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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 26, 2001

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

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American Restaurant Group, Inc.(Exact name of registrant as specified in its charter)

|Delaware                        |  | 33-48183         |  | 33-0193602         
|------------------------------- |  | ---------------- |  | -------------------
|(State or other jurisdiction of |  | (Commission File |  | (I.R.S. employer   
|incorporation or organization)  |  | Number)          |  | identification no.)

4410 El Camino Real, Suite 201
Los Altos, CA 94022
(650) 949-6400(Address and telephone number of principal executive offices)

Former
name, former address and former fiscal year if changed since last report.

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

The
number of outstanding shares of the Company's Common Stock (one cent par value) as of April 30, 2001 was 128,081.

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AMERICAN RESTAURANT GROUP, INC.

INDEX

|         |  |                                                                                       |  | PAGE
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I.  |  | FINANCIAL INFORMATION                                                                 |  |     
|ITEM 1.  |  | FINANCIAL STATEMENTS:                                                                 |  |     
|         |  | Consolidated Condensed Balance Sheets                                                 |  | 1   
|         |  | Consolidated Statements of Operations                                                 |  | 3   
|         |  | Consolidated Statements of Cash Flows                                                 |  | 4   
|         |  | Notes to Consolidated Condensed Financial Statements                                  |  | 5   
|ITEM 2.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 7   
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 9   
|PART II. |  | OTHER INFORMATION                                                                     |  | 9   

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

DECEMBER 25, 2000 AND MARCH 26, 2001

|                        |                                      | December 25,
2000    |            | March 26,
2001
|----------------------- | ------------------------------------ | -------------------- | ---------- | --------------
|
|ASSETS                  |                                      |                      |            |               
|CURRENT ASSETS:         |                                      |                      |            |               
|                        | Cash                                 |                      | $          | 8,532,000     
|                        | Accounts and notes receivable        |                      |            | 2,938,000     
|                        | Inventories                          |                      |            | 2,853,000     
|                        | Prepaid expenses                     |                      |            | 2,803,000     
|                        |                                      |                      |            |               
|                        |                                      | Total current assets |            |               
|                        |                                      |                      |            |               
|PROPERTY AND EQUIPMENT: |                                      |                      |            |               
|                        | Land and land improvements           |                      |            | 2,629,000     
|                        | Buildings and leasehold improvements |                      |            | 67,631,000    
|                        | Fixtures and equipment               |                      |            | 48,629,000    
|                        | Property held under capital leases   |                      |            | 7,480,000     
|                        | Construction in progress             |                      |            | 2,816,000     
|                        |                                      |                      |            |               
|                        | Property and Equipment               |                      |            | 129,185,000   
|                        | LessAccumulated depreciation        |                      |            | 75,815,000    
|                        |                                      |                      |            |               
|                        | Net property and equipment           |                      |            | 53,370,000    
|                        |                                      |                      |            |               
|OTHER ASSETS, NET:      |                                      |                      | 19,079,000 |               
|                        |                                      |                      |            |               
|                        | Total assets                         |                      | $          | 89,575,000    
|                        |                                      |                      |            |               

The
accompanying notes are an integral part of these consolidated condensed statements.
(consolidated condensed balance sheets continued on the following page)

