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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549

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FORM 10-Q

|(Mark One)
|----------
|x         
|          
|          
|          
|OR        
|          
|o         
|          
|          

Commission file number 0-20792

FRESH CHOICE, INC.(Exact name of
registrant as specified in its charter)

|Delaware                                                           |  | 77-0130849                              
|------------------------------------------------------------------ |  | ----------------------------------------
|(State
  or other jurisdiction of
  incorporation or organization) |  | (I.R.S.
  Employee
  Identification No.)

485 Cochrane Circle, Morgan Hill, California 95037(Address of principal
executives offices)          (Zip
Code)

Registrants telephone number, including area
code:     (408) 776-0799

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

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

|x | Yes | o | No
|- | --- | - | --

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

|o | Yes | x | No
|- | --- | - | --

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FRESH CHOICE, INC.

INDEX

|PART I -
  FINANCIAL INFORMATION |                                                                                                                                
|-------------------------------- | -------------------------------------------------------------------------------------------------------------------------------
|                                 |                                                                                                                                
|                                 | Item 1 -
  Financial Statements                                                                                                
|                                 |                                                                                                                                
|                                 | Condensed Consolidated Balance Sheets at June 13, 2004and December 28, 2003                                                    
|                                 |                                                                                                                                
|                                 | Condensed Consolidated Statements of Operations for the Twelve and
  Twenty-Four Weeks 
  ended June 13, 2004 and June 15, 2003
|                                 |                                                                                                                                
|                                 | Condensed
  Consolidated Statements of Cash Flows for the Twenty-Four Weeks 
  ended June 13, 2004 and June 15, 2003           
|                                 |                                                                                                                                
|                                 | Notes to
  Condensed Consolidated Financial Statements                                                                         
|                                 |                                                                                                                                
|                                 | Item 2 -
  Managements Discussion and Analysis of Financial Condition 
  and Results of Operations                            
|                                 |                                                                                                                                
|                                 | Item 3 -
  Quantitative and Qualitative Disclosures About Market Risk                                                          
|                                 |                                                                                                                                
|                                 | Item 4- Controls and Procedures.                                                                                               
|                                 |                                                                                                                                
|PART II -
  OTHER INFORMATION    |                                                                                                                                
|                                 |                                                                                                                                
|                                 | Item 1 -
  Legal Proceedings                                                                                                   
|                                 | Item 2 -
  Changes in Securities                                                                                               
|                                 | Item 3 -
  Defaults Upon Senior Securities                                                                                     
|                                 | Item 4 -
  Submission of Matters to a Vote of Security Holders                                                                 
|                                 | Item 5 -
  Other Information                                                                                                   
|                                 | Item 6 -
  Exhibits and Reports on Form 8-K                                                                                    
|                                 |                                                                                                                                
|SIGNATURES                       | 28                                                                                                                             
|                                 |                                                                                                                                
|INDEX TO
  FORM 10-Q EXHIBITS    | 29                                                                                                                             
|                                 |                                                                                                                                

2

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PART I.  FINANCIAL INFORMATION

Item 1 - Financial Statements

FRESH
CHOICE, INC. (Debtor in Possession as of July 12, 2004)
CONDENSED CONSOLIDATED BALANCE SHEETS 
(In thousands, except share and per share amounts) 
(Unaudited)

|                                             |                                                 | June 13,
  2004                                    |        | December 28,
  2003 |       
|-------------------------------------------- | ----------------------------------------------- | -------------------------------------------------- | ------ | ------------------- | ------
|                                             |                                                 |                                                    |        |                     |       
|ASSETS:                                      |                                                 |                                                    |        |                     |       
|                                             |                                                 |                                                    |        |                     |       
|CURRENT
  ASSETS:                            |                                                 |                                                    |        |                     |       
|                                             | Cash and cash equivalents                       |                                                    | $      | 948                 |       
|                                             | Inventories                                     |                                                    |        | 443                 |       
|                                             | Prepaid expenses and other
  current assets     |                                                    |        | 636                 |       
|                                             |                                                 |                                                    |        |                     |       
|                                             | Total
  current assets                          |                                                    |        | 2,027               |       
|                                             |                                                 |                                                    |        |                     |       
|PROPERTY
  AND EQUIPMENT, net                |                                                 |                                                    | 19,710 |                     |       
|                                             |                                                 |                                                    |        |                     |       
|DEPOSITS
  AND OTHER ASSETS                  |                                                 |                                                    | 695    |                     |       
|                                             |                                                 |                                                    |        |                     |       
|TOTAL
  ASSETS                               |                                                 | $                                                  | 22,432 |                     |       
|                                             |                                                 |                                                    |        |                     |       
|                                             |                                                 |                                                    |        |                     |       
|LIABILITIES
  AND STOCKHOLDERS EQUITY:      |                                                 |                                                    |        |                     |       
|                                             |                                                 |                                                    |        |                     |       
|CURRENT
  LIABILITIES:                       |                                                 |                                                    |        |                     |       
|                                             | Accounts payable                                |                                                    | $      | 1,999               |       
|                                             | Other accrued expenses                          |                                                    |        | 3,114               |       
|                                             | Accrued salaries and wages                      |                                                    |        | 1,506               |       
|                                             | Sales tax payable                               |                                                    |        | 796                 |       
|                                             | Current portion of long-term
  obligations      |                                                    |        | 4,866               |       
|                                             |                                                 |                                                    |        |                     |       
|                                             | Total current liabilities                       |                                                    |        | 12,281              |       
|CAPITAL
  LEASE OBLIGATIONS                  |                                                 |                                                    | -      |                     |       
|LONG-TERM
  DEBT                             |                                                 |                                                    | 110    |                     |       
|OTHER
  LONG-TERM LIABILITIES                |                                                 |                                                    | 2,601  |                     |       
|                                             |                                                 |                                                    |        |                     |       
|                                             | Total liabilities                               |                                                    |        | 14,992              |       
|                                             |                                                 |                                                    |        |                     |       
|STOCKHOLDERS
  EQUITY:                      |                                                 |                                                    |        |                     |       
|                                             | Convertible preferred stock,
  $.001 par value; |                                                    |        |                     |       
|                                             |                                                 | 3.5 million shares authorized;
  shares            |        |                     |       
|                                             |                                                 | outstanding: 2004 and 2003 -
  1,187,906;          |        |                     |       
|                                             |                                                 | liquidation preference;
  2004-$9,133; 2003-$8,826 |        |                     | 5,175 
|                                             | Common stock - $.001 par
  value;               |                                                    |        |                     |       
|                                             |                                                 | 15 million shares authorized;
  shares             |        |                     |       
|                                             |                                                 | outstanding: 2004 -
  6,037,461; 2003 - 6,017,190  |        |                     | 42,743
|                                             | Accumulated deficit                             |                                                    |        | (40,478             | )     
|                                             |                                                 |                                                    |        |                     |       
|                                             | Total stockholders equity                      |                                                    |        | 7,440               |       
|                                             |                                                 |                                                    |        |                     |       
|TOTAL
  LIABILITIES AND STOCKHOLDERS EQUITY |                                                 | $                                                  | 22,432 |                     |       
|                                             |                                                 |                                                    |        |                     |       

The December 28,
2003 amounts are derived from the Companys audited financial statements.
See accompanying notes to condensed consolidated financial statements.

