<PAGE>
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 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 4, 1998

                                       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.)


                           14103 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
November 17, 1998:  33,270,535.
<PAGE>
 
                           EINSTEIN/NOAH BAGEL CORP.

                                     INDEX
                                        



<TABLE>
<CAPTION>
                                                                                             Page No.
                                                                                             ------- 
PART I.  FINANCIAL INFORMATION

 
         Item 1.  Financial Statements
<S>                                                                                         <C>
 
                  Consolidated Balance Sheets as of December 28, 1997 and
                  October 4, 1998.............................................                     3
 
                  Consolidated Statements of Operations for the quarter and
                  three quarters ended October 5, 1997 and October 4, 1998....                     4
 
                  Consolidated Statements of Cash Flows for the three quarters
                  ended October 5, 1997 and October 4, 1998...................                     5
 
                  Notes to Consolidated Financial Statements..................                     6
 
       Item 2.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.........................                     8
 
PART II. OTHER INFORMATION
 
       Item 1.    Legal Proceedings...........................................                    12
 
       Item 6.    Exhibits and Reports on Form 8-K............................                    12
 
       Signature Page.........................................................                    13
 
       Exhibit Index..........................................................                    14
</TABLE>

                                       2
<PAGE>
 
                   EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                      December 28,   October 4,
                                                                          1997          1998
                                                                      -------------  -----------
                                                                                     (unaudited)
<S>                                                                   <C>            <C>
 
ASSETS
------
 
Current Assets:
  Cash and cash equivalents.........................................      $ 34,148     $  6,251
  Accounts receivable...............................................         1,593          922
  Inventories.......................................................         9,823        9,385
  Prepaid expenses and other current assets.........................           502          747
                                                                          --------     --------
     Total current assets...........................................        46,066       17,305
 
Property and Equipment, net.........................................       194,152      191,068
Goodwill, net.......................................................       360,155      357,048
Trademarks, net.....................................................        22,075       22,600
Recipes, net........................................................         7,202        6,574
Other Assets, net...................................................        13,478        8,179
                                                                          --------     --------
     Total assets...................................................      $643,128     $602,774
                                                                          ========     ========
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
 
  Accounts payable..................................................      $ 16,140     $ 13,042
  Accrued expenses..................................................        38,369       36,419
  Current portion of senior term loan...............................         6,000        6,000
                                                                          --------     --------
     Total current liabilities......................................        60,509       55,461
 
Revolving Credit Facility...........................................            --        1,200
Long-Term Portion of Senior Term Loan...............................        24,000       19,500
Convertible Subordinated Debentures.................................       125,000      125,000
Other Noncurrent Liabilities........................................        23,225       19,731
Minority Interest...................................................        80,048       75,396
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: 33,333,246 shares in December and
     34,083,681 shares in October...................................           333          341
  Additional paid-in capital........................................       374,685      377,616
  Treasury stock, at cost (813,146 shares in December and October)..        (5,261)      (5,261)
 
  Accumulated deficit...............................................       (39,411)     (66,210)
                                                                          --------     --------
     Total stockholders' equity.....................................       330,346      306,486
                                                                          --------     --------
       Total liabilities and stockholders' equity...................      $643,128     $602,774
                                                                          ========     ========
 
</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 5,   October 4,   October 5,   October 4,
                                                1997         1998         1997         1998
                                             -----------  -----------  -----------  -----------
<S>                                          <C>          <C>          <C>          <C>
 
Revenue:
  Store revenue............................  $       --      $87,325      $ 2,103     $285,699
  Royalties and franchise-related fees.....      13,882           --       41,782           --
                                             ----------   ----------   ----------   ----------
     Total revenue.........................      13,882       87,325       43,885      285,699
 
Costs and Expenses:
  Store:
     Cost of products sold.................          --       29,559          704       98,038
     Salaries and benefits.................          --       26,789          609       89,458
     Other controllable costs..............          --        6,829          122       23,086
     Rent, occupancy and related costs.....          --        8,171          150       26,762
     Marketing expenses....................          --        3,625          126       11,082
     Depreciation and amortization.........          --        4,553           66       15,601
                                             ----------   ----------   ----------   ----------
 