1

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|                                                    |                                                                                                                                                                                                                   | December 25,
2000                  |            | March 26,
2001 |             
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ---------- | -------------- | ------------
|
|LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT        |                                                                                                                                                                                                                   |                                    |            |                |             
|CURRENT LIABILITIES:                                |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    | Accounts payable                                                                                                                                                                                                  |                                    | $          | 15,193,000     |             
|                                                    | Accrued liabilities                                                                                                                                                                                               |                                    |            | 11,521,000     |             
|                                                    | Accrued insurance                                                                                                                                                                                                 |                                    |            | 2,373,000      |             
|                                                    | Accrued interest                                                                                                                                                                                                  |                                    |            | 6,251,000      |             
|                                                    | Accrued payroll costs                                                                                                                                                                                             |                                    |            | 7,069,000      |             
|                                                    | Current portion of obligations under capital leases                                                                                                                                                               |                                    |            | 713,000        |             
|                                                    | Current portion of long-term debt                                                                                                                                                                                 |                                    |            | 432,000        |             
|                                                    | Current liabilities from discontinued operations                                                                                                                                                                  |                                    |            | 2,945,000      |             
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    |                                                                                                                                                                                                                   | Total current liabilities          |            |                | 46,497,000  
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|LONG-TERM LIABILITIES, net of current portion:      |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    | Obligations under capital leases                                                                                                                                                                                  |                                    |            | 2,588,000      |             
|                                                    | Long-term debt                                                                                                                                                                                                    |                                    |            | 144,066,000    |             
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    |                                                                                                                                                                                                                   | Total long-term liabilities        |            |                | 146,654,000 
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|DEFERRED GAIN                                       |                                                                                                                                                                                                                   |                                    | 4,192,000  |                |             
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|COMMITMENTS AND CONTINGENCIES                       |                                                                                                                                                                                                                   |                                    |            |                |             
|CUMULATIVE PREFERRED STOCK, MANDATORILY REDEEMABLE: |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    | Senior pay-in-kind exchangeable preferred stock, $0.01 par value; 160,000 shares authorized; 50,953 shares issued and outstanding at December 25, 2000 and 52,830 shares issued and outstanding at March 26, 2001 |                                    |            | 49,891,000     |             
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|COMMON STOCKHOLDERS' DEFICIT:                       |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    | Common stock, $0.01 par value; 1,000,000 shares authorized; 128,081 shares issued and outstanding at December 25, 2000 and March 26, 2001                                                                         |                                    |            | 1,000          |             
|                                                    | Paid-in capital                                                                                                                                                                                                   |                                    |            | 15,788,000     |             
|                                                    |                                                                                                                                                                                                                   | Accumulated deficit                |            |                | (173,448,000
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|                                                    |                                                                                                                                                                                                                   | Total common stockholders' deficit |            |                | (157,659,000
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             
|Total liabilities and common stockholders' deficit  |                                                                                                                                                                                                                   | $                                  | 89,575,000 |                | $           
|                                                    |                                                                                                                                                                                                                   |                                    |            |                |             

The
accompanying notes are an integral part of these consolidated condensed statements.

2

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AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THIRTEEN WEEKS ENDED MARCH 27, 2000 AND MARCH 26, 2001

(UNAUDITED)

|                                                 |                                                                               | Thirteen Weeks Ended
|------------------------------------------------ | ----------------------------------------------------------------------------- | --------------------
|
|REVENUES                                         |                                                                               | $                   
|RESTAURANT COSTS:                                |                                                                               |                     
|                                                 | Food and beverage                                                             |                     
|                                                 | Payroll                                                                       |                     
|                                                 | Direct operating                                                              |                     
|                                                 | Depreciation and amortization                                                 |                     
|GENERAL AND ADMINISTRATIVE EXPENSES              |                                                                               |                     
|                                                 |                                                                               |                     
|                                                 | Operating profit                                                              |                     
|INTEREST EXPENSE, net                            |                                                                               |                     
|                                                 |                                                                               |                     
|                                                 | Income / (loss) before provision for income taxes and discontinued operations |                     
|PROVISION FOR INCOME TAXES                       |                                                                               |                     
|                                                 |                                                                               |                     
|                                                 | Income / (loss) from continuing operations                                    |                     
|NET INCOME / (LOSS) FROM DISCONTINUED OPERATIONS |                                                                               |                     
|                                                 |                                                                               |                     
|                                                 | Net Income / (Loss)                                                           |                     
|                                                 |                                                                               |                     

The
accompanying notes are an integral part of these consolidated condensed statements.

