<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                        ---------------------------------

                                    FORM 10-Q

(Mark One)

   [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                  For the quarterly period ended June 28, 1999

                                       OR


   [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

          For the transition period from ____________ to _____________


                         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.)


                            450 Newport Center Drive
                             Newport Beach, CA 92660
                                 (949) 721-8000
          -------------------------------------------------------------
          (Address and telephone number of principal executive offices)


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



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 August 02, 1999 was 128,081.

<PAGE>   2

                         AMERICAN RESTAURANT GROUP, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>           <C>                                                                                              <C>
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..................................       11

PART II.      OTHER INFORMATION

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................       11

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K............................................................       11
</TABLE>

<PAGE>   3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:


                AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED CONDENSED BALANCE SHEETS

                       DECEMBER 28, 1998 AND JUNE 28, 1999

<TABLE>
<CAPTION>
ASSETS                                                 December 28,       June 28,
                                                           1998             1999
                                                       ------------     ------------
                                                                        (unaudited)
<S>                                                    <C>              <C>
CURRENT ASSETS:
  Cash                                                 $  8,832,000     $  7,369,000
  Accounts and notes receivable, net of reserve of
    $602,000 and $45,000 at December 28, 1998
    and June 28, 1999, respectively                       4,804,000        5,047,000
  Inventories                                             5,716,000        5,411,000
  Prepaid expenses                                        3,108,000        2,676,000
                                                       ------------     ------------

      Total current assets                               22,460,000       20,503,000
                                                       ------------     ------------

PROPERTY AND EQUIPMENT:
  Land and land improvements                              5,485,000        5,485,000
  Buildings and leasehold improvements                  112,280,000      111,189,000
  Fixtures and equipment                                 84,774,000       81,967,000
  Property held under capital leases                     11,634,000       11,634,000
  Construction in progress                                2,250,000        4,012,000
                                                       ------------     ------------

                                                        216,423,000      214,287,000
  Less -- Accumulated depreciation                      125,858,000      124,983,000
                                                       ------------     ------------

                                                         90,565,000       89,304,000
                                                       ------------     ------------

OTHER ASSETS -- NET                                      37,434,000       34,982,000
                                                       ------------     ------------

    Total Assets                                       $150,459,000     $144,789,000
                                                       ============     ============
</TABLE>


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


                                       1
<PAGE>   4

<TABLE>
<CAPTION>
LIABILITIES AND COMMON STOCKHOLDERS'                    December 28,         June 28,
EQUITY                                                      1998               1999
                                                       -------------      -------------
                                                                           (unaudited)
<S>                                                    <C>                <C>
CURRENT LIABILITIES:
  Accounts payable                                     $  22,937,000      $  22,064,000
  Accrued liabilities                                     18,299,000         11,533,000
  Accrued insurance                                        4,243,000          4,186,000
  Accrued interest                                         7,033,000          7,034,000
  Accrued payroll costs                                    8,194,000          7,564,000
  Current portion of obligations
    under capital leases                                     950,000            939,000
  Current portion of long-term debt                          421,000            520,000
                                                       -------------      -------------

    Total current liabilities                             62,077,000         53,840,000
                                                       -------------      -------------

LONG-TERM LIABILITIES, net of current portion:
  Obligations under capital leases                         6,566,000          6,134,000
  Long-term debt                                         159,506,000        159,349,000
                                                       -------------      -------------

    Total long-term liabilities                          166,072,000        165,483,000
                                                       -------------      -------------

DEFERRED GAIN                                              4,684,000          4,496,000
                                                       -------------      -------------

COMMITMENTS AND CONTINGENCIES

CUMULATIVE PREFERRED STOCK,
MANDATORILY REDEEMABLE                                    36,801,000         39,201,000
                                                       -------------      -------------

REDEEMABLE CUMULATIVE PREFERRED STOCK:
  Redeemable cumulative senior
    preferred stock, $0.01 par value;
    1,400,000 shares authorized,
    no shares issued or outstanding                             --                 --

  Redeemable cumulative junior
    preferred stock, $0.01 par value;
    100,000 shares authorized,
    no shares issued or outstanding                             --                 --

COMMON STOCKHOLDERS' EQUITY:
  Common stock, $0.01 par value; 1,000,000
    shares authorized; 128,081 shares
    issued and outstanding at December 28,
    1998 and June 28, 1999                                     1,000              1,000
  Paid-in capital                                         55,666,000         53,265,000
  Accumulated deficit                                   (174,842,000)      (171,497,000)
                                                       -------------      -------------