3

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FRESH CHOICE, INC. (Debtor in Possession as of July
12, 2004)CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)(Unaudited)

|                                                               |                                               | Twelve Weeks Ended |   | Twenty-Four Weeks Ended |       
|-------------------------------------------------------------- | --------------------------------------------- | ------------------ | - | ----------------------- | ------
|                                                               |                                               |                    |   |                         |       
|                                                               |                                               | June 13,
  2004    |   | June 15,
  2003         |       
|                                                               |                                               |                    |   |                         |       
|                                                               |                                               |                    |   |                         |       
|NET
  SALES                                                    |                                               |                    | $ | 17,696                  |       
|                                                               |                                               |                    |   |                         |       
|COSTS
  AND EXPENSES:                                          |                                               |                    |   |                         |       
|                                                               | Cost of sales                                 |                    |   |                         | 3,976 
|                                                               | Restaurant operating expenses:                |                    |   |                         |       
|                                                               | Labor                                         |                    |   |                         | 6,180 
|                                                               | Occupancy and other                           |                    |   |                         | 6,025 
|                                                               | General and administrative
  expenses         |                    |   |                         | 1,218 
|                                                               | Depreciation and amortization                 |                    |   |                         | 803   
|                                                               | Store closure and asset
  impairment expenses |                    |   |                         | 7,254 
|                                                               | Restaurant opening costs                      |                    |   |                         | -     
|                                                               |                                               |                    |   |                         |       
|                                                               | Total costs and expenses                      |                    |   |                         | 25,456
|                                                               |                                               |                    |   |                         |       
|OPERATING
  LOSS                                               |                                               |                    |   | (7,760                  | )     
|                                                               |                                               |                    |   |                         |       
|Interest
  income                                              |                                               |                    |   | -                       |       
|Interest
  expense                                             |                                               |                    |   | (132                    | )     
|                                                               |                                               |                    |   |                         |       
|                                                               |                                               |                    |   |                         |       
|Interest
  expense, net                                        |                                               |                    |   | (132                    | )     
|                                                               |                                               |                    |   |                         |       
|LOSS
  FROM OPERATIONS BEFORE INCOME TAXES                     |                                               |                    |   | (7,892                  | )     
|                                                               |                                               |                    |   |                         |       
|Provision
  for income taxes                                   |                                               |                    |   | -                       |       
|                                                               |                                               |                    |   |                         |       
|NET
  LOSS                                                     |                                               |                    | $ | (7,892                  | )     
|                                                               |                                               |                    |   |                         |       
|                                                               |                                               |                    |   |                         |       
|Basic
  and diluted net loss per common share:                 |                                               |                    | $ | (1.31                   | )     
|                                                               |                                               |                    |   |                         |       
|Shares
  used in computing basic and diluted per share amounts |                                               |                    |   | 6,021                   |       
|                                                               |                                               |                    |   |                         |       
|                                                               |                                               |                    |   |                         |       

See accompanying notes to condensed consolidated financial
statements.

4

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FRESH CHOICE, INC. (Debtor in Possession as of July
12, 2004)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands)
(Unaudited)

|                                                                                           |                                                        | Twenty-Four
  Weeks Ended |  
|------------------------------------------------------------------------------------------ | ------------------------------------------------------ | ------------------------- | -
|                                                                                           |                                                        |                           |  
|                                                                                           |                                                        | June 13,
  2004           |  
|                                                                                           |                                                        |                           |  
|OPERATING
  ACTIVITIES :                                                                   |                                                        |                           |  
|Net
  loss from continuing operations                                                      |                                                        |                           | $
|Adjustments
  to reconcile net loss to net cash provided (used) by   operating activities: |                                                        |                           |  
|                                                                                           | Depreciation and amortization                          |                           |  
|                                                                                           | Non-cash store closure and
  asset impairment expenses |                           |  
|                                                                                           | Issuance of common stock for
  consulting services     |                           |  
|                                                                                           | Loss (gain) on disposal of
  property and equipment    |                           |  
|                                                                                           | Deferred rent                                          |                           |  
|                                                                                           | Change in operating assets and
  liabilities:          |                           |  
|                                                                                           | Inventories                                            |                           |  
|                                                                                           | Prepaid expenses and other
  current assets            |                           |  
|                                                                                           | Accounts payable                                       |                           |  
|                                                                                           | Accrued salaries and wages                             |                           |  
|                                                                                           | Sales tax payable                                      |                           |  
|                                                                                           | Other accrued expenses                                 |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | Net cash provided (used) by
  operating activities     |                           |  
|                                                                                           |                                                        |                           |  
|INVESTING
  ACTIVITIES:                                                                    |                                                        |                           |  
|                                                                                           | Capital expenditures                                   |                           |  
|                                                                                           | Proceeds from sale of property
  and equipment         |                           |  
|                                                                                           | Deposits and other assets                              |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | Net cash used in investing
  activities                |                           |  
|                                                                                           |                                                        |                           |  
|FINANCING
  ACTIVITIES:                                                                    |                                                        |                           |  
|                                                                                           | Common stock sales                                     |                           |  
|                                                                                           | Bank borrowings                                        |                           |  
|                                                                                           | Long-term debt - repayments                            |                           |  
|                                                                                           | Capital lease obligations -
  borrowings               |                           |  
|                                                                                           | Capital lease obligations -
  repayments               |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | Net cash provided by financing
  activities            |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           |                                                        |                           |  
|DECREASE
  IN CASH AND CASH EQUIVALENTS                                                    |                                                        |                           |  
|CASH
  AND CASH EQUIVALENTS:                                                               |                                                        |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | Beginning of period                                    |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | End of period                                          |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           |                                                        |                           |  
|Supplemental
  Disclosure of Cash Flow Information:                                        |                                                        |                           |  
|                                                                                           | Cash paid during the period
  for interest             |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           | Cash paid during the period
  for income taxes         |                           |  
|                                                                                           |                                                        |                           |  
|                                                                                           |                                                        |                           |  

See accompanying notes to condensed consolidated
financial statements

5

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FRESH
CHOICE, INC. (Debtor in Possession as of July 12, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Twelve and Twenty-Four Weeks Ended June 13, 2004 and June 15, 2003
(Unaudited)

1.       CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

The
accompanying condensed consolidated financial statements have been prepared by
the Company without audit and reflect all adjustments, consisting of normal
recurring adjustments and accruals, which are, in the opinion of management,
necessary for a fair statement of financial position and the results of
operations for the interim periods.  The
statements have been prepared in accordance with the regulations of the
Securities and Exchange Commission, but omit certain information and footnote
disclosures necessary to present the statements in accordance with generally
accepted accounting principles.  For
further information, refer to the financial statements and notes thereto included
in the Companys Annual Report on Form 10-K for the fiscal year ended December
28, 2003.

