U.S. SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              Form 10-KSB

X   ANNUAL  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
    EXCHANGE ACT OF 1934
    For the Fiscal Year Ended December 31, 1998

    TRANSITION  REPORT  UNDER  SECTION  13 OR 15(d)  OF THE  SECURITIES
    EXCHANGE  ACT OF 1934 FOR THE  TRANSITION  PERIOD FROM  ________ TO
    ----------

Commission File Number 000-23174

                       THE QUIZNO'S CORPORATION
   (Exact name of small business issuer as specified in its charter)

              Colorado                             84-1169286
   (State or other jurisdiction of              (I.R.S. Employer
    incorporation or organization)             Identification No.)

    1099 18th Street, Suite 2850
          Denver, Colorado                           80202
   -------------------------------              ------------------
   (Address of Principal Executive                 (Zip Code)
              Offices)

                              (303) 291-0999
                 (Issuer's telephone number including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          Common Stock, $.001 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.
[  ]

State registrant's revenue for its most recent fiscal year: $20,736,754

The  aggregate   market  value  of  the   registrant's   common  stock  held  by
non-affiliates  of  the  registrant  as of  March  16,  1999  was  approximately
$10,199,609  (for  purposes  of the  foregoing  calculation  only,  each  of the
registrant's officers and directors is deemed to be an affiliate).

There were 3,057,068 shares of registrant's common stock outstanding as of March
16, 1999.

Documents incorporated by reference: None

Transitional  Small  Business  Disclosure  Format (Check one):  Yes [ ]
No [X]





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                           TABLE OF CONTENTS


PART I                                                     PAGE NO.

ITEM 1.    DESCRIPTION OF BUSINESS.................................1

ITEM 2.    DESCRIPTION OF PROPERTY.................................11

ITEM 3.    LEGAL PROCEEDINGS.......................................12

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF
           SECURITY HOLDERS........................................13

PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS....................................14

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS
            OR PLAN OF OPERATION...................................15

ITEM 7.    FINANCIAL STATEMENTS....................................25

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH
           ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
           DISCLOSURE..............................................26

PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
           CONTROL PERSONS; COMPLIANCE WITH
           SECTION 16(A) OF THE EXCHANGE ACT.......................26

ITEM 10.   EXECUTIVE COMPENSATION..................................30

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
           OWNERS AND MANAGEMENT...................................35

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED
           TRANSACTIONS............................................37

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K........................39


<PAGE>







                                PART I

ITEM 1.    DESCRIPTION OF BUSINESS

The Restaurants

The Company is engaged in franchising  and, to a lesser extent,  operating quick
service  restaurants  ("QSR") (the  "Restaurants")  using the registered service
mark "Quizno's" and the name "Quizno's  Subs." The  Restaurants  offer a menu of
submarine style sandwiches,  salads,  soups,  desserts and beverages,  including
"Classic  Lite"  selections  of  submarine  sandwiches  and salads  designed for
consumers  who are looking for a low-fat,  healthy  alternative  to typical fast
food products.

The Company  believes that the submarine  sandwiches  offered in the Restaurants
are  distinctive  in the market for several  reasons.  Each sandwich is prepared
after the customer orders and with special ingredients,  recipes and techniques.
These  ingredients,  recipes and techniques are controlled to provide uniformity
of taste and quality among all of the Restaurants.

One of the most important  distinctions of the Quizno's sandwich product is that
it is served to the customer  warm.  Each sandwich is prepared open face and run
through a conveyor oven that toasts the bread, melts the cheese and enhances the
flavors of the meats.

The Company  focuses on the  quality of the  ingredients  contained  in the food
products it uses and requires that all of its specified  ingredients,  which are
generally higher quality than those that other submarine  sandwich shops use, be
purchased from approved  suppliers.  The cheeses used in the Restaurants are all
natural.  The Italian style meats include a wine-cured  Genoa salami,  pepperoni
and capicola, an Italian spiced ham. The turkey breast is real turkey breast.

The Restaurants also are required to use certain products which are prepared for
the Company in accordance  with  proprietary  recipes  developed by the Company.
Foremost  among these is Quizno's  special  recipe soft baguette style bread and
its  red-wine  based  vinaigrette  dressing  used  as a  base  on  most  of  the
sandwiches.  In addition,  the Restaurants use the Company's  proprietary recipe
tuna mix blend, garlic oil blend, and marinara sauce.

The  Restaurants'  upscale  decor is designed to convey an Italian deli ambiance
and to match the upscale  QSR market  niche  represented  by the  product.  Open
kitchens allow  customers to watch as their  sandwiches are prepared.  The decor
package for the Restaurants  includes framed  reproductions  of old Italian food
product labels,  and  hand-painted  Italian style posters.  The Italian theme is
prevalent throughout a Quizno's Restaurant.

Besides a pleasant  upscale  environment  for in-house  dining,  the Restaurants
offer  conveniently  packaged  meals for carry out to serve  lunch  time  office
workers and the home meal replacement segment of the market.

                                     - 1 -
<PAGE>


The Restaurants are also located in mall food courts and are designed to operate
in smaller  spaces while  retaining the same ambiance and decor as a traditional
Quizno's Restaurant.  "Quizno's Express" Restaurants are typically smaller units
established  at such  non-traditional  locations  as  convenience  and  gasoline
stations, sports facilities,  hospitals, and college campuses.  Quizno's Express
Restaurants offer a full menu with an extensive variety of Quizno's  sandwiches.
Soups,  salads and desserts are also available at Quizno's Express  Restaurants.
Quizno's  Express  Restaurants  will typically  share common area seating or may
have very limited seating at venues designed primarily for take out.

Quizno's Restaurants were first opened in 1981 by the Company's predecessor.  As
of March 24, 1999, there were 499 Restaurants in operation,  including 15 Bain's
Deli  restaurants  (not including  those sold to Bain's Deli  Corporation),  and
agreements  were in  place  for the  opening  of an  additional  481  franchised
Restaurants.  38 of the  Restaurants  in  operation  were in Canada and 1 was in
Japan.

In  November  1997,  the  Company  acquired  the  franchisor  of the Bain's Deli
restaurant system. Since that acquisition,  the Company has included Bain's Deli
restaurants  within the definition of  Restaurants  for reporting  purposes.  In
March 1999, the Company sold the Bain's Deli  franchising  rights and the rights
and obligations under the existing Bain's Deli franchise  agreements (other than
15 agreements retained by the Company) to Bain's Deli Corporation.

The  Company  from time to time may make  proposals  and engage in  negotiations
regarding  acquisitions of material  restaurant assets or other companies in the
restaurant industry,  if management and the Board of Directors believe that such
a  proposed  transaction  would  be in the best  interest  of the  Company.  The
Company's policy is not to publicly announce such proposals until the likelihood
that the proposed transaction will be completed becomes probable.

Going Private Proposal

On December 29, 1998,  the Company  received a proposal from Richard E. Schaden,
the President,  CEO and a Director of the Company,  and Richard F. Schaden,  the
Secretary and a Director of the Company (the "Schadens"),  who own a majority of
the outstanding shares of Common Stock of the Company, to merge the Company with
a new  company to be owned by them,  pursuant to which the  shareholders  of the
Company,  other than  themselves,  would  receive  cash for their  shares of the
Company's  Common Stock.  At a special meeting of the Board of Directors on that
date,  the Board  received  the proposal  and  appointed a Special  Committee of
independent Directors to consider the proposal. The proposal offered to pay each
shareholder,  other than the Schadens, between $ 7.84 and $8.20 per share in the
merger.   The  proposal  is  subject  to,  among  other  things,  the  following
conditions: (i) the execution and delivery of a definitive acquisition agreement
and satisfaction of all conditions set forth therein, (ii) receipt of a fairness
opinion  or an  appraisal  of the  fair  value  of the  shares,  by the  Special
Committee  that  indicates  that the price payable to the  stockholders  is fair
value  to the  stockholders  of  the  Company,  (iii)  receipt  of  satisfactory
financing for the transaction,  (iv) approval of the proposed transaction by the
Special  Committee  of the  Board,  the  Board of  Directors  and the  Company's
shareholders,  and  (v)  applicable  regulatory  approval.  None  of  the  above
conditions  have been  satisfied at the time of the filing of this  Report.  The
Company  cannot  predict  whether any of these  conditions  will be satisfied or
whether the proposed transaction will ever be completed.

                                     - 2 -
<PAGE>



Concept and Strategy

The Company's  marketing  strategy is to position the  Restaurants  between fast
food and  full-service  dining.  The Company believes that consumers are looking
for a healthy and tasty  alternative to typical fast foods; in particular,  they
are looking for an alternative to fast food  hamburgers and fried foods.  At the
same time,  the  Company  believes  many busy  families  are  looking for a more
convenient and reasonably priced  alternative to full-service  dining.  Quizno's
offers all the  convenience of typical fast food in terms of quick ticket times,
affordability,  and  carry  out and home meal  replacement  options,  but with a
fresh, tasty alternative to fast food products.  In terms of full-service dining
benefits,  Quizno's  offers more  comfortable  dining  rooms than most fast food
restaurant  concepts as well as other  dining  options -- such as  catering  and
delivery -- generally not available in the fast food arena. Due to the Company's
quick  service  product,  the Company  believes it is well  positioned to fill a
growing niche in the  restaurant  business that has developed  between fast food
and full-service  dining.  The Quizno's  concept also  accommodates a variety of
dining options from comfortable  in-house dining to lunchtime  carry-out to home
meal replacement.

The Company's goal is to build a strong and consistently  profitable  nationwide
chain of Restaurants.  The Company became the third largest  submarine  sandwich
restaurant  chain in the United States in 1997.  Since 1993, the primary vehicle
for achieving the Company's planned growth has been its Area Director  marketing
program.  Under this program, the Company grants to a qualified person (an "Area
Director")  the right to sell Quizno's  franchises on behalf of the Company in a
specified  market  area.  The  Area  Director  is  required  to sell  and open a
specified number of franchised  Restaurants  annually throughout the life of the
Area Director marketing agreement.

The  Company's  revenues  are  primarily  derived from a royalty on all sales at
franchised  Restaurants,  initial  franchise fees from each franchise  sold, and
fees  collected  from Area  Directors  for the grant of  territorial  Restaurant
marketing rights, as well as revenue generated from  Company-owned  Restaurants.
Franchisees  and Area  Directors pay fees to the Company only once in connection
with execution of Franchise  Agreements and Area Director Marketing  Agreements,
respectively.  Royalties  provide a  long-term  continuing  source  of  revenue.
Franchise  fees  and  royalties  are  expected  to  increase  as the  number  of
franchised  Restaurants in operation increases.  The Company may also repurchase
certain  territories  in the  future.  The  royalty  rate  is  currently  7% for
traditional  Restaurants,  and  the  royalty  rate  is 8% for  Quizno's  Express
Restaurants;  however,  a  small  number  of  franchisees  operate  under  older
agreements that set lower royalty rates of 4% to 6%.

Area Director Marketing Agreements

The Company offers to Area Directors a Territory  ("Territory")  within which to
sell franchised  Restaurants  pursuant to an Area Director Marketing  Agreement.
The Area Director  marketing  program was  established by the Company in January
1993 and  restructured  in December 1994. This program is designed to assist the
Company in  accelerating  the marketing and sale of franchises and the selection
of Restaurant  locations in each  Territory.  Territories are generally based on
areas of dominant influence of local television broadcast stations as defined by
the  television  broadcast  industry.  The Company's  growth  strategy  clusters
Restaurants   in   particular   television   markets  in  order  to   facilitate
implementation of its advertising program.

Each Area Director  pays the Company a fee based on the total of the  population
in the  Territory.  At present,  the fee is $.07 per person  located  within the
Territory,  plus a training fee of $10,000. The population-based portion of this
fee is deemed fully earned by the Company when paid and is not refundable.

Area Directors are required to market  franchises for  Restaurants to be located
within the  Territory.  The Area  Director  agrees to open,  through the sale of
franchises,  a specified number of franchised  Restaurants  within the Territory
during the term of the Area Director Marketing Agreement.  The sales and opening
schedules  are  lower in the first  years of the  development  period.  The Area
Director  Marketing  Agreement  does not grant the Area  Director the  exclusive
right to market franchises or solicit franchisees in the Territory,  but it does
grant  the Area  Director  the  right to  receive  certain  fees and  royalties,
described in more detail  below,  from all  franchised  Restaurants  and Company
owned  Restaurants  established  in the  Territory  during  the term of the Area
Director  Marketing  Agreement.  The Company  reserves  the right under the Area
Director  Marketing  Agreement  to market and sell  franchises  and to establish
Company-owned Restaurants in a Territory.

The Company,  as of March 24, 1999, has 81 area  directorships  owned by 68 Area
Directors whose  Territories  cover  approximately  75% of the population of the
United States. The Company has also sold the rights to open Quizno's Restaurants
in Canada, Japan, United Kingdom and Australia.

The Area Director  Marketing  Agreements  set  increasing  "Minimum  Performance
Levels"  that require the Area  Director to sell and open a specified  number of
franchised  Restaurants  in each  year  during  the  term of the  Area  Director
Marketing Agreement.  The Company's experience with the Area Director program to
date  indicates  that while some Area  Directors  will exceed their  development
schedules,  others  will fail to meet  their  schedules.  In its  planning,  the
Company has allowed for a certain percentage of Area Directors who will not meet
their development  schedules.  Delays in the sale and opening of Restaurants can
occur  for  many  reasons.  The most  common  are  delays  in the  selection  or
acquisition of an appropriate location for the Restaurant, delays in negotiating
the terms of the lease and delays in the franchisee  financing.  The Company may
terminate an Area Director  Marketing  Agreement if the Area  Director  fails to
meet the  development  schedule,  and the  Company  would then have the right to
resell the Territory to a new Area Director.

                                     - 3 -
<PAGE>



Most Area Directors are required to maintain an office within the Territory.  In
addition,  through a required monthly minimum  marketing  expenditure,  the Area
Director is required to actively promote the sale of Company  franchises  within
the  Territory.  The  Area  Director  is  required  to  visit  with  prospective
franchisees and refer appropriate  locations for franchised  Restaurants  within
the  Territory  to the  Company  for  consideration.  The Area  Director is also
required to perform monthly quality assurance  inspections of the Restaurants in
its area and  assist  franchisees  within  its area in  opening.  The  Company's
franchise sales materials are made available to the Area Director.

Each Area Director is paid a commission of 40% of the royalty fees  collected by
the Company from each franchised Restaurant or of royalties that would otherwise
be payable by Company owned  Restaurants  in the  Territory  opened and operated
during the term of the Area Director  Marketing  Agreement,  so long as the Area
Director performs the services described above. In certain  circumstances,  Area
Directors  are  entitled  to an  ongoing  commission  of 1% on  gross  sales  of
Restaurants  open and  operating in the  Territory on the date the Area Director
Marketing  Agreement  is  terminated  through  either  the  initial  term of the
underlying  franchise  agreement  or five  years  (15  years  for Area  Director
marketing  Agreements  executed  before January 1998),  whichever is less.  This
approach rewards the Area Director for selecting higher quality  franchisees and
higher quality  locations  while  discouraging  the Area Director from selecting
locations that are too close  together.  In addition to the foregoing,  the Area
Director is entitled to receive a  commission  of 50% of the initial fee paid to
the Company for each  franchise  sold and open within the  Territory  during the
term of the Area Director Marketing Agreement.

The  Company  has a program  under  which it will  finance up to 50% of the Area
Director  Marketing Fees for certain approved Area Director  candidates who have
the  experience  and  skill  requirement  sought  by the  Company  for its  Area
Directors,  but do not have  sufficient  cash to pay the fee in  full.  The Area
Director is required to  personally  sign a promissory  note due the Company for
the amount financed, which will bear interest at between 6% and 15% per year and
be repaid in  monthly  installments  over five  years.  The  promissory  note is
secured  by the  Area  Director  Marketing  Agreement  and by  other  collateral
unrelated to the business,  typically a second  mortgage in the Area  Director's
home.

Franchise Program

The Company authorizes individuals and companies  ("Franchisees" or "Owners") to
establish and operate  Restaurants at an approved location pursuant to the terms
of a Franchise Agreement.  Under the Franchise Agreement, the Company undertakes
to perform or have  performed  certain  services with respect to the opening and
operation of a Restaurant. In connection with the opening of a Restaurant, those
services  include (i) review and approval of the proposed  Restaurant  location,
(ii)  review  and  approval  of  construction  plans for the  Restaurant,  (iii)
identification of sources of supply for items which are ordinarily  necessary to
operate a Restaurant,  (iv) an operations manual providing detailed instructions
with respect to operation of the  Restaurant,  (v) training  with respect to the
Company's method of operations, including operating procedures, food preparation
techniques,  controls, promotion programs,  management and public relations, and
(vi)  pre-opening  assistance.  After  opening of the  Restaurant,  the  Company
provides  continuing  advice and  consultation  with respect to operation of the
Restaurant.  From  time to time,  the  Company  takes  over the  operation  of a
Restaurant from an unsuccessful  Franchisee and operates the Restaurant  until a
new  Franchisee is found.  The Company's  investment in such  operations  may be
recovered at the time the Restaurant is transferred to the new Franchisee.

The  current  franchise  fee for the Owner's  first  traditional  Restaurant  is
$20,000,  $15,000 for the second,  and $10,000 for the third and any  additional
franchise  agreement.  The Company  offers the franchise for a Quizno's  Express
Restaurant at a reduced  franchise fee of $10,000 for the first  agreement.  The
Owner also pays the Company a continuing  royalty fee of 7% of the Owner's gross
sales (8% for Quizno's Express franchises). Old forms of the Franchise Agreement
require  royalty  fee  payments  at rates  between 4% and 6%.  "Gross  sales" is
defined as all sales  whether on credit or for cash,  and all revenues  from any
source caused by the operation of the Restaurant, whether directly or indirectly
relating to the operation thereof.  Sales tax and any other state or federal tax
is excepted.  The Owner also pays an advertising fee to the Company in an amount
equal to 1% to 4% of the  Franchisee's  gross sales,  which fees are used by the
Company for advertising,  marketing, and public relations programs and materials
to enhance and build the image and  goodwill of the Quizno's  system.  There are
certain  other fees that must be paid by the  Franchisee to the Company in order
to reimburse the Company for costs incurred in connection with the establishment
of a Restaurant. The total average cost to a Franchisee for opening a Restaurant
ranges  between  $37,600  and  $196,150,  including  funds to cover the  initial
franchise  fee, with most of the variation  attributable  to  differences in the
costs of leasehold improvements for the Restaurant,  size of the Restaurant, and
whether the Restaurant is a traditional or Express Restaurant.

The Company has developed  certain items, such as bread and dressings for salads
and sandwiches, which are prepared for use in the Restaurants based upon recipes
developed  by the  Company and which are  provided  to Owners  under the private
label  "Quizno's."  The Owner is required to purchase those items from specified
vendors  for  sale  and use in the  Restaurant.  The  Franchise  Agreement  also
requires the Owner to acquire  specified  equipment and inventory,  to establish
and maintain  specified signage and to operate the Restaurant in accordance with
the standards and requirements outlined in the Company's operations manual.

                                     - 4 -
<PAGE>


The  Company  has  entered  into an  agreement  with a  national  food  products
distributor  that allows Owners to obtain meat products,  produce and other food
and non-food items  necessary for operation of franchised  Restaurants at prices
more  favorable than those that could be obtained by individual  Owners.  All of
the  purchasing  of  the  ingredients  for  the  food  products  offered  in the
Restaurants  is done  centrally by the Company,  which allows for better quality
control by the Company.  Each Owner then  contacts the  distributor  directly to
obtain the items needed for the Owner's  Restaurant,  which are delivered by the
distributor.  The distributor bills the Owner directly for all items ordered. If
the national food products  distributor  no longer  provided this service to the
Company and its Franchisees,  the Company believes adequate alternative services
would be available to it without a significant increase in costs.

The Company  charges  certain fees to the primary vendors who supply products to
its Company  Restaurants  and its  franchisees.  The fees are for the use of the
Company's name,  trademarks,  and proprietary  information such as recipes,  and
help  offset  the  Company's  costs  related  to  research,   development,   and
negotiating  and managing  purchase  arrangements on behalf of Company owned and
franchised  Restaurants.  In  1998,  the  Company  received  licensing  fees  of
approximately  $1,840,562, of which  $1,057,467  was deposited into the National
Advertising  Fund.  The Company also receives fees from  equipment  suppliers to
fund an in-house  construction  department primarily  responsible for overseeing
all  aspects  of  design  and  construction  of  Franchisees'   Restaurants  and
facilitating openings in as short a period and as cost-effectively as possible.

The Company  retains the right to approve the terms of the Owner's  lease. A law
firm  selected by the Company must  negotiate  the lease as part of the approval
process.  The cost for  negotiation  of the lease by the lawyer  selected by the
Company are paid by the Owner. The Company also reserves the right to enter into
a lease directly with each landlord and then to sublease to the Franchisee.

The Owner,  or person  designated  by the Owner and approved by the Company,  is
required  to  devote  his  or  her  full  time,  attention  and  efforts  to the
performance of the Owner's duties under the Franchise  Agreement relating to the
operation of the Restaurant.  The Owner agrees in the Franchise Agreement to use
his or her  best  efforts  to  produce  maximum  volume  of  gross  sales in the
Restaurant. The Restaurant must be operated continuously on such days and during
such minimum hours as are required by the Company,  unless restricted by Owner's
lease or other rules applicable to the Restaurant.

The Owner agrees to maintain  books and records for the Restaurant in accordance
with the  requirements  and  specifications  set forth  from time to time by the
Company. The Franchisee is required by the Franchise Agreement to be responsible
for  submitting  all  required  reports to the Company when and in the manner or
format required by the Company.

In order to provide for proper financial  tracking and planning for Owners,  the
Company  began  providing a  restaurant  bookkeeping  service to its  Restaurant
Owners in 1994. In mid-1998,  the Company out sourced the bookkeeping  function.
This service is intended to assure the Owners have accurate financial records as
well as to allow the Company to keep accurate systemwide  statistics.  Franchise
agreements executed after February 10, 1995, require Owners to use the Company's
designated  bookkeeping service for the first year of operations for the Owner's
first Restaurant for a fee of $85 per week.