       Total store costs and expenses......          --       79,526        1,777      264,027
  Non-Store:
     Salaries, benefits, general and
       administrative......................       3,096        7,149       12,887       30,008
     Depreciation and amortization
       (excluding goodwill amortization)...       1,061          823        3,039        2,644
     Goodwill amortization.................         458        2,463        1,541        8,172
                                             ----------   ----------   ----------   ----------
       Total non-store costs and expenses..       4,615       10,435       17,467       40,824
                                             ----------   ----------   ----------   ----------
       Total costs and expenses............       4,615       89,961       19,244      304,851
                                             ----------   ----------   ----------   ----------
 
Income (Loss) from Operations..............       9,267       (2,636)      24,641      (19,152)
 
Other Income (Expense):
  Interest income..........................         653            5        1,630          273
  Interest expense.........................      (2,146)      (2,694)      (3,696)      (9,162)
  Other....................................          --           (1)          --       (3,410)
                                             ----------   ----------   ----------   ----------
     Total other income (expense)..........      (1,493)      (2,690)      (2,066)     (12,299)
                                             ----------   ----------   ----------   ----------
 
 
Income (Loss) before Income Taxes and
  Minority Interest........................       7,774       (5,326)      22,575      (31,451)
Income Taxes...............................       2,410           --        6,919           --
Minority Interest in Loss of Subsidiary....          --         (893)          --       (4,652)
                                             ----------   ----------   ----------   ----------
Net Income (Loss)..........................     $ 5,364      $(4,433)     $15,656     $(26,799)
                                             ==========   ==========   ==========   ==========
 
Basic Earnings (Loss) per Share............        $.16        $(.13)        $.48        $(.81)
                                             ==========   ==========   ==========   ==========
Diluted Earnings (Loss) per Share..........        $.16        $(.13)        $.45        $(.81)
                                             ==========   ==========   ==========   ==========
 
Weighted Average Number of Common
  Shares Outstanding:
     Basic.................................      33,266       33,271       32,927       32,930
                                             ==========   ==========   ==========   ==========
     Diluted...............................      34,578       33,271       34,776       32,930
                                             ==========   ==========   ==========   ==========
 
</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 5,   October 4,
                                                                     1997         1998
                                                                  ---------     ---------
<S>                                                              <C>          <C> 
Cash Flows from Operating Activities:
 
  Net income (loss)............................................   $  15,656     $(26,799)
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Depreciation and amortization.............................       4,646       26,417
     Provision for write-down of notes receivable..............          --        3,409
     Minority interest.........................................          --       (4,652)
     Warrant and option exercise...............................          48           --
     Deferred income taxes.....................................        (300)          --
     Changes in assets and liabilities:
       Accounts receivable.....................................     (10,021)         671
       Accounts payable and accrued expenses...................       8,341       (5,492)
       Deferred franchise revenue..............................      (1,030)          --
 
       Other assets and liabilities............................        (107)      (3,475)
                                                                  ---------     --------
          Net cash provided by (used in) operating activities..      17,185       (9,920)
                                                                  ---------     --------
 
 
Cash Flows from Investing Activities:
  Purchase of property and equipment...........................      (6,588)     (14,545)
  Proceeds from sale of assets.................................       3,600           --
  Purchase of other assets.....................................      (9,827)        (132)
  Issuance of notes receivable.................................    (299,808)          --
  Repayment of notes receivable................................     139,869           --
                                                                  ---------     --------
     Net cash used in investing activities.....................    (172,754)     (14,677)
                                                                  ---------     --------
Cash Flows Provided by Financing Activities:
  Proceeds from issuance of common stock.......................      10,350           --
  Borrowings under credit facilities...........................      62,200       47,100
  Repayments under credit facilities...........................     (62,200)     (50,400)
  Proceeds from convertible debt...............................     125,000           --
                                                                  ---------     --------
     Net cash provided by (used in) financing activities.......     135,350       (3,300)
                                                                  ---------     --------
 
