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


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarter ended October 3, 2004           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                   11747-4714
    (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           No
    -------      -------

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes           No    X
    -------      -------


The  number  of  shares  of Common  Stock of the  registrant  outstanding  as of
November 5, 2004 was 7,064,328.


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


<PAGE>

                                  SBARRO, INC.

                                 FORM 10-Q INDEX


<TABLE>
<CAPTION>
PART I.      FINANCIAL INFORMATION                                                                      PAGES
<S>                                                                                                    <C>

Consolidated Financial Statements:

         Balance Sheets - October 3, 2004 (unaudited) and December 28, 2003.............................3-4

         Statements of Operations (unaudited) - Forty and Twelve Weeks ended

             October 3, 2004 and October 5, 2003........................................................5-6

         Statements of Cash Flows (unaudited) - Forty Weeks ended

             October 3, 2004 and October 5, 2003........................................................7-8

         Notes to Unaudited Consolidated Financial Statements..........................................9-24

Management's Discussion and Analysis of Financial Condition and Results of

    Operations........................................................................................25-34

Qualitative and Quantitative Disclosures of Market Risk..................................................35

Controls and Procedures..................................................................................35

PART II.     OTHER INFORMATION...........................................................................36
</TABLE>



                                     Page 2
<PAGE>

Part I - Financial Information

Item 1.    Consolidated Financial Statements

                          SBARRO, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    (In thousands)
                                                                --------------------------
ASSETS                                                      October 3, 2004   December 28, 2003
                                                                --------          --------
                                                              (unaudited)
<S>                                                             <C>               <C>
Current assets:
    Cash and cash equivalents                                   $ 36,561          $ 56,409
    Receivables, net of allowance for doubtful
       accounts of $460 in 2004 and $488 in 2003:
         Franchisees                                               1,927             1,700
         Other                                                     1,666             1,171
    Inventories                                                    2,516             2,707
    Prepaid expenses                                              10,711             3,865
    Current portion of loans receivable from officers              5,550             2,810
                                                                --------          --------
               Total current assets                               58,931            68,662

Property and equipment, net                                       89,641            96,604

Intangible assets:
Trademarks, net                                                  195,916           195,916
Goodwill, net                                                      9,204             9,204
Deferred financing costs and other, net                            4,742             5,482

Loans receivable from officers, less current portion                 102             3,347
Other assets                                                       7,404             7,614
                                                                --------          --------
                                                                $365,940          $386,829
                                                                ========          ========
</TABLE>



            See notes to unaudited consolidated financial statements.


                                     Page 3
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                (In thousands except share data)
                                                                  --------------------------
LIABILITIES & SHAREHOLDERS' EQUITY                            October 3, 2004   December 28, 2003
                                                                  --------          --------
                                                                (unaudited)
<S>                                                               <C>               <C>
Current liabilities:
      Accounts payable                                            $ 11,050          $ 13,734
      Accrued expenses                                              18,343            18,795
      Accrued interest payable                                       1,708             8,181
      Current portion of mortgage payable                              179               168
                                                                  --------          --------
             Total current liabilities                              31,280            40,878
                                                                  --------          --------

Deferred rent                                                        9,024             8,711
                                                                  --------          --------

Long-term debt, net                                                268,294           268,152
                                                                  --------          --------

Commitments and contingencies:

Shareholders' equity:
      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                                         71                71
      Additional paid-in capital                                        10                10
      Retained earnings                                             57,261            69,007
                                                                  --------          --------
               Total shareholders' equity                           57,342            69,088
                                                                  --------          --------
                                                                  $365,940          $386,829
                                                                  ========          ========
</TABLE>




            See notes to unaudited consolidated financial statements.


                                     Page 4
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         (In thousands)
                                                                  -----------------------------
                                                                    For the forty weeks ended
                                                                  -----------------------------
                                                               October 3, 2004     October 5, 2003
                                                                  ---------           ---------
<S>                                                               <C>                 <C>
Revenues:
     Restaurant sales                                             $ 233,587           $ 228,863
     Franchise related income                                         8,885               7,625
     Real estate and other                                            4,762               4,448
                                                                  ---------           ---------
           Total revenues                                           247,234             240,936
                                                                  ---------           ---------

Costs and expenses:
     Cost of food and paper products                                 52,015              49,248
     Payroll and other employee benefits                             66,109              66,357
     Other operating costs                                           85,997              85,790
     Depreciation and amortization                                   12,388              14,820
     General and administrative costs                                18,798              20,122
     Asset impairment and restaurant closing charges, net               560               4,467
                                                                  ---------           ---------
            Total costs and expenses                                235,867             240,804
                                                                  ---------           ---------
     Operating income                                                11,367                 132
                                                                  ---------           ---------

Other (expense) income:
     Interest expense                                               (23,697)            (23,930)
     Interest income                                                    468                 569
     Equity in net income of unconsolidated affiliates                  678                 270
                                                                  ---------           ---------
            Net other (expense)                                     (22,551)            (23,091)
                                                                  ---------           ---------

(Loss) before minority interest                                     (11,184)            (22,959)
Minority interest                                                       (42)                (22)
                                                                  ---------           ---------
(Loss) before income taxes                                          (11,226)            (22,981)
Income taxes                                                            520                 675
                                                                  ---------           ---------
Net (loss)                                                        ($ 11,746)          ($ 23,656)
                                                                  =========           =========
</TABLE>



            See notes to unaudited consolidated financial statements.


                                     Page 5
<PAGE>


                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      (In thousands)
                                                                ---------------------------
                                                                For the twelve weeks ended
                                                                ---------------------------
                                                            October 3, 2004    October 5, 2003
                                                                --------           --------
<S>                                                             <C>                <C>
Revenues:
     Restaurant sales                                           $ 74,057           $ 72,109
     Franchise related income                                      2,894              2,295
     Real estate and other                                         1,355              1,374
                                                                --------           --------
           Total revenues                                         78,306             75,778
                                                                --------           --------

Costs and expenses:
     Cost of food and paper products                              16,069             15,701
     Payroll and other employee benefits                          20,258             20,530
     Other operating costs                                        26,553             26,261
     Depreciation and amortization                                 3,726              4,411
     General and administrative costs                              5,328              6,056
     Asset impairment and restaurant closing costs, net              185              3,410
                                                                --------           --------
            Total costs and expenses                              72,119             76,369
                                                                --------           --------
Operating income (loss)                                            6,187               (591)
                                                                --------           --------

Other (expense) income:
     Interest expense                                             (7,114)            (7,167)
     Interest income                                                 144                158
     Equity in net loss of unconsolidated affiliates                 (70)              (241)
                                                                --------           --------
             Net other (expense)                                  (7,040)            (7,250)
                                                                --------           --------

(Loss) before minority interest                                     (853)            (7,841)
Minority interest                                                    (25)               (12)
                                                                --------           --------
(Loss) before income taxes                                          (878)            (7,853)
Income taxes                                                         151                101
                                                                --------           --------

Net (loss)                                                      ($ 1,029)          ($ 7,954)
                                                                ========           ========
</TABLE>


            See notes to unaudited consolidated financial statements.


                                     Page 6
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              (In thousands)
                                                                                         ---------------------------
                                                                                        For the forty weeks ended
                                                                                         ---------------------------
                                                                                    October 3, 2004    October 5, 2003
                                                                                         --------           --------
<S>                                                                                      <C>                <C>
Operating activities:
Net (loss)                                                                               ($11,746)          ($23,656)

Adjustments to reconcile net (loss) to net cash (used in) operating activities:
       Depreciation and amortization                                                       12,388             14,820
       Accretion of original issue discount                                                   292                292
       Amortization of deferred financing costs                                               740                826
       Asset impairment and restaurant closing costs, net                                     560              4,467
       Increase in deferred rent, net                                                         282                232
       Loss on sale of other concept units                                                      -                 50
       Minority interest                                                                       42                 22
       Equity in net income of unconsolidated affiliates                                     (678)              (270)
       Dividends received from unconsolidated affiliate                                       305                119
                                                                                         --------           --------
                                                                                            2,185             (3,098)
Changes in operating assets and liabilities:
       Receivables                                                                           (400)               351
       Inventories                                                                            191                987
       Prepaid expenses                                                                    (6,770)            (6,371)
       Other assets                                                                           207               (105)
       Accounts payable and accrued  expenses                                              (2,267)            (1,898)
       Accrued interest payable                                                            (6,473)            (6,473)
                                                                                         --------           --------
Net cash (used in) operating activities                                                   (13,327)           (16,607)
                                                                                         --------           --------
</TABLE>



            See notes to unaudited consolidated financial statements.