                                     - 5 -
<PAGE>



The  Owner  must  submit  copies  of all  proposed  advertising  or  promotional
materials  for  approval by the Company  prior to use. The Company must give its
written approval to any advertising or promotional materials before the Owner is
authorized to use such materials.

The Company expects that Restaurants  operating within its franchise system will
emphasize  quality  "submarine"   sandwiches.   In  order  to  satisfy  customer
expectations  regarding  menus and  service,  the Company  requires  substantial
uniformity among all Restaurants.  All Restaurants must conform to the decor and
menu  specifications of the Company.  The Owner is not allowed to sell any goods
or services at a Restaurant other than those goods and services specified by the
Company.

Franchise Marketing Programs

In order to  facilitate  the marketing of  franchised  Restaurants,  the Company
devotes resources for national print media,  sales staff,  marketing  materials,
and trade shows.  In addition,  the Company has specific  programs to market its
franchises, including the following:

Discovery Day.  Discovery Day is a day-long event  regularly  scheduled
in Denver to introduce  potential  Owners from  throughout  the country
to the Quizno's concept.

Toll  Free  Phone  Line.  The  Company  has  installed  a toll free  phone  line
(1-800-DELI-SUBS) which rings directly into the Franchise Sales Department.  The
information is entered into a data base of Owner inquiries and an  informational
package mailed to the caller.

Open  Houses.  The  Company  has an  ongoing  program  of  hosting  open  houses
throughout the country in conjunction  with its Area Directors.  Individuals who
have  expressed  an  interest  in the  Company's  franchise  are invited to open
houses.

Computerized  Data Base of  Franchise  Inquiries.  The Company  has  installed a
computer  network  within its  Franchise  Sales  Department  for the  purpose of
organizing,  managing,  and tracking individuals who inquire about the Company's
franchise.

National  Advertising.  The Company  continues to advertise  nationally
for new  Franchisees  on a regular and  consistent  basis in  national,
regional and local publications.

Company Owned Restaurants

The Company currently owns and operates 24 Quizno's Restaurants, 16 of which are
located in Colorado and 8 of which are located in Kansas. In 1998, Company-owned
Restaurants generated $560,880 in earnings.  The Company also currently owns and
operates 4 Quizno's  Restaurants  held for resale which incurred losses totaling
$260,053 in 1998.

While the Company  expects to add new  Company  owned  Restaurants  from time to
time, the Company expects most of its growth in the foreseeable future to result
from the development of franchised Restaurants.

                                     - 6 -

<PAGE>



In addition,  the Company,  from time to time, acquires or assumes the operation
of  franchised  Restaurants  where the  Franchisee  has been  unable to  operate
successfully for reasons unrelated to the location or the market. In such cases,
the  Company  will  typically   operate  the   Restaurant,   make  any  required
improvements and repairs,  re-staff, begin local store marketing, and ultimately
transfer the Restaurant to a new qualified  Owner.  Occasionally the Company may
incur short term losses in such cases. However, the royalty stream provided over
the long term by the new Owner will normally offset or exceed any such losses.

Advertising

Quizno's advertising staff develops advertising  campaigns for use at all levels
to support  consumer  sales in all of its  locations.  A marketing fee currently
equal to 1% of gross sales is paid to the Company by Owners,  which is deposited
into a "national"  advertising fund to be used to develop advertising to attract
customers to the  Restaurants  and to create  awareness  of the  Quizno's  brand
image.   Campaigns   developed  using  the  "national"  fund  are  created  with
television, radio and print elements, which are available to each local Quizno's
market.  Coverage  has  historically  been local or regional,  but in 1998,  the
Company  launched its first national  cable  television  campaign,  and plans to
continue and increase national coverage in 1999.

Each  Restaurant  is  required  to spend  another  3% to 4% of sales  for  local
advertising  or promotions.  Funds may be used to purchase  media  schedules for
Company produced TV, radio,  print ads, or any other approved media. A number of
markets with a concentration  of Restaurants  have formed  separate  advertising
cooperatives  which  coincide  with  the  area of  dominant  influence  of local
television broadcast stations. These cooperatives pool their advertising fees to
jointly purchase media.

New Programs

The Company has, and will continue to develop new programs that will augment its
Restaurant   operations   and   facilitate   the  marketing  of  new  franchised
Restaurants.

Decentralized  Franchise  Support.  In  1998,  the  Company  instituted  a "High
Performance  Team"  program,  in which  regional  teams of  corporate  personnel
support Area Directors in selling  franchises,  opening  stores,  and supporting
Franchisees. The teams include corporate employees who specialize in sales, real
estate, design and construction,  and Restaurant operations. There are currently
three teams, and the Company believes that this program will accelerate openings
and help provide increased operational consistency throughout the chain.

                                     - 7 -
<PAGE>



Foreign Operations

In 1997, the first non-U.S. Quizno's Restaurant was opened in Vancouver, British
Columbia.  Since then, the Company has sold the rights to operate Restaurants in
all of Canada to a group of  Canadian  entrepreneurs  and the  rights to operate
Restaurants  in all of Japan to a group of Japanese  entrepreneurs.  The Company
recently  sold the rights to operate  Restaurants  in the United  Kingdom to the
group of  Canadian  entrepeneurs,  and the  rights  to  operate  Restaurants  in
Australia to an Australian group. The Company continues to discuss further sales
of rights in other countries.  While international operations involve risks that
do not exist in  domestic  operations,  such as adverse  fluctuation  in foreign
exchange rates,  monetary exchange controls,  foreign  government  regulation of
business relationships, and uncertainty of intellectual property protection, the
Company  believes  that the rewards of  expanding  the market for the  Company's
services to selected foreign countries outweighs such risks.

Competition

Restaurant  Operations.  The  restaurant  industry  is highly  competitive  with
respect to price,  service,  food  quality and  location  and there are numerous
well-established   competitors   possessing   substantially  greater  financial,
marketing,  personnel and other resources than the Company.  The Company will be
required  to respond to  various  factors  affecting  the  restaurant  industry,
including changes in consumer preferences, tastes and eating habits, demographic
trends and traffic  patterns,  increases  in food and labor costs and  national,
regional and local economic conditions.

The  Company  competes in the  sandwich  segment of the fast food  industry,  an
industry long dominated by hamburger  chains.  Subway(R),  the nation's  largest
submarine sandwich restaurant chain, has grown significantly in recent years and
had over 12,000 units opened at December 31, 1998.  The  expansion of Subway has
drawn  attention  to  submarine  sandwiches,  during a time of  growing  concern
relating  to beef and fried  foods.  The  Company  believes  that the  submarine
sandwich  segment  is  underdeveloped,  and  that  demand  for  submarine  style
sandwiches  will  continue to grow.  Blimpie(R),  the second  largest  submarine
sandwich chain, had 2,060 (domestic and international) units open as of December
31, 1998.  Most of the other submarine  sandwich chains  currently are primarily
local or  regional.  As of December  31,  1998,  the Company had 494  franchised
Restaurants  operating (including 45 Bain's Deli units),  making the Company the
third largest submarine sandwich chain in the United States.

The Company's major competitors, including Blimpie, have followed Subway closely
in  the  style  and  quality  of  the  product,  creating  very  little,  if any
differentiation  in the market.  Subway offers a low-cost product in a fast food
style  restaurant  with  limited   seating.   The  Company  has  positioned  the
Restaurants  between the traditional fast food restaurant style of its submarine
sandwich  competitors and full-service dining, and has focused on higher quality
food products, to distinguish the Restaurants from their competitors.

                                     - 8 -
<PAGE>



Franchise  Competition.  In addition to its Restaurant  operations,  the Company
competes with fast food chains,  major restaurant  chains and other  franchisors
for Franchisees.  Many franchisors,  including those in the restaurant industry,
have greater  market  recognition  and greater  financial,  marketing  and human
resources  than  the  Company.   The  Company   believes  that  it  can  compete
successfully  for Franchisees for several  reasons.  The total cost of opening a
Quizno's  Restaurant  tends to be lower  than  that of  hamburger  fast food and
full-service  dining  restaurants.  The ratio of sales revenue per restaurant to
restaurant  opening costs is also better for Quizno's  Restaurants than for most
of its competitors.  Finally,  the ambiance of Restaurants offers a Franchisee a
unique pride in ownership.

Government Regulations

The  Company is  subject to Federal  Trade  Commission  ("FTC")  regulation  and
several state laws which regulate the offer and sale of franchises.  The Company
is also subject to a number of state laws which regulate  substantive aspects of
the  franchisor-franchisee  relationship.  The FTC's  Trade  Regulation  Rule on
Franchising  (the "FTC Rule")  requires  the  Company to furnish to  prospective
franchisees a franchise offering circular containing  information  prescribed by
the FTC Rule.

State  laws  that   regulate   the  offer  and  sale  of   franchises   and  the
franchisor-franchisee  relationship  presently exist in a substantial  number of
states.  State  laws that  regulate  the offer  and sale of  franchises  require
registration  of the  franchise  offering  with  state  authorities.  Those that
regulate the franchise  relationship  generally  require the  franchisor to deal
with its franchisees in good faith, prohibit interference with the right of free
association among franchisees,  limit the imposition of standards of performance
on a franchisee  and regulate  discrimination  against  franchisees  in charges,
royalties  or  fees.  Although  such  laws  may  restrict  a  franchisor  in the
termination of a franchise agreement by, for example,  requiring "good cause" to
exist as a basis for the  termination,  advance  notice to the franchisee of the
termination,  an  opportunity to cure a default and a repurchase of inventory or
other  compensation,  these provisions have not had a significant  effect on the
Company's  franchise  operations.  The  Company  is not  aware  of  any  pending
franchise  legislation  which in its view is likely to affect  significantly the
operations of the Company.  The Company  believes that its operations  comply in
all material respects with the FTC Rule and the applicable state franchise laws.

Each franchised  Restaurant,  and each Company-owned  Restaurant,  is subject to
licensing and  regulation  by a number of  governmental  authorities,  which may
include health,  sanitation,  safety,  fire,  building and other agencies in the
state or  municipality  in which the  Restaurant  is  located.  Difficulties  in
obtaining or failure to obtain the required licenses or approvals could delay or
prevent the development of a new Restaurant in a particular area. The Company is
subject to federal and state environmental regulations, but these have not had a
material  effect  on  the  Company's  operations.   More  stringent  and  varied
requirements of local governmental  bodies with respect to zoning,  land use and
environmental factors could delay or prevent the development of a new Restaurant
in a particular area.

                                     - 9 -
<PAGE>



The  Company is also  subject to state and  federal  labor laws that  govern its
relationship with its employees,  such as minimum wage  requirements,  overtime,
working  conditions and citizenship  requirements.  Significant  numbers of food
service  and  preparation  personnel  are paid at rates  governed by the federal
minimum  wage.  Accordingly,  increases in the benefits  under any of these laws
would increase labor costs to the Company and its Franchisees.

Trademarks

The  Company  presently  owns the  following  trademarks  or service  marks (the
"Marks"),  each of which is registered  on the Principal  Register of the United
States Patent and Trademark Officer:


                Mark                   Registration    Registration Date
                                          Number

      "QUIZNO'S" service mark            1,317,420     January 29, 1985

      "QUIZNO'S" service mark            1,317,421     January 29, 1985

  "QUIZNO'S & Design" service mark       1,716,834       September 15,
                                                             1992

  "QUIZNO'S EXPRESS CLASSIC SUBS"        2,086,598       September 19,
            service mark                                     1996

  "CHEEZE LOUISE & Design" service       2,125,221     December 30, 1997
                mark

The Quizno's  Acquisition  Company, a subsidiary of the Company,  grants current
Bain's Deli franchisees the non-exclusive right to use the following  trademarks
for  the  operation  of  their  Bain's  Deli  Restaurants:   "BAIN'S  CAFETERIA"
trademark,  Registration  Number 959,079 (May 15, 1973); and "BAIN'S" trademark,
Registration Number
1,640,049 (April 2, 1991).

The Company also filed an application  for  registration of a new "QUIZNO'S SUBS
OVEN  BAKED  CLASSICS  and  Design"  service  mark on  March 9,  1998,  and that
application  is pending.  In  addition,  the Company has filed  applications  to
register its trademarks in the European Union, Australia, Canada, and Japan.

There are no presently effective  determinations of the United States Patent and
Trademark   Office,   the  trademark  trial  and  appeal  board,  the  trademark
administrator of any state or any court, nor are there any pending infringement,
opposition or  cancellation  proceedings or material  litigation,  involving the
Marks.  There are no other  agreements  currently in effect which  significantly
limit the Company's right to use or license the use of the Marks.

Research and Development

The  Company  conducts  ongoing  development  of new menu  items and tests  such
products,  as well as new  Company-developed  food  marketing  aids, in selected
Quizno's  outlets.   Although  such  research  and  development  activities  are
important to the Company's business,  its expenditures for these activities have
not historically been material.

                                     - 10 -
<PAGE>



Employees

As of December  31,  1998,  the  Company  employed 61  full-time  employees.  In
addition,  the Company employed 71 full-time and 138 part-time  employees in its
Company-owned  Restaurants.  The  Company's  employees  are not  covered  by any
collective  bargaining  agreement and management believes its employee relations
are excellent.


ITEM 2.    DESCRIPTION OF PROPERTY

The Company  leases its  headquarters  office space of 7,462 square feet at 1099
18th Street, Suite 2850, Denver,  Colorado.  The Company recently executed a new
lease for its  headquarters  at 1415 Larimer  Street,  Denver,  Colorado,  which
contains 13,368 square feet. The Company expects to move to its new headquarters
on or about June 1, 1999.  The Company  leased the  premises  for each of the 29
Company-owned and operated Restaurants at December 31, 1998, as follows:

1.    12201 E. Arapahoe Rd., #B7   Englewood, CO 80112     2,486 sq. feet
2.    6525 Gunpark Dr.             Boulder, CO 80301       1,976 sq. feet
3.    191 Blue River Parkway       Silverthorne, CO 80498  931 sq. feet
4.    8081 E. Orchard Rd., #67     Greenwood  Village,  CO 
                                    80111                  3,166 sq. feet
5.    2875 Pearl St., Unit A       Boulder, CO 80301       2,450 sq. feet
6.    9425 S. University Blvd.     Highlands Ranch, CO     1,919 sq. feet
                                    80126
7.    1275 Grant Street            Denver, CO 80203        1,400 sq. feet
8.    1250 S. Hover Rd., Bldg. 8A  Longmont, CO 80501      2,350 sq. feet
9.    1660 Lincoln St., # 105      Denver, CO 80264        1,660 sq. feet
10.   10450 West Colfax            Lakewood, CO  80215     1,992 sq. feet
11.   4495 North Washington        Denver, CO  80216       1,903 sq. feet
12.   11211 120th Ave., # 73A      Kenosha, WI 53142       1,214 sq. feet
13.   14413 W. Colfax              Lakewood, CO 80401      1,300 sq. feet
14.   999 18th Street,  # 136      Denver, CO 80202        1,360 sq. feet
15.   3507 Manchester Expr., #F10  Columbus, GA 31909      613 sq. feet
16.   2236 Cove Blvd., #FC2236     Panama City, FL 32405   687 sq. feet
17.   250 Granite Street           Braintree, MA 02184     775 sq. feet
18.   999 S. Washington St.(Bains) N. Attleborough, MA 
                                    02760                  464 sq. feet
19.   270 W. 14th St.              Denver, CO 80204        1,700 sq. feet
20.   4403 S. Tamarac Pkwy.        Denver, CO 80237        2,420 sq. feet
21.   818 17th Street              Denver, CO 80202        1,800 sq. feet
22.   2401 W. Central              El Dorado, KS 67042     1,800 sq. feet
23.   738 N. Waco                  Wichita, KS 67203       1,151 sq. feet
24.   4100 E. Harry, #55           Wichita, KS 67218       1,850 sq. feet
25.   3300 N. Rock Rd.             Wichita, KS 67226       1,840 sq. feet
26.   2792 S. Seneca               Wichita, KS 67217       1,700 sq. feet
27.   2407 W. 21st St.             Wichita, KS 67203       1,225 sq. feet
28.   602 N. Tyler                 Wichita, KS 67212       1,500 sq. feet
29.   678 E. 47th St. South        Wichita, KS 67216       1,540 sq. feet

                                     - 11 -
<PAGE>



ITEM 3.    LEGAL PROCEEDINGS

The Quizno's  Corporation v. Robert W. Mitelhaus,  No. 77 114 00187 98; American
Arbitration  Association  (Denver,  Colorado).  On August 1, 1998,  the  Company
terminated the area director  agreement with Robert W.  Mitelhaus,  a California
Area Director.  On the same day, the Company  instituted an  arbitration  action
against  Mitelhaus in Denver,  Colorado,  alleging  that  Mitelhaus had breached
various  provisions  of the area  director  agreement.  On  September  1,  1998,
Mitelhaus denied that he breached the area director agreement. Mitelhaus alleged
fraudulent  termination of the area director agreement.  In addition,  Mitelhaus
alleged that the Company  failed to refund or pay certain  amounts he claims are
due to him, and that the Company  violated  various state and federal  franchise
and securities laws by misstating revenues in publicly filed documents. Hearings
in this matter were held before the American Arbitration  Association from March
8-16, 1999. During the hearings, the respondent demanded damages in excess of $4
million.  The  Company  argued  that  should  the  arbitration  panel  find  the
Respondent entitled to damages, the amount should not exceed $450,000, which the
Company  believes is the value of the Territory as of the date the  Respondent's
area director  agreement was terminated.  The Company believes that any award to
the Respondent will not exceed the value of that Territory (as determined by the
Arbitration panel), which the Company now owns.

In re Kirwin Ventures,  L.L.C.,  Case No. 54 114 00312 98, American  Arbitration
Association:  Mibichu  L.L.C,  v. The  Quizno's  Corporation,  No.  98-007226-CK
(Oakland  County,  Michigan).  On June 29, 1998,  Kirwin  Ventures,  L.L.C.  and
Mibichu LLC, two Michigan  franchisee  entities  owned by the same  individuals,
filed an arbitration  action and Michigan state court action against the Company
and certain of its  subsidiaries and officers.  The claims allege  violations of
the Michigan Franchise Investment Law and  misrepresentations in connection with
the franchise  sale. The  plaintiffs  seek damages in excess of $400,000 in each
case.  The Company  intends to deny each claim and is confident that it complied
with all regulatory requirements as well as acted in good faith.

Larry and Carlene Wagner and Lester  Clemetson v. The Quizno's  Corporation  and
Anthony Kruse. (No. 98-2-11502-5SEA) (King County, Washington). This action (the
"State  Court  Action") was brought  against the Company on May 11,  1998,  by a
former  franchisee  who had  abandoned  its  Restaurant  and opened a  competing
restaurant.  After receiving  notice from the Company that the franchisee was in
breach of the post-term  non-competition  covenants of the franchise  agreement,
the  franchisee  filed this action  alleging  failure to comply with  Washington
state franchise disclosure rules and the Washington Consumer Protection Act. The
Complaint seeks damages in excess of $200,000 plus  consequential  and exemplary
damages.  On or about July 16, 1998,  the Company filed a Petition in the United
States District Court for the District of Colorado (Civil Action No.  98-B-1535)
to Compel Arbitration in Denver of the disputes set forth in the Complaint.  The
Company also moved,  on or about July 17,  1998,  to stay the State Court Action
Pending  Arbitration.  On or about July 29,  1998,  the parties  entered  into a
Stipulation  staying the State Court  Action  pending  final  resolution  of the
parties' claims in arbitration.

                                     - 12 -
<PAGE>





By Order dated  November  17, 1998,  the United  States  District  Court for the
District of Colorado granted the Company's Petition to Compel  Arbitration.  The
Company  subsequently  filed a  Motion  for  Attorneys'  Fees  and  Costs it had
incurred  in  compelling  arbitration.  That  Motion was  granted by Order dated
February 9, 1999. The Company also filed,  with the Denver,  Colorado  office of
the  American  Arbitration  Association,  a Demand for  Arbitration  against the
plaintiffs. The Demand seeks, among other things, a declaration that the Company
has no  liability  for the  claims  asserted  in the State  Court  Action and an
injunction enforcing the terms of the post-term non-competition agreement in the
parties' Franchise Agreement. The district court entered a judgment awarding the
Company its attorneys'  fees and costs on February 12, 1999. The Company intends
to also file claims against the Wagners in connection  with their operation of a
competing Restaurant.

On December 9, 1998, the Company filed an action in the District Court, City and
County of Denver,  Colorado  entitled The Quizno's  Corporation and The Quizno's
Acquisition  Company  vs.  Bain's Deli  Franchise  Associates,  LP.  Bain's Deli
Franchise  Corp.,  Gemini  Enterprises,  Ltd, Jolles  Corporation #4, Gemini One
Inc.,  and Jordan A. Katz,  individually  and as shareholder of Gemini One. Inc,
Gemini  Enterprises,  Ltd. and Bain's Deli  Franchise  Associates,  L.P.,  Civil
Action No.  98-9333.  The Company  alleged that the Defendants had made material
misrepresentations  in  connection  with the sale of the Bain's  Deli  franchise
system to The Quizno's Acquisition Company in 1997. The Company seeks damages of
the  amounts  paid  of  over  $220,000,  recission  of the  purchase  agreement,
recission of a  $579,510.00  note,  recission of 18,182  shares of the Company's
stock,  indemnification,  fees and costs. The Defendants removed the case to the
Federal  District  Court of  Colorado  and the case number is now  98-N-55.  The
Defendants have filed  counterclaims  alleging breach of the underlying purchase
agreement.  The Defendants seek $579,510.00 plus fees, costs and treble damages.
The  Company  intends to  vigorously  pursue its  claims and  vigorously  defend
against the allegations in the counterclaims.

