================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


  X  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

For the quarter ended July 16, 2000          Commission File Number 333-90817



                                  SBARRO, INC.
             (Exact name of registrant as specified in its Charter)


            NEW YORK                                  11-2501939
   (State or other jurisdiction of              (I.R.S. Employer I.D. No.)
   incorporation or organization)

 401 Broad Hollow Road, Melville, New York                      11747
    (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:         (631) 715-4100

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days.

Yes      X                 No

The Company has been  required to file reports since April 24, 2000 but has been
required to or has been voluntarily filing reports
for more than the past 12 months.

The number of shares of Common Stock of the registrant  outstanding as of August
15, 2000 was 7,064,328.

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


<PAGE>






                                  SBARRO, INC.

                                 FORM 10-Q INDEX



PART I.     FINANCIAL INFORMATION                                  PAGES


Consolidated Financial Statements:

         Balance Sheets - July 16, 2000 (unaudited) and
               January 2, 2000. . . . . . . . . . . . . . . . . . . . . 3-4

         Statements of Operations  (unaudited) -  Twenty-eight
               Weeks ended July 16, 2000 and July 18, 1999 and
               Twelve Weeks ended July 16, 2000 and July 18, 1999 . . . 5-6

         Statements of Cash Flows (unaudited) - Twenty-eight
               Weeks ended July 16,2000 and July 18, 1999 . . . . . . . 7-8

         Notes to Unaudited Consolidated Financial Statements
                - July 16, 2000  . . . . . . . . . . . . . . . . . . . .9-21

Management's Discussion and Analysis of Financial Condition and
             Results of Operations . . . . . . . . . . . . . . . . . . 22-28


PART II.    OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . .29
            -----------------
















                                      Pg. 2

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                  (In thousands except share data)
                                                              July 16, 2000               January 2, 2000
                                                              -------------               ---------------
                                   (unaudited)
Current assets:
<S>                                                                <C>                              <C>
     Cash and cash equivalents                                     $19,207                          $33,514
     Restricted cash for untendered shares (Note 2)                    195                              298
     Receivables; net of allowance for doubtful
        accounts of $138 and $419, respectively
       Franchisees                                                    1,341                           1,429
       Taxes                                                         1,174                                -
       Other                                                         4,007                            2,938
                                                             ----------------                --------------

                                                                      6,522                           4,367

     Inventories                                                       2,891                          3,686

     Prepaid expenses                                                  3,450                          1,905
                                                             ----------------                 -------------

       Total current assets                                          32,265                          43,770

Property and equipment, net                                         139,323                         137,232

Other assets:

     Excess of purchase price over the cost
        of net assets acquired, net of
        accumulated amortization of
       $6,047 and $2,000, respectively (Note 2)                     216,720                         220,681
     Deferred financing costs, net of
       accumulated amortization of $843
       and $277, respectively (Note 2)                                8,987                           9,553
     Loan receivable from officer (Note 4)                            2,000                               -
     Other assets                                                     5,932                           6,597
                                                            ---------------                   -------------
                                                                   $405,227                        $417,833
                                                               ============                     ===========
</TABLE>

                                   (continued)


                                      Pg. 3
<PAGE>



                          SBARRO, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                   (In thousands except share data)
                                                              July 16, 2000               January 2, 2000
                                                              -------------               ---------------
                                   (unaudited)
Current liabilities:
    <S>                                                                   <C>                            <C>
     Amounts due for untendered shares (Note 2)                        $195                            $298
     Accounts payable                                                 6,464                           9,673
     Accrued expenses                                                 26,003                         32,409
     Accrued interest payable (Note 2 and 3)                         9,740                            7,480
     Current portion of mortgage payable                               116                                -
     Income taxes payable (Note 5)                                       -                              754
                                                                 ----------------            --------------

       Total current liabilities                                     42,518                          50,614


Deferred income taxes (Note 5)                                   -                                    5,629

Long-term debt, net of original issue
     discount (Note 2)                                              251,515                         251,310

Mortgage payable, net of current
     portion (Note 3)                                               15,854                                -

Shareholders' equity (Note 2):
     Preferred stock, $1 par value; authorized
       1,000,000 shares; none issued                                        -                             -
     Common stock, $.01 par value; authorized
       40,000,000 shares; issued and outstanding
       7,064,328 shares at July 16, 2000 and
       January 2, 2000                                                  71                                71
     Additional paid-in capital                                         10                                10
     Retained earnings                                              95,259                           110,199
                                                                 ---------------               ------------
                                                                    95,340                           110,280
                                                              ---------------                  ------------

                                                                  $405,227                          $417,833
                                                                =============                  ============
</TABLE>

            See notes to unaudited consolidated financial statements

                                      Pg. 4

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                (In thousands)
                                                                 For the twenty-eight weeks ended:
                                                              July 16, 2000July 18, 1999
Revenues:
<S>                                                           <C>                                  <C>
     Restaurant sales                                         $  185,664                           $179,051
     Franchise related income                                      6,581                              4,332
     Interest income                                                 635                              2,624
                                                             ----------------               ---------------
       Total revenues                                            192,880                            186,007
                                                                -------------                 -------------

Costs and expenses:
     Cost of food and paper products                                 36,290                          36,981
     Restaurant operating expenses:
       Payroll and other employee benefits                           52,296                          49,575
       Occupancy and other                                           59,032                          56,124
     Depreciation and amortization                                   16,516                          12,261
     General and administrative                                      13,863                          12,442
     Interest expense (Note 3)                                       16,585                               -
     Other operating income                                          (2,934)                         (2,579)
                                                                --------------                --------------
       Total costs and expenses                                     191,648                         164,804
                                                                -------------                  ------------

Income before income taxes                                            1,232                          21,203
(Benefit)/provision for income taxes
     (Note 5)                                                        (5,409)                          8,057
                                                                --------------               --------------

Net income                                                         $  6,641                       $  13,146
                                                                =============                 =============

</TABLE>











                                      Pg. 5
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                (In thousands)
                                                                        For the twelve weeks ended:
                                                              July 16, 2000               July 18, 1999
Revenues:
<S>                                                           <C>                                   <C>
     Restaurant sales                                            $  81,365                       $78,697
     Franchise related income                                        3,785                         1,826
     Interest income                                                   181                         1,033
                                                                 ------------               ---------------
       Total revenues                                               85,331                        81,556
                                                              ----------------               --------------

Costs and expenses:
     Cost of food and paper products                                15,956                        16,017
     Restaurant operating expenses:
       Payroll and other employee benefits                          22,720                        21,472
       Occupancy and other                                          25,560                        24,256
     Depreciation and amortization                                   7,106                         5,311
     General and administrative                                      6,218                         5,530
     Interest expense (Notes 2 and 3)                                7,255                             -
     Other operating income                                         (1,081)                       (1,084)
                                                                 -------------                  ------------
       Total costs and expenses                                     83,734                        71,502
                                                                -------------                   -----------

Income before income taxes                                           1,597                        10,054
Provision for income taxes  (Note 5)                                   150                         3,820
                                                              ---------------                 -------------

Net income                                                        $  1,447                      $  6,234
                                                                =============                 =============


</TABLE>











                                      Pg. 6

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                             (In thousands)
                                                                For the twenty-eight weeks ended:
                                                              July 16, 2000               July 18, 1999
Operating activities:

<S>                                                              <C>                                <C>
Net income                                                       $  6,641                           $13,146
Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                17 315                           12,278
       Provision for deferred income taxes                          (5,629)                            (337)
       Changes in operating assets and liabilities:
         Increase in receivables                                    (2,011)                             (15)
         Decrease in inventories                                       795                              240
         Increase in prepaid expenses                               (1,545)                          (3,823)
         Decrease (increase) in other assets                           859                           (2,357)
         Decrease in accounts payable and accrued
            expenses                                                (9,578)                            (306)
         Increase in accrued interest payable                        2,260                                -
         Decrease in income taxes payable                             (754)                          (4,071)
                                                                 --------------                -------------