    Total common stockholders' deficit                  (119,175,000)      (118,231,000)
                                                       -------------      -------------

   Total liabilities and common
   stockholders' equity                                $ 150,459,000      $ 144,789,000
                                                       =============      =============
</TABLE>


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


                                       2
<PAGE>   5

                AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

          FOR THE THIRTEEN WEEKS ENDED JUNE 29, 1998 and JUNE 28, 1999

         AND THE TWENTY-SIX WEEKS ENDED JUNE 29, 1998 AND JUNE 28, 1999

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                       Thirteen Weeks Ended              Twenty-Six Weeks Ended
                                 -------------------------------     ------------------------------
                                    June 29,          June 28,          June 29,         June 28,
                                      1998              1999              1998            1999
                                 -------------     -------------     -------------    -------------
<S>                              <C>               <C>               <C>              <C>
REVENUES                         $ 110,872,000     $ 104,684,000     $ 222,994,000    $ 214,147,000

RESTAURANT COSTS:
  Food and beverage                 35,263,000        32,963,000        70,868,000       67,149,000
  Payroll                           33,510,000        31,218,000        66,712,000       64,516,000
  Direct operating                  27,619,000        25,904,000        54,853,000       52,611,000
  Depreciation and
    amortization                     3,503,000         3,296,000         7,252,000        6,818,000
GENERAL AND ADMINISTRATIVE
  EXPENSES                           5,146,000         5,398,000        10,455,000       10,517,000

GRANDY'S FRANCHISE CONVERSION
  PROGRAM:
  Gain on sale of assets                  --               2,000              --            836,000
  Non-cash charge for assets
    to be disposed                        --             (38,000)             --           (146,000)
                                 -------------     -------------     -------------    -------------

  Operating profit                   5,831,000         5,869,000        12,854,000       13,226,000
INTEREST EXPENSE, net                4,939,000         4,937,000        10,460,000        9,777,000
                                 -------------     -------------     -------------    -------------
  Income before provision
    for income taxes and
    extraordinary gain (loss)          892,000           932,000         2,394,000        3,449,000

PROVISION FOR INCOME
  TAXES                                 73,000           102,000            77,000          104,000
                                 -------------     -------------     -------------    -------------

  Income before
    extraordinary gain (loss)          819,000           830,000         2,317,000        3,345,000


EXTRAORDINARY GAIN (LOSS) ON
  EXTINGUISHMENT OF DEBT                (3,000)             --           9,559,000             --
                                 -------------     -------------     -------------    -------------
  Net income                     $     816,000     $     830,000     $  11,876,000    $   3,345,000
                                 =============     =============     =============    =============
</TABLE>


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


                                       3
<PAGE>   6

                AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

         FOR THE TWENTY-SIX WEEKS ENDED JUNE 29, 1998 AND JUNE 28, 1999

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               June 29,            June 28,
                                                                 1998                1999
                                                             -------------      -------------
<S>                                                          <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                               $ 223,127,000      $ 213,904,000
  Cash paid to suppliers and employees                        (217,512,000)      (202,733,000)
  Interest paid, net                                           (11,496,000)        (9,777,000)
  Income taxes paid                                                (77,000)           (67,000)
                                                             -------------      -------------
    Net cash provided by (used in)
      operating activities                                      (5,958,000)         1,327,000
                                                             -------------      -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                          (5,041,000)        (5,714,000)
  Net (increase) decrease in other assets                         (464,000)           257,000
  Proceeds from disposition of assets                                1,000            444,000
  Proceeds from sale of Grandy's assets                               --            2,915,000
                                                             -------------      -------------

    Net cash used in investing activities                       (5,504,000)        (2,098,000)
                                                             -------------      -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on indebtedness                                    (155,840,000)        (5,190,000)
  Borrowings on indebtedness                                   155,215,000          5,132,000
  Net increase in deferred debt costs                          (10,536,000)          (191,000)
  Costs included in extraordinary gain on extinguishment
    of debt                                                     (1,686,000)              --
  Issuance of cumulative preferred stock                        35,000,000               --
  Cost related to issuance  of cumulative preferred
    stock                                                       (2,179,000)              --
  Payments on insurance-related financing                       (7,450,000)              --
  Payments on capital lease obligations                           (470,000)          (443,000)
                                                             -------------      -------------