On
July 12, 2004 (the Petition Date), Fresh Choice, Inc. (the Company) filed a
voluntary petition for relief (the Filing) under Chapter 11 (Chapter 11) of
title 11 of the United States Code (the Bankruptcy Code) in the United States
Bankruptcy Court for the Northern District of California (the Bankruptcy
Court). The case has been assigned No. 04-54318 (Chapter 11 Case).  The Company is operating its business and
managing its property as a debtor in possession of its assets and the Companys
existing directors and officers continue to oversee operation of the Companys
business as a debtor-in-possession.

Financial Statement Presentation

The
accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue to operate as a going concern, which
contemplates continuity of operations, timely payment for services by customers,
control of operating costs and expenses and the realization of asset sales and
liquidation of liabilities and commitments. 
The bankruptcy filing and related circumstances, including the closure
of ten stores, the Companys default on certain pre-petition debt, the losses
from operations, as well as current economic conditions, raise substantial
doubts about the Companys ability to continue as a going concern, accordingly,
such realization of assets and liquidation of liabilities are subject to uncertainty.  In connection with its plan of
reorganization, the Company may liquidate or settle liabilities for amounts
other than those reflected in the Condensed Consolidated Financial Statements.  Further a plan of reorganization could
materially change the amounts and classifications reported in the consolidated
historical financial statements, which do not give effect to any adjustments to
the carrying value of assets or amounts of liabilities that might be necessary
as a consequence of a plan of reorganization.

Pursuant
to the Bankruptcy Code, schedules will be filed by the Company with the
Bankruptcy Court setting forth the assets and liabilities of the Company.  Differences between amounts recorded by the
Company and claims filed by creditors will be investigated and resolved as part
of the Chapter 11 Case.

The
Company has received approval from the Bankruptcy Court to pay or otherwise
honor certain of its pre-petition obligations, including employee wages, salaries,
benefits and other employee obligations and certain other pre-petition
claims.

As
part of the Filing, the Company rejected certain leases as allowed by the
Bankruptcy Code.  The Company will
record an accrual of approximately $3.5 million, in the third quarter, for the
estimated maximum amount of allowable claims under the Bankruptcy Code for the
ten restaurants closed in early July whose leases were rejected.

2.       STOCK-BASED COMPENSATION

The
Company accounts for stock-based awards to employees using the intrinsic value
method in accordance with Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees. 
The Company

6

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accounts for stock-based awards to non employees in accordance with
Statement of Financial Accounting Standards (SFAS) No. 123 Accounting for
Stock-Based Compensation and Emerging Issues Task Force (EITF) Issue No.
96-18 Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services.

The
following table illustrates the effect on net loss and net loss per common
share if the Company had applied fair value recognition provisions of SFAS No.
123 to stock based employee compensation.

|                                      |                                          | Twelve Weeks Ended |        | Twenty-Four Weeks Ended |  
|------------------------------------- | ---------------------------------------- | ------------------ | ------ | ----------------------- | -
|                                      |                                          |                    |        |                         |  
|(In thousands, except per share data) |                                          | June 13,
  2004    |        | June 15,
  2003         |  
|                                      |                                          |                    |        |                         |  
|                                      |                                          |                    |        |                         |  
|Net loss                              |                                          | $                  | (7,892 | )                       | $
|Deduct: Total stock-based employee    |                                          |                    |        |                         |  
|                                      | compensation
  expense determined under  |                    |        |                         |  
|                                      | fair
  value based method for all awards |                    |        | (33                     | )
|                                      |                                          |                    |        |                         |  
|Pro forma net loss                    |                                          | $                  | (7,925 | )                       | $
|                                      |                                          |                    |        |                         |  
|Net loss per common share:            |                                          |                    |        |                         |  
|                                      | Basic and
  diluted- as reported         |                    | $      | (1.31                   | )
|                                      |                                          |                    |        |                         |  
|                                      | Basic and
  diluted-pro forma            |                    | $      | (1.32                   | )
|                                      |                                          |                    |        |                         |  
|                                      |                                          |                    |        |                         |  

3.       NET
LOSS PER COMMON SHARE

Basic
net loss per common share excludes dilution and is computed by dividing net
income by the weighted average of its common shares outstanding for the
period.  Diluted net loss per common
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.  The Company converts common stock options
and warrants into potential dilutive shares using the treasury stock method and
converts preferred stock into potential dilutive shares using the if
converted method.

A
reconciliation of the components of basic and diluted net income per share
follows:

|                                      |                                    | Twelve Weeks Ended |   | Twenty-Four Weeks Ended |      
|------------------------------------- | ---------------------------------- | ------------------ | - | ----------------------- | -----
|                                      |                                    |                    |   |                         |      
|                                      |                                    |                    |   |                         |      
|(In thousands, except per share data) |                                    | June 13, 2004      |   | June 15, 2003           |      
|                                      |                                    |                    |   |                         |      
|                                      |                                    |                    |   |                         |      
|Basic Net Loss Per Common
  Share     |                                    |                    |   |                         |      
|                                      |                                    |                    |   |                         |      
|Net Loss                              |                                    |                    | $ | (7,892                  | )    
|                                      |                                    |                    |   |                         |      
|Average common shares
  outstanding   |                                    |                    |   | 6,021                   |      
|                                      |                                    |                    |   |                         |      
|Basic net loss per common
  share     |                                    |                    | $ | (1.31                   | )    
|                                      |                                    |                    |   |                         |      
|                                      |                                    |                    |   |                         |      
|Diluted Net Loss Per Common
  Share   |                                    |                    |   |                         |      
|                                      |                                    |                    |   |                         |      
|Net Loss                              |                                    |                    | $ | (7,892                  | )    
|                                      |                                    |                    |   |                         |      
|Average common shares
  outstanding   |                                    |                    |   | 6,021                   |      
|                                      |                                    |                    |   |                         |      
|Dilutive shares:                      |                                    |                    |   |                         |      
|                                      | Stock options                      |                    |   |                         | -    
|                                      | Convertible preferred stock        |                    |   |                         | -    
|                                      |                                    |                    |   |                         |      
|                                      | Total shares and dilutive
  shares |                    |   |                         | 6,021
|                                      |                                    |                    |   |                         |      
|Diluted net loss per common
  share   |                                    |                    | $ | (1.31                   | )    
|                                      |                                    |                    |   |                         |      