Net cash provided by operating
     activities                                                       8,353                        14,755
                                                                 ------------                  ------------

Investing activities:

Purchases of property and equipment                                 (14,663)                      (12,746)
                                                                 -------------                --------------

Net cash used in investing activities                               (14,663)                      (12,746)
                                                                 -------------                --------------



</TABLE>



                                   (continued)


                                      Pg. 7

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                                             (In thousands)
                                                                 For the twenty-eight weeks ended:
                                                              July 16, 2000               July 18, 1999
Financing activities:
<S>                                                                   <C>                             <C>
Proceeds from mortgage                                              16,000                             -
Mortgage principal repayments                                          (29)                            -
Cost of mortgage                                                      (387)                            -
Loan to officer                                                     (2,000)                            -
Proceeds from exercise of stock options                            -                                 426
Distributions to shareholders                                       (21,581)                           -
                                                                 -------------                 -----------

Net cash (used in) provided by financing activities                  (7,997)                         426
                                                               ---------------               ------------


(Decrease) increase in cash and cash equivalents                    (14,307)                        2,435

Cash and cash equivalents at beginning of period                     33,514                       150,472
                                                                -------------                 -------------

Cash and cash equivalents at end of period                          $19,207                      $152,907
                                                                 ============                  ============



Supplemental disclosure of cash flow information:

Cash paid during the period for income taxes                         $2,962                       $13,861
                                                                =============                 =============

Cash paid during the period for interest                            $13,559                 $           -
                                                                 ============                ==============


</TABLE>



            See notes to unaudited consolidated financial statements




                                      Pg. 8


<PAGE>



                          SBARRO, INC. AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements

1.       Basis of presentation:

         The accompanying  unaudited consolidated financial statements have been
         prepared  in  accordance  with  the  instructions  for  Form  10-Q  and
         Regulation  S-X related to interim  period  financial  statements  and,
         therefore,  do not include all  information  and footnotes  required by
         generally accepted  accounting  principles.  However, in the opinion of
         Sbarro's  management,  all adjustments  (consisting of normal recurring
         adjustments and accruals)  considered necessary for a fair presentation
         of the consolidated  financial  position of Sbarro and its subsidiaries
         at July 16, 2000 and our consolidated results of operations for each of
         the twenty-eight and twelve weeks ended July 16, 2000 and July 18, 1999
         and cash  flows for the  twenty-eight  weeks in each of the  respective
         years have been included. The results of operations for interim periods
         are not necessarily  indicative of the results that may be expected for
         the  entire  year.  Reference  should be made to the  annual  financial
         statements,  including footnotes thereto, included in our Annual Report
         on Form 10-K for the fiscal year ended January 2, 2000.

         Certain  items  in the  fiscal  1999  financial  statements  have  been
         reclassified to conform to the fiscal 2000 presentation.

  2.     Going Private Transaction:

         On September 28, 1999,  members of the Sbarro family (who prior thereto
         owned  approximately  34.4% of the Sbarro's  common  stock)  became the
         holders of 100% of our issued and outstanding  common stock as a result
         of a "going private" merger. The cost of the merger, including fees and
         expenses,  was funded through the use of substantially  all of our cash
         on hand and the  placement of $255.0  million of 11.0% Senior Notes due
         September  15, 2009 (the "Senior  Notes") sold at a price of 98.514% of
         par to yield  11.25% per annum.  The Senior  Notes were issued under an
         Indenture dated September 28, 1999 (the  "Indenture").  We also entered
         into a five year, $30 million  unsecured  senior  revolving bank credit
         facility under a Credit  Agreement  dated as of September 23, 1999 (the
         "Credit Agreement").  The Credit Agreement provides an unsecured senior
         revolving  credit  facility which enables us to borrow,  on a revolving
         basis from time to time during its five-year term, up to $30.0 million,
         including a $10.0 million  sublimit for standby letters of credit.  Our
         payment obligations under the Senior Notes and the Credit Agreement are
         jointly,  severally,  unconditionally and irrevocably guaranteed by all
         of  our  current  Restricted  Subsidiaries  (as  defined)  and is to be
         similarly guaranteed by our future Restricted Subsidiaries.

         As of July 16, 2000, there was $0.2 million remaining on deposit with a
         third party paying agent for  untendered  shares to be redeemed as part
         of the merger consideration.  Such amounts are shown as restricted cash
         and amounts due for untendered shares in the balance sheet.  Should any
         shares remain  untendered  after one year from  September 28, 1999, the
         related  funds are to be returned to Sbarro to be held until claimed or
         escheated to the appropriate juristrictions.



                                      Pg. 9

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                    Notes To Consolidated Financial Statements (continued)

2.       Going Private Transaction (continued):

         In accordance  with Emerging  Issues Task Force Issue 88-16,  "Basis in
         Leveraged Buyout Transactions",  the acquisition of all the outstanding
         shares  of  common  stock  not  owned  by the  Sbarro  family  and  all
         outstanding  stock  options have been  accounted for under the purchase
         method of accounting. As a result, the remaining shares of common stock
         owned by the Sbarro  family are  presented in  shareholders'  equity at
         their original basis in the  accompanying  consolidated  balance sheet.
         The final  purchase price  allocations  have not been completed and are
         subject to adjustment  based on fair market  appraisals  and other fair
         market  value  estimates  as of the date of the  Merger.  The excess of
         purchase price over the cost of assets acquired is being amortized on a
         straight line basis over an estimated useful life of 30 years.

         Summarized  below are the unaudited pro forma results of our operations
         for the  twenty-eight  and twelve  weeks  ended July 18, 1999 as if the
         merger and related financing had taken place as of the beginning of the
         1999 periods presented. Adjustments have been made for the amortization
         of the excess of the  purchase  price over the cost basis of net assets
         acquired,  interest  expense and related  changes in income tax expense
         arising  from  our  election  to be  taxed  under  Subchapter  S of the
         Internal Revenue Code (see Note 5).

                           Twenty-eight weeks ended       Twelve weeks ended
                                July 18, 1999                July 18, 1999
                               --------------                -------------
         Pro Forma:
            Revenues                   $183,383                    $80,523
                                      =========                   ========
            Income (loss) before
               income taxe              $(1,511)                      $411
                                     ===========                   ========
            Net loss                    $(2,523)                     $(446)
                                     ===========                  =========

         These pro forma results of operations are not necessarily indicative of
         the actual  results of  operations  that  would have  occurred  had the
         merger and related  financing  taken place at the beginning of the 1999
         period presented.

3.       Mortgage payable:

         In March  2000,  one of our  Restricted  Subsidiaries  obtained a $16.0
         million,  8.4% loan due in 2010 secured by a mortgage on our  corporate
         headquarters  building.  The loan is payable in monthly installments of
         principal and interest of $0.1 million. The mortgage agreement contains
         various   covenants   including  a  requirement   that  the  Restricted
         Subsidiary maintain a minimum ratio of EBITDA to annual debt service of
         at least 1.2 to 1.0.





                                               Pg. 10
<PAGE>

                                SBARRO, INC. AND SUBSIDIARIES
                    Notes To Consolidated Financial Statements (continued)

4.       Related party transactions:

(a)      On March 13,  2000,  our board of directors  authorized  us to lend our
         Chairman,  President and Chief  Executive  Officer $2.0 million under a
         note that is payable on April 4, 2002.  The note bears  interest at the
         rate of 6.46% payable annually.