Net Increase (Decrease) in Cash and Cash Equivalents...........     (20,219)     (27,897)
Cash and Cash Equivalents, beginning of period.................      50,741       34,148
                                                                  ---------     --------
Cash and Cash Equivalents, end of period.......................   $  30,522     $  6,251
                                                                  =========     ========
 
</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 interim financial statements have been prepared by
Einstein/Noah Bagel Corp. (the "Company") and are unaudited.  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 4, 1998 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 filed with the Securities and Exchange Commission in the Company's
Form 10-K for the year ended December 28, 1997.  The consolidated results of
operations for the quarter and three quarters ended October 4, 1998 are not
necessarily indicative of the results expected for the full year.



2. COMMITMENTS AND CONTINGENCIES

   The Company has entered into agreements with certain vendors which provide
for minimum purchases over specified terms.  Such agreements call for
retroactive rate adjustments or cash settlement in the event of purchase
shortfalls.  Management believes that the ultimate settlement of such
commitments will not have a material impact on the consolidated financial
position or results of operations of the Company.

   Bagel Store Development Funding, L.L.C. ("Bagel Funding") has invested a
total of approximately $89.5 million, representing an approximately 21% equity
interest, in Einstein/Noah Bagel Partners, L.P., a majority-owned subsidiary of
the Company ("Bagel Partners").  The Company is the manager of Bagel Funding.
Bagel Funding has the right to require Bagel Partners or the Company to redeem
Bagel Funding's equity interest in Bagel Partners at a pre-determined formula
price based on store level cash flow of Bagel Partners in the event that, at any
time after December 5, 1999 and prior to June 5, 2001, the Company does not
consent to a public offering of such equity interests or the termination of
certain rights and obligations under franchise and license agreements between
the Company and Bagel Partners.  Such right becomes exercisable prior to
December 5, 1999 if there is a Change in Control (as defined in the Bagel
Partners partnership agreement) of the Company.  The Company or Bagel Partners
may pay the purchase price for such equity interests in cash, shares of the
Company's common stock or a combination thereof.

   The Company has become subject to various lawsuits, claims and other legal
matters in the course of conducting its business.  The Company does not believe
that any such matters of which it is aware are material to the Company
individually or in the aggregate, but matters may arise which could adversely
affect the Company or its business operations.

   The Company and certain of its current and former executive officers and
directors, the underwriters in the Company's initial public offering and the
Company's independent public accountants are defendants in a class action
lawsuit filed in the United States District Court for the District of Colorado.
In addition, an action was filed in state court in Jefferson County, Colorado,
although such action has been stayed pending resolution of the federal case.
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 thereunder, as well as certain similar provisions of
Colorado state law.  The plaintiffs are seeking, among other things, an award of
unspecified compensatory damages, interest and costs.  Although the Company
cannot predict the outcome of these lawsuits, the Company believes the
complaints are without merit and is vigorously defending against the allegations
made in the complaints.  On February 10, 1998, the Company filed a motion to
dismiss the complaint in the federal case.



3. RECLASSIFICATIONS

   Certain reclassifications have been made to the 1997 financial statements to
conform to the 1998 presentation.

                                       6
<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"),
EINSTEIN/NOAH BAGEL PARTNERS, L.P., A MAJORITY-OWNED SUBSIDIARY OF THE COMPANY
("BAGEL PARTNERS"), AND EINSTEIN BROS.BAGELS AND NOAH'S NEW YORK BAGELS 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; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND
AWARENESS; AVAILABILITY AND TERMS OF CAPITAL; ADVERSE PUBLICITY; ACCEPTANCE OF
NEW PRODUCT OFFERINGS; THE COMPANY'S RELATIONSHIP WITH, AND BUSINESS OF, BOSTON
CHICKEN, INC., THE COMPANY'S MAJORITY STOCKHOLDER ("BOSTON CHICKEN"); CHANGES IN
BUSINESS STRATEGY OR DEVELOPMENT PLANS; ACHIEVEMENT OF DEVELOPMENT SCHEDULES;
AVAILABILITY, LOCATIONS AND TERMS OF SITES FOR STORE DEVELOPMENT; FOOD, LABOR
AND EMPLOYEE BENEFIT COSTS; CHANGES IN GOVERNMENT REGULATION; REGIONAL WEATHER
CONDITIONS; AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q.  THE COMPANY CANNOT
PREDICT WHICH FACTORS WOULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
INDICATED BY THE FORWARD-LOOKING STATEMENTS.  IN ADDITION TO CONSIDERING
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.



