** **

** **

                                                              

**TABLE OFCONTENTS**

| **FORM 10-KSB  - PART I**                                                                                                                                                         | **3 - 15**  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
| Item  1       Description of Business                                                                                                               | 3 - 14      |
| Item  2       Description of Property                                                                                                               | 15 - 15     |
| Item  3       Legal Proceedings                                                                                                                     | 15          |
| Item 4       Submission  of Matters to a Vote of Security Holders                                                                                   | 15          |
| **PART II**                                                                                                                                                                       | **16 - 23** |
| Item 5       Market  for Common Equity and Related Stockholder Matters                                                                              | 16 - 17     |
| Item 6       Management's  Discussion and Analysis of Financial Condition and Results of Operations                                                 | 18 - 22     |
| Item  7       Financial Statements                                                                                                                  | F1 - F15    |
| Item 8       Changes  In and Disagreements with Accountants on Accounting and Financial Disclosure                                                  | 23          |
| Item  8A     Controls and Procedures                                                                                                                          | 23          |
| Item  8B     Other Information                                                                                                                                | 23          |
| ****
**PART III**                                                                                                                                                                 | **23 - 28** |
| Item 9       Directors,  Executive Officers, Promoter, Control Persons and Corporate Governance;  Compliance with Section 16(a) of the Exchange Act | 23          |
| Item  10     Executive Compensation                                                                                                                           | 24          |
| Item 11     Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                                                  | 24          |
| Item 12     Certain  Relationships, Related Transactions, and Director Independence                                                                           | 24          |
| Item  13     Exhibits                                                                                                                                         | 24 - 27     |
| Item 14     Principal Accountant  Fees and Services                                                                                                           | 27          |
| Signatures                                                                                                                                                                        | 28          |

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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington****, D.C.**** 20549**

** **

**FORM 10-KSB**

(Mark One)

(X)        ANNUALREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACTOF 1934

For the fiscalyear ended:  September 30, 2008

OR

(  )        TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACTOF 1934

For thetransition period from ____________ to _____________

Commissionfile number: 000-18590

**Good TimesRestaurants Inc.**

(Name of smallbusiness issuer in its charter)

 

Nevada                                 84-1133368

(State orother jurisdiction of      (I.R.S. Employer

incorporationor organization)     Identification No.)

601 CorporateCircle, Golden, Colorado     80401

(Address ofprincipal executive offices)     (Zip Code)

Issuer'stelephone number:  (303) 384-1400

Securitiesregistered under Section 12(b) of the Exchange Act:

                                       Titleof each class                                      Name of each exchangeon which registered

Common Stock$.001 par value, Preferred Stock $.01 par value              The NASDAQ StockMarket, LLC

(Title ofclass)

Securitiesregistered under Section 12(g) of the Exchange Act:

Check whetherthe issuer (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes   [X]  No   [   ]

Check if thereis no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB [X]

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).

Yes [   ]     No [X]

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The issuer's revenues for itsmost recent fiscal year ended September 30, 2008 were $25,882,000

As of December 15, 2008, the aggregate market value of the 1,945,818 shares of common stock held bynon-affiliates of the issuer, based on the closing sales price of the commonstock on December 15, 2008 of $1.30 per share as reported on the Nasdaq CapitalMarket, was $2,529,563.

As of December 15, 2008, the issuer had 3,898,559 shares of common stock outstanding.

**DOCUMENTSINCORPORATED BY REFERENCE**

The information required byItems 9 through 13 of Part III of this form is incorporated by reference fromthe issuer's definitive proxy statement to be filed with the SEC not later than120 days after the end of the fiscal year covered by this form in connectionwith the issuer's annual meeting of shareholders to be held on January 26, 2009.

TransitionalSmall Business Disclosure Format  Yes [    ]     No [X] 

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**PARTI**

**Item 1.           Description ofBusiness.**

**Overview:**Good Times Restaurants Inc., a Nevada corporation (the "Company"),was organized in 1987.  The Company is essentially a holding company for itswholly owned subsidiary, Good Times Drive Thru Inc., which is engaged in thebusiness of developing, owning, operating and franchising hamburger-orienteddrive-through restaurants under the name Good Times Burgers & FrozenCustard.  Most of our restaurants are located in the front-range communities of  Colorado but we also have franchised restaurants in Idaho, North Dakota and Wyoming.  The terms "Good Times", "we", "us" and "our" whereused herein refer to the operations of Good Times Drive Thru Inc. and of theCompany.

**RecentDevelopments:**  After several years of same storesales growth, including several months of double digit growth in fiscal 2007and early fiscal 2008, we experienced a dramatic change in our sales trends,beginning in early calendar 2008 as the economy began to slow and competitivepricing pressures intensified.   Due to the dramatic decline in consumerspending, the unprecedented rise in commodity costs and the upheaval in thecredit markets, we suspended most of our restaurant development under both thedual brand format and under the Development Agreement with Zen Partners LLCdescribed below.  We also had to slow the pace of development of company-ownedrestaurants. 

As discussedbelow in Concept and Business Strategy, we are focusing on regaining our samestore sales momentum, improving our core value proposition for the consumer andevolving the brand to a more highly differentiated position in the marketplace.

The initialstore of a dual brand test with a large regional Mexican quick servicerestaurant chain, Taco John's International, opened in the spring of 2004. Weconverted two existing underperforming Good Times to the dual brand format inJune 2005 and February 2006 and we opened a new dual brand company-ownedrestaurant in August 2006.  Four additional franchised dual brand restaurantswere opened during fiscal 2006 in Colorado and North Dakota and two additionalfranchised dual brand restaurants were opened during fiscal 2007 in Wyoming and   North Dakota.  Initial sales at the test stores generally met or exceededexpectations.  However, operating costs were significantly higher thananticipated and customer service measures were lower in the dual brandoperation, limiting its franchise expansion potential.  In December 2007 wegranted permission for a North Dakota franchisee to terminate their Good Timesfranchise agreements in the dual brand concept and effective December 2008 oneWyoming dual brand franchise agreement will also be terminated.  Our dual brandtest agreement expired in September 2008 by mutual agreement. However, oneadditional franchised dual brand restaurant will open in December 2008 inSheridan, Wyoming.

On December 3, 2007, we entered into a development agreement with Zen PartnersLLC that is comprised of a Development Agreement, a Management Agreement and aSite Selection, Construction Management and Pre-Opening Services Agreement. David Grissen, a significant stockholder and a member of our board ofdirectors, has a 20% ownership interest in Zen Partners LLC.  The agreementsprovide for the development of up to twenty-five restaurants with a five yeardevelopment schedule for up to ten restaurants and an option to develop anadditional fifteen restaurants, exercisable any time during the initial fiveyear period.  We will operate the restaurants utilizing our employees on thesame basis as we would company-owned restaurants; however, Zen Partners LLCwill provide all development and operating capital.  For each restaurant thatis developed, we will receive a monthly management fee of 5% of gross operatingrevenues for the restaurant, and a services fee of $25,000.  We may provide alimited lease guaranty on the initial three restaurants developed, for which wewill receive a lease guaranty fee equal to 1% of net sales of the restaurantfor so long as the lease guaranty is in effect.  We may also arrange saleleaseback transactions for sites of the restaurants developed, for which wewill receive a sale leaseback fee of $7,500 per restaurant.  We will also participatein the ongoing profitability of the restaurants by receiving an incentive feeequal to (i) 30% of the incentive income (as defined in the ManagementAgreement) per year until Zen Partners LLC has received a 25% return on its netequity investment and (ii) 20% of the incentive income per year thereafter. The total future amounts of these fees and participations, if any, to bereceived by us, and the interest therein of David Grissen, in connection withthis transaction are not currently determinable.  In August 2008 we announcedthe suspension of development of Good Times restaurants with Zen Partners LLC.  Wecurrently plan to reevaluate expansion discussion as conditions impacting oursales trends, the macroeconomic environment and credit markets may change. 

**Conceptand Business Strategy:**We operate with two different formats that have evolved over the course of ourhistory:  a smaller, 880 square foot double drive thru building focused ondrive thru service and limited walk up service; and a newer 2,400 to 2,700square foot, 70 seat dining room format that is the model for future stores. We are currently further refining the prototype design to reduce developmentcosts and improve the return on investment model for company owned andfranchised restaurant expansion with a 2,000 square foot, 50 seat dining roomdesign that will carry forward all of the core design elements of our priorprototype design.

The most reliable measure of customer loyalty istheir likelihood to recommend a restaurant brand.  Our objective is to haveevery customer and every employee want to recommend Good Times to theirfriends.  To achieve this, we have developed the following strategies.

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§  *Focuson our most important drivers of success:*

o   *Values. *Westrive to build and develop behaviors and expectations around what we valuemost throughout the company: integrity, continued improvement, customer loyaltyand respect for each other.

o   *People.* Beginningwith our Operating Partner Program, people are our strongest asset.  We seek tohire high quality people throughout and provide them with comprehensivetraining programs to ensure that we deliver consistently superior products andservice.

o   *Distinctivequality. *Westrive to offer unique, highly distinctive tastes with the highest qualityingredients available in the quick service restaurant category.

o   *Excellentsystems.* Westrive to provide the best systems and processes in every area to free ourmanagement to focus on leading their people.

§ *Offerhigh quality, unique menu items that provide exceptional value. *Ourrestaurants feature menu items that are unique in the quick service segment,and flavor profiles that are associated more with casual theme restaurants thanwith fast food.  Whenever possible, products support the brand umbrella of"fresh, high quality ingredients" such as fresh frozen custard made freshthroughout the day in every restaurant, 100% all natural Coleman beef, freshsqueezed lemonade, fresh leaf lettuce, grilled honey cured bacon, slicedBermuda onions and toppings such as real guacamole,  grilled pineapple andsautéed mushrooms.  Each menu category has signature recipes with fun,irreverent names that build Good Times' non-traditional personality such asWild Fries with Wild Dippin Sauce, Big Daddy Bacon Cheeseburger, Mighty Deluxe,Burnin' Buffalo Chicken and Cappuccino Mocha Joe, Raspberry Torte andStrawberry Cheesecake Addiction Custard Spoonbenders.  We use a culinaryconsultant to assist in the ongoing development of new products and validate aproduct's appeal through research, testing and customer feedback panels priorto its rollout.  We rolled out a new 100% all natural Coleman beef snack-sizedburger available in 3 packs and 5 packs called the Bambino Burger to appeal tothe more budget conscious consumer in May of 2007 which generated significantsales growth until January of 2008.  Consumer feedback has shown that theproduct is unique and consumers use it for a different occasion than ourtraditional products, but it has not been a viable substitute for competing $1value menus.  We do not offer a broad menu of $1 items and do not believe wecan compete effectively at that price with the major chains.  We are makingsignificant changes to our entire menu to leverage our heritage of qualityproducts and to position the Good Times brand for a more unique and highlydifferentiated consumer experience.   Those product and system changes includethe following:

a.      Theintroduction of fresh, never frozen, all natural, purebred Angus beef for allof our burgers.  The beef is Certified Humanely Raised, has never hadantibiotics or growth hormones and is vegetarian fed. 

b.     Increasing thesize of our hamburger patties by approximately 10% on a new split top, spongebaked bun that is 20% heavier with increased portions of fresh produce.

c.      A permanentlyreduced price for our core Deluxe Burger and Deluxe Cheeseburger for a strongervalue proposition.

d.     Establishing anew fresh grilled, honey cured bacon burger category with new flavor profiles.

e.      Reworking ourchicken category with 100% breast meat sandwiches and tenders with revisedflavor profiles that are unique to fast food.

f.       Evaluatinghomemade, hand-breaded onion rings.

g.      Evaluatinghomemade, fresh cut fries.

h.      Raising thesales and promotional activity of our fountain category of fresh squeezedlemonades, fresh frozen custard treats, shakes, malts and floats.

i.       Re-trainingevery team member in every restaurant on every position with new standards.

•        *Establisha unique brand position in quick service restaurants*.  We aspireto have Good Times stand for "providing food the way it used to be.  Good Timesis bringing real food back to fast food with pure, wholesome food that tastesthe way food used to taste."  Key brand support for that will includeattributes such as "Fresh", "All Natural", "Fresh Grilled", "Authentic","Homemade", and "Fresh Squeezed" with a theme of fresh ingredients and handcrafted food. 

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§ *Continuallyimprove our fast, friendly, personal customer service.*We strive tooptimize and personalize the interaction between our employees and customers,particularly at the points of order and payment, to build a reputation ashaving the friendliest service.  We manage the face to face interaction withour customers through extensive employee screening and hospitality training toensure their experience is punctuated by attentive, friendly service.  Duringfiscal 2009 we plan to introduce a new online screening and hiring system to reduceour hourly employee turnover and hire for good service attitudes.  Additionally,we plan on introducing video training tools for the first time that willenhance consistent execution of our quality standards. Speed of service throughour drive thru lanes is important to the consumers' need for convenience, butis always secondary to delivering the highest quality product possible.  Wemonitor each car's service time and have developed incentive programs formanagement and employees to maintain our quick service standards.

§ *Buildcustomer loyalty through a unique brand experience. *In addition tofast friendly service and great tasting products, we strive to maintain clean,safe and appealing facilities with a particular emphasis on well groomedlandscaping, freshly painted exteriors and merchandising that highlights theunique product attributes and flavors of our products.  We believe thateverything the customer sees, smells, hears and feels influences their overallimpression and the reputation of Good Times and that Good Times' targetcustomer is seeking more out of even a quick service restaurant experience. While providing an excellent value at an average check slightly over $5 perperson, we do not focus on offering the lowest price or the biggest portions.

§ *Buildawareness of the Good Times Burgers & Frozen Custard brand.*We believethat Good Times has built substantial brand equity among our customers and hasbecome known for our quality, service and signature tastes, particularly withinthe hamburger category.  We believe there is significant opportunity tocontinue to build that reputation within the hamburger category by continuingto build a stronger overall value proposition and increase awareness of ourfrozen custard and fountain category. As we continue to build out the Colorado market, we plan to increase our media advertising, raising our overall awarenessand building a highly differentiated brand personality.  Our objective is tocreate customer loyalty and affinity for Good Times.

§ *Continuallyimprove our employees' knowledge and proficiency of our core processes.*Our customers'experience is driven by the ability of our management and employees toconsistently execute clearly defined processes in every area of our business. We believe that our employees' abilities and attitudes are directly related toour ability to provide well designed service, production and operatingprocesses and effective training that allows them to continually learn, improveand succeed.  We train, test, certify and re-train all employees and managementon all of our core operating and management processes to continually improvelevels of proficiency.

**Current fiscal year initiatives**

1.    **ConsistentlyGrow Same Store Sales:** We will continue to focus on comparable restaurantsales driven by increases in guest counts and increases in the average guestcheck.  Same store sales decreased 1.6% in fiscal 2008 compared to fiscal 2007. We experienced the largest decreases in the last four months of the year asthe macroeconomic environment deteriorated.  We hope to increase guest countsin fiscal 2009 through a multi-faceted approach to continually improve the GoodTimes brand experience for our customers by:

•      Establishingan improved core value proposition that is centered on the price/valuerelationship of our Deluxe and Double Cheeseburgers.

•      Expandingour core consumer target to include more 16 to 29 year olds, who show a higheraffinity for all natural products and are amongst the heaviest users of quickservice restaurants.  We will continue to orient our media advertising to thiscore consumer group.

•      Evolvingthe Good Times brand position under a new umbrella of "Back to Real Food."

•      Increasingour level of discount offers to promote the trial of new and re-engineeredproducts.

•      Improvingour execution on customer service and the delivery of our brand experiencethrough re-training of all of our employees on new standards and heightenedexpectations.

•      Continuingto reinvest in our existing facilities with enhanced landscaping, patios andexterior building finishes to improve the restaurants' curb appeal andappearance.  We plan to remodel select restaurants with finishes consistentwith our new restaurants so that we have a common image, regardless of theformat or age of the restaurant.

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2.    **ManageRestaurant Operating Costs:** Fiscal 2008 was again a challenging macro environmentfor food, paper and labor costs in the restaurant industry, with unprecedentedincreases in commodity costs that affected most of our product ingredientcosts. We implemented a cumulative total weighted menu price increase of 4.8%during fiscal 2008, but we experienced a weighted increase in the cost of ourfood and paper ingredients of 12%, with the majority of those cost increasescoming in the last six months of the year, so our gross profit margin declined..40% for the year.  Although the consumer spending environment is heavilyweighted toward value and low price, we are limited in our ability to takeadditional price increases.  Colorado minimum wage increased from $5.15 to $6.85per hour on January 1, 2007 and increased again to $7.02 on January 1, 2008, which increased our overall wage scale by approximately $.72 per employeehour over the last two years.   During fiscal 2008, we engineered labor hoursout of our system through improved efficiencies without affecting our servicelevels and plan to continue to focus on reducing non-service hours.  Typically,our newly opened restaurants initially experience higher operating costs inboth dollars and percentage of revenues when compared to our restaurants openfor more than a year.  Accordingly, sales volumes, timing of openings and initialoperating margins of any new restaurants are expected to have an impact on ouroverall profitability until our restaurant operating base is large enough tomitigate the impact of these opening costs and inefficiencies.

3.      **NewRestaurant Growth:**  Our newer prototype model stores located on highprofile pad sites in big box retail and strip centers in higher incomedemographic areas are performing consistently above the average of our olderstores. While we still believe that we can add an additional 10 to 15restaurants in Colorado over the next several years as sites become available,our ability to effectively finance those new stores is driven by our salesgrowth and profitability, so we have slowed the acquisition of new sites.  Weclosed on one restaurant site in late 2008 and have it fully titled andpermitted for development, but we will wait until we see an improvement in oursales trends and operating cash flow before we develop the site.  We suspendedour developer-owner and company-owned development in Nebraska due to thedramatic shift in the credit markets and the inability for us and our developerpartners to access acceptable debt financing.  Good Times continues to offerfranchises for the development of additional Good Times restaurants, however weare not actively marketing for new franchisees and we terminated our VicePresident of Franchise Development in late 2008.  We hope to resume anaccelerated franchise development program based on the success of our brandinginitiatives, development of the smaller prototype building and improvement inthe macro-economic environment.