(b)      In April  2000,  we  renewed  the  lease for an  administrative  office
         building  in  which  we are the  sole  tenant  on the  same  terms  and
         conditions  as our present  lease.  The annual rent  payable  under the
         lease is $0.3  million  per year for the  remainder  of the lease  term
         which expires in 2011. In addition, we are obligated to pay real estate
         taxes,  utilities,   insurance  and  certain  other  expenses  for  the
         facility.  The building is leased from Sbarro  Enterprises,  L.P. whose
         limited partners are Mario, Joseph, Anthony and Carmela Sbarro.

5.       Income taxes:

         In  March  2000,  we  elected  to be  taxed  under  the  provisions  of
         Subchapter  S  of  the  Internal  Revenue  Code  of  1986,  and,  where
         applicable  and  permitted,  under  similar  state and local income tax
         provisions, beginning January 3, 2000. With certain limited exceptions,
         we will not pay  federal,  state and local income taxes for periods for
         which we are treated as an S corporation.

         Rather,  our  shareholders  will include  their  pro-rata  share of our
         taxable income on their individual  income tax returns and thus will be
         required to pay taxes on their  respective share of our taxable income,
         whether or not it is distributed to them.

         In  connection  with the  going  private  transaction  and the  related
         financing,  we have  entered  into a tax  payment  agreement  with  our
         shareholders. The tax payment agreement permits us to make periodic tax
         distributions  to our  shareholders  in amounts  that are  intended  to
         approximate the income taxes,  including estimated taxes, that would be
         payable by our  shareholders  if their only income were their  pro-rata
         share of our  taxable  income and that  income was taxed at the highest
         applicable federal and New York State marginal income tax rates. We may
         only make the tax distributions with respect to periods in which we are
         treated as an S corporation for income tax purposes.

         For the  twenty-eight  weeks ended July 16, 2000, we made tax
         distributions  of $3.6 million in accordance with the tax payment
         distribution agreement.

         In accordance  with SFAS No. 109,  "Accounting  for Income  Taxes",  we
         reversed our deferred tax accruals upon our conversion to S corporation
         status.  This  resulted in a credit to income  taxes of $5.6 million in
         the first quarter of fiscal 2000.




                                     Pg. 11

<PAGE>

                           SBARRO, INC. AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements (continued)

6.       Comprehensive income:

         The Company's  operations did not give rise to any items  includible in
         comprehensive  income which were not already included in net income for
         either of the  twenty-eight  or twelve week periods ended July 16, 2000
         and July 18, 1999.

7.       Contingencies:

         In February 1999, the Umberto of New Hyde Park joint venture companies,
         in which we have an 80% interest,  began an action in the U.S. District
         Court for the Eastern District of New York against Umberto Corteo,  who
         owns the  remaining 20% interest in the joint  venture  companies,  and
         against three other restaurants owned by Mr. Corteo. We alleged,  among
         other things,  that Mr. Corteo engaged in unfair trade practices and in
         trademark infringement, thereby breaching the joint venture agreements.
         We are seeking an  accounting,  compensatory  and punitive  damages and
         injunctive relief. The answer filed by Mr. Corteo and his co-defendants
         denies our claims and further alleges that non-competition restrictions
         against Mr. Corteo in the joint venture  agreements are  unenforceable.
         Mr. Corteo and his co-defendants  have also  counterclaimed  against us
         alleging  misappropriation  of trademark  rights and failure to perform
         administrative  duties that amounted to a breach of the agreements.  We
         believe that our claims  against Mr.  Corteo will be proven and that we
         have substantial defenses to his counterclaims.

         On November 17, 1999,  an action  entitled  Shan Wanli,  Basem  Tawill,
         Abdul Hamid v.  Sbarro,  Inc.  was filed in the  Superior  Court of the
         State of Washington for King County.  The  plaintiffs  allege that they
         served as store  managers,  general  managers,  assistant  managers  or
         co-managers  in our  restaurants  in the State of Washington at various
         times  since  November  17,  1996 and that,  in  connection  with their
         employment,  we violated the overtime  pay  provisions  of the State of
         Washington's  Minimum  Wage Act by  treating  them as  overtime  exempt
         employees,   breached  alleged  employment   agreements  and  statutory
         provisions  by  failing  to  record  and pay for  hours  worked  at the
         contract  rates  and/or  statutory  minimum  wage  rates and  failed to
         provide  statutorily   required  meal  breaks  and  rest  periods.  The
         plaintiffs  also  seek  to  represent  all of our  restaurant  managers
         employed  for any  period of time on or after  November  9, 1996 in the
         State of Washington. We currently own and operate 18 restaurants in the
         State of Washington.  The  plaintiffs  seek actual  damages,  exemplary
         damages and costs of the lawsuit, including reasonable attorney's fees,
         each in unspecified  amounts, and injunctive relief. We believe that we
         have substantial defenses to the claims and intend to vigorously defend
         this action.

         On December  20,  1999,  Antonio  Garcia and eleven  other  current and
         former general managers of Sbarro  restaurants in California  amended a
         complaint  filed in the Superior Court of California for Orange County.
         The complaint alleges that the plaintiffs were improperly classified as
         exempt employees under the California wage and hour law. The plaintiffs
         are seeking actual damages,  punitive damages and costs of the lawsuit,
         including reasonable attorney's fees, each in

                                     Pg. 12

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
              Notes To Consolidated Financial Statements (continued)

7.       Contingencies (continued):

         unspecified  amounts.  Plaintiffs'  counsel  has  stated  that he is in
         contact with the plaintiffs'  counsel in the Wanli case and that he may
         attempt to file a class  action based upon  alleged  violations  of the
         Fair Labor Standards Act. We believe that we have substantial  defenses
         to the claims and intend to vigorously defend this action.

         From  time  to  time,  we are a  party  to  certain  claims  and  legal
         proceedings in the ordinary  course of business,  none of which, in our
         opinion, would have a material adverse effect on our financial position
         or results of operations.

8.       Guarantor and non-guarantor financial statements:

         Certain  subsidiaries  have guaranteed  amounts  outstanding  under the
         Senior   Notes  and  Credit   Agreement.   Each  of  the   guaranteeing
         subsidiaries is our direct or indirect wholly owned subsidiary and each
         has fully  and  unconditionally  guaranteed  the  Senior  Notes and the
         Credit  Agreement on a joint and several basis. As described in Note 2,
         we have not completed  final purchase price  allocations.  Accordingly,
         the condensed  summary financial  information  presented below does not
         give effect to any final purchase price allocations.

         The following condensed consolidating financial information presents:

(1)    Condensed  consolidating  statements  of  operations  for  the
       twenty-eight and twelve weeks ended July 16, 2000 and July 18,
       1999 and cash flows for the twenty-eight week periods ended in
       each  respective  year and balance  sheets as of July 16, 2000
       and January 2, 2000 of (a) Sbarro,  Inc., the parent,  (b) the
       guarantor  subsidiaries  as  a  group,  (c)  the  nonguarantor
       subsidiaries  as a group and (d) the Company on a consolidated
       basis,

(2) Elimination entries necessary to consolidate Sbarro,  Inc., the parent, with
the guarantor and nonguarantor subsidiaries.

(3)  Investments  in  subsidiaries  are  accounted for by the parent on the cost
method.

         The principal  elimination entries eliminate  intercompany balances and
transactions.