7

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The
following table presents the total dilutive securities, which the Company
excluded for each period presented from its diluted EPS computation because the
exercise price of the securities exceeded the average fair value of the
Companys common stock or the Company had a net loss and therefore, these
securities were anti-dilutive:

|                                |                               |                      |  |                           | 
|------------------------------- | ----------------------------- | -------------------- |  | ------------------------- | 
|                                |                               | Twelve
  Weeks Ended |  | Twenty-Four
  Weeks Ended | 
|                                |                               |                      |  |                           | 
|(In thousands)                  |                               | June 13,
  2004      |  | June 15,
  2003           | 
|                                |                               |                      |  |                           | 
|                                |                               |                      |  |                           | 
|Potential
  Dilutive Securities |                               |                      |  |                           | 
|                                |                               |                      |  |                           | 
|                                | Stock
  options excluded      |                      |  | 1,172                     | 
|                                | Stock
  warrants              |                      |  | 100                       | 
|                                | Convertible
  preferred stock |                      |  | 1,188                     | 

4.       OTHER
ACCRUED EXPENSES

The
components of other accrued expenses are as follows:

The
following table presents the total dilutive securities, which the Company
excluded for each period presented from its diluted EPS computation because the
exercise price of the securities exceeded the average fair value of the
Companys common stock or the Company had a net loss and therefore, these
securities were anti-dilutive:

|(In thousands)                  |  | June 15,2004 |       | December 28,2003 | 
|------------------------------- |  | ------------ | ----- | ---------------- | 
|                                |  |              |       |                  | 
|                                |  |              |       |                  | 
|Accrued
  workers compensation |  | $            | 833   |                  | 
|Unredeemed
  gift certificates  |  |              | 588   |                  | 
|Deferred
  vendor allowances    |  |              | 421   |                  | 
|Accrued
  utilities             |  |              | 223   |                  | 
|Accrued
  advertising           |  |              | 260   |                  | 
|Accrued
  property taxes        |  |              | 98    |                  | 
|Accrued
  insurance             |  |              | 118   |                  | 
|Store
  closure reserve         |  |              | 233   |                  | 
|Accrued
  professional fees     |  |              | 107   |                  | 
|Other                           |  |              | 233   |                  | 
|                                |  |              |       |                  | 
|                                |  | $            | 3,114 |                  | 
|                                |  |              |       |                  | 

5.       BORROWING
ARRANGEMENTS

The Company has a $2,200,000 loan (the
Loan), with a commercial bank.  Under
the terms of the Loan, the Company issued a promissory note (the Note) in the
amount of $2,200,000.  The Note is
secured by a deed of trust on certain Company-owned real estate.  The Note bears interest at the prime rate
(4.0% at June 13, 2004) plus 0.625%. 
The Note has a fifteen-year amortization period and matures after 84
monthly payments of principal and interest. 
All unpaid principal and interest shall be due and payable on the Notes
maturity date of September 2, 2008.

On
June 13, 2004 the Company had $1,850,000 of debt outstanding under the Loan
described above, all of which was included in the current portion of long-term
obligations as the Company was not in compliance with the minimum debt service
ratio and the bank had the right, subject to the automatic stay in effect
during the bankruptcy case, to demand payment of the balance due.  The Deed of Trust requires the Company to
maintain a minimum debt service coverage ratio and to maintain a minimum
tangible net worth.  On May 13, 2004 the
Company had obtained a waiver of the minimum tangible net worth requirement.

In
March 2004 the Company amended its $2,000,000 revolving line of credit
(the  Agreement) with its bank to
increase the amount to $3,000,000 and extend the Agreement to May 17, 2005.  Borrowings bear interest at the prime rate
(4.0% at June 13, 2004) plus 0.5%. 
Certain of the Companys personal property collateralize borrowings
under the Agreement.  On June 13, 2004
the Company had $500,000 in borrowings outstanding under the Agreement which
was included in the current portion of long-term obligations as the Company was
not in compliance with certain covenants under the agreement and the bank had
the right, subject to the automatic stay in effect during the bankruptcy case,
to demand payment of the balance due.  
In addition, the Company had $2,322,000 utilized to support outstanding
letters of

8

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credit required under its workers compensation program.  The letters of credit, which are scheduled to expire March 1, 2005, will automatically
extend for a one-year period.

The
amended Agreement requires the Company to maintain (i) a minimum tangible net
worth, (ii) a minimum debt service coverage ratio and (iii) a maximum debt to
tangible net worth ratio.  The Agreement
also limits the Companys fixed asset acquisitions and requires approval before
paying dividends or repurchasing outstanding shares of stock.  In addition the Agreement requires the
outstanding principal balance of the loan to be zero for at least one period of
thirty consecutive days during the term of the loan.

Covenant
compliance is reported quarterly and the Company was not in compliance with the
minimum debt service ratio and the maximum debt to tangible net worth ratio
under the amended Agreement at June 13, 2004. On May 13, 2004 the Company had
obtained a waiver of the minimum tangible net worth requirement for the quarter
ended June 13, 2004 and further lowered its fixed asset acquisition limit.

The
Company had capital lease obligations at June 13, 2004 that totaled $2,515,000,
all of which was included in the current portion of long-term obligations as
the Company did not make the July 1, 2004 required payments which gave the
leasing companies the right, subject to the automatic stay in effect during the
bankruptcy case, to demand payment of the remaining lease payments.  Long-Term Debt also included a $111,000 note
for site construction costs of which $1,000 was included in the current portion
of long-term obligations.