                                     Page 7
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                 (In thousands)
                                                            ---------------------------
                                                            For the forty weeks ended
                                                            ---------------------------
                                                         October 3, 2004   October 5, 2003
                                                            --------           --------
<S>                                                         <C>                <C>
Investing activities:
      Purchases of property and equipment                   ($ 6,206)          ($ 6,265)
                                                            --------           --------
      Net cash used in investing activities                   (6,206)            (6,265)
                                                            --------           --------

Financing activities:
      Mortgage principal repayments                             (139)              (128)
      Tax distributions                                         (682)            (1,10l)
      Reduction in loans receivable from officers                506                  -
                                                            --------           --------
      Net cash used in financing activities                     (315)            (1,229)
                                                            --------           --------

Decrease in cash and cash equivalents                        (19,848)           (24,101)

Cash and cash equivalents at beginning of period              56,409             55,150
                                                            --------           --------


Cash and cash equivalents at end of period                  $ 36,561           $ 31,049
                                                            ========           ========

Supplemental disclosure of cash flow information:

Cash paid during the period for income taxes                $    285           $    378
                                                            ========           ========
Cash paid during the period for interest                    $ 29,138           $ 29,250
                                                            ========           ========
</TABLE>



            See notes to unaudited consolidated financial statements.


                                     Page 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
         our  management,   all  adjustments  (consisting  of  normal  recurring
         adjustments and accruals)  considered necessary for a fair presentation
         of the consolidated  financial  position of Sbarro and our subsidiaries
         at October 3, 2004 and our consolidated  results of operations and cash
         flows for the forty and twelve week periods  ended  October 3, 2004 and
         October  5, 2003 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,  reported in our
         Annual Report on Form 10-K for the fiscal year ended December 28, 2003.

         Certain  items  in  the  financial   statements   presented  have  been
         reclassified to conform to the fiscal 2004 presentation.

2.       Recent accounting pronouncements:

         Financial Accounting Standards Board (FASB) Interpretation  ("FIN") No.
         46,  "Consolidation  of  Variable  Interest  Entities,"  was  effective
         immediately  upon its issuance  during fiscal 2003 for all  enterprises
         with variable  interests in entities created after January 31, 2003. In
         December  2003,  the FASB staff issued FIN No. 46(R) which  changes the
         effective  date for  interests in variable  interest  entities  created
         before  February 1, 2003  beginning  with the first  interim  reporting
         period  after  March  15,  2004.  If an entity  is  determined  to be a
         variable  interest  entity,  it must be  consolidated by the enterprise
         that  absorbs the  majority  of the  entity's  expected  losses if they
         occur, receives a majority of the entity's expected residual returns if
         they  occur,  or  both.  Where  it  is  reasonably  possible  that  the
         enterprise will  consolidate or disclose  information  about a variable
         interest entity, the enterprise must disclose the nature, purpose, size
         and  activity  of the  variable  interest  entity and the  enterprise's
         maximum  exposure  to loss as a  result  of its  involvement  with  the
         variable  interest  entity in all  financial  statements  issued  after
         January  31,  2003.  The FASB  has  specifically  exempted  traditional
         franchise  arrangements  from the  evaluations  required  under FIN No.
         46(R).  We have  reviewed  our  corporate  relationships  for  possible
         coverage under FIN No. 46(R).  The application of FIN No. 46(R) did not
         have a material effect on our disclosures and our financial position or
         results of operations.  We have several variable interest entities, for
         which  we  provide  disclosures.   However,  we  are  not  the  primary
         beneficiary and therefore do not need to consolidate these entities.


                                     Page 9
<PAGE>

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


3.       Debt:

         In March 2004, we obtained an uncommitted line of credit to replace our
         former revolving credit facility. Under the new line, we currently have
         the  ability,  subject to bank  approval,  to borrow up to $3  million,
         including outstanding letters of credit.

         The new line of credit  contains no financial  covenants or unused line
         fees.  Interest applicable to the loans under the new line of credit is
         at the  bank's  prime  rate at the  time of any  borrowings.  The  line
         expires in May 2005.  There  currently  are $1.7  million of letters of
         credit outstanding.

         Under our senior  notes  indenture,  there are various  covenants  that
         limit our  ability  to  borrow  funds,  other  than  certain  permitted
         indebtedness,  to make  "restricted  payments"  including,  among other
         things,  dividend  payments  and to make  investments  in,  among other
         things, unrestricted subsidiaries.   The indenture for the senior notes
         permits us to make  distributions  to  shareholders  pursuant  to a tax
         payment  agreement  between  us and our  shareholders  that  contains a
         formula that is designed 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 such
         income were taxed at the highest  applicable federal and New York State
         marginal income tax rates.

         Among other covenants,  the indenture requires that, in order for us to
         borrow,  our  consolidated  interest  ratio coverage (as defined in the
         indenture),  after  giving pro forma  effect to the interest on the new
         borrowing,  for the four most recently ended fiscal quarters must be at
         least 2.5 to 1. As of October  3,  2004,  that ratio was 1.4 to 1. As a
         result,   we  are  not  presently  able  to  borrow  funds  except  for
         specifically  permitted  indebtedness,  including  up to $75 million of
         revolving credit loans.

         In order to make restricted  payments,  that ratio must be at least 2.0
         to 1, after giving pro forma effect to the  restricted  payment and, in
         any event, is limited in dollar amount pursuant to a formula  contained
         in the  indenture.  We refer to the amount that is available  for us to
         make dividends and other restricted payments as the "restricted payment
         availability".   We  cannot  make   restricted   payments  (other  than
         distributions  pursuant to the tax payment agreement) until we increase
         the restricted payment availability by approximately $20.3 million, and
         then only to the extent of any excess over that amount.

         In March 2000,  one of our  subsidiaries  obtained a $16 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 $.1 million. The outstanding  principal balance of the loan
         as of  October  3,  2004 was  $15.4  million.  The  mortgage  agreement
         contains various covenants, including a requirement that the subsidiary
         maintain a minimum  ratio of EBITDA to annual debt  service of at least
         1.2 to 1.

         We were in  compliance  with all  covenants  in the  indenture  for the
         senior notes and our mortgage as of October 3, 2004.


                                    Page 10
<PAGE>

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


4.       Income taxes:

         We made Subchapter S tax distributions in the amount of $1.8 million to
         our shareholders  related to our fiscal 2003 tax basis income.  Of such
         amount,  $1.1  million  was paid in the first  quarter  of 2003 and $.7
         million was paid in the first quarter of 2004.

5.       Litigation:

         On December 20, 1999,  Antonio  Garcia and thirteen  current and former
         general managers of Sbarro  restaurants in California filed a complaint
         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 unspecified  amounts.
         Plaintiffs filed a motion to certify the lawsuit as a class action, but
         the Court denied the motion. The court issued a ruling in December 2003
         which was unfavorable  but failed to specify the amount of damages.  We
         are appealing the ruling due to errors that we believe were made by the
         trial judge.

         On September 6, 2000, Manuel Jimenez and seven other current and former
         general managers of Sbarro  restaurants in California filed a complaint
         against  Sbarro in the Superior  Court of California  for Orange County
         alleging  that the  plaintiffs  were  improperly  classified  as exempt
         employees  under  California  wage and hour law. The plaintiffs  sought
         actual damages,  punitive  damages and costs of the lawsuit,  including
         reasonable attorney's fees, each in unspecified amounts. Plaintiffs are
         represented by the same counsel who is  representing  the plaintiffs in
         the case  discussed  in the  preceding  paragraph.  We have  separately
         settled with two of the managers for immaterial amounts.  The remaining
         parties to this case have agreed that it will be settled  upon the same
         terms and  conditions  that the court  orders  in  connection  with its
         decision in the case discussed in the preceding paragraph.

         On March 22, 2002, five former general  managers of Sbarro  restaurants
         in California filed a complaint against Sbarro in the Superior Court of
         California  for Los Angeles  County.  The  complaint  alleges  that the
         plaintiffs  were  required to perform  labor  services  without  proper
         premium overtime compensation from at least May of 1999. The plaintiffs
         are seeking actual  damages,  punitive  damages and attorney's fees and
         costs,  each in  unspecified  amounts.  In  addition,  plaintiffs  have
         requested  class action status for all managerial  employees who worked
         overtime  and/or were not  otherwise  paid regular  wages due and owing
         from May 1999 to present. The case is currently in the discovery phase.

         In August 2002, a subcontractor and the general contractor, pursuant to
         a  construction  contract  to build a joint  venture  location  that we
         closed in fiscal 2002 and is also the subject of the lawsuit  discussed
         below,  filed a complaint  against the limited  liability joint venture
         company alleging that plaintiffs are owed approximately  $800,000, plus
         interest.  We are a defendant in the suit by reason of the fact that we
         guaranteed  the bonds under

                                    Page 11
<PAGE>

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


         which mechanics liens for the plaintiffs were bonded.  The parties have
         agreed to binding  arbitration.  We believe that our maximum  liability
         that would result from the binding  arbitration should be approximately
         $400,000 and we have included this amount in our financial statements.