From time to time, the Company is involved in litigation and proceedings arising
out of the ordinary course of its business. Other than the foregoing,  there are
no other pending  material legal  proceedings to which the Company is a party or
to which the property of the Company is subject. It is the opinion of management
that the  liability,  if any,  arising from all pending claims and lawsuits will
not have a material adverse impact upon the Company's  consolidated  earnings or
financial position.

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

No matters were  submitted to a vote of security  holders of the Company  during
the fourth quarter of its fiscal year ended December 31, 1998.


                                     - 13 -

                                PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded in the NASDAQ Small-Cap Issues Market under
the symbol "QUIZ." The following table shows high asked, low bid and close price
information  for each  quarter in the last two  calendar  years as  reported  by
Prophet Information Services,  Inc., a provider of online historical stock price
data for all major U.S. securities markets. Such quotations reflect inter-dealer
prices,  without  retail  mark-ups,   markdowns  or  commissions,  and  may  not
necessarily  represent actual transactions.  On March 24, 1999, the stock closed
at $7.38.

Fiscal Year Ended December 31,
1997
                                         High       Low       Close
First Quarter                       $    3.63   $    2.94  $    3.13
Second Quarter                      $    4.44   $    3.00  $    4.13
Third Quarter                       $    6.88   $    3.81  $    5.00
Fourth Quarter                      $    6.38   $    4.50  $    4.88

Fiscal Year Ended December 31,
1998
                                        High         Low      Close
First Quarter                       $    5.88   $    4.44  $    5.88
Second Quarter                      $    9.00   $    6.00  $    8.19
Third Quarter                       $    8.38   $    7.25  $    8.13
Fourth Quarter                      $    8.06   $    6.50  $    7.63

There  were  approximately  151  holders  of  record  (and  approximately  1,000
beneficial owners) of the Company's Common Stock as of March 16, 1999. The first
number includes shareholders of record who hold stock for the benefit of others.

The  Company  does not expect to pay any  dividends  on its Common  Stock in the
foreseeable future.  Management  currently intends to retain all available funds
for the development of its business and for use as working capital.

During  the last  quarter of the fiscal  year  ending  December  31,  1998,  the
following  securities  were sold by the Company  without  registration  with the
Securities and Exchange Commission pursuant to the exemption noted:

                      Number
 Securities             of                                        Exemptions
    Sold       Date   Shares    Consideration      Purchasers      Claimed
-----------  ------  --------  ---------------   --------------  ------------


Common Stock 11/5/98   635     $5,172 Plan       Quizno's 401(k)   Section 4(2)
                                obligation


                                     - 14 -
<PAGE>



ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

In  1998,  the  Company  was  profitable  for the  year and for each of the four
quarters in 1998, completing its 6th consecutive  profitable quarter on December
31, 1998. The Company ended the year with almost 500 Restaurants  open,  another
388  Restaurants  sold and  scheduled  to open in the future,  29 Company  owned
Restaurants,  81  area  directorships  owned  by  68  Area  Directors,  and  two
international  master  franchisees.  Management  believes  it has built a strong
foundation  for the Company upon which  growth can  continue  along with regular
profits.  In 1998 the Company earned $1,112,615 compared to a loss of $89,618 in
1997 (amounts are before preferred stock dividends).

On a quarterly  basis,  earnings by business segment reflect  continued  overall
improvement over the last eight quarters.


                      Franchise      Company
                     Operations       Stores        Other         Net
                     -----------    ----------    ----------    ---------



1st Quarter 1997      $  7,272      $    966     $(226,144)    $(217,906)
2nd Quarter 1997       103,631        70,279      (223,266)      (49,356)
3rd Quarter 1997       214,261       118,347      (228,550)      104,058
4th Quarter 1997       357,876       102,059      (386,349)       73,586
1st Quarter 1998       291,888       107,384      (257,593)      141,679
2nd Quarter 1998       482,699       166,386      (400,411)      248,674
3rd Quarter 1998       463,868       203,556      (388,917)      278,507
4th Quarter 1998       708,022        83,554      (347,821)      443,755

                                     - 15 -

<PAGE>


The  following  table  reflects the Company's  revenue  growth by source and the
Company's Restaurants for the past five years:


                                         Year Ended December 31,
                          -----------------------------------------------------
                            1998       1997       1996        1995       1994
                          --------   -------    ---------   --------   --------
(000's)

Continuing fees           $  5,837   $  2,748   $   1,591   $  1,046   $    779
Initial franchise fees       2,884      2,269       1,164        593        390
Area director fees           3,022      2,139       1,421      1,380        326
Other                          863        731         398        356        354
                          --------   --------   ---------   --------   --------
Franchise revenue           12,606      7,887       4,574      3,375      1,849

Sales by Company owned
 stores                      6,849      4,071       2,681      3,011        604
Sales by stores held
 for resale                  1,282        149         231        143        194
                          --------   --------   ---------   --------   --------

Total revenue             $ 20,737   $ 12,107   $   7,486   $  6,529   $  2,647
                          ========   ========   =========   ========   ========

Percent increase               71%        62%        15%        147%
                          ========   ========   ========    ========



Restaurants open,
 beginning                     327        156         105         66         40
New Restaurants opened         187        140          67         39         27
Restaurants acquired             8         52          -                     -
Restaurants closed             (28)       (16)        (12)        -          (1)
Restaurants closed,
  scheduled to reopen            -         (5)         (4)        -          -
                          --------   --------   ---------   --------   --------

Restaurant open, end           494        327         156        105         66
                          ========   ========   =========   ========   ========

Franchises sold,
 domestic                      401        180         172         50         37
Franchises sold,
 international                  87         11           1         -          -
                          --------   --------   ---------   --------   --------
Total franchises sold          488        191         173         50         37
                          ========   ========   =========   ========   ========

Initial franchise fees
  collected (000's)       $  5,670   $  2,920   $   1,744   $  1,040   $    710

Systemwide sales             $102       $55        $36         $26        $19
                           million    million     million    million    million

Average unit volume (1)   $339,000   $316,259    $300,580   $322,000   $363,000

Same store sales (2)(3)   Up 10.7%    Up 1.3%   Down 0.2%  Down 7.3%    Up 4.1%

(1)   Excludes  Restaurants  located in  convenience  stores  and gas  stations.
      Includes only Restaurants open at least one year under the same ownership.
(2)   Same  store  sales  for 1998 is based on 109  stores  open all of 1997 and
      1998.  Stores which  transferred  ownership during this period, or were in
      substantial  default of the franchise  agreement at December 31, 1998, are
      excluded.
(3)   Because the Company is and will  continue  to be in an  aggressive  growth
      mode over the next few years, it is anticipated that same store sales will
      fluctuate as Restaurants are included from more start up markets.

                                     - 16 -
<PAGE>



Results of Operations

Comparison of Years Ended December 31, 1998 and 1997

Franchise  revenue increased 60% in 1998 to $12,606,113 from $7,887,447 in 1997.
Total revenue increased 71% in 1998 to $20,736,754 from $12,107,662 in 1997. The
revenue  increase  resulted  primarily  from  continuing  fees and Company store
sales.

Continuing fees increased 112% to $5,836,822 from $2,747,955 in 1997. Continuing
fees are comprised of royalties and licensing fees.

Royalty fees increased 97% to $5,411,386 from  $2,747,955 in 1997.  Royalty fees
are a  percentage  of each  Franchisee's  sales  paid to the  Company  and  will
increase as new franchises  open, as the average royalty  percentage  increases,
and as average unit sales increase or decrease. At December 31, 1998, there were
465 franchises  open (including  Bain's),  as compared to 308 franchises open at
December 31, 1997. The royalty rate was 5% for agreements  entered into prior to
February 11, 1995,  6% for all franchise  agreements  entered into from February
11, 1995  through  March 31, 1998 and 7% for all  agreements  entered into since
March 31,  1998.  The Company has no  immediate  plans to further  increase  the
royalty rate.

Included  are 45 Bain's  franchises  acquired on November  12,  1997,  which pay
royalties  at rates  ranging  from 0% to 5%, and  account  for  $282,685 in 1998
royalty revenue and $72,347 in 1997 royalty revenue.

Licensing fees are generated through the licensing of the Quizno's trademark for
use by others.  Licensing  fees are  expected  to  continue  and to  increase as
systemwide  sales and the awareness and value of the Quizno's  brand  increases.
For 1998,  licensing fees were  $425,436.  There was no licensing fee revenue in
1997.

Initial  franchise fees increased 27% in 1998 to $2,883,650  from  $2,269,001 in
1997.  Initial  franchise fees are one-time fees paid by Franchisees at the time
the franchise is purchased.  Initial franchise fees are not recognized as income
until the period in which all of the Company's  obligations relating to the sale
have been  substantially  performed,  which generally  occurs when the franchise
opens.  The Company's  share of initial  franchise  fees sold by foreign  master
franchisees  is  recognized  when  received.  In 1998,  the  Company  opened 187
franchises,   including  26  international  Restaurants,  as  compared  to  140,
including 7  international  Restaurants,  opened in 1997. The Company's  initial
franchise  fee has been $20,000 since 1994.  Franchisee's  may purchase a second
franchise  for $15,000  and third and  subsequent  franchise  for  $10,000.  The
initial franchise fee for a Quizno's Express franchise is $10,000 for the first,
$7,500  for the  second,  and  $5,000  for the third and  additional  franchises
purchased by the same Franchisee.  The Company's share of initial franchise fees
for international  Restaurants is generally 30% of the sales price and will vary
depending on the country and the currency exchange rate.

                                     - 17 -
<PAGE>



Initial franchise fees collected by the Company for domestic franchise sales are
recorded as deferred initial  franchise fees until the related  franchise opens.
Deferred  initial  franchise  fees at  December  31,  1998 were  $4,781,946  and
represent 308 domestic  franchises  sold but not yet in  operation,  compared to
$2,148,662 at December 31, 1997  representing  142 domestic  franchises sold but
not open.  Approximately 80 international  franchises had been sold but were not
open at December 31, 1998 (5 at December 31, 1997).  Direct costs related to the
sale,  primarily sales commissions to area directors,  are deferred on the books
of the  Company  and  recorded  as an  expense  at the same time as the  related
initial franchise fee is recorded as income.  Deferred costs paid and due at the
time of opening with respect to initial  franchise fees deferred at December 31,
1998 were $926,226.  Approximately  50% of all domestic  initial  franchise fees
received  by the  Company  are paid to Area  Directors  for  sales  and  opening
commissions.

The Company did not sell or open any Bain's  franchises in 1998 or 1997 nor does
it expect to in the future.

Area director and master franchise fees increased 41% in 1998 to $3,022,276 from
$2,139,080 in 1997. Area director fees are one-time fees paid to the Company for
the right to sell  franchises in a designated,  non-exclusive,  area,  including
international markets.

Domestic area  director  fees were  $1,688,276 in 1998 compared to $2,020,330 in
1997. The fee for U.S. areas was $.03 per person in the designated  area through
June 1996,  $.035 from July 1996 through  December 1996,  $.05 from January 1997
through  December 1997,  $.06 from January 1998 through  February 1998, and $.07
since  March 1, 1998.  In  addition,  each Area  Director  is  required to pay a
training fee of $10,000. The population based portion of the fee is deemed fully
earned by the Company when the area director  marketing  agreement is signed and
is  recognized as income in that period.  In 1998,  the Company sold 16 new area
directorships  including 11 existing Area  Directors  who  purchased  additional
territory,  as compared to 28 area  directorships  sold in 1997. At December 31,
1998,  the  Company  had a  total  of 81  area  directorships  owned  by 68 Area
Directors who owned areas  encompassing  approximately  75% of the population of
the United States.

International  master franchise fees earned were $1,334,000 in 1998 and $118,750
in 1997.  The 1998 fees were for  Canada,  $514,000,  Japan,  $350,000,  and the
United  Kingdom,  $470,000.  The 1997  fees  were for the  province  of  British
Columbia, Canada. An additional $1,332,848 is due the Company for the Japan area
fee in 1999, which will be recorded as revenue when paid.

The Company offers domestic and international  area applicants  financing for up
to 50% of the area  fee.  The  amount  financed  is  required  to be paid to the
Company in  installments  over five years at interest  rates between 6% and 15%.
The promissory notes are personally  signed by the Area Director and,  depending
on the personal financial  strength of the Area Director,  secured by collateral
unrelated  to the  area  directorship,  usually  a second  mortgage  on the Area
Director's  home.  Of the 19 domestic and  international  areas sold in 1998, 12
used this financing for $1,926,438,  representing  64% of the area director fees
recognized in 1998. In 1997, a total of $354,412 was financed,  representing 17%
of area revenue.

                                     - 18 -
<PAGE>



There are no Area Directors in the Bain's system and the Company does not intend
to sell any Bain's area directorships in the future.

Other revenue increased by 2% in 1998  to $604,172  from $593,771 in 1997. Other
revenue  is  primarily  amounts  paid by  equipment  suppliers  for  design  and
construction  and  bookkeeping  fees charged  Franchisee's  for whom the Company
provided bookkeeping services.  Amounts paid by equipment suppliers was $357,659
in 1998  compared to $145,993 in 1997.  This amount will vary based on new store
openings.  Since  1995,  the  Company's  franchise  agreement  requires  all new
Franchisees to utilize the Company's  bookkeeping services, or a firm designated
by the  Company to provide  bookkeeping  services,  for their first 12 months of
operations. Bookkeeping fees were $172,382 in 1998 compared to $326,958 in 1997.
Bookkeeping  fees  declined,  and are expected to be  immaterial  in the future,
because the Company out-sourced the function to a third party in 1998.

Sales and royalty  commissions  expense  increased 82% to  $4,266,024  (48.9% of
royalty and initial  franchise fees) in 1998 from  $2,346,746  (46.8% of royalty
and initial  franchise fees) in 1997. Sales and royalty  commissions are amounts
paid to the domestic Area  Directors of the Company,  commissions  paid to other
sales  agents  and  employees,   and  costs  related  to  sales  promotions  and
incentives.

The Company's  domestic Area Directors  receive  commissions equal to 50% of the
initial  franchise  fees  and 40% of  royalties  received  by the  Company  from
franchises  sold,  opened,  and operating in the Area Director's  territory.  In
exchange for these  payments,  the Area  Director is required to market and sell
franchises, provide location selection assistance, provide opening assistance to
new owners,  and perform  monthly quality control reviews at each franchise open
in the Area Director's territory.

The Area Director is entitled to receive commissions during the term of the Area
Director  Marketing  Agreement  and in some cases,  upon  expiration of the area
director agreement, the commission paid is reduced to 1% of sales for 5 years.

General and  administrative  expenses  increased  34% to $6,201,857 in 1998 from
$4,611,978   in  1997.   As  a  percent  of  franchise   revenue,   general  and
administrative  expenses have fallen from 80% in 1995, 74% in 1996, 58% in 1997,
to 49% in 1998.  General and  administrative  expenses include all the operating
costs of the Company. The increase is primarily due to the addition of employees
to  service  the  rapidly  growing  network  of  Quizno's  Franchisees  and Area
Directors.  Although general and administrative expenses will likely continue to
increase  as the  Company  grows,  management  expects  the rate of  increase to
continue to decline.

The Company  believes its general and  administrative  expenses are adequate and
are not excessive in relation to the size and growth of the Company.

                                     - 19 -
<PAGE>



Company owned stores earned  $560,880 on sales of $6,848,737 in 1998 compared to
$291,651 on sales of $4,070,666 in 1997. During 1998 the Company operated stores
for a total of 197 store operating  months.  In 1997, the Company had a total of
118 store  operating  months.  Sales per store  month  increased  .5% in 1998 to
$34,677 from $34,497 in 1997.

At December 31, 1998 the Company had 24 (17 at December 31, 1997)  Company owned
stores. During 1998 the Company acquired and converted to Company owned Quizno's
eight competitive sandwich shops in Wichita,  Kansas, built and opened three new
Company owned Quizno's,  purchased from  Franchisees  two Quizno's  Restaurants,
reclassified as stores held for resale five Company owned Quizno's,  and sold to
a Franchisee  one Company  owned stores.  In 1997,  the Company  acquired  three
Bain's  sandwich shops,  built and opened four new Company owned  Quizno's,  and
purchased from Franchisees five Quizno's Restaurants.

                                     - 20 -
<PAGE>



Stores held for resale lost  $260,053 on sales of $1,281,904 in 1998 compared to
a loss of $60,673 on sales of $149,549 in 1997.  In 1998,  the Company  operated
eight  stores held for resale,  for a total of 71 store  operating  months.  Two
Bain's units were  returned to the seller in the first  quarter and one Quizno's
Restaurant  was sold to a Franchisee in the fourth quarter of 1998. In 1997, the
Company  operated one  Restaurant  for three months and one store for ten months
which was then closed.  At December 31, 1998,  the Company  operated four stores
held for resale (none at December 31, 1997).

Provision  for bad debts was $285,308 in 1998  compared to $49,540 in 1997.  The
1998 expense  includes  allowances for promissory notes due for stores purchased
from the Company subsequently closed.

Other  expenses were $47,838 in 1998  compared to $64,544 in 1997.  The 1998 and
1997 expense is primarily  subleasing  losses related to one store (two in 1997)
previously owned by the Company and sold to Franchisees.

Depreciation  and  amortization  was $781,977 in 1998 and $406,444 in 1997.  The
increase is due to the  acquisition  and  development of seven new Company owned
Restaurants, the acquisition of the Bain's chain in late 1997, and certain other
tangible and intangible assets with short lives expensed  beginning in late 1997
and 1998. A portion of the increase related to certain  intangible  assets fully
amortized in 1999 and thereafter not recurring.

Interest  expense was  $340,614 in 1998 and  $290,019 in 1997.  The  increase is
primarily  attributable to the interest on debt related to financing new Company
owned Restaurants and stores held for resale.

                                     - 21 -
<PAGE>



Income tax  benefit  was  $368,553  in 1998.  There was no income tax benefit or
expense recorded in 1997. The Company's taxable income has historically exceeded
its book income  primarily  because initial  franchise fees the Company receives
are  taxable  income in the year  received  and are book  income in the year the
franchise  opens.  Consequently,  the Company  will not pay income taxes on this
income when it is recognized  for financial  reporting  purposes.  In 1998,  the
Company used all of its tax net operating loss  carryforwards and incurred a tax
liability.  Accordingly,  in 1998 the Company reduced the amount by which it had
recorded an impairment of its deferred tax asset in prior years and recorded the
tax benefit of prior years' net operating losses in 1998.

Liquidity and Capital Resources

Net cash  provided by operating  activities  was  $2,597,243 in 1998 compared to
$723,951 in 1997,  an  improvement  of  $1,873,292.  The primary  reason for the
improvement  from 1997 to 1998 is the 1998 net income compared to the 1997 loss,
a turnaround  of  $1,202,233,  the increase in net  deferred  franchise  fees of
$2,060,093,  less the increase in  promissory  notes  accepted for area director
fees of $1,245,565 and the decrease of $641,068  associated with deferred income
taxes.

Net cash used in investing  activities  was  $3,230,108 in 1998 compared to cash
used by  investing  activities  of  $2,620,457  in 1997.  Cash used by investing
activities  for  both  years  was  primarily   related  to  the  acquisition  or
development of Company owned Restaurants.  In addition, in 1997 cash was used to
acquire Bain's and was invested in short term A rated corporate bonds.

Net cash provided by financing  activities was $773,836 in 1998 compared to cash
provided  by  financing  activities  of  $330,463  in 1997.  The 1998 amount was
primarily from financing Company owned Restaurants.  The amount provided in 1997
was primarily from the sale of preferred stock less principal payments on debt.

At December  31,  1998,  the Company  had  $690,030  invested in stores held for
resale. The stores held for resale are expected to be sold in 1999.

In the first quarter of 1998,  the Company tested a program under which its Area
Directors  had the right to elect to have all  future  Franchisee  leases in the
Area  Director's  territory  signed by The Quizno's  Realty Company  ("QRC"),  a
wholly  owned  subsidiary  of the  Company.  As a  condition  of the lease,  the
landlord agrees not to look beyond QRC for payments.  These locations would then
be subleased by QRC to the  Franchisee,  whose personal  liability is limited to
one year. The Franchisee pays QRC an indemnification fee of $165 per month, pays
a one time lease processing fee to QRC of $2,200, and pays a security deposit to
QRC equal to two months rent.  Effective March 1, 1998, the Company  transferred
cash and other assets  having a book value of  approximately  $500,000 to QRC in
exchange for stock and a promissory note. As of December 31, 1998, 10 leases had
been  executed  under this  program,  and the Company is  evaluating  whether to
continue the program in the future.

                                     - 22 -
<PAGE>



As it has in the past,  the Company will  continue to consider  acquisitions  of
other chains, the purchase of Quizno's Restaurants from its Franchisees, and the
purchase of Quizno's area  directorships  from its Area Directors.  From time to
time,  the Company  will make  offers and enter into  letters of intent for such
transactions subject to the completion of due diligence.  In all such cases, the
Company will identify the sources of cash required to complete such transactions
prior to entering into a binding agreement.

On December 31, 1996,  the Company  completed a debt financing for $2 million of
which $500,000 was converted to preferred stock in December 1997. The $1,500,000
loan was payable  interest only at 12.75%,  $15,937.50  per month,  through June
1998, interest and principal payments of $34,141 from July 1998 through November
2001,  and a final  balloon  payment  of  $587,295  on  December  31,  2001.  In
connection with the loan, the lender has the right to purchase 372,847 shares of
the Company's  common stock for $3.10 per share.  On January 6, 1999 the Company
paid off the loan and  redeemed  the  preferred  stock at a cost of  $1,854,000.
These funds were borrowed from a financial  institution  and is repayable over 7
years at an interest rate of 7.75%

As  discussed  elsewhere  in this  Report,  on December  29,  1998,  the Company
received a proposal from the majority  shareholders  of the Company to merge the
Company into a new company owned by them, pursuant to which all of the Company's
shareholders other than themselves, would receive cash for their Company shares.
Such proposal is subject to a number of conditions,  which are listed  elsewhere
in this Report. None of such conditions have yet been satisfied. If the proposed
transaction  is in fact  completed,  the  Company or its  successors  will incur
substantial   debt  in  order  to  fund  the  cash   payments  to  the  minority
shareholders.  The amount of such debt cannot  be determined at this time. It is
expected that such debt will be secured by some or all of the Company's assets.