At
June 13, 2004 the current portion of long-term obligations consisted of:

| | (In thousands)                                      |  |                
| | --------------------------------------------------- |  | ---------------
| |                                                     |  |                
| |                                                     |  | Current Portion
| |                                                     |  |                
| | Secured Note                                        |  |                
| | Secured Line of Credit                              |  |                
| | Capital Lease Obligations                           |  |                
| | Other Note Payable                                  |  |                
| |                                                     |  |                
| | Total Current Portion of
  long-
  term obligations |  |                
| |                                                     |  |                

6.       STORE
CLOSURE AND ASSET IMPAIRMENT EXPENSES

In
the second quarter ended June 13, 2004, the Company recorded a non-cash
impairment charge of $6,954,000 for the write-down of buildings, leasehold
improvements and equipment to fair value for eighteen of the Companys
restaurants. The Company closed ten of these restaurants in the third quarter
(eight of which had been previously impaired). The Company intends to either
sell or discontinue operations at four of the other impaired restaurants.
Fifteen of the impaired locations are located in Southern California, Texas and
Washington, which are outside of the Companys core northern California
markets.  The ten closed restaurants
were operating at negative cash flows and were currently projected to incur
future negative cash flows.  The impairment
charge for the eighteen restaurants was required because the carrying amounts
of the impaired assets were not recoverable from their currently projected
undiscounted cash flows.  The impairment
loss was calculated as the difference between the carrying amount and fair
value of the assets. In addition, the Company closed one previously impaired
restaurant in the second quarter and recorded a $300,000 charge for the
estimated cash costs associated with the restaurant closure and settlement of
the lease obligation. The Company will record a charge of approximately $3.5
million in the third quarter for the expected liability from rejection of the
leases for the ten closed restaurants under Section 502 (B)(6) of the
Bankruptcy Code

9

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7.       CONVERTIBLE
PREFERRED STOCK

The
Companys outstanding Series B non-voting convertible preferred stock is
currently held by one entity and is convertible, at the holders option, into
Series A voting convertible preferred stock on a one-for-one basis.  Although no Series A preferred stock is
currently outstanding, holders of Series A preferred stock, if any, would be
entitled to vote with common stockholders on all matters submitted to a vote of
stockholders.  When and if issued, the
holders of a majority of the outstanding Series A preferred stock would have a
separate right to approve certain corporate actions.

In
fiscal 1998, the Company failed to achieve a specified earnings target, which
constituted an event of default of the terms of the preferred stock agreement
and which triggered the right of the Series A preferred stockholders, if any,
to elect a majority of the Companys Board of Directors.  The holder of the Series B preferred stock
has not initiated any action to convert such shares into shares of Series A preferred
stock nor has it exercised its right to elect a majority of the Board of
Directors.  The holder has
entered into a letter agreement waiving this right until the date that such
holder elects to sell, transfer, convey or otherwise dispose of all its
shares.

8.       DISCONTINUED OPERATIONS

When a
restaurant is closed or held for sale, the Company makes an evaluation as to
whether its results should be reflected as discontinued operations in
accordance with Statement of Financial Accounting Standard 144-Accounting for
the Impairment or Disposal of Long-Lived Assets.

Subsequent
to June 13, 2004, the Company has closed ten restaurants and is holding four
for sale.  The Company is in the process
of determining which of these restaurants will be reflected as discontinued operations
under its policy.  In summary the
results of operations for the fourteen restaurants included in continuing
operations in the twelve and twenty-four weeks ended June 13, 2004 and June 15,
2003 is as follows:

|                                 |                          | Twelve
  Weeks Ended |   | Twenty-Four
  Weeks Ended |      
|-------------------------------- | ------------------------ | -------------------- | - | ------------------------- | -----
|                                 |                          |                      |   |                           |      
|(In thousands)                   |                          | June 13, 2004        |   | June 15, 2003             |      
|                                 |                          |                      |   |                           |      
|                                 |                          |                      |   |                           |      
|Net sales                        |                          |                      | $ | 2,962                     |      
|                                 |                          |                      |   |                           |      
|Cost of sales                    |                          |                      |   | 756                       |      
|Restaurant operating
  expenses: |                          |                      |   |                           |      
|                                 | Labor                    |                      |   |                           | 1,330
|                                 | Occupancy and other      |                      |   |                           | 1,302
|Depreciation and
  amortization  |                          |                      |   | 198                       |      
|                                 |                          |                      |   |                           |      
|                                 | Total costs and expenses |                      |   |                           | 3,586
|                                 |                          |                      |   |                           |      
|Operating loss                   |                          |                      | $ | (624                      | )    
|                                 |                          |                      |   |                           |      

9.       SUBSEQUENT
EVENT

On
July 12, 2004, the Company filed a voluntary petition for relief under Chapter
11 of title 11 of the Bankruptcy Code in the Bankruptcy Court. The case has
been assigned to the Honorable Arthur Weissbrodt and bears case No. 04-54318.  The Company is operating its business and
managing its property as a debtor in possession of its assets and the Companys
existing directors and officers continue to oversee operation of the Companys
business as a debtor-in-possession. In the days before the filing the Company closed
ten restaurants and expects to record a charge of approximately $3.5 million in
the third quarter for the expected liability from rejection of the leases under
Section 502 (B)(6) of the Bankruptcy Code. The Company continues to operate 46
restaurants primarily located in Northern California.

10

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10.     RECENTLY
ISSUED ACCOUNTING STANDARDS

In
January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN No. 46 requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively disperse
risks among parties involved. Variable interest entities that effectively
disperse risk will not be consolidated unless a single party holds an interest
or combination of interests that effectively recombines risks that were
previously dispersed. FIN No. 46 also requires enhanced disclosure requirements
related to variable interest entities. FIN No. 46 was revised in December 2003
and is effective for the first financial reporting period ending after March
15, 2004.  The Company adopted the
provisions of FIN No. 46 for the fiscal quarter ending March 21, 2004, which
did not have a material impact on the financial statements.

Item 2 - Managements Discussion and Analysis of Financial
Condition and Results of Operations

The
following discussion is intended to highlight significant changes in the
Companys financial position and results of operations for the twelve and
twenty-four weeks ended June 13, 2004. 
The interim financial statements and this Managements Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with the Consolidated Financial Statements and Notes thereto for
the fiscal year ended December 28, 2003 and the related Managements Discussion
and Analysis of Financial Condition and Results of Operations, both of which
are contained in the Companys Annual Report on Form 10-K for the fiscal year
ended December 28, 2003.

Certain
statements set forth in this discussion and analysis of financial condition and
results of operations including, among others, the Companys ability to
continue as a going-concern and trends in or expectations regarding the
Companys operations constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995.  Such statements are based on currently
available operating, financial and competitive information and are subject to
various risks and uncertainties.  Actual
future results and trends may differ materially depending on a variety of
factors as set forth under the heading Business Risks, including the ability
of the Company to successfully reorganize its remaining operations and
restructure its financial affairs under Chapter 11 of the Bankruptcy Code; the
ability of the Company to return to positive comparable-store sales and achieve
profitability; and the Companys ability to secure and retain services of
experienced personnel during the Chapter 11 proceedings.