**Expansion strategy and site selection:** Our longerterm strategy is to become a super regional brand in select contiguous markets,maximizing our overall brand awareness and distribution, marketing andoperational efficiencies. 

We plan on developing our new prototype restaurantdesign on sites that are on or adjacent to big box or grocery store anchoredshopping centers in high activity and employment areas.  Our site selection fornew restaurants is oriented toward slightly higher income demographic areasthan many of our urban locations and most of our targeted trade areas are inrelatively high growth areas of the Denver, Colorado Springs and northern Colorado markets.

We lease most of our sites.  When we do purchaseand develop a site, we intend to sell the developed site into thesale-leaseback market under a long term lease.  Our primary site objective isto secure a suitable site, with the decision to buy or lease as a secondaryobjective.  Our site criteria includes a mix of substantial daily traffic,density of at least 30,000 people within a three mile radius, strong daytimepopulation and employment base, retail and entertainment traffic generators,good visibility and easy access.

**Restaurant locations:** We currentlyoperate and franchise a total of fifty-two Good Times restaurants, of whichforty-eight are in Colorado, with forty-three in the Denver greatermetropolitan area, three in Colorado Springs, one in Grand Junction and one inSilverthorne.

| ** **                              | **Total**                        | **Denver****, CO**

**Greater  Metro**                         | **Colorado**

**Other** | **Idaho** | **Wyoming** | **North    Dakota** |
|-----------------------------------------|----------------------------------|----------------------------------------------------------------|-------------------------|-----------|-------------|---------------------|
| Good  Times co-owned & co-developed |     27            |          24            | 3                       |           |             |                     |
| Good  Times franchised                  |     17            |          14            | 2                       | 1         |             |                     |
| Dual  brand co-owned                    |       3 |            3 |                         |           |             |                     |
| Dual  brand franchised                  |       5 |            2 |                         |           | 2           | 1                   |
| Total                                   |     52            |          43            | 5                       | 1         | 2           | 1                   |

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| **DECEMBER** |
|--------------|

|                                | **2007** | **2008** |
|--------------------------------|----------|----------|
| Company-owned restaurants      | 18       | 21       |
| Joint venture restaurants      | 9        | 9        |
| Franchise operated restaurants | 27       | 22       |
| Total  restaurants             | 54       | 52       |

In January 2008 a North Dakota franchiseterminated their Good Times franchise agreement in the dual brand concept andhas stopped selling Good Times products in their two locations.  In March 2008we purchased two Good Times restaurants from an existing franchisee.  In June2008 the Good Times franchisee operating at the University of Wyoming Food  Court ceased operations when the contract to operate in the food courtexpired.  There are no plans for this franchisee to operate in anotherlocation.  In October 2008 we opened one new company-owned restaurant inFirestone, Colorado.

**Menu:** The menu of aGood Times Burgers & Frozen Custard restaurant is limited to hamburgers,cheeseburgers, chicken sandwiches, french fries, onion rings, fresh squeezedand frozen lemonades, soft drinks and frozen custard products.  Each menu itemis made to order at the time the customer places the order and is notpre-prepared.

The hamburger patty is prepared with speciallyformulated and seasoned Coleman 100% natural beef, served on a 4 1/4 inch bun. Coleman was acquired by Meyer All Natural Beef and as of January 2009 all ofour hamburgers will be made from fresh, all natural, pure bred Angus beef.  Hamburgersand cheeseburgers are garnished with fresh iceberg lettuce, fresh sliced sweetredonions,mayonnaise,mustard,ketchup, pickles and fresh sliced tomatoes.  Other specialty hamburger toppingsinclude guacamole, fresh grilled honey cured bacon, and proprietary sauces. The chicken products include a spiced, battered whole muscle breast patty and agrilled seasoned breast patty, both served with mayonnaise, lettuce andtomatoes and Chicken Dunkers, whole breast meat breaded strips. Signaturechicken sandwiches include the Burnin' Buffalo, Tasty Teriyaki, PeppercornRanch and Guacamole Chicken.  Equipment has been automated and equipped withcompensating computers to deliver a consistent product and minimize variabilityin operating systems.

All natural Angus beef is raised without the useof any hormones, antibiotics or animal byproducts that are normally used in theopen beef market.  We believe that all natural beef delivers a better tastingproduct and, because of the rigorous protocols and testing that are a part ofthe Meyer processes, also may minimize the risk of any food-bornebacteria-related illnesses. 

Fresh frozen custard is a premium ice cream(requiring in excess of 10% butterfat content) with a proprietary vanilla blendthat is prepared from highly specialized equipment that minimizes the amount ofair that is added to the mix and that creates smaller ice crystals than otherfrozen dairy desserts.  The custard is scooped similarly to hard-packed icecream but is served at a slightly warmer temperature. The resulting product issmoother, creamier and thicker than typical soft serve or hard-packed ice creamproducts.  Good Times serves the frozen custard in cups and cones, specialtysundaes and "Spoonbenders", a mix of custard and toppings, and weanticipate it will continue to become a larger percentage of sales as wecontinue to develop custard products and awareness.

**Marketing & Advertising:** Our marketingstrategy focuses on:  1) driving comparable restaurant sales through attractingnew customers and increasing the frequency of visits by current customers; 2)communicating specific product news and attributes to build strong points ofdifference from competitors; and 3) communicating a unique, strong andconsistent brand.

Media is an important component of building GoodTimes' brand awareness and distinctiveness.  We spent our advertising dollarson both television and radio media during fiscal 2008.  The Colorado market isan expensive media market, so most of our advertising placement is not in primetime but in early and late fringe, prime access and late news time slots.  Aswe continue to develop more and more distinctiveness to Good Times' brand andincrease penetration of the Colorado market, we anticipate we will continue touse media advertising to increase overall awareness.

Another important component of our marketingefforts is point-of-sale and on-site merchandising.  We rotate new four colorproduct point-of-purchase displays every other month and support new productintroductions with extensive merchandising. Our restaurants with dining roomshave back-lit and front-lit product displays, table tents and product messagingthroughout.  Menu boards are kept fresh with new food photography and graphicsseveral times throughout the year.

During fiscal 2006 we re-designed and expanded theuse of our website and have begun to use email marketing as a tool to buildcustomer loyalty.  We have a marketing agreement with the Pepsi Center in Denver , Colorado to serve and promote Good Times' products in that venue.

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As we re-engineer several of our core products,our marketing will also focus on generating new customer trials through streetmarketing, public relations, direct response mail and charitable tie-ins. 

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**Operations**

**Restaurant Management:** We aredeveloping Operating Partners in most of our restaurants as we are able torecruit qualified candidates.  We believe that this is a distinct competitiveadvantage that provides a higher level of service, quality control andstability over time. The objective of the Operating Partner Program is to haveeach partner develop a relationship with the employees, the customers and thecommunity at their restaurant and develop an ownership mentality withcommensurate rewards as sales increase over a longer period of time.  Theprogram allows an Operating Partner to earn 25% of a restaurant's improvementin cash flow over an established baseline.  Each Good Times unit employs anoperating partner or a general manager, one to two assistant managers andapproximately 15 to 25 employees, most of whom work part-time during threeshifts.  An eight to ten week training program is utilized to train restaurantmanagers on all phases of the operation.  Ongoing training is provided asnecessary. We believe that incentive compensation of our restaurant managers isessential to the success of our business.  Accordingly, in addition to asalary, managerial employees may be paid a bonus based upon proficiency inmeeting financial, customer service and quality performance objectives tied toa monthly scorecard of measures.

**Operational systems and processes:** We believethat we have some of the best operating systems and processes in the industry. Detailed processes have been developed for hourly, daily, weekly and monthlyresponsibilities that drive consistency across our system of restaurants andperformance against our standards within different day parts.  We utilize alabor program to determine optimal staffing needs of each restaurant based onits actual customer flow and demand.  We also employ several additionaloperational tools to continuously monitor and improve speed of service, foodwaste, food quality, sanitation, financial management and employeedevelopment.  We are moving toward automating and computerizing as many ofthese systems as possible into an integrated, digital management system.

The order system at each Good Times restaurant isequipped with an internal timing device that displays and records the time eachorder takes to prepare and deliver.  The total transaction time for thedelivery of food at the window is approximately 30 to 60 seconds during peak times.

We use several sources of customer feedback toevaluate each restaurant's service and quality performance, including anextensive, computerized secret shopper program, customer comment phone line,telephone surveys and web site comments.  Additionally, management uses bothits own primary consumer research for product development and to determinecustomer usage and attitude patterns as well as third party market researchthat evaluates Good Times' performance ratings on several different operatingattributes against key competitors.

**Training:** We strive tomaintain quality and consistency in each of our restaurants through the carefultraining and supervision of all our employees at all levels and theestablishment of, and adherence to, high standards relating to personnelperformance, food and beverage preparation and maintenance of our restaurants. Each manager must complete an eight to ten week training program, be certifiedon several core processes and is then closely supervised to show both comprehensionand capability before they are allowed to manage autonomously.  All of ourtraining and development is based upon a "train, test, certify, re-train" cyclearound standards and operating processes at all levels.  We conduct asemi-annual performance review with each manager to discuss prior performanceand future performance goals.  We have a defined weekly and monthly goalsetting process around service, employee development, financial management andstore maintenance goals for every restaurant.  During fiscal 2009, we willbegin to develop additional video training tools to drive training efficienciesand consistency.

**Recruiting and retention:** We seek tohire experienced restaurant managers and Operating Partners.  We supportemployees by offering competitive wages and benefits, including a 401(k) plan,medical insurance, stock options for regional managers and incentives plans atevery level that are tied to performance against key goals and objectives.  Wemotivate and prepare our employees by providing them with opportunities forincreased responsibilities and advancement.  We also provide various otherincentives, including vacations, car allowances, monthly performance bonusesand monetary rewards for managers who develop future managers for our restaurants.  In fiscal 2009, we will implement an online screening and hiring tool that hasproven to reduce hourly employee turnover in the quick service restaurantindustry.

**Franchising:** Good Timeshas prepared prototype area rights and franchise agreements, a UniformFranchise Disclosure Document ("UFDD") and advertising material to be utilizedin soliciting prospective franchisees.  We seek to attract franchisees that areexperienced restaurant operators, well capitalized and have demonstrated theability to develop one to five restaurants.  We currently review sites selectedfor franchises and monitor performance of franchise units.  We are notcurrently soliciting new franchisees until later in fiscal 2009 or early 2010.

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We estimate that it will cost a franchisee onaverage approximately $750,000 to $1,100,000 to open a restaurant with diningroom seating, including pre-opening costs and working capital, assuming theland is leased.  A franchisee typically will pay a royalty of 4% of net sales,an advertising materials fee of at least 1.5% of net sales, plus participationin regional advertising up to an additional 4% of net sales, or a higher amountapproved by the advertising cooperative, and initial development and franchisefees totaling $25,000 per restaurant.  Among the services and materials whichwe provide to franchisees are site selection assistance, plans andspecifications for construction of the Good Times Burgers and Frozen Custardrestaurants, an operating manual which includes product specifications andquality control procedures, training, on-site opening supervision and advicefrom time to time relating to operation of the franchised restaurants.

After a franchise agreement is signed, we activelywork with and monitor our franchisees to ensure successful franchise operationsas well as compliance with Good Times systems and procedures.  During thedevelopment phase, we assist in the selection of sites and the development ofprototype and building plans, including all required changes by localmunicipalities and developers.  We provide an opening team of trainers toassist in the opening of the restaurant and training of the employees.  Weadvise the franchisee on menu, management training, marketing, and employeedevelopment.  On an ongoing basis we conduct standards reviews of all franchiserestaurants in key areas including product quality, service standards,restaurant cleanliness and sanitation, food safety and people development.

We have entered into thirteen franchise agreementsin the greater Denver metropolitan area.  Fourteen franchise restaurants andnine joint-venture restaurants are operating in the Denver metropolitan areamedia market.  Good Times franchise restaurants also operate in Colorado Springs and Grand Junction, Colorado and in Boise, Idaho.  Dual brandedfranchised restaurants operate in Cheyenne and Gillette, Wyoming, Ft. Collins and Windsor, Colorado, and Bismarck, North Dakota.

**Management Information Systems:** Financial andmanagement control is maintained through the use of automated data processingand centralized accounting and management information systems that we provide. Sales, labor and cash data is collected daily via a restaurant back officesystem which gathers data from the restaurant point-of-sale system.  Managementreceives daily, weekly and monthly reports identifying food, labor andoperating expenses and other significant indicators of restaurant performance. We believe that these reporting systems are sophisticated and enhance ourability to control and manage operations.

**Food Preparation, Quality Control& Purchasing:**We believe that we have some of the highest food quality standards in the quickservice restaurant industry.  Our systems are designed to protect our foodsupply throughout the preparation process.  We inspect specific qualifiedmanufacturers and work together with those manufacturers to providespecifications and quality controls.  Our operations management teams aretrained in a comprehensive safety and sanitation course provided by theNational Restaurant Association.  Minimum cook temperature requirements andline checks throughout the day ensure the safety and quality of both burgersand other items we use in our restaurants.

We currently purchase 100% of our restaurant foodand paper supplies from Yancey's Food Service.  We do not believe that thecurrent reliance on this sole vendor will have any long-term material adverseeffect since we believe that there are a sufficient number of other suppliersfrom which food and paper supplies could be purchased.  We do not anticipateany difficulty in continuing to obtain an adequate quantity of food and papersupplies of acceptable quality and at acceptable prices.

**Employees:** At December 15, 2008, we had approximately 536 employees of which 445 are part time hourlyemployees and 91 are salaried employees working full time.  We considerour employee relations to be good.  None of our employees are covered by acollective bargaining agreement.

**Competition:** Therestaurant industry, including the fast food segment, is highly competitive. Good Times competes with a large number of other hamburger-oriented fast foodrestaurants in the areas in which it operates.  Many of these restaurants areowned and operated by regional and national restaurant chains, many of whichhave greater financial resources and experience than we do.  Restaurantcompanies that currently compete with Good Times in the Denver market includeMcDonald's, Burger King, Wendy's, Carl's Jr. and Sonic.  Double drive-throughrestaurant chains such as Rally's Hamburgers and Checker's Drive-InRestaurants, which currently operate a total of over 800 double drive-throughrestaurants in various markets in the United States, are not currentlyoperating in Colorado.  Management believes that these double drive-throughrestaurant chains will not expand into Colorado based on their publiclyreported objectives and resources.  Culver's is the only significant competitoroffering frozen custard as a primary menu item operating in the Denver and   Colorado Springs markets and has a significant presence in the targetedMidwestern markets for expansion.  Additional "fast casual" hamburgerrestaurants are being developed in the Colorado market, such as Smashburger andFive Guys, however, they do not have drive-through service and generate anaverage per person check that is approximately 50% higher than Good Times.

Our management believes that we may have acompetitive advantage in terms of quality of product compared to traditionalfast food hamburger chains.  Early development of our double drive-throughconcept in Colorado has given us an advantage over other double drive-throughchains that may seek to expand into Colorado because of our brand awareness andpresent restaurant locations.  Nevertheless, we may be at a competitivedisadvantage to other restaurant chains with greater name recognition andmarketing capability.  Furthermore, most of our competitors in the fast-foodbusiness operate more restaurants, have been established longer, and havegreater financial resources and name recognition than we do.  There is alsoactive competition for management personnel, as well as for attractivecommercial real estate sites suitable for restaurants.

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**Trademarks**: Good Timeshas registered its mark "Good Times! Drive Thru Burgers"(SM) with theState of Colorado.  We have also registered our mark "Good Times Burgers &Frozen Custard" federally and with the State of Colorado.  Good Times receivedapproval of its federal registration of "Good Times" in 2003.  Inaddition we own trademarks or service marks that have been registered, or forwhich applications are pending, with the United States Patent and TrademarkOffice including but not limited to: "Mighty Deluxe", "Wild Fries","Spoonbender", "Chicken Dunkers", "Big Daddy Bacon Cheeseburger", and"Wild Dippin' Sauce". Our trademarks expire between 2009 and 2015.

**Government Regulation:** Each GoodTimes restaurant is subject to the regulations of various health, sanitation,safety and fire agencies in the jurisdiction in which the restaurant islocated.  Difficulties or failures in obtaining the required licenses orapprovals could delay or prevent the opening of a new Good Times restaurant. Federal and state environmental regulations have not had a material effect onour operations. More stringent and varied requirements of local governmentalbodies with respect to zoning, land use and environmental factors could delayor prevent development of new restaurants in particular locations.  We aresubject to the Fair Labor Standards Act, which governs such matters as minimumwages, overtime, and other working conditions.  In addition, we are subject tothe Americans With Disabilities Act, which requires restaurants and otherfacilities open to the public to provide for access and use of facilities bythe handicapped.  Management believes that we are in compliance with theAmericans With Disabilities Act.

We are also subject to federal and state lawsregulating franchise operations, which vary from registration and disclosurerequirements in the offer and sale of franchises to the application ofstatutory standards regulating franchise relationships.

**Available Information:** Our Internetwebsite address is www.goodtimesburgers.com.  We make available free of chargethrough our website's investor relations information section our annual reportson Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K,and any amendments to those reports filed with or furnished to the SEC underapplicable securities laws as soon as reasonably practical after weelectronically file such material with, or furnish it to, the SEC.  Our websiteinformation is not part of or incorporated by reference into this Annual Reporton Form 10-KSB.