                            Pg. 13

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
           Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>

                                                Condensed Consolidating Statement of Operations
                                                 For the Twenty-Eight Weeks Ended July 16, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Revenues:
<S>                               <C>                <C>                 <C>               <C>               <C>
    Restaurant sales            $ 81,997          $93,953             $9,714              $    -              $185,664
    Franchise related income       6,58                 -                  -                   -                 6,581
     Intercompany credits             -             8,043                  -              (8,043)                    -
     Interest income              1,334                 -               (699)                  -                   635
                                 --------       -------------        ------------   -------------              --------

       Total revenues             89,912          101,996              9,015              (8,043)             192,880
                                 --------           ---------       ------------         ---------           ---------

Costs and expenses:
     Cost of food and paper
       products                   14,670           18,965              2,655                  -                36,290
     Restaurant operating
        expenses:
       Payroll and other
         employee benefits        22,835           25,805              3,656                   -               52,296
Occupancy and other               26,105           30,420              2,507                   -               59,032
     Depreciation and
        amortization               9,589            6,529                398                  -                16,516
     General and administrative    5,919            7,436                508                  -                13,863
     Intercompany charges          8,043                    -                  -         (8,043)                   -
     Interest expense             16,090              440                 55                  -                16,585
     Other operating income       (1,825)          (1,109)                 -                -                  (2,934)
                               ----------         -----------        --------            -------               -------
       Total costs and expenses  101,426           88,486              9,779             (8,043)              191,648
                               ----------         -----------        --------            -------              -------

Income (loss) before
     income taxes                (11,514)          13,510               (764)               -                   1,232
Income taxes (benefit)            (5,918)             537                (28)               -                  (5,409)
                               -----------         ----------           ------          --------              --------

Net income (loss)                $(5,596)         $12,973              $(736)          $     -                 $6,641
                                ==========        ========             ======          ========                ========


</TABLE>















                                                                     Pg. 14

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
               Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>
                                               Condensed Consolidating Statement of Operations
                                                 For the Twenty-Eight Weeks Ended July 18, 1999

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Revenues:
     <S>                             <C>                <C>                  <C>                <C>                <C>
     Restaurant sales          $79,349             $92,819             $6,883              $    -            $179,051
     Franchise related inc       4,332                   -                  -                   -               4,332
     Intercompany credits            -               9,715                  -              (9,715)                 -
     Interest income             2,624                      -               -                   -               2,624
                               ----------          ----------          ---------       ----------          -------------

       Total revenues           86,305             102,534              6,883              (9,715)            186,007


Costs and expenses:
     Cost of food and paper
       products                 15,148              20,064              1,769                   -              36,981
Restaurant operating
        expenses:
       Payroll and other
         employee benefits      20,374              26,788              2,413                   -              49,575
       Occupancy and other      27,822              26,513              1,789                   -              56,124
     Depreciation and
        amortization             5,332               6,613                316                   -              12,261
     General and administrative  4,438               8,081                277               (354)              12,442
     Intercompany charges        9,715                    -                  -            (9,715)                  -
     Other operating income     (1,989)             (1,088)               144                354               (2,579)
                               --------           ---------        ----------         ----------             -----------
       Total costs and expenses 80,840              86,971              6,708             (9,715)             164,804
                               ---------          ----------           --------          --------          ------------

Income  before
     income taxes                5,465              15,563                175                  -               21,203
Income taxes                     2,076               5,914                 67                  -                8,057
                                -------            --------            -------           --------             ----------

Net income                      $3,389              $9,649               $108            $     -             $ 13,146
                                ========            ========             ======         ========             ===========


</TABLE>



















                                     Pg. 15

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                 Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                    For the Twelve Weeks Ended July 16, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Revenues:
     <S>                             <C>                 <C>                 <C>                <C>                 <C>
     Restaurant sales          $35,801             $41,129              $4,435         $        -             $81,365
     Franchise related
          income                 3,785                  -                    -                  -               3,785
     Intercompany credits            -               3,361                   -             (3,361)                  -
     Interest income               363                  -                 (182)                 -                 181
                               ----------          ----------          ---------         ----------             ----------

       Total revenues           39,949              44,490                4,253            (3,361)             85,331


Costs and expenses:
     Cost of food and paper
       products                  6,434               8,304                1,218                   -             15,956
     Restaurant operating
        expenses:
       Payroll and other
         employee benefits      10,646              10,409                1,665                   -             22,720
       Occupancy and other       9,471              14,992                1,097                   -             25,560
     Depreciation and
        amortization             4,128               2,801                 177                    -              7,106
     General and administrative  3,216               2,826                 176                    -              6,218
     Intercompany charges        3,361                   -                   -              (3,361)                   -
     Interest expense            6,896                 336                  23                    -              7,255
     Other operating inco         (648)               (433)                  -                    -             (1,081)
                               -----------         -----------       -----------        -----------             ---------
       Total costs and expenses 43,504               39,235              4,356              (3,361)             83,734
                               ----------          ----------           --------           -------               ---------

Income  (loss) before
     income taxes               (3,555)              5,255                (103)                 -                 1,597
Income taxes (benefit)            (103)                259                  (6)                 -                   150
                               -----------          ---------            --------        --------               --------

Net income (loss)              $(3,452)             $4,996                $(97)          $     -                 $1,447
                              ==========           ========              ======          ========                =======




</TABLE>














                                     Pg. 16

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
              Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                    For the Twelve Weeks Ended July 18, 1999

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Revenues:
     <S>                             <C>                 <C>                 <C>                <C>                 <C>
     Restaurant sales          $34,917             $40,661             $3,119              $    -             $78,697
     Franchise related income    1,826                   -                  -                   -               1,826
     Intercompany credits            -               4,220                  -              (4,220)                  -
     Interest income             1,033                   -                  -                   -               1,033
                              -----------          ----------          ---------        ----------           ------------
       Total revenues           37,776              44,881              3,119              (4,220)             81,556


Costs and expenses:
     Cost of food and paper
       products                  6,585               8,632                800                   -              16,017
Restaurant operating
        expenses:
       Payroll and other
         employee benefits       8,878              11,475              1,119                   -              21,472
       Occupancy and other      12,747              10,734                775                   -              24,256
     Depreciation and
        amortization             2,045               3,128                138                   -               5,311
     General and administrative  1,306               4,279                122                (177)              5,530
     Intercompany charges        4,220                   -                  -              (4,220)                  -
     Other operating income       (593)               (729)                61                 177              (1,084)
                               -----------          ----------         ---------           --------           ---------
       Total costs and expenses 35,188              37,519              3,015              (4,220)             71,502
                               ----------          ----------           --------           -------             ---------

Income  before
     income taxes                2,588               7,362                104                  -               10,054
Income taxes                       983               2,798                 39                  -                3,820
                               --------             -------             -------            --------             ----------

Net income                      $1,605              $4,564                $65             $     -              $6,234
                                ========            ========              =====            ========            ========


</TABLE>



















                                     Pg. 17

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
           Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>
                      Condensed Consolidating Balance Sheet
                               As of July l6, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total

<S>                            <C>                  <C>                  <C>           <C>                    <C>
Cash and cash equivalents      $15,814              $3,275               $118          $      -                  $19,207
Restricted cash for untendered
     shares                        195                -                     -                 -                      195
Receivables                      5,411                 962                149                 -                    6,522
Inventories                      1,245               1,487                159                 -                    2,891
Prepaid expenses and other       1,702               1,594                154                 -                    3,450
                               ----------             -------           --------           ------            -----------
     Total current assets       24,367               7,318                580                   -                 32,265
Intercompany receivables             -             184,513                  -           (184,513)                      -
Investment in subsidiaries      66,237                   -                  -            (66,237)                      -
Net property, plant and
     equipment                  45,126              81,592             12,605                   -                139,323
Intercompany  receivables
     - long term                 3,579                   -                  -             (3,579)                      -
Goodwill and other assets      249,014               1,041              (1,239)          (15,177)                233,639
                              -----------      --------------        ----------        -----------           ------------
     Total assets              $388,323           $274,464             $11,946         $(269,506)               $405,227
                               ==========         ===========         ==========       ==========           ============

Amounts due for untendered
     shares                       $195              $     -             $    -          $     -                     $195
Accounts payable and accrued
     expenses                   28,738                  854              2,875                -                   32,467
Accrued interest                 9,740                    -                  -                -                    9,740
Current portion of mortgage
     payable                         -                  116                  -                -                      116
                               ----------            --------          ---------         --------      -----------------
     Total current liabilities  38,673                  970              2,875                -                   42,518

Intercompany payables          184,513                    -             13,407          (197,920)                     -
Long-term debt, net of
     current portion           251,515               15,854                  -                -                  267,369
Intercompany payables -
     long term                       -                3,579                  -            (3,579)                     -
Common stock                        71                    -                  -                -                       71
Additional paid-in capital          10               66,237              1,770           (68,007)                     10
Retained earnings (deficit)    (86,459)             187,824             (6,106)               -                   95,259
                               --------         ------------             -------   -------------              ----------
     Total stockholders' equity
       (deficiency)            (86,378)             254,061             (4,336)         (68,007)                  95,340
                              ----------        -----------             -------         --------             -----------
     Total liabilities and
       stockholders' equity    $388,323            $274,464            $11,946        $(269,506)                $405,227
                               ==========         ===========         ==========       ==========             ===========



</TABLE>








                                     Pg. 18

<PAGE>

                         SBARRO, INC. AND SUBSIDIARIES
          Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>

                      Condensed Consolidating Balance Sheet
                              As of January 2, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total

<S>                               <C>                  <C>                <C>              <C>                   <C>
Cash and cash equivalents         $27,853              $4,391             $1,270           $    -                $33,514
Restricted cash for untendered
     shares                           298                   -                  -                -                    298
Receivables                         3,485                 829                 53                -                  4,367
Inventories                         1,594               1,963                129                -                  3,686
Prepaid expenses and other          2,234                (378)                49                -                  1,905
                                  -------              -------           -------            -----                -------
     Total current assets          35,464               6,805              1,501                -                 43,770
Intercompany receivables                -             172,769                  -         (172,769)                     -
Investment in subsidiaries         66,237                   -                  -          (66,237)                     -
Net property, plant and
     equipment                     47,568              82,215              7,449                -                137,232
Intercompany receivables
     - long term                   19,897                   -                  -         (19,897)                      -
Goodwill and other assets         247,180                 706              1,433         (12,488)                236,831
                                ---------         -----------           --------      -----------              ---------
     Total assets                $416,346            $262,495            $10,383       $(271,391)               $417,833
                                 ========            ========            =======       ==========               ========

Amounts due for untendered
     shares                          $298               $   -              $   -            $   -                   $298
Accounts payable and accrued
     expenses                      38,587                 759              2,736                -                 42,082
Accrued interest                    7,480                   -                  -                -                  7,480
Income taxes                          986               (180)                (52)               -                    754
                                 --------               -----             ------          -------                -------
     Total current liabilities     47,351                 579              2,684                -                 50,614

Intercompany payables             172,769                   -             10,718        (183,487)                      -
Long-term debt, net of
     current portion              251,310                   -                  -                -                251,310
Deferred income taxes               5,629                   -                  -                -                  5,629
Intercompany payables
     - long term                        -              19,897                  -         (19,897)                      -
Common stock                           71                   -                  -                -                     71
Additional paid-in capital             10              66,237              1,770         (68,007)                     10
Retained earnings (deficit)      (60,794)             175,782             (4,789)               -                110,199
                                 --------             -------             -------   -------------                -------
     Total stockholders' equity
       (deficiency)              (60,713)             242,019             (3,019)        (68,007)                110,280
                                 --------             -------             -------        --------                -------
     Total liabilities and
       stockholders' equity      $416,346            $262,495            $10,383       $(271,391)               $417,833
                                 ========            ========            =======       ==========               ========


</TABLE>





                                     Pg. 19

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                 Notes To Consolidated Financial Statements (continued)
8.       Guarantor and non-guarantor financial statements (continued):
<TABLE>
<CAPTION>
                 Condensed Consolidating Statement of Cash Flows
                 For the Twenty-Eight Weeks ended July 16, 2000
                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Operating activities:
<S>                               <C>              <C>                     <C>              <C>                <C>
Net income (loss)                 $(5,596)         $12,973                 $(736)           $   -                $6,641
Adjustments to reconcile net income
   to net cash provided by
   operating activities:
     Depreciation and amortization 10,365            6,524                   426                -                17,315
     Deferred taxes                (5,629)               -                     -                -                (5,629)
     Changes in operating assets
      and liabilities:
      Increase in receivables      (1,782)            (133)                  (96)               -                (2,011)
      Decrease (increase) in
          inventories                 348              477                   (30)               -                   795
      Decrease (increase) in
        prepaid expenses              531           (1,971)                 (105)               -                 (1,545)
      Increase (decrease) in
        other assets               (3,998)             102                 2,066            2,689                    859
      (Decrease) increase in accounts
       payable and accrued expenses (9,737)             20                   139                -                 (9,578)
      Increase in accrued
        interest payable             2,260               -                     -                -                  2,260
      (Decrease) increase in
        income taxes payable          (986)            180                    52                -                   (754)
                                 ---------          ---------         ----------        ---------                 -------
Net cash (used in) provided by
   operating activities            (14,224)         18,172                 1,716            2,689                   8,353
                                  --------           --------           --------          -------                 -------

Investing activities:
Purchases of property and
   equipment                        (3,296)          (5,810)              (5,557)               -                 (14,663)
                                   -------           -------            -------         ----------                --------
Net cash used in investing
     activities                     (3,296)          (5,810)              (5,557)               -                 (14,663)
                                    -------          -------            -------         ----------                --------
Financing activities:
Proceeds from mortgage                  -             16,000                  -                -                   16,000
Mortgage principal repayments           -                (29)                 -                -                      (29)
Cost of mortgage                        -               (387)                 -                -                     (387)
Loan to officer                    (2,000)                 -                  -                -                   (2,000)
Distributions to shareholders     (21,581)                 -                  -                -                  (21,581)
Intercompany balances              29,062            (29,062)             2,689            (2,689)                      -
                              -----------            --------          --------          --------             ------------
Net cash (used in) provided
   by financing activities          5,481            (13,478)             2,689            (2,689)                 (7,997)
                              -----------            ---------          --------           -------                -------

Decrease in cash and cash
   equivalents                    (12,039)            (1,116)            (1,152)               -                  (14,307)
Cash and cash equivalents
   at beginning of period          27,853              4,391              1,270                -                   33,514
                               ----------           ---------              -----          -------                 -------
Cash and cash equivalents
   at end of period               $15,814             $3,275               $118           $    -                  $19,207
                                =========            ========             ======         ========               ==========

Supplemental disclosure of cash flow information:
Cash paid during the period
   for income taxes               $2,515                $409                $38         $      -                   $2,962
                                =========               =====               ====        ===========            ==========
Cash paid during the period
   for interest                  $13,060                $440                $59        $       -                  $13,559
                                =========               =====              =====         ==========             =========
</TABLE>

                                     Pg. 20

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
            Notes To Consolidated Financial Statements (continued)

8.       Guarantor and non-guarantor financial statements (continued):
<TABLE>
<CAPTION>

                 Condensed Consolidating Statement of Cash Flows
                 For the Twenty-Eight Weeks ended July 18, 1999

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Operating activities:
<S>                                <C>              <C>                    <C>              <C>               <C>
Net income                           $3,389           $9,649                $108             $   -             $13,146
Adjustments to reconcile net income
   to net cash provided by
   operating activities:
     Depreciation and amortization    5,960             5,984                334                 -              12,278
     Deferred taxes                    (337)                -                  -                 -                (337)
     Changes in operating assets
      and liabilities:
      Decrease (increase)in receivables   6                 1                (22)                -                 (15)
      Decrease (increase)in inventories  93               159                (12)                -                 240
      Increase in prepaid expenses   (2,060)           (1,643)              (120)                -              (3,823)
      Decrease in other assets       (2,039)              (10)              (308)                -              (2,357)
      (Decrease) increase in accounts
         payable and accrued expenses  (955)             (461)             1,110                 -                (306)
      Decrease in income
        taxes payable                (4,030)              (41)                 -                 -              (4,071)
                                   ---------        ------------       ---------           --------           ---------
Net cash provided by
   operating activities                  27            13,638              1,090                 -              14,755
                                 -----------          ----------        --------           --------            --------