Year 2000 Disclosure

The Company uses current versions of widely used,  publicly  available  software
for its accounting and other data processing requirements.  The providers of the
software  utilized by the Company  have stated that there will be no failures in
the programs used by the Company  resulting from the year 2000. The Company uses
a small amount of customized  software,  all of which has been  developed by the
Company in the last twelve months,  and has been written to be functional in the
year 2000. The Company has not yet determined the impact, if any, that year 2000
issues may have on its vendors. However, the Company believes there are adequate
alternative  vendors  that can supply  products  and  services to the Company if
necessary.  Finally, the Company's business,  quick service restaurants,  is not
highly  dependent upon electronic data  processing.  In conclusion,  the Company
does not believe it has material risk from year 2000 issues.

                                     - 23 -
<PAGE>



Forward-Looking Statements

Certain  information  discussed in this Form 10-KSB,  and in  particular  in the
section entitled  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations,"  are  forward-looking  statements that involve risks
and uncertainties that might adversely affect the Company's operating results in
the future in a material  way.  Such risks and  uncertainties  include,  without
limitation,  the effect of national and regional  economic and market conditions
in the United States and in other countries in which  franchises are sold, costs
of labor and employee benefits,  costs of marketing,  costs of food and non-food
items used in the operation of the  restaurants,  intensity of  competition  for
locations  and  franchisees,  as well as  customers,  perception of food safety,
legal  claims,  and  the  availability  of  financing  for the  Company  and its
Franchisees.  Many of these  risks are  beyond the  control of the  Company.  In
addition,  specific  reference  is made to the "Risk  Factors"  contained in the
Company's  Prospectus,  dated  January  9,  1998,  related  to the  Registration
Statement on Form S-3 filed by the Company (Registration No. 333-38691).

As described  earlier,  the  Company's  principal  sources of income are royalty
fees,  initial  franchise fees, and area director  marketing fees. These sources
are  subject  to  a  variety  of  factors  that  could   adversely   impact  the
profitability  of the Company in the future,  including  those  mentioned in the
preceding paragraph.  The continued strength of the U.S. economy is a key factor
to the restaurant  business because  consumers tend to immediately  reduce their
discretionary  purchases in economically  difficult times. An economic  downturn
would  adversely  affect  all three of the above  identified  sources of income.
Because many of the Company's franchises are still concentrated in a few regions
of the U.S.,  regional  economic  factors could  adversely  affect the Company's
profitability.  Weather,  particularly  severe winter  weather,  will  adversely
affect royalty  income and could affect the other sources cited above.  Culinary
fashions among Americans and people in other  countries in which  franchises are
sold will also impact the Company's  profitability.  As eating habits change and
types of cuisine move in and out of fashion,  the Company's challenge will be to
formulate a menu within the Company's distinctive culinary style that appeals to
an increasing market share.  Finally,  the intense competition in the restaurant
industry continues to challenge participants in all segments of this industry.

                                     - 24 -
<PAGE>



ITEM 7. FINANCIAL STATEMENTS

                       THE QUIZNO'S CORPORATION
                           AND SUBSIDIARIES

                 Consolidated Financial Statements and
                     Independent Auditors' Report
                   December 31, 1998, 1997 and 1996

                                     - 25 -
<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES




                           Table of Contents

                                                                   Page

Independent Auditors' Report......................................F - 1

Consolidated Financial Statements

    Consolidated Balance Sheets...................................F - 2

    Consolidated Statements of Operations.........................F - 3

    Consolidated Statement of Stockholders' Equity................F - 4

    Consolidated Statements of Cash Flows.........................F - 5

Notes to Consolidated Financial Statements........................F - 7



<PAGE>








                     INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
The Quizno's Corporation and Subsidiaries
Denver, Colorado

We have audited the  accompanying  consolidated  balance  sheets of The Quizno's
Corporation  and  Subsidiaries  as of December 31, 1998,  1997 and 1996, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of The  Quizno's
Corporation  and  Subsidiaries  as of December 31,  1998,  1997 and 1996 and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with generally accepted accounting principles.




                                /s/ Ehrhardt Keefe Steiner & Hottman PC
                                    Ehrhardt Keefe Steiner & Hottman PC
March 2, 1999
Denver, Colorado



<PAGE>







               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

                      Consolidated Balance Sheets

<TABLE>
<CAPTION>


                                                                                 December 31,
                                                              ------------------------------------------------
                                                                  1998               1997               1996
                                                              ------------      ------------      ------------
                                     Assets
<S>                                                           <C>               <C>               <C>
Current assets
 Cash and cash equivalents ..............................     $    702,258      $    561,287      $  2,127,330
 Short-term investments .................................        1,541,423           538,188              --
 Accounts receivable, net of allowance
  for doubtful accounts of $20,000 (1998),
  $38,231 (1997) and $51,077 (1996) (Note 8) ............          857,280           545,109           363,602
 Current portion of notes receivable
  (Notes 3 and 8) .......................................        1,212,522           598,486           501,255
 Deferred tax asset (Note 13) ...........................           81,260              --                --
 Other current assets ...................................          266,100           375,902           164,604
 Assets of stores held for resale or under
  development (Note 4) ..................................          690,030           593,675           116,229
                                                              ------------      ------------      ------------
     Total current assets ...............................        5,350,873         3,212,647         3,273,020
                                                              ------------      ------------      ------------

Property and equipment at cost, net
 (Notes 2 and 5) ........................................        3,535,222         2,240,661         1,458,979
                                                              ------------      ------------      ------------

Other assets
 Intangible assets, net (Notes 2 and 6) .................        1,553,522         1,651,637           557,483
 Deferred assets (Notes 7 and 13) .......................        1,854,179           914,762           937,450
 Deposits and other assets (Note 2) .....................          119,883            76,294            37,630
 Notes receivables, net (Notes 3 and 8) .................        1,375,872           734,495           575,222
                                                              ------------      ------------      ------------
     Total other assets .................................        4,903,456         3,377,188         2,107,785
                                                              ------------      ------------      ------------

Total assets ............................................     $ 13,789,551      $  8,830,496      $  6,839,784
                                                              ============      ============      ============


                     Liabilities and Stockholders' Equity

Current liabilities
 Accounts payable .......................................     $  1,317,085      $  1,065,374      $  1,053,028
 Accrued liabilities ....................................          532,324           489,848           170,728
 Line-of-credit (Note 9) ................................             --                --             100,000
 Current portion of long-term obligations
  (Notes 8 and 10) ......................................          370,404           303,084           375,595
 Current portion of subordinated debt
  (Note 10) .............................................          244,084           110,912              --   
 Income taxes payable (Note 13) .........................          200,000              --                --
                                                              ------------      ------------      ------------
     Total current liabilities ..........................        2,663,897         1,969,218         1,699,351

Line-of-credit (Note 9) .................................             --                --             120,239
Long-term obligations (Notes 8 and 10) ..................          964,984           741,570           203,801
Convertible subordinated debt (Note 10) .................        1,130,916         1,389,088         2,000,000
Deferred revenue ........................................        4,781,946         2,148,662         1,575,471
                                                              ------------      ------------      ------------
     Total liabilities ..................................        9,541,743         6,248,538         5,598,862
                                                              ------------      ------------      ------------

Commitments and contingencies (Notes 4, 11
 and 14)

Minority interest in Subsidiary (Note 2) ................          151,601              --                --

Stockholders' equity (Notes 10 and 12)
 Preferred  stock, $.001 par value,
  1,000,000 shares authorized;
  Series A issued and outstanding 146,000 ...............              146               146               146
  (1998, 1997 and 1996) ($876,000
  liquidation preference)
 Series B issued and outstanding 100,000
  (1998), 100,000 (1997) and 0 (1996) ...................              100               100              --
  ($500,000 liquidation preference)
 Series C issued and outstanding 167,000
  (1998), 167,000 (1997) and 0 (1996) ...................              167               167              --
  ($835,000 liquidation preference)
 Common stock, $.001 par value; 9,000,000
  shares authorized; issued and
  outstanding, 3,054,459 (1998), 2,923,294 ..............            3,054             2,923             2,865
  (1997) and 2,864,757 (1996)
  Capital in excess of par value ........................        5,065,247         4,663,744         3,233,415
  Accumulated deficit ...................................         (972,507)       (2,085,122)       (1,995,504)
                                                              ------------      ------------      ------------

           Total stockholders' equity ...................        4,096,207         2,581,958         1,240,922
                                                              ------------      ------------      ------------

Total liabilities and stockholders' equity ..............     $ 13,789,551      $  8,830,496      $  6,839,784
                                                              ============      ============      ============

</TABLE>

                                 F - 2


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                           For the Year Ended
                                                              December 31,
                                            ------------------------------------------------
                                                 1998              1997              1996
                                            ------------      ------------      ------------

<S>                                         <C>               <C>               <C>
Franchise operations:
 Revenue (Note 8)
  Continuing fees .....................     $  5,836,822      $  2,747,955      $  1,590,673
  Initial franchise fees ..............        2,883,650         2,269,001         1,164,500
  Area director and master franchise
   fees ...............................        3,022,276         2,139,080         1,421,555
  Other ...............................          604,172           593,771           248,094
  Interest ............................          259,193           137,640           149,781
                                            ------------      ------------      ------------
      Total revenue ...................       12,606,113         7,887,447         4,574,603
                                            ------------      ------------      ------------

 Expenses
  Sales and royalty commissions .......       (4,266,024)       (2,346,476)         (914,726)
  Advertising and promotion ...........         (191,755)         (245,953)         (239,209)
  General and administrative ..........       (6,201,857)       (4,611,978)       (3,400,802)
                                            ------------      ------------      ------------
       Total expenses .................      (10,659,636)       (7,204,407)       (4,554,737)
                                            ------------      ------------      ------------


Income from franchise operations ......        1,946,477           683,040            19,866
                                            ------------      ------------      ------------

Company store operations:
 Sales ................................        6,848,737         4,070,666         2,680,521
                                            ------------      ------------      ------------
 Cost of sales ........................       (2,042,092)       (1,309,624)         (959,045)
 Cost of labor ........................       (1,683,225)       (1,037,101)         (777,170)
 Other store expenses .................       (2,562,540)       (1,432,290)         (857,472)
                                            ------------      ------------      ------------
       Total expenses .................       (6,287,857)       (3,779,015)       (2,593,687)
                                            ------------      ------------      ------------

Income from Company stores operations .          560,880           291,651            86,834

Other income (expenses):
 Research, development and new programs             --             (72,161)         (217,321)
 Sales by stores held for resale .....         1,281,904           149,549           231,371
 Loss and expenses related to stores
  held for sale ......................        (1,541,957)         (210,222)         (307,813)
 Loss on sale or closure of Company
  stores .............................           (47,505)         (120,928)             --
 Provision for litigation settlement .              --                --            (134,500)
 Write-off of accounts and notes
  receivable..........................          (285,308)          (49,540)         (224,063)
 Other expenses ......................           (47,838)          (64,544)         (104,844)
 Depreciation and amortization .......          (781,977)         (406,444)         (288,435)
 Interest expense ....................          (340,614)         (290,019)          (80,063)
                                            ------------      ------------      ------------
        Total other expenses ..........       (1,763,295)       (1,064,309)       (1,125,668)
                                            ------------      ------------      ------------

Net income (loss) before income taxes .          744,062           (89,618)       (1,018,968)
Income tax benefit (Note 13) ..........          368,553              --                --
                                            ------------      ------------      ------------
Net income (loss) .....................        1,112,615           (89,618)       (1,018,968)
Preferred stock dividends .............         (220,890)          (93,998)          (56,940)
                                            ------------      ------------      ------------

Net income (loss) applicable to
 common stockholders ..................     $    891,725      $   (183,616)     $ (1,075,908)
                                            ============      ============      ============

Basic earnings (loss) per share of
 common stock - basic .................     $        .30      $       (.06)     $       (.38)
                                            ============      ============      ============

Weighted  average common shares
 outstanding - basic ..................        3,014,042         2,878,310         2,864,757
                                            ============      ============      ============

Earnings (loss) per share of common
 stock - diluted ......................     $        .26      $       (.06)     $       (.38)
                                            ============      ============      ============

Weighted  average common shares
 outstanding - diluted ................        3,445,972         2,878,310         2,864,757
                                            ============      ============      ============
</TABLE>

                                 F - 3

<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

            Consolidated Statement of Stockholders' Equity
         For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>



                             Preferred Stock                  Common Stock            Additional
                       --------------------------       -------------------------       Paid-in         Accumulated
                         Shares          Amount           Shares        Amount          Capital          Deficit           Total
                       ----------     -----------       ---------     -----------     -----------      ------------     -----------
<S>                    <C>            <C>               <C>           <C>             <C>              <C>              <C>   
Balance, December 31,
 1995                     146,000     $       146       2,864,757     $     2,865     $ 3,290,355      $  (976,536)     $ 2,316,830

Preferred stock
 dividends ...........       --              --              --              --           (56,940)            --            (56,940)

Net loss .............       --              --              --              --              --         (1,018,968)      (1,018,968)
                      -----------     -----------     -----------     -----------     -----------      -----------      -----------

Balance, December 31,
 1996                     146,000             146       2,864,757           2,865       3,233,415       (1,995,504)       1,240,922

Issuance of
 convertible Series
 C preferred stock
 for cash, net of
 offering costs of
 $36,454 (Note 12) ...    167,000             167            --              --           798,379             --            798,546

Issuance of Series
 B convertible
 preferred stock
 for debt, net of
 offering costs of
 $44,277 (Note 10) ...    100,000             100            --              --           455,623             --            455,723

Inherent value of
 warrants granted
 to lender in
 connection with
 conversion at debt
 to Series B
 preferred stock
 (Note 10) ...........       --              --              --              --            44,277             --             44,277

Issuance of common
 stock for
 acquisition, (Note 2)       --              --            18,182              18          99,982             --            100,000

Issuance of common
 stock for exercise
 of options and
 pursuant to the
 employee benefit
 plan (Note 12) ......       --              --            40,355              40          92,116             --             92,156

Inherent value of
 options granted to
 area directors
 (Note 12) ...........       --              --              --              --            33,950             --             33,950

Preferred stock
 dividend ............       --              --              --              --           (93,998)            --            (93,998)

Net loss .............       --              --              --              --              --            (89,618)         (89,618)
                      -----------     -----------     -----------     -----------     -----------      -----------      -----------

Balance, December 31,
 1997                     413,000             413       2,923,294           2,923       4,663,744       (2,085,122)       2,581,958

Issuance of common
 stock for exercise
 of options and
 pursuant to the
 employee benefit
 plan (Note 12) ......       --              --            51,165              51         222,473             --            222,524

Issuance of common
 stock for exercise
 of options by
 underwriter (Note 12)       --              --            80,000              80         399,920             --            400,000

Preferred stock
 dividends ...........       --              --              --              --          (220,890)            --           (220,890)

Net income ...........       --              --              --              --              --          1,112,615        1,112,615
                      -----------     -----------     -----------     -----------     -----------      -----------      -----------

Balance, December 31,
 1998                     413,000     $       413       3,054,459     $     3,054     $ 5,065,247      $  (972,507)     $ 4,096,207
                      ===========     ===========     ===========     ===========     ===========      ===========      ===========
</TABLE>

                                 F - 4

<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>


          
                                                         For the Year Ended December 31,
                                                  ---------------------------------------------
                                                     1998              1997             1996
                                                  -----------      -----------      -----------
<S>                                               <C>              <C>              <C>
Cash flows from operating activities
 Net income (loss) ..........................     $ 1,112,615      $   (89,618)     $(1,018,968)
 Adjustments to reconcile net income
  (loss) to net cash provided (used) by
  operating activities -
  Depreciation and amortization .............         757,911          406,444          259,840
  Write-off of accounts and notes
   receivable ...............................         285,308          (12,846)         179,300
  Loss on disposal of asset .................          78,004          120,928           44,648
  Issuance of stock for services ............            --             16,349             --
  Inherent value of options granted .........            --             33,950             --
  Deferred income taxes .....................        (641,068)            --               --
  Amortization of deferred financing
   costs ....................................          24,066           54,072             --
  Issuance of notes receivable for
   master franchise and area director
   agreeements ..............................      (1,599,977)        (354,412)        (236,407)
  Changes in assets and liabilities -
   Accounts receivable ......................        (369,279)        (168,661)        (126,380)
   Other assets .............................         109,802         (192,997)           7,296
   Accounts payable .........................         251,711           12,346          339,582
   Accrued liabilities ......................          42,476          319,120          117,560
   Other liabilities ........................            --               --            (12,101)
   Deferred franchise costs .................        (287,610)           6,085         (231,650)
   Deferred initial franchise fees ..........       2,633,284          573,191          266,316
   Accrued income taxes .....................         200,000             --               --
                                                  -----------      -----------      -----------
                                                    1,484,628          813,569          608,004
                                                  -----------      -----------      -----------
        Net cash provided (used) by
         operating activities ...............       2,597,243          723,951         (410,964)
                                                  -----------      -----------      -----------

Cash flows from investing activities
 Cash paid for acquisition ..................            --           (623,800)            --
 Purchase of property and equipment .........      (1,780,767)        (764,184)        (626,157)
 Proceeds from notes receivable .............         889,671          553,007          273,421
 Investment in turnkey stores ...............        (281,620)        (593,675)            --
 Short-term investments .....................      (1,003,235)        (538,188)            --
 Issuance of other notes receivable .........        (773,307)        (455,099)        (305,089)
 Investment by minority interest owners .....         151,601             --               --
 Intangible and deferred assets .............        (601,862)        (294,853)         (72,366)
 Proceeds from sale of asset and stores .....         213,000          135,000           13,716
 Deposits ...................................         (43,589)         (38,665)          (6,176)
 Provision for store closure ................            --               --            (58,000)
                                                  -----------      -----------      -----------
        Net cash used by investing
         activities .........................      (3,230,108)      (2,620,457)        (780,651)
                                                  -----------      -----------      -----------

Cash flows from financing activities
 Line-of-credit - net .......................            --           (220,239)        (155,266)
 Principal payments on long-term
  obligations ...............................        (505,440)        (347,799)        (196,099)
 Proceeds from long-term obligations ........         877,642          155,615        2,160,577
 Loan costs .................................            --            (37,469)        (117,749)
 Proceeds from issuance of common stock
  and preferred stock .......................         622,524          910,807             --
 Offering costs .............................            --            (36,454)            --
 Dividends paid .............................        (220,890)         (93,998)         (56,940)
                                                  -----------      -----------      -----------
         Net cash provided by financing
          activities ........................         773,836          330,463        1,634,523
                                                  -----------      -----------      -----------

Net increase (decrease) in cash and cash
 equivalents ................................         140,971       (1,566,043)         442,908

Cash and cash equivalents - beginning of year         561,287        2,127,330        1,684,422
                                                  -----------      -----------      -----------

Cash and cash equivalents - end of year .....     $   702,258      $   561,287      $ 2,127,330
                                                  ===========      ===========      ===========
</TABLE>

                                 F - 5

<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Cash Flows


Supplemental  disclosure of cash flow  information Cash paid during the year for
     interest was $340,614 (1998), $290,019 (1997) and $80,063 (1996).

     Cash paid during the year for income taxes was $72,515  (1998) and $0 (1997
     and 1996).

Supplemental  disclosure of non-cash  investing and financing  activities 

     During 1998, the Company transferred  $220,227 of property and equipment to
     assets of stores held for resale or under development.

     Additionally  in 1998, the Company  reduced notes payable,  pursuant to the
     terms  of  the  Bains  purchase  agreement,  in  the  amount  of  $437,553.
     Corresponding  reductions in property and equipment ($150,000) and goodwill
     ($287,553) were also recorded.

     During 1998,  1997 and 1996,  the Company  acquired  assets  under  capital
     leases totaling $231,085, $77,942 and $24,841, respectively.

     During 1997, the Company converted $500,000 of subordinated debt to 100,000
     shares of Series B convertible  preferred  stock net of $44,277 of deferred
     offering costs.

     Additionally  in 1997,  the  Company  acquired  the  assets of Bain's  Deli
     Franchise  Associates,  which included 52 franchise  restaurants  and three
     company owned deli restaurants as follows:

        Property and equipment                    $   225,000
        Non-compete agreement                       1,060,000
        Other assets                                  122,900
                                                   ----------

                                                  $ 1,407,900
                                                  ===========

        Acquisition costs                         $  (104,600)
        Cash paid                                    (623,800)
        Promissory note issued                       (579,500)
        Common stock issued                          (100,000)
                                                  -----------

                                                  $(1,407,900)
                                                  ===========







                              F - 6


<PAGE>



               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 1 - Description of Business and Summary of Significant
Accounting Policies

The Quizno's Corporation (the "Company") was incorporated on January 7, 1991, in
the State of Colorado,  and is primarily  engaged in the business of franchising
Quizno's quick service restaurants  throughout the United States, Canada, United
Kingdom  and  Japan  featuring   submarine   sandwiches,   salads,   soups,  and
refreshments.

The  Company's  wholly owned  subsidiaries  are The Quizno's  Operating  Company
("QOC")  incorporated in 1994 to own and operate  Company  stores,  The Quizno's
Development  Company  ("QDC")  incorporated in 1995 to develop stores to sell or
lease to franchisees,  The Quizno's Realty Company ("QRC")  incorporated in 1995
to execute leases for store locations,  The Quizno's Acquisition Company ("QAC")
incorporated in 1997 to purchase  existing  unrelated quick service  restaurants
and the  Quizno's  Licensing  Company  ("QLC")  incorporated  in 1998 to license
companies  who use the  Quizno's  logos.  In  addition,  in  1998,  the  Company
organized  Quizno's  Kansas  LLC  ("QKL"),  and  purchased  the assets of Stoico
Restaurant Group (see below).