GENERAL

   On December 5, 1997, the Company converted its loans to its area developers
into a majority equity interest in the area developers and purchased additional
area developer equity interests, and the area developers merged into a surviving
entity, Einstein/Noah Bagel Partners, L.P. ("Bagel Partners").  As a result of
the loan conversions and the area developer merger (together with certain
related transactions, the "Transactions"), the Company owns approximately 78% of
Bagel Partners with the remaining equity interest owned by Bagel Store
Development Funding, L.L.C. and management of the former area developers.

   Prior to the date of the Transactions, the revenue reflected in the
consolidated statements of operations were those generated by the Company as a
lender, franchisor and service provider to the area developers.  From and after
the date of the Transactions, the consolidated statements of operations reflect
all store revenue and operating results.  Such results are adjusted in the
"minority interest" line item to reflect the minority interest in Bagel Partners
not owned by the Company.  As a result of the Transactions, the operating
results for the quarter and three quarters ended October 4, 1998 are not readily
comparable to those for the quarter and three quarters ended October 5, 1997.

   As of October 4, 1998, Boston Chicken held approximately 51.0% of the common
stock of the Company.  In addition, Boston Chicken has an option that permits it
to maintain ownership of shares of common stock having up to 52% of the voting
power of all of the outstanding shares of capital stock of the Company having
the power generally to vote in the election of directors.  The Company and
Boston Chicken 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.  Any interruption of
these services could have a material adverse effect on the Company.

   On October 5, 1998, Boston Chicken announced that it and its Boston Market-
related subsidiaries had filed for protection under Chapter 11 of the federal
bankruptcy laws.  The Company does not expect the filing to have a material
adverse effect on the business, financial condition or results of operations of
the Company.  The business, operations and management of the Company are
separate from Boston Chicken, as are the Company's relationships with its banks
and vendors.

                                       7
<PAGE>
 
   The Company's future financial condition and results of operations are
subject to uncertainties related to stockholder class action lawsuits filed
against the Company and certain other defendants.  See Note 2 of Notes to the
Company's Consolidated Financial Statements.  Because such litigation is at a
preliminary stage, the Company is unable to make a meaningful estimate of any
loss that could result from an unfavorable outcome of the litigation.



RESULTS OF OPERATIONS

   The Company's results of operations for the quarter and three quarters ended
October 5, 1997 reflect the Company's operations primarily as a franchisor.  As
a result of the Transactions, the Company's results of operations for the
quarter and three quarters ended October 4, 1998 reflect the results of the
Company as the majority owner and operator of stores systemwide.

   Revenue. Total systemwide store net revenue increased 13.4% to $87.3 million
for the quarter ended October 4, 1998 compared to $77.0 million for the prior
comparable quarter.  Total systemwide store net revenue increased 27.9% to
$285.7 million for the three quarters ended October 4, 1998 from $223.4 million
for the prior comparable period.  The increase in systemwide store net revenue
was due to an increase in the average number of stores in operation systemwide
to 543 for the quarter ended October 4, 1998 from 510 for the quarter ended
October 5, 1997 and an increase to 553 stores for the first three quarters of
1998 from 433 stores for the comparable 1997 period.