    Net cash provided by (used in) financing activities         12,054,000           (692,000)
                                                             -------------      -------------
NET INCREASE (DECREASE) IN CASH                                    592,000         (1,463,000)

CASH, at beginning of period                                     5,737,000          8,832,000
                                                             -------------      -------------

CASH, at end of period                                       $   6,329,000      $   7,369,000
                                                             =============      =============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
  Net income                                                 $  11,876,000      $   3,345,000
  Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
      Extraordinary gain on
        extinguishment of debt                                  (9,559,000)              --
      Depreciation and amortization                              7,252,000          6,818,000
      Non-cash charge for assets to be disposed                       --              146,000
      (Gain) loss on disposition of assets                          28,000           (816,000)
      Amortization of deferred gain                               (173,000)          (188,000)
      Accretion on indebtedness                                     21,000               --
      (Increase) decrease in current assets:
        Accounts and notes receivable, net                         133,000           (243,000)
        Inventories                                                 12,000            305,000
        Prepaid expenses                                           689,000            432,000
      Increase (decrease) in current liabilities:
        Accounts payable                                        (8,183,000)          (873,000)
        Accrued liabilities                                     (7,181,000)        (6,912,000)
        Accrued insurance                                        1,303,000            (57,000)
        Accrued interest                                        (1,057,000)              --
        Accrued payroll                                         (1,119,000)          (630,000)
                                                             -------------      -------------
           Net cash provided by (used in)
             operating activities                            $  (5,958,000)     $   1,327,000
                                                             =============      =============
</TABLE>


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


                                       4
<PAGE>   7

                AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


1.        MANAGEMENT OPINION

          The Consolidated Condensed Financial Statements included were prepared
          by 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)
          necessary to present fairly the Company's financial position as of
          December 28, 1998 and June 28, 1999, and the results of its operations
          for the thirteen weeks and the twenty-six weeks ended June 29, 1998
          and June 28, 1999 and its cash flows for the twenty-six weeks ended
          June 29, 1998 and June 28, 1999. 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, we suggest 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 28, 1998.


2.        OPERATIONS

          The Company's operations are affected by local and regional economic
          conditions, including competition in the restaurant industry. The
          Company has had recurring operating losses in recent years and was
          unable to meet a required debt principal payment during 1997. 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 flow from operations in the future to make
          principal payments 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.

3.        INCOME TAX

          The tax provision against the Company's pre-tax income in 1999 and
          1998 consisted of certain state income tax and estimated Federal
          income tax payments. The Company previously established a valuation
          allowance against net operating loss carryforwards.

4.        SEGMENT REPORTING

          Effective December 28, 1998, the Company adopted Statement of
          Financial Accounting Standards No. 131, Disclosures about Segments of
          an Enterprise and Related Information. The Company's reportable
          operating segments include Black Angus, Grandy's and the Other
          Concepts (Spoons, Spectrum and National Sports Grill, none of which
          meet the separate disclosure requirements).


                                       5
<PAGE>   8

          The applicable line items for the Company's reportable segments
          reconciled to the consolidated financial statements are as follows (in
          thousands, except for number of restaurants):

<TABLE>
<CAPTION>
                                   Thirteen Weeks Ended         Twenty-six Weeks Ended
                                 -------------------------     -------------------------
                                  June 29,       June 28,       June 29,       June 28,
                                    1998           1999           1998           1999
                                 ----------     ----------     ----------     ----------
<S>                              <C>            <C>            <C>            <C>
Number of Restaurants
  Black Angus                           101            100            101            100
  Grandy's                               89             77             89             77
  Other Concepts                         39             38             39             38
                                 ----------     ----------     ----------     ----------
    Total Consolidated                  229            215            229            215
                                 ==========     ==========     ==========     ==========
Revenues (a)
  Black Angus                    $   68,988     $   67,584     $  139,816     $  138,794
  Grandy's                           18,604         14,864         37,080         31,902
  Other Concepts                     23,280         22,236         46,098         43,451
                                 ----------     ----------     ----------     ----------
    Total Consolidated           $  110,872     $  104,684     $  222,994     $  214,147
                                 ==========     ==========     ==========     ==========
Gross Profit (b)
  Black Angus                    $    9,753     $   10,231     $   21,004     $   21,606
  Grandy's                            2,525          1,552          5,003          3,710
  Other Concepts                      2,202          2,816          4,554          4,555
                                 ----------     ----------     ----------     ----------
    Total Consolidated           $   14,480     $   14,599     $   30,561     $   29,871
                                 ==========     ==========     ==========     ==========
Net Income (loss) (c)
  Black Angus                    $    3,689     $    3,785     $    8,324     $    8,771
  Grandy's                               78           (696)           114           (130)
  Other Concepts                       (305)           291           (488)          (369)
  Corporate                          (2,570)        (2,448)        (5,556)        (4,823)
                                 ----------     ----------     ----------     ----------
    Total Consolidated           $      892     $      932     $    2,394     $    3,449
                                 ==========     ==========     ==========     ==========
</TABLE>