The  following  table  summarizes  the number of  Quizno's  restaurants  open at
December 31, 1998:

                                    Sold But Not
                                       Yet in
                                     Operation       Operational      Total
                                     ---------       -----------    ---------

Quizno's
--------
Company owned restaurants                    -              16            16
Franchise restaurants                       388            420           808
Restaurants held for resale                  -               4             4

Bain's
-------
Restaurants held for resale                  -               1             1
Franchise restaurants                        -              45            45

Quizno's Kansas
---------------
Company owned restaurants                    -               8             8
                                      ---------      ---------     ---------

                                            388            494           882
                                      =========      =========     =========

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiaries  QOC,  QDC,  QRC,  QLC,  QAC  and a  52%  owned
subsidiary, Classic Subs LLC and a 70% owned subsidiary, Quiznos Kansas, LLC.

                                 F - 7


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all highly liquid  instruments  purchased with an original
maturity of three months or less to be cash equivalents.

Inventory

Inventory  is  included  in other  assets  and is stated at the lower of cost or
market and consists of food and paper  products.  Cost is  determined  using the
first in, first out (FIFO) method.

Credit Risk

The Company grants credit in the normal course of business, primarily consisting
of royalty fees receivable and loans to area directors and its  franchisees.  To
reduce credit risk for U.S. franchises,  the Company  electronically  debits the
franchisees bank account weekly for fees due the Company  according to franchise
agreements  entered  into  after  1993,  and  reserves  the  right to  terminate
franchise and area director agreements for non-payment of amounts owed.

The Company's  cash  equivalents  consists of short-term  commercial  paper with
original  maturities  not in excess of three  months.  The  Company  continually
monitors  its  positions   with,  and  the  credit  quality  of,  the  financial
institutions it invests with. As of the balance sheet date, balances of cash and
cash  equivalents   exceeded  the  federally   insured  limit  by  approximately
$1,131,000.

Short-term Investments

The Company classifies its investment in corporate debt securities with original
maturities in excess of three months as short-term investments held-to-maturity.
The Company has the ability and intent to hold these securities until maturity.

Short-term  investments  are  recorded  at  amortized  cost,  adjusted  for  the
amortization  or accretion of premiums or discounts.  Realized  gains and losses
are recognized in earnings upon redemption.  The specific  identification method
is used to  determine  the cost of  securities  sold.  Discounts or premiums are
accreted or amortized  using the  level-interest-yield  method to the earlier of
the call date or maturity of the related security.

During 1998,  unrealized  gains and losses were  immaterial  as  amortized  cost
approximated market value.
                                 F - 8


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

Accounts Receivable/Royalties Receivable

At the time the accounts and royalties  receivable are  originated,  the Company
considers a reserve for doubtful accounts based on the  creditworthiness  of the
franchisee.  The provision for uncollectible amounts is continually reviewed and
adjusted to  maintain  the  allowance  at a level  considered  adequate to cover
future  losses.  The allowance is  management's  best estimate of  uncollectible
amounts and is determined  based on historical  performance  which is tracked by
the Company on an ongoing  basis.  The losses  ultimately  incurred could differ
materially  in the near term  from the  amounts  estimated  in  determining  the
allowance.

Property and Equipment

Property and  equipment is stated at cost.  Equipment  under  capital  leases is
valued at the lower of fair  market  value or net  present  value of the minimum
lease payments at inception of the lease. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 3 to 10 years,  and the related lease term for leasehold  improvements  and
equipment under capital leases.

Deferred Financing Costs

Cost  associated  with  obtaining debt financing are deferred and amortized on a
straight-line basis over the term of the debt.

Intangible Assets

The amounts paid by the Company for  non-compete  agreements are being amortized
over the term of the non-compete agreements.

The excess of the purchase price over net assets  acquired for stores  purchased
by the Company  from  unrelated  third  parties is  recorded as goodwill  and is
amortized over 15 years.

Other  intangibles  are recorded at cost and are amortized on the  straight-line
basis over the contractual or estimated useful lives as follows:

Franchise agreements                                12 years
Trademarks and other intangibles                    3 - 15 years

                                 F - 9


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

Long-Lived Assets

The Company  reviews its  long-lived  assets for impairment  whenever  events or
changes in circumstances  indicate that the carrying amount of the asset may not
be recovered.  The Company looks primarily to the undiscounted future cash flows
in its  assessment of whether or not long-lived  assets have been  impaired.  At
December 31, 1998, the Company determined no impairment was appropriate.

Initial Franchise Fees and Related Franchise Costs

Management  believes it is probable that all of the deferred franchise fees will
be realized.  The amount of the deferred  franchise fees considered  realizable,
however,  could be reduced in the near term if estimates of the future franchise
openings is reduced.

Initial  franchise  fees paid by U.S.  franchises are recognized as revenue when
all  material  services and  conditions  required to be performed by the Company
have  been  substantially  completed,  which is  generally  when  the  franchise
commences operations. Initial franchise fees collected by the Company before all
material  services and  conditions are  substantially  performed are recorded as
deferred  franchise sales revenue.  Incremental  development costs are deferred,
but not in  excess  of the  deferred  revenue  and  estimated  cost to open  the
Quizno's restaurant, and are expensed when the revenue is recognized.

Area Director Marketing Agreements

The area director marketing agreement provides the area director a non-exclusive
right to sell and open franchises in a defined geographic  territory in the U.S.
and  requires  that  the area  director  be  responsible  for  advertising  for,
soliciting and screening  prospective  franchisees.  The agreements also require
the area director to sell and open a minimum of new franchised  restaurants each
year or forfeit future rights to the territory.  In addition,  the area director
is responsible for identifying  possible  locations,  providing  on-site opening
assistance,  and  providing  quality  assurance  services to  franchises  in the
defined area.  The Company pays the area  director 50% of the initial  franchise
fee sold by the area director,  and a fee of 40% of the royalty  received by the
Company from each  franchise  within the defined area.  The agreements are for a
period of ten years,  with the option to extend for an additional ten years. The
area  director is entitled  to receive  commissions  during the term of the area
director marketing agreement and, in certain circumstances, the area director is
entitled  to 1% of  gross  sales  for  franchise  restaurants  operating  in the
territory as of the termination  date of the area director  agreement.  The area
director  marketing  fee is  $.07  per  person  living  in the  area  director's
territory, plus a $10,000 training fee which is deferred until training has been
completed.  Revenue is  recognized  when all material  services  and  conditions
required to be performed by the Company have been substantially completed.
                                F - 10


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

International Fees

The Company grants master  franchise rights for the development of international
markets.  The master  franchisee will enter into  individual  franchise and area
director  agreements for  development  within the franchised  country,  and will
assume all of the franchisor's  obligations and duties under the agreement.  The
Company is not a party to the individual franchise and area director agreements.
Generally,  the master franchise agreement requires the master franchisee to pay
the  Company  a  percentage,  currently  30%,  of all  initial  franchise  fees,
royalties,  and area fees collected by the  franchisee.  The Company  recognizes
these fees when received by the Company.

The master franchise agreement provides the master franchisee an exclusive right
to sell and open franchises and grant area directorships in a defined geographic
territory.  The master  franchisee is  responsible  for providing all franchisor
services  in the  territory  and must sell and open a minimum of new  franchised
restaurants each year. The fee for master  franchise  agreements is based on the
population  of the  territory  and will  vary  depending  on  certain  economic,
demographic  and  cultural  factors.  Revenue is  recognized  when all  material
services  and  conditions  required to be  performed  by the  Company  have been
substantially performed, which is generally the date the fee is paid.

Royalties and Advertising Fees

Pursuant to the various franchise  agreements,  U.S.  franchises are required to
pay the Company  royalties and  advertising  fees based on a percentage of sales
ranging from 4% to 8% for royalties, and 1% to 4% for advertising fees.

Royalties  as  required  by the  franchise  agreement  are  accrued  based  on a
percentage  of gross  sales,  as reported by  franchisees,  and are  included in
accounts receivable.

The Company does not recognize any portion of the  advertising  fees as revenue,
nor  does  it  accrue  such  fees  or  consolidate  the  accounts  of any of the
advertising  funds as they  are  paid to and  disbursed  out of  separate  legal
advertising entities.

Income Taxes

The Company  calculates  and records the amount of taxes  payable or  refundable
currently or in future years for temporary  differences between the consolidated
financial  statement basis and income tax basis based on the current enacted tax
laws. Temporary  differences are differences between the tax basis of assets and
liabilities and their reported amounts in the consolidated  financial statements
that will result in taxable or deductible amounts in future years. The Company's
temporary  differences  result primarily from  depreciation,  deferred franchise
sales   revenues  and  deferred   franchise   costs  and  net   operating   loss
carryforwards.
                                F - 11


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

Basic and Diluted Loss Per Common Share

In accordance with FAS 128, basic earnings per share is computed by dividing net
income by the number of weighted  average common shares  outstanding  during the
year.  Diluted  earnings  per share is computed  by  dividing  net income by the
number of weighted average common shares outstanding during the year,  including
potential  common shares,  which for the years ended December 31, 1996, 1997 and
1998  consisted   solely  of  convertible   debt,  stock  options  and  warrants
outstanding (Note 12).

Use of Estimates

The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and liabilities at the date of the consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The  carrying  amounts  of  financial   instruments   including  cash  and  cash
equivalents,  short-term investments,  receivables, prepaids, current portion of
notes receivable,  accounts payable and accrued expenses approximated fair value
as of  December  31,  1998  because of the  relatively  short  maturity of these
instruments.

The carrying amounts of long-term notes receivable  approximate fair value as of
December 31, 1998 because the discounted cash flows at current rates approximate
the rates of the notes.

The carrying amounts of notes payable and debt issued  approximate fair value as
of December 31, 1998 because  interest  rates on these  instruments  approximate
market interest rates.

Reclassifications of Prior Year Amounts

Certain  reclassifications  have been made to the  balances  for the years ended
December 31, 1997 and 1996 to make them  comparable  to those  presented for the
year ended December 31, 1998,  none of which change the previously  reported net
income or total assets.

                                F - 12


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note  1  -  Description   of  Business  and  Summary  of  Significant  
Accounting Policies (continued)

Recently Issued Accounting Pronouncements

In February of 1998, the FASB issued Statement of Financial Accounting Standards
No.  132,  "Employers'  Disclosures  about  Pensions  and  Other  Postretirement
Benefits" (SFAS No. 132),  which supercedes SFAS No.'s 87, 88, and 106. SFAS No.
132 addresses  disclosure only and is effective for fiscal years beginning after
December 15, 1997. Restatement of disclosures for prior periods is required. The
adoption of SFAS No. 132 will have no current impact on the Company's  financial
statements,  as no  prior  disclosures  under  SFAS  No.  87,  88,  or 106  were
applicable.

During June 1998, the FASB issued Statement No. 133,  "Accounting for Derivative
Instruments and Hedging Activities".  Statement 133 establishes new standards by
which  derivative  financial  instruments  must be  recognized  in any  entity's
financial  statements.  Besides requiring  derivatives to be included on balance
sheets at fair value,  Statement  133  generally  requires that gains and losses
from later  changes in a  derivative's  fair value be  recognized  currently  in
earnings.  Statement 133 also unifies  qualifying  criteria for hedges involving
all kinds of  derivatives,  requiring  that a company  document,  designate  and
assess the effectiveness of its hedges.  Statement 133 is required to be adopted
by the  Company in 2000.  Management,  however,  does not expect the impact from
this   statement  to  have  a  material   impact  on  the  financial   statement
presentation, financial position or results of operations.

The Company has not  determined  what  additional  disclosures,  if any,  may be
required by the provisions of Statement 132 and 133 but does not expect adoption
of these statements to have a material effect on its results of operations.

During April 1998, Statement of Position 98-5,  "Reporting on the costs of Start
Up Activities"  was issued.  SOP 98-5 requires costs of start-up  activities and
organization  costs to be  expensed  as  incurred.  SOP 98-5 is  required  to be
adopted by the Company in 1999.  Upon adoption,  the Company will be required to
write off approximately  $140,000 in preopening related costs currently deferred
on the balance sheet as of December 31, 1998. This write-off will be reported as
a cumulative effect of a change in accounting principle.


Note 2 - Acquisition of Assets

In August 1998, QKL purchased 70% of Stoico  Restaurant  Group. At the same time
30% of QKL was sold to an unrelated  area director for $150,000.  The results of
operations  from August 17, 1998 (date of acquisition) to December 31, 1998 have
been included in the 1998 consolidated financial statements.  As of December 31,
1998,  $1,601 was  allocated  to the  minority  owners for their  portion of the
earnings.  The amount has not been  disclosed  separately  on the  statement  of
operations  due to its  immateriality.  The  acquisition  has been accounted for
under the purchase method.

                                F - 13


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 2 - Acquisition of Assets (continued)

The Company's purchase price has been allocated to the assets purchased based on
the fair market values at the date of acquisition, as follows:

   Property and equipment                           $184,000
   Goodwill                                          259,118
   Inventory                                          38,455
   Other assets                                       18,427
                                                    --------

      Assets acquired                               $500,000
                                                    ========

   Cash paid                                        $500,000    
                                                    ========

The following  unaudited pro forma data summarizes the results of operations for
the periods  indicated as if the  acquisition of Stoico had been completed as of
the  beginning  of the  periods  presented.  The pro forma data gives  effect to
actual  operating  results  prior  to  the  acquisition,   adjusted  to  include
depreciation of fixed assets, amortization of intangibles and the elimination of
Stoico  corporate  expenses and  revenues  and expenses  related to stores whose
store leases were not assumed or assigned as part of the acquisition.  These pro
forma  amounts do not purport to be  indicative  of the results  that would have
actually  been obtained if the  acquisition  occurred as of the beginning of the
periods presented or that may be obtained in the future.


                                                          December 31,      
                                                    -------------------------
                                                       1998          1997
                                                    -----------   -----------
Revenues and sales from Company owned stores        $20,533,970   $14,124,530
Net income (loss) applicable to common
 stockholders                                       $ 1,037,166   $   (47,101)
Basic earnings (loss) per share                     $       .34   $      (.02)
Diluted earnings (loss) per share                   $       .30   $      (.02)

On January 26, 1998, the Company  purchased the assets of Falcon Financial LLC 2
for a total purchase price of $150,000. The purchase was accounted for under the
purchase method.

                                F - 14


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 2 - Acquisition of Assets (continued)

The purchase price has been allocated to the assets  purchased based on the fair
market values at the date of acquisition, as follows:

   Equipment                                        $ 50,000
   Leasehold improvements                            100,000
                                                    --------

                                                    $150,000
                                                    ========

   Cash paid as a deposit in 1997                   $ 10,000
   Cash paid at closing                               10,000
   Promissory notes                                  130,000
                                                    --------

                                                    $150,000
                                                    ========

No pro forma  statement  of  operations  is presented as the effect would not be
material to the Company's operations.


Note 3 - Notes Receivable

Notes receivable consist of the following:
<TABLE>
<CAPTION>

                                                                     December 31,
                                                       -----------------------------------------
                                                          1998           1997            1996
                                                       -----------     ---------       ---------
<S>                                                    <C>             <C>             <C>
Notes  receivable  related to area  director
 marketing   agreements,   interest  ranging
 from  6% to  15%,  due in  varying  amounts
 through December 2004.                                 $1,878,855      $853,028        $453,135

Notes   receivable   for  sale  of   stores,
 interest  ranging  from 6% to  15%,  due in
 varying amounts through October 2012.                     410,058       494,318         434,383

Note  receivable  from national  advertising
 trust,  interest  at  10%,  paid in full in
 February 1999.                                            267,058           -               -
</TABLE>

                                F - 15


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 3 - Notes Receivable (continued)
                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------
Other   notes   receivable   with   interest
 ranging  from  0% to  11%,  due in  varying
 amounts  through  2011.   Includes  $21,524
 (1998),  $35,524 (1997) and $178,444 (1996)     32,423    125,635     328,959
                                               --------   --------   ---------
 due from the Advertising Fund (Note 8).
                                              2,588,394  1,472,981  1,216,477
    Less current portion                     (1,212,522)  (598,486)  (501,255)
                                              ---------  ---------  ---------
                                              1,375,872    874,495    715,222
    Less allowance                                   -    (140,000)  (140,000)
                                               --------   --------   ---------

                                             $1,375,872   $734,495   $ 575,222
                                             ==========   ========   =========

At the time notes receivable are executed, the Company reserves an allowance for
doubtful  collections.  The provision for  uncollectible  amounts is continually
reviewed and adjusted to maintain the allowance at a level  considered  adequate
to  cover  future  losses.  The  allowance  is  management's  best  estimate  of
uncollectible  amounts and is determined based on historical  performance of the
notes which is tracked by the Company on an ongoing basis. The losses ultimately
incurred could differ  materially in the near term from the amounts estimated in
determining the allowance.  The Company  collateralizes  the notes with the area
directorship agreement, assets of the store sold or other related assets.

Future principal payments are as follows:

      Year Ended December 31,

            1999                                    $1,212,522
            2000                                       235,068
            2001                                       278,026
            2002                                       309,444
            2003                                       263,683
            Thereafter                                 289,651
                                                     ---------
                                                     2,588,394
            Less allowance                                 -
                                                     ---------
                                                    $2,588,394
                                                     =========

                                F - 16


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 4 - Assets of Stores Held for Resale or Under Development

Included  in assets  of stores  held for  resale  or under  development  are the
following:

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------

    Furniture fixtures and equipment           $221,034   $     -    $  29,999
    Leasehold improvements                      383,771         -       81,673
    Goodwill and other                           85,225         -        4,557
    Stores under development                         -     593,675          -
                                               --------   --------   --------

                                               $690,030   $593,675   $ 116,229
                                               ========   ========   =========

During 1997, the Company was in the process of constructing  four stores. At the
end of 1997,  three of the four stores were  operational and in 1998, the fourth
store  became  operational.  In  March  1998,  one of the  stores  was sold as a
franchise  for a sale price of $213,000.  Cost  incurred by the Company prior to
the sale  amounted  to  approximately  $234,000.  The Company  will  operate the
remaining three stores until they can be sold as franchises.


Note 5 - Property and Equipment

Property and equipment consist of the following:

                                                        December 31,
                                   Useful    ---------------------------------
                                    Life        1998       1997        1996
                                 ---------   ----------  ---------  ----------


   Equipment                      3-10 years $1,524,799   $903,371   $ 267,061
   Furniture and fixtures         7-10 years    764,672    390,435     271,727
   Leasehold improvements         Lease term
                                   (Note 11)  1,712,215  1,297,334   1,138,461
   Software                       3-5 years     313,540    113,506          -
                                             ----------  ---------   --------- 
                                              4,315,226  2,704,646   1,677,249
   Less accumulated
    depreciation and amortization              (780,004)  (463,985)   (218,270)
                                             ----------  ---------   ---------

   Net property and equipment                $3,535,222 $2,240,661  $1,458,979
                                             ========== ==========  ==========

Depreciation  expense for 1998 included  depreciation on certain assets held for
resale that will not recur in future years if these  assets are sold,  as is the
intention of the Company.

                                F - 17


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 6 - Intangible Assets

Intangible assets consist of the following:

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------

   Covenants not to compete                  $1,667,546 $1,664,759   $500,113
   Franchise agreements                         310,506    292,395    292,395
   Goodwill (Note 14)                           126,705    126,705     77,407
   Trademarks and other                         316,108    192,122    183,885
                                              ---------   --------   --------
                                              2,420,865  2,275,981  1,053,800
   Less accumulated amortization               (867,343)  (624,344)  (496,317)
                                              ---------   --------   --------

                                             $1,553,522 $1,651,637   $557,483
                                             ========== ==========  =========


Note 7 - Deferred Assets

Deferred assets consist of the following:

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------


   Deferred franchise costs                     $926,226   $638,616   $ 644,701
   Deferred tax asset (Note 13)                  734,808    175,000     175,000
   Deferred financing costs                       87,080    101,146     117,749
   Other deferred costs                          106,065         -           -
                                                --------   --------   --------

                                                $1,854,179 $914,762   $ 937,450
                                                ========== ========   =========


Note 8 - Related Party Transactions

The Company has notes receivable from the Advertising  Fund of $21,524,  $35,524
and  $178,444 at December 31, 1998,  1997 and 1996,  respectively.  The balances
relate to an off season  build-up for  advertising  which is  reimbursed  to the
Company in the subsequent  year. At December 31, 1996, the Company had a $44,555
non-interest  bearing  note due to the  Advertising  Fund  which was paid off in
1997.

                                F - 18


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 8 - Related Party Transactions (continued)

Two  directors  of the  Company own more than 50% in one of the  Company's  area
directorships.  The area  directorship  is managed by an adjacent  area director
and, during 1997 and 1998, all sales,  opening and royalty commissions were paid
to the  managing  area  director.  The  Company  made no  payments  to the  area
director.  At December 31, 1998, $58,149 was owed to the Company on a promissory
note due from the area  director.  During 1997 and 1998,  payments on such notes
were $4,655 and $6,212,  respectively.  An additional  $18,000 was paid in March
1999 to bring the note and all accrued  interest  current.  The area director is
also  indebted to the Company  for  $18,187 in  connection  with the resale of a
Quizno's  restaurant  once operated by the area  director.  The area director is
reducing this debt by offsetting  commissions on royalty fees from that location
paid to the managing area  director.  The debt is expected to be reduced to zero
in  approximately  18 months.  The area director also is indebted to the Company
for $14,270 in accounts  receivable for wages,  accounting  fees,  royalties and
other amounts paid by the Company on behalf of the area  director.  This will be
satisfied  by the  assignment  of  equipment  with a net book value in excess of
$14,000 to the Company.

In 1995, the Company sold an area directorship to a company owned by a director,
officer and shareholder for $150,000. During 1997 and 1998, the Company paid the
area  director  no sales  commissions  and  $9,259  and  $27,664  in  royalties,
respectively.  The area  directorship  was sold in 1998 to an  unrelated  third
party.