**Special Note About Forward-LookingStatements:**From time to time the Company makes oral and written statements that reflectthe Company's current expectations regarding future results of operations,economic performance, financial condition and achievements of the Company.  Wetry, whenever possible, to identify these forward-looking statements by usingwords such as "anticipate," "assume," "believe,""estimate," "expect," "intend," "plan,""project," "may," "will," "would," andsimilar expressions  Certain forward-looking statements are included in thisForm 10-KSB, principally in the sections captioned "Description ofBusiness," and "Management's Discussion and Analysis of FinancialCondition and Results of Operations."  Forward-looking statements arerelated to, among other things:

§  business objectivesand strategic plans;

§  operatingstrategies;

§  our ability toopen and operate additional restaurants profitably and the timing of suchopenings;

§  restaurant andfranchise acquisitions;

§  anticipatedprice increases;

§  expectedfuture revenues and earnings, comparable and non-comparable restaurant sales,results of operations, and future restaurant growth (both company-owned andfranchised);

§  estimatedcosts of opening and operating new restaurants, including general andadministrative, marketing, franchise development and restaurant operatingcosts;

§  anticipatedselling, general and administrative expenses and restaurant operating costs,including commodity prices, labor and energy costs; 

§  future capitalexpenditures;

§  ourexpectation that we will have adequate cash from operations and credit facilityborrowings to meet all future debt service, capital expenditure and workingcapital requirements in fiscal year 2009;

§  thesufficiency of the supply of commodities and labor pool to carry on ourbusiness;

§  success ofadvertising and marketing activities;

§  the absence ofany material adverse impact arising out of any current litigation in which weare involved;

§  impact of theadoption of new accounting standards and our financial and accounting systemsand analysis programs;

§  expectationsregarding competition and our competitive advantages;

§  impact of ourtrademarks, service marks, and other proprietary rights; and

§  effectivenessof our internal control over financial reporting.

Although we believe that the expectations reflectedin our forward-looking statements are based on reasonable assumptions, suchexpectations may prove to be materially incorrect due to known and unknownrisks and uncertainties.

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In some cases, information regarding certainimportant factors that could cause actual results to differ materially from anyforward-looking statements appears together with such statement.  In addition,the factors described under Critical Accounting Policies and Estimates in Item6 and Risk Factors in this Item 1, as well as other possible factors notlisted, could cause actual results to differ materially from those expressed inforward-looking statements, including, without limitation, the following:concentration of restaurants in certain markets and lack of market awareness innew markets; changes in disposable income; consumer spending trends and habits;increased competition in the quick service restaurant market; costs andavailability of food and beverage inventory; our ability to attract qualifiedmanagers, employees, and franchisees; changes in the availability of capital orcredit facility borrowings; costs and other effects of legal claims byemployees, franchisees, customers, vendors, stockholders and others, includingsettlement of those claims; effectiveness of management strategies anddecisions; weather conditions and related events in regions where ourrestaurants are operated; and changes in accounting standards policies andpractices or related interpretations by auditors or regulatory entities.

All forward-looking statements speak only as ofthe date made.  All subsequent written and oral forward-looking statementsattributable to us, or persons acting on our behalf, are expressly qualified intheir entirety by the cautionary statements.  Except as required by law, weundertake no obligation to update any forward-looking statement to reflectevents or circumstances after the date on which it is made or to reflect theoccurrence of anticipated or unanticipated events or circumstances.

**Risk Factors:** You should considercarefully the following risk factors before making an investment decision withrespect to Good Times Restaurants' securities. You are cautioned that the riskfactors discussed below are not exhaustive.

***We have accumulated losses.*** We haveincurred losses in every fiscal year since inception except 1999, 2002, 2006and 2007.  As of September 30, 2008 we had an accumulated deficit of$12,160,000.  We cannot assure you that we will not have a loss for the currentfiscal year ending September 30, 2009.  As of September 30, 2008, we had a working capital deficit of $2,082,000.

***We must sustain same store salesincreases*****.****As we developadditional restaurants, we expect that the increase in operating incomegenerated by those restaurants will improve our financial results.  However, wecannot assure you that we will sustain profitability on a consistent basis.  Wemust sustain same store sales increases in existing restaurants to sustainprofitability and we experienced declines in our same store sales in fiscal2008.  Sales increases will depend in part on the success of our advertisingand promotion of new and existing menu items and consumer acceptance.  Wecannot assure that our advertising and promotional efforts will in fact besuccessful.

***New restaurants, once opened, may notbe profitable, if at all, for several months****.*  Weanticipate that our new restaurants will generally take several months to reachnormalized operating levels due to inefficiencies typically associated with newrestaurants, including lack of market awareness, the need to hire and train asufficient number of employees, operating costs, which are often materiallygreater during the first several months of operation then thereafter,pre-opening costs and other factors.  Further, some, or all of our newrestaurants may not attain anticipated operating results or results similar tothose of our existing restaurants.  We have experienced delays in opening someof our restaurants and may experience delays in the future.  In addition,restaurants opened in new markets may open at lower average weekly salesvolumes than restaurants opened in existing markets, and may have higherrestaurant-level operating expense ratios than in existing markets.  Sales atrestaurants opened in new markets may take longer to reach average annualcompany-owned restaurant sales, if at all, thereby affecting the profitabilityof these restaurants.

***Our operations are susceptible to thecost of and changes in food availability which could adversely affect ouroperating results.***  Our profitability depends in part on our abilityto anticipate and react to changes in food costs.  Various factors beyond ourcontrol, including adverse weather conditions, governmental regulation,production, availability, recalls of food products and seasonality may affectour food costs or cause a disruption in our supply chain.  We enter into annualcontracts with our beef and chicken suppliers.  Our contracts for chicken arefixed price contracts.  Our contracts for beef are generally based on currentmarket prices plus a processing fee.  Changes in the price or availability ofchicken or beef could materially adversely affect our profitability.  We cannotpredict whether we will be able to anticipate and react to changing food costsby adjusting our purchasing practices and menu prices, and a failure to do socould adversely affect our operating results.  In addition, because we providea "value-priced" product, we may not be able to pass along priceincreases to our guests.

***The macroeconomic recession couldaffect our operating results.***  The current state of the economy anddecreased consumer spending has adversely affected our sales over the last yearand may continue to cause material negative sales trends.  A continued shift inconsumer purchases toward $1 value menus, in our competitive segment, and aproliferation of heavy discounting by our major competitors may also negativelyaffect our sales and operating results.  We currently do not offer a separatevalue menu and anticipate selective discounting and price promotions which maynot drive increased customer traffic.

***Price increases may impact guestvisits.*** We may make price increases on selected menu items in order to offset increasedoperating expenses we believe will be recurring.  Although we have notexperienced significant consumer resistance to our past price increases, wecannot provide assurance that this or other future price increases will notdeter guests from visiting our restaurants or affect their purchasingdecisions.

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***The hamburger restaurant market ishighly competitive*****.** The hamburger restaurant market ishighly competitive.  Our competitors include many recognized national andregional fast-food hamburger restaurant chains such as McDonald's, Burger King,Wendy's, Carl's Jr., Sonic and Culver's.  We also compete with small regionaland local hamburger and other fast-food restaurants, many of which featuredrive-through service.  Most of our competitors have greater financialresources, marketing programs and name recognition.  All of the major hamburgerchains have increasingly offered selected food items and combination meals atdiscounted prices and have recently intensified their promotions of valuepriced meals.  Continued discounting by competitors may adversely affect therevenues and profitability of our restaurants.

***Sites may be difficult to acquire.*** Location ofour restaurants in high-traffic and readily accessible areas is an importantfactor for our success.  Drive-through restaurants require sites with specificcharacteristics and there are a limited number of suitable sites available inour geographic markets.  Since suitable locations are in great demand, we maynot be able to obtain optimal sites at a reasonable cost.  In addition, wecannot assure you that the sites we do obtain will be successful.

***We may require additional financing*****.** In order tofully develop the Denver and Colorado Springs/Pueblo markets and to expand intomarkets outside of Colorado, we will require additional financing.  Although wehave recently obtained debt facilities for the borrowing of additional capital,we cannot assure you that these facilities will adequately finance our planneddevelopments or that additional financing will be available on reasonableterms.  The current economic recession and status of the capital markets mayadversely affect our ability to acquire additional debt or equity financing fornew restaurant development, refinancing of existing agreements or foradditional working capital.

***If our franchisees cannot develop orfinance new restaurants, build them on suitable sites or open them on schedule,our growth and success may be impeded.***  Under our current form ofarea development agreement, some franchisees must develop a predeterminednumber of restaurants according to a schedule that lasts for the term of theirdevelopment agreement.  Franchisees may not have access to the financial ormanagement resources that they need to open the restaurants required by theirdevelopment schedules, or may be unable to find suitable sites on which todevelop them.  Franchisees may not be able to negotiate acceptable lease orpurchase terms for the sites, obtain the necessary permits and governmentapprovals or meet construction schedules.  From time to time in the past, we haveagreed to extend or modify development schedules and we may do so in thefuture.  Any of these problems could slow our growth and reduce our franchiserevenues.

Additionally, our franchisees depend uponfinancing from banks and other financial institutions in order to construct andopen new restaurants.  If any franchisee experienced difficulty in obtainingadequate financing, the lack of adequate availability of such financing couldadversely affect the number and rate of new restaurant openings by our franchiseesand adversely affect our future franchise revenues.

***Our franchisees could take actionsthat could harm our business.***  Franchisees are independentcontractors and are not our employees.  We provide training and support tofranchisees; however, franchisees operate their restaurants as independentbusinesses.  Consequently, the quality of franchised restaurant operations maybe diminished by any number of factors beyond our control.  Moreover,franchisees may not successfully operate restaurants in a manner consistentwith our standards and requirements, or may not hire and train qualifiedmanagers and other restaurant personnel.  Our image and reputation, and theimage and reputation of other franchisees, may suffer materially andsystem-wide sales could significantly decline if our franchisees do not operatesuccessfully.

***We depend on key management employees*****.** We believeour current operations and future success depend largely on the continuedservices of our management employees, in particular Boyd E. Hoback, ourpresident and chief executive officer and Scott LeFever, our vice president ofoperations.  Although we have entered into an employment agreement with Mr.Hoback, he may voluntarily terminate his employment with us at any time.  Inaddition, we do not maintain key-person insurance on Messrs. Hoback's or LeFever'slife.  The loss of Messrs. Hoback's or LeFever's services, or other keymanagement personnel, could have a material adverse effect on our financialcondition and results of operations.

***Labor shortages could slow our growthor harm our business.*** Our success depends in part upon our ability toattract, motivate and retain a sufficient number of qualified, high-energyemployees.  Qualified individuals needed to fill these positions are in shortsupply in some areas.  The inability to recruit and retain these individualsmay delay the planned openings of new restaurants or result in high employeeturnover in existing restaurants, which could harm our business.  Additionally,competition for qualified employees could require us to pay higher wages toattract sufficient employees, which could result in higher labor costs.  Mostof our employees are paid on an hourly basis.  The employees are paid inaccordance with applicable minimum wage regulations.  Accordingly, any increasein the minimum wage, whether state or federal, could have a material adverseimpact on our business.

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***Nevada law and our articles of incorporation and bylawshave provisions that discourage corporate takeovers and could preventstockholders from realizing a premium on their investment.*** Weare subject to anti-takeover laws for Nevada corporations.  These anti-takeoverlaws prevent a Nevada corporation from engaging in a business combination withany stockholder, including all affiliates and associates of the stockholder,who owns 10% or more of the corporation's outstanding voting stock, for threeyears following the date that the stockholder acquired 10% or more of thecorporation's voting stock, unless specified conditions are met.

Our articles of incorporation and our bylawscontain a number of provisions that may deter or impede takeovers or changes ofcontrol or management.  These provisions:

§ authorizeour board of directors to establish one or more series of preferred stock, theterms of which can be determined by the board of directors at the time ofissuance;

§ donot allow for cumulative voting in the election of directors unless required byapplicable law.  Under cumulative voting, a minority stockholder holding a sufficientpercentage of a class of shares may be able to ensure the election of one ormore directors;

§ statethat special meetings of our stockholders may be called only by the chairman ofthe board, the president or any two directors, and must be called by thepresident upon the written request of the holders of ten percent of theoutstanding shares of capital stock entitled to vote at such special meeting;and

§ providethat the authorized number of directors is currently set at seven.

Theseprovisions, alone or in combination with each other, may discouragetransactions involving actual or potential changes of control, includingtransactions that otherwise could involve payment of a premium over prevailingmarket prices to stockholders for their common stock.

***Future changes in financial accounting standards maycause adverse unexpected operating results and affect our reported results ofoperations.***  Changes in accounting standards can have a significanteffect on our reported results and may affect our reporting of transactionscompleted before the change is effective.  As an example, in 2006, we adoptedthe change that requires us to record compensation expense in the statement ofoperations for employee stock options using the fair value method.  See Note 1 toour Consolidated Financial Statements for further discussion.  Newpronouncements and varying interpretations of pronouncements have occurred andmay occur in the future.  Changes to existing rules or differinginterpretations with respect to our current practices may adversely affect ourreported financial results.

***OurNASDAQ Listing Is Important.*****Our commonstock is currently listed for trading on the NASDAQ Capital Market.  The NASDAQmaintenance rules require, among other things, that our common stock priceremains above $1.00 per share and that we have minimum net tangible assets inexcess of $2 million.  We were required to obtain shareholder approval in 1998for a reverse stock split to maintain a sufficient per share price to preserveour NASDAQ listing.

***Weare subject to extensive government regulation that may adversely hinder orimpact our ability to govern various aspects of our business including ourability to expand and develop our restaurants.***  The restaurant industry issubject to various federal, state and local government regulations, includingthose relating to the sale of food.  While in the past we have been able toobtain and maintain the necessary governmental licenses, permits and approvals,our failure to maintain these licenses, permits and approvals, including foodlicenses, could adversely affect our operating results.  Difficulties orfailures in obtaining the required licenses and approvals could delay or resultin our decision to cancel the opening of new restaurants.  Local authoritiesmay suspend or deny renewal of our food licenses if they determine that ourconduct does not meet applicable standards or if there are changes inregulations.

Variousfederal and state labor laws govern our relationship with our employees and affectoperating costs.  These laws govern minimum wage requirements, such as those tobe imposed by recently enacted legislation in Colorado, overtime pay, meal andrest breaks, unemployment tax rates, workers' compensation rates, citizenshipor residency requirements, child labor regulations and sales taxes.  Additionalgovernment-imposed increases in minimum wages, overtime pay, paid leaves ofabsence and mandated health benefits may increase our operating costs.

Thefederal Americans with Disabilities Act prohibits discrimination on the basisof disability in public accommodations and employment.  Although ourrestaurants are designed to be accessible to the disabled, we could be requiredto make modifications to our restaurants to provide service to, or makereasonable accommodations for, disabled persons.

Weare also subject to federal and state laws that regulate the offer and sale offranchises and aspects of the licensor-licensee relationship.  Many statefranchise laws impose restrictions on the franchise agreement, includinglimitations on non-competition provisions and the termination or non-renewal ofa franchise.  Some states require that franchise materials be registered beforefranchises can be offered or sold in the state.

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***Compliancewith changing regulation of corporate governance and public disclosure mayresult in additional expenses.*** Keeping abreast of, and in compliance with, changing laws, regulations andstandards relating to corporate governance and public disclosure, including theSarbanes-Oxley Act of 2002, new SEC regulations and The NASDAQ  Market rules,has required an increased amount of management attention.  We remain committedto maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest all reasonably necessary resources to complywith evolving standards, and this investment has resulted in and will continueto result in increased general and administrative expenses and a diversion ofmanagement time and attention from revenue-generating activities to complianceactivities.

***Risksrelated to internal controls.*** Public companies in the United States are required to review their internalcontrols as set forth in the Sarbanes-Oxley Act of 2002.  It should be notedthat any system of controls, however well designed and operated, can provideonly reasonable, and not absolute, assurance that the objectives of the systemare met.  In addition, the design of any control system is based in part uponcertain assumptions about the likelihood of future events.  Because of theseand other inherent limitations of control systems, there can be no assurancethat any design will succeed in achieving its stated goals under all potentialfuture conditions, regardless of how remote.  If the internal controls put inplace by us are not adequate or in conformity with the requirements of theSarbanes-Oxley Act of 2002, and the rules and regulations promulgated by theSecurities and Exchange Commission, we may be forced to restate our financialstatements and take other actions which will take significant financial andmanagerial resources, as well as be subject to fines and other governmentenforcement actions.

***Healthconcerns relating to the consumption of beef, chicken or other food productscould affect consumer preferences and could negatively impact our results ofoperations.*** Like other restaurant chains, consumer preferences could be affected by healthconcerns about the avian influenza, also known as bird flu, or the consumptionof beef, the key ingredient in many of our menu items, or negative publicityconcerning food quality, illness and injury generally, such as negativepublicity concerning E. coli, "mad cow" or "foot-and-mouth"disease, publication of government or industry findings concerning foodproducts served by us, or other health concerns or operating issues stemmingfrom one restaurant or a limited number of restaurants.  This negativepublicity may adversely affect demand for our food and could result in adecrease in guest traffic to our restaurants.  If we react to the negativepublicity by changing our concept or our menu we may lose guests who do notprefer the new concept or menu, and may not be able to attract a sufficient newguest base to produce the revenue needed to make our restaurants profitable. In addition, we may have different or additional competitors for our intendedguests as a result of a concept change and may not be able to competesuccessfully against those competitors.  A decrease in guest traffic to ourrestaurants as a result of these health concerns or negative publicity or as aresult of a change in our menu or concept could materially harm our business.

**Item2.          Description of Property.**

We currently lease approximately 3,700 square feetof space for our executive offices in Golden, Colorado for approximately $55,000per year.  The lease is for a one year term ending September 2009. The space isleased from The Bailey Company, a significant stockholder, at their corporateheadquarters.  We anticipate extending the lease or leasing comparable space onterms similar to our current lease.

As of December 15, 2008, Good Times has an ownership interest in thirty Good Times units, all of which are located in Colorado.  Nine of these restaurants are held in joint venture limited partnerships ofwhich Good Times is the general partner.  Good Times has a 50% interest inseven of the partnership restaurants, a 78% interest in one restaurant and a51% interest in another restaurant.  There are twenty one Good Times units thatare wholly owned by Good Times.

Most of our existing Good Times restaurants are acombination of free-standing structures containing approximately 880 squarefeet for the double drive thru format and approximately 2400 square feet forour prototype building with a 70 seat dining room.  In addition, we haveseveral restaurants that are conversions from other concepts in various sizesranging from 1700 square feet to 3500 square feet.  The buildings are situatedon lots of approximately 18,000 to 50,000 square feet.  Certain restaurantsserve as collateral for the underlying debt financing arrangements as discussedin the Notes to Consolidated Financial Statements included in this report.  Weintend to acquire new sites both through ground leases and purchase agreementssupported by mortgage and leasehold financing arrangements and throughsale-leaseback agreements.