   Average systemwide weekly per store net sales ("WPSA") were $13,378 and
$12,880 for the quarter and three quarters ended October 4, 1998, compared to
$12,721 and $12,968 for the prior comparable periods.  WPSA represents the
weekly per store average revenue, after customer and employee discounts, for all
stores open at the end of the periods presented.  The increase in WPSA for the
quarter ended October 4, 1998 compared to the prior comparable quarter was due
to a new lunch menu and higher menu prices in the third quarter of 1998 and the
closure of underperforming stores in the first and second quarters of 1998.  The
decrease in WPSA for the three quarters ended October 4, 1998 compared to the
prior comparable period was due to lower revenue generated by Noah's New York
Bagels stores during the 1998 period compared to the prior comparable period.

   Company store net revenue was $87.3 million for the quarter ended October 4,
1998.  There were no Company stores in operation in the prior comparable
quarter.  Company store net revenue increased to $285.7 million for the three
quarters ended October 4, 1998, compared to $2.1 million for the prior
comparable period from stores subsequently sold to area developers.  The
increase was due to an increase in the average number of Company stores in
operation to 553 for the three quarters ended October 4, 1998 from an average of
five Company stores for the prior comparable period.

   As a result of the Transactions, the Company did not have any royalties and
franchise-related fees for the quarter or three quarters ended October 4, 1998.
Royalties and franchise-related fees were $7.6 million and $24.9 million for the
quarter and three quarters ended October 5, 1997.

   Store Costs and Expenses.  There were no Company stores in operation for the
quarter ended October 5, 1997 and there was an average of five Company stores in
operation for the three quarters ended October 5, 1997.  Because of the
significant change in the Company store base resulting from the transition to a
Company-controlled system, the Company does not believe that store costs and
expenses for the 1998 periods presented are readily comparable to the
corresponding 1997 periods.

   Store costs and expenses increased to $264 million for the three quarters
ended October 4, 1998 from $1.8 million for the prior comparable period.  The
increase in store costs and expenses was due to an increase in the number of
Company stores resulting from the transition to a Company-controlled system.
Store costs and expenses, as a percentage of store revenue, for the quarter
ended October 4, 1998 were 91.0%.  Store costs and expenses, as a percentage of
store revenue, for the three quarters ended October 4, 1998 were 92.4%, compared
to 84.5% for the prior comparable period.  This increase was due to larger
stores, more complex store configurations and higher food costs associated with
different menu offerings for the three quarters ended October 4, 1998, compared
to the prior comparable period.  Store costs and expenses for the three quarters
ended October 4, 1998 included approximately $0.8 million associated with the
closing of a bagel production plant.  Such increases were offset by a decrease
in 

                                       8
<PAGE>
 
marketing expenses, as a percentage of store revenue, to 3.9% for the three
quarters ended October 4, 1998 from 6.0% for the prior comparable period.  Such
decrease was the result of a change in marketing strategy.

   Salaries, Benefits, General and Administrative. Salaries, benefits, general
and administrative expenses increased to $7.1 million for the quarter ended
October 4, 1998 from $3.1 million for the prior comparable quarter.  Salaries,
benefits, general and administrative expenses increased to $30.0 million for the
three quarters ended October 4, 1998 from $12.9 million for the prior comparable
period.  The increases were due to the transition to a Company-controlled
system, under which expenses previously incurred by the Company's area
developers are now reflected on the Company's consolidated financial statements.
In addition, the Company incurred a severance charge of $1.5 million for
terminated employees in the first quarter of 1998.

   Depreciation and Amortization.  Non-store depreciation and amortization
(excluding goodwill amortization) remained relatively consistent at $0.8 million
for the quarter ended October 4, 1998, compared to $1.1 million for the prior
comparable quarter and $2.6 million for the three quarters ended October 4,
1998, compared to $3.0 million for the prior comparable period.  Goodwill
amortization increased to $2.5 million for the quarter ended October 4, 1998
from $0.5 million for the prior comparable quarter and increased to $8.2 million
for the three quarters ended October 4, 1998 from $1.5 million for the prior
comparable period.  The increases in goodwill amortization resulted from the
Transactions.

   Other Expense.  The Company incurred other expense of $2.7 million for the
quarter ended October 4, 1998 compared to other expense of $1.5 million for the
prior comparable quarter.  The Company incurred other expense of $12.3 million
for the three quarters ended October 4, 1998 compared to other expense of $2.1
million for the prior comparable period.  The increases were due to the interest
on the Company's convertible subordinated debentures issued in the second
quarter of 1997 and a $3.4 million charge associated with the write-off of
certain notes receivable in the second quarter of 1998.