In 1997, the Company purchased a Quizno's  restaurant from a company in which an
executive  officer is a 50%  shareholder.  The restaurant  paid royalties to the
Company of $2,027 in 1997 up to the date purchased by the Company.  The purchase
price was $80,000 of which $15,000 was paid in cash and $60,000 paid by issuance
of the  Company's  promissory  note  bearing  interest at 11% and payable over 4
years.  During  1997  and  1998,  the  Company  made  payments  pursuant  to the
promissory note totaling $18,839 and $18,993, respectively.


Note 9 - Line-of-Credit

The  Company  had a  $300,000  line-of-credit  and a term note from a  financial
institution. The line-of-credit and term note were paid off January 1997.


Note 10 - Long-Term Obligations and Convertible Subordinated Debt

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------



Various   capital   leases,   with   monthly
 payments    totaling   $26,919    including
 interest at rates ranging from 9.74% to 11%
 and     expiring    through   April   2003. 
 Collateralized by restaurant equipment.       $ 986,077   $127,770   $    --

                                F - 19


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 10 - Long-Term  Obligations  and  Convertible  Subordinated  Debt 
(continued)

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------

Note payable to a  financial  institution, 
 $1,372    monthly   payments    including 
 interest at the bank index rate (8.75% at
 December  31,  1998)  plus   1%,  through 
 February 2001, when any unpaid  principal
 and interest  is   due.   The   note   is
 collateralized   by restaurant equipment.       35,869     52,048     68,123

Note  payable to a company,  with interest
 at 11%.  The  note  calls   for   monthly
 payments  of  $1,583 and matures November
 2001.  Collateralized   by the  assets of
 one store with  a  net   book   value  of  
 approximately $68,000.                          46,056     59,188         -

Notes  payable to a company with interest at
 11%.  The notes call for  monthly  payments
 of $2,888  and  mature  through  July 2001.
 Collateralized  by the assets of two stores
 with  a   combined   net   book   value  of
 approximately $102,000.                         57,526     82,833         -

Note  payable  to  a company  with  interest  
 payments at 10%. The note calls for monthly
 payments  of $10,736 and matures in January
 2004. Collateralized by the assets acquired
 from  Bain's  Deli  Franchise   Associates.
 The  principal  balance  of  the  note  was  
 decreased by approximately $431,000 due  to
 provisions in the purchase agreement  which
 allow for  quarterly decreases or increases
 in  the  note  balance  based   on  certain 
 performance  standards  of  the  franchises
 acquired.                                      116,118    576,612         -

Note  payable to a  financing  company  with
 interest  at  9.5%.   The  note  calls  for
 monthly  principal and interest payments of
 $2,106   and   matures   July   15,   2003.
 Collateralized by restaurant equipment.         93,742         -          -

Notes  payable,  paid in  full  in 1998  and
 1997                                                -     146,203    511,273
                                               ---------   --------   --------
                                               1,335,388   1,044,654   579,396
Less current portion                            (370,404)  (303,084)  (375,595)
                                               ---------   --------   --------

                                               $ 964,984   $741,570   $203,801
                                               =========   ========   ========


                                F - 20


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 10 - Long-Term  Obligations  and  Convertible  Subordinated  Debt 
(continued)

Convertible subordinated debt consists of:

                                                        December 31,
                                             ---------------------------------
                                                1998       1997        1996
                                             ----------  ---------  ----------


12.75% Convertible Subordinated Debt, 
 $1,155,825 convertible into 10% on a
 fully diluted basis, (372,847 shares
 at   December   31,  1998)  of   the
 Company's  common stock at $3.10 per
 share.  The   warrants  have   a put
 option to the Company on December 31,
 2002, if   the   Company   has   not
 completed a secondary public offering.
 The warrants and underlying stock have
 demand registration rights as well as
 unlimited   piggy  back  registration
 rights.  No value was ascribed to the
 underlying  conversion  rights as the 
 conversion price exceeded the trading
 value of the stock  on   the  date of
 issuance.  In   1997,  $500,000   was
 converted  into   100,000  shares  of 
 Series B convertible preferred stock.
 On January 6,  1999,    the   Company
 paid  $500,000 to redeem  all  of its
 outstanding  Class B  Preferred Stock
 and  paid off the remaining principal
 of its convertible subordinated  loan.
 As  required by  the  loan  agreement,
 the  Company issued a warrant  to the 
 bondholder   to    purchase   372,847
 shares   of  its   common stock at an
 exercise price of $3.10.                   $1,375,000   $1,500,000  $2,000,000
    Less current portion                      (244,084)    (110,912)        -
                                            ----------    ---------- ----------

                                            $1,130,916   $1,389,088  $2,000,000
                                            ==========   ==========  ==========

In connection  with the  conversion of debt to equity,  the Company  granted the
note holder  42,209  warrants to purchase  common stock at $5.00 per share.  The
inherent value of the options of $44,277 was recorded as deferred offering costs
associated with the conversion.

                                F - 21


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 10 - Long-Term  Obligations  and  Convertible  Subordinated  Debt 
(continued)

Maturities of long-term obligations,  convertible  subordinated debt and capital
leases are as follows:

                                           Long-Term
                                          Obligations
                                              and
                                          Convertible
                                          Subordinated  Capital
      Year Ending December 31,                 Debt     Leases        Total
      ------------------------             ----------  --------    ----------

              1999                           $433,162   $277,173    $ 710,335
              2000                            348,657    273,520      622,177
              2001                            366,029    258,912      624,941
              2002                            379,808    255,582      635,390
              2003                            196,655    160,180      356,835
              Thereafter                         -           -            -   
                                           ----------  ---------    ---------
                                            1,724,311  1,225,367    2,949,678
              Less amount representing
               interest                           -     (239,290)    (239,290)
                                           ----------  --------    ----------
              Total principal               1,724,311   986,077     2,710,388
              Less current portion           (433,162) (181,326)     (614,488)
                                           ----------  --------    ----------

                                           $1,291,149  $804,751    $2,095,900
                                           ==========  ========    ==========

Included in equipment in the accompanying 1998, 1997 and 1996 balance sheets are
assets  held under  capital  leases in the amount of  $1,278,925,  $161,147  and
$83,205,  respectively  and accumulated  amortization  of $132,837,  $65,079 and
$32,850, respectively.


Note 11 - Commitments and Contingencies

The  Company  leases  an  office  facility,   twenty-nine  restaurant  locations
(including  stores held for resale or under  development) and certain  equipment
and vehicles under operating lease  agreements  which provide for the payment of
rent  totaling  approximately  $68,000 per month plus  common  area  maintenance
costs.  One of the  restaurant  locations also requires the Company to pay 6% of
gross sales in excess of $430,000  annually.  Rent expense under these operating
leases, totaled $642,447,  $636,874 and $367,439 during the years ended December
31, 1998, 1997 and 1996, respectively.

                                F - 22


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 11 - Commitments and Contingencies (continued)

Future minimum rental payments are as follows:

    Year Ending December 31,

             1999                                   $1,016,557
             2000                                      941,494
             2001                                      899,387
             2002                                      835,317
             2003                                      556,852
             Thereafter                              1,093,980
                                                     ---------

                                                    $5,343,587
                                                    ==========

Minimum  payments for the year ended  December 31, 1998 have not been reduced by
minimum rentals of $1,231,873 due in the future under a noncancellable sublease.

The Company has entered into employment agreements with two directors, officers,
and stockholders of the Company which provide for the payment of annual salaries
totaling  $192,000 plus  individual  bonuses equal to six and ten percent of the
positive increase in net income before  depreciation,  amortization and interest
over the prior  year.  There  were no  bonuses  accrued  and paid  during  1996;
however,  $291,260  and  $209,000  was  accrued at  December  31, 1997 and 1998,
respectively. One agreement expired in December 1998 while the  other  agreement
expires in December 2003. The annual salary  amount,  in   total,  was  $303,500
from July 21, 1998 to December 31, 1998 and $220,000 after December 31, 1998.

Litigation

There are various claims and lawsuits pending by and against the Company, which,
in the opinion of the  management,  and supported by advice from legal  counsel,
will not result in any material  adverse effect in excess of amounts  accrued in
the accompanying consolidated financial statements.

On December  31, 1996, a demand for  arbitration  was filed by S2D Subs,  LLC, a
former franchisee of the Company. During 1997, the Company rejected any possible
settlement  and  vigorously  defided the  action.  In May 1998,  an  arbitration
decision  was  reached  whereby  the case was  discharged  and the  Company  was
dismissed of any liability.

                                F - 23


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 11 - Commitments and Contingencies (continued)

On August 10,  1998,  the Company  terminated  an area  director  agreement  and
instituted an  arbitration  action  alleging that the area director had breached
various  provisions of the area director  agreement.  On September 1, 1998,  the
area  director  denied that he breached  the area  director  agreement,  alleged
fraudulent termination of the area director agreement,  alleged that the Company
failed to refund or pay certain  amounts  due him and  alleged  that the Company
violated  various state and federal  franchise and securities laws by misstating
revenues in publicly filed  documents.  Hearings in this matter were held before
the American Arbitration Association from March 8-16, 1999. During the hearings,
the respondent demanded damages in excess of $4 million. The Company argued that
should the arbitration panel find the respondent entitled to damages, the amount
should not exceed  $450,000,  which is the value of the territory as of the date
the respondent's  area director  agreement was terminated.  The Company believes
that any award to the  respondent  will not exceed the value of that  territory,
which the Company now owns.

Service Agreement

In connection with the Bain's  acquisition,  the Company entered into a two year
consulting  agreement with a seller of Bain's to provide various services to the
Company for $50,000 per year. This agreement expires as of February 2000.


Note 12 - Stockholders' Equity

Convertible Preferred Stock

Series A convertible  preferred stock bears a 6.5% cumulative dividend,  payable
monthly  and is  convertible  into  common  shares on a one for one basis and is
callable  by the  Company  with sixty  days  notice.  The  Series A  convertible
preferred  stock has a  liquidation  preference  of $6 per  share  plus all then
accrued and unpaid cumulative dividends.

Series B convertible preferred stock bears a 12.75% cumulative dividend, payable
monthly  and is  convertible  after five years at the then  market  value of the
common  stock.  The Series B  convertible  preferred  stock is redeemable at the
Company's  option at $5.00 per share and has a  liquidation  preference of $5.00
per share plus all then accrued and unpaid  cumulative  dividends.  The Series B
convertible preferred stock was redeemed in full in 1999.

Series C convertible preferred stock bears a 12.00% cumulative dividend, payable
monthly and is convertible into common stock on a one-for-one basis at $5.00 per
share.  The Series C convertible  preferred stock is redeemable at the Company's
option at $5.00 per share and has a  liquidation  preference  of $5.00 per share
plus all then accrued and unpaid cumulative dividends.

                                F - 24


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 12 - Stockholders' Equity (continued)

During 1997, the Company sold 167,000  shares of Series C convertible  preferred
stock at $5.00 per  share.  The  Company  incurred  legal and  accounting  costs
related to the sale of $36,454.

Stock Options and Warrants

The  Company  has  established  an Employee  Stock  Option Plan (the Plan).  The
Company has reserved  320,000  shares of its Common Stock for issuance  upon the
exercise  of options  available  for grant  under the Plan.  Options are granted
under the plan at not less  than the  market  price of the  Company  stock.  The
options cannot be exercisable for more than ten years. Options granted under the
Plan will include  incentive  stock options  (ISOs) as defined in Section 422 of
the Internal Revenue Code and  non-qualified  stock options  (NQSOs).  Under the
terms of the Plan, all officers and employees are eligible for ISOs.  During the
years  ended  December  31,  1998,  1997 and 1996,  117,205,  98,550 and 53,073,
options were granted under the Plan, respectively.

Additionally,  the Company has  established an Amended and Restated Stock Option
Plan for  Non-Employee  Directors and Advisors  (Director Plan). The Company has
reserved  140,000  shares of common  stock for  issuance  upon the  exercise  of
options  granted or available for grant to  non-employee  directors and advisors
under the Director  Plan. The Director Plan provides that any person who becomes
a  non-employee  director  or advisor of the  Company  may  receive an option to
purchase 4,000 shares (or a pro rata portion thereof) at their fair market value
on the date such person becomes a non-employee  director or advisor,  and on the
first  day of  each  year  thereafter  as  long  as the  person  continues  as a
non-employee  director  or  advisor, limited  to the  overall  number  of shares
available  for  issuance  under the  Director  Plan.  Options that expire or are
canceled may be  re-granted  under the Director  Plan at the  discretion  of the
Board of Directors.  The options expire after ten years.  During the years ended
December  31,  1998,  1997,  and 1996,  28,000,  18,000 and 20,000  options were
granted under the Director Plan, respectively.

In February 1999, the Board of Directors  approved an increase to 670,000 shares
for the Plan and 200,000 shares for the Director Plan subject to approval by the
shareholders.

In 1997,  the Company  granted  stock  options  covering  48,500  shares to Area
Directors  pursuant to individual  contracts.  The Company  established  an Area
Director Equity  Participation  Rights Stock Option Plan (AD Plan) providing for
grants of stock options to Area  Directors  beginning in 1998.  During 1998, the
Company  granted stock options  covering  60,375 shares pursuant to the AD Plan.
Options are granted  under the AD Plan at the market  price of the common  stock
for six month  options or a 20%  discount  (not to exceed  $1.20) if the grantee
exercises  within seven business days of the grant. The Company recorded $33,950
related to the inherent value of the options  granted to Area Directors in 1997.
No amounts were recorded for inherent value of the options for 1998.
                                F - 25


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 12 - Stockholders' Equity (continued)

In 1996,  the Company issued  warrants to purchase  372,847 shares of its common
stock to a lender in connection with a $2,000,000 convertible  subordinated loan
made to the Company.  The warrants are exercisable at $3.10 per share and expire
on December 31, 2004.  Additionally,  in 1997,  the Company  issued  warrants to
purchase  another  42,209  shares  of its  common  stock to the same  lender  in
connection  with  the  lender's   conversion  of  $500,000  of  the  convertible
subordinated  debt to Class B preferred  stock.  The warrants are exercisable at
$5.00 per share and do not have an expiration  date.  These warrants are reduced
to 20,597 if the Company meets certain earnings goals through 2000.

In connection with the Company's public  offering,  the Company issued a warrant
for the  underwriter  to  purchase up to 100,000  shares of its common  stock at
$5.00 per share.  During 1998,  80,000 warrants were exercised and the remaining
20,000 were cancelled.  Additionally in 1997, the Company issued 33,000 warrants
to  consultants  that  allowed the holders to purchase  33,000  shares of common
stock at $5.40 to $5.50 per share. These warrants expire through December 2000.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly, no compensation cost has been recognized for the stock option plans
as they relate to options
issued to employees and directors.

Had  compensation  cost for the Company's  two employee  stock option plans been
determined  based on the fair  value at the grant date for  consistent  with the
provisions  of SFAS No. 123, the  Company's  net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below:

                                                        December 31,
                                              -------------------------------
                                                 1998       1997       1996
                                              ---------- ---------- ---------

Net  income  (loss)   applicable  to  common
 stockholders - as reported                    $891,725  $(183,618) $(1,075,908)
Net  income  (loss)   applicable  to  common
 stockholders - pro forma                      $586,960  $(433,536) $(1,218,264)
Basic earnings (loss) per share - as reported  $    .30  $    (.06) $      (.38)
Basic earnings (loss) per share - pro forma    $    .19  $    (.15) $      (.43)

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants:  dividend yield of 0%; expected  volatility of 42%;
discount rate of 5.5%; and expected lives of up to 10 years.
                                F - 26

<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 12 - Stockholders' Equity (continued)

The  following  is a table of the shares  covered by the  options  and  warrants
granted:
                                                                  Exercise
                                                Options and         Price
                                                   Warrants       Per Shares
                                                -----------    --------------

Balance, December 31, 1996                        693,540      $3.00 - $5.75
    Granted                                       240,259      $3.44 - $5.50
    Forfeited or exercised                        (45,739)     $3.13 - $5.00
                                                 --------      -------------

Balance, December 31, 1997                        888,060      $3.00 - $5.75
    Granted                                       205,580      $3.90 - $7.88
 Forfeited or exercised                          (197,102)     $3.00 - $7.75
-----------------------                          --------      -------------

Balance, December 31, 1998                        896,538      $3.00 - $7.88
                                                 ========      =============

The weighted  average option and warrant  exercise price at December 31, 1998 is
$4.05. The weighted average remaining contractual life is 63 months.

The Company  granted an option  during the year ended  December 31, 1993,  to an
area  director  that after this area  director  opened its tenth  restaurant  in
accordance with the area director agreement, the area director would be entitled
to purchase one percent of the then outstanding  common stock of the Company for
$50,000. In 1997, the Company waived the requirement for ten restaurants and the
area  director  exercised  the right to purchase one percent of the  outstanding
common  stock for $50,000 and  received  approximately  28,900  shares of common
stock.


Note 13 - Income Taxes

The  components  of the  provision  for  income tax  benefit  for the year ended
December 31, 1998 are as follows:
                                                December 31,
                                                    1998
                                                -----------



Current income tax expense                       $  213,500
Deferred income tax benefit                        (582,053)
                                                 ----------

                                                 $  368,553
                                                 ==========

                                F - 27


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 13 - Income Taxes (continued)

Prior to 1998,  the Company had provided for a valuation  allowance  against its
deferred tax asset as management had determined that it was more likely than not
that the Company would not realize its deferred tax asset.  In 1998,  management
determined it would be more likely than not they would  realize  their  deferred
tax asset and this has eliminated its valuation  allowance  against the deferred
tax asset  resulting  in a benefit of $582,053  reflected  in the  statement  of
operations for the year ending December 31, 1998.

Deferred  tax  liabilities  and assets are  determined  based on the  difference
between the financial  statement assets and liabilities and tax basis assets and
liabilities  using the tax rates in effect for the year in which the differences
occur. In 1998, the Company's  deferred income tax assets and liabilities result
primarily  from  differing  depreciation  and  amortization  periods  of certain
assets,  deferred  franchise  revenue and costs and the  recognition  of certain
expenses for financial statement purposes and not for tax purposes. For 1997 and
1996, the deferred income tax assets related primarily to net operating losses.

The  net  current  and  long-term  deferred  tax  assets  (liabilities)  in  the
accompanying balance sheet include the following items:

                                                        December 31,
                                              -------------------------------
                                                 1998       1997       1996
                                              ---------- ---------- ---------

Current deferred tax asset                     $ 81,260   $     -    $      -
Current deferred tax liabilities                     -          -           -
                                               --------   --------   --------

                                               $ 81,260   $     -    $      -
                                               ========   ========   ========


                                                        December 31,
                                              -------------------------------
                                                 1998       1997       1996
                                              ---------- ---------- ---------

Long-term deferred tax asset                  $1,673,620   $900,000  $ 736,000
Long-term deferred tax liability                (938,812)        -         -
                                              ----------   --------   --------
                                                 734,808    900,000    736,000
      Less impairment                                -     (725,000)  (561,000)
                                              ----------   --------  ---------

                                                 734,808    175,000    175,000
                                              ----------   --------  ---------

Net deferred tax asset                        $  816,068   $175,000  $ 175,000
                                              ==========   ========  =========

                                F - 28

<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 13 - Income Taxes (continued)

Rate Reconciliation

The  reconciliation  of income tax expense  (benefit)  by  applying  the Federal
statutory tax rates to the Company's effective income tax rate is as follows:

                                                        December 31,
                                              -------------------------------
                                                 1998       1997       1996
                                              ---------- ---------- ---------

Federal statutory rate                             34.0%     (34.0)%    (34.0)%
Nondeductible expenses                              8.4        -          -
Other - deferred  including  utilization  of      (13.5)       -          -
NOL
Valuation allowance                               (78.0)      34.0       34.0
                                               --------   --------   --------

                                                  (49.1)%      - %         - %
                                               ========   =======    ========


Note 14 - Employee Benefit Plan

The  Company  has  adopted  a  401(k)  plan  during  1995  for  its   employees.
Participation  is voluntary and employees are eligible to  participate at age 21
and after one year of employment  with the Company.  The Company  matches 50% of
the employee's contribution up to $10,000 of the employee's salary.

A participant's vested benefit is fully distributed upon death or disability and
is distributed upon termination of employment according to the following vesting
schedule:

   Years of Services       Percentage

          1                     0%
          2                    25%
          3                    50%
          4                    75%
          5                    100%

The Company  has  contributed  $31,675,  $33,251 and $10,525 to the Plan for the
years ended December 31, 1998, 1997 and 1996, respectively.

                                F - 29


<PAGE>


               THE QUIZNO'S CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements.


Note 15 - Earnings (Loss) Per Share

The following table sets forth the  computation  for basic and diluted  earnings
per share:

                                                        December 31,
                                              -------------------------------
                                                 1998       1997       1996
                                              ---------- ---------- ---------
Numerator
  Numerator for basic and diluted earnings
  per share - net income (loss)               $891,725   $(183,616) $(1,075,908)
                                              ========   =========  ===========

Denominator
  Denominator for basic earnings per share
  - weighted average shares                   3,014,042  2,878,310  2,864,757
  Effect of dilutive securities -
  convertible debt, options and warrants        431,930         -           -
                                               --------   --------   --------
  Denominator for diluted earnings per
  share - adjusted weighted average shares    3,445,972  2,878,310  2,864,757
                                              =========  =========  =========

  Basic earnings (loss) per share             $     .30  $    (.06) $    (.38)
                                              =========  =========  =========

  Diluted earnings (loss) per share           $     .26  $    (.06) $    (.38)
                                              =========  =========  =========

Where the inclusion of potential common shares is anti-dilutive, such shares are
excluded from the computation.





                                F - 30



<PAGE>


Attached  hereto and filed as a part of this Form  10-KSB  are the  consolidated
financial  statements  listed  in  the  Index  to  the  Consolidated   Financial
Statements at page F-1.

ITEM 8. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

        None.