3

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AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THIRTEEN WEEKS ENDED MARCH 27, 2000 AND MARCH 26, 2001

(UNAUDITED)

|                                                                                           |                                                                                                                                   | March 27,
2000                                                 |                                    | March 26,
2001 |          
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | -------------- | ---------
|CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:                                           |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           | Cash received from customers                                                                                                      |                                                                | $                                  | 78,366,000     |          
|                                                                                           | Cash paid to suppliers and employees                                                                                              |                                                                |                                    | (62,699,000    | )        
|                                                                                           | Interest paid, net                                                                                                                |                                                                |                                    | (9,362,000     | )        
|                                                                                           | Income taxes paid                                                                                                                 |                                                                |                                    | (3,000         | )        
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           |                                                                                                                                   | Net cash provided by (used in) continuing operating activities |                                    |                | 6,302,000
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                      |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           | Capital expenditures                                                                                                              |                                                                |                                    | (1,841,000     | )        
|                                                                                           | Net (increase) decrease in other assets                                                                                           |                                                                |                                    | (11,000        | )        
|                                                                                           | Proceeds from disposition of assets                                                                                               |                                                                |                                    |               |          
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|Net cash (used in) investing activities                                                    |                                                                                                                                   |                                                                | (1,852,000                         | )              |          
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                      |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           | Payments on indebtedness                                                                                                          |                                                                |                                    | (26,000        | )        
|                                                                                           | Payments on capital lease obligations                                                                                             |                                                                |                                    | (153,000       | )        
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           |                                                                                                                                   | Net cash provided by (used in) financing activities            |                                    |                | (179,000 
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|NET INCREASE / (DECREASE) FROM CONTINUING OPERATIONS                                       |                                                                                                                                   |                                                                | 4,271,000                          |                |          
|NET INCREASE / (DECREASE) FROM DISCONTINUED OPERATIONS                                     |                                                                                                                                   |                                                                | 1,465,000                          |                |          
|CASH, at beginning of period                                                               |                                                                                                                                   |                                                                | 8,316,000                          |                |          
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|CASH, at end of period                                                                     |                                                                                                                                   | $                                                              | 14,052,000                         |                | $        
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|RECONCILIATION OF NET INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           | Net income from continuing operations                                                                                             |                                                                | $                                  | 2,814,000      |          
|                                                                                           | Adjustments to reconcile net income from continuing operations to net cash provided by/(used in) continuing operating activities: |                                                                |                                    |                |          
|                                                                                           |                                                                                                                                   |                                                                | Depreciation and amortization      |                |          
|                                                                                           |                                                                                                                                   |                                                                | Amortization of deferred gain      |                |          
|                                                                                           | (Increase) decrease in current assets:                                                                                            |                                                                |                                    |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accounts and notes receivable, net |                |          
|                                                                                           |                                                                                                                                   |                                                                | Inventories                        |                |          
|                                                                                           |                                                                                                                                   |                                                                | Prepaid expenses                   |                |          
|                                                                                           | Increase (decrease) in current liabilities:                                                                                       |                                                                |                                    |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accounts payable                   |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accrued liabilities                |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accrued insurance                  |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accrued interest                   |                |          
|                                                                                           |                                                                                                                                   |                                                                | Accrued payroll                    |                |          
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          
|                                                                                           | Net cash provided by continuing operating activities                                                                              |                                                                | $                                  | 6,302,000      |          
|                                                                                           |                                                                                                                                   |                                                                |                                    |                |          

The
accompanying notes are an integral part of these consolidated condensed statements.

4

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AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. MANAGEMENT OPINION

The Consolidated Condensed Financial Statements included were prepared by American Restaurant Group, Inc. (the "Company"), without audit, in accordance
with Securities and Exchange Commission Regulation S-X. In the opinion of the Company's management, these Consolidated Condensed Financial Statements contain all adjustments (all of
which are of a normal recurring nature except for the discontinued operations) necessary to present fairly the Company's financial position as of December 25, 2000 and March 26, 2001,
and the results of its operations for the thirteen weeks ended March 27, 2000 and March 26, 2001 and its cash flows for the thirteen weeks ended March 27, 2000 and
March 26, 2001. The Company's results for an interim period are not necessarily indicative of the results that may be expected for the year.