          (a) Reflects sales and revenues from external customers. Intersegment
              sales and revenues do not apply.

          (b) Gross profit is defined as revenues less food and beverage,
              payroll and direct operating costs.

          (c) Before provision for income taxes and extraordinary items.

          There has not been a material change from the total asset amounts
          disclosed in the December 28, 1998 Form 10-K; therefore, total assets
          are not disclosed in this Form 10-Q.

5.        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 11.5% senior secured
          notes, due 2003, 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.


                                       6
<PAGE>   9

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

The following discussion and analysis of American Restaurant Group, Inc.'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 OPERATIONS

Thirteen weeks ended June 29, 1998 and June 28, 1999:

Revenues. Total revenues decreased to $104.7 million in the second quarter of
1999 from $110.9 million in the second quarter of 1998. Same-store-sales
decreased 2.3%. There were 215 restaurants operating as of June 28, 1999 and 229
operating as of June 29, 1998.

Black Angus revenues decreased 2.0% to $67.6 million in the second quarter of
1999 as compared to the same period in 1998. The decrease consisted of $1.1
million from discontinuing late-night entertainment at eight restaurants and
$1.0 million related to two restaurants closed at the end of the leases. These
amounts were partially offset by a $0.6 million increase related to one new
store and a $0.1 million, or a 0.1%, increase in same-store-sales (excluding
late-night entertainment and discontinued lunch).

Grandy's revenues decreased 20.1% to $14.9 million in the second quarter of 1999
as compared to the same period in 1998. The decrease consisted of $2.5 million
from six closed restaurants and six restaurants converted from company-owned
restaurants to franchised operations at the end of the first quarter of 1999 as
well as $1.2 million, a 7.8% decline in same-store-sales. Franchise revenues
remained constant.

Revenues from Other Concepts (Spoons, Spectrum and National Sports Grill)
decreased 4.5% to $22.2 million in the second quarter 1999 compared to the same
quarter in 1998. The decrease consisted of $0.8 million from the closure of
three restaurants during 1998 and 1999 and $0.3 million, or a 1.1% decline in
same-store-sales.

Food and Beverage Costs. As a percentage of revenues, food and beverage costs
decreased to 31.5% in the second quarter of 1999 from 31.8% in the second
quarter of 1998. The decrease was related primarily to seafood and produce
costs.

Payroll Costs. As a percentage of revenues, labor costs decreased to 29.8% in
the second quarter of 1999 from 30.2% in the second quarter of 1998. The
decrease was primarily from lower unit staff payroll costs.

Direct Operating Costs. Direct operating costs consist of occupancy, advertising
and other expenses incurred by individual restaurants. As a percentage of
revenues, these costs decreased to 24.7% in the second quarter of 1999 from
24.9% in the second quarter of 1998. The decrease was primarily from lower
general liability insurance costs.

Depreciation and Amortization. Depreciation and amortization consists of
depreciation of fixed assets used by individual restaurants, divisions and
corporate offices, as well as amortization of intangible assets. As a percentage
of revenues, depreciation and amortization decreased slightly to 3.1% in the
second quarter of 1999 from 3.2% in the second quarter of 1998.

General and Administrative Expenses. General and administrative expenses
increased to $5.4 million in the second quarter of 1999 from $5.1 million in the
second quarter of 1998. The increase was primarily due to higher legal expenses.
General and administrative expenses as a percentage of revenues increased to
5.2% in the second quarter of 1999 from 4.6% in the second quarter of 1998.