Investing activities:
Purchases of property and
   equipment                         (8,180)            (3,745)             (821)               -                (12,746)
                                     -------             -------            -----         ----------            --------
Net cash used in investing
   activities                        (8,180)            (3,745)             (821)               -                (12,746)
                                     -------             -------            -----         ----------             --------

Financing activities:
Proceeds from exercise of
   stock options                        426                   -                -                -                    426
Intercompany balances                12,832             (12,832)               -                -                      -
                                  ---------             --------          ------             ------              ---------
Net cash (used in) provided
   by financing activities           13,258             (12,832)               -                -                    426
                                -----------           ----------          ------             ------                 -----

Increase (decrease) in cash and
   cash equivalents                   5,105               (2,939)            269                -                  2,435
Cash and cash equivalents
   at beginning of period           143,697                6,268             507                -                150,472
                                -----------             ---------           -----         --------            -----------
Cash and cash equivalents
   at end of period                $148,802               $3,329            $776           $    -               $152,907
                                 ==========               ========         ======         ========            ===========

Supplemental disclosure of cash flow information:
Cash paid during the period
   for income taxes                $12,848                $1,003             $10          $     -                $13,861
                                 ==========             ========           =====        =========              ==========

</TABLE>





                                     Pg. 21
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Results of Operations

Our fiscal year ends on the Sunday nearest to December 31.  Fiscal 2000 and
fiscal 1999 each contain 52 weeks.

The following table provides information  concerning the number of Company-owned
and franchised restaurants in operation during each indicated period:
<TABLE>
<CAPTION>

                                            28 Weeks       28 Weeks       12 Weeks       12 Weeks
                                              Ended          Ended          Ended          Ended           Fiscal Year
                                            07/16/00       07/18/99       07/16/00        7/18/99        1999          1998
                                            --------       --------       --------        -------        ----          ----
Company-owned restaurants (1):
  <S>                                            <C>            <C>           <C>           <C>             <C>          <C>
   Opened during period                         5              9             -              2           24              25
   Acquired from (sold to)
     franchisees during period-net              -             -              -              -            (1)             1

   Closed during period                        (8)            (5)           (4)           (3)             (9)          (20)
                                            ------          -----         ------       -------         ------        ------
   Open at end of period                      635            628           641            625            638           624

Franchised restaurants:
   Opened during period                        17             19            11              6           49              43
   Purchased from (sold to)
     Company during period-net                      -       -                -              -             1             (1)
   Closed or terminated during period         (13)          (13)             (6)          (7)           (32)           (13)
                                             -----         -----            ----        ------           ----         -----
   Open at end of period                     290             274           290           274             286           268

All restaurants:
   Opened during period                      22              28            11               8           73              68
   Closed or terminated during period        (18)          (18)          (10)            (10)          (41)            (33)
                                             -----         -----          ----            ----         -----         -----
   Open at end of period                     925            902           925             899          924             892

Kiosks (all franchised) open at
   end of period                               5              8             5               8             4              8

</TABLE>

(1)      Excludes 28, 23, 26 and 19 new concept units as of July 16, 2000,
July 18, 1999, fiscal 1999 and fiscal 1998, respectively.



                                     Pg. 22



<PAGE>



Our business is subject to seasonal fluctuations,  and the effect of weather and
economic conditions. Earnings have been highest in our fourth fiscal quarter due
primarily to  increased  volume in shopping  malls  during the holiday  shopping
season.  While the fourth fiscal quarter normally accounts for approximately 40%
of  operating  income for the year,  the length of the holiday  shopping  period
between  Thanksgiving  and New  Year's Day and the number of weeks in our fourth
quarter result in fluctuations in fourth quarter  financial results from year to
year.

The going private transaction and certain other transactions  described in Notes
2,  3, 4 and 5 of  the  Notes  to the  Consolidated  Financial  Statements  have
affected  the   comparability   of  the  interest   income,   depreciation   and
amortization,  interest  expense  and income tax line items in our  consolidated
statements of operations  for the  twenty-eight  and twelve weeks ended July 16,
2000 as compared to the comparable period in fiscal 1999 (see below).

Our consolidated EBITDA for the twenty-eight weeks ended July 16, 2000 was $33.7
million and our EBITDA  margin was 17.5%,  compared to $30.8  million and 16.8%,
respectively,  for the twenty-eight  weeks ended July 18, 1999. Our consolidated
EBITDA for the twelve weeks ended July 16, 2000 was $15.8 million and our EBITDA
margin was 18.6%  compared  to $14.3  million  and 17.8%,  respectively.  EBITDA
represents  earnings before  cumulative  effect of change in accounting  method,
interest income, interest expense, taxes, depreciation and amortization.  EBITDA
margin  represents  EBITDA divided by the sum of restaurant  sales and franchise
related  income.  EBITDA  should not be  considered  in isolation  from, or as a
substitute  for,  net  income,  cash flow  from  operations  or other  cash flow
statement  data  prepared  in  accordance  with  generally  accepted  accounting
principles or as a measure of a company's  profitability  or liquidity.  Rather,
EBITDA is  presented  because  it is a widely  accepted  supplemental  financial
measure,  and we believe that it provides relevant and useful  information.  Our
calculation  of EBITDA  may not be  comparable  to a  similarly  titled  measure
reported by other companies,  since all companies do not calculate this non-GAAP
measure  in the  same  manner.  Our  EBITDA  calculations  are not  intended  to
represent  cash  provided by (used in)  operating  activities  since they do not
include interest and taxes and changes in operating assets and liabilities,  nor
are they  intended to represent a net increase in cash since they do not include
cash provided by (used in) investing and financing activities.

Restaurant  sales from  Sbarro-owned  units and  consolidated  new concept joint
venture  units  increased  by $6.6  million  or 3.7% to $185.7  million  for the
twenty-eight  weeks ended July 16, 2000 from $179.1 million in the  twenty-eight
weeks ended July 18, 1999.  Restaurant  sales from those same units increased by
$2.7  million or 3.4% to $81.4  million for the twelve weeks ended July 16, 2000
from $78.7  million  in the twelve  weeks  ended July 18,  1999.  Sales from new
concept units contributed $9.7 million and $4.4 million for the twenty-eight and
twelve  weeks ended July 16,  2000,  respectively,  compared to $6.9 million and
$3.1 million for the  twenty-eight  and twelve  weeks ended July 18,  1999.  The
increase in overall  restaurant sales resulted primarily from a higher number of
units being in operation in the current fiscal year than the  comparable  period
in 1999 and selective menu price increases of approximately 2.8% at Sbarro units
which became effective in September 1999. Comparable Sbarro unit sales increased
0.8% for the first  twenty-eight weeks of fiscal 2000 over the same twenty-eight
week period of the 1999 fiscal year.  Comparable restaurant sales are made up of
sales at  locations  that were open during the entire  current and prior  fiscal
year.

                        Pg. 23

<PAGE>

Franchise  related  income  increased  51.9%  to  $6.6  million  for  the  first
twenty-eight  weeks  ended July 16, 2000 from $4.3  million in the  twenty-eight
week period ended July 18, 1999.  The increase for the second  quarter of fiscal
2000 was 107.3% to $3.8 million from $1.8 million for the same quarter of fiscal
1999. The increases resulted from greater  continuing  royalties due to a higher
number of franchise units in operation in the current twelve week period than in
the comparable 1999 period,  higher area development and initial  franchise fees
in each of the first two quarters of fiscal 2000 than the comparable  periods of
fiscal 1999 and,  for the second  quarter of 2000,  approximately  $1.5  million
recognized in second  quarter of fiscal 2000 related to the  termination  of our
development  agreement and the closing of all Sbarro locations in Japan.  During
the first  quarter  of 2000,  we entered  into area  development  agreements  in
specific  domestic  and  international  venues and  markets  with two major food
service operators.  We believe these agreements will increase the rate of growth
in our franchise operations.