Forward-looking
statements reflect the expectations of the Company at the time they are made,
and investors should rely on them only as expressions of opinion about what may
happen in the future and only at the time they are made.  The Company undertakes no obligation to
update any forward-looking statements. 
Although the Company believes it has an appropriate business strategy
and the resources necessary for its operations, future revenue and margin
trends cannot be reliably predicted and the Company may alter its business
strategies to address changing conditions.

On
July 12, 2004, the Company filed a voluntary petition for relief under Chapter
11 of title 11 of the Bankruptcy Code in the Bankruptcy Court. The case has
been assigned No. 04-54318.  The Company
is operating its business and managing its property as a debtor in possession
of its assets and the Companys existing directors and officers continue to
oversee operation of the Companys business as a debtor-in-possession.

Consequences of the Chapter 11 Filing

As
a consequence of the Filing, all pending claims against the Company are stayed
automatically by Section 362 of the Bankruptcy Code, and absent further order
of the Bankruptcy Court, no party may take any action to recover any
pre-petition claims, enforce any lien against or obtain possession of any
property from the Company.   In
addition, pursuant to Section 365 of the Bankruptcy Code, the Company may
reject or assume pre-petition executory contracts and unexpired leases. The
non-debtor parties to these contracts or leases may file claims with the
Bankruptcy Court in accordance with the Chapter 11 reorganization process.

As
provided by the Bankruptcy Code, the Company initially will have the exclusive
right for 120 days

11

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---

following the Petition Date to propose a plan of reorganization.  If the Company fails to file a plan of reorganization
during such period or any extension thereof, or if such plan is not accepted by
the requisite numbers of creditors and equity holders entitled to vote on the
plan within 180 days after the Petition Date or any extension thereof, other
parties in interest may be permitted to propose their own plan or plans of
reorganization for the Company.  The
Company is unable to predict at this time what the treatment of creditors and
equity holders of the Company will be under any proposed plan or plans of
reorganization.

The Bankruptcy Court may confirm a plan of
reorganization only upon making certain findings required by the Bankruptcy
Code, and a plan may be confirmed over the dissent of non-accepting creditors
and equity security holders if certain requirements of the Bankruptcy Code are
met.  The payment rights and other
entitlements of pre-petition creditors and the Companys stockholders may be
substantially altered by any plan of reorganization confirmed in the Chapter 11
Case.   There can be no assurance that
there will be sufficient assets to satisfy the Companys pre-petition
liabilities in whole or that the Companys equity securities will have any
continuing value. Under a plan of reorganization, pre-petition creditors could
receive less than 100% of the face value of their claims and the Companys
equity securities could be cancelled. 
In addition, the Company has not yet proposed a plan of
reorganization.  It is not possible to
predict the outcome of the Chapter 11 Case, the terms and provisions of any
plan of reorganization, or the effect of the Chapter 11 reorganization process
on the claims of the creditors of the Company or the interests of the Companys
equity security holders.

The
Company believes it will need to obtain additional financing to fund the
operations during the Chapter 11 proceedings. The Company believes it has
sufficient capital to fund its operations through August 2004.  It is attempting to finance its unmet
capital needs after August 2004 through some combination of vendor and debtor
in possession financing.  There can be
no assurance that additional capital will be available on terms acceptable to
the Company, or at all.  Failure to
raise sufficient additional capital would have a material adverse effect on the
Companys ability to operate as a going concern or to restructure in Chapter
11.

In addition, the ability of the Company to
continue as a going concern (including its ability to meet post-petition
obligations of the Company) and the appropriateness of using the going concern
basis for its financial statements are dependent upon, among other things, any
orders entered by the Bankruptcy Court concerning matters outside of the
ordinary course of business, and obtaining confirmation of a plan of
reorganization under the Bankruptcy Code. 
The consolidated financial statements contain no adjustments related to
this uncertainty.

On July 21, 2004, the Companys securities were delisted from the NASDAQ
National Market. The Companys common stock currently trades on the NASD OTC
under the symbol SALDQ.PK.

Background of Filing

The
Companys operations have produced losses on declining same store sales for
much of the past three years.  In addition,
the Companys new restaurants, opened during the same time period, have not
performed up to the Companys expectations and have suffered significant
losses.  The Companys comparable store
sales improved in the first quarter of 2004 and the Company expected that this
positive trend would continue into the second and third quarters, traditionally
the Companys strongest sales periods.

The
Companys comparable store sales did not continue to improve as the Company
expected.  Instead, comparable store
sales were down 4.8% in the second quarter of 2004 versus the same quarter a
year-ago.  In fact, the sales trend grew
worse during the second quarter with comparable store sales down, versus the
comparable year-ago period, 2.3% in the first four-week period of the second
quarter, 3.5% in the second four-week period and 8.6% in the last four-week
period of the quarter.  This trend has
continued with comparable store sales down 8.9% for the first four-week period
of the third quarter.

In
addition, sales at the Companys newer restaurants did not improve as expected
and continued to perform below expectations. 
Average restaurant sales at the Companys five newer locations, open for
both lunch and dinner and not included in comparable store sales, were 46.1%
below the comparable store sales average for the second quarter.

These
declining sales trends resulted in reduced earnings and cash flow.  As a result of the reduced earnings and cash
flow, the Company failed to achieve the required minimum debt service coverage
or maximum debt to tangible

12

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net worth ratios required under the Companys lending agreements.  Failure to achieve these covenants gave the
bank the right, subject to the automatic stay in effect during the bankruptcy
case, to declare the Companys loans in default and to demand payment of the
$1,850,000 of outstanding debt under its secured loan and the $500,000
outstanding debt under its revolving line of credit.

As
the sales continued to deteriorate the Companys revised internal projections indicated
the Company would not generate sufficient cash to cover operating and capital
requirements for the remainder of fiscal 2004. 
The Company, therefore, decided to close ten cash flow negative
restaurants in early July and file for protection under Chapter 11 of the
Bankruptcy Code on July 12, 2004.

Financial Statement Presentation

The
accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue to operate as a going concern, which
contemplates continuity of operations, timely payment for services by
customers, control of operating costs and expenses and the realization of asset
sales and liquidation of liabilities and commitments.  The bankruptcy filing and related circumstances, including the
closure of ten stores, the Companys default on certain pre-petition debt, the
losses from operations, as well as current economic conditions, raise
substantial doubts about the Companys ability to continue as a going
concern, accordingly, such realization of assets and liquidation of
liabilities are subject to uncertainty. 
In connection with its plan of reorganization, the Company may liquidate
or settle liabilities for amounts other than those reflected in the Condensed
Consolidated Financial Statements. 
Further a plan of reorganization could materially change the amounts and
classifications reported in the consolidated historical financial statements,
which do not give effect to any adjustments to the carrying value of assets or
amounts of liabilities that might be necessary as a consequence of a plan of
reorganization.

