter. See "Special Note Regarding Forward-Looking
Statements" on page 11.

     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 October 5, 1997. However, there can be no assurance that funding under
such facility will be available to the Company if and when requested.

     The timing of the Company's capital requirements will be affected by the
number of stores opened and the operational results of the ENBC system. If the
Company is unable to consummate the New Credit Facilities, it will need
additional capital from other sources for working capital needs and to
accomplish its expansion goals. There can be no assurance that additional
capital would be available on satisfactory terms. If the New Credit Facilities
are not obtained, consummation of the Loan Conversions would result in a default
under the Company's existing credit facility unless appropriate waivers are
obtained from the Company's lenders. Additionally, although management believes
that cash from operations and the New Credit Facilities will be sufficient to
fund the Company's expansion goals for 1998, there can be no assurance that the
Company will not need additional capital to carry out its expansion plans. In
the event such capital is required, there can be no assurance that the Company
or its area developers will be able to raise such capital on satisfactory terms,
if at all, when needed. See "Special Note Regarding Forward-Looking Statements"
on page 11.

                                      14
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

          The information set forth under Note 7 of the Company's Notes to
          Consolidated Financial Statements contained in Part I of this Form
          10-Q is incorporated herein by reference thereto.

Item 2.   Changes in Securities.

     (c)  During the third quarter of 1997, the Company issued 19,685 shares of
          the Company's common stock upon the exercise of certain warrants for
          an aggregate purchase price of $127,362. 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.

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 did not file any reports on Form 8-K
          during the quarter ended October 5, 1997.

                                      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.



Date:  November 18, 1997
                                                 /s/ Mark R. Goldston
                                           ------------------------------------
                                                     Mark R. Goldston
                                                  Chief Executive Officer

Date:  November 18, 1997
                                                 /s/ Jeffrey L. Butler
                                           ------------------------------------
                                                     Jeffrey L. Butler
                                                          President

Date:  November 18, 1997
                                                 /s/ W. Eric Carlborg
                                           ------------------------------------
                                                     W. Eric Carlborg
                                                 Chief Financial Officer

                                      16
<PAGE>
 

                                 EXHIBIT INDEX
                                        
Exhibit
-------
Number                             Exhibits*
------                             --------

  10.1    Fourth Amendment dated August 11, 1997 to Secured Credit Agreement by
          and among the Company, the Lenders referenced therein and Bank of
          America National Trust and Savings Association ("Bank of America"), as
          Agent (incorporated by reference to Exhibit 10.3 to the Company's
          Quarterly Report on Form 10-Q for the quarter ended July 13, 1997).
          
  10.2    Fifth Amendment dated October 3, 1997 to Secured Credit Agreement by
          and among the Company, the Lenders referenced therein and Bank of
          America, as Agent (incorporated by reference to Exhibit 10.7 to Boston
          Chicken, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
          October 5, 1997).
       
  10.3**  Amended and Restated Project and Approved Supplier Agreement dated
          August 15, 1997 among the Company, Harlan Bagel Supply Company,
          L.L.C., ("Harlan") Harlan Bakeries, Inc., Hal P. Harlan, Hugh P.
          Harlan and Doug H. Harlan.
       
  10.4    Amended and Restated Option Agreement dated August 15, 1997 among the
          Company, Harlan, Hal P. Harlan, Hugh P. Harlan and Doug H. Harlan.
       
  10.5    1997 Stock Option Plan of the Company.
       
  11      Statement re: Computation of Earnings (Loss) Per Share.
       
  27      Financial Data Schedule.
       
  99      Uniform Franchise Offering Circular dated March 27, 1997, as amended
          August 20, 1997.

*   In the case of incorporation by reference to documents filed by Boston
    Chicken, Inc. under the Securities Exchange Act of 1934, as amended, Boston
    Chicken, Inc.'s file number under that Act is 0-22802.
**  Confidential treatment requested.

                                  Exhibit - 1