All of therestaurants are regularly maintained by our repair and maintenance staff aswell as by outside contractors, when necessary.  We believe that all of ourproperties are in good condition and that there will be a need for periodiccapital expenditures to maintain the operational and aesthetic integrity of ourproperties for the foreseeable future, including recurring maintenance andperiodic capital improvements.  All of our properties are covered up toreplacement cost under our property and casualty insurance policies and in theopinion of management are adequately covered by insurance.

**Item 3.          LegalProceedings.**

Weare not involved in any material legal proceedings.  We are subject, from timeto time, to various lawsuits in the normal course of business.  These lawsuitsare not expected to have a material impact.

**Item 4.           Submission ofMatters to a Vote of Security Holders.**

No matters were submitted to a vote ofsecurity holders during the fourth quarter of the fiscal year ended September 30, 2008.

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**PART II**

**Item 5.           Market for CommonEquity and Related Stockholder Matters.**

Shares of Good Times Restaurants Inc. common stockare listed for trading on the NASDAQ Capital Market under the symbol "GTIM."  The following table presents the quarterly high and low bid prices for Good TimesRestaurants common stock as reported by the NASDAQ Capital Market for eachquarter within the last two fiscal years.  The quotations reflect interdealerprices, without retail mark-ups, markdowns or commissions and may not representactual transactions.

| **2007** | **2008** |
|----------|----------|

| ****
**Quarter Ended** | **High** | **Low** | **Quarter Ended**    | **High** | **Low** |
|------------------------|----------|---------|----------------------|----------|---------|
| December   31, 2006    | $6.89    | $5.51   | December   31, 2007  | $6.25    | $5.10   |
| March 31,   2007       | $6.00    | $4.75   | March 31,   2008     | $6.25    | $4.99   |
| June 30,   2007        | $6.00    | $4.99   | June 30,   2008      | $5.50    | $2.08   |
| September   30, 2007   | $6.25    | $3.95   | September   30, 2008 | $3.50    | $1.23   |

As of December 15, 2008 there were approximately 300 holders of record of Common Stock.  However, management estimates thatthere are not fewer than 1,390 beneficial owners of our Common Stock.

**Dividend Policy:** We have neverpaid dividends on our common stock and do not anticipate paying dividends inthe foreseeable future.  In addition, we have obtained financing underloan agreements that restrict the payment of dividends.  Our ability topay future dividends will necessarily depend on our earnings and financialcondition.  However, since restaurant development is capital intensive, wecurrently intend to retain any earnings for that purpose.

**Disclosure with Respect to theCompany's Equity Compensation Plans:** We maintain the 2008 Omnibus EquityIncentive Compensation Plan, pursuant to which we may grant equity awards toeligible persons, and have outstanding stock options granted under our 2001Good Times Restaurants Stock Option Plan, 1992 Incentive Stock Option Plan and1992 Non-Statutory Stock Option Plan.  For additional information, see Note 11,Stockholders' Equity, in the Notes to the Consolidated Financial Statementsincluded in this report. The following table gives information about equityawards under our plans as of September 30, 2008.

**Equity Compensation Plan Information**

| ****
** **                                         | **(a)**                                                                                             | **(b)**                                                                            | **(c)**                                                                                                                                           |
|---------------------------------------------------------|-----------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| **Plan category**                                       | **Number of  securities to be issued upon exercise of outstanding options, warrants &  rights** | **Weighted-average  exercise price of outstanding options, warrants & rights** | **Number of  securities remaining available for future issuance under equity compensation  plans (excluding securities reflected in column (a))** |
| Equity  compensation plans approved by security holders | 353,942                                                                                             | $4.04                                                                              | 198,130                                                                                                                                           |
| Total                                                   | 353,942                                                                                             | $4.04                                                                              | 198,130                                                                                                                                           |

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** SelectedFinancial Data.**

The selected financial data on the following pagesare derived from our historical financial statements and is qualified in itsentirety by such financial statements which are included in Item 7 hereof.

**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY**

The followingpresents certain historical financial information of the Company.  Thisfinancial information includes the combined operations of the Company and itssubsidiary for the fiscal years ended September 30, 2007 and 2008.

| ** ** | **September** |
|------------|---------------|

| **Operating  Data:**                                                                      | **2008**                                                       | **2007**                                                                                           |
|-------------------------------------------------------------------------------------------|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
| Restaurant  sales                                                                         | $ 25,244,000                                                   | $   24,215,000                                                                           |
| Franchise  fees and royalties                                                             |        638,000                   |         740,000                                                 |
|            Total Net Revenues                |    25,882,000                                        |     24,955,000                                                                      |
| Restaurant Operating Costs:                                                               |                                                                |                                                                                                    |
|       Food and packaging costs                                        |      8,002,000                             |       7,589,000                                                           |
|       Payroll and other employee benefit costs                        |      8,780,000                             |       8,063,000                                                           |
|       Occupancy and other operating costs                             |      4,881,000                             |       4,393,000                                                           |
|       New store pre-opening costs                                     |          38,000        |         118,000                                                 |
|       Depreciation and amortization                                   |      1,283,000                             |       1,223,000                                                           |
|           Total restaurant operating  costs  |    22,984,000                                        |     21,386,000                                                                      |
|      Selling, General &  Administrative Expenses                  |      3,567,000                             |       3,226,000                                                           |
|       Franchise Costs                                                 |        312,000                   |         161,000                                                 |
|       Gain on disposal of restaurants and equipment                   |         (35,000)            |          (17,000)                                          |
| Income  (Loss) from Operations                                                       | ($    946,000)                                  | $       200,000                                                      |
| Other Income and (expenses)                                                               |                                                                |                                                                                                    |
|     Minority  income (expense), net                                        |       (113,000)                       |        (211,000)                                                     |
|       Interest income (expense), net                                  |         (13,000)            |           40,000                                      |
|            Total other income and (expenses) |       (126,000)                       |        (171,000)                                                     |
| Net Income (Loss) before Income  Taxes                                                    | ($  1,072,000)                                            | $        29,000                                                 |
|           Income tax expense                 |          4,000         |                  - |
| Net Income (Loss)                                                                         | ($  1,076,000)                                            | $        29,000                                                 |
| Basic  and Diluted Earnings (Loss) Per Share                                              | ($           .28) | $             .01                           |

Weightedaverage shares and equivalents used in per share calculations

|            Basic   |      3,886,730 |       3,838,867 |
|-----------------------------------------------------------------|------------------------------------|------------------------------------------|
|            Diluted |      3,886,730 |       3,975,957 |

*Balance Sheet Data:*

| Working Capital      | ($  2,082,000)                          | $       532,000           |
|----------------------|----------------------------------------------|----------------------------------------------------|
| Total assets         |    11,920,000                      |     11,544,000                      |
| Minority Interest    |        584,000 |         751,000 |
| Long-term debt       |        846,000 |         970,000 |
| Stockholders' equity | $   5,409,000                      | $    6,333,000                           |

17

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**Item 6.      Management's Discussionand Analysis of Financial Condition and Results of Operations.**

**Results of Operations**

**Net Revenues:** Net revenuesfor fiscal 2008 increased $927,000 (3.7%) to $25,882,000 from $24,955,000 forfiscal 2007.  Same store restaurant sales decreased $263,000 or (1.48%), duringfiscal 2008. Restaurants are included in same store sales after they have beenopen a full fifteen months and only Good Times restaurants are included whiledual branded restaurants are excluded.  Restaurant sales increased $90,000 dueto one non-traditional company-owned restaurant not included in same storesales and increased $1,593,000 due to six new, acquired or dual brandedcompany-owned restaurants that were opened or acquired in fiscal 2007 and 2008. Restaurant sales decreased $391,000 due to one company-owned restaurant sold toa franchisee in May 2007.  Net revenues decreased $102,000 in fiscal 2008 dueto a decrease in franchise fees of $70,000 and a decrease in franchiseroyalties of $32,000.

Our third and fourth quarter same store restaurantsales declines of 5.7% and 10.8%, respectively, reflect the adverse impact themacroeconomic environment is having on consumers' discretionary spending andthe proliferation of heavy promotion of $1 value menus and discounting bycompetitors.  Additionally, we are comparing the 2008 sales declines to samestore sales increases of 10% and 11.9%, respectively, in the same quarters offiscal 2007 when we introduced Bambino Burgers.  We had shown same store salesgrowth in sixteen consecutive quarters leading into the third quarter of thisfiscal year.  Our outlook for fiscal 2009 remains cautious as the economicpressures may continue to impact consumer spending and we anticipate that wewill continue to face increased competitive pricing pressure.  While we areimplementing several broad product and brand initiatives during fiscal 2009 toimprove our core value proposition, we are not planning to implement a broader$1 menu and our sales may be adversely affected during the economic recession.

Total restaurant sales for Good Times and itsfranchisees were $42,195,000 for fiscal 2008 compared to $42,304,000 for fiscal2007.

Average restaurant sales (including double drivethru restaurants and restaurants with dining rooms but excluding dual brand restaurants)for fiscal 2007 and 2008 were as follows:

| ** **          | **Fiscal  2008** | **Fiscal  2007** |
|---------------------|------------------|------------------|
| Company  operated   | $916,000         | $930,000         |
| Franchise  operated | $801,000         | $819,000         |

For factorswhich may affect future results of operations, please refer to the sectionentitled "Current Fiscal Year Initiatives" in Item 1 on pages 17-18 of thisreport and a related discussion of planned product and system changes discussedin the section entitled "Concept and Business Strategy" in Item 1 on pages 15-17of this report.

**Restaurant Operating Costs:** Restaurantoperating costs as a percent of restaurant sales were 91.1% for fiscal 2008compared to 88.3% in fiscal 2007.

The changes in restaurant-level costsare explained as follows:

| Restaurant-level costs for the  period ended September 30, 2007 | 88.3%                       |
|-----------------------------------------------------------------|-----------------------------|
| Increase in food and packaging costs                            | .4%                         |
| Increase in payroll and other  employee benefit costs           | 1.5%                        |
| Increase in occupancy and other  operating costs                | 1.2%                        |
| Decrease in pre-open costs                                      | (.3%)                       |
| Depreciation and amortization costs                             |      0% |
| Restaurant-level costs for the  period ended September 30, 2008 | 91.1%                       |

**Food and Packaging Costs:** Food andpackaging costs for fiscal 2008 increased $413,000 from $7,589,000 (31.3% ofrestaurant sales) in fiscal 2007 to $8,002,000 (31.7% of restaurant sales). Weexperienced unprecedented increases in commodity costs including beef, bakery,soft drinks, dairy and packaging costs with the majority of those increasesoccurring in May through July 2008.

Our weighted food and packaging costs haveincreased approximately 12% since the beginning of the fiscal 2008 year. However, food and packaging costs increased only slightly as a percent ofrestaurant sales due to menu price increases taken in October 2007 and May 2008. The cumulative weighted menu price increases taken during the fiscal year wereapproximately 4.8%.  We anticipate limited price increases in fiscal 2009 withcontinued cost pressure on several core commodities.

**Payroll and Other Employee BenefitCosts**:For fiscal 2008 payroll and other employee benefit costs increased $717,000from $8,063,000 (33.3% of restaurant sales) in fiscal 2007 to $8,780,000 (34.8%of restaurant sales).

18

----

                                                              

The increase in payroll and other employee benefitcosts for fiscal 2008 is primarily due to an increase in restaurant sales andthe addition of new and acquired company-owned restaurants opened in latefiscal 2007 and during 2008, as well as a state mandated increase in theminimum wages paid to hourly employees in January 2007 and 2008.  Payroll andbenefit costs are semi-variable and therefore increase or decrease as salesfluctuate.  Additionally, the new restaurants operate at a higher labor cost asa percent of sales due to higher initial labor costs at new stores until theyreach mature staffing levels.  The three dual branded restaurants also have ahigher labor cost as a percent of sales than Good Times single brandrestaurants.

We havereduced our labor hours allocation through increased efficiencies and improvedour sales per employee hour efficiencies on service hours, thereby eliminatingapproximately $300,000 of annual fixed payroll costs.

**Occupancy and Other Costs:** For fiscal2008, occupancy and other costs increased $488,000 from $4,393,000 (18.1% ofrestaurant sales) in fiscal 2007 to $4,881,000 (19.3% of restaurant sales). The $488,000 increase in occupancy and other costs are primarily attributableto:

§ Increasesin building rent of $159,000 due to the new and purchased restaurants.

§ Increasesin bank fees of $50,000 due to a greater number of customer transactions usingcredit cards in addition to credit card sales at the new and purchased restaurants.

§ Increasesin property taxes of $66,000 related to the new and purchased restaurants.

§ Increasesin utility costs of $114,000 related to the new and purchased restaurants, aswell as utility rate increases.

Occupancy costs may increase as a percent of salesas new company-owned restaurants are developed due to higher rent associatedwith sale-leaseback operating leases, as well as increased property taxes onthose locations.

**New Store Pre-opening Costs:** For fiscal2008, new store pre-opening costs decreased $80,000 from $118,000 in fiscal 2007to $38,000.  New store pre-opening costs in fiscal 2008 are related to one newcompany-owned restaurant that opened in October 2008.  Fiscal 2007 new storepre-opening costs were related to the opening of two new company-ownedrestaurants.

**Depreciation and Amortization Costs**: For fiscal2008, depreciation and amortization costs increased $60,000 from $1,223,000 infiscal 2007 to $1,283,000.  Depreciation costs increased due to the addition ofnew company-owned restaurants in late fiscal 2007 and two restaurants acquiredfrom a franchisee in March 2008.

**Selling, General and AdministrativeCosts:**For fiscal 2008, selling, general and administrative costs increased $342,000from $3,226,000 (13.3% of restaurant sales) in fiscal 2007 to $3,567,000 (14.1%of restaurant sales) in fiscal 2008.  The increase in selling, general andadministrative costs are partially attributable to increased advertising costs,which increased to $1,525,000 (6% of restaurant sales) for fiscal 2008 from $1,427,000(5.9% of restaurant sales) for fiscal 2007, and an increase in general andadministrative costs, which increased to $2,042,000 (8.1% of restaurant sales)for fiscal 2008 from $1,799,000 (7.4% of restaurant sales) for fiscal 2007 (asexplained below).

The increase in advertising costs is due to theincrease in restaurant sales (contributions based on sales are made to theadvertising funds).

We anticipate that fiscal 2009 advertising willconsist primarily of television advertising, on-site and point-of-purchasemerchandising totaling approximately 5.8% of restaurant sales.  

The $243,000 increase in general andadministrative cost is primarily attributable to:

§ Professionalservices cost increase of $127,000 related to 1) the Company's Sarbanes Oxley404 compliance of $62,000; 2) legal costs of $43,000 related to the Omaha,Nebraska expansion and the Company's 2008 Omnibus Equity Incentive CompensationPlan; and 3) $23,000 of costs related to a brand positioning research project.

§ Writeoff of $81,000 in preliminary site costs related to the Omaha, Nebraska expansion.

We have reduced planned selling, general andadministrative and franchise costs by approximately $450,000 for fiscal 2009through the elimination of executive management positions, salary reductionsand professional services costs.

**Franchise Costs:** For fiscal2008, franchise costs increased $151,000 from $161,000 (.6% of total revenues)in fiscal 2007 to $312,000 (1.2% of total revenues).

The increase in franchise costs for fiscal 2008 isattributable to the addition of a Vice President of Franchise Development hiredon October 1, 2007.  This position was eliminated in July 2008 in conjunctionwith Good Times' exit from the planned Omaha, Nebraska expansion.

19

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**Gain on disposal of restaurants andequipment:**For fiscal 2008, the gain on disposal of restaurants and equipment increased $18,000to $35,000 from $17,000.  The $35,000 gain on disposal of restaurants and equipmentin fiscal 2008 is from the partial recognition of deferred gains related to twosale-leaseback transactions that were completed in fiscal 2004 and 2006.

**Income (Loss) from Operations:** The loss fromoperations was $946,000 in fiscal 2008 compared to income from operations of $200,000in fiscal 2007.

**Net Income(Loss):** Net loss was $1,076,000 for fiscal 2008 comparedto net income of $29,000 in fiscal 2007.  The change from fiscal 2007 to fiscal2008 was primarily attributable to the matters discussed in the "NetRevenues", "Food and Packaging Costs", "Selling, Generaland Administrative Costs" and "Franchise Costs" sections of Item6.  In addition, 1) minority interest expense decreased $98,000 due todecreased income from restaurant operations of the joint venture restaurantsfor fiscal 2008 and 2) net interest expense increased $43,000 in fiscal 2008due to increased interest expense on debt and reduced earnings on cash reservesin the current period.

**Liquidityand Capital Resources**

**Cash and Working Capital:** As of September 30, 2008, we had $1,414,000 of cash and cash equivalents on hand. We currentlyplan to use the cash balance and cash generated from operations for increasingour working capital reserves and for recurring capital expenditures.  Managementbelieves that the current cash on hand and additional cash expected fromoperations in fiscal 2009 will be sufficient to cover our working capitalrequirements for fiscal 2009.

As of September 30, 2008, we had a working capital deficit of $2,082,000 primarily from our development line-of-credit of$2,180,000 shown as a current liability maturing in July 2009.  We have afully-developed site that we are marketing for a sale-leaseback transactionwith expected net proceeds of approximately $1,600,000 which will be used toreduce the line of credit. Because restaurant sales are collected in cash andaccounts payable for food and paper products are paid two to four weeks later,restaurant companies often operate with working capital deficits. We anticipatethat working capital deficits will be incurred in the future as new Good Timesrestaurants are opened.

**Financing:** In May 2007,the Company borrowed $1,100,000 from Wells Fargo Bank under a note payable withan eight year term with a floating interest rate at .50% below prime.  Wesimultaneously entered into an interest rate swap transaction with Wells FargoBank for the full $1,100,000 with a fixed interest rate of 7.7% for the fulleight year term coinciding with the note payable.  Partial proceeds from theloan were used to: 1) payoff our existing GE Capital notes payable of $398,000;and 2) fund new store construction.  The balance of the proceeds were used topartially fund the purchase of two existing restaurants from a franchisee.  Weanticipate that we will be in default of certain technical loan covenants as of December 31, 2008 on the Wells Fargo note and we are working with Wells Fargoto modify these covenants based upon our fiscal 2009 plan and cash flow.  Wehave never been in payment default nor do we expect to be in the future.

On March 1, 2008, we purchased two restaurants from an existing franchisee for total consideration of$1,330,000.  We simultaneously sold the land, building and improvements relatedto one of the restaurants in a sale-leaseback transaction, the proceeds ofwhich were used for the purchase of the restaurants.  Net cash used in thepurchase transaction was $272,000.  After accounting for both the acquisitionand the sale-leaseback, assets of $490,000 were recorded, a deferred gain of$26,000 was recognized as a cost of the consideration and notes receivable duefrom the franchisee of $250,000 were forgiven.  We believe the $1,330,000represents the fair value of the franchisee acquired.

In July 2008, we entered into a $2,500,000promissory note with an unrelated third party (PFGI II, LLC).  The promissorynote constitutes a revolving line-of-credit for the development of newrestaurants which may be advanced and repaid on a monthly basis from time totime.  Prior to maturity, no principal payments are required and monthlypayments of interest only at the prime rate plus 2% (with a minimum rate of 8%)are due, with all unpaid principal due in July 2009.  The loan is secured byseparate leasehold deeds of trust and security agreements related to sixcompany-owned restaurants and a first deed of trust on the property developed. The total outstanding balance on the line of credit was $2,180,000 at September 30, 2008.  Of the $2,180,000 outstanding balance, $1,574,000 is related to theconstruction of one company-owned restaurant in Firestone, Colorado that openedin October 2008.  The restaurant is currently under contract for asale-leaseback.  The remaining balance is related to a land purchase in Aurora, Colorado that will be either developed into a company-owned restaurant or sold infiscal 2009.

Additional commitments for thedevelopment of new restaurants in fiscal 2009 will depend on the Company'ssales trends, cash generated from operations and our access to capital in thesale-leaseback markets.

20

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**Cash Flows:** Net cashprovided by operating activities was $619,000 for fiscal 2008 compared to $1,763,000in fiscal 2007.  The decreased net cash provided by operating activities forfiscal 2008 was the result of net loss of $1,076,000 and non-cash reconcilingitems totaling $1,695,000 (comprised principally of depreciation andamortization of $1,283,000, minority interest of $113,000, $185,000 of non-cashexpenses associated with our planned exit activity from the Omaha, Nebraskamarket and our stock option compensation expense and increases in operatingassets and liabilities totaling $114,000).

Net cash used in investing activities in fiscal2008 was $2,787,000 compared to $2,057,000 in fiscal 2007.  The fiscal 2008activity reflects payments for the purchase of property and equipment of $3,282,000,proceeds from a sale-leaseback transaction of $747,000, net payments receivedon loans made to franchisees of $20,000 and $272,000 used to purchase tworestaurants from a franchisee.

Net cash provided by financing activities infiscal 2008 was $1,117,000 compared to $146,000 in fiscal 2007.  The fiscal 2008activity includes principal payments on notes payable and long term debt of $120,000,net borrowings on the revolving line-of-credit of $1,430,000, distributions tominority interests in partnerships of $297,000 and proceeds from the exerciseof stock options of $104,000.

**Contingencies and Off-Balance SheetArrangements:**We are contingently liable on several ground leases that have been subleased orassigned to franchisees.  We have never experienced any losses nor do weanticipate any future losses from these contingent lease liabilities.

**Critical Accounting Policies andEstimates**

**Notes Receivable:** We evaluatethe collectability of our note receivables from franchisees annually. Historically, such amounts have been fully repaid and we believe the collateraland guarantees are adequate to provide for future payments; therefore noallowances for amounts estimated to be uncollectable have been provided.

**Impairment of Long-Lived Assets:** We review ourlong-lived assets annually for potential impairment as well as their estimatedremaining life. Historically, we have not been required to impair our long-termassets nor revise their estimated life, however, the restaurant industry isextremely competitive and we continue to be responsive to changes in itsoperating environment.  Therefore such estimates are considered significant andsubject to change.

**Income Taxes:** The deferredtax assets are reviewed periodically for recoverability, and valuationallowances are adjusted as necessary.  We believe it is more likely than notthat the recorded deferred tax assets will be realized.

**Variable Interest Entities**: In December2003, the Financial Accounting Standards Board (the "FASB") finalizedFASB Interpretation No. 46R, Consolidation of Variable Interest Entities--AnInterpretation of ARB 51 (FIN 46R).  FIN 46R expands the scope of ARB 51 and can require consolidation of "Variable Interest Entities (VIEs)."  Once anentity is determined to be a VIE, the party with the controlling financialinterest, the primary beneficiary, is required to consolidate it.  We haveseveral franchisees with notes payable to the Company and after analysis wehave determined that, while these franchisees are Variable Interest Entities asdefined by FIN 46R, we are not the primary beneficiary of the entities, andtherefore they are not required to be consolidated under FIN 46R.

**New Accounting Pronouncements:** In September 2006,the Financial Accounting Standards Board ("FASB") issued Statement of FinancialAccounting Standards No. 157 ("SFAS 157").  The Statement defines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles ("GAAP"), and expands disclosures about fair valuemeasurements.  This Statement is effective for financial statements issued forfiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years.  The adoption of SFAS 157 is not expected to have amaterial effect on the Company's financial position, results of operations orcash flows.

In February 2007, the FASB issued SFAS No. 159. "The Fair Value Option for Financial Assets and Financial Liabilities -including an amendment of FASB Statement No. 115" ("SFAS 159"). SFAS 159provides companies with an option to report selected financial assets andfinancial liabilities at fair value.  Unrealized gains and losses on items forwhich the fair value option has been elected are reported in earnings at eachsubsequent reporting date.  SFAS 159 is effective for fiscal years beginningafter November 15, 2007 which will be effective for our fiscal year beginning October 1, 2008.  The adoption of this statement is not expected to have a material impacton the Company's financial position or results of operations.

In December 2007, the FASB issued FASB StatementNo. 141 (revised 2007), "Business Combinations" ("FAS 141 (R)"), whichestablishes accounting principles and disclosure requirements for alltransactions in which a company obtains control over another business.  Thisaccounting pronouncement is effective for fiscal years beginning after December 15, 2008, which will effective for our fiscal year beginning October 1, 2009.  We are currently evaluating the requirements of FAS 141 and have not yet determinedthe impact on our financial statements.

21

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In December 2007, the FASB issued FASB StatementNo. 160, "Noncontrolling Interests in Consolidated Financial Statements andamendment to ARB No. 51" ("FAS 160").  This standard prescribes the accountingby a parent company for minority interests held by other parties in asubsidiary of the parent company.  FAS 160 is effective for fiscal yearsbeginning after December 15, 3008, which will be effective for our fiscal yearbeginning October 1, 2009.  We are currently evaluating the requirements of FAS160 and have not yet determined the impact on our financial statements.

In March 2008, the FASB issued SFAS No. 161,"Disclosures about Derivative instruments and Hedging Activities" ("SFAS161").  SFAS 161 amends and expands the disclosure requirements in SFAS 133,"Accounting for Derivative Instruments and Hedging Activities".  SFAS 161 iseffective for fiscal years and interim periods beginning after November 15, 2008, which will be effective for our interim period beginning January 1, 2009.  We are currently evaluating the requirements of FAS 161 and have not yetdetermined the impact on our financial statements.

**Pre-approval of non-audit services:** On October 16, 2008, the Audit Committee of the Board of Directors of Good Times RestaurantsInc. approved in advance certain non-audit services to be performed by Hein& Associates, Good Times' independent auditor.  These non-audit servicesare to consist primarily of corporate income tax compliance services.

22

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F-1

----

**Item 7.          FinancialStatements**

INDEX TOFINANCIAL STATEMENTS

|                                                                                          | PAGE |
|------------------------------------------------------------------------------------------|------|
|                                                                                          |      |
| Report  of Independent Registered Public Accounting Firm                                 | F-2  |
|                                                                                          |      |
| Consolidated  Balance Sheet - September 30, 2008                                         | F-3  |
|                                                                                          |      |
| Consolidated  Statements of Operations - For the Years Ended September 30, 2008 and 2007 | F-4  |
|                                                                                          |      |
| Consolidated  Statements of Stockholders' Equity - For the Period from October 1, 2006   |      |
| through  September 30, 2008                                                              | F-5  |
|                                                                                          |      |
| Consolidated  Statements of Cash Flows - For the Years Ended September 30, 2008 and 2007 | F-6  |
|                                                                                          |      |
| Notes  to Consolidated Financial Statements                                              | F-7  |

***Seeaccompanying notes to these consolidated financial statements.***

F-2

----

REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and

Board of Directors

Good Times Restaurants, Inc.

Golden, Colorado

We have audited the accompanyingconsolidated balance sheet of Good Times Restaurants, Inc. and Subsidiary as of September 30, 2008, and the related consolidated statements ofoperations, stockholders' equity, comprehensive income and cash flows for theyears ended September 30, 2008 and 2007.  These consolidated financialstatements are the responsibility of the Company's management.  Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

We conducted our audits in accordancewith the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements arefree of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all materialrespects, the financial position of Good Times Restaurants, Inc. and Subsidiaryas of September 30, 2008, and the results of their operations and theircash flows for the years ended September 30, 2008 and 2007, in conformitywith U.S. Generally Accepted Accounting Principles.

We were not engaged to examinemanagement's assertion about the effectiveness of Good Times Restaurants, Inc'sinternal control over financial reporting as of September 30, 2008 included in the accompanying *Management's Annual Report on Internal Control OverFinancial Reporting*included in Item 8A, and, accordingly, we do notexpress an opinion thereon.

***HEIN****& ASSOCIATES LLP*

Denver, Colorado

December 15, 2008

***Seeaccompanying notes to these consolidated financial statements.***

F-3

----

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDBALANCE SHEET

SEPTEMBER 30, 2008

| ASSETS |
|--------|

| Current Assets:                                            |              |
|------------------------------------------------------------|--------------|
| Cash and cash equivalents                                  | $1,414,000   |
| Receivables, net of allowance for  doubtful accounts of $0 | 160,000      |
| Inventories                                                | 240,000      |
| Prepaid expenses and other                                 | 79,000       |
| Notes receivable                                           | 35,000       |
| Total  current assets                                      | 1,928,000    |
| Property and Equipment:                                    |              |
| Land and buildings                                         | 6,566,000    |
| Leasehold improvements                                     | 4,017,000    |
| Fixtures and equipment                                     | 8,303,000    |
|                                                            | 18,886,000   |
| Less accumulated depreciation                              | (10,602,000) |
|                                                            | 8,284,000    |
|                                                            |              |
| Assets held for sale                                       | 1,574,000    |
|                                                            |              |
| Other Assets:                                              |              |
| Notes receivable                                           | 83,000       |
| Other                                                      | 51,000       |
|                                                            | 134,000      |
| Total Assets                                               | $11,920,000  |

| LIABILITIES  AND STOCKHOLDERS' EQUITY                                                            |
|--------------------------------------------------------------------------------------------------|
| Current Liabilities:                                                                             |  |  |
| Current maturities of long-term debt  and leases                                                 |  | $2,304,000 |
| Accounts payable                                                                                 |  | 628,000 |
| Deferred income                                                                                  |  | 139,000 |
| Other accrued liabilities                                                                        |  |    939,000 |
| Total  current liabilities                                                                       |  | 4,010,000 |
| Long-Term Liabilities:                                                                           |  |  |
| Debt and leases, net of current  portion                                                         |  | 846,000 |
| Deferred and other liabilities                                                                   |  | 1,071,000 |
| Total  long-term liabilities                                                                     |  | 1,917,000 |
| Minority  Interests in Partnerships                                                              |  | 584,000 |
| Commitments and Contingencies   (Notes  4 and 6)                                                 |  |  |
| Stockholders' Equity:                                                                            |  |  |
| Preferred  stock, $.01 par value, 5,000,000 shares authorized, none issued and  outstanding |  | - |
| Common stock,  $.01 par value; 50,000,000 shares authorized, 3,866,896 issued and  outstanding   |  | 4,000 |
| Accumulated other comprehensive loss                                                             |  | (68,000) |
| Capital contributed in excess of par  value                                                      |  | 17,633,000 |
| Accumulated deficit                                                                              |  | (12,160,000) |
| Total  stockholders' equity                                                                      |  |     5,409,000 |
| Total Liabilities and Stockholders' Equity                                                       |  | $11,920,000 |

***Seeaccompanying notes to these consolidated financial statements.***

F-4

----

F-5

*Seeaccompanying notes to these consolidated financial statements.*

----

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF OPERATIONS

|  |  | For the Years Ended

September 30, |
|--|--|------------------------------------|

|                                                                |  | 2008         |        | 2007        |
|----------------------------------------------------------------|--|--------------|--------|-------------|
| Net Revenues:                                                  |  |              |        |             |
| Restaurant sales                                               |  | $25,244,000  |        | $24,215,000 |
| Area development and franchise fees                            |  | -            |        | 70,000      |
| Franchise royalties                                            |  | 638,000      |        | 670,000     |
| Total  net revenues                                            |  | 25,882,000   |        | 24,955,000  |
| Restaurant Operating Costs:                                    |  |              |        |             |
| Food and packaging costs                                       |  | 8,002,000    |        | 7,589,000   |
| Payroll and other employee benefit  costs                      |  | 8,780,000    |        | 8,063,000   |
| Restaurant occupancy costs                                     |  | 3,714,000    |        | 3,310,000   |
| Accretion of deferred rent                                     |  | 33,000       |        | 32,000      |
| Other restaurant operating costs                               |  | 1,134,000    |        | 1,051,000   |
| New store pre-opening costs                                    |  | 38,000       |        | 118,000     |
| Depreciation and amortization                                  |  | 1,283,000    |   | 1,223,000   |
| Total  restaurant operating costs                              |  | 22,984,000   |        | 21,386,000  |
| General and administrative costs                               |  | 2,042,000    |        | 1,798,000   |
| Advertising costs                                              |  | 1,525,000    |        | 1,427,000   |
| Franchise costs                                                |  | 312,000      |        | 161,000     |
| Gain on disposal of restaurants and  equipment                 |  | (35,000)     |   | (17,000)    |
| Income  (Loss) From Operations                                 |  | (946,000)    |        | 200,000     |
| Other Income (Expenses):                                       |  |              |        |             |
| Interest income                                                |  | 67,000       |        | 99,000      |
| Interest expense                                               |  | (80,000)     |        | (59,000)    |
| Minority interest in income of  partnerships                   |  | (113,000)    |        | (211,000)   |
| Total  other expenses, net                                     |  | (126,000)    |        | (171,000)   |
| Net Income  (Loss) before Income Taxes                    |  | (1,072,000)  |        | 29,000      |
|          Income Tax Expense |  | 4,000        |        | -           |
| Net Income  (Loss)                                        |  | ($1,076,000) |        | $29,000     |
|                                                                |  |              |        |             |
| Basic and Diluted Income   (Loss) per Share                    |  | ($0.28)      |        | $0.01       |
|                                                                |  |              |        |             |
| Weighted Average Common Shares Outstanding:                    |  |              |        |             |
| Basic                                                          |  | 3,886,730    |        | 3,838,867   |
| Diluted                                                        |  | 3,886,730    |        | 3,975,957   |

F-6

*Seeaccompanying notes to these consolidated financial statements.*

----

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE PERIODFROM OCTOBER 1, 2006 THROUGH SEPTEMBER 30, 2008

|  | Preferred  Stock | Common Stock |  |  |  |  |
|--|------------------|--------------|--|--|--|--|

|                                                                            | Issued

Shares                                                        | Par

Value                                          | Issued

Shares | Par

Value                | Capital  Contributed in Excess of Par Value | Accumulated  Deficit | Accumulated  Other Comprehensive Loss | Comprehensive  Income | Total       |
|----------------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------|----------------|---------------------------|---------------------------------------------|----------------------|---------------------------------------|-----------------------|-------------|
|                                                                            |                                                                       |                                                     |                |                           |                                             |                      |                                       |                       |             |
| Balances,  October 1, 2006                                                 | $            0 | $         0 | 3,811,151      | $  4,000             | $17,191,000                                 | $(11,113,000)        | $0                                    | $0                    | $6,082,000  |
|                                                                            |                                                                  |                                                |           |                      |                                        |                 |                                  |                  |        |
| Stock option  compensation cost                                            |                                                                       |                                                     | -              |                           | 84,000                                      |                      |                                       |                       | 84,000      |
| Stock issued  for exercised stock options                                  |                                                                       |                                                     | 55,745         |                           | 164,000                                     |                      |                                       |                       | 164,000     |
| Comprehensive  income (Loss)                                               |                                                                       |                                                     |                |                           |                                             |                      |                                       |                       | --          |
|     Net  Income                                             |                                                                       |                                                     |                |                           |                                             | 29,000               |                                       | 29,000                | 29,000      |
|     Deferred  hedging losses                                |                                                                       |                                                     |                |                           |                                             |                      | (26,000)                              |                       | (26,000)    |
|           Comprehensive  loss | _________                                                             |  _______                                       | _________      | _________                 | _________                                   | _________            | _________                             | (26,000)              | _________   |
|                                                                            |                                                                       |                                                     |                |                           |                                             |                      |                                       |                       |             |
| Balances,  September 30, 2007                                         |                                                                  | $       0             | 3,866,896      | $   4,000       | $17,439,000                                 | $(11,084,000)        | $(26,000)                             | 3,000                 | $6,333,000  |
|                                                                            |                                                                       |                                                     |                |                           |                                             |                      |                                       |                       |             |
| Stock option  compensation cost                                            |                                                                       |                                                     |                |                           | 90,000                                      |                      |                                       |                       | 90,000      |
| Stock issued  for exercised stock options                                  |                                                                       |                                                     | 31,663         |                           | 104,000                                     |                      |                                       |                       | 104,000     |
| Comprehensive  income (Loss)                                               |                                                                       |                                                     |                |                           |                                             |                      |                                       |                       | --          |
|     Net  Income (Loss)                                      |                                                                       |                                                     |                |                           |                                             | (1,076,000)          |                                       | (1,076,000)           | (1,076,000) |
|     Deferred  hedging losses                                |                                                                       |                                                     |                |                           |                                             |                      | (42,000)                              |                       | (42,000)    |
|           Comprehensive  loss | ________                                                              | _______                                             | _________      | _________                 | _________                                   | _________            | _________                             | (42,000)              | _________   |
| Balances,  September 30, 2008                                         | $           0       | $        0       | 3,898,559      | $    4,000 | $17,633,000                                 | $(12,160,000)        | $(68,000)                             | $(1,115,000)          | $5,409,000  |

F-7

*Seeaccompanying notes to these consolidated financial statements.*

----

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

|  |  | For the Years Ended

September 30, |
|--|--|------------------------------------|

|                                                                                                 |  | 2008                                                                         |        | 2007                             |
|-------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------|--------|----------------------------------|
| Cash Flows from Operating  Activities:                                                          |  |                                                                              |        |                                  |
| Net income (Loss)                                                                               |  | $(1,076,000)                                                                 |        | $29,000                          |
| Adjustments  to reconcile net income (loss) to net cash provided by  operating activities: |  |                                                                              |        |                                  |
| Depreciation and amortization                                                                   |  | 1,283,000                                                                    |        | 1,223,000                        |
| Accretion of deferred rent                                                                      |  | 33,000                                                                       |        | 32,000                           |
| Minority interest expense                                                                       |  | 113,000                                                                      |        | 211,000                          |
| Gain on disposal  of property, restaurants and equipment                                        |  | (35,000)                                                                     |        | (17,000)                         |
| Stock option  compensation cost                                                                 |  | 90,000                                                                       |        | 84,000                           |
| Expenses  associated with exit activity                                                         |  | 95,000                                                                       |        | -                                |
|                                                                                                 |  |                                                                              |        |                                  |
| Changes in  operating assets and liabilities:                                                   |  |                                                                              |        |                                  |
| (Increase)  decrease in:                                                                        |  |                                                                              |        |                                  |
| Receivables                                                                                     |  | 42,000                                                                       |        | (97,000)                         |
| Inventories                                                                                     |  |  (35,000)                                                               |        | 13,000                           |
| Prepaid expenses and other                                                                      |  | (40,000)                                                                     |        | 4,000                            |
| Deposits and other assets                                                                       |  | (3,000)                                                                      |        | (18,000)                         |
| (Decrease)  increase in:                                                                        |  |                                                                              |        |                                  |
| Accounts payable                                                                                |  | 232,000                                                                      |        | 120,000                          |
| Accrued and other liabilities                                                                   |  | (90,000)                                                                     |        | 229,000                          |
| Deferred franchise fees                                                                         |  |   10,000                                                                |   |   (50,000)                  |
| Net cash provided by operating  activities                                                      |  | 619,000                                                                      |   | 1,763,000                        |
| Cash Flows From Investing  Activities:                                                          |  |                                                                              |        |                                  |
| Payments for  the purchase of property and equipment                                            |  | (3,282,000)                                                                  |        | (3,738,000)                      |
|  Proceeds  from the sale of assets                                                         |  | -                                                                            |        | -                                |
|  Proceeds  from sale-leaseback transaction                                                 |  | 747,000                                                                      |        | 1,580,000                        |
|  Purchase of  franchisee                                                                   |  | (272,000)                                                                    |        | -                                |
|  Loans made  to franchisees and to others                                                  |  | (54,000)                                                                     |        | -                                |
|  Payments  received on loans to franchisees and to others                                  |  |     74,000                                                    |   |      101,000 |
| Net cash used in investing  activities                                                          |  | (2,787,000)                                                                  |        | (2,057,000)                      |
|  Cash Flows From Financing Activities:                                                     |  |                                                                              |        |                                  |
| Principal  payments on notes payable, capital leases, and long‐term debt                  |  | (870,000)                                                                    |        | (809,000)                        |
| Borrowings on  notes payable and long-term debt                                                 |  | 2,180,000                                                                    |        | 1,100,000                        |
| Proceeds  (expenses) from preferred stock offering                                              |  | -                                                                            |        | -                                |
| Proceeds from  exercise of stock options                                                        |  | 104,000                                                                      |        | 164,000                          |
| Preferred  dividends paid                                                                       |  | -                                                                            |        | -                                |
| Distributions  paid to minority interests in partnerships                                       |  | (297,000)                                                                    |        | (319,000)                        |
| Contributions  from minority interests in partnerships                                          |  |              -   |        | 10,000                           |
| Net cash provided by financing  activities                                                      |  | 1,117,000                                                                    |   | 146,000                          |
| Net Change in Cash and Cash Equivalents                                                         |  | (1,051,000)                                                                  |        | (148,000)                        |
| Cash and Cash Equivalents, beginning of year                                                    |  |  2,465,000                                                              |   | 2,613,000                        |
| Cash and Cash Equivalents, end of year                                                          |  | $1,414,000                                                                   |   | $2,465,000                       |
| Supplemental Disclosures of Cash Flow Information:                                              |  |                                                                              |        |                                  |
| Cash paid for  interest                                                                         |  | $   111,000                                                        |   | $   106,000            |
| Purchase of equipment with debt                                                                 |  | $              - |   | $     27,000 |
| Non-cash deferred hedging losses                                                                |  | $     42,000                                             |   | $     26,000 |

F-8

Seeaccompanying notes to these consolidated financial statements*.*

----

1.         Organization and Summary of Significant AccountingPolicies:

Organization - Good TimesRestaurants Inc. (Good Times or the Company) is a Nevada corporation. TheCompany operates through its wholly owned subsidiary Good Times Drive Thru Inc.(Drive Thru).

Drive Thru commenced operations in 1986 and, as of September 30, 2008, operates twenty-nine company-owned and jointventure drive-thru fast food hamburger restaurants.  The Company's restaurantsare located in Colorado. In addition, Drive Thru has twenty-two franchises, eighteenoperating in Colorado, two in Wyoming, one in Idaho and one in North Dakota,and is offering franchises for development of additional Drive Thrurestaurants.  

Principles of Consolidation - Theconsolidated financial statements include the accounts of Good Times, itssubsidiary and two limited partnerships, in which the Company exercises controlas general partner.  The Company owns an approximate 51% interest in bothpartnerships, is the sole general partner and receives a management fee priorto any distributions to the limited partners.  Because the Company owns anapproximate 51% interest in the partnerships and exercises complete managementcontrol over all decisions for the partnerships, except for certain vetorights, the financial statements of the partnerships are consolidated into theCompany's financial statements.  The equity interests of the unrelated limitedpartners are shown on the accompanying consolidated balance sheet as minorityinterest, and the limited partners' shares of net income in the partnerships isshown as minority interest expense in the accompanying consolidated statementof operations. All inter-company accounts and transactions are eliminated.

Accounting Estimates - Thepreparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles requires management to make estimates andassumptions that affect the amounts reported in these consolidated financialstatements and the accompanying notes.  Actual results could differ from thoseestimates.

Reclassification - Certain prioryear balances have been reclassified to conform to the current year'spresentation.  Such reclassifications had no effect on the net income or loss.

Cash and Cash Equivalents - The Companyconsiders all highly liquid debt instruments purchased with an initial maturityof three months or less to be cash equivalents.

Accounts Receivable - Accountsreceivable include uncollateralized receivables from our franchisees and ouradvertising fund, due in the normal course of business, generally requiringpayment within thirty days of the invoice date. On a periodic basis the Companymonitors all accounts for delinquency and provides for estimated losses ofuncollectible accounts. Currently and historically there have been noallowances for unrecoverable accounts receivable.

Inventories - Inventoriesare stated at the lower of cost or market, determined by the first-in,first-out method, and consist of restaurant food items and related packagingsupplies.

Property and Equipment -Depreciation is recognized using the straight-line method over the estimateduseful lives of the assets or the lives of the related leases, if shorter, asfollows:

| Buildings              | 15 years   |
|------------------------|------------|
| Leasehold improvements | 7-15 years |
| Fixtures and equipment | 3-8 years  |

Maintenance and repairs are charged toexpense as incurred, and expenditures for major improvements are capitalized. When assets are retired, or otherwise disposed of, the property accounts arerelieved of costs and accumulated depreciation with any resulting gain or losscredited or charged to income.

Assets held for sale of $1,574,000shown in the accompanying consolidated balance sheet is related to a site in Firestone,  Colorado which has been developed and is being marketed in the salelease-back market.

Impairment of Long-Lived Assets - The Companyreviews undiscounted cash flows of each restaurant as compared to the net bookvalue of each restaurant's respective properties.  If the undiscounted cashflows of each restaurant are less than their respective net book values, therespective properties are written down to their fair market values. To date wehave not written down any assets due to impairment.

Sales of Restaurants and RestaurantEquity Interests- Sales of restaurants or non-controlling equity interests in restaurantsdeveloped by the Company are recorded under either the full accrual method orthe installment method of accounting.  Under the full accrual method, a gain isnot recognized until the collectibility of the sales price is reasonablyassured and the earnings process is virtually complete without furthercontingencies.  When a sale does not meet the requirements for incomerecognition, the related gain is deferred until those requirements are met. Under the installment method, the gain is incrementally recognized as principalpayments on the related notes receivable are collected.  The Company'saccounting policy, with regards to the sale of restaurants, is in accordancewith SFAS No. 66.  If the initial payment is less than the percentages setforth, use of the installment method is required.  

F-9

----

The Company's accounting for the saleof restaurants is in accordance with SAB Topic 5-E because the risks and otherincidents of ownership have been transferred to the buyer.  Specifically, a) nocontinuing involvement by the Company exists in restaurants that are sold, b)sales contracts and related income recognition are not dependant on the future successfuloperations of the sold restaurants, and c) the Company is not involved as aguarantor on the purchasers' debts.

Deferred Liabilities - Rentexpense is reflected on a straight-line basis over the term of the lease forall leases containing step-ups in base rent.  An obligation representing futurepayments (which totaled $551,000 as of September 30, 2008) is reflected in the accompanying consolidated balance sheet as a deferred liability.  Alsoincluded in the $1,071,000 deferred and other liability balance is a $452,000deferred gain on the sale of the building and improvements of two Company-ownedrestaurants in two separate sale leaseback transactions.  The building andimprovements were subsequently leased back from the third party purchasers. Thegains will be recognized in future periods in proportion to the rents paid onthe fifteen and twenty year leases.  The remaining balance represents adeferred hedging loss liability of $68,000.  

Opening Costs - Openingcosts are expensed as incurred.

Advertising - The Companyincurs advertising expenses in connection with the marketing of its restaurantoperations.  Advertising costs are expensed when the related advertisingbegins.

Franchise and Area Development Fees - Individualfranchise fee revenue is deferred when received and is recognized as incomewhen the Company has substantially performed all of its obligations under thefranchise agreement and the franchisee has commenced operations.  The Company'scommitments and obligations pursuant to the franchise agreements consist of a)development assistance; including site selection, building specifications andequipment purchasing and b) operating assistance; including training ofpersonnel and preparation and distribution of manuals and operating materials. All of these obligations are effectively complete upon the opening of therestaurant at which time the franchise fee and the portion of any developmentfee allocable to that restaurant is recognized.  There are no additionalmaterial commitments or obligations.

The Company has not recognized anyfranchise fees that have not been collected.  The Company segregates initialfranchise fees from other franchise revenue in the statement of operations. Revenues and costs related to company-owned restaurants are segregated fromrevenues and costs related to franchised restaurants in the statement ofoperations.

Continuing royalties from franchisees,which are a percentage of the gross sales of franchised operations, arerecognized as income when earned.  Franchise development expenses, whichconsist primarily of legal costs and restaurant opening expenses associatedwith developing and opening franchise restaurants, are expensed against therelated franchise fee income.

Accounting for Notes Receivable - The Company'snotes receivables are all due from Good Times franchisees, or franchiseadvertising cooperatives. All of the notes receivable are collateralized byreal estate or equipment and certain of the notes are personally guaranteed bythe franchisees. The notes are all term notes with interest accruing at marketrates. The Company reviews the notes from time to time to accesscollectability. The Company has determined that all notes receivable at September 30, 2008 are collectable and allowances for write-downs are not necessary.

Operating Partner Program - OperatingPartners in a restaurant share in future increases of their restaurant's cashflows above an established baseline, which is based on the preceding twelvemonths' cash flow after full allocation of advertising and capital expenses. This program is designed to figuratively put Operating Partners in the shoes ofan owner so that a portion of their compensation is derived solely from theimprovement in the financial performance of their respective restaurants.  Theportion of cash flow increases allocable to the Operating Partners are expensedas incurred on a quarterly basis, with a cumulative adjustment made for anymonths where cash flows fall below the established baselines. Compensationunder this program is expensed to restaurant operations as incurred.  No otherlong term benefits accrue or vest to the Operating Partners in this program. Operating Partners are employees at will and are subject to termination fromthis program if certain operating, customer service and financial objectivesare not met.

Income Taxes - Incometaxes are recorded in accordance with asset and liability approaches whereby the recognition of deferred tax liabilities and assets are recorded for theexpected future tax consequences of temporary differences between the carryingamounts and the tax bases of the Company's assets and liabilities. Valuationallowances are provided for deferred tax assets if their recovery is more notlikely than not.

F-10

----

Net Income (Loss) Per Common Share - The income(loss) per share is presented in accordance with the provisions of SFASNo. 128, "Earnings Per Share."  Basic EPS is calculated by dividing theincome (loss) available to common stockholders by the weighted average numberof common shares outstanding for the period.  Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock. Options for 81,364shares of common stock were not included in computing diluted EPS for 2008because their effects were anti-dilutive. Options for 137,090 shares of commonstock were included in computing diluted EPS for 2007 because they weredilutive. 

Financial Instruments andConcentrations of Credit Risk - Credit risk represents theaccounting loss that would be recognized at the reporting date ifcounterparties failed completely to perform as contracted.  Concentrations ofcredit risk (whether on or off balance sheet) that arise from financialinstruments exist for groups of customers or counterparties when they havesimilar economic characteristics that would cause their ability to meetcontractual obligations to be similarly effected by changes in economic orother conditions.  Financial instruments with off-balance-sheet risk to theCompany include lease liabilities whereby the Company is contingently liable asa guarantor of certain leases that were assigned to third parties in connectionwith various sales of restaurants to franchisees (see Note 5).  

Financial instruments potentiallysubjecting the Company to concentrations of credit risk consist principally ofreceivables.  At September 30, 2008, notes receivable totaled $118,000 and aredue from six entities.  Additionally, the Company has other current receivablestotaling $160,000, which includes $91,000 of franchise receivables.

The Company purchases 100% of itsrestaurant food and paper from one vendor. The Company believes a sufficientnumber of other suppliers exist from which food and paper could be purchased toprevent any long-term, adverse consequences.  

The Company operates in one industrysegment, restaurants.  A geographic concentration exists because the Company'scustomers are generally located in the State of Colorado. 

The estimated fair values of financialinstruments are determined at discrete points in time based on relevant marketinformation.  These estimates involve uncertainties and cannot be determinedwith precision.  The carrying amounts of all financial instruments approximatefair value as a result of either the instrument's short-term maturities orinterest rates that approximate the Company's current expected borrowing andlending rates. 

Comprehensive Income (Loss) -Comprehensive income includes net income or loss, changes in certain assets andliabilities that are reported directly in equity such as adjustments resultingfrom unrealized gains or losses on held-to-maturity investments and certainhedging transactions. See Note 10 for additional information. 

Stock-Based Compensation - Effective October 1, 2006, the Company adopted the provisions of Statement of Financial AccountingStandard ("SFAS") No. 123(R), Share-Based Payment, using the modifiedprospective application transition method. Under the provisions of SFAS 123(R),stock-based compensation is measured at the grant date, based on the calculatedfair value of the award, and is recognized as an expense over the requisiteemployee service period (generally the vesting period of the grant). See Note10 for additional information.

Variable Interest Entities - In December2003, the FASB finalized FASB Interpretation No. 46R, "Consolidation ofVariable Interest Entities - An Interpretation of ARB51" (FIN 46R). FIN 46Rexpands the scope of ARB51 and can require consolidation of "variable interestentities" (VIEs).  Once an entity is determined to be a VIE, the party with thecontrolling financial interest, the primary beneficiary, is required toconsolidate it.  The Company has several franchisees with notes payable to theCompany.  These franchisees are variable interest entities as defined by FIN46R, however, the Company is not the primary beneficiary of these entities. Therefore they are not required to be consolidated under FIN 46R.

New Accounting Pronouncements- In September 2006, the Financial AccountingStandards Board ("FASB") issued Statement of Financial Accounting StandardsNo. 157 ("SFAS 157"). The Statement defines fair value, establishes aframework for measuring fair value in generally accepted accounting principles("GAAP"), and expands disclosures about fair value measurements.  ThisStatement is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, and interim periods within those fiscalyears. The adoption of SFAS 157 is not expected to have a material effect onthe Company's financial position, results of operations or cash flows.

In February 2007, the FASB issued SFASNo. 159, "The Fair Value Option for Financial Assets and Financial Liabilities- including an amendment of FASB Statement No. 115" ("SFAS 159"). SFAS 159provides companies with an option to report selected financial assets andfinancial liabilities at fair value. Unrealized gains and losses on items forwhich the fair value option has been elected are reported in earnings at eachsubsequent reporting date. SFAS 159 is effective for fiscal years beginningafter November 15, 2007 which will be effective for our fiscal yearbeginning October 1, 2008. The adoption of this statement is not expected tohave a material impact on the Company's financial position or results ofoperations.

In December 2007, the FASB issued FASBStatement No. 141 (revised 2007), "Business Combinations" ("FAS 141(R)"), whichestablishes accounting principles and disclosure requirements for alltransactions in which a company obtains control over anotherbusiness.  This accounting pronouncement is effective for fiscalyears beginning after December 15, 2008, which will be effective for our fiscalyear beginning October 1, 2009. We are currently evaluating the requirements ofFAS 141 and have not yet determined the impact on our financial statements.