Pursuant to the Bankruptcy Code, schedules will
be filed by the Company with the Bankruptcy Court setting forth the assets and
liabilities of the Company.  Differences
between amounts recorded by the Company and claims filed by creditors will be
investigated and resolved as part of the Chapter 11 Case.

The Company has received approval from the
Bankruptcy Court to pay or otherwise honor certain of its pre-petition
obligations, including employee wages, salaries, benefits and other employee
obligations and certain other pre-petition claims.

As
part of the Filing, the Company rejected certain leases as allowed by the
Bankruptcy Code.  The Company will
record an accrual of approximately $3.5 million, in the third quarter, for the
estimated maximum amount of allowable claims under the Bankruptcy Code for the
ten restaurants closed in early July whose leases were rejected.

Liquidity and Capital Resources

The Companys operations have produced losses
on declining same store sales for much of the past three years.  These declining sales trends resulted in
reduced earnings and cash flow and an increased net working capital
deficit.  As sales continued to deteriorate,
the Companys revised internal projections indicated the Company would not
generate sufficient cash to cover operating and capital requirements for the
remainder of fiscal 2004.  The Company,
therefore, decided to close ten cash flow negative restaurants in early July
and file for protection under Chapter 11 of the Bankruptcy Code on July 12,
2004.

The
Company believes it will need to obtain additional financing to fund the
operations during the Chapter 11 proceedings. The Company believes it has
sufficient capital to fund its operations through August 2004.  It is attempting to finance its unmet
capital needs after August 2004 through some combination of vendor and debtor
in possession financing.  There can be
no assurance that additional capital will be available on terms acceptable to
the Company, or at all.  Failure to
raise sufficient additional capital would have a material adverse effect on the
Companys ability to operate as a going concern or to restructure in Chapter
11.

13

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In addition, the ability of the Company to
continue as a going concern (including its ability to meet post-petition
obligations of the Company) and the appropriateness of using the going concern
basis for its financial statements are dependent upon, among other things, any
orders entered by the Bankruptcy Court concerning matters outside of the
ordinary course of business, and obtaining confirmation of a plan of
reorganization under the Bankruptcy Code. 
The consolidated financial statements contain no adjustments related to
this uncertainty.

The
Companys primary capital requirements have been for the expansion of its
restaurant operations and remodeling of its restaurants.  The Company has traditionally financed these
requirements with funds from equity offerings, cash flow from operations,
landlord allowances, capital equipment leases and short-term bank debt.  The Company does not have significant trade
receivables or inventory and receives trade credit based upon negotiated terms
in purchasing food and supplies.

The Company has a $2,200,000 loan (the
Loan), with a commercial bank.  Under
the terms of the Loan, the Company issued a promissory note (the Note) in the
amount of $2,200,000.  The Note is
secured by a deed of trust on certain Company-owned real estate.  The Deed of Trust requires the Company to
maintain a minimum debt service coverage ratio and to maintain a minimum
tangible net worth.  The Note bears
interest at the prime rate (4.0% at June 13, 2004) plus 0.625%.  The Note has a fifteen-year amortization
period and matures after 84 monthly payments of principal and interest.  All unpaid principal and interest shall be
due and payable on the Notes maturity date of September 2, 2008.

On June 13, 2004 the Company had $1,850,000
of debt outstanding under the Loan described above, all of which was included
in the current portion of long-term obligations at June 13, 2004 as the Company
was not in compliance with the minimum debt service ratio and the bank had the
right, subject to the automatic stay in effect
during the bankruptcy case, to demand payment of the balance
due.  On May 13, 2004 the Company had
obtained a waiver of the minimum tangible net worth requirement.

In
March 2004 the Company amended its $2,000,000 revolving line of credit
(the  Agreement) with its bank to
increase the amount to $3,000,000 and extend the Agreement to May 17,
2005.  Borrowings bear interest at the
prime rate (4.0% at June 13, 2004) plus 0.5%. 
Certain of the Companys personal property collateralize borrowings
under the Agreement.  On June 13, 2004
the Company had $500,000 in borrowings outstanding under the Agreement which
was included in the current portion of long-term obligations as the Company was
not in compliance with certain covenants under the agreement and the bank had
the right, subject to the automatic stay in effect during the bankruptcy case,
to demand payment of the balance due.  
In addition, the Company had $2,322,000 utilized to support outstanding
letters of credit required under its workers compensation program.  The letters of credit, which are scheduled
to expire March 1, 2005, will automatically extend for a one-year period.

The
amended Agreement requires the Company to maintain (i) a minimum tangible net
worth, (ii) a minimum debt service coverage ratio and (iii) a maximum debt to
tangible net worth ratio.  The Agreement
also limits the Companys fixed asset acquisitions and requires approval before
paying dividends or repurchasing outstanding shares of stock.  In addition the Agreement requires the
outstanding principal balance of the loan to be zero for at least one period of
thirty consecutive days during the term of the loan.

Covenant
compliance is reported quarterly and the Company was not in compliance with the
minimum debt service ratio and the maximum debt to tangible net worth ratio
under the amended Agreement at June 13, 2004. On May 13, 2004 the Company had
obtained a waiver of the minimum tangible net worth requirement and further
lowered its fixed asset acquisition limit.

The
Company had capital lease obligations at June 13, 2004 that totaled $2,515,000,
all of which was included in the current portion of long-term obligations as
the Company did not make the July 1, 2004 required payments which gave the
leasing companies the right to demand payment of the remaining lease
payments.  Long-Term Debt also included
a $111,000 note for site construction costs of which $1,000 was included in the
current portion of long-term obligations.

14

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At
June 13, 2004 the current portion of long-term obligations consisted of:

| | (In thousands)                                      |  |                 |  
| | --------------------------------------------------- |  | --------------- | -
| |                                                     |  |                 |  
| |                                                     |  | Current Portion |  
| |                                                     |  |                 |  
| | Secured Note                                        |  |                 | $
| | Secured Line of Credit                              |  |                 |  
| | Capital Lease Obligations                           |  |                 |  
| | Other Note Payable                                  |  |                 |  
| |                                                     |  |                 |  
| | Total Current Portion of
  long-
  term obligations |  |                 | $
| |                                                     |  |                 |  

The
Companys other long-term liabilities include deferred rent of $2,169,000 at
June 13, 2004.  The Companys deferred
rent liability consists of the net cumulative rent expensed in excess of rent payments
since inception of these leases. In addition other long term liabilities
includes $167,000 of deferred income at June 13, 2004 from a gain on the 1993
sale and leaseback of a building and land for one of the Companys restaurants.  The Company is amortizing the gain over the
20-year initial term of the lease. The remaining balance of $265,000 in other
long-term liabilities is the non-current portion of certain employee benefit
plans.