Although
the Company believes that all adjustments necessary for a fair presentation of the interim periods presented are included and that the disclosures are adequate to make the
information presented not misleading, the Company suggests that these Consolidated Condensed Financial Statements be read in conjunction with the Consolidated Financial Statements and related notes
included in the Company's annual report on Form 10-K, File No. 33-48183, for the year ended December 25, 2000.

2. SALE OF STOCK TO SPECTRUM RESTAURANT GROUP

The Company sold all of the outstanding stock of four wholly owned subsidiaries ("Non-Black Angus Subsidiaries") to Spectrum Restaurant
Group, Inc. (formerly known as NBACo, Inc.) There was no gain or loss recorded because of the related-party nature of the stock sale. The Company received $17.0 million in cash on
June 28, 2000, and transferred certain assets and liabilities to Spectrum Restaurant Group, Inc. Concurrent with the sale, advances between the Company and the Non-Black
Angus Subsidiaries were eliminated. Paid-in capital of $26.9 million was charged as a result of the sale. The Company retained the assets and liabilities associated with certain
closed restaurants as well as certain liabilities, estimated on June 26, 2000 at $12.6 million, associated with the operating restaurants that were sold. The amount of estimated
liabilities remaining at March 26,2001 was approximately $2.1 million.

The
Company is currently working to settle these liabilities. Any adjustments to the recorded balance, as a result of such settlement, will be recognized as a loss on discontinued
operations in the current year, if such a settlement is reached prior to June 28, 2001.

3. OPERATIONS

The Company's operations are affected by local and regional economic conditions, including competition in the restaurant industry. Prior to the year ended
December 25, 2000, the Company experienced recurring operating losses (before extraordinary gain (loss) on extinguishment of debt) after debt service. A recapitalization plan was consummated
during 1998. This plan substantially eliminated debt principal payments until the year 2003.

Management
believes the recapitalization will also allow it to effect changes in its operations and has already implemented measures to reduce overhead costs. However, the Company
does not expect to generate sufficient cash flows from operations in the future to fully pay the principal on long-term debt upon maturity in the year 2003 and, accordingly, it expects to
refinance all or a portion of such debt, obtain new financing, or possibly sell assets.

5

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4. INCOME TAXES

The tax provision against the Company's pre-tax income in 2001 and in 2000 consisted of certain state income tax and estimated Federal income tax
payments. The Company previously established a valuation allowance against net-operating-loss carryforwards.

5. PREFERRED STOCK

As part of the Recapitalization Plan in February, 1998, the Company issued 35,000 preferred stock units (the "Units") of the Company. Each Unit consists of
$1,000 initial liquidation preference of 12% senior pay-in-kind exchangeable preferred stock and one common-stock purchase warrant initially to purchase 2.66143 shares
of the common stock at an initial exercise price of one cent per share. The Company's cumulative preferred stock is mandatorily redeemable on August 15, 2003 for cash at a price per share equal
to 110% of the then-applicable liquidation preference.

A
stock dividend of 3,618 shares was made on February 15, 2001. There were 52,830 shares outstanding at March 26, 2001.

6. SUBSIDIARY GUARANTORS

Separate financial statements of the Company's subsidiaries are not included in this report on Form 10-Q because the subsidiaries are fully,
unconditionally, jointly and severally liable for the obligations of the Company under the Company's 111/2% Senior Secured Notes due 2003 (the "Notes"), and the aggregate net assets,
earnings, and equity of such subsidiary guarantors are substantially equivalent to the net assets, earnings, and equity of the Company on a consolidated basis.

7. INSURANCE

The Company self-insures certain risks up to varying limits including medical, workers' compensation, property, and general liability. Deductible
and self-insured limits have varied historically, ranging from $0 to $350,000 per incident depending on the type of risk. The policy deductibles are $100,000 for its annual medical and
dental benefits per person. Reserves for losses are established based upon currently estimated obligations for the claim over time and the deductible or self-insured retention in place at
the time of the loss.