         In May 2002, the landlord of the joint venture  described above filed a
         complaint  against Sbarro in the Supreme Court of the State of New York
         for Westchester  County alleging that we were obligated to it, pursuant
         to a Guaranty Agreement we executed,  for all rent during the remaining
         lease  based  on an  alleged  breach  of the  lease  by the  tenant,  a
         subsidiary  of the joint  venture.  We believe  that our  guarantee  is
         limited  in  amount,  while the  landlord  alleges  that the  guarantee
         covered all amounts  that would become due during the  remaining  lease
         term. The court issued a ruling in November 2003 which  established our
         liability at $500,000 and we have included this amount in our financial
         statements. The landlord has appealed this decision.

         We believe that we have  substantial  defenses in each of these actions
         and we are vigorously defending these actions.

         In addition to the above complaints,  from time to time, we are a party
         to  certain  claims and legal  proceedings  in the  ordinary  course of
         business.  In our  opinion,  the  results of the  complaints  and other
         claims  and  legal  proceedings  are not  expected  to have a  material
         adverse  effect on our  consolidated  financial  position or results of
         operations.

6.       Guarantor and non-guarantor financial statements:

         Certain  subsidiaries  have guaranteed  amounts  outstanding  under our
         senior  notes  and  new  line  of  credit.  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.

         The following condensed consolidating financial information presents:

         (1)      Condensed  consolidating  balance sheets as of October 3, 2004
                  (unaudited) and December 28, 2003 and statements of operations
                  and cash flows for the forty and twelve weeks ended October 3,
                  2004  (unaudited)  and  October  5,  2003  (unaudited)  of (a)
                  Sbarro, Inc., the parent, (b) the guarantor  subsidiaries as a
                  group, (c) the  non-guarantor  subsidiaries as a group and (d)
                  Sbarro on a consolidated basis.

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

         The principal  elimination entries eliminate  intercompany balances and
         transactions.  Investments  in  subsidiaries  are  accounted for by the
         parent on the cost method.


                                    Page 12
<PAGE>

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


                           Consolidating Balance Sheet
                              As of October 3, 2004
                        (In thousands except share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                               Guarantor     Nonguarantor
ASSETS                                            Parent      Subsidiaries   Subsidiaries    Eliminations    Consolidated
                                                 ---------      ---------      ---------       ---------       ---------
<S>                                              <C>            <C>            <C>            <C>             <C>
Current assets:
    Cash and cash equivalents                    $  31,839      $   3,578      $   1,144                       $  36,561
    Receivables less allowance for doubtful
     accounts of $460
      Franchisees                                    1,927              -              -                           1,927
      Other                                             73          1,052            541                           1,666
    Inventories                                      1,039          1,334            143                           2,516
    Prepaid expenses                                 8,139          2,212            360                          10,711
    Current portion of loans receivable from
      officers                                       5,550              -              -                           5,550
                                                 ---------      ---------      ---------                       ---------

        Total current assets                        48,567          8,176          2,188          58,931

Intercompany receivables                             2,687        310,892              -       ($313,579)              -

Investment in subsidiaries                          65,469              -              -         (65,469)              -

Property and equipment, net                         33,941         51,586          4,114               -          89,641

Intangible assets:
    Trademarks, net                                195,916              -              -               -         195,916
    Goodwill, net                                    9,101              -              -             103           9,204
    Deferred financing costs and other, net          4,539            203              -               -           4,742

Loans receivable from officers, less current
    portion                                            102              -              -               -             102

Other assets                                         8,277          1,752           (654)         (1,971)          7,404
                                                 ---------      ---------      ---------       ---------       ---------

                                                 $ 368,599      $ 372,609      $   5,648       ($380,916)      $ 365,940
                                                 =========      =========      =========       =========       =========
</TABLE>


                                    Page 13
<PAGE>

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



                           Consolidating Balance Sheet
                              As of October 3, 2004
                        (In thousands except share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Guarantor     Nonguarantor
   LIABILITIES & SHAREHOLDERS' EQUITY            Parent      Subsidiaries    Subsidiaries    Eliminations    Consolidated
                                               ---------       ---------       ---------       ---------       ---------
<S>                                            <C>             <C>             <C>             <C>             <C>
Current liabilities:
      Accounts payable                         $   9,822       $     224       $     395       $     609       $  11,050
      Accrued expenses                            14,997           1,636           1,710               -          18,343
      Accrued interest payable                     1,708               -               -               -           1,708
      Current portion of mortgage payable              -             179               -               -             179
                                               ---------       ---------       ---------       ---------       ---------

            Total current liabilities             26,527           2,039           2,105             609          31,280
                                               ---------       ---------       ---------       ---------       ---------

Intercompany payables                            310,892               -           2,687        (313,579)              -
                                               ---------       ---------       ---------       ---------       ---------

Deferred rent                                      8,378               -             646               -           9,024
                                               ---------       ---------       ---------       ---------       ---------

Long-term debt, net                              253,119          15,175               -               -         268,294
                                               ---------       ---------       ---------       ---------       ---------

Shareholders' equity (deficit):
      Preferred stock, $1 par value;
        authorized 1,000,000 shares; none
        issued                                         -               -               -               -               -
      Common stock, $.01 per value:
        authorized 40,000,000 shares;
        issued and outstanding 7,064,328
        shares                                        71               -               -               -              71
      Additional paid-in capital                      10          65,469           2,477         (67,946)             10
      Retained earnings (deficit)               (230,398)        289,926          (2,267)              -          57,261
                                               ---------       ---------       ---------       ---------       ---------

      Total shareholders' equity (deficit)      (230,317)        355,395             210         (67,946)         57,342
                                               ---------       ---------       ---------       ---------       ---------

                                               $ 368,599       $ 372,609       $   5,648       ($380,916)      $ 365,940
                                               =========       =========       =========       =========       =========
</TABLE>


                                    Page 14
<PAGE>

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



                           Consolidating Balance Sheet
                             As of December 28, 2003
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                    Guarantor    Nonguarantor
ASSETS                                                Parent      Subsidiaries    Subsidiaries     Eliminations    Consolidated
                                                    ---------       ---------       ---------       ---------       ---------
<S>                                                 <C>             <C>             <C>             <C>            <C>
Current assets:
     Cash and cash equivalents                      $  49,515       $   5,595       $   1,299                       $  56,409
     Receivables less allowance for
       doubtful accounts of $488
        Franchisees                                     1,700               -               -                           1,700
        Other                                            (191)            966             396                           1,171

     Inventories                                        1,177           1,387             143                           2,707
     Prepaid expenses                                   4,039            (227)             53                           3,865
     Current portion of loans receivable
       from officers                                    2,810           2,810
                                                    ---------       ---------       ---------                       ---------
           Total current assets                        59,050           7,721           1,891                          68,662

Intercompany receivables                                6,697         317,237               -       ($323,934)              -

Investment in subsidiaries                             65,469               -               -         (65,469)              -

Property and equipment, net                            36,189          55,706           4,709               -          96,604

Intangible assets:
     Trademarks, net                                  195,916               -               -               -         195,916
     Goodwill, net                                      9,101               -               -             103           9,204
     Deferred financing costs and other, net            5,369             233               -            (120)          5,482

Loans receivable from officers, less
  current portion                                       3,347               -               -               -           3,347

Other assets                                            7,137           1,822            (212)         (1,133)
                                                    ---------       ---------       ---------       ---------       ---------
                                                                                                                        7,614

                                                    $ 388,275       $ 382,719       $   6,388       ($390,553)      $ 386,829
                                                    =========       =========       =========       =========       =========
</TABLE>


                                    Page 15
<PAGE>

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


                           Consolidating Balance Sheet
                             As of December 28, 2003
                        (In thousands except share data)


<TABLE>
<CAPTION>
                                                                      Guarantor      Nonguarantor
    LIABILITIES & SHAREHOLDERS'    EQUITY                Parent      Subsidiaries    Subsidiaries    Eliminations   Consolidated
                                                       ---------       ---------       ---------       ---------       ---------
<S>                                                    <C>             <C>             <C>             <C>             <C>
 Current liabilities:
     Accounts payable                                  $  11,859       $     129       $     419       $   1,327       $  13,734
     Accrued expenses                                     15,542           1,447           1,806               -          18,795
     Accrued interest payable                              8,181               -               -               -           8,181
     Current portion of mortgage payable                       -             168               -               -             168
                                                       ---------       ---------       ---------       ---------       ---------
     Total current liabilities                            35,582           1,744           2,225           1,327          40,878
                                                       ---------       ---------       ---------       ---------       ---------

 Intercompany payables                                   317,236           2,958           3,740        (323,934)              -
                                                       ---------       ---------       ---------       ---------       ---------

 Deferred rent                                             8,009               -             702               -           8,711
                                                       ---------       ---------       ---------       ---------       ---------

Long-term debt, net                                      252,827          15,325               -               -         268,152
                                                       ---------       ---------       ---------       ---------       ---------