                                       7
<PAGE>   10

Operating Profit. Due to the above items, operating profit increased to $5.9
million in the second quarter of 1999 from $5.8 million in the second quarter of
1998. As a percentage of revenues, operating profit increased to 5.6% in the
second quarter of 1999 from 5.3% in the second quarter of 1998.

Interest Expense - Net. Interest expense remained constant at $4.9 million. The
Company's average stated interest rate was 11.5% in the second quarter of both
1999 and 1998. The weighted-average debt balance (excluding capitalized lease
obligations) decreased to $159.8 million in the second quarter of 1999 from
$160.1 million in the second quarter of 1998.


Twenty-six weeks ended June 29, 1998 and June 28, 1999:

Revenues. Total revenues decreased to $214.1 million in 1999 from $223.0 million
in 1998. Same-store-sales decreased 1.7%. During the twenty-six weeks ended June
28, 1999, the Company closed three restaurants and converted six Grandy's
restaurants from company-owned to franchised restaurants. There were 215
restaurants operating as of June 28, 1999 and 229 operating as of June 29, 1998.

Black Angus revenues decreased 0.7% to $138.8 million in 1999 as compared to the
same period in 1998. The decrease consisted of $2.2 million from discontinuing
late-night entertainment at eight restaurants and $1.8 million from two
restaurants closed at the end of the leases. These amounts were partially offset
by a $1.8 million, or a 1.4%, increase in same-store-sales (excluding late-night
entertainment and discontinued lunch) and a $1.2 million increase related to one
new store opened in the third quarter of 1998.

Grandy's revenues decreased 14.0% to $31.9 million in 1999 as compared to the
same period in 1998. The decrease consisted of $3.3 million from six closed
restaurants and six restaurants converted from company-owned restaurants to
franchised operations at the end of the first quarter of 1999 as well as $2.0
million, or a 6.4% decline in same store sales. Franchise revenues improved $0.1
million primarily because of franchise fees related to six company-owned
restaurants converted to franchised restaurants at the end of the first quarter
of 1999.

Revenues from Other Concepts (Spoons, Spectrum and National Sports Grill)
decreased 5.7% to $43.5 million in 1999 compared to 1998. The decrease consisted
of $1.7 million from the closure of three restaurants during 1998 and 1999 and
$1.1 million, or a 2.6% decline in same-store-sales, offset in part by $0.2
million related to the opening of one new restaurant in 1998. The Company closed
one restaurant in the first quarter of 1999.

Food and Beverage Costs. As a percentage of revenues, food and beverage costs
decreased to 31.4% in 1999 from 31.8% in 1998. The decrease was related
primarily to seafood and produce costs.

Payroll Costs. As a percentage of revenues, labor costs increased to 30.1% in
1999 from 29.9% in 1998, primarily as a result of higher management payroll
costs at Black Angus.

Direct Operating Costs. As a percentage of revenues, these costs remained
constant at 24.6%.

Depreciation and Amortization. As a percentage of revenues, depreciation and
amortization decreased to 3.2% in 1999 from 3.3% in 1998. The decrease was
primarily from the non-cash reduction of the historical costs of certain
long-lived assets at the end of 1998.

General and Administrative Expenses. General and administrative expenses
remained constant at $10.5 million. General and administrative expenses, as a
percentage of revenues, increased to 4.9% in 1999 from 4.7% in 1998.


                                       8
<PAGE>   11

Grandy's Franchise Conversion Program. In 1998, the Company announced a plan to
convert a majority of its company-owned Grandy's restaurants to franchised
restaurants. The Company recorded a $0.8 million gain on the sale of the
property and equipment, including applicable lease rights and certain intangible
assets, related to the conversion of restaurants in the first quarter of 1999.
It also recorded a $0.1 million non-cash charge related to the conversion.

Operating Profit. Due to the above items, operating profit increased to $13.2
million in 1999 from $12.9 million in 1998. As a percentage of revenues,
operating profit increased to 6.2% in 1999 from 5.8% in 1998.

Interest Expense - Net. Interest expense decreased to $9.8 million in 1999 from
$10.5 million in 1998. The decrease was primarily attributable to the
refinancing of the Company's debt in February 1998. The Company's average stated
interest rate decreased to 11.3% in 1999 from 12.0% in 1998. The
weighted-average debt balance (excluding capitalized lease obligations)
decreased to $161.0 million in 1999 from $164.1 million in 1998.