8. FORWARD-LOOKING STATEMENTS

Certain statements contained herein are forward-looking regarding cash flows from operations, restaurant openings, capital requirements, and other matters.
These forward-looking statements involve risks and uncertainties and, consequently, could be affected by general business conditions, the impact of competition, governmental regulations, and
inflation.

6

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the historical
financial information included in the Consolidated Condensed Financial Statements.

Results of Continuing Operations

Thirteen weeks ended March 26, 2001 and March 27, 2000:

Revenues.Total revenues from continuing operations increased to $82.2 million in the first quarter of 2001 from
$78.6 million in the first quarter of 2000. Same-store-sales increased 1.4%. There were 105 Black Angus restaurants operating as of March 26, 2001 and 102 Black Angus
restaurants operating as of March 27, 2000.

Food and Beverage Costs.As a percentage of revenues, food and beverage costs from continuing operations decreased to
33.0% in the first quarter of 2001 from 33.9% in the first quarter of 2000. The decrease relates primarily to the cutting of steaks at the restaurant, which resulted in lower food costs.

Payroll Costs.As a percentage of revenues, labor costs from continuing operations increased to 27.6% in the first
quarter of 2001 from 26.3% in the first quarter of 2000. The increase is primarily a result of an increase in the federal and state minimum-wage rates, and a reduction in the number of
assigned tables for food servers to improve customer service.

Direct Operating Costs.Direct operating costs consist of occupancy, advertising, and other expenses incurred by
individual restaurants. As a percentage of revenues, these costs from continuing operations decreased to 22.3% in the first quarter of 2001 from 22.6% in the first quarter of 2000. The decrease
relates primarily to leveraging costs over a higher sales base.

Depreciation and Amortization.Depreciation and amortization consists of depreciation of fixed assets as well as
amortization of intangible assets. As a percentage of revenues, depreciation and amortization from continuing operations decreased to 2.6% in the first quarter of 2001 from 3.7% in the first quarter
of 2000. The decrease relates primarily to corporate assets not retained by the Company pursuant to the stock sale and leveraging costs over a higher sales base.

General and Administrative Expenses.General and administrative expenses from continuing operations decreased to
$2.5 million in the first quarter of 2001 from $2.9 million in the first quarter of 2000. The decrease relates to the reduction of corporate expenses as a result of the stock sale and
reduction of other overhead expenses.

Operating Profit.As a result of the above items, profit from continuing operations increased to $9.4 million in
the first quarter of 2001 from $7.6 million in the first quarter of 2000. As a percentage of revenues, profit from continuing operations increased to 11.5% in the first quarter of 2001 from
9.7% in the first quarter of 2000.

Interest ExpenseNet.The interest expense decreased to $4.2 million in the first quarter of 2001
from $4.8 million in the first quarter of 2000. The decrease was a result of the $16 million pay down of principal on the Notes in December 2000.

Net Income / (Loss) from Discontinued Operations.Effective June 26, 2000, the Company
sold all of the outstanding stock of the Non-Black Angus Subsidiaries.

7

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The following is a summary of the net income/(loss) from discontinued operations for the thirteen weeks ended March 27, 2000 and March 26, 2001. There was no activity in
2001.

|($000)                                         |                               | March 27, 2000 |        | March 26, 2001
|---------------------------------------------- | ----------------------------- | -------------- | ------ | --------------
|Revenues                                       |                               | $              | 32,566 |               
|Food and Beverage Costs                        |                               |                | 8,518  |               
|Payroll Costs                                  |                               |                | 11,092 |               
|Direct Operating Costs                         |                               |                | 8,002  |               
|Depreciation and Amortization                  |                               |                | 1,011  |               
|General and Administrative                     |                               |                | 1,507  |               
|Grandy's Conversion:                           |                               |                |        |               
|                                               | (Gain)/Loss on Sale of Assets |                |        | 633           
|Operating Profit/(Loss)                        |                               |                | 1,803  |               
|Interest Expense                               |                               |                | 0      |               
|                                               |                               |                |        |               
|Income/(Loss) Before Taxes                     |                               |                | 1,803  |               
|Provision for Income Taxes                     |                               |                | 0      |               
|                                               |                               |                |        |               
|Net Income/(Loss) from Discontinued Operations |                               | $              | 1,803  |               
|                                               |                               |                |        |               