                              PART III

ITEM 9. DIRECTORS,  EXECUTIVE OFFICERS,  PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors

The names of and other  information  about the  Directors  of the  Company as of
March 16, 1999, are set forth below:


      Nominee          Age     Position(s) with Company         Director Since

Richard E. Schaden      35     President, Chief           
                               Executive Officer and
                               Director                              1991

Richard F. Schaden      60     Secretary and Director                1991


Frederick H. Schaden    52     Director                              1993


J. Eric Lawrence        31     Director                              1997


Brownell E. Bailey      45     Director                              1993


Mark L. Bromberg        48     Director                              1997


Each director is currently  serving a one year term that will end on the date of
the Company's  1999 Annual Meeting of  Shareholders.  The Board of Directors has
nominated  each of its members to stand for election for an additional  one year
term at such Annual meeting.

Director's Biographical Information

Mr.  Richard E. Schaden has been  President  and a Director of the Company since
its inception on January 7, 1991. Mr. Schaden had been a principal and the chief
operating officer of Schaden & Schaden,  Inc., a company that owned and operated
Quizno's  franchised  Restaurants  from  1987  to 1994  when it was  sold to the
Company.  Mr. Schaden  graduated Magna Cum Laude from the University of Colorado
with a degree in Business Management and Finance. See "Certain Transactions."

                                     - 26 -
<PAGE>



Mr.  Richard F. Schaden has been  Secretary  and a Director of the Company since
its  inception on January 7, 1991.  He had been a Vice  President of the Company
until  December 31, 1998. Mr. Schaden had been a principal of Schaden & Schaden,
Inc., a company that owned and operated  Quizno's  franchised  Restaurants  from
1987 to 1994  when it was  sold to the  Company.  Mr.  Schaden  is the  founding
partner of the law firm of Schaden,  Katzman,  Lampert & McClune with offices in
Bloomfield Hills, Michigan and Broomfield,  Colorado. Mr. Schaden graduated from
the   University  of  Detroit  with  a  Bachelor  of  Science  in   Aeronautical
Engineering,  received his Juris  Doctorate  from the  University of Detroit Law
School and is an internationally known, well-published attorney, specializing in
aviation  law.  Prior to  entering  the legal  profession,  Mr.  Schaden  was an
aeronautical   engineer  for  Boeing  Aircraft  and  Continental   Aviation  and
Engineering.  Mr. Schaden has been on the board of numerous  private  companies.
See "Certain Transactions."

Mr. Brownell M. Bailey is a self-employed  real-estate  development  consultant,
land planner and design engineer. He has been self-employed for over five years.
Prior  employment  included  the  management  of field  operations  and contract
services for the acquisition, development and construction of resort properties,
including residential, mixed use, and commercial projects. Mr. Bailey has a B.A.
degree from Union College and a B.S.  degree in Urban  Planning and  Engineering
from Worcester Polytechnic Institute.

Mr.  Frederick  H.  Schaden is an Executive  Vice  President  of the  Automotive
Consulting Group of Aon Consulting, Inc. Aon Consulting, Inc. is a subsidiary of
Aon  Corporation,  a publicly  held  company  with annual  revenues of nearly $6
billion.  He has been employed by Aon and its predecessors for over 25 years and
has served as a senior officer since 1981. Mr. Schaden earned a B.S. in Business
Administration  from  Xavier  University  in  Cincinnati,   Ohio.  See  "Certain
Transactions."

Mr. J. Eric Lawrence has been the General Partner of Retail & Restaurant  Growth
Capital,  L.P.  ("RRGC"),  a $60 million  investment  fund  focused on providing
growth and expansion  capital to small  businesses in the retail and  restaurant
industries,  since December 1995. RRGC is a Small Business  Investment  Company,
federally licensed by the Small Business Administration.  RRGC loaned $2,000,000
to the  Company in 1996,  and Mr.  Lawrence  serves on the Board  pursuant  to a
contractual  arrangement  between the Company and RRGC.  Mr.  Lawrence  has been
extensively  involved  in  the  analysis  of  the  financial,   operational  and
managerial  aspects of retail and  restaurant  companies  throughout his career.
Prior to RRGC, he served as Vice President of Strategic Retail Ventures, Inc., a
boutique financial  consulting and private investment firm focusing on the needs
of specialty  retail and restaurant  companies from March 1993 to December 1995.
Prior to SRV, Mr.  Lawrence was a Senior  Consultant  with Arthur  Andersen,  in
Dallas,  Texas. Mr. Lawrence is a licensed C.P.A., and is a graduate of Southern
Methodist  University with a B.B.A. in Accounting and Minor in Economics,  which
included study abroad at Oxford University, Oxford, England.

                                     - 27 -
<PAGE>



Mr. Mark L. Bromberg has been a self-employed  management  consultant  providing
strategic planning, positioning and senior management consulting services to the
hospitality industry,  for over five years. Mr. Bromberg is the former President
& CEO of East Side Mario's  Restaurants  Inc.,  the Dallas based  subsidiary  of
Pepsi-co,  which he grew from one  restaurant  in 1988 to 30 in 1993 when it was
sold to Pepsi-co. Mr. Bromberg has been the founder and President of a number of
causal dining restaurant chains,  including Mr. Greenjeans,  Ginsberg & Wong and
Lime  Rickey's and served as President of Prime  Restaurant  Group,  the largest
privately-held  restaurant chain in Canada.  He holds a B.S. and an M.B.A.  from
Cornell  University  and remains highly  involved in foodservice  education as a
curriculum  advisor and guest  lecturer.  He is a past  chairman of the Canadian
Restaurant and  Foodservice  Association  and is a past director of the National
Restaurant  Association  of the U.S.  Mr.  Bromberg  was elected to the Board of
Directors  pursuant to a  contractual  arrangement  with RRGC that  required the
election of an additional Board member acceptable to RRGC.

Executive Officers

      The following  table sets forth (i) the names of the  executive  officers,
(ii) their ages, and (iii) the capacities in which they serve the Company:



  Nominee                Age     Position(s) with Company    


 Richard E. Schaden       35     President, Chief Executive 
                                  Officer and Director

 Mark R. Laramie          48     Chief Operating Officer

 Robert W. Scanlon        52     Executive Vice President for Development

 Sue A. Hoover            52     Executive Vice President for Marketing

 Patrick E. Meyers        39     Vice President and General Counsel

 John L. Gallivan         52     Chief Financial Officer, Treasurer and
                                  Assistant Secretary

 Richard F. Schaden       60     Secretary and Director

Executive Officer's Biographical Information

See  "Director's  Biographical  Information"  above  for a  description  of  the
backgrounds of Richard E. Schaden and Richard F. Schaden.

Mark R. Laramie joined the Company in 1998 as the Chief Operating Officer. Prior
to  joining  the  Company,  he was a managing  member  and owner of Great  Lakes
Restaurant  Group,  LLC from November 1997 through  August 1998.  From July 1996
through  October 1997, Mr. Laramie was a managing  member of Peer Group,  LLC, a
franchisee of Little  Caesars Pizza in Michigan.  Mr.  Laramie was also the Vice
President of Franchising for Little Caesars  Enterprises,  Inc. from August 1980
through June 1996. He received his B.S. degree from Eastern Michigan  University
in 1973.

                                     - 28 -
<PAGE>



Robert W. Scanlon has been our Executive  Vice  President of  Development  since
October  1998.  Mr.  Scanlon  served  as  our  Senior  Vice  President  of  Real
Estate/Design  & Construction  from August 1997 through  September 1998. He also
served as our Senior  Vice  President  of Concept  Development  and Design  from
January  1997  to  July  1997  and  as  our  Vice  President  of  Nontraditional
Development  from May 1996 to December 1996.  From June 1990 through April 1996,
he was first Vice  President of Sales and Marketing and later Vice  President of
Business Development for Carts of Colorado,  located in Commerce City, Colorado,
an equipment  manufacturer.  Mr. Scanlon graduated from the University of Texas,
with a B.S. degree in 1973.

Sue A. Hoover joined the Company as Director of Marketing in 1991 as Director of
Marketing and served in that capacity until 1996, when she left to start her own
marketing firm, although her firm continued to provide marketing services to the
Company.  She rejoined the Company as Senior Vice President of Marketing in 1997
and was named an Executive  Vice  President of  Marketing in October  1998.  Ms.
Hoover graduated from the University of Iowa with a B.A. in 1968.


                                     - 29 -
<PAGE>



Patrick E. Meyers joined the Company in 1997. He had been an associate  with the
Denver law firm of Moye,  Giles,  O'Keefe,  Vermeire & Gorrell  since  September
1991, and was selected as a partner of that firm in 1996.  Before that he served
as a judicial  law clerk to a Justice of the  Colorado  Supreme  Court from July
1990 to September  1991. Mr. Meyers received his J.D. degree from the University
of California,  Hastings  College of Law and his B.A. degree from the University
of Colorado - Denver.  Mr.  Meyers served as a director of the Company from 1993
to 1997, when he resigned to become a full-time employee of the Company.

John L. Gallivan joined the Company as Chief  Financial  Officer in 1994. He was
later  elected  Treasurer  and  Assistant  Secretary.  Prior to his  joining the
Company, he was a director and Executive Vice President of Grease Monkey Holding
Corporation of Denver, a franchisor,  owner, and operator of over 200 ten minute
oil  change and fluid  maintenance  centers  in the U.S.  and  Mexico  from 1979
through  April 1994.  He is a member of the  Colorado  Society and the  American
Institute of CPAs. He graduated  from the University of Colorado at Boulder with
a bachelors degree in accounting.

Compliance with Section 16(a) of  the Exchange Act

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors, officers (including a person performing a policy-making function) and
persons  who own more than 10% of a  registered  class of the  Company's  equity
securities  ("10% Holders") to file with the Securities and Exchange  Commission
("SEC")  initial  reports of  ownership  and reports of changes in  ownership of
Common Stock and other equity securities of the Company. Directors, officers and
10% Holders are required by SEC  regulations  to furnish the Company with copies
of all of the Section 16(a)  reports they file.  Based solely upon such reports,
the Company believes that during 1998 its directors,  advisors, officers and 10%
Holders  complied  with  all  filing  requirements  under  Section  16(a) of the
Exchange Act, except for Mr. Steven  Shaffer,  a Senior Regional Vice President,
who  inadvertently  failed  to  file  his  Form 3 in a  timely  manner,  and who
inadvertently failed to file a Form 4 related to the exercise of options,  which
was remedied in his Form 5 for 1998.

ITEM 10.   EXECUTIVE COMPENSATION

Executive Compensation

Set  forth  below is  information  about  the  compensation  during  1998 of the
Company's Chief Executive Officer,  the four most highly  compensated  executive
officers of the Company at the end of 1998, other than the CEO, and additionally
the two most highly compensated non-executive officers (the "Named Officers").


                                     - 30 -
<PAGE>


Summary  Compensation  Table.  The  following  table  provides  certain  summary
information for fiscal 1998, 1997, and 1996, concerning  compensation awarded or
paid to, or earned by, the Named Officers:

<TABLE>
<CAPTION>


                                            Annual Compensation            Long-Term and Other Compensation
                                    ------------------------------------  -----------------------------------
                                                                              Option          401(K) Plan
Name and Position           Year     Salary        Bonus      Other(1)       Shares(2)       Contribution(3)
-----------------        ---------  --------    ----------  ------------  -------------    ------------------

<S>                      <C>         <C>          <C>         <C>                <C>            <C>             
Richard E. Schaden,      12/31/96    $108,500     $      0    $  11,039              0           $2,160
 President and Chief     12/31/97    $108,500     $125,731    $  10,168          4,000           $2,534
 Executive Officer       12/31/98    $181,452     $130,625    $  15,361          5,164           $2,000

Richard F. Schaden,      12/31/96    $ 83,500     $      0    $       0              0           $    0
 Vice President and      12/31/97    $ 83,500     $ 75,439    $       0              0           $    0
 Secretary               12/31/98    $ 83,500     $ 78,375    $       0              0           $    0
                                                          
Robert W. Scanlon,       12/31/96    $ 49,110     $  5,316    $       0          4,000           $    0
 Executive Vice          12/31/97    $ 79,998     $ 13,276    $       0          4,000           $1,168
 President for           12/31/98    $ 85,783     $ 28,115    $       0          5,164           $3,418
 Development                                              

Sue A. Hoover,           12/31/96    $ 24,000     $      0    $       0              0           $  600
 Executive Vice          12/31/97    $ 33,000     $      0    $       0          4,000           $  654
  President for          12/31/98    $ 90,479     $ 13,968    $       0          9,164           $3,016
  Marketing                                               
 
John L. Gallivan,        12/31/96    $ 85,000     $  6,100    $       0          4,000           $5,100
 Chief Financial         12/31/97    $ 79,165     $  9,400    $       0          4,000           $2,376
 Officer and             12/31/98    $ 90,945     $ 11,961    $       0          5,164           $3,080
 Treasurer                                                

Scott K. Adams,          12/31/96    $ 62,936     $ 64,747    $       0          9,773           $    0
 Senior Vice             12/31/97    $220,347     $      0    $       0          4,000           $   37
 President for           12/31/98    $ 59,836     $198,457    $       0          5,164           $    0
 Development(4)                                           

John F. Fitchett,        12/31/96    $ 55,385     $      0    $       0          4,000           $    0
 Senior Regional         12/31/97    $ 82,176     $ 30,778    $       0          4,000           $1,143 
 Vice President          12/31/98    $ 92,004     $ 21,651    $       0          5,164           $2,102
 for the East 
 Region

</TABLE>

                                     - 31 -
<PAGE>



------

(1)  The Company  provides Mr.  Richard E. Schaden with an automobile  allowance
     for both  business and  personal use and pays $1,200  annually in term life
     insurance premiums on his behalf. 

(2)  The  Company,  as an incentive  for its  eligible  employees to endeavor to
     enhance the Company's  performance  and assure its future  success,  grants
     options to purchase shares of its Common Stock to successful employees from
     time to time under its Employee Stock Option Plan. All options indicated in
     this table have been granted under such Plan.  

(3)  The Company has provided its  employees  with a 401(K)  Employee's  Savings
     Plan, pursuant to which the Company contributes to each eligible employee's
     account an amount equal to 50% of such employee's annual  contribution,  up
     to 6% of such employee's total annual compensation.  The Company has issued
     shares of its  Common  Stock  for 50% of its  annual  contribution  to each
     account under its 401(K) Plan.  Beginning in 1999,  the limit on the amount
     of an employee's  total annual  compensation  that will receive a 50% match
     has been amended to be $10,000.  

(4)  Mr. Adams terminated his employment with the Company in 1998.

Stock Option  Awards.  The Company  adopted its Employee  Stock Option Plan (the
"Employee  Plan") in 1993.  The purposes of the Employee  Plan are to enable the
Company to provide  opportunities  for certain  officers  and key  employees  to
acquire a proprietary  interest in the Company,  to increase incentives for such
persons to contribute to the Company's  performance and further success,  and to
attract  and  retain  individuals  with  exceptional  business,  managerial  and
administrative  talents,  who  will  contribute  to  the  progress,  growth  and
profitability  of the  Company.  As of March 16,  1999,  the  Company had issued
11,436  shares upon  exercise of options under the Employee Plan and has 308,564
shares  currently  reserved for issuance  under the Employee  Plan. The Board of
Directors  of the Company has  authorized  a proposal to increase  the number of
shares of Common  Stock  reserved  for  issuance  under the  Employee  Plan from
320,000 to 670,000 to be presented  to the  Company's  shareholders  at the next
Annual Meeting.

Options  granted  under the Employee Plan include both  incentive  stock options
("ISOs"),  within the meaning of Section  422 of the  Internal  Revenue  Code of
1986, as amended (the "Code"),  and non-qualified stock options ("NQOs").  Under
the terms of the Employee  Plan,  all officers and  employees of the Company are
eligible for ISOs. The Company determines in its discretion,  which persons will
receive ISOs, the applicable exercise price, vesting provisions and the exercise
term  thereof.  The terms and  conditions of option grants do differ and are set
forth in the optionees individual stock option agreement. Such options generally
vest over a period of one or more  years and expire  after up to ten  years.  In
order to qualify for certain  preferential  treatment  under the Code, ISOs must
satisfy the statutory  requirements thereof.  Options that fail to satisfy those
requirements  will be deemed  NQOs and will not receive  preferential  treatment
under  the Code.  Upon  exercise,  shares  will be issued  upon  payment  of the
exercise  price in cash,  by  delivery  of shares of Company  Common  Stock,  by
delivery of options  granted under the Employee Plan or a combination  of any of
these methods.
                                     - 32 -

<PAGE>
                      Option Grants in 1998
                     -----------------------
                      Number of
                      Shares of
                       Common 
                        Stock   Percentage of
                     Underlying Total Options
                       Options    Granted to
                       Granted     Employees   Exercise  Expiration
       Name            in 1998      in 1998     Price       Date
------------------   ----------   ----------  ---------  ----------

Richard E. Schaden      5,164         4.4%       $5.37      (1)
Richard F. Schaden        0           N.A.       N.A.       N.A.
Robert W. Scanlon       5,164         4.4%      $4.875      (1)
Sue A. Hoover           5,165         4.4%      $4.875      (1)
Sue A. Hoover           4,000         3.4%       $7.25   11/05/08(2)
John L. Gallivan        5,164         4.4%      $4.875      (1)
Scott K. Adams          5,164         4.4%      $4.875      (1)
John F. Fitchett        5,164         4.4%      $4.875      (1)


(1)  The options have two expiration  dates. In each case, the options  covering
     75% of the  underlying  shares  expire on April 30,  1999,  and the options
     covering 25% of the underlying shares expire May 9, 2001.
(2)  The options vest in equal amounts annually over five years.

<TABLE>
<CAPTION>

                                                    Number of Securities                Value of Unexercised
                                                   Underlying Unexercised               In-the-Money Options
                                                    Options at Year-End                     at Year-End(1)
                    Shares        Value        -----------------------------      -------------------------------
Name               Exercised     Realized      Exercisable     Unexercisable      Exercisable       Unexercisable
------             ---------     --------      -----------     -------------      -----------       -------------
<S>                     <C>          <C>          <C>              <C>               <C>                 <C>

Richard E. Schaden       0            0           1,087             5,164             $3,654             $11,645
Richard F. Schaden       0            0               0                 0                  0                   0
Robert W. Scanlon        0            0           2,400            10,764             10,200              37,001
Sue A. Hoover            0            0          10,800            12,364             29,350              18,047
John L. Gallivan         0            0           7,006            12,364             27,827              44,347
Scott K. Adams           0            0          15,451            16,424             52,605              59,829
John F. Fitchett         0            0           2,400            10,764             10,200              37,001
</TABLE>



(1)  The dollar values are  calculated by  determining  the  difference  between
     $7.625 per share, the fair market value of the Common Stock at December 31,
     1998, and the exercise price of the respective options.


                                     - 33 -
<PAGE>


Employment  Contracts.  Richard  E.  Schaden  has  entered  into  an  Employment
Agreement  with the Company that  terminates on December 31, 2003.  His contract
provides  that he will serve as  President  and Chief  Executive  Officer of the
Company.  Mr. Schaden will devote his full time to the Company.  His annual base
salary was increased to $220,000,  effective  July 21, 1998.  Such amount may be
adjusted from time to time by mutual agreement between Mr. Schaden and the Board
of Directors. The contract provides an annual bonus equal to 10% of any positive
increase in earnings before interest,  taxes,  depreciation and amortization for
such  full  calendar  year  over the level of such  amount  for the  prior  full
calendar year. Mr. Schaden will receive a monthly automobile  allowance of up to
$620.00 plus up to $150.00 for  insurance  coverage.  He will also receive a per
diem travel allowance of $30.00 per day while traveling on Company business. The
contract  provides that the Company will pay one-half of Mr.  Schaden's  medical
insurance coverage and one-half of the cost of disability insurance. The Company
will pay for $1,000,000 of term life insurance for Mr.  Schaden,  payable to his
designated  beneficiary.  The Company may terminate the Employment Agreement for
cause upon  ninety  days  notice.  Mr.  Schaden  may  terminate  the  Employment
Agreement upon ninety days notice.

Richard F. Schaden entered into an Employment Agreement with the Company in 1993
that  terminated on December 31, 1998.  Mr. Schaden did not devote his full time
to the Company,  but devoted such time to the Company as the Company  requested.
His base salary was $83,500 per year under the contract.  The contract  provided
an  annual  bonus  equal  to 6% of any  positive  increase  in  earnings  before
interest,  taxes, depreciation and amortization for such full calendar year over
the  level of such  amount  for the  prior  full  calendar  year.  Although  his
Employment Agreement has terminated, Mr. Schaden continues to serve as Secretary
and a Director of the Company.

None of the other Named Officers have an employment agreement with the Company.

Director Compensation

Directors who are not officers or employees of the Company are paid $500 per day
for each Board and  Committee  meeting they attend and they are  reimbursed  for
their  reasonable  expenses  of  attending  such  meetings.  In  addition,  such
directors receive an annual grant of options to purchase 4,000 shares of Company
Common Stock, which immediately vest.

                                     - 34 -
<PAGE>



During  1998,  the  Company  paid each of its  non-employee  directors,  Messrs.
Bailey, Bromberg, Lawrence and Frederick Schaden ("Outside Directors"),  $2,000,
as compensation for their attendance at Board and Committee meetings.  For their
service during 1998,  the Outside  Directors each received a grant of options to
purchase 4,000 shares of Company Common Stock that immediately vested.


ITEM 11.   SECURITY   OWNERSHIP  OF  CERTAIN   BENEFICIAL   OWNERS  AND
           MANAGEMENT

                        PRINCIPAL STOCKHOLDERS

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership of the Company's  equity  securities  (common stock and two classes of
preferred  stock) as of March 16, 1999,  (a) by each person known to the Company
to own beneficially  more than 5% of the Company's Common Stock, (b) each of the
Company's  Named Officers and directors and (c) by all officers and directors of
the Company named herein as a group.