F-11

----

In December 2007, the FASB issued FASBStatement No. 160, "Noncontrolling Interests in Consolidated FinancialStatements and amendment to ARB No. 51" ("FAS 160").  This standardprescribes the accounting by a parent company for minority interests held byother parties in a subsidiary of the parent company.  FAS 160 iseffective for fiscal years beginning after December 15, 2008, which will be effective for our fiscal year beginning October 1, 2009.  We are currently evaluating the requirements of FAS 160 and have not yetdetermined the impact on our financial statements.

In March 2008, the FASB issued SFASNo. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161").  SFAS 161 amends and expands thedisclosure requirements in SFAS 133, "Accounting for Derivative Instruments andHedging Activities".  SFAS 161 is effective for fiscal years and interim periodsbeginning after November 15, 2008, which will be effective for our interimperiod beginning January 1, 2009. We are currently evaluating therequirements of FAS 161 and have not yet determined the impact on our financialstatements.

2.         Liquidity:

As of September 30, 2008, we had $1,414,000 of cash and cash equivalents on hand. We currently plan to use the cashbalance and cash generated from operations for increasing our working capitalreserves and for recurring capital expenditures.  We believe that the currentcash on hand and additional cash expected from operations in fiscal 2009 willbe sufficient to cover our working capital requirements for fiscal 2009.

As of September 30, 2008, we had a working capital deficit of $2,082,000 primarily from ourdevelopment line-of-credit of $2,180,000 shown as a current liability maturingin July 2009.  We have a fully-developed site that we are marketing for asale-leaseback transaction with expected net proceeds of $1,600,000 which wouldbe used to reduce the line of credit.

We havereduced planned selling, general and administrative and franchise costs byapproximately $450,000 for fiscal 2009 through the elimination of executivemanagement positions, salary reductions and professional services costs. Wehave also reduced our labor hours allocation through increased efficiencies andimproved our sales per man hour efficiencies on service hours, therebyeliminating approximately $300,000 of annual fixed restaurant payroll costs.

We anticipatethat we will be in default of certain technical loan covenants as of December 31, 2008 on the Wells Fargo note and we are working with Wells Fargo to modifythese covenants based upon our fiscal 2009 plan and cash flow.  We have neverbeen in payment default nor do we expect to be in the future.

3.         Notes Receivable:

Notesreceivable consists of the following as of September 30, 2008:

| Notes  receivable from franchisees related to installation of certain equipment;  8.5% to 10% interest per annum; monthly payments of principal and interest  are due in the amount of approximately $4,100; final payment due in 2011;  collateralized by all fixtures and equipment of the related restaurants. |  | 60,000   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|----------|
|                                                                                                                                                                                                                                                                                                                   |  |     |
| Other,  various terms                                                                                                                                                                                                                                                                                             |  | 58,000   |
|                                                                                                                                                                                                                                                                                                                   |  | 118,000  |
| Less  current portion                                                                                                                                                                                                                                                                                             |  | (35,000) |
| Notes receivable, net of current  portion                                                                                                                                                                                                                                                                         |  | $83,000  |

F-12

----

4.        Debt:

| Note payable  with PFGI II, LLC with monthly payments of interest (prime rate +2%, with a  minimum rate of 8%, at September 30, 2008 the rate was 8.0%) with all unpaid  principal due on July 10, 2009.  The loan is secured by six Leasehold Deeds  of Trust and six Security Agreements and Assignment  of Rents and Fixture Filings related to those six corporate restaurants.  The  promissory note constitutes a revolving line of credit which may be advanced,  repaid and re-advanced from time to time. The maximum available under the  line is $2,500,000. |  | $2,180,000  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |             |
| Note payable  with Wells Fargo Bank, NA with payments of principal and interest (prime rate  less .5%) due monthly and the final payment due in April 2015.  The loan is  secured by four Security Agreements related to four corporate restaurants.                                                                                                                                                                                                                                                                                                                         |  | 960,000     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |             |
| Other, various terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 10,000      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 3,150,000   |
| Less current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | (2,304,000) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $846,000    |

In conjunctionwith the Wells Fargo Bank term loan, the Company entered into a variable tofixed interest rate swap agreement with Wells Fargo Bank effective May 9, 2007,with a notional amount of $1,100,000, a pay rate of 7.77% and a receive ratebased on the bank prime rate less .50%. The swap agreement has an eight-yearterm and has the effect of normalizing the effective interest rate at 7.77%.

As of September 30, 2008, the fair value of the contract was a loss of $68,000. The change in the fair valuehas been recorded in other comprehensive loss.

Asof September 30, 2008, principal payments on debt became due as follows:

| Years Ending

September  30, |  |               |
|------------------------------|--|---------------|
|                              |  |               |
| 2009                         |  | $ 2,304,000   |
| 2010                         |  | 124,000       |
| 2011                         |  | 134,000       |
| 2012                         |  | 144,000       |
| 2013                         |  | 156,000       |
| Thereafter                   |  |  288,000 |
|                              |  |          |
|                              |  | $3,150,000    |

In connectionwith the Wells Fargo Bank loan, the Company has agreed to certain covenants,which include minimum tangible net worth, a total liabilities to tangible networth ratio and a fixed charge coverage ratio, as defined in the agreement. Asof September 30, 2008, the Company was in compliance with its loan covenants.

5.         Other Accrued Liabilities:

Otheraccrued liabilities consist of the following at September 30, 2008:

| Wages  and other employee benefits |  | $264,000 |
|------------------------------------|--|----------|
| Taxes,  other than income tax      |  | 542,000  |
| Other                              |  | 133,000  |
|                                    |  |          |
|                                    |  | $939,000 |

 

F-13

----

6.         Commitments and Contingencies:

The Company's office space, and theland and buildings related to the Drive Thru restaurant facilities areclassified as operating leases and expire over the next 16 years. Some leasescontain escalation clauses over the lives of the leases. Most of the leases containone to three five-year renewal options at the end of the initial term. Certainleases include provisions for additional contingent rent payments if salesvolumes exceed specified levels. The Company paid no material contingentrentals during fiscal 2008 and 2007.

Following is a summary of operatinglease activities:

|                        |  | Year Ended  September 30,

2008 |
|------------------------|--|---------------------------------|
|                        |  |                                 |
| Minimum  rentals       |  | $2,379,000                      |
| Less  sublease rentals |  | (391,000)                       |
|                        |  |                                 |
| Net rent  paid         |  | $1,988,000                      |

As of September 30, 2008, future minimum rental commitments required under the Company's operating leases thathave initial or remaining noncancellable lease terms in excess of one year areas follows:

| Years Ending September 30, 2008     |  |             |
|-------------------------------------|--|-------------|
|                                     |  |             |
|       2009 |  | $2,339,000  |
|       2010 |  | 2,091,000   |
|       2011 |  | 1,931,000   |
|       2012 |  | 1,819,000   |
|       2013 |  | 1,756,000   |
|    Thereafter             |  | 10,941,000  |
|                                     |  | 20,877,000  |
| Less sublease rentals               |  | (3,026,000) |
|                                     |  |             |
|                                     |  | $17,851,000 |

The Company is contingently liable on severalground leases that have been subleased or assigned to franchisees. Thesubleased and assigned leases expire between 2009 and 2024. The Company hasnever experienced any losses from these contingent lease liabilities.

7.      Financing Transactions:

In July 2006, the Company purchased the equipmentand improvements from a franchisee for total consideration of $329,000.  Theassets of the restaurant were recorded on the Company's books at the fairmarket value of $296,000, resulting in the recording of goodwill in the amountof $33,000.  In May 2007 the Company sold the restaurant to an unrelated thirdparty franchisee, resulting in the write off of the goodwill. The land,building and improvements for this site were originally sold in a salelease-back transaction. We will remain contingently liable on that lease whichwas subleased to the new franchisee. The Company has maintained ownership ofthe fixtures and equipment and entered into a lease of those assets with thefranchisee.

InMay 2007 the Company borrowed $1,100,000 from Wells Fargo Bank under a notepayable with an eight year term with a floating interest rate at .50% belowprime.  We simultaneously entered into an interest rate swap transaction withWells Fargo Bank for the full $1,100,000 with a fixed interest rate of 7.77%for the full eight year term coinciding with the note payable.  Partial proceedsfrom the loan were used to: 1) payoff our existing GE Capital notes payable of$398,000; and, 2) fund new store construction. The balance of the proceeds wereused to partially fund the purchase of an existing restaurant from a franchiseeand for working capital.

8.       Managed Limited Partnerships:

Drive Thru is the general partner of two limitedpartnerships that were formed to develop Drive Thru restaurants.  Limitedpartner contributions have been used to construct new restaurants.  Drive Thru,as a general partner, generally receives an allocation of approximately 51% ofthe profit and losses and a fee for its management services.  The limitedpartners' equity has been recorded as a minority interest in the accompanyingconsolidated financial statements.

F-14

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9.       Income Taxes:

Deferred tax assets (liabilities) arecomprised of the following at September 30, 2008:

|                                                 |  | Current                                       |        | Long Term                                                                    |
|-------------------------------------------------|--|-----------------------------------------------|--------|------------------------------------------------------------------------------|
| Deferred  assets (liabilities):                 |  |                                               |        |                                                                              |
| Tax effect  of net operating loss carry-forward |  | $        - |        | $1,886,000                                                                   |
| Partnership  basis difference                   |  | -                                             |        | 124,000                                                                      |
| Deferred  revenue                               |  | -                                             |        | 183,000                                                                      |
| Property and  equipment basis differences       |  | -                                             |        | 57,000                                                                       |
| Other  accrued liability difference             |  | 7,000                                         |   | -                                                                            |
| Net deferred  tax assets                        |  | 7,000                                         |        | 2,250,000                                                                    |
| Less  valuation allowance*                      |  | (7,000)                                       |        | (2,250,000)                                                                  |
|                                                 |  |                                          |        |                                                                         |
| Net deferred  tax assets                        |  | $       -       |        | $              - |

*     The valuation allowance increasedby $144,000 during the year ended September 30, 2008.

The Companyhas net operating loss carry-forwards of approximately $4,952,000 for incometax purposes which expire from 2009 through 2028.  The use of these netoperating loss carry-forwards may be restricted due to changes in ownership.

Total income tax expense for the yearsended 2008 and 2007 differed from the amounts computed by applying the U.S.Federal statutory tax rates to pre-tax income as follows:

|                                                                             |  | 2008                                                             |  | 2007                                                             |
|-----------------------------------------------------------------------------|--|------------------------------------------------------------------|--|------------------------------------------------------------------|
|                                                                             |  |                                                                  |  |                                                                  |
| Total  expense (benefit) computed by applying the U.S. Statutory rate (35%) |  | $(375,000)                                                       |  | $10,000                                                          |
| State income tax, net of  federal tax benefit                               |  |  (32,000)                                                   |  | 1,000                                                            |
| Effect of change in valuation  allowance                                    |  | 144,000                                                          |  |  55,000                                                     |
| Change in partnership basis                                                 |  |  240,000                                                    |  | -                                                                |
| Permanent differences                                                       |  |  57,000                                                     |  | 41,000                                                           |
| Other                                                                       |  |  (  34,000)                                                 |  | (107,000)                                                        |
|                                                                             |  |                                                                  |  |                                                                  |
| Provision for income taxes                                                  |  | $            - |  | $            - |

10.       Related Parties:

A significant stockholder has enteredinto two franchise and management agreements with the Company.  The Companyalso leases office space from this stockholder under a lease agreement whichexpires in 2009.  Rent paid to the stockholder in 2008 and 2007 for officespace was $55,000 and $54,000, respectively.  One of the Company's Boardmembers is a principal of the stockholder.

The Bailey Company is also the ownerof two franchised Good Times Drive Thru restaurants which are located in Thornton and Loveland, Colorado.  The Bailey Company has entered into two franchise andmanagement agreements with us, and payments under those agreements totaled approximately$94,000 for the fiscal year ended September 30, 2008.

11.       Stockholders' Equity:

Preferred Stock - The Companyhas the authority to issue 5,000,000 shares of preferred stock.  The Board ofDirectors has the authority to issue such preferred shares in series anddetermine the rights and preferences of the shares as may be determined by theBoard of Directors.

Common Stock Dividend Restrictions - As long asat least two-thirds of the shares of common stock into which the Series BPreferred Stock was converted remains held by the former holders of suchconverted Series B Preferred Stock, without the written consent or affirmativevote of the holders of three-quarters of the then outstanding votes of theshares of the Series B Preferred Stock and the shares of the common stock, theCompany cannot institute any payment of cash dividends or other distributionson any shares of common stock.

F-15

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Stock Option Plans - The Companyhas a 2008 Omnibus Equity Incentive Compensation Plan (the "2008  Plan"), approvedby shareholders in fiscal 2008, which is the successor equity compensation planto the Company's 2001 Stock Option Plan (the "2001  Plan").  As of September 30, 2008, 198,130 shares were available for future grants of nonqualifiedstock options, incentive stock options, stock appreciation rights, restrictedstock, restricted stock units, performance shares, performance units andstock-based awards.

The 2008 Plan serves as the successorto our 2001 Plan, as amended (the "Predecessor Plan"), and no further awardsshall be made under the Predecessor Plan from and after the effective date ofthe 2008 Plan.  All outstanding awards under the Predecessor Plan immediatelyprior to the effective date of the 2008 Plan shall be incorporated into the2008 Plan and shall accordingly be treated as awards under the 2008 Plan. However, each such award shall continue to be governed solely by the terms andconditions of the instrument evidencing such grant or issuance, and, except asotherwise expressly provided in the 2008 Plan or by the Committee thatadministers the 2008 Plan, no provision of the 2008 Plan shall affect orotherwise modify the rights or obligations of holders of such incorporatedawards.

Effective October 1, 2006, the Companyadopted the provisions of Statement of Financial Accounting Standard ("SFAS")No. 123(R), Share-Based Payment, using the modified prospective applicationtransition method. Under the provisions of SFAS 123(R), stock-basedcompensation is measured at the grant date, based on the calculated fair valueof the award, and is recognized as an expense over the requisite employeeservice period (generally the vesting period of the grant).

On August 3, 2006, the Company's Boardof Directors, upon the review and recommendation by the Compensation Committeeof the Board, approved the acceleration of the vesting, effective August 3,2006, of outstanding unvested stock options to purchase a total of approximately108,235 shares of the Company's common stock, representing all outstandingunvested stock options granted under the Company's 2001 Stock Option Plan thatare held by current employees, including all executive officers of the Company.Stock options held by the Company's non-employee members of the Board were notaccelerated. As a result, the accelerated options became fully vested on August 3, 2006. 

The Company measures the compensationcost associated with share-based payments by estimating the fair value of stockoptions as of the grant date using the Black-Scholes option pricing model. TheCompany believes that the valuation technique and the approach utilized todevelop the underlying assumptions are appropriate in calculating the fairvalues of the Company's stock options granted during fiscal 2008. Estimates offair value are not intended to predict actual future events or the valueultimately realized by the employees who receive equity awards.

Net income for the fiscal years ended September 30, 2008 and 2007 includes $90,000 and $84,000, respectively, of compensationcosts related to our stock-based compensation arrangements.

During the fiscal year ended September 30, 2008, we granted 12,000 non-statutory stock options and 16,700 incentivestock options both with exercise prices of $5.75. Of the 16,700 incentiveoptions issued 10,000 shares were forfeited in conjunction with the terminationof the company's VP of Franchise Development in August 2008. The per shareweighted average fair values were $3.26 for non-statutory stock option grantsand $3.10 for incentive stock option grants.

In addition to the exercise and grantdate prices of the awards, certain weighted average assumptions that were usedto estimate the fair value of stock option grants are listed in the followingtable:

|                          | Incentive  Stock Options | Non-Statutory  Stock Options |
|--------------------------|--------------------------|------------------------------|
| Expected  term (years)   | 6.0                      | 6.7                          |
| Expected  volatility     | 51%                      | 51%                          |
| Risk-free  interest rate | 4.4%                     | 4.4%                         |
| Expected  dividends      | 0                        | 0                            |

We estimateexpected volatility based on historical weekly price changes of our commonstock for a period equal to the current expected term of the options. Therisk-free interest rate is based on the United States treasury yields in effectat the time of grant corresponding with the expected term of the options. The expectedoption term is the number of years we estimate that options will be outstandingprior to exercise considering vesting schedules and our historical exercisepatterns.

SFAS 123(R) requires the cash flowsresulting from the tax benefits for tax deductions in excess of thecompensation expense recorded for those options (excess tax benefits) to beclassified as financing cash flows. These excess tax benefits were $0 for thefiscal years ended September 30, 2008 and 2007.

F-16

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A summary of stock option activityunder our share-based compensation plan for the fiscal year ended September 30, 2008 is presented in the following table:

|                            | Options        | Weighted  Average Exercise Price | Weighted  Average Remaining Contractual Life (Yrs.) | Aggregate Intrinsic  Value |
|----------------------------|----------------|----------------------------------|-----------------------------------------------------|----------------------------|
| Outstanding-beg  of year   | 366,905        | $3.89                            |                                                     |                            |
| Granted                    |  28,700   | $5.75                            |                                                     |                            |
| Exercised                  | (31,663)       | $3.26                            |                                                     |                            |
| Forfeited  or expired      |  (10,000) | $5.75                            |                                                     |                            |
| Outstanding Sept 30, 2008  | 353,942        | $4.04                            | 5.0                                                 | $32,000                    |
|                            |                |                                  |                                                     |                            |
| Exercisable  Sept 30, 2008 | 299,744        | $3.64                            | 4.4                                                 | $32,000                    |

As of September 30, 2008, the total remaining unrecognized compensation cost related to unvestedstock-based arrangements was $114,000 and is expected to be recognized over aweighted average period of 2.75 years.

The total intrinsic value of stockoptions exercised during the fiscal year ended September 30, 2008 was $71,000.  Cash received from stock option exercises for the fiscal year ended September 30, 2008 was $104,000.

Accumulated Other Comprehensive Loss - In May2007, the Company entered into an interest rate swap agreement, designated as acash flow hedge, which hedges the Company's exposure to interest ratefluctuations on the Company's floating rate $1,100,000 term loan. The Companyrecords the fair value of these contracts in the balance sheet, with the offsetto other comprehensive loss. The contract requires monthly settlements of thedifference between the amounts to be received and paid under the agreement, theamount of which is recognized in current earnings as interest expense. See NoteThree for additional information.