 Shareholders' equity (deficit):
     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                          71               -               -               -              71
     Additional paid-in capital                               10          65,469           2,477         (67,946)             10
     Retained earnings (deficit)
                                                        (225,460)        297,223          (2,756)              -          69,007
                                                       ---------       ---------       ---------       ---------       ---------

     Total shareholders' equity (deficit)               (225,379)        362,692            (279)        (67,946)         69,088
                                                       ---------       ---------       ---------       ---------       ---------

                                                       $ 388,275       $ 382,719       $   6,388       ($390,553)      $ 386,829
                                                       =========       =========       =========       =========       =========
</TABLE>


                                    Page 16
<PAGE>

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



                      Consolidating Statement of Operations
                    For the forty weeks ended October 3, 2004
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Guarantor     Nonguarantor
                                             Parent       Subsidiaries    Subsidiaries    Eliminations    Consolidated
                                            ---------       ---------       ---------       ---------       ---------
Revenues:
<S>                                         <C>             <C>             <C>             <C>             <C>
    Restaurant sales                        $ 101,279       $ 121,128       $  11,180                       $ 233,587
    Franchise related income                    8,885               -           8,885
    Real estate and other                       2,569           2,193               -                           4,762
    Intercompany charges                        8,319               -               -       ($  8,319)              -
                                            ---------       ---------       ---------       ---------       ---------
       Total revenues                         121,052         123,321          11,180          (8,319)        247,234
                                            ---------       ---------       ---------       ---------       ---------

Cost and expenses:
    Cost of food and paper products            21,064          27,898           3,053               -          52,015
    Payroll and other employee benefits        26,389          35,968           3,752               -          66,109
    Other operating costs                      39,812          43,041           3,144               -          85,997
    Depreciation and amortization               5,345           6,346             697               -          12,388
    General and administrative costs           11,148           7,626              24               -          18,798
    Restaurant closing charges, net               560               -               -               -             560
    Intercompany charges                            -           8,319               -          (8,319)              -
                                            ---------       ---------       ---------       ---------       ---------
       Total costs and expenses               104,318         129,198          10,670          (8,319)        235,867
                                            ---------       ---------       ---------       ---------       ---------

Operating income (loss)                        16,734          (5,877)            510               -          11,367
                                            ---------       ---------       ---------       ---------       ---------

Other (expense) income:
    Interest expense                          (22,588)         (1,109)              -               -         (23,697)
    Interest income                               468               -               -               -             468
    Equity in net income of
      unconsolidated affiliates                   678               -               -               -             678
                                            ---------       ---------       ---------       ---------       ---------

Net other (expense)                           (21,442)         (1,109)              -               -         (22,551)
                                            ---------       ---------       ---------       ---------       ---------

(Loss) income before minority interest         (4,708)         (6,986)            510               -         (11,184)

Minority interest                                   -               -             (42)              -             (42)
                                            ---------       ---------       ---------       ---------       ---------

(Loss) income before income taxes              (4,708)         (6,986)            468               -         (11,226)

Income taxes (benefit)                            231             310             (21)              -             520
                                            ---------       ---------       ---------       ---------       ---------

Net (loss) income                           ($  4,939)      ($  7,296)      $     489               -       ($ 11,746)
                                            =========       =========       =========       =========       =========
</TABLE>



                                    Page 17
<PAGE>

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


                      Consolidating Statement of Operations
                    For the forty weeks ended October 5, 2003
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Guarantor      Nonguarantor
                                                   Parent      Subsidiaries    Subsidiaries    Eliminations    Consolidated
                                                 ---------       ---------       ---------       ---------       ---------
<S>                                              <C>             <C>             <C>           <C>               <C>
Revenues:
    Restaurant sales                             $  98,078       $ 119,528       $  11,257                       $ 228,863
    Franchise related income                         7,625               -               -                           7,625
    Real estate and other                            2,170           2,217              61                           4,448
    Intercompany charges                             7,841               -               -       ($  7,841)              -
                                                 ---------       ---------       ---------       ---------       ---------
       Total revenues                              115,714         121,745          11,318          (7,841)        240,936
                                                 ---------       ---------       ---------       ---------       ---------

Cost and expenses:

    Cost of food and paper products                 20,105          26,180           2,963               -          49,248
    Payroll and other employee benefits             27,300          35,218           3,839               -          66,357
    Other operating costs                           39,048          43,682           3,060               -          85,790
    Depreciation and amortization                    6,727           7,328             765               -          14,820
    General and administrative costs                11,959           8,176             (13)              -          20,122
    Asset impairment and restaurant closing
       charges, net                                  4,310               -             157               -           4,467
    Intercompany charges                                 -           7,841               -          (7,841)              -
                                                 ---------       ---------       ---------       ---------       ---------
       Total costs and expenses                    109,449         128,425          10,771          (7,841)        240,804
                                                 ---------       ---------       ---------       ---------       ---------

Operating income (loss)                              6,265          (6,680)            547               -             132

Other (expense) income:
    Interest expense                               (22,810)         (1,120)              -               -         (23,930)
    Interest income                                    569               -               -               -             569
    Equity in net income  of unconsolidated
       affiliates                                      270               -               -               -             270
                                                 ---------       ---------       ---------       ---------       ---------

Net other expense                                  (21,971)         (1,120)              -               -         (23,091)
                                                 ---------       ---------       ---------       ---------       ---------

(Loss) income before minority interest             (15,706)         (7,800)            547               -         (22,959)

Minority interest                                        -               -             (22)              -             (22)
                                                 ---------       ---------       ---------       ---------       ---------

(Loss) income before income taxes                  (15,706)         (7,800)            525               -         (22,981)
                                                 ---------       ---------       ---------       ---------       ---------

Income taxes (benefit)                                 447             244             (16)              -             675
                                                 ---------       ---------       ---------       ---------       ---------

Net (loss) income                                ($ 16,153)      ($  8,044)      $     541               -       ($ 23,656)
                                                 =========       =========       =========       =========       =========
</TABLE>


                                    Page 18
<PAGE>

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


                      Consolidating Statement of Operations
                   For the twelve weeks ended October 3, 2004
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                          Guarantor     Nonguarantor
                                             Parent      Subsidiaries    Subsidiaries  Eliminations   Consolidated
                                            --------       --------       --------       --------       --------
<S>                                         <C>            <C>            <C>            <C>            <C>
Revenues:
    Restaurant sales                        $ 32,627       $ 37,980       $  3,450                      $ 74,057
    Franchise related income                   2,894              -              -                         2,894
    Real estate and other                        705            650              -                         1,355
    Intercompany charges                       3,334              -              -       ($ 3,334)             -
                                            --------       --------       --------       --------       --------
       Total revenues                         39,560         38,630          3,450         (3,334)        78,306
                                            --------       --------       --------       --------       --------

Cost and expenses:
    Cost of food and paper products            6,650          8,506            913              -         16,069
    Payroll and other employee benefits        8,054         11,078          1,126              -         20,258
    Other operating costs                     12,535         13,045            973              -         26,553
    Depreciation and amortization              1,584          1,931            211              -          3,726
    General and administrative costs           3,846          1,609           (127)             -          5,328
    Restaurant closing charges, net              185              -              -              -            185
    Intercompany charges                           -          3,334              -         (3,334)             -
                                            --------       --------       --------       --------       --------
       Total costs and expenses               32,854         39,503          3,096         (3,334)        72,119
                                            --------       --------       --------       --------       --------

Operating (loss) income                        6,706           (873)           354              -          6,187
                                            --------       --------       --------       --------       --------

Other (expense) income:
    Interest expense                          (6,788)          (326)             -              -         (7,114)
    Interest income                              144              -              -              -            144
    Equity in net income  of
      unconsolidated affiliates                  (70)             -              -              -            (70)
                                            --------       --------       --------       --------       --------

Net other (expense)                           (6,714)          (326)             -              -         (7,040)
                                            --------       --------       --------       --------       --------

(Loss) income before minority interest            (8)        (1,199)           354              -           (853)

Minority interest                                  -              -            (25)             -            (25)
                                            --------       --------       --------       --------       --------

(Loss) income before income taxes                 (8)        (1,199)           329              -           (878)

Income taxes (benefit)                            63            104            (16)             -            151
                                            --------       --------       --------       --------       --------

Net (loss) income                           $    (71)      $ (1,303)      $    345              -       $ (1,029)
                                            ========       ========       ========       ========       ========
</TABLE>


                                    Page 19
<PAGE>

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


                      Consolidating Statement of Operations
                   For the twelve weeks ended October 5, 2003
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Guarantor     Nonguarantor
                                                  Parent      Subsidiaries   Subsidiaries   Eliminations   Consolidated
                                                 --------       --------       --------       --------       --------
<S>                                              <C>            <C>            <C>            <C>            <C>
Revenues:
    Restaurant sales                             $ 31,445       $ 37,267       $  3,397                      $ 72,109
    Franchise related income                        2,295              -              -                         2,295
    Real estate and other                             682            666             26                         1,374
    Intercompany charges                            2,349              -              -       ($ 2,349)             -
                                                 --------       --------       --------       --------       --------
       Total revenues                              36,771         37,933          3,423         (2,349)        75,778
                                                 --------       --------       --------       --------       --------