Extraordinary Gain. The company recognized an extraordinary gain of $9.6 million
on the extinquishment of debt in 1998. This gain resulted from the refinancing
of the Company's debt in February 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are cash flow 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 June 28, 1999, the Company had cash of $7.4 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, and restaurant businesses do not maintain
substantial inventory because 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 June 28, 1999, the Company had a
working capital deficit of $33.3 million.

In conjunction with the Company's plan to convert a majority of its
company-owned Grandy's restaurants to franchised restaurants, the Company
received proceeds of $2.9 million related to the conversion of restaurants in
1999. The Company continues to market its Grandy's restaurants for franchising;
however, the timing and amount of proceeds from the conversion of other
restaurants cannot be determined. The Company is required to reinvest the net
proceeds as capital expenditures or to pay down outstanding debt.

The Company estimates that capital expenditures of $6.0 million to $8.0 million
are required annually to maintain and refurbish its existing restaurants. In
addition, the Company spends approximately $10.0 million to $12.0 million
annually for repairs and maintenance which are expensed as incurred. 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 year-to-date were $5.7 million and $5.0 million in
1999 and 1998, respectively. The Company estimates that capital expenditures in
1999 will be approximately $10.0 million. The Company intends to open new
restaurants with small capital outlays and to finance most of the expenditures
through operating leases.

As a result of the 11.5% senior secured notes issued by the Company in February
1998, the Company is obligated to make semiannual interest payments on February
15 and August 15 through February 2003. Accordingly, an interest payment of $9.1
million was made in February 1999.


                                       9
<PAGE>   12

Substantially all assets of the Company are pledged to its senior lenders. In
addition, the subsidiaries have guaranteed the indebtedness owed by the Company
and such guarantee is 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. However, the Company does not expect to generate
sufficient cash flow from operations in the future to 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.

YEAR 2000 COMPLIANCE

Since 1997, the Company has been assessing the Year 2000 issues that may affect
its operations. The Company believes the Year 2000 issues it must address
include ensuring (i) its information technology systems (hardware and software)
enable it to manage and operate its business and (ii) its non-information
technology systems (including heating, air conditioning and security systems)
will continue to operate. The Company is currently on schedule for Year 2000
compliance and does not believe it has material potential liability to third
parties if its systems are not Year 2000 compliant.

The Company has received written responses from third parties with which it has
material relationships. All of the responses received to date indicate the
suppliers have or will timely resolve their Year 2000 issues.

The Company's costs of compliance with the Year 2000 requirements are immaterial
because it was in the process of upgrading or establishing systems in the normal
course of business.

The Company believes it and its material suppliers will resolve their Year 2000
issues in a timely fashion. However, if the Company or its material suppliers do
not become Year 2000 compliant, the Company could suffer a material adverse
effect on its business, results of operations and financial condition. The
Company believes it is unlikely any of these events will result, but there can
be no such assurance. The Company currently has no contingency plan to handle
the occurrence of these events and does not currently intend to create one.

RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Position No. 98-5, Reporting on the Costs of Start-up Activities
(SOP No. 98-5) was issued in April 1998. SOP No. 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. The Company has
historically accumulated costs incurred in connection with opening a new
restaurant and amortized these costs over the initial year of operations. Any
previously deferred preopening costs were expensed as of the end of fiscal year
1998. New restaurant openings are typically staggered throughout the year and,
therefore, the Company does not anticipate the requirements of SOP No. 98-5 to
materially affect the Company's financial position or results of operations.


                                       10
<PAGE>   13

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk of the Company's financial instruments as of June 28, 1999 has
not materially changed since December 28, 1998. The market risk profile on
December 28, 1998 is disclosed in the Company's annual report on Form 10-K, File
No. 33-48183, for the year ended December 28, 1998.

PART II.          OTHER INFORMATION

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)       List of Exhibits

          Exhibit No.           Description

27.1      Financial Data Schedule, which is submitted electronically to
          the Securities and Exchange Commission for information only.


                                       11
<PAGE>   14

                                    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: August 10, 1999                      By:       /s/ KEN DI LILLO
      ---------------                          ---------------------------------
                                                         Ken Di Lillo
                                               Treasurer and Assistant Secretary


                                       12
<PAGE>   15

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                               Description
-----------                               -----------
<S>              <C>
   27.1           Financial Data Schedule
</TABLE>