                                     - 35 -
<PAGE>
<TABLE>
<CAPTION>

                                                            Class A                      Class C
                                                Class A    Preferred      Class C       Preferred
                      Common       Common      Preferred     Stock       Preferred        Stock
                       Stock        Stock        Stock     Percentage      Stock        Percentage
      Name            Owned(1)    Percentage     Owned        Owned        Owned          Owned
------------------    --------   -----------   ----------   ---------   ------------   -------------


<S>                  <C>             <C>         <C>             <C>           <C>            <C>
Richard E. Schaden   859,117(2)      27.4%       73,000          50%           0              0
1099 Eighteenth
St., Suite 2850
Denver, CO  80202

Richard F. Schaden   882,667(2)      27.9%       73,000          50%      34,000          20.4%
11870 Airport Way
Broomfield, CO
80021

Retail &             405,612(3)      11.7%            0           0            0             0
Restaurant Growth
Capital, L.P.
10000 N. Central
Expressway
Suite 1060
Dallas, TX  75231

Brownell M. Bailey   42,000(4)        1.4%            0           0       20,000         12.0%
10 Parkway Drive
Englewood, CO
80110

Mark L. Bromberg     10,000(4)         *              0           0            0            0
1801 Kings Isle
Drive
Plano, TX  75093

J. Eric Lawrence     12,000(4)         *              0           0            0            0
10000 N. Central
Expressway
Suite 1060
Dallas, TX  75231

Frederick H.         24,000(4)         *              0           0        2,000         1.1%
Schaden
100 South Wacker
Drive, Suite 860
Chicago, IL   60606

Robert W. Scanlon     6,273(4)         *              0           0            0           0
1099 18th Street,
Suite 2850
Denver, CO 80202

Sue A. Hoover        23,074(4)         *              0           0            0           0
1099 18th Street,
Suite 2850
Denver, CO 80202

John L. Gallivan     13,297(4)         *              0           0            0           0
1099 18th Street,
Suite 2850
Denver, CO 80202

Scott K. Adams       21,606(4)         *              0           0            0           0
1099 18th Street,
Suite 2850
Denver, CO 80202

John F. Fitchett      6,273(4)         *              0           0            0           0
1099 18th Street,
Suite 2850
Denver, CO 80202

All Executive     1,932,990           56.7%     146,000         100%      56,000       33.5%
Officers and
Directors  as a
Group 14 persons)
------------------------------------------------------------------
</TABLE>


                                     - 36 -
<PAGE>


------------------------
*   Indicates less than 1% of the shares outstanding

(1)  The persons  named in the table have sole voting  power with respect to all
     shares of Common  Stock shown as  beneficially  owned by them.  A person is
     deemed to be the  beneficial  owner of  securities  that can be acquired by
     such person within sixty (60) days from the filing date of the Report, upon
     the  exercise  of  options  or  warrants  or  conversion   of   convertible
     securities.  The record ownership of each beneficial owner is determined by
     assuming that options or warrants or convertible  securities  that are held
     by such person and that are  exercisable or  convertible  within sixty (60)
     days have been exercised or converted. The total outstanding shares used to
     calculate each  beneficial  owner's  percentage  also assumes such options,
     warrants or  convertible  securities  will be exercised or  converted.  The
     Company's  Class A and Class C Preferred  Stock are  currently  convertible
     into Quizno's Common Stock.
(2)  Richard E.  Schaden and Richard F.  Schaden  hold all of their Common Stock
     and Preferred Stock of the Company in a voting trust pursuant to which they
     are joint voting  trustees  (excluding  577 shares  allocated to Richard E.
     Schaden under the Company's  401(K) Plan,  2,913 shares owned by Richard E.
     Schaden as a result of  exercising  Company stock options and 34,000 shares
     of Class C  Convertible  Preferred  Stock  owned by  Richard  F.  Schaden).
     However, each of them,  individually,  has been given a proxy by the voting
     trust to vote 50% of the shares owned by the voting  trust.  The  remaining
     duration of the voting trust agreement is 5 years, subject to extension. Of
     the shares  indicated  as owned by each of them,  73,000 may be acquired by
     conversion of Class A Convertible  Preferred Stock,  34,000 may be acquired
     by Richard F. Schaden by conversion of Class C Convertible Preferred Stock,
     and 4,960 may be acquired  by Richard E.  Schaden  through the  exercise of
     options.
(3)  Retail & Restaurant  Growth Capital,  L.P.  ("RRGC"),  in connection with a
     loan to the  Company  that has  since  been  repaid,  has been  issued  two
     Warrants by the Company.  One is  exercisable  for 372,847 shares of Common
     Stock at an  exercise  price of $3.10,  subject  to  adjustment  in certain
     circumstances.  The other is exercisable  for 42,209 shares of Common Stock
     at an exercise  price of $5.00 per share,  subject to adjustment in certain
     circumstances.
(4)  All of the  shares  indicated  as  owned  by  Messrs.  Lawrence,  Bromberg,
     Fitchett and Scanlon may be acquired through the exercise of options by the
     holder.  All of the  shares  indicated  as  owned  by  Messrs.  Bailey  and
     Frederick  Schaden  may be  acquired  through  the  exercise  of options or
     conversion of Class C Convertible Preferred Stock by the holder. All of the
     shares indicated as owned by Messrs.  Gallivan and Adams and Ms. Hoover may
     be acquired through the exercise of options by the holder, except for 1,794
     shares, 2,482 shares and 8,000 shares held by each of them, respectively.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 31, 1996, Retail & Restaurant  Growth Capital,  L.P. ("RRGC") made a
$2,000,000 loan to the Company,  a portion of which was convertible into 372,847
shares of the Company's Common Stock which accrued interest at 12.75% per annum.
If the loan were  repaid  before  conversion,  RRGC  would  receive a warrant to
purchase  the same number of shares of the  Company's  Common Stock at $3.10 per
share.  On October 8, 1997,  the Company and RRGC amended the loan  agreement to
provide for the conversion of $500,000 of the principal  amount of the loan into
100,000  shares  of  the  Company's  Class  B  Preferred  Stock,   reducing  the
outstanding  principal  amount of the loan to $1,500,000.  The Class B Preferred
Stock was non-voting,  with a cumulative  dividend of 12.75%. In connection with
such  amendment,  the Company  also issued a Warrant to RRGC that granted it the
right to purchase up to 42,209 shares of the Company's Common Stock at $5.00 per
share.  Such number of shares of Common Stock is subject to downward  adjustment
if the Company  meets  certain net income and other  goals.  In no case will the
warrant be  exercisable  for less than  20,597  shares of the  Company's  Common
Stock.  On January 6, 1999,  the Company paid off the loan from RRGC,  issued to
RRGC the Warrant to purchase  372,847  shares of Common Stock  referred to above
and redeemed the Class B Preferred Stock held by RRGC.

                                     - 37 -
<PAGE>


Effective October 1, 1994, a wholly-owned  subsidiary of the Company acquired by
merger all of the assets and obligations of Schaden & Schaden,  Inc., a Colorado
corporation  ("SSI"),  owned by Richard E. Schaden and Richard F.  Schaden.  The
assets of SSI included  five  wholly-owned  Quizno's  Classic  Subs  Restaurants
located in and near Denver, a majority interest in a sixth Quizno's Classic Subs
Restaurant  located near Denver, and interests in two area directorships for the
Company owning three Quizno's  Classic Subs  Restaurants in the Chicago area and
two Quizno's Classic Subs  Restaurants in Michigan as well as other assets.  The
consideration paid by the Company to the Schadens, as selling shareholders,  was
$1,139,000,  of which  $263,000  was paid in cash and  $876,000  was paid in the
Company's  Preferred Stock.  The Class A Preferred Stock is non-voting,  bears a
6.5%  cumulative  dividend,  and became  convertible  on  November  1, 1997 into
146,000 shares of the Company's  Common Stock.  The Company may call the Class A
Preferred  Stock  upon 60 days  notice.  During  1996  and 1997  each  preferred
shareholder received dividends of $28,470 annually.

Richard F. Schaden and Frederick H. Schaden,  directors of the Company, each own
an interest in one of the Company's Area  Directors,  Illinois Food  Management,
Inc.  ("IFM").  The  Company  also  owns  approximately  12% of  IFM.  The  Area
Directorship  is managed by an adjacent Area Director and, during 1997 and 1998,
all sales,  opening  and  royalty  commissions  were paid to the  managing  Area
Director. The Company made no payments to IFM. In early 1996, IFM requested that
the Company  convert to a promissory note certain amounts owed to the Company by
IFM. As a result of such  request,  IFM has issued to the  Company a  promissory
note for $63,547 payable over 6 years with an interest rate of 12% per annum. At
December  31, 1998,  $ 58,149 was owed to the Company on this  promissory  note.
During   1997  and  1998,   payments  on  such  note  were  $4,655  and  $6,212,
respectively. IFM is also indebted to the Company for $18,187 in connection with
the resale of a Restaurant  once  operated by IFM. IFM is reducing  this debt by
offsetting  commissions  on royalty fees from that location paid to the managing
Area Director.  The debt is expected to be reduced to zero in  approximately  18
months.  IFM also is indebted to the Company for $14,270 in accounts  receivable
for wages,  accounting fees,  royalties and other amounts paid by the Company on
behalf of IFM. In 1999, IFM contributed its area directorship to an entity which
became the successor Area Director.

In 1995 the Company sold the Area Director rights for the Detroit, Michigan area
to a company  wholly-owned  by Richard F.  Schaden.  The fee to the  Company was
$150,000,  which is consistent  with the then fees received for the sale of area
directorships  to unaffiliated  parties,  and was paid in cash.  During 1997 and
1998,  the  Company  paid the Area  Director  $9,259 and  $27,664 in  royalties,
respectively. The area directorship was sold by Mr. Schaden in 1998 to an entity
owned by Scott Adams, a former Company  employee,  and the Company  approved the
transfer of the Area Director Marketing Agreement.

In 1997, the Company  purchased a Restaurant from a company in which Sue Hoover,
the Company's Executive Vice President of Marketing,  is a 50% shareholder.  The
Restaurant  paid  royalties  to the  Company  of $2,027 and $0 in 1997 and 1998,
respectively,  up to the date  purchased by the Company.  The purchase price was
$80,000,  of which  $15,000 was paid in cash and $65,000 paid by issuance of the
Company's  promissory  note  bearing  interest at 11% and payable  over 4 years.
During 1997 and 1998, the Company made payments  pursuant to the promissory note
totaling $18,839 and $18,993, respectively.

                                     - 38 -
<PAGE>



Thomas Schaden, a brother of Richard F. Schaden and Frederick H. Schaden,  is in
the  insurance  brokerage  business and has acted as a broker for the  Company's
insurance  policies,  including  the  directors  and officers  policies that the
Company has purchased.

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits  required by Item 601 of Regulation  S-B. The Company will furnish
     to its  shareholders  of record as of the record  date for its 1999  Annual
     Meeting of  Stockholders,  a copy of any of the exhibits  listed below upon
     payment of $.25 per page to cover the costs of the  Company  of  furnishing
     the exhibits.


                                     - 39 -
<PAGE>




2.1  Articles of Merger  Merging  Schaden & Schaden into The Quizno's  Operating
     Company,  incorporated  by reference to Exhibit 2(ii) to the Company's Form
     8-K, dated November 4, 1994.

2.2  Asset Purchase Agreement,  among The Quizno's Acquisition  Company,  Bain's
     Deli Franchise Associates, through its General Partner, Gemini Enterprises,
     Ltd., Gemini One, Inc. and Jolles #4 Partnership,  dated November 12, 1997,
     incorporated  by reference to Exhibit 2.1 to Firm 8-K, filed by the Company
     with the SEC on November 26, 1997.

3.1  Amended and Restated Articles of Incorporation of the Company, incorporated
     by  reference to Exhibit 3(a) to the  Company's  Registration  Statement on
     Form SB-2 (Reg. No. 33-72378-D).

3.2  Articles  of  Amendment  to the  Articles of  Incorporation  of the Company
     Authorizing  146,000  Shares of Class A  Cumulative  Convertible  Preferred
     Stock,  incorporated  by  reference  to Exhibit 3.2 to the  Company's  Form
     10-KSB, dated March 28, 1997.

3.3  Articles of Amendment changing the Company name,  incorporated by reference
     to Exhibit 3.3 to the Company's Form 10-KSB, dated March 28, 1997.


3.4  By-laws of the  Company,  incorporated  by  reference to Exhibit 3.4 to the
     Company's Form 10-KSB, dated March 28, 1997 .

3.5  Articles of  Amendment  to the  Articles of  Incorporation  of the Company,
     authorizing 100,000 shares of Class B Preferred Stock and 200,000 shares of
     Class C Cumulative  Convertible Preferred Stock,  incorporated by reference
     to Exhibit 3.5 to the Company's Form 10-KSB, dated March 26, 1998.

4.1  Form of  certificate  evidencing  Common  Stock,  $.001 par  value,  of the
     Company,  incorporated  by  reference  to  Exhibit  4(a)  to the  Company's
     Registration Statement on Form SB-2 (Reg. No. 33-72378-D).


9.1  Voting Trust  Agreement  between Richard E. Schaden and Richard F. Schaden,
     dated July 14, 1994, incorporated by reference to Exhibit A to the Schedule
     13-D,  dated July 14,  1994,  filed by Richard E.  Schaden  and  Richard F.
     Schaden.

9.2  First   Amendment  to  Voting  Trust  Agreement  dated  November  4,  1994,
     incorporated  by reference to Exhibit A to the  Amendment No. 1 to Schedule
     13-D,  dated  November 4, 1994,  filed by Richard E. Schaden and Richard F.
     Schaden.

9.3  Second  Amendment  to Voting  Trust  Agreement  dated  September  5,  1996,
     incorporated  by  reference  to Exhibit 9.3 to the  Company's  Form 10-KSB,
     dated March 28, 1997.

10.1 Employment  Agreement of Mr. Richard E. Schaden,  incorporated by reference
     to Exhibit 10(a) to the Company's Registration Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.2 Employment  Agreement of Mr. Richard F. Schaden,  incorporated by reference
     to Exhibit 10(b) to the Company's Registration Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.3 Employee  Stock Option Plan,  incorporated  by reference to Exhibit 99.1 to
     the Company's Registration Statement on Form S-8 (Reg. No.333-45549).

10.4 Amended and  Restated  Stock  Option Plan for  Non-Employee  Directors  and
     Advisors,  incorporated  by  reference  to  Exhibit  99.2 to the  Company's
     Registration Statement on Form S-8 (Reg. No. 333- 44549).

10.5 Indemnity  Agreement of Richard E.  Schaden,  incorporated  by reference to
     Exhibit  10(e) to the Company's  Registration  Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.6 Indemnity  Agreement of Richard F.  Schaden,  incorporated  by reference to
     Exhibit  10(f) to the Company's  Registration  Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.7 Indemnity  Agreement  of Patrick E.  Meyers,  incorporated  by reference to
     Exhibit  10(g) to the Company's  Registration  Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.8 Indemnity  Agreement  of Brownell M. Bailey,  incorporated  by reference to
     Exhibit  10(h) to the Company's  Registration  Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.9 Indemnity  Agreement of Frederick H. Schaden,  incorporated by reference to
     Exhibit  10(i) to the Company's  Registration  Statement on Form SB-2 (Reg.
     No. 33-72378-D).

10.10Indemnity  Agreement  of J. Eric  Lawrence,  incorporated  by  reference to
     Exhibit 10.10 to the Company's Form 10-KSB, dated March 26, 1998

10.11Indemnity  Agreement  of Mark L.  Bromberg,  incorporated  by  reference to
     Exhibit 10.11 to the Company's Form 10-KSB, dated March 26, 1998

10.12Form of Franchise Agreement,  incorporated by reference to Exhibit 10.12 to
     the Company's Form 10-KSB, dated March 26, 1998.

10.13Form of Area Director  Marketing  Agreement,  incorporated  by reference to
     Exhibit 10.12 to the Company's Form 10-KSB, dated March 28, 1997.

10.14(a) Headquarters Office Lease for the Company, incorporated by reference to
     Exhibit 10.14 to the Company's Form 10-KSB, dated March 28, 1997.

10.14(b) Headquarters Office Lease, beginning on or about June 1, 1999

10.15Amendment  to Employment Agreement  between the Company and Mr.  Richard E.
     Schaden,  dated  February  29, 1996,  incorporated  by reference to Exhibit
     10.15 to the Company's 10-KSB, dated March 29, 1996.

10.16Amendment to Employment  Agreement  between the Company and Mr.  Richard F.
     Schaden,  dated  February  29, 1996,  incorporated  by reference to Exhibit
     10.16 to the Company's 10-KSB, dated March 29, 1996.

10.17Deferment  Agreement  between  the Company and  Illinois  Food  Management,
     Inc.,  dated February 27, 1996,  incorporated by reference to Exhibit 10.17
     to the Company's 10-KSB, dated March 29, 1996.

10.18Investment  Agreement  between the Company and Retail and Restaurant Growth
     Capital,  L.P.  ("RRGC"),  dated as of December 31, 1996,  incorporated  by
     reference to Exhibit  10.18 to the Company's  From 10-KSB,  dated March 28,
     1997.

10.19Senior  Subordinated  Convertible  Promissory  Note  (with  Form of Warrant
     attached)  issued  by  the  Company  to  RRGC,  dated  December  31,  1996,
     incorporated  by reference to Exhibit 99(a) to Schedule 13D filed by Retail
     & Restaurant Growth Capital,  L.P., a Delaware limited  partnership,  filed
     with the SEC on January 9, 1998.

10.20Security  Agreement  between the Company and RRGC, dated as of December 31,
     1996,  incorporated  by reference to Exhibit  10.20 to the  Company's  From
     10-KSB, dated March 28, 1997.

10.21Stockholders'  Agreement between the Company and RRGC, dated as of December
     31, 1996,  incorporated by reference to Exhibit 99(b) to Schedule 13D filed
     by RRGC with the SEC on January 9, 1998.

10.22Amended and Restated  Senior  Subordinated  Convertible  Note issued by the
     Company to RRGC,  incorporated  by reference  to Exhibit  99(c) to Schedule
     13D/A filed by RRGC with the SEC on December 4, 1997.

10.23First  Amendment  to  Investment  Agreement  between  RRGC and the Company,
     dated as of October 8, 1997,  incorporated by reference to Exhibit 10.23 to
     the Company's Form 10-KSB, dated March 26, 1998.

10.24Warrant to  Purchase  Shares of Common  Stock of the  Company,  dated as of
     November 11, 1997 and issued to RRGC,  incorporated by reference to Exhibit
     10.24 to the Company's Form 10-KSB, dated March 26, 1998.

10.25First Amendment to Security  Agreement between RRGC and the Company,  dated
     as of November 11, 1997,  incorporated by reference to Exhibit 10.25 to the
     Company's Form 10-KSB, dated March 26, 1998.

10.26Amended and Restated  Security  Agreement  among the Company,  The Quizno's
     Operating Company and RRGC, dated as of December 31, 1996,  incorporated by
     reference to Exhibit  10.26 to the Company's  Form 10-KSB,  dated March 26,
     1998.

10.27Asset Purchase  Agreement among Stoico  Restaurant Group, Inc. d/b/a Stoico
     Food  Service,  Inc.,  Sub & Stuff,  Inc.  and  spaghetti  Jack's Inc.  and
     Quizno's  Kansas  LLC,  incorporated  by  reference  to Exhibit  2.1 to the
     Company's Form 8-K, filed by the Company with the SEC on September 1, 1998.

10.28Asset  Purchase  Agreement  between The  Quizno's  Acquisition  Company and
     Bain's Deli Corporation dated as of February 1, 1999.

20.1 Risk Factors  Section from the Company's  Prospectus  dated January 9, 1998
     included  in the  Registration  Statement  on Form S-3 filed by the Company
     (Registration No. 333-38691),  incorporated by reference to Exhibit 20.1 to
     the Company's 10-KSB, dated March 26, 1998.

21.1 List of Company subsidiaries.

23   Consent of  Ehrhardt  Keefe  Steiner & Hottman PC to the  incorporation  by
     reference  of its report dated March  2, 1999  appearing  elsewhere in this
     Form 10-KSB into two  Registration  Statements  on Form S-8 of the Company,
     Reg. Nos. 333-45549 and 333-45205, and the Company's Registration Statement
     on Form S-3, Reg. No. 333-38691.

(b)  Reports on Form 8-K. The Company filed four (4) reports on Form 8-K and one
     (1) report on Form 8-K/A during the last quarter of 1998. All four Form 8-K
     filings reported on only Item 5 matters. Such filings where made on October
     1,  November 3,  November 6, and December  29,  1998,  and related to press
     releases  announcing the signing of a master franchise agreement for Japan,
     Restaurants  opened in the third quarter,  third quarter  financial results
     and a going private proposal, respectively. The one Form 8-K/A was filed on
     November  2, 1998 and  amended  an  earlier  Form 8-K by  filing  financial
     statements in connection with the Company's acquisition of certain assets.

                                   
<PAGE>




                            SIGNATURES

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 31, 1999.

                            THE QUIZNO'S CORPORATION


                               By:/s/ Richard E. Schaden
                                  ---------------------------
                                  Richard E. Schaden,
                                  President and Chief Executive
                                  Officer

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed below by the  following  persons on behalf of the  Registrant  and in the
capacities indicated and on the dates indicated.


      Signature                Title                          Date


/s/ Richard E. Schaden    President, Chief Executive
______________________     Officer and Director
Richard E. Schaden         (Principal Executive Officer)    March  31, 1999

/s/ Richard F. Schaden    Vice President,
______________________     Secretary and Director
Richard F. Schaden                                          March 31, 1999

/s/ Brownell M. Bailey    Director
______________________
Brownell M. Bailey                                          March 31, 1999

/s/J. Eric Lawrence       Director
______________________
J. Eric Lawerence                                           March 31, 1999

/s/ Frederick H. Schaden  Director
____________________
Frederick H. Schaden                                        March 31, 1999

/s/ Mark L. Bromberg
___________________       Director 
Mark L. Bromberg                                            March 31, 1999

/s/ John L. Gallivan      Chief Financial Officer
____________________       and Treasurer (Principal
John L. Gallivan           Financial and Accounting
                           Officer                          March 31, 1999