Interest income was approximately  $0.6 million for the twenty-eight weeks ended
July 16, 2000  compared to $2.6  million in the  twenty-eight  week period ended
July 18, 1999. Interest income for the respective twelve week periods then ended
were $0.2 million and $1.0 million.  As discussed  elsewhere in this report,  we
used  substantially  all of our available cash on September 28, 1999 in order to
fund the going private transaction.  Therefore,  we have a substantial reduction
in our  interest  income  for  fiscal  2000.  We will not  realize  the level of
interest  income as we have in the past  unless  and until we  rebuild  our cash
position.

Cost of food and paper products as a percentage of restaurant  sales improved to
19.5% and 19.6% for the  twenty-eight  and twelve  weeks  ended  July 16,  2000,
respectively, from 20.7% and 20.4%, respectively, for the comparable 1999 fiscal
periods.  These  improvements  were primarily due to lower average cheese prices
during fiscal 2000 and the impact of the menu price increases described above.

Restaurant operating expenses - payroll and other employee benefits increased to
28.2% of  restaurant  sales in the  twenty-eight  weeks ended July 16, 2000 from
27.7% of restaurant sales in the twenty-eight weeks ended July 18, 1999. For the
second  quarter of fiscal 2000 and 1999,  these expenses  represented  27.9% and
27.3%, respectively,  of restaurant sales. These increases were primarily due to
the tight  labor  market,  resulting  in  pressures  on wages and  salaries  and
associated  increases in amounts paid for payroll  taxes.  Congress has recently
been  considering  increasing  the minimum  wage by $1.00 per hour over a two to
three year  period,  which if  implemented,  would  increase our labor costs for
certain  of our  hourly  employees.  This is also  expected  to  result  in wage
increases  for our  hourly  employees  that are paid in excess  of the  proposed
minimum wage level.

Restaurant  operating expenses - occupancy and other expenses increased to 31.8%
of restaurant sales in the twenty-eight  weeks ended July 16, 2000 from 31.3% in
the twenty-eight weeks ended July 18, 1999. These expenses represented 31.3% and
30.8% of restaurant  sales for the twelve weeks ended July 16, 2000 and July 18,
1999,  respectively.  These increases were attributable principally to increases
in rent and other occupancy related costs.

Depreciation and amortization  expense increased by $4.3 and $1.8 million in the
twenty-eight  and twelve  weeks  ended  July 16,  2000,  respectively,  over the
twenty-eight and twelve week period ended July 18, 1999, respectively, primarily
as a result of the  amortization  of the excess of the  purchase  price over the
cost of net assets deemed in connection with the completion of the going private
transaction on September 28, 1999.

                                   Pg. 24

<PAGE>

General  and  administrative  expenses  were  $13.9  million,  or 7.2% of  total
revenues,  for the  twenty-eight  weeks ended July 16,  2000,  compared to $12.4
million,  or 6.7% of total revenues,  for the twenty-eight  weeks ended July 18,
1999.  For the twelve weeks ended July 16, 2000 and July 18,  1999,  general and
administrative  expenses were $6.2 million, or 7.3% of total revenues,  compared
to $5.5 million, or 6.8% of total revenues,  respectively.  These increases were
primarily due to higher  payroll costs due to the tight labor market,  expanding
joint venture operations, higher litigation costs and increases in various field
training and human resource functions.

Interest  expense of $16.6  million for the first half and $7.3  million for the
second  quarter of 2000 relate to the Senior  Notes,  mortgage and unused Credit
Agreement line fees. Of this amount, $0.8 and $0.4 million represented  non-cash
charges for the twenty-eight and twelve weeks ended July 16, 2000, respectively,
for the  accretion  of the original  issue  discount on our Senior Notes and the
amortization of deferred financing costs on both the Senior Notes and the Credit
Agreement.

Other  operating  income  increased  by $0.4  million  to $2.9  million  for the
twenty-eight  weeks ended July 16, 2000 primarily as a result of income,  net of
expenses,  generated  from the  leasing of  substantially  all of our  corporate
headquarters building not occupied by Sbarro to third parties and an increase in
equity  earnings of new concept  joint  ventures  accounted for under the equity
method of accounting. Other operating income for the twelve weeks ended July 16,
2000 was unchanged from the comparable period in fiscal 1999.

We have elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code and, where applicable and permitted,  under similar state and local
income tax  provisions  beginning  January 3, 2000.  As required by Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", we
recognized a $5.6 million  credit  associated  with the reversal of our deferred
tax liabilities upon conversion to S corporation status. Under the provisions of
Subchapter  S,  substantially  all  taxes  on  our  income  is now  paid  by our
shareholders  rather  than us. Our tax  expense  for the first two  quarters  of
fiscal 2000  included  $0.3  million (of which $0.2  million was recorded in the
second  quarter)  for  taxes  owed  to  jurisdictions  that do not  recognize  S
corporation status or that tax entities based on factors other than income.

Liquidity and Capital Resources

We have  historically  not  required  significant  working  capital  to fund our
existing  operations and have financed our capital  expenditures and investments
in our joint ventures through cash generated from operations.  Substantially all
of our cash at  September  28,  1999  was used to  complete  the  going  private
transaction.  As a result,  at July 16, 2000, we had unrestricted  cash and cash
equivalents  of $19.2  million and a working  capital  deficit of $10.3  million
compared to  unrestricted  cash, cash  equivalents and marketable  securities of
$127.3 million and working capital of $232.4 million at July 18, 1999.

As part of the going private  transaction,  we issued  $255.0  million of Senior
Notes and entered  into a $30.0  million  bank Credit  Agreement.  We have $27.5
million of undrawn availability

                                     Pg. 25

<PAGE>

under the Credit Agreement,  net of outstanding letters of credit and guarantees
of reimbursement obligations currently aggregating approximately $2.5 million.
In March and April 2000,  we  obtained  a  $16.0  million  8.4%  mortgage  loan
on  our  corporate headquarters   building,   distributed   an  $18.0   million
dividend  to  our shareholders,  and loaned $2 million to our Chairman  and CEO.
In  addition,  we have made $3.6 million of tax distributions  (which are
treated as dividends) to our shareholders through the second quarter as
discussed below.

Net cash generated in operating activities was $8.4 million for the twenty-eight
weeks  ended  July 16,  2000  compared  to $14.8  million  generated  during the
twenty-eight weeks ended July 18, 1999. The $6.4 million reduction was primarily
due to the  decrease  in net income of $6.5  million  and a decrease in deferred
taxes of $5.3 million offset by increased  depreciation and amortization of $5.0
million and a $0.4 million net increase in operating assets and liabilities. The
net increase in operating assets and liabilities in the comparable  twenty-eight
week  periods  of 2000 from the  changes  during the  comparable  period in 1999
resulted  principally  from an  increase  in  accrued  interest  payable of $2.3
million,  and a $9.3 million  reduction in accounts payable and accrued expenses
(other than  accrued  interest  expense)  and a $5.3  million  increase in taxes
receivable  and decrease in income taxes  payable as a result of our election of
Subchapter S status in March 2000 (see below).

Net cash used in investing activities primarily relates to capital expenditures,
including  investments  made by our joint  ventures.  Net cash used in investing
activities was $14.7 million for the twenty-eight  weeks ended July 16, 2000 and
$12.7 million for the  twenty-eight  weeks ended July 18, 1999.