Cost and expenses:
    Cost of food and paper products                 6,526          8,267            908              -         15,701
    Payroll and other employee benefits             8,434         10,973          1,123              -         20,530
    Other operating costs                          12,029         13,302            930              -         26,261
    Depreciation and amortization                   2,029          2,155            227              -          4,411
    General and administrative costs                3,505          2,470             81              -          6,056
    Asset impairment and restaurant closing
      charges, net                                  3,410              -              -              -          3,410
    Intercompany charges                                -          2,349              -         (2,349)             -
                                                 --------       --------       --------       --------       --------
       Total costs and expenses                    35,933         39,516          3,269         (2,349)        76,369
                                                 --------       --------       --------       --------       --------

Operating income (loss)                               838         (1,583)           154              -           (591)
                                                 --------       --------       --------       --------       --------

Other (expense) income:
    Interest expense                               (6,832)          (335)             -              -         (7,167)
    Interest income                                   158              -              -              -            158
    Equity in net income  of
      unconsolidated affiliates                      (241)             -              -              -           (241)
                                                 --------       --------       --------       --------       --------

                                                   (6,915)          (335)             -              -         (7,250)
                                                 --------       --------       --------       --------       --------

(Loss) income before minority interest             (6,077)        (1,918)           154              -         (7,841)

Minority interest                                       -              -            (12)             -            (12)
                                                 --------       --------       --------       --------       --------

(Loss) income before income taxes                  (6,077)        (1,918)           142              -         (7,853)
Income taxes (benefit)                                 73             30             (2)             -            101
                                                 --------       --------       --------       --------       --------

Net (loss) income                                ($ 6,150)      ($ 1,948)      $    144              -       ($ 7,954)
                                                 ========       ========       ========       ========       ========
</TABLE>


                                    Page 20
<PAGE>

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


                      Consolidating Statement of Cash Flows
                    For the forty weeks ended October 3, 2004
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Guarantor      Nonguarantor
                                                    Parent      Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                                     --------       --------       --------       --------       --------
<S>                                                  <C>            <C>            <C>            <C>            <C>
Operating Activities:
---------------------

Net (loss) income                                    ($ 4,939)      ($ 7,296)      $    489                      ($11,746)
  Adjustments to reconcile net (loss) income to
      net cash (used in) provided by operating
      activities:
     Depreciation and amortization                      5,258          6,433            697                        12,388
     Accretion of original issue discount                 292              -              -                           292
     Amortization of deferred financial costs             711             29              -                           740
     Asset impairment and restaurant closing
      charges, net                                        560              -              -                           560
     Increase in deferred rent, net                       272             66            (56)                          282
     Minority interest                                      -              -             42                            42
     Equity in net income of unconsolidated
      affiliates                                         (678)             -              -                          (678)
     Dividends received from unconsolidated
      affiliates                                          305              -              -                           305
                                                     --------       --------       --------                      --------

                                                        1,781           (768)         2,185                         1,172
                                                     --------       --------       --------                      --------
Changes in operating assets and liabilities:
     Receivables                                         (169)           (86)          (145)                         (400)
     Inventories                                          138             53              -                           191
     Prepaid expenses                                  (4,024)        (2,439)          (307)                       (6,770)
     Other assets                                        (951)             -            336       $    822            207
     Accounts payable and accrued expenses
                                                       (1,654)           287           (163)          (737)        (2,267)
     Accrued interest payable                          (6,473)             -              -              -         (6,473)
                                                     --------       --------       --------       --------       --------

Net cash (used in) provided by operating activities   (11,352)        (2,953)           893             85        (13,327)
                                                     --------       --------       --------       --------       --------
</TABLE>


                                    Page 21
<PAGE>

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


                      Consolidating Statement of Cash Flows
                    For the forty weeks ended October 3, 2004
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            Guarantor     Nonguarantor
                                               Parent      Subsidiaries   Subsidiaries   Eliminations   Consolidated
                                              --------       --------       --------       --------       --------
<S>                                           <C>            <C>            <C>            <C>            <C>
Investing activities:
---------------------

Purchases of property and equipment           ($ 3,368)      ($ 2,737)      ($   101)                     ($ 6,206)
                                              --------       --------       --------                      --------

Net cash used in investing activities           (3,368)        (2,737)          (101)                       (6,206)
                                              --------       --------       --------                      --------


Financing activities:
---------------------

Mortgage principal repayments                        -           (139)             -                          (139)
Tax distribution                                  (682)             -              -                          (682)
Reduction in loans receivable from
    officers                                       506              -              -                           506
Intercompany balances                           (2,780)         3,812           (947)      ($    85)             -
                                              --------       --------       --------       --------       --------

Net cash provided by (used in)
     financing activities                       (2,956)         3,673           (947)           (85)          (315)
                                              --------       --------       --------       --------       --------

Decrease in cash and cash equivalents          (17,676)        (2,017)          (155)             -        (19,848)

Cash and cash equivalents at beginning
   of period                                    49,515          5,595          1,299              -         56,409
                                              --------       --------       --------       --------       --------

Cash and cash equivalents at end of
   period                                     $ 31,839       $  3,578       $  1,144              -       $ 36,561
                                              ========       ========       ========       ========       ========

Supplemental disclosure of cash flow
   information:
Cash paid during the period for income
     taxes                                    $    117       $    141       $     27              -       $    285
                                              ========       ========       ========       ========       ========

Cash paid during the period for interest      $ 28,058       $  1,080              -              -       $ 29,138
                                              ========       ========       ========       ========       ========
</TABLE>


                                    Page 22
<PAGE>

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



                      Consolidating Statement of Cash Flows
                    For the forty weeks ended October 5, 2003
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  Guarantor    Nonguarantor
                                                     Parent      Subsidiaries   Subsidiaries  Eliminations Consolidated
                                                    --------       --------       --------       ------      --------
<S>                                                 <C>            <C>            <C>         <C>            <C>
Operating Activities:
---------------------

Net (loss) income                                   ($16,153)      ($ 8,044)      $    541            -      ($23,656)
Adjustments to reconcile net (loss) income to
     net cash (used in) provided by operating
     activities:
   Depreciation and amortization                       7,215          6,843            762            -        14,820
   Amortization of deferred financing costs              797             29              -            -           826
   Accretion of original issue discount                  292              -              -            -           292
   Asset impairment and restaurant closing
     charges, net                                      4,467              -              -            -         4,467
   Increase in deferred rent, net                        230            (33)            35            -           232
   Loss on sale of other concept units                     -              -             50            -            50
   Minority interest                                       -              -             22            -            22
   Equity in net income of unconsolidated
     affiliates                                         (270)             -              -            -          (270)
   Dividends received from unconsolidated
     affiliates                                          119              -              -            -           119
                                                    --------       --------       --------       ------      --------
                                                      (3,303)        (1,205)        (1,410)           -        (3,098)
Changes in operating assets and liabilities:
   Receivables                                           149            264            (62)           -           351
   Inventories                                           405            569             13            -           987
   Prepaid expenses                                   (3,805)        (2,394)          (172)           -        (6,371)
   Other assets                                         (573)           (24)           492            -          (105)
   Accounts payable and accrued expenses              (2,557)           776           (117)           -        (1,898)
   Accrued interest payable                           (6,473)             -              -            -        (6,473)
                                                    --------       --------       --------       ------      --------

Net cash (used in) provided by operating activities  (16,157)        (2,014)         1,564            -       (16,607)
                                                    --------       --------       --------       ------      --------
</TABLE>


                                    Page 23
<PAGE>

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


                      Consolidating Statement of Cash Flows
                    For the forty weeks ended October 5, 2003
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Guarantor     Nonguarantor
                                            Parent      Subsidiaries   Subsidiaries    Eliminations   Consolidated
                                           --------       --------       --------        ---------      --------
<S>                                          <C>            <C>              <C>         <C>              <C>
Investing activities:
---------------------

Purchase of property and equipment         ($ 4,219)      ($ 1,875)      ($   171)               -      ($ 6,265)
                                           --------       --------       --------        ---------      --------

Net cash used in investing activities        (4,219)        (1,875)          (171)               -        (6,265)
                                           --------       --------       --------        ---------      --------

Financing activities:
---------------------

Mortgage principal repayments                     -           (128)             -                -          (128)
Tax distribution                             (1,101)             -              -                -        (1,101)
Intercompany balances                           799            780         (1,579)               -             -
                                           --------       --------       --------        ---------      --------

Net cash (used in) provided by
  financing activities                         (302)           652         (1,579)               -        (1,229)

Decrease in cash and
  cash equivalents                          (20,678)        (3,237)          (186)               -       (24,101)

Cash and cash equivalents at
  beginning of period                        47,636          6,539            975                -        55,150
                                           --------       --------       --------        ---------      --------