   Minority Interest.  The minority interest in losses of Bagel Partners was
$0.9 million for the quarter ended October 4, 1998 and $4.7 million for the
three quarters ended October 4, 1998.

   Income Taxes.  Because of the uncertainty of utilizing the loss incurred in
1998, no income tax benefit was established.



LIQUIDITY AND CAPITAL RESOURCES

   Cash used in operations for the three quarters ended October 4, 1998 was $9.9
million compared to $17.2 million of cash provided from operations for the three
quarters ended October 5, 1997. The increase in use of cash was due primarily to
a net loss of $26.7 million for the three quarters ended October 4, 1998
compared to net income of $15.6 million for the prior comparable period. The
primary reason for the net loss was the transition to a Company-controlled
system, where costs previously incurred by the Company's area developers are now
incurred by the Company. The use of cash also increased as the result of a
reduction in accounts payable and other changes in working capital.

   For the three quarters ended October 4, 1998, the Company's primary capital
requirements consisted of store development and refurbishment, development and
maintenance of its corporate infrastructure and investments in food production
facilities.  During the three quarters ended October 4, 1998, the Company
expended $14.5 million on construction of new stores, corporate infrastructure
and investments in food production facilities.  A majority of the expenditures
on new store construction were made in the first quarter of 1998 for stores
opened during the fourth quarter of 1997.  For the three quarters ended October
5, 1997, the Company expended $6.6 million related to corporate infrastructure
and investments in food production facilities.

   Cash used in financing activities was $3.3 million for the three quarters
ended October 4, 1998. For the three quarters ended October 5, 1997, financing
activities provided $135.0 million in cash, primarily from the issuance of
convertible subordinated debt.

                                       9
<PAGE>
 
   The Company is party to a secured credit agreement with Bank of America
National Trust and Savings Association and the lenders named therein (the
"Credit Facility"), that consists of a secured term loan facility, under which
$25.5 million was outstanding at October 4, 1998, and a $25.0 million secured
revolving credit facility, of which $1.2 million was outstanding as of October
4, 1998.  Amounts available under the $25.0 million revolving credit facility
are subject to an incurrence test based on the ratio of senior indebtedness to
cash flow.  The Credit Facility contains financial covenants that require
maintaining certain minimum average weekly net sales levels and cash flow
ratios.

   The Company's primary uses of capital for the remainder of 1998, other than
providing working capital for normal operating expenses, are expected to consist
primarily of satisfaction of current liabilities, expenditures related to
maintaining and refurbishing existing stores, and payment of principal and
interest on outstanding indebtedness.  In the event the Company requires
additional capital for working capital needs, there can be no assurance that the
Company will be able to raise such capital on satisfactory terms, if at all.
SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 7.



YEAR 2000

   The Year 2000 issue is the result of computer programs written to identify
the applicable year with two digits rather than four.  As written, these program
may identify the year "00" as 1900 rather than 2000, which could result in
systems miscalculations or systems failure leading to potentially substantial
business disruptions.  The Company has adopted a comprehensive plan to identify
and resolve its Year 2000 issues.  The Company's Year 2000 plan consists of
assuring that its information technology systems, provided by Boston Chicken
under the terms of a computer and communications services agreement, are Year
2000 compliant.  In addition, the Company has implemented a program to obtain
assurances from its third party vendors that their businesses and systems will
be Year 2000 compliant on a timely basis.

   Boston Chicken has informed the Company that the information technology
systems it provides are, or will be by September 1999, Year 2000 compliant.
Such systems include back office and point of sale store systems as well as
financial, human resources, payroll and desktop systems utilized at the
Company's Support Center.  In addition to the public disclosure provided by
Boston Chicken with respect to its Year 2000 compliance efforts, the Company
receives periodic reports from Boston Chicken management relating to Year 2000
issues.  In addition to the fees the Company pays to Boston Chicken under the
computer and communications services agreement, the Company expects to incur
capital expenditures of approximately $1.5 million, primarily to purchase Year
2000 compliant hardware.  The Company intends to continue monitoring Boston
Chicken's Year 2000 compliance efforts on a regular basis.  SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 7.

   The Company has also implemented a program to obtain third party vendor
assurances of Year 2000 compliance.  The Company is currently in the process of
identifying all of its third party vendors and assessing the impact on the
Company if vendors are not Year 2000 compliant. Management of the Company
expects to meet with its most significant vendors, such as its bagel and cream
cheese suppliers and its distribution vendor, by the end of 1998 to discuss
their Year 2000 compliance plans. Substantially all other vendors, including the
Company's landlords, equipment vendors, service providers, banks and utility
companies, will receive letters from the Company requesting written assurance of
Year 2000 compliance on a timely basis. The Company expects that substantially
all third party vendor letters will be sent by mid-December 1998. Management
will then evaluate all vendor responses and, if any response is deemed
inadequate, will follow-up with letters, telephone calls and/or meetings with
the applicable vendor. Throughout this process, management of the Company will
assess both the likelihood of compliance by the vendor and the impact on the
Company if it is determined that the vendor will not be compliant on a timely
basis. To the extent that the Company determines that a significant vendor is
not likely to be Year 2000 compliant in a timely manner, the Company intends to
develop contingency plans, including obtaining alternative sources for any
product or service material to maintaining uninterrupted business operations.
The Company expects that its third party vendor compliance program, including
the development and implementation of contingency plans, if necessary, will be
complete by June 1999. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS"
ON PAGE 7.

                                       10
<PAGE>
 
   The Company's Year 2000 compliance efforts involve a significant amount of
time and effort by management and employees, the total cost of which is
difficult to precisely estimate.  The Company does not, however, anticipate that
these costs will be material to the Company.  The Company does not expect
significant business disruptions arising from the failure of its third party
vendors to be Year 2000 compliant on a timely basis; however, third party
compliance efforts are not within the Company's control.  There can be no
assurance that all of the Company's material third party vendors will be Year
2000 compliant, or that the Company will successfully develop and implement
satisfactory contingency plans on a timely basis.  The occurrence of any such
event could have a material adverse effect on the financial condition or results
of operations of the Company.  SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 7.

                                       11
<PAGE>
 
PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

     The information set forth under Note 2 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 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:  During the third quarter ended October 4, 1998,
          the Company filed a current report on Form 8-K dated July 15, 1998.
          The Form 8-K reported under Item 5 that the Company had been notified
          that the Nasdaq Stock Market ("Nasdaq") had determined that the
          Company was not in compliance with certain listing requirements for
          continued listing of the Company's common stock on the Nasdaq National
          Market.  Subsequent to the end of the third quarter, the Company filed
          a current report on Form 8-K dated October 13, 1998 announcing that as
          a result of a Nasdaq hearing held in August 1998, Nasdaq had notified
          the Company that the Company's common stock would begin trading on the
          Nasdaq Small Cap Market effective October 15, 1998.

                                       12
<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 17, 1998
                                           /s/ Robert M. Hartnett
                                           -------------------------------------
                                                    Robert M. Hartnett
                                                  Chairman of the Board,
                                           Chief Executive Officer and President



Date:  November 17, 1998
                                           /s/ W. Eric Carlborg
                                           -------------------------------------
                                                      W. Eric Carlborg
                                                   Chief Financial Officer

                                       13
<PAGE>
 
                                 EXHIBIT INDEX
                                        

10.1 Second Amendment and Waiver dated as of October 4, 1998 to Amended and
     Restated Secured Credit Agreement dated as of November 21, 1997 among the
     Company, Bank of America National Trust and Savings Association, as Agent
     and Issuing Lender, General Electric Capital Corporation, as Co-Agent and
     the Lenders named therein.

10.2 Employment Agreement dated September 11, 1998 between the Company and
     Robert M. Hartnett.

27   Financial Data Schedule.

                                       14