12.       Retirement Plan:

The Company has a 401(k) profitsharing plan (the "Plan").  Eligible employees may make voluntary contributionsto the Plan, which are matched by the Company, in an amount equal to 25% of theemployee's contribution up to 6% of their compensation.  The amount of employeecontributions is limited as specified in the Plan. The Company may, at itsdiscretion, make additional contributions to the Plan or change the matchingpercentage.  The Company made matching contributions of $30,000 and $31,000 infiscal 2008 and fiscal 2007 respectively.  All matching contributions are madein cash.

F-17

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**Item 8.           ChangesIn and Disagreements with Accountants on Accounting and Financial Disclosure.**

During the two most recent fiscal years, GoodTimes Restaurants has not had any changes in or disagreements with itsindependent accountants on matters of accounting or financial disclosure.

**Item 8A.        Controls andProcedures**

**ConclusionRegarding the Effectiveness of Disclosure Controls and Procedures**

Based on anevaluation of the Company's disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, asamended), as of the end of the Company's fiscal year ended September 30,2008, the Company's Chief Executive Officer and Controller (its principalexecutive officer and principal financial officer, respectively) have concludedthat the Company's disclosure controls and procedures were effective.

**Management's Report on InternalControl Over Financial Reporting**

We areresponsible for establishing and maintaining adequate internal control overfinancial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securitiesand Exchange Act of 1934, as amended). We maintain a system of internalcontrols that is designed to provide reasonable assurance in a cost-effectivemanner as to the fair and reliable preparation and presentation of theconsolidated financial statements. 

Because of itsinherent limitations, internal control over financial reporting may not preventor detect misstatements. Therefore, even those systems determined to beeffective can provide only reasonable assurance with respect to financialstatement preparation and presentation.

We conducted an evaluation of the effectiveness ofour internal control over financial reporting as of September 30, 2008. In making this evaluation, our management used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. This evaluation included a review of thedocumentation of controls, evaluation of the design effectiveness of controls,testing of the operating effectiveness of controls and a conclusion on thisevaluation. We have concluded that, as of September 30, 2008, the Company's internal control over financial reporting was effective based on thesecriteria.

This Annual Report does notinclude an attestation report of the Company's registered public accountingfirm regarding internal control over financialreporting.  Management's report was not subject to attestation by theCompany's registered public accounting firm pursuant to temporary rules of theSEC that permit the Company to provide only management's report in this AnnualReport.

**Changes in Internal Controlover Financial Reporting**

Therehave been no significant changes in the Company's internal control overfinancial reporting that occurred during the Company's fiscal quarter endedSeptember 30, 2008 that have materially affected, or are reasonably likelyto materially affect, the Company's internal control over financial reporting. 

**Item 8B.         Other Information**

Nothing to report.

**PART III**

**Item 9.           Directors,Executive Officers, Promoters and Control Persons, Corporate Governance;Compliance with Section 16(a) of the Exchange Act**

The information required by this Item concerningour directors and executive officers is incorporated by reference to theinformation provided under the captions Item 1 for Voting "Election ofDirectors" and "Executive Officers" in our definitive proxystatement for the annual meeting of stockholders, to be held on January 26, 2009and to be filed within 120 days from September 30, 2008.  Information regardingthe Company's Code of Ethics, nominating procedures and Audit Committee isincorporated by reference to the information provided under the captions "Codeof Ethics," "Nominee Selection Process" and "Board Committees" in ourdefinitive proxy statement for the annual meeting of stockholders, to be heldon January 26, 2009 and to be filed within 120 days from September 30, 2008.

The information required by this Item concerningcompliance with Section 16(a) of the Securities Exchange Act of 1934 isincorporated by reference to the information provided under the caption"Section 16(a) Beneficial Ownership Reporting Compliance" in ourdefinitive proxy statement for the annual meeting of stockholders, to be heldon January 26, 2009 and to be filed within 120 days from September 30, 2008.

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**Item 10.         ExecutiveCompensation**

The information required by this Item isincorporated by reference to the information provided under the captions"Directors' Compensation" and "Executive Compensation" inour definitive proxy statement for the annual meeting of stockholders to beheld on January 26, 2009 and to be filed within 120 days from September 30, 2008.

**Item11.         Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

The information required by this Item concerningsecurity ownership of certain beneficial owners and management is incorporatedby reference to the information provided under the caption "Ownership ofcommon stock by Principal Stockholders and Management" in our definitiveproxy statement for the annual meeting of stockholders to be held on January26, 2009 and to be filed within 120 days from September 30, 2008.

The information required by this Itemconcerning securities authorized for issuance under equity compensation plansis incorporated by reference to the information provided under the caption"Disclosure with Respect to the Company's Equity Compensation Plan"in Part II - Item 5 - Market for Common Equity and Related Stockholder Matters,included in this Form 10-KSB.

**Item 12.         CertainRelationships, Related Transactions and Director Independence.**

The information required by this Item isincorporated by reference to the information provided under the caption"Certain Relationships and Related Transactions" in our definitiveproxy statement for the annual meeting of stockholders to be filed within 120days from September 30, 2008.

Theinformation required by this Item concerning director independence isincorporated by reference to the information provided under the captions"Nominee selection process", "Nominees" and "Board Committees" in ourdefinitive proxy statement for the annual meeting of stockholders to be filedwithin 120 days from September 30, 2008.

**Item 13.         Exhibits**

The following exhibits are furnished as part ofthis report:

**Exhibit****           Description**

3.1             Articlesof Incorporation of the Registrant (previously filed on November 30, 1988 as Exhibit 3.1 to the registrant's Registration Statement on Form S-18 (File No.33-25810-LA) and incorporated herein by reference)

3.2             Amendmentto Articles of Incorporation of the Registrant dated January 23, 1990(previously filed on January 18, 1990 as Exhibit 3.1 to the registrant'sCurrent Report on Form 8-K (File No. 000-18590) and incorporated herein byreference)

3.3             Amendmentto Articles of Incorporation (previously filed as Exhibit 3.5 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1996 and (File No. 000-18590) incorporated herein by reference)

3.4             RestatedBylaws of Registrant dated November 7, 1997 (previously filed as Exhibit 3.6 tothe registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1997 (File No. 000-18590) and incorporated herein by reference)

3.5             RestatedBylaws of Registrant, amended as of August 14, 2007 (previously filed as Exhibit 3/1 to the registrant's current report on Form 8-K dated August 14, 2007 (File No. 000-18590) and incorporated herein by reference)

4.1             Certificateof Designations, Preferences, and Rights of Series B Convertible PreferenceStock of Good Times Restaurants Inc. (previously filed as Exhibit 1 to theAmendment No. 6 to Schedule 13D filed by The Erie County Investment Co., The Bailey Company, LLLP and Paul T. Bailey (File No. 005-42729) on February 14, 2005 and incorporated herein by reference)

10.1           Formof Promissory Note dated November 3, 1995 by and between AT&T CommercialFinance Corporation, Boise Co-Development Limited Partnership, Good Times GoodTimes Inc. as general partner, and Good Times Restaurants Inc. as guarantor inthe amount of $254,625 (previously filed as Exhibit 10.34 to the registrant'sAnnual Report on Form 10-KSB/A for the fiscal year ended September 30, 1995(File No. 000-18590) and incorporated herein by reference)

24

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10.2           Formof Promissory Note dated November 3, 1995 by and between AT&T CommercialFinance Corporation, Boise Co-Development Limited Partnership, Good Times GoodTimes Inc. as general partner, and Good Times Restaurants as guarantor in theamount of $104,055 (previously filed as Exhibit 10.35 to the registrant'sAnnual Report on Form 10-KSB/A for the fiscal year ended September 30, 1995(File No. 000-18590) and incorporated herein by reference)

10.3           RegistrationRights Agreement dated May 31, 1996 regarding registration rights of the commonstock issuable upon conversion of the Series A Convertible Preferred Stock(previously filed as Exhibit 10.15 to the registrant's Annual Report on Form10-KSB/A for the fiscal year ended September 30, 1995 (File No. 000-18590) and incorporated herein by reference)

10.4           Amendmentand Agreement regarding Series A Convertible Preferred Stock by and betweenGood Times Restaurants Inc. and The Bailey Company dated December 3, 1997,effective as of October 31, 1997 (previously filed as Exhibit 10.13 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1997 (File No. 000-18590) and incorporated herein by reference)

10.5           Indemnificationby Dr. Kenneth Dubach to Good Times Good Times Inc. dated December 10, 1996with respect to the promissory note of the Boise Co-Development LimitedPartnership dated November 3, 1995 in the original amount of $254,625 and thepromissory note dated November 3, 1995 in the original amount of $104,055(previously filed as Exhibit 10.14 to the registrant's Annual Report on Form10-KSB for the fiscal year ended September 30, 1997 (File No. 000-18590) andincorporated herein by reference)

10.6           Officelease (previously filed as Exhibit 10.12 to the registrant's Annual Report onForm 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.7           TheBailey Company Guaranty Agreement (previously filed as Exhibit 10.13 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.8           1992Incentive Stock Option Plan, as amended (previously filed as Exhibit 4.9 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.9           1992Non-Statutory Stock Option Plan, as amended (previously filed as Exhibit 4.10to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.10          TheBailey Company Private Placement Letter Agreement dated March 12, 1999 (previously filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-QSBfor the quarter ended March 31, 1999 (File No. 000-18590) and incorporatedherein by reference)

10.11          Warrantdated April 15, 1999 Issued to The Bailey Company, LLLP for the Purchase of25,000 Shares of Common Stock of Good Times Restaurants Inc. (previously filedas Exhibit 4.2 to Amendment No. 4 to Schedule 13D filed on June 7, 1999 by TheBailey Company, LLLP, The Erie County Investment Co., and Paul T. Bailey (FileNo. 005-42729) and incorporated herein by reference)

10.12          MerrillLynch Commitment Letter dated November 17, 1999 for Line of Credit (previouslyfiled as Exhibit 10.18 to the registrant's Annual Report on Form 10-KSB for thefiscal year ended September 30, 1999 (File No. 000-18590) and incorporatedherein by reference)

10.13          GECapital Term Note dated November 14, 2001 (previously filed as Exhibit 10.15 tothe registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001 (File No. 000-18590) and incorporated herein by reference)

10.14          GECapital Note dated November 14, 2001 (previously filed as Exhibit 10.1 to theregistrant's Quarterly Report on Form 10-QSB for the quarter ended December 31, 2001 (File No. 000-18590 and incorporated herein by reference)

10.15          EmploymentAgreement dated October 3, 2001 between the registrant and Boyd E. Hoback

10.16          WellsFargo Credit Agreement (previously filed as Exhibit 10.17 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2003 (File No. 000-18590) and incorporated herein by reference)

10.17          Formof Option Agreement (previously filed as Exhibit 10.18 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 000-18590) and incorporated herein by reference)

10.18          Formof Option Grant Notice (previously filed as Exhibit 10.19 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 000-18590) and incorporated herein by reference)

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10.19          CashBonus Plan for Boyd Hoback (previously filed as Exhibit 10.20 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 000-18590) and incorporated herein by reference)

10.20          SecuritiesPurchase Agreements (previously filed on the registrant's Current Report onForm 8-K dated January 3, 2005 (File No. 000-18590) and incorporated herein byreference)

10.21          Amendmentto Securities Purchase Agreement (previously filed as Exhibit 10.1 to theregistrant's Form 8-K Report dated January 27, 2005 (File No. 000-18590) and incorporated herein by reference)

10.22          2001Stock Option Plan, as amended (previously filed as Exhibit 99.1 to theregistrant's Registration Statement on Form S-8 filed on May 23, 2005 (Registration No. 333-125150) and incorporated herein by reference)

10.23          RegistrationStatement (previously filed on the registrant's Registration Statement on FormS-3 filed on February 17, 2005 (Registration No. 333-122890) and incorporatedherein by reference

10.24          AmendmentNo. 1 to Registration Statement (previously filed on the registrant'sRegistration Statement on Form S-3 filed on April 4, 2005 (Registration No. 333-122890) and incorporated herein by reference

10.25          Conversionof Series B Convertible Preferred Stock (previously filed as Exhibit 99.1 tothe registrant's Form 8-K Report dated June 8, 2006 (File No. 000-18590) and incorporated herein by reference)

10.26          LoanAgreement and Promissory Note (previously filed as Exhibit 10.1 and 10.2 to theregistrant's Form 8-K Report dated August 7, 2006 (File No. 000-18590) and incorporated herein by reference)

10.27          Accelerationof Vesting of Stock Options and Form of Resale Restriction Agreement(previously filed as Exhibit 10.1 to the registrant's Form 8-K Report dated August 8, 2006 (File No. 000-18590) and incorporated herein by reference)

10.28          Expansionof Loan Agreement and Promissory Note (previously filed as Exhibit 10.1 and10.2 to the registrant's Form 8-K Report dated March 15, 2007 (File No. 000-18590) and incorporated herein by reference)

10.29          LoanAgreement and Promissory Note (previously filed as Exhibit 10.1 and 10.2 to theregistrant's Form 8-K Report dated May 7, 2007 (File No. 000-18590) and incorporated herein by reference)

10.30          AmendmentNo. 1 to Loan Agreement and Promissory Note (previously filed as Exhibit 10.1and 10.2 to the registrant's Form 8-K Report dated May 10, 2007 (File No. 000-18590) and incorporated herein by reference)

10.31          DevelopmentAgreement (previously filed as Exhibit 10.1 to the registrant's Form 8-K Reportdated December 2, 2007 (File No. 000-18590) and incorporated herein byreference)

10.32          ManagementAgreement (previously filed as Exhibit 10.2 to the registrant's Form 8-K Reportdated December 2, 2007 (File No. 000-18590) and incorporated herein byreference)

10.33          SiteSelection, Construction Management and Pre-Opening Services Agreement(previously filed as Exhibit 10.3 to the registrant's Form 8-K Report dated December 2, 2007 (File No. 000-18590) and incorporated herein by reference)

10.34          2008Omnibus Equity Incentive Compensation Plan (previously filed as Exhibit 10.1  tothe registrant's Form 8-K Report dated January 29, 2008 (File No. 000-18590) and incorporated herein by reference)

10.35          EmploymentAgreement of Boyd E. Hoback (previously filed as Exhibit 10.1 to theregistrant's Form 8-K Report dated January 29, 2008 (File No. 000-18590) and incorporated herein by reference)

10.36          LetterAgreement between Good Times Drive Thru Inc. and CEDA Enterprises, Inc. (previouslyfiled as Exhibit 10.1 to the registrant's Form 8-K Report dated March 12, 2008(File No. 000-18590) and incorporated herein by reference)

10.37          LetterAgreement between Good Times Drive Thru Inc. and CEDA Enterprises, Inc. and CEJInvestments, LLC (previously filed as Exhibit 10.2 to the registrant's Form 8-KReport dated March 12, 2008 (File No. 000-18590) and incorporated herein byreference)

10.38          Amendedand Restated Loan Agreement (previously filed as Exhibit 10.1 to theregistrant's Form 8-K Report dated July 2, 2008 (File No. 000-18590) andincorporated herein by reference)

10.39          PromissoryNote by Good Times Drive Thru Inc. and Good Times Restaurants Inc. payable to PFGI II, LLC (previously filed as Exhibit 10.2 to the registrant's Form 8-K Report dated July 2, 2008 (File No. 000-18590) and incorporated herein by reference)

26

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10.40          Departureof Management Employees, Transfer of Development Rights and Suspension ofExpansion (previously filed in the registrant's Form 8-K Report dated June 26, 2008 (File No. 000-18590) and incorporated herein by reference)

14.1           Codeof Ethics (previously filed as Exhibit 14.1 to the registrant's Annual Reporton Form 10-KSB for the fiscal year ended September 30, 2003 (File No.000-18590) and incorporated herein by reference)

21.1           Subsidiariesof registrant (previously filed as Exhibit 21.1 to the registrant's AnnualReport on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

23.1           *Consentof HEIN & ASSOCIATES LLP

31.1           *Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350

31.2           *Certificationof Controller pursuant to 18 U.S.C. Section 1350

32.1           *Certificationof Chief Executive Officer and Controller pursuant to 18 U.S.C. Section 1350

*Filed herewith

**Item 14.         Principal AccountantFees and Services**

The information required by this Item isincorporated by reference to the information provided under the caption"Independent Public Accountants" in our definitive proxy statementfor the annual meeting of stockholders to be filed within 120 days from September 30, 2008.

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**SIGNATURES**

In accordancewith Section 13 or 15(d) of the Exchange Act, the registrant caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.

| ** **               | **GOOD TIMES  RESTAURANTS INC.**                   |
|--------------------------|---------------------------------------------------------|
| Date:  December 26, 2008 | /s/  Boyd E. Hoback                                     |
|                          | Boyd  E. Hoback

President  and Chief Executive Officer |

Inaccordance with the Exchange Act, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on thedates indicated.

| */s/  Eric W. Reinhard*                                                              | * * | */s/ Boyd E. Hoback*                                                                     |
|--------------------------------------------------------------------------------------|----------|------------------------------------------------------------------------------------------|
| Eric  W. Reinhard, Chairman

and  Chief Development Officer

Date: December 26, 2008 |          | Boyd E. Hoback, Director 

and President and CEO

Date: December 26, 2008                |
| */s/ Geoffrey R. Bailey*                                                             |          | */s/ Susan M. Knutson*                                                                   |
| Geoffrey  R. Bailey, Director

Date:  December 26, 2008                              |          | Susan  M. Knutson, Controller and

Principal  Financial Officer

Date: December 26, 2008 |
| */s/ Ron Goodson*                                                                    |          | */s/ Richard J. Stark*                                                                   |
| Ron  Goodson, Director

Date: December 26, 2008                                      |          | Richard  J. Stark, Director

Date:  December 26, 2008                                    |
| */s/ David Grissen*                                                                  | * * | */s/ Alan A. Teran*                                                                      |
| David  Grissen, Director

Date:  December 26, 2008                                   |          | Alan A. Teran, Director

Date: December 26, 2008                                         |

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