Cash and cash equivalents at               $ 26,958       $  3,302       $    789                -      $ 31,049
  end of period                            ========       ========       ========        =========      ========

Supplemental disclosure of cash flow
  information:

Cash paid during the period for
  income taxes                             $    280       $     85       $     13        $       -      $    378
                                           ========       ========       ========        =========      ========

Cash paid during the period for
  interest                                 $ 28,159       $  1,091       $      -        $       -      $ 29,250
                                           ========       ========       ========        =========      ========
</TABLE>


                                    Page 24
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

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

Results of Operations
---------------------

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

<TABLE>
<CAPTION>
                                           40 Weeks   40 Weeks   12 Weeks  12 Weeks        Fiscal Year
                                             Ended     Ended      Ended      Ended       ---------------
                                            10/3/04   10/5/03    10/3/04    10/5/03      2003       2002
                                            -------   -------    -------    -------      ----       ----
<S>                                           <C>        <C>        <C>        <C>        <C>        <C>
Company-owned restaurants:
Open at beginning of period                   528        558        513        537        558        602
   Opened during period                         2          3          -          2          4         13
   Acquired from (sold to)
    franchisees during  period, net            (2)        (7)         -         (1)       (12)        (6)
   Closed during period                       (19)       (19)        (4)        (3)       (22)       (51)
                                             ----       ----       ----       ----       ----       ----
Open at end of period (1)                     509        535        509        535        528        558
                                             ====       ====       ====       ====       ====       ====

Franchised restaurants:
Open at beginning of period                   387        353        407        368        353        325
   Opened during period                        40         25         17          3         39         42
   Purchased from (sold to)
    Company during period, net                  2          7          -          1         12          6
   Closed or terminated during period          (8)       (15)        (3)        (2)       (17)       (20)
                                             ----       ----       ----       ----       ----       ----
Open at end of period                         421        370        421        370        387        353
                                             ====       ====       ====       ====       ====       ====

All restaurants:
Open at beginning of period                   915        911        920        905        911        927
   Opened during period                        42         28         17          5         43         55
   Closed or terminated during period         (27)       (34)        (7)        (5)       (39)       (71)
                                             ----       ----       ----       ----       ----       ----
Opened at end of period (1)                   930        905        930        905        915        911
                                             ====       ====       ====       ====       ====       ====

Kiosks (all franchised) open at end
   of period                                    3          3          3          3          3          3
                                             ====       ====       ====       ====       ====       ====
</TABLE>


----------
(1)      Excludes  28, 31, 29 and 32 other  concept  units as of October 3, 2004
         and October 5, 2003, the end of fiscal 2003 and the end of fiscal 2002,
         respectively.


                                    Page 25
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES

Seasonality

Our business is subject to seasonal fluctuations, and the effects 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. As a result,  our annual earnings can fluctuate due to the length of the
holiday  shopping period between  Thanksgiving and New Year's Day and the number
of weeks in our fourth quarter.  In recent years,  our fourth quarter income has
fluctuated significantly due to a number of other factors, including the adverse
effect of the general  economic  downturn and  significant  year end adjustments
relating to asset  impairment and store closing costs. Due to the seasonality of
our  business,  we are not able to perform  the testing  for  impairment  on our
goodwill and intangible  assets with indefinite  lives acquired prior to July 1,
2001 as required by SFAS No. 142,  "Goodwill and Other Intangible  Assets" until
after our fourth quarter is completed.  Our annual  impairment test is performed
at that time unless impairment factors are present earlier.

Relevant Financial Information
------------------------------

<TABLE>
<CAPTION>
                                                     Forty weeks ended    Twelve weeks ended

                                                   October 3,  October 5, October 3, October 5,
                                                       2004       2003       2004      2003
                                                       ----       ----       ----      ----
                                                                   (in millions)
<S>                                                    <C>        <C>         <C>       <C>
Comparable Sbarro - owned quick service sales (1)      $220       $209        $70       $67

Franchise location sales                               $189       $176        $62       $56

Franchise revenues                                     $  9       $  8        $ 3       $ 2

Provision for asset impairment and restaurant
closings                                               $  1       $  5          -       $ 3

EBITDA                                                 $ 24       $ 15        $10       $ 4

Comparable Sbarro - owned quick service sales -
percentage change (1)                                   5.2%      (3.5%)      4.7%     (1.2%)

Cost of food and paper products as a percentage
of restaurant sales                                    22.3%      21.5%      21.7%     21.8%

Payroll and other benefits as a percentage of
restaurant sales                                       28.3%      29.0%      27.4%     28.5%

Other operating expenses as a percentage of
restaurant sales                                       36.8%      37.5%      35.9%     36.4%

General and administrative costs as a percentage
of restaurant sales                                     8.0%       8.8%       7.2%      8.4%
</TABLE>


(1)      Comparable   Sbarro-owned   quick   service  sales  dollar  and  annual
         percentage changes are based on locations that were in operation at all
         times since December 29, 2002.


                                    Page 26
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


Our  consolidated  EBITDA for the first three quarters of 2004 was $24.4 million
compared to $15.2 million for the first three quarters of 2003. Our consolidated
EBITDA for the third  quarter of 2004 was $9.8 million  compared to $3.6 million
for the third  quarter  of 2003.  EBITDA  represents  earnings  (losses)  before
interest income, interest expense, taxes, depreciation and amortization.  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 of the United States
("GAAP") measure of a company's  profitability or liquidity.  Rather, we believe
that EBITDA provides relevant and useful  information for analysts and investors
in our senior notes in that EBITDA is one of the factors in the  calculation  of
our compliance with the ratios in the indenture under which our senior notes are
issued.  We also  internally  use  EBITDA as one of the  measures  to  determine
whether to continue  operating  or close  restaurant  units since it provides us
with a  measurement  of whether we are  receiving an adequate cash return on our
cash investment.  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.  The following table  reconciles  EBITDA to our net loss for each of
the  periods  presented  which we believe  is the most  direct  comparable  GAAP
financial measure to EBITDA (in thousands):

<TABLE>
<CAPTION>
                                               Forty weeks ended                 Twelve weeks ended
                                          10/3/2004        10/5/2003          10/3/2004      10/5/2003
                                          ---------        ---------          ---------      ---------
<S>                                         <C>             <C>                <C>             <C>
EBITDA                                      $24,391         $15,200            $9,818          $3,567
Interest expense                            (23,697)        (23,930)           (7,114)         (7,167)
Interest income                                 468             569               144             158
Income taxes                                   (520)           (675)             (151)           (101)
Depreciation and amortization               (12,388)        (14,820)           (3,726)         (4,411)
                                           =========      ==========          ========        --------
Net loss                                   ($11,746)       ($23,656)          ($1,029)        ($7,954)
                                           =========      ==========          ========        ========
</TABLE>


                                    Page 27
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES


Restaurant  sales  increased  $4.7 million,  or 2.1%, to $233.6  million for the
first three  quarters  of fiscal  2004 from  $228.9  million for the first three
quarters of fiscal  2003.  The increase in sales  resulted  from $4.8 million of
higher sales of the quick service  business offset by $.1 million of lower sales
of  consolidated  other  restaurant  concepts.  The  increase  in quick  service
business   resulted  from  an  approximate  $10.8  million  (5.2%)  increase  in
comparable sales offset by the loss of approximately  $8.8 million of sales from
the closure, since the first quarter of 2003, of generally low volume locations.
Sales for locations  that opened after December 29, 2002 comprised the remaining
$2.7 million increase in quick service sales.

Restaurant sales increased $1.9 million, or 2.7%, to $74.1 million for the third
quarter of fiscal  2004 from $72.1  million in the third  quarter of 2003.  This
increase in sales was  primarily a result of higher  sales of the quick  service
business.  The increase in the quick service  business  included an  approximate
$3.2  million  (4.7%)  increase  in  comparable  sales  offset  by the  loss  of
approximately $2.2 million of sales from the closure, since the first quarter of
2003, of generally low volume locations.  Third quarter sales for locations that
were opened after December 29, 2002 comprised the remaining $.9 million increase
in quick service sales.

We believe that the increases in comparable  sales in both 2004 reported periods
from the  comparable  2003 periods was  primarily  due to economic  trends,  the
strengthening  of operational  management and training  programs which generated
increased sales and operational  efficiencies,  as well as a series of selective
price increases that became  effective  during the second quarter of fiscal 2004
and during the last half of the first quarter of 2004. We believe that the price
increases will have an approximate 3% effect on sales on an annual basis.

Franchise  related  income  increased  16.5% to $8.9 million for the first three
fiscal  quarters of 2004 from $7.6 million in the first three fiscal quarters of
2003.  The increase in franchise  related  income was  comprised of increases in
royalties from  comparable  locations that resulted from sales increases of 9.0%
for international  locations and 3.5% for domestic  locations as well as royalty
income  derived  from  locations  that were opened after  December 29, 2002.  In
addition,  during the third quarter of 2003, we reduced our royalty  revenues by
approximately $.2 million for excess royalties that had been paid by our Russian
franchisee as it had  erroneously  included  sales and other income taxes in its
reported sales.