Liquidity and Capital Resources

The Company's primary sources of liquidity are cash flows from operations and borrowings under its credit facilities. The Company requires capital principally
for the acquisition and construction of new
restaurants, the remodeling of existing restaurants, and the purchase of new equipment and leasehold improvements. As of March 26, 2001, the Company had cash of approximately
$4.5 million.

In
general, restaurant businesses do not have significant accounts receivable because sales are made for cash or by credit-card vouchers, which are ordinarily paid within
three to five days. The restaurants do not maintain substantial inventory as a result of the relatively brief shelf life and frequent turnover of food products. Additionally, restaurants generally are
able to obtain trade credit in purchasing food and restaurant supplies. As a result, restaurants are frequently able to operate with working-capital deficits, i.e., current liabilities exceed current
assets. At March 26, 2001, the Company had a working-capital deficit of $22.8 million.

The
Company estimates that capital expenditures of $3.0 million to $6.0 million are required annually to maintain and refurbish its existing restaurants. Other capital
expenditures, which are generally discretionary, are primarily for the construction of new restaurants and for expanding, reformatting, and extending the capabilities of existing restaurants and for
general corporate purposes. Total capital expenditures for continuing operations were $.2 million in the first quarter of 2001 and $1.9 million in the first quarter of 2000. The Company
estimates that capital expenditures in 2001 will be approximately $6.0 million. The Company intends to open new restaurants with small capital outlays and to finance most of the expenditures
through mortgages on capital equipment.

As
a result of the Notes, the Company is obligated to make semiannual interest payments on February 15 and August 15 through February 2003. Accordingly, the
Company made an interest payment of $8.2 million in February 2001.

On
June 28, 2000, the Company amended the terms of the Credit Facility to reduce the aggregate commitment of the lenders from $15 million to $12 million, to
reduce the amount available for issuances of letters of credit from $10 million to $7 million, and to extend the maturity date from February 25, 2001 to June 30, 2002. On
March 26, 2001, letters of credit were the only drawing under the Credit Facility, with $7.1 million remaining under the Credit Facility.

8

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Substantially all assets of the Company are pledged to its senior lenders. In addition, the Company's direct subsidiaries guarantee the indebtedness owed by the Company and such
guarantees are secured by substantially all of the assets of the subsidiaries. In connection with such indebtedness, contingent and mandatory prepayments may be required under certain specified
conditions and events. There are no compensating balance requirements.

Although
the Company is highly leveraged, based upon current levels of operations and anticipated growth, the Company expects that cash flows generated from operations together with
its other available sources of liquidity will be adequate to make required payments of principal and interest on
its indebtedness, to make anticipated capital expenditures, and to finance working capital requirements for the next several years. However, the Company does not expect to generate sufficient cash
flows from operations in the future to fully pay the Notes upon maturity and, accordingly, it expects to refinance all or a portion of such debt, obtain new financing, or possibly sell assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk of the Company's financial instruments as of March 26, 2001 has not materially changed since December 25, 2000. The market risk
profile on December 25, 2000 is disclosed in the Company's annual report on Form 10-K, File No. 33-48183, for the year ended December 25, 2000.

PART II. OTHER INFORMATION

Not Applicable

9

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SIGNATURE

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

|                  |  | AMERICAN RESTAURANT GROUP, INC.
(Registrant)                                  
|----------------- |  | ------------------------------------------------------------------------------
|Date: May 8, 2001 |  | By: /s/ Ralph S. RobertsRalph S. Roberts
Chief Executive Officer and President

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