Net cash used in  financing  activities  was $8.0  million for the  twenty-eight
weeks ended July 16, 2000 compared to $0.4 million of cash provided by financing
activities for the comparable period in 1999. This increase  primarily  resulted
from cash dividends of $18.0 million and tax  distributions of $3.6 million (see
below) to our  shareholders  and a $2.0  million  loan to our  Chairman  and CEO
offset by $15.6 million of net proceeds from a loan secured by a mortgage on our
corporate headquarters.

As a result of the going private  transaction,  we used substantially all of our
cash on hand at September 29. 1999 and incurred  approximately $255.0 million of
debt. We will incur annual cash interest expense of approximately  $29.7 million
under the  senior  notes and  mortgage  loan and may incur  additional  interest
expense for borrowings under our Credit Agreement.  In addition to debt service,
we expect that our other  liquidity  needs will relate to capital  expenditures,
working capital, investments in joint ventures, distributions to shareholders as
permitted  under the  Indenture  and  Credit  Agreement  and  general  corporate
purposes. We expect our primary sources of liquidity to meet these needs will be
cash flow from operations and availability under our Credit Agreement.

We believe that aggregate restaurant capital expenditures and our investments
in joint ventures



                                     Pg. 26

<PAGE>

during the next twelve  months will be  moderately  higher than levels in recent
fiscal years.

We do not have any principal repayment obligations under the Senior Notes or our
Credit  Agreement  for ten and five years,  respectively.  We were in compliance
with the various covenants in the Indenture, Credit Agreement and Mortgage as of
July 16, 2000.

In March 2000,  we elected to be taxed under the  provisions  of Subchapter S of
the Internal  Revenue Code and, where  applicable  and permitted,  under similar
state and local  income tax  provisions  beginning  January  3, 2000.  Under the
provisions of Subchapter S,  substantially  all taxes on our income will be paid
by our  shareholders.  We and our  shareholders  will  have a tax  liability  of
approximately  50% of our  taxable  income.  This  tax rate is  higher  than our
historical  effective  tax  rate due to (i)  differences  in tax  rates  between
individual  and  corporate  taxpayers,  (ii) the timing  differences  previously
accounted for as deferred  taxes in our  financial  statements  (which  deferred
taxes were eliminated upon our conversion to S corporation status) and (iii) the
effect of double  taxation  in those state and local  jurisdictions  that do not
recognize  S  corporation  status.  The  Indenture  and credit  facility  permit
distributions  to  shareholders  for  taxes  on our  earnings  and we  made  tax
distributions of $3.6 million in the twenty-eight weeks ended July 16, 2000.

Historically we have paid dividends on our common stock to our shareholders.  On
March 13, 2000 our Board of Directors  declared a dividend of $18.0 million.  We
expect that our Board of Directors will from time to time elect to pay dividends
to our  shareholders  in amounts  that will be based  upon a number of  factors,
including  our  working  capital  needs,  operating  performance,  debt  service
obligations and capital expenditure  requirements.  Distributions are subject to
the provisions of the Indenture and Credit Agreement.

Forward Looking Statements

This report (and other reports and statements issued by us and our officers from
time to time) contains  certain  forward-looking  statements about our financial
condition,   results  of  operations,   future  prospects  and  business.  These
statements  appear in a number of places in the  report and  include  statements
regarding our intent,  belief,  expectation,  strategies or  projections at that
time. These statements generally contain words such as "may", "should", "seeks",
"believes",  "expects", "intends", "plans", "estimates",  "projects", "strategy"
and similar expressions or the negative of those words.

Forward-looking  statements  are subject to a number of known and unknown  risks
and  uncertainties  that could cause actual  results to differ  materially  from
those projected,  expressed or implied in the forward-looking statements.  These
risks and uncertainties,  many of which are not within our control,  include but
are not limited to,  general  economic,  weather and  business  conditions;  the
availability of suitable restaurant sites in appropriate regional shopping malls
and other  locations on  reasonable  rental terms;  changes in consumer  tastes;
changes in population and traffic  patterns;  our ability to continue to attract
franchisees;  the success of our  present,  and any future,  joint  ventures and
other expansion opportunities; the availability of food (particularly cheese and
tomatoes)  and  paper  products  at  reasonable  prices;  no  material  increase
occurring in

                                     Pg. 27

<PAGE>

the  Federal  minimum  wage;  the loss of  services  of  members  of our senior
management  team;  our ability to attract  competent  restaurant  and  executive
managerial  personnel;  competition;  government  regulations;  our  ability  to
generate  sufficient cash flow to make interest payments and principal under our
Senior Notes and Credit Agreement;  the effects which restrictions imposed on us
under our Senior Notes,  Indenture and Credit  Agreement may have on our ability
to operate our  business;  and our  ability to  repurchase  Senior  Notes to the
extent  required and make  repayments  under our Credit  Agreement to the extent
required  in the event we make  certain  asset sales or  experience  a change of
control.

Because forward-looking  statements are subject to risks and uncertainties,  you
are cautioned not to place undue reliance on these statements,  which speak only
as of the date of this report.

We do not  undertake  any  responsibility  to release  publicly any revisions to
these  forward-looking  statements to take into account events or  circumstances
that  occur  after  the date of this  report,  other  than as  required  by law.
Additionally,  we do not  undertake  any  responsibility  to  update  you on the
occurrence of any unanticipated  events which may cause actual results to differ
from those expressed or implied by the forward-looking  statements  contained in
this report, other than as required by law.

Item 3.           Qualitative and Quantitative Disclosures of Market Risk

We have historically invested our cash on hand in short term, fixed rate, highly
rated and  highly  liquid  instruments  which are  reinvested  when they  mature
throughout  the year.  Although our existing  investments  are not considered at
risk with respect to changes in interest rates or markets for these instruments,
our rate of return on  short-term  investments  could be affected at the time of
reinvestment as a result of intervening events.

Our  borrowings  under our credit  facility will be subject to  fluctuations  in
interest rates.  However, we do not expect to enter into any interest rate swaps
or other instruments to hedge our borrowings under our credit facility.

We have not purchased  future,  forward,  option or other  instruments  to hedge
against fluctuations in the prices of the commodities we purchase.  As a result,
our future  commodities  purchases  are subject to changes in the prices of such
commodities.

All of our transactions  with foreign  franchisees have been denominated in, and
all  payments  have been made in,  United  States  dollars,  reducing  the risks
attendant in changes in the values of foreign  currencies.  As a result, we have
not purchased future  contracts,  options or other  instruments to hedge against
changes in values of foreign currencies.







                                     Pg. 28
<PAGE>



                           PART II. OTHER INFORMATION



Item 6.           Exhibits and Reports on Form 8-K.

(a)      Exhibits:
         No.               Description

         27                Financial Data Schedule



(b)      Reports on Form 8-K.

No  Current  Reports  on Form 8-K were  filed by the  Company  during the period
covered by this report.


























                                     Pg. 29


<PAGE>


                                    SIGNATURE


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



                                                     SBARRO, INC.
                                                     Registrant


Date:    August 29, 2000            By:    /s/ MARIO SBARRO
         ---------------                    ------------------------------------
                                               Mario Sbarro
                                               Chairman of the Board and
                                               President (Principal
                                               Executive Officer)



Date:    August 29, 2000            By:     /s/ ROBERT G. ROONEY
         ---------------                    ------------------------------------
                                                Robert G. Rooney
                                                Senior Vice President and Chief
                                                Financial Officer (Principal
                                                Financial Officer)



Date:    August 29, 2000            By:     /s/ STEVEN B. GRAHAM
         ---------------                     -----------------------------------
                                                Steven B. Graham
                                                Vice President and Controller
                                                (Principal Accounting Officer)












                                     Pg. 30



<PAGE>




                                  EXHIBIT INDEX



Exhibit Number                      Description

         27                                 Financial Data Schedule