Net
cash provided by operating activities for the first twenty-four weeks of 2004
was $312,000 and consisted of:

| | (In thousands)                                                                                    |  |   |        |  
| | ------------------------------------------------------------------------------------------------- |  | - | ------ | -
| |                                                                                                   |  |   |        |  
| | Loss
  from operations                                                                            |  | $ | (8,299 | )
| | Adjustments
  to reconcile loss from operations to net
    cash provided by operating activities: |  |   |        |  
| | Depreciation
  and amortization                                                                   |  |   | 1,693  |  
| | Non-cash
  store closure and asset impairment expenses                                            |  |   | 7,187  |  
| | Change
  in operating assets and liabilities                                                      |  |   | (73    | )
| | Change
  in deferred rent and other                                                               |  |   | (196   | )
| |                                                                                                   |  |   |        |  
| | Net
  cash provided by operating activities                                                       |  | $ | 312    |  
| |                                                                                                   |  |   |        |  

Net
cash provided by operating activities for the first twenty-four weeks of 2004
included a change in operating assets and liabilities of ($73,000).  The change in operating assets and
liabilities of ($73,000) was primarily due to the timing of payments on certain
accrued liabilities, particularly utilities and property taxes, partially
offset by the collection of the tenant improvement receivable outstanding at
December 28, 2003.  The Change in deferred
rent and other is primarily the result of the timing of rent payments versus
the expense recorded in the statement of operations.

During
the same period the Company invested $823,000 in property and equipment,
consisting primarily of restaurant equipment and the remodeling of one restaurant.

The
Companys contractual obligations as of June 13, 2004 are as follows:

| | (In thousands)                       |  |       |        
| | ------------------------------------ |  | ----- | -------
| |                                      |  |       |        
| |                                      |  | Total |        
| |                                      |  |       |        
| | Secured Note                         |  | $     | 1,850  
| | Secured Line of Credit               |  |       | 500    
| | Capital Lease Obligations            |  |       | 2,515  
| | Other Note Payable                   |  |       | 111    
| | Operating Leases                     |  |       | 129,390
| |                                      |  |       |        
| | Total Contractual Cash
  Obligations |  | $     | 134,366
| |                                      |  |       |        

15

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The
Companys outstanding Series B non-voting convertible preferred stock is
currently held by one entity and is convertible, at the holders option, into
Series A voting convertible preferred stock on a one-for-one basis.  Although no Series A preferred stock is
currently outstanding, holders of Series A preferred stock, if any, would be
entitled to vote with common stockholders on all matters submitted to a vote of
stockholders.  When and if issued, the
holders of a majority of the outstanding Series A preferred stock will have a
separate right to approve certain corporate actions.

In
fiscal 1998, the Company failed to achieve a specified earnings target (before
interest, taxes, depreciation and amortization) of at least $5.5 million which
constituted an event of default of the terms of the preferred stock agreement
and which triggered the right of the Series A preferred stockholders to elect a
majority of the Companys Board of Directors. 
The holder of the Series B preferred stock has not initiated any action
to convert such shares into shares of Series A preferred stock nor has it
exercised its right to elect a majority of the Board of Directors.  In December 2003 such holder entered into a
letter agreement whereby the holder of the Series B preferred stock agreed to not
convert any of its shares of Series B preferred stock into Series A preferred
stock so long as the holder owns the Series B preferred shares.

The
Companys future growth depends to a significant degree on its ability to open
new restaurants and to operate such restaurants profitably.  The Company does not currently have plans to
open any new restaurants in 2004.  The
Companys ability to resume an expansion strategy will depend upon a variety of
factors, including its return to profitability and the Companys ability to
obtain funds.  See Business Risks
included herein.

Post Filing
Liquidity

On
July 12, 2004 the Company filed a voluntary petition for relief under Chapter
11 of the Bankruptcy Code, and, as a result, all pending claims against the Company
are stayed automatically.  Accordingly,
subject to the requirements of Bankruptcy Code Section 315, the Company may
reject or assume pre-petition executory contracts and leases as allowed by the
Bankruptcy Code.  The Company has
rejected the leases at eleven closed restaurants and is currently reviewing all
other pre-petition executory contracts to determine which other agreements it
will assume or reject.

Currently, subject to resolution of outstanding
leases claims and
its ability to raise interim financing, the Company believes that all known, non-disputed, non-contingent claims
will be paid in full. However, there is no assurance that there will be
sufficient assets to satisfy the Companys pre-petition liabilities in whole.
Under a plan of reorganization, pre-petition creditors could receive less than
100% of the face value of their claims. 
Although the Company expects that it will have excess assets after
payment of liabilities, and that there will be continuing value for holders of
its equity securities, there can be no assurance that its equity securities
will continue to have value.  It is not
possible to predict the outcome of the Chapter 11 Case, the terms and
provisions of any plan of reorganization, or the effect of the Chapter 11
reorganization process on the claims of the Companys creditors or the
interests of the Companys equity security holders.

Impact of Inflation

Many
of the Companys employees are paid hourly rates related to the federal and
state minimum wage laws.  Accordingly,
increases in the minimum wage could materially increase the Companys labor
costs.  In addition, the cost of food
commodities utilized by the Company is subject to market supply and demand
pressures.  Shifts in these costs may
have a significant impact on the Companys food costs.  The Company anticipates that increases in
these costs may be offset through pricing and other cost control efforts;
however, there is no assurance that the Company would be able to pass such
costs on to its guests or that even if it were able to do so, it could do so in
a short period of time.

Business Risks

Certain characteristics and dynamics of the
Companys business and of financial markets in general create

16

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risks
to the Companys long-term success and to predictable financial results.  These risks include:

Bankruptcy
Filing.  On July 12, 2004, the Company filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code.  As a result, the Company is presently
operating its business as a debtor-in-possession.  Currently, neither the
Company nor its creditors have proposed a plan of reorganization and there can
be no assurance that the Bankruptcy Court will confirm any plan of
reorganization that the Company or its creditors committee may propose.  As provided by the Bankruptcy Code, the
Company initially has the exclusive right to propose a plan of reorganization
for 120 days following the filing of its Chapter 11 petition.  If the Company fails to file a plan of
reorganization during such period or any extