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


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarter ended October 8, 2000    Commission File Number 333-90817



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


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

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

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

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

Yes      X                 No

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

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

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


<PAGE>






                                  SBARRO, INC.

                                 FORM 10-Q INDEX



PART I.     FINANCIAL INFORMATION                                  PAGES


Consolidated Financial Statements:

         Balance Sheets - October 8, 2000 (unaudited)
          and January 2, 2000 . . . . . . . . . . . . . . . . . . . . 3-4

         Statements of  Operations  (unaudited)  - Forty Weeks
              ended  October 8, 2000 and October 10, 1999 and
              Twelve Weeks ended October 8, 2000
              and October 10, 1999 . . . . . . . . . . . . . . . . .  5-6

         Statements of Cash Flows (unaudited) - Forty weeks ended
          October 8, 2000 and October 10, 1999 . . . . . . . . . . . .7-8

         Notes to Unaudited Consolidated Financial Statements -
          October 8, 2000  . . . . . . . . . . . . . . . . . . . . . 9-21

Management's Discussion and Analysis of Financial Condition and
             Results of Operations  . . . . . . . . . . . . . . . . 22-29


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













                                      Pg. 2

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                  (In thousands except share data)
                                                              October 8, 2000             January 2, 2000
                                                              ---------------             ---------------
                                   (unaudited)
Current assets:
<S>                                                                <C>                              <C>
     Cash and cash equivalents                                     $18,068                          $33,514
     Restricted cash for untendered shares (Note 2)                    188                              298
     Receivables; net of allowance for doubtful
        accounts of $138 and $419, respectively
       Franchisees                                                   1,436                            1,429
       Taxes                                                           701                               -
       Other                                                         3,246                            2,938
                                                             ----------------                --------------

                                                                     5,383                            4,367

     Inventories                                                     2,989                            3,686

     Prepaid expenses                                                6,489                            1,905
                                                              ---------------                 -------------

       Total current assets                                        33,117                            43,770

Property and equipment, net                                       156,896                           137,232

Other assets:

     Intangible assets, net of accumulated
       amortization of $8,058 and $2,000,
         respectively                                              203,729                          230,234
     Loan receivable from officer (Note 4)                           2,000                               -
     Other assets,net                                                7,419                            6,597
                                                             --------------                   -------------
                                                                  $403,161                         $417,833
                                                               ============                     ===========

</TABLE>




                                   (continued)



                                      Pg. 3

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                   (In thousands except share data)
                                                              October 8, 2000             January 2, 2000
                                                              ---------------             ---------------
                                                                 (unaudited)
Current liabilities:
    <S>                                                                <C>                                <C>
     Amounts due for untendered shares (Note 2)                        $188                            $298
     Accounts payable                                                10,596                           9,673
     Accrued expenses                                                24,847                          32,409
     Accrued interest payable (Notes 2 and 3)                         2,259                           7,480
     Current portion of mortgage payable                                129                               -
     Income taxes payable (Note 5)                                        -                             754
                                                                 ----------------            --------------

       Total current liabilities                                     38,019                          50,614


Deferred income taxes (Note 5)                                             -                          5,629

Long-term debt, net of original issue
     discount (Note 2)                                              251,602                         251,310

Mortgage payable, net of current
     portion (Note 3)                                               15,811                                -

Shareholders' equity (Note 2):
     Preferred stock, $1 par value; authorized
       1,000,000 shares; none issued                                        -                             -
     Common stock, $.01 par value; authorized
       40,000,000 shares; issued and outstanding
       7,064,328 shares at October 8, 2000 and
       January 2, 2000                                                  71                               71
     Additional paid-in capital                                         10                               10
     Retained earnings                                              97,648                          110,199
                                                                 --------------                ------------
                                                                    97,729                          110,280
                                                                -------------                  ------------

                                                                   $403,161                        $417,833
                                                                 ============                  ============
</TABLE>

            See notes to unaudited consolidated financial statements

                                      Pg. 4

<PAGE>

                         SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                (In thousands)
                                                                        For the forty weeks ended:
                                                              October 8, 2000             October 10, 1999
Revenues:
<S>                                                               <C>                              <C>
     Restaurant sales                                               $270,656                       $265,022
     Franchise related income                                          9,103                          6,750
                                                              --------------                  -------------

       Total revenues                                                279,759                       271,772
                                                                -------------                  ------------

Costs and expenses:
     Cost of food and paper products                                53,127                           54,926
     Restaurant operating expenses:
       Payroll and other employee benefits                           75,256                          72,405
       Occupancy and other                                           84,822                          81,355
     Depreciation and amortization                                   24,110                          18,026
     General and administrative                                      19,752                          17,804
     Other operating income                                          (4,023)                         (3,600)
                                                                --------------                --------------

       Total costs and expenses                                     253,044                        240,916
                                                                -------------                  ------------

                           Operating income                            26,715                        30,856

Interest (expense) income:
     Interest expense (Notes 2 and 3)                                 (23,837)                         (980)
     Interest income                                                       967                        3,679
                                                                  ------------                 ------------
       Net interest (expense) income                                  (22,870)                        2,699
                                                                  -----------                   -----------

Income before income taxes                                              3,845                        33,555

(Benefit) provision for income taxes (Note 5)                          (5,244)                       12,846
                                                                 -------------               --------------

                           Net income                                  $9,089                     $  20,709
                                                                 ============                 =============


</TABLE>



                                      Pg. 5

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                     (In thousands)

                                                                                          For the twelve weeks ended:
                                                              October 8, 2000             October 10, 1999
Revenues:
<S>                                                                    <C>                          <C>
     Restaurant sales                                                $84,992                        $85,971
     Franchise related income                                          2,522                          2,418
                                                              --------------                  -------------

       Total revenues                                                 87,514                        88,389
                                                               --------------                 -------------

Costs and expenses:
     Cost of food and paper products                                 16,837                          17,945
     Restaurant operating expenses:
       Payroll and other employee benefits                           22,962                          22,830
       Occupancy and other                                           25,790                          25,231
     Depreciation and amortization                                    7,594                           5,765
     General and administrative                                       5,889                           5,362
     Other operating income                                          (1,089)                         (1,021)
                                                                  -----------                   -----------

       Total costs and expenses                                      77,983                          76,112
                                                                 ------------                    ----------

                           Operating income                           9,531                          12,277
                                                                 ------------                    ----------

Interest (expense) income:
     Interest expense (Notes 2 and 3)                                (7,252)                          (980)
     Interest income                                                    332                          1,055
                                                                 -------------                  ----------         -
       Net interest (expense) income                                 (6,920)                            75
                                                                 ------------                 ------------

Income before income taxes                                             2,611                        12,352

Provision for income taxes  (Note 5)                                    165                          4,789
                                                               --------------                  ------------

                           Net income                                 $2,446                      $  7,563
                                                                  ===========                  ============




</TABLE>

                                      Pg. 6

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             (In thousands)
                                                                       For the forty weeks ended:
                                                              October 8, 2000             October 10, 1999
Operating activities:

<S>                                                              <C>                                <C>
Net income                                                         $9,089                           $20,709
Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                25,253                           18,087
       Benefit for deferred income taxes                            (5,629)                            (538)
       Changes in operating assets and liabilities:
         Increase in receivables                                      (873)                          (1,243)
         Decrease in inventories                                       697                              267
         Increase in prepaid expenses                               (4,584)                          (5,060)
         Decrease (increase) in other assets                           827                             (930)
         (Decrease) increase in accounts payable
            and accrued expenses                                    (6,800)                           2,595
         (Decrease) increase in accrued interest
            payable                                                 (5,221)                             935
Decrease in income taxes payable                                      (754)                          (3,880)
                                                                 --------------               -------------

         Net cash provided by operating
           activities                                                12,005                           30,942
                                                              ---------------                  ------------

Investing activities:

Purchases of property and equipment                                 (19,364)                        (18,865)
                                                                 -------------                --------------

       Net cash used in investing activities                        (19,364)                        (18,865)
                                                                 -------------                --------------



</TABLE>



                                   (continued)


                                      Pg. 7

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                             (In thousands)
                                                                       For the forty weeks ended:
                                                              October 8, 2000             October 10, 1999
Financing activities:

<S>                                                                         <C>                       <C>
Proceeds from long-term debt                                                -                        251,211
Cost of Merger and related financing                                        -                       (411,000)
Accrued or previously paid Merger costs                                     -                          2,828
Proceeds from mortgage                                                 16,000                             -
Mortgage principal repayments                                             (60)                            -
Cost of mortgage                                                         (387)                            -
Loan to officer                                                        (2,000)                            -
Proceeds from exercise of stock options                                    -                             426
Distributions to shareholders                                         (21,640)                            -
                                                                 -------------           ------------------

Net cash used in financing activities                                  (8,087)                     (156,535)
                                                                --------------                 -------------

Decrease in cash and cash equivalents                                 (15,446)                     (144,458)

Cash and cash equivalents at beginning of period                       33,514                       154,909
                                                                -------------                 -------------

Cash and cash equivalents at end of period                            $18,068                   $    10,451
                                                                 ============                ==============



Supplemental disclosure of cash flow information:

Cash paid during the period for income taxes                          $3,711                       $16,743
                                                                =============                 =============

Cash paid during the period for interest                             $27,879                 $           -
                                                                 ============            ==================


</TABLE>


            See notes to unaudited consolidated financial statements


                                      Pg. 8


<PAGE>



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

1.       Basis of presentation:

         The accompanying  unaudited consolidated financial statements have been
         prepared  in  accordance  with  the  instructions  for  Form  10-Q  and
         Regulation  S-X related to interim  period  financial  statements  and,
         therefore,  do not include all  information  and footnotes  required by
         generally accepted  accounting  principles.  However, in the opinion of
         Sbarro's  management,  all adjustments  (consisting of normal recurring
         adjustments and accruals)  considered necessary for a fair presentation
         of the consolidated  financial  position of Sbarro and its subsidiaries
         at October 8, 2000 and our consolidated  results of operations for each
         of the forty and twelve week period  ended  October 8, 2000 and October
         10, 1999 and cash flows for the forty  weeks in each of the  respective
         years have been included. The results of operations for interim periods
         are not necessarily  indicative of the results that may be expected for
         the  entire  year.  Reference  should be made to the  annual  financial
         statements,  including footnotes thereto, included in our Annual Report
         on Form 10-K for the fiscal year ended January 2, 2000.

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

  2.     Going Private Transaction:

         On September 28, 1999,  members of the Sbarro family (who prior thereto
         owned  approximately  34.4% of the Sbarro's  common  stock)  became the
         holders of 100% of our issued and outstanding  common stock as a result
         of a "going private" merger. The cost of the merger, including fees and
         expenses,  was funded through the use of substantially  all of our cash
         on hand and the  placement of $255.0  million of 11.0% Senior Notes due
         September  15,  2009 sold at a price of 98.514% of par to yield  11.25%
         per annum.  In April 2000,  we exchanged  these Senior Notes for Senior
         Notes having the same terms,  except that the new Senior Notes ("Senior
         Notes")  were  registered  under the  Securities  Act of 1933.  The old
         senior notes and the Senior Notes were issued under an Indenture  dated
         September 28, 1999 (the "Indenture"). We also entered into a five year,
         $30 million  unsecured  senior  revolving bank credit  facility under a
         Credit   Agreement   dated  as  of  September  23,  1999  (the  "Credit
         Agreement").   The  Credit  Agreement   provides  an  unsecured  senior
         revolving  credit  facility which enables us to borrow,  on a revolving
         basis from time to time during its five-year term, up to $30.0 million,
         including a $10.0 million  sublimit for standby letters of credit.  Our
         payment obligations under the Senior Notes and the Credit Agreement are
         jointly,  severally,  unconditionally and irrevocably guaranteed by all
         of  our  current  Restricted  Subsidiaries  (as  defined)  and is to be
         similarly guaranteed by our future Restricted Subsidiaries.

         As of October 8, 2000, there was $0.2 million remaining on deposit with
         a third party paying agent for untendered shares to be redeemed as part
         of the merger consideration.  Such amounts are shown as restricted cash
         and amounts due for untendered  shares in the balance sheet.  Funds for
         the  untendered  shares are being  returned  to Sbarro to be held until
         claimed or escheated to the appropriate juristrictions.

                                        Pg. 9

<PAGE>

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

2.       Going Private Transaction (continued):

         In accordance  with Emerging  Issues Task Force Issue 88-16,  "Basis in
         Leveraged Buyout Transactions",  the acquisition of all the outstanding
         shares  of  common  stock  not  owned  by the  Sbarro  family  and  all
         outstanding  stock  options have been  accounted for under the purchase
         method of accounting. As a result, the remaining shares of common stock
         owned by the Sbarro  family are  presented in  shareholders'  equity at
         their original basis in the  accompanying  consolidated  balance sheet.
         Portions of the final purchase  price  allocations  were  determined by
         professional  appraisers  utilizing recognized valuation procedures and
         techniques.  During the third quarter of fiscal 2000, we recorded an
         allocation of the purchase price from the going private transaction
         based on an appraisal of the Company at September 29, 1999.  As a
         result, property and equipment and intangible assets were increased by
         $18.5 million and $204 million, respectively, and additional
         amortization expense for the period from September 29, 1999 through
         July 10, 2000 of $0.3 million was recorded in the third quarter of
         fiscal 2000.  The purchase price  allocation is being  amortized on a
         straight line basis over an  average  estimated  useful  life of 30
         years.

         Summarized  below are the unaudited pro forma results of our operations
         for the forty and twelve weeks ended  October 10, 1999 as if the merger
         and related  financing  had taken place as of the beginning of the 1999
         periods  presented.  Adjustments have been made for the amortization of
         the  excess of the  purchase  price  over the cost  basis of net assets
         acquired,  interest  expense and related  changes in income tax expense
         arising  from  our  election  to be  taxed  under  Subchapter  S of the
         Internal Revenue Code (see Note 5).

                                        Forty weeks ended    Twelve weeks ended
                                         October 10, 1999      October 10, 1999
                                        -----------------     ----------------
         Pro Forma (000's):
           Revenues                     $271,772                      $88,389
                                        =========                     ========
           Income before income taxes     $2,407                       $3,852
                                         ========                    =========
         Net income (loss)              $(868)                     $1,591
                                       ==========                  =========

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

3.       Mortgage payable:

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


                                       Pg. 10

<PAGE>

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

4.       Related party transactions:

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

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

5.       Income taxes:

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

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

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

         For the forty weeks ended October 8, 2000, we made tax distributions of
         $3.6 million in accordance with the tax payment distribution agreement.

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




                                     Pg. 11

<PAGE>

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

6.       Comprehensive income:

         The Company's  operations did not give rise to any items  includable in
         comprehensive  income which were not already included in net income for
         either of the forty or twelve week  periods  ended  October 8, 2000 and
         October 10, 1999.

7.       Contingencies:

         In February 1999, the Umberto of New Hyde Park joint venture companies,
         in which we have an 80% interest,  began an action in the U.S. District
         Court for the Eastern District of New York against Umberto Corteo,  who
         owns the  remaining 20% interest in the joint  venture  companies,  and
         against three other restaurants owned by Mr. Corteo. We alleged,  among
         other things,  that Mr. Corteo engaged in unfair trade practices and in
         trademark infringement, thereby breaching the joint venture agreements.
         We are seeking an  accounting,  compensatory  and punitive  damages and
         injunctive relief. The answer filed by Mr. Corteo and his co-defendants
         denies our claims and further alleges that non-competition restrictions
         against Mr. Corteo in the joint venture  agreements are  unenforceable.
         Mr. Corteo and his co-defendants  have also  counterclaimed  against us
         alleging  misappropriation  of trademark  rights and failure to perform
         administrative  duties that amounted to a breach of the agreements.  We
         believe that our claims  against Mr.  Corteo will be proven and that we
         have substantial defenses to his counterclaims.  Based upon discussions
         held with Mr.  Corteo  during  November  2000,  we  believe  there is a
         substantial  likelihood  that the litigation  will be resolved  through
         settlement.  Any settlement  agreement would not have a material impact
         upon either the financial condition or operations of the Company.

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



                                     Pg. 12

<PAGE>

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

7.       Contingencies (continued):

         On December  20,  1999,  Antonio  Garcia and eleven  other  current and
         former general managers of Sbarro  restaurants in California  amended a
         complaint  filed in the Superior Court of California for Orange County.
         The complaint alleges that the plaintiffs were improperly classified as
         exempt employees under the California wage and hour law. The plaintiffs
         are seeking actual damages,  punitive damages and costs of the lawsuit,
         including  reasonable  attorney's  fees,  each in unspecified  amounts.
         Plaintiffs'  counsel  has  stated  that  he  is  in  contact  with  the
         plaintiffs' counsel in the Wanli case and that he may attempt to file a
         class action based upon alleged  violations of the Fair Labor Standards
         Act.  We believe  that we have  substantial  defenses to the claims and
         intend to vigorously defend this action.

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

8.       Guarantor and non-guarantor financial statements:

         Certain  subsidiaries  have guaranteed  amounts  outstanding  under the
         Senior   Notes  and  Credit   Agreement.   Each  of  the   guaranteeing
         subsidiaries is our direct or indirect wholly owned subsidiary and each
         has fully  and  unconditionally  guaranteed  the  Senior  Notes and the
         Credit Agreement on a joint and several basis.

         The following condensed consolidating financial information presents:

(1)      Condensed consolidating statements of operations for the forty
         and twelve  weeks ended  October 8, 2000 and October 10, 1999,
         statements  of cash flows for the forty week periods  ended in
         each  respective year and balance sheets as of October 8, 2000
         and January 2, 2000 of (a) Sbarro,  Inc., the parent,  (b) the
         guarantor  subsidiaries  as  a  group,  (c)  the  nonguarantor
         subsidiaries  as a group and (d) the Company on a consolidated
         basis,

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

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

         The principal  elimination entries eliminate  intercompany balances and
transactions.






                                 Pg. 13

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                   For the forty weeks ended October 8, 2000


                                                      Guarantor          Nonguarantor                     Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations          Total
Revenues:
<S>                              <C>           <C>                 <C>                     <C>            <C>
     Restaurant sales            $119,584      $136,445            $14,627                 $    -         $270,656
     Franchise related income       9,103            -                 -                       -            9,103
     Intercompany credits               -        11,924                -                (11,924)               -
                             ------------      --------           -----------         ---------         -------------
         Total revenues           128,687       148,369            14,627               (11,924)           279,759

Costs and expenses:
     Cost of food and paper
       products                  21,388           27,696            4,043                     -            53,127
     Restaurant operating
        expenses:
       Payroll and other
         employee benefits      30,062              39,697             5,497                      -            75,256
Occupancy and other             39,392               41,516             3,914                      -           84,822
     Depreciation and
        amortization             13,841               9,646                623                     -             24,110
     General and administrative   8,936              10,107                709                     -           19,752
     Intercompany charges        11,924                 -                  -                (11,924)              -
     Other operating income      (2,502)             (1,521)                 -                -                 (4,023)
                               -----------         -----------       -----------      -----------            ------------
       Total costs and expenses 123,041             127,141              14,786           (11,924)               253,044
                               ----------          ----------           --------          --------             ---------

Operating income (loss)             5,646              21,228               (159)                -                26,715

Interest (expense) income:
     Interest expense             (22,986)              (775)                (76)                -              (23,837)
     Interest income                1,970                   -             (1,003)                -                   967
                               ----------      --------------          ----------    -------------           -----------
     Net interest (expense) income   21,016             (775)             (1,079)                -              (22,870)
                                  ---------       -----------          ----------    -------------           -----------

Income (loss) before
     income taxes                 (15,370)            20,453              (1,238)               -                  3,845
Income taxes (benefit)             (5,968)               770                 (46)               -                 (5,244)
                                ----------          ---------           ---------      ----------                --------

Net income (loss)                 $(9,402)          $19,683              $(1,192)        $     -                 $9,089
                                ==========          =========            ========       ========                 =======


</TABLE>












                                       Pg. 14

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                   For the forty weeks ended October 10, 1999

                                                      Guarantor          Nonguarantor                      Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations           Total
Revenues:

<S>                                <C>                  <C>            <C>                <C>               <C>
     Restaurant sales              $117,190             $137,147       $10,685            $    -            $265,022
     Franchise related income         6,750                 -                 -                -               6,750
     Intercompany credits               -               13,973                -          (13,973)                 -
                             ------------            --------        -----------        ----------         -------------
         Total revenues            123,940             151,120          10,685            (13,973)           271,772

Costs and expenses:
     Cost of food and paper
       products                    22,327              29,814              2,785               -              54,926
Restaurant operating
        expenses:
       Payroll and other
         employee benefits        30,111               39,118              3,176                -              72,405
       Occupancy and other        37,584              40,714              3,057                 -              81,355
     Depreciation and
        amortization               7,956               9,605                465                   -            18,043
     General and administrative    8,761               9,072                555                (554)           17,804
     Intercompany charges         13,973                  -                  -             (13,973)                -
     Other operating income       (2,329)             (1,815)              (10)                554             (3,600)
                                  --------         -----------           --------      ----------             -----------
       Total costs and expenses  118,353            126,508              10,028          (13,973)               240,916
                                ----------         ----------           --------         ---------             ---------

Operating income (loss)             5,587              24,612                657                 -                30,856

Interest (expense) income:
     Interest expense               (980)                   -                  -                 -                  (980)
     Interest income                3,679                   -                  -                 -                 3,679
                                 --------        ------------        -----------    --------------             ---------
     Net interest (expense) income   2,699                  -                  -                 -                 2,699
                                  --------       ------------        -----------    --------------             ---------

Income  before
     income taxes                 8,286              24,612                 657                     -            33,555
Income taxes                      3,167               9,426                253                  -               12,846
                                 --------           ---------            -------         --------             ----------

Net income                       $5,119             $15,186               $404            $     -              $20,709
                                 ========           =========             ======         ========              ========      ======


</TABLE>














                                     Pg. 15

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                   For the twelve weeks ended October 8, 2000

                                                      Guarantor          Nonguarantor                       Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations           Total
Revenues:
<S>                         <C>                 <C>                  <C>               <C>                 <C>
     Restaurant sales       $37,586             $42,493              $4,913            $        -          $84,992
  Franchise related income    2,522                   -                  -                      -            2,522
     Intercompany credits         -              3,881                   -                (3,881)             -
                              -----------      --------               ----------           -------           -----------
         Total revenues      40,108              46,374              4,913                 (3,881)          87,514
                                                                                                                           -
Costs and expenses:
     Cost of food and paper
       products               6,717               8,732              1,388                      -           16,837
Restaurant operating
        expenses:
       Payroll and other
         employee benefits   7,228               13,892              1,842                      -            22,962
       Occupancy and other   13,287              11,096              1,407                      -            25,790
     Depreciation and
        amortization          4,252               3,117                225                      -            7,594
     General and administrative 3,017              2,671                 201                     -             5,889
     Intercompany charges       3,881                  -                  -                (3,881)                 -
     Other operating income     (678)               (411)               -                -                   (1,089)
                                ----------          ----------       -----------      -----------               ---------
       Total costs and expenses   37,704              39,097             5,063             (3,881)               77,983
                               ----------           ---------           --------           -------            ----------

Operating income (loss)            2,404                7,277             (150)                 -                  9,531

Interest (expense) income:
     Interest expense              (6,896)               (335)               (21)               -                 (7,252)
     Interest income                   636                  -               (304)               -                    332   Net
                                  --------         ----------             -------     -----------                --------
interest (expense) income          (6,260)              (335)               (325)               -                 (6,920)
                                 ---------         ----------           ---------     -----------               ---------

Income  (loss) before
     income taxes                (3,856)               6,942                (475)               -                 2,611
Income taxes (benefit)              (50)                 233                (18)                -                   165
                               -----------            -------           ---------        --------                -------

Net income (loss)               $(3,806)             $6,709               $(457)          $     -                $2,446
                                ==========           ========             =======        ========                =======   =



</TABLE>













                                     Pg. 16

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                Condensed Consolidating Statement of Operations
                                                  For the twelve weeks ended October 10, 1999

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Revenues:
<S>                           <C>                  <C>                 <C>                <C>                 <C>
     Restaurant sales         $37,841              $44,328             $3,802             $    -              $85,971
Franchise related income        2,418                    -                  -                -                  2,418
     Intercompany credits           -                4,258                  -              (4,258)                  -
                              -----------          -------             ---------          --------           -----------
         Total revenues         40,259              48,586              3,802             (4,258)              88,389
                                                                                                                           -

Costs and expenses:
     Cost of food and paper
       products                  7,179               9,750                1,016                 -              17,945
Restaurant operating
        expenses:
       Payroll and other
         employee benefits      9,738               12,330              762                     -               22,830
       Occupancy and other       9,762              14,202               1,267                  -               25,231
     Depreciation and
        amortization             2,624               2,992                149                   -               5,765
     General and administrative  4,312                 991                278                (200)               5,381
     Intercompany charges        4,258                      -                  -           (4,258)                     -
     Other operating income       (358)               (728)             (154)             200                   (1,040)
                               ----------           ---------           --------         --------               ---------
       Total costs and expenses  37,515              39,537              3,318             (4,258)                76,112
                               ----------           ---------           --------           -------              --------

Operating income (loss)             2,744               9,049              3,318                 -                12,277

Interest (expense) income:
     Interest expense               (980)                   -                  -                 -                  (980)
     Interest income                1,055                   -                  -                 -                  1,055
                                ---------         -----------         ----------        ----------              ---------
     Net interest (expense) income    75               -                  -                 -                     75
                                  -----------     -----------         ----------        ----------            -----------

Income  before
     income taxes                 2,819               9,049                 484                 -               12,352
Income taxes                      1,091               3,511                187                  -                4,789
                                ---------             -------            -------         --------             ----------

Net income                       $1,728              $5,358               $297                  -               $7,563
                                 ========            ========             ======         ========               ========



</TABLE>













                                     Pg. 17

<PAGE>

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

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

<TABLE>
<CAPTION>
                     Condensed Consolidating Balance Sheet
                              As of October 8, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total

<S>                               <C>                  <C>                  <C>              <C>                 <C>
Cash and cash equivalents         $14,066              $3,480               $522             $            -      $18,068
Restricted cash for untendered
    shares                         188                   -                     -                -                 188
Receivables                      4,060              1,241                  82                      -            5,383
Inventories                      1,263               1,509                217                      -            2,989
Prepaid expenses and other        4,085               2,217                187                  -               6,489
                                ---------            --------            -------           ------         --------------
    Total current assets         23,662               8,447              1,008                 -                33,117
Intercompany receivables             -             177,031                    -            (177,031)                -
Investment in subsidiaries       65,469                    -                  -            (65,469)                 -
Net property, plant and
    equipment                    51,197              91,075             14,624                   -             156,896
Intercompany  receivables
    - long term                  3,579                    -                  -          (3,579)                    -
Intangibles and other assets, net  231,120            1,008              (1,617)         (17,363)              213,148
                                 -----------       ----------         -----------     -----------         --------------
     Total assets               $375,027            $277,561           $14,015          $(263,442)           $403,161
                               ==========          ==========         ==========       ==========        ===============

Amounts due for untendered
    shares                     $188                   $     -             $    -          $     -             $188
Accounts payable and accrued
    expenses                   31,782                 433              3,228                    -           35,443
Accrued interest               2,259                         -                  -                -            2,259
Current portion of mortgage
    payable                           -               129                    -                -             129
                               ----------           ---------          ---------         --------       ----------------
     Total current liabilities  34,229              562              3,228                      -           38,019

Intercompany payables          177,031                    -          15,593               (192,624)              -
Long-term debt, net of
    current portion            251,602               15,811                  -                -             267,413
Intercompany payables -
    long term                      -                3,579                        -           (3,579)              -
Common stock                       71                    -                  -                -                   71
Additional paid-in capital         10                65,469             1,770               (67,239)              10
Retained earnings (deficit)   (87,916)              192,140             (6,576)               -                97,648
                                  --------         ----------             -------     -----------              ---------
     Total stockholders' equity
       (deficiency)              (87,835)           257,609               (4,806)         (67,239)         97,729
                                 ---------        -----------             -------         --------       ---------------
     Total liabilities and
       stockholders' equity    $375,027            $277,561            $14,015          $(263,442)        $403,161
                               ==========          ==========          =========        ==========        ==============



</TABLE>








                                     Pg. 18

<PAGE>

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

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

<TABLE>
<CAPTION>

                      Condensed Consolidating Balance Sheet
                              As of January 2, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total

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

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

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





</TABLE>


                                     Pg. 19

<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                 Notes To Consolidated Financial Statements (continued)
8.       Guarantor and non-guarantor financial statements (continued):

<TABLE>
<CAPTION>
                 Condensed Consolidating Statement of Cash Flows
                    For the forty weeks ended October 8, 2000

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Operating activities:
<S>                               <C>           <C>                      <C>                <C>                      <C>
Net income (loss)                 $(9,402)      $19,683                  $(1,192)           $   -                    $9,089
Adjustments to reconcile net income
   to net cash provided by
   operating activities:
     Depreciation and amortization 15,028          9,601               624                      -                    25,253
     Deferred taxes                (5,629)                  -                  -                -                    (5,629)
     Changes in operating assets
      and liabilities:
      Increase in receivables        (432)               (412)               (29)               -                      (873)
      Decrease (increase) in inventories 330         455                     (88)               -                       697
      Increase in prepaid
        expenses                  (1,852)              (2,594)              (138)               -                    (4,584)
      (Decrease) increase in
        other assets               (6,175)                84            2,043       4,875                               827
      (Decrease) increase in accounts
         payable and accrued expenses(6,706)           (586)           492                      -                    (6,800)
      Decrease in accrued
        interest payable          (5,221)                   -                  -                -                    (5,221)
      (Decrease) increase in
        income taxes payable         (986)              180                 52                  -                      (754)
                                 ---------        -----------         ----------      -----------                 -------
Net cash (used in) provided by
   operating activities           (21,045)           26,411              1,764            4 875                      12,005
                                  --------         ----------          ---------        ---------              ---------

Investing activities:
Purchases of property and
   equipment                       (4,708)             (7,269)            (7,387)               -                   (19,364)
                                   -------             -------            -------      ----------                  --------
Net cash used in investing activities(4,708)           (7,269)            (7,387)               -                   (19,364)
                                     -------           -------            -------      ----------                   --------

Financing activities:
Proceeds from mortgage                  -        16,000                        -                -                    16,000
Mortgage principal repayments           -                 (60)                 -                -                       (60)
Cost of mortgage                        -            (387)                     -                -                      (387)
Loan to officer                    (2,000)                  -                  -                -                    (2,000)
Distributions to shareholders     (21,640)                  -                  -                -                   (21,640)
Intercompany balances           35,606                (35,606)           4,875            (4,875)                    -
                              -----------             --------         ---------          --------              ------------
Net cash (used in) provided
   by financing activities      11,966                (20,053)           4,875             (4,875)                   (8,087)
                            -------------            ---------         ---------           -------                  -------

Decrease in cash and cash
   equivalents                    (13,787)               (911)              (748)               -                   (15,446)
Cash and cash equivalents
   at beginning of period        27,853               4,391              1,270                 -                     33,514
                              -----------           ---------           --------          -------                   ---------

Cash and cash equivalents
   at end of period             $14,066              $3,480              $522            $      -                     $18,068
                                =========            ========            =======         ========               =============

Supplemental disclosure of cash flow information:
Cash paid during the period
   for income taxes              $3,110                $557                $44          $      -                      $3,711
                                =========              ======              =====        ==========             ==============
Cash paid during the period
   for interest                 $27,022                $775                $82         $       -                     $27,879
                                =========              ======             ======       ==========                ============
</TABLE>

                                     Pg. 20

<PAGE>

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

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

                 Condensed Consolidating Statement of Cash Flows
                   For the forty weeks ended October 10, 1999
<TABLE>
<CAPTION>

                                                      Guarantor          Nonguarantor                            Consolidated
                                    Parent           Subsidiaries      Subsidiaries     Eliminations               Total
Operating activities:
<S>                               <C>           <C>                     <C>                 <C>                    <C>
Net income                        $5,119        $15,186                 $404                $   -                  $20,709
Adjustments to reconcile net income
   to net cash provided by
   operating activities:
     Depreciation and amortization  8,017           9,605                465                      -                    18,087
     Deferred taxes                    (538)                -                  -                -                   (538)
     Changes in operating assets
      and liabilities:
      (Increase)  in receivables     (1,173)             (41)                (29)               -                 (1,243)
      Decrease in inventories        105          162                          -                -                267
      Increase in prepaid expenses   (2,702)           (2,248)              (110)               -                 (5,060)
      Increase (decrease) in other assets1,691         (1,974)                34          (681)                   (930)
      Increase (decrease) in accounts
         payable and accrued expenses 1,551             (268)          1,312                    -                  2,595
      Increase in accrued interest payable935               -                  -                -                    935
      Decrease in income taxes payable  (3,784)         (96)                 -                  -                 (3,880)
                                      ---------   ------------       -----------         --------               ---------
Net cash provided by
   operating activities             9,221           20,326             2,076                 (681)              30,942
                                  ---------       -----------        -----------        ----------            ----------

Investing activities:
Purchases of property and
   equipment                        (11,850)           (5,794)            (1,221)               -                (18,865)
                                    --------           -------            -------      ----------                --------
Net cash used in investing
   activities                       (11,850)           (5,794)            (1,221)               -                (18,865)
                                    --------           -------            -------      ----------                --------

Financing activities:
Proceeds from exercise of
   stock options                        426              -                  -                   -                    426
Proceeds from long-term debt        251,211                 -                  -                -                251,211
Cost of merger and related financing(411,000)               -                  -                -               (411,000)
Accrued or previously paid merger costs2,828                -                  -                -                  2,828
Intercompany balances              16,756             (16,756)            (681)              681                     -
                               ------------           --------         ----------          ------              ---------
Net cash (used in) provided
   by financing activities       (139,779)            (16,756)             (681)             681               (156,535)
                               -------------        ----------            -------          ------            -----------

(Decrease) increase in cash and
   cash equivalents             (142,408)              (2,224)              174                 -            (144,458)
Cash and cash equivalents
   at beginning of period         148,134             6,268                  507                -          154,909
                                -----------          --------               ----         --------         --------------
Cash and cash equivalents
   at end of period                $5,726            $4,044                $681          $      -          $10,451
                                   ========          ========              =====         ========          =============

Supplemental disclosure of cash flow information:
Cash paid during the period
   for income taxes               $15,164            $1,569                 $10         $      -                 $16,743
                                 ==========          ========               ====        =========              =========
Cash paid during the period
   for interest     $         -                  $        -             $     -         $      -            $          -
                   ==============                ============           ========        =========           ============

</TABLE>


                                     Pg. 21


<PAGE>

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

Results of Operations

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

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

<TABLE>
<CAPTION>
                                            40 Weeks       40 Weeks       12 Weeks       12 Weeks
                                              Ended          Ended          Ended          Ended           Fiscal Year
                                            10/08/00       10/10/99       10/08/00       10/10/99        1999          1998
                                            --------       --------       --------       --------        ----          ----
Company-owned restaurants:
<S>                                           <C>             <C>           <C>             <C>         <C>             <C>
   Opened during period                       7               18            2               9           24              25
   Acquired from (sold to)
     franchisees during period-net              -             -              -              -            (1)             1
   Closed during period                       (11)            (9)           (3)           (4)             (9)          (20)
                                           -------          -----         ------       -------         ------        ------
   Open at end of period (1)                634              633        634               633         638              624

Franchised restaurants:
   Opened during period                      28               34          11               15           49              43
   Purchased from (sold to)
     Company during period-net                 -           -                 -              -              1            (1)
   Closed or terminated during period        (15)            (24)            (2)         (11)            (32)          (13)
                                            -----           -----           ----       -------           ----         -----
   Open at end of period                      299            278        299            278               286           268

All restaurants:
   Opened during period                    35                52            13              24           73              68
   Closed or terminated during period         (26)          (33)           (5)            (15)           (41)          (33)
                                             -----         -----           ---            ----          -----         -----
   Open at end of period (1)            933                 911        933                911         924              892

Kiosks (all franchised) open at
   end of period                              5               6            5                6             4              8
</TABLE>


(1) Excludes 31, 24, 26 and 19 new concept units as of October 8, 2000,  October
10, 1999, fiscal 1999 and fiscal 1998, respectively.






                                     Pg. 22


<PAGE>



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

The going private transaction and certain other transactions  described in Notes
2,  3, 4 and 5 of  the  Notes  to the  Consolidated  Financial  Statements  have
affected  the   comparability   of  the  interest   income,   depreciation   and
amortization,  interest  expense  and income tax line items in our  consolidated
statements of operations for the forty and twelve weeks ended October 8, 2000 as
compared to the comparable period in fiscal 1999 (see below).

Our  consolidated  EBITDA for the forty  weeks  ended  October 8, 2000 was $50.8
million and our EBITDA  margin was 18.2%,  compared to $48.9  million and 18.0%,
respectively,  for the forty weeks  ended  October 10,  1999.  Our  consolidated
EBITDA for the twelve  weeks  ended  October 8, 2000 was $17.1  million  and our
EBITDA margin was 19.6% compared to $18.0 million and 20.4%,  respectively,  for
the twelve  weeks ended  October 10, 1999.  EBITDA  represents  earnings  before
cumulative  effect of change in accounting  method,  interest  income,  interest
expense, taxes,  depreciation and amortization.  EBITDA margin represents EBITDA
divided by the sum of restaurant  sales and  franchise  related  income.  EBITDA
should not be considered in isolation  from, or as a substitute for, net income,
cash  flow from  operations  or other  cash  flow  statement  data  prepared  in
accordance with generally  accepted  accounting  principles or as a measure of a
company's profitability or liquidity.  Rather, EBITDA is presented because it is
a  widely  accepted  supplemental  financial  measure,  and we  believe  that it
provides relevant and useful  information.  Our calculation of EBITDA may not be
comparable to a similarly  titled measure  reported by other companies since all
companies do not calculate this non-GAAP measure in the same manner.  Our EBITDA
calculations  are not intended to represent cash provided by (used in) operating
activities since they do not include interest and taxes and changes in operating
assets and  liabilities,  nor are they  intended to  represent a net increase in
cash  since  they do not  include  cash  provided  by (used  in)  investing  and
financing activities.

Restaurant  sales from  Sbarro-owned  units and  consolidated  new concept joint
venture units  increased by $5.6 million or 2.1% to $270.7 million for the forty
weeks ended October 8, 2000 from $265.0 million in the forty weeks ended October
10, 1999.  Restaurant  sales from those same units  decreased by $1.0 million or
1.1% to $85.0  million  for the twelve  weeks  ended  October 8, 2000 from $86.0
million in the twelve weeks ended October 10, 1999. Sales from new concept units
contributed  $14.6 million and $4.9 million for the forty and twelve weeks ended
October 8, 2000,  respectively,  compared to $10.7  million and $3.8 million for
the forty and twelve  weeks ended  October  10,  1999.  The  increase in overall
restaurant  sales in the  comparable  forty week period of fiscal 2000  resulted
primarily  from a higher  number of new concept  units being in operation in the
current fiscal year than the comparable  period in 1999 and selective menu price
increases  of  approximately  2.8% at Sbarro  units which  became  effective  in
September 1999. The decrease in sales at Sbarro-owned units in the third quarter
of 2000 from the same  quarter  in 1999  resulted  from a greater  reduction  in
revenues  from closed  units than the  increase in revenue from new units due to
lower net new unit openings in fiscal 2000 than in

                                     Pg. 23

<PAGE>

fiscal 1999.  Comparable  Sbarro unit sales  decreased 0.5% for the twelve weeks
ended  October  8,  2000 as  compared  to the same  period  in  fiscal  1999 and
increased 0.4% for the first forty weeks of fiscal 2000 over the same forty week
period of the 1999 fiscal year. Comparable restaurant sales are made up of sales
at locations that were open during the entire current and prior fiscal year.

Franchise  related  income  increased  34.9% to $9.1 million for the forty
weeks ended  October 8, 2000 from $6.8  million in the forty week  period  ended
October 10, 1999.  The increase for the third quarter of fiscal 2000 was 4.3% to
$2.5  million  from  $2.4  million  for the same  quarter  of fiscal  1999.  The
increases resulted from greater  continuing  royalties due to a higher number of
franchise  units in operation in the fiscal 2000 periods than in the  comparable
1999 period,  higher area development and initial  franchise fees in each of the
first three quarters of fiscal 2000 than the  comparable  periods of fiscal 1999
and,  approximately $1.5 million recognized in the second quarter of fiscal 2000
related to the termination of our  development  agreement and the closing of all
Sbarro  locations in Japan.  During the first  quarter of 2000,  we entered into
area development  agreements in specific domestic and  international  venues and
markets with two major food service operators.  We believe these agreements will
increase the rate of growth in our franchise operations.

Cost of food and paper products as a percentage of restaurant  sales improved to
19.6%  and  19.8%  for the  forty  and  twelve  weeks  ended  October  8,  2000,
respectively, from 20.7% and 20.9%, respectively, for the comparable 1999 fiscal
periods.  These  improvements  were primarily due to lower average cheese prices
during fiscal 2000 and the impact of the menu price increases described above.

Restaurant operating expenses - payroll and other employee benefits increased to
27.8% of restaurant sales in the forty weeks ended October 8, 2000 from 27.3% of
restaurant  sales in the forty  weeks  ended  October  10,  1999.  For the third
quarter of fiscal 2000 and 1999,  these  expenses  represented  27.0% and 26.6%,
respectively,  of restaurant  sales.  These  increases were primarily due to the
tight labor market,  resulting in pressures on wages and salaries and associated
increases in amounts paid for payroll taxes. Congress has passed bills which, if
signed and implemented, would increase the minimum wage by $1.00 per hour over a
two to three year period and increase the  Company's  labor costs for certain of
its hourly  employees.  This is also  expected to result in wage  increases  for
hourly employees that are paid in excess of the proposed minimum wage level.

Restaurant  operating expenses - occupancy and other expenses increased to 31.3%
of  restaurant  sales in the forty weeks ended October 8, 2000 from 30.7% in the
forty weeks ended October 10, 1999. These expenses  represented  30.3% and 29.3%
of  restaurant  sales for the twelve weeks ended October 8, 2000 and October 10,
1999,  respectively.  These increases were attributable principally to increases
in rent and utility costs.

Depreciation and amortization  expense increased by $6.1 and $1.8 million in the
forty and twelve weeks ended October 8, 2000,  respectively,  over the forty and
twelve week period ended October 10, 1999,  respectively,  primarily as a result
of the amortization of the excess of the purchase

                                  Pg. 24

<PAGE>

price over the cost of net assets  acquired in connection with the completion of
the  going  private   transaction  on  September  28,  1999.  In the third
quarter of fiscal 2000, we recorded additional amortization of $0.3 million for
the period from September 29, 1999 to July 10, 2000 in connection with
recording of the purchase price allocation for the going private transaction.

General  and  administrative  expenses  were  $19.8  million,  or 7.0% of  total
revenues,  for the forty weeks ended October 8, 2000, compared to $17.8 million,
or 6.6% of total  revenues,  for the forty weeks ended October 10, 1999. For the
twelve  weeks  ended  October  8,  2000  and  October  10,  1999,   general  and
administrative  expenses were $5.9 million, or 6.7% of total revenues,  compared
to $5.4 million, or 6.1% of total revenues,  respectively.  These increases were
primarily due to higher  payroll costs due to the tight labor market,  expanding
franchise  and new  concept  operations  and  increases  in various  field human
resource functions.

Other operating  income  increased by $0.4 million to $4.0 million for the forty
weeks ended October 8, 2000 from the comparable  fiscal 1999 period primarily as
a result of income, net of expenses, generated from the leasing of substantially
all of our  corporate  headquarters  building  not  occupied  by Sbarro to third
parties  and an  increase  in equity  earnings  of new  concept  joint  ventures
accounted for under the equity method of accounting.  Other operating income for
the twelve weeks ended October 8, 2000  increased  nominally over the comparable
period in fiscal 1999.

Interest  expense of $23.8 million for the first three quarters and $7.3 million
for the third quarter of 2000 relate to the Senior Notes and mortgage  discussed
in Notes 2 and 3 and line fees for unused borrowing capacity under the Credit
Agreement. Results for the third quarter of 1999 included interest only from the
September 28, 1999 date of the Merger to the end of the quarter of $1.0 million.
Of these  amounts,  $1.1 and $0.4  million for the forty and twelve  weeks ended
October 8, 2000 and $50,000 for each of the forty and twelve weeks ended October
10, 1999,  represented  non-cash charges for the accretion of the original issue
discount on our Senior Notes and the amortization of deferred financing costs on
both the Senior Notes and the Credit Agreement.

Interest  income was  approximately  $1.0 million and $0.3 million for the forty
and twelve week periods  ended October 8, 2000,  respectively,  compared to $3.7
million and $1.1 million in the forty and twelve week periods  ended October 10,
1999. As discussed  elsewhere in this report,  we used  substantially all of our
available  cash on  September  28,  1999 in  order  to fund  the  going  private
transaction.  Therefore,  we have a substantial reduction in our interest income
for fiscal 2000. We will not realize the level of interest  income as we have in
the past unless and until we rebuild our cash position.

We have elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code and, where applicable and permitted,  under similar state and local
income tax  provisions  beginning  January 3, 2000.  As required by Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", we
recognized a $5.6 million  credit  associated  with the reversal of our deferred
tax liabilities upon conversion to S corporation  status in the first quarter of
fiscal 2000.  Under the provisions of Subchapter S,  substantially  all taxes on
our income is now paid by our  shareholders  rather than us. Our tax expense for
the first three

                                     Pg. 25

<PAGE>

quarters  of fiscal  2000  included  $0.4  million  (of which $0.2  million  was
recorded  in the third  quarter)  for taxes  owed to  jurisdictions  that do not
recognize S corporation  status or that tax entities based on factors other than
income.

Liquidity and Capital Resources

We have  historically  not  required  significant  working  capital  to fund our
existing  operations and have financed our capital  expenditures and investments
in our joint ventures through cash generated from operations.  Substantially all
of our cash at  September  28,  1999  was used to  complete  the  going  private
transaction.  As a result, at October 8, 2000, we had unrestricted cash and cash
equivalents  of $18.1  million  and a working  capital  deficit of $4.9  million
compared to  unrestricted  cash, cash  equivalents and marketable  securities of
$10.5  million  and a working  capital  deficit of $18.5  million at October 10,
1999.

As part of the going private  transaction,  we issued  $255.0  million of Senior
Notes and entered into a $30.0 million bank Credit Agreement. At October 8, 2000
we have $26.9 million of undrawn availability under the Credit Agreement, net of
outstanding  letters  of credit  and  guarantees  of  reimbursement  obligations
currently  aggregating  approximately $2.5 million. In March 2000, we obtained a
$16.0  million 8.4% mortgage  loan on our  corporate  headquarters  building and
distributed an $18.0 million dividend to our shareholders and, in April 2000, we
loaned $2  million  to our  Chairman  and CEO.  In  addition,  we have made $3.6
million  of  tax   distributions   (which  are  treated  as  dividends)  to  our
shareholders in fiscal 2000 as discussed below.

Net cash generated in operating activities was $12.0 million for the forty weeks
ended October 8, 2000 compared to $30.9 million generated during the forty weeks
ended October 10, 1999. The $18.9 million reduction was primarily due to a $25.6
million   increase  in  net  interest  expense  related  to  the  going  private
transaction  partially  offset by an  improvement  in  operating  income  before
depreciation and amortization.

Net cash used in investing activities primarily relates to capital expenditures,
including  investments  made by our joint  ventures.  Net cash used in investing
activities was $19.4 million for the forty weeks ended October 8, 2000 and $18.9
million for the forty weeks ended October 10, 1999.

Net cash used in financing activities was $8.1 million for the forty weeks ended
October 8, 2000 compared to $156.5 million of cash used by financing  activities
for the  comparable  period  in 1999.  Financing  activities  through  the third
quarter of fiscal 2000,  resulted primarily from cash dividends of $18.0 million
and tax distributions of $3.6 million (see below) to our shareholders and a $2.0
million loan to our  Chairman,  President and CEO offset by $15.6 million of net
proceeds  from a loan  secured  by a  mortgage  on our  corporate  headquarters.
Financing  activities for the comparable period of 1999 resulted  primarily from
$408.2 million of cash used (net of accrued or previously  paid Merger costs) to
pay the Merger  consideration  and related Merger and financing  costs offset by
approximately  $251.2  million  of  net  proceeds  raised  through  the  private
placement of the Senior Notes.

                                     Pg. 26

<PAGE>

As a result of the going private  transaction,  we used substantially all of our
cash on hand at September 28, 1999 and incurred  approximately $255.0 million of
debt. We will incur annual cash interest expense of approximately  $29.7 million
under the  Senior  Notes and  mortgage  loan and may incur  additional  interest
expense for borrowings under our Credit Agreement.  In addition to debt service,
we expect that our other  liquidity  needs will relate to capital  expenditures,
working capital, investments in joint ventures, distributions to shareholders as
permitted under the Indenture for the Senior Notes and the Credit  Agreement and
general corporate  purposes.  We expect our primary sources of liquidity to meet
these needs will be cash flow from operations and availability  under our Credit
Agreement.

We believe that aggregate restaurant capital expenditures and our investments in
joint  ventures  during the next twelve  months will be  moderately  higher than
levels in recent fiscal years.

We do not have any principal repayment obligations under the Senior Notes or our
Credit Agreement until September 2009 and September 2004, respectively.  We were
in compliance with the various  covenants in the Indenture for the Senior Notes,
the Credit Agreement and the Mortgage as of October 8, 2000.

In March 2000,  we elected to be taxed under the  provisions  of Subchapter S of
the Internal  Revenue Code and, where  applicable  and permitted,  under similar
state and local  income tax  provisions  beginning  January  3, 2000.  Under the
provisions of Subchapter  S,  substantially  all taxes on our income are paid by
our  shareholders.  We  and  our  shareholders  will  have  a tax  liability  of
approximately  46% of our  taxable  income.  This  tax rate is  higher  than our
historical  effective tax rate prior to 2000 due to (i) differences in tax rates
between  individual  and  corporate  taxpayers,   (ii)  the  timing  differences
previously  accounted for as deferred taxes in our financial  statements  (which
deferred taxes were eliminated upon our conversion to S corporation  status) and
(iii) the effect of double taxation in those state and local  jurisdictions that
do not  recognize S corporation  status.  The Indenture for the Senior Notes and
the Credit Agreement  permit us to make  distributions to shareholders for taxes
on our earnings and we made tax  distributions  of $3.6 million during the forty
weeks ended October 8, 2000.

Historically we have paid dividends on our common stock to our shareholders.  On
March 13, 2000 our Board of Directors  declared a dividend of $18.0 million.  We
expect that our Board of Directors will from time to time elect to pay dividends
to our  shareholders  in amounts  that will be based  upon a number of  factors,
including  our  working  capital  needs,  operating  performance,  debt  service
obligations and capital expenditure  requirements.  Distributions are subject to
the  limitations  contained in the Indenture for the Senior Notes and the Credit
Agreement.  We believe that cash flow from operations will be sufficient to fund
future growth and meet planned capital expenditure needs through fiscal 2001.






                                     Pg. 27

<PAGE>

Forward Looking Statements

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

Forward-looking  statements  are subject to a number of known and unknown  risks
and  uncertainties  that could cause actual  results to differ  materially  from
those projected,  expressed or implied in the forward-looking statements.  These
risks and uncertainties,  many of which are not within our control,  include but
are not limited to,  general  economic,  weather and  business  conditions;  the
availability of suitable restaurant sites in appropriate regional shopping malls
and other  locations on  reasonable  rental terms;  changes in consumer  tastes;
changes in population and traffic  patterns;  our ability to continue to attract
franchisees;  the success of our  present,  and any future,  joint  ventures and
other expansion opportunities; the availability of food (particularly cheese and
tomatoes) and paper products at reasonable  prices;  increases  occurring in the
Federal  minimum wage; the loss of services of members of our senior  management
team;  our ability to attract  competent  restaurant  and  executive  managerial
personnel;   competition;   government  regulations;  our  ability  to  generate
sufficient  cash flow to make interest  payments and principal  under our Senior
Notes and Credit Agreement;  the effects which restrictions  imposed on us under
the  Indenture  for the Senior  Notes and the Credit  Agreement  may have on our
ability to operate our business;  and our ability to repurchase  Senior Notes to
the extent required and make repayments under the Credit Agreement to the extent
required  in the event we make  certain  asset sales or  experience  a change of
control.

Because forward-looking  statements are subject to risks and uncertainties,  you
are cautioned not to place undue reliance on these statements,  which speak only
as of the date of this report. We do not undertake any responsibility to release
publicly any revisions to these forward-looking  statements to take into account
events or circumstances that occur after the date of this report,  other than as
required by law. Additionally,  we do not undertake any responsibility to update
you on the occurrence of any unanticipated events which may cause actual results
to differ from those expressed or implied by the forward-looking statements.

Item 3.           Qualitative and Quantitative Disclosures of Market Risk

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


                                     Pg. 28

<PAGE>

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

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

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






                           PART II. OTHER INFORMATION



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

(a)      Exhibits:
         No.               Description

         27                Financial Data Schedule



(b)      Reports on Form 8-K.

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











                                     Pg. 29


<PAGE>


                                    SIGNATURE


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



                                                     SBARRO, INC.
                                                     Registrant


Date:    November 21, 2000          By:    /s/MARIO SBARRO
         -----------------                  ----------------------------------
                                           Mario Sbarro
                                           Chairman of the Board and President
                                           (Principal Executive Officer)



Date:    November 21, 2000          By:    /s/ROBERT G. ROONEY
         -----------------                  -----------------------------------
                                           Robert G. Rooney
                                           Senior Vice President and Chief
                                           Financial Officer (Principal
                                           Financial Officer)



Date:    November 21, 2000          By:     /s/STEVEN B. GRAHAM
         -----------------                  ----------------------------------
                                            Steven B. Graham
                                            Vice President and Controller
                                            (Principal Accounting Officer)












                                     Pg. 30


<PAGE>





                                  EXHIBIT INDEX



Exhibit Number                      Description

         27                                 Financial Data Schedule