Franchise  related income  increased  26.1% to $2.9 million for the third fiscal
quarter of 2004 from $2.3  million for the third  quarter of 2003.  The increase
was comprised of increases in royalties that resulted from sales  increases from
comparable  locations of 2.2% for international  locations and 4.6% for domestic
locations  as well as  royalty  income  derived  during the third  quarter  from
locations  that were opened after  December 29, 2002.  The third quarter of 2003
was  affected by the royalty  reduction  due to the earlier  overpayment  of $.2
million of royalties by our Russian franchisee.

Real estate and other  revenues  increased  7.1% for the first three quarters of
fiscal  2004  compared  to the same  period in  fiscal  2003,  primarily  due to
variations  in certain  vendor  rebates  relating to  franchisees  and marketing
allowances.  Real estate and other  revenues  were flat in the third  quarter of
fiscal 2004 compared to the third quarter of fiscal 2003.

                                    Page 28
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


Cost of food and paper products as a percentage of restaurant sales increased to
22.3% for the first three  quarters of fiscal 2004 from 21.5% for the comparable
2003  fiscal  period.  An  increase in cheese  prices  during the second  fiscal
quarter  of 2004 had a negative  effect on the cost of food and paper  products.
While cheese prices have moderated,  the  fluctuations in cheese prices resulted
in a 1.2%, as a percentage of restaurant sales, increase in the cost of food and
paper products in the first three quarters of fiscal 2004,  when compared to the
same  periods  in  fiscal  2003.  The  cost of food  and  paper  products,  as a
percentage of restaurant  sales,  in the 2004 period was positively  impacted by
the increase in comparable unit sales. .

Cost of food and paper products as a percentage of restaurant sales decreased to
21.7% for the third  quarter  of 2004 from  21.8% for the  comparable  period in
2003. The  improvement  in the cost of sales  percentage in the third quarter of
2004 was positively  impacted by the increases in comparable unit sales.  Cheese
prices during the third quarter of 2004 as compared to the third quarter of 2003
were relatively flat.

Payroll and other employee  benefits  decreased to 28.3% of restaurant sales for
the first  three  quarters of 2004 from 29.0% of  restaurant  sales in the first
three quarters of 2003.  Payroll and other employee benefits  decreased to 27.4%
of  restaurant  sales  for the  third  quarter  of  fiscal  2004  from  28.5% of
restaurant  sales  for the  third  quarter  of  fiscal  2003.  These  percentage
decreases  were  primarily  due to  increased  restaurant  sales  as well as the
elimination of locations with higher payroll costs as a percentage of restaurant
sales.

Other  operating  expenses  decreased to 36.8% of restaurant  sales in the first
three quarters of fiscal 2004 from 37.5% of restaurant  sales in the first three
quarters of 2003.  Other  operating  expenses  decreased to 35.9% of  restaurant
sales for the third quarter of 2004 from 36.4% of restaurant sales for the third
quarter of 2003.  While the dollars in both periods  presented  were  relatively
flat these costs,  as a percentage of restaurant  sales improved  primarily as a
result of the higher level of sales.

Depreciation and amortization expense was $2.4 million lower for the first three
quarters of fiscal 2004 as compared to the same period in 2003. Depreciation and
amortization expense was $.7 lower for the third quarter of fiscal 2004, than in
the third  quarter of fiscal 2003.  The  reductions  were  primarily  due to the
reduction  in  depreciable  assets as a result  of  restaurant  closings,  asset
impairments in 2003 and the consolidation of our administrative offices in 2003.

General and  administrative  expenses were $18.8 million,  or 8.0% of restaurant
sales for the first three quarters of fiscal 2004 compared to $20.1 million,  or
8.8% of  restaurant  sales for the first  three  quarters  of fiscal  2003.  The
improvement  was  primarily  comprised  of the  reduction  in work force and the
absence of bonuses paid to certain  executive  officers offset,  in part, by the
cost of severance  and the cost of the new members of our  executive  team.  The
annual effect of our  reduction in work force on our general and  administrative
costs are estimated at $3.1 million.

General administrative expenses were $5.3 million or 7.2% of restaurant sales in
the third  quarter of fiscal 2004 compared to $6.1 million or 8.4% of restaurant
sales for the third quarter of fiscal 2003. The reduction is primarily comprised
of the reduction in work force.

                                    Page 29
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES

Interest  expense for the first three quarters of fiscal 2004 and 2003 was $23.7
million and $23.9 million,  respectively,  and $7.1 million and $7.2 million for
the third quarter of 2004 and 2003, respectively.

Equity  in  the  net  income  of   unconsolidated   affiliates   represents  our
proportionate  share of earnings and losses in those concepts in which we have a
50% or less ownership interest.  The increase in our proportionate share was $.4
million  for the first  three  quarters  of fiscal  2004.  The  increase  in our
proportionate share was $.2 million for the third quarter of 2004. The increases
were  primarily  due to the absence of losses  incurred in 2003 from the sale of
two locations.  There currently are two steakhouses under construction which are
expected to be  completed  by early in fiscal  2005.  We do not have any further
expansion plans for our unconsolidated joint ventures.

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.  Under the provisions of Subchapter S,  substantially all
taxes on our income are paid by our shareholders rather than us. Our tax expense
was $.5 million and $.7 million for the first three quarters and $.2 million and
$0.1 million for the third quarters of 2004 and 2003, respectively.  The expense
was for taxes owed by us (rather than our shareholders) to jurisdictions that do
not recognize S corporation  status or that tax entities  based on factors other
than income and for taxes withheld at the source of payment on foreign franchise
income related payments.

Liquidity and Capital Resources
-------------------------------

Cash Requirements

Our liquidity requirements relate to debt service, capital expenditures, working
capital,  investments in other  ventures,  distributions  to  shareholders  when
permitted  under the indenture for the senior notes,  repayment of borrowings we
may make under our line of credit agreement and general corporate  purposes.  We
incur annual cash  interest  expense of  approximately  $29.5  million under our
senior notes and mortgage  loan and may incur  additional  interest  expense for
borrowings  under our line of  credit.  We are not  required  to make  principal
payments,  absent the  occurrence of certain  events,  on our senior notes until
they mature in September  2009.  We believe that  aggregate  restaurant  capital
expenditures  and our  investments  in joint  ventures  during  fiscal 2004 will
approximate  the fiscal 2003 level of $8.5  million.  Our $3.0  million  line of
credit which  expires in May 2005 is  uncommitted.  Therefore,  our lender could
refuse  to lend to us at any time.  There  were no  unpaid  capital  expenditure
commitments at October 3, 2004.

We expect our primary source of liquidity to meet current  requirements  will be
cash flow from  operations.  We do not presently expect to borrow under our line
of credit in fiscal 2004 except for required letters of credit.

Contractual Obligations and Off-Balance Sheet Arrangements

Our contractual  obligations and off balance sheets arrangements with respect to
Sbarro owned and franchised restaurants,  as well as those for our other concept
arrangements (both those in

                                    Page 30
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


which we have a majority or minority  interest),  do not materially  differ from
the  information  disclosed in Part II, Item 7 of our Annual Report on Form 10-K
for the 2003 fiscal year.

Sources and Uses of Cash

The following table summarizes our cash and cash equivalents and working capital
as at the end of the  third  quarter  of 2004  and 2003 and the uses of our cash
flows during the first three quarters of each of the respective fiscal years:

                                       As at and for the Forty Weeks Ended
                                       -----------------------------------
                                     October 3, 2004         October 5, 2003
                                     ---------------         ---------------
                                                  (in millions)
                                                  -------------
Liquidity at the end of periods
-------------------------------
Cash and cash equivalents               $  36.6                 $  31.0
Working capital                            27.7                    14.4
Net cash flows for the period
-----------------------------
Used in operating activities              (13.3)                  (16.6)
Used in investing activities               (6.2)                   (6.3)
Used in financing activities                (.3)                   (1.2)
Net decrease in cash                      (19.8)                  (24.1)

We have  historically  not  required  significant  working  capital  to fund our
existing  operations and have financed our capital  expenditures and investments
in joint ventures through cash generated from operations.

Net cash used in  operating  activities  was $13.3  million  for the first three
quarters of 2004 compared to $16.6 million used during the first three  quarters
of 2003. The decrease is primarily a result of improved operating results.

Net cash used in  investing  activities  has  historically  been  primarily  for
capital expenditures.  Net cash used in investing activities of $6.2 million for
the first three quarters of 2004 was approximately the same as the 2003 level.

Net cash  used in  financing  activities  was $.3  million  in the  first  three
quarters of fiscal 2004 compared to $1.2 million for the first three quarters of
fiscal 2003.  The decline in cash used in financing  activities  resulted from a
repayment of shareholder loans in 2004 as well as lower tax distributions.  Cash
used in financing  activities included tax distributions of $.7 million and $1.1
million to our  shareholders  in the fiscal 2004 and fiscal 2003,  respectively.
The tax  distributions  in the first quarter of both fiscal years were made with
respect to our taxable  income for fiscal  2002.  The  distribution  made in the
first  quarter of 2004 was declared in November  2003.  We do not expect to make
tax distributions in 2004 related to the 2003 results of operation.

Financing

As part of the transaction in which we became a privately-held  company in 1999,
we sold $255  million of 11% senior notes (at a price of 98.514% of par to yield
11.25% per annum), the net

                                    Page 31
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


proceeds of which,  together with  substantially  all of our then existing cash,
was used to finance the  transaction.  At that time,  we also entered into a $30
million credit agreement that we terminated in the fourth quarter of 2003.

Under our senior notes  indenture,  there are various  covenants  that limit our
ability to borrow funds, to make "restricted  payments"  including,  among other
things,  dividend  payments  (other  than as  distributions  pursuant to the tax
payment agreement), and to make investments in, among other things, unrestricted
subsidiaries.   The   indenture   for  the  senior  notes  permits  us  to  make
distributions to shareholders  pursuant to a tax payment agreement that contains
a formula that is designed 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 such income were taxed at the highest
applicable federal and New York State marginal income tax rates.

Among other covenants,  the indenture  requires that, in order for us to borrow,
our  consolidated  interest ratio coverage (as defined in the Indenture),  after
giving pro forma effect to the interest on the new borrowing,  for the four most
recently ended fiscal quarters must be at least 2.5 to 1. As of October 3, 2004,
that ratio was 1.4 to 1. As a result,  we are not presently able to borrow funds
except for specifically permitted indebtedness, including up to $75.0 million of
revolving credit loans. In order to make restricted payments, that ratio must be
at least 2.0 to 1, after giving pro forma effect to the restricted  payment and,
in any event, is limited in dollar amount pursuant to a formula contained in the
indenture. We refer to the amount that is available for us to make dividends and
other restricted  payments as the "restricted  payment  availability." We cannot
make restricted  payments (other than distributions  pursuant to the tax payment
agreement)   until  we  increase  the   restricted   payment   availability   by
approximately $20.3 million, and then only to the extent of any excess over that
amount.

In March 2004, we obtained an uncommitted  line of credit,  which expires in May
2005, to replace our former  revolving  credit  facility.  We currently have the
ability,  subject  to bank  approval,  to  borrow  up to $3  million,  including
outstanding  letters of credit.  We have $1.7 million of outstanding  letters of
credit and $1.3 million of undrawn availability. The new line of credit contains
no financial  covenants or unused line fees.  Interest  applicable  to the loans
under  the new line of  credit is at the  bank's  prime  rate at the time of any
borrowings.

In March 2000, one of our subsidiaries  obtained a $16 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
outstanding  principal  balance  of the loan as of  October  3,  2004 was  $15.4
million.  The  mortgage  agreement  contains  various  covenants,   including  a
requirement  that the  subsidiary  maintain a minimum  ratio of EBITDA to annual
debt service of at least 1.2 to 1.0.

We were in  compliance  with all covenants in the indenture for the senior notes
and our mortgage as of October 3, 2004.

Critical Accounting Policies and Judgments
------------------------------------------

Accounting  policies are an integral  part of the  preparation  of our financial
statements in accordance with accounting  principles  generally  accepted in the
United States of America.

                                    Page 32
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


Understanding  these policies,  therefore,  is a key factor in understanding our
reported results of operations and financial position. Accounting policies often
require us to make estimates and assumptions  that affect the amounts of assets,
liabilities,  revenues and expenses reported in the financial statements. Due to
their nature,  estimates  involve  judgments  based upon available  information.
Therefore,  actual  results or  amounts  could  differ  from  estimates  and the
difference  could  have  a  material  impact  on  our   consolidated   financial
statements. During the first half of fiscal 2004, there were no material changes
in the  accounting  policies,  the  application  of  which  may  have  the  most
significant  effect on our reported results of operations and financial position
and that require  judgments  estimates and  assumptions  by management  that can
affect their  application from the matters discussed under the heading "Critical
Accounting  Policies and  Judgments"  in Part II, Item 7 of our Annual Report on
Form 10-K for the fiscal year ended December 28, 2003.

Certain Relationships and Related Transactions

During the first  three  quarters of fiscal  2004,  there were no changes in the
matters   discussed  under  the  heading  "Certain   Relationships  and  Related
Transactions"  in Part II,  Item 13 of our  Annual  Report  on Form 10-K for the
fiscal year ended December 28, 2003.

Forward Looking Statements

This report  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 this
time. These statements generally contain words such as "may," "should," "seeks,"
"believes,"  "in  our  opinion,"  "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:

o        general economic, weather and business conditions;
o        the availability of suitable  restaurant sites in appropriate  regional
         shopping malls and other locations on reasonable rental terms;
o        changes in consumer tastes;
o        changes in population,  energy prices and traffic  patterns,  including
         the effect that military  action and terrorism or other events may have
         on the willingness of consumers to frequent shopping malls, airports or
         downtown areas which are the predominant areas in which our restaurants
         are located;
o        our ability to continue to attract franchisees;
o        the success of our present,  and any future,  joint  ventures and other
         expansion opportunities;
o        the availability of food (particularly  cheese and tomatoes),  beverage
         and paper products at current prices;
o        our ability to pass along cost increases to our customers;

                                    Page 33
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


o        no material increase occurring in the Federal minimum wage;
o        the continuity of services of members of our senior management team;
o        our ability to attract and retain  competent  restaurant  and executive
         managerial personnel;
o        competition;
o        the level of, and our ability to comply with, government regulations;
o        our ability to generate  sufficient cash flow to make interest payments
         and principal under our senior notes and mortgage loan;
o        our ability to comply with covenants  contained in the indenture  under
         which the  senior  notes are issued  and in our  mortgage  loan and the
         effects which the  restrictions  imposed by those covenants may have on
         our ability to operate our business; and
o        our ability to  repurchase  senior notes to the extent  required in the
         event we make certain asset sales or experience a change of control.

You are cautioned not to place undue reliance on these  statements,  which speak
only as of the date of the 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.
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.


                                    Page 34
<PAGE>
                          SBARRO, INC. AND SUBSIDIARIES


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.  The  indenture  under  which our senior  notes are issued
limits us to similar  investments.  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.

Future  borrowings  under our  uncommitted  line of credit  (none are  currently
outstanding) will be at rates that float with the market and, therefore, will be
subject to  fluctuations  in interest  rates.  We are not a party to, and do not
expect to enter  into any  interest  rate  swaps or other  instruments  to hedge
interest rates.

We have not, and do not expect to,  purchase  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 to 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.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures:

Our management,  with the participation of our Chief Executive Officer and Chief
Financial  Officer,  has evaluated the effectiveness of our disclosure  controls
and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under
the Securities  Exchange Act of l934, as amended (the "Exchange Act"), as of the
end of the period covered by this report.  Based on that  evaluation,  our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of  the  period,   our   disclosure   controls  and  procedures  are  effective.
Notwithstanding the foregoing, a control system, no matter how well designed and
operated,  can provide only  reasonable,  not absolute,  assurance  that it will
detect or  uncover  failures  within  Sbarro to  disclose  material  information
otherwise required to be set forth in our periodic reports.

Internal Control Over Financial Reporting:

There have not been any changes in our internal control over financial reporting
(as such term is defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange
Act) during the forty weeks ended October 3, 2004 that have materially affected,
or are  reasonably  likely to  materially  affect,  our  internal  control  over
financial reporting.


                                    Page 35
<PAGE>

                           PART II. OTHER INFORMATION


Item 6.  Exhibits

         31.01    Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

         31.02    Certification of Vice President,  Chief Financial  Officer and
                  Principal  Accounting  Officer  pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         32.01    Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

         32.02    Certification of Vice President,  Chief Financial  Officer and
                  Principal  Accounting  Officer  pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.


                                    Page 36
<PAGE>

                                   SIGNATURES


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:    November 12, 2004       By: /s/ MICHAEL O'DONNELL
         -----------------           -------------------------------------------
                                     Michael O'Donnell
                                     President and Chief Executive Officer


Date:    November 12, 2004        By: /s/ ANTHONY J. PUGLISI
         -----------------           -------------------------------------------
                                     Anthony J. Puglisi
                                     Vice President; Chief Financial Officer and
                                     Principal Accounting Officer


                                    Page 37
<PAGE>

                                  EXHIBIT INDEX


    Exhibit Number                    Description


         31.01    Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

         31.02    Certification of Vice President,  Chief Financial  Officer and
                  Principal  Accounting  Officer  pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         32.01    Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

         32.02    Certification of Vice President,  Chief Financial  Officer and
                  Principal  Accounting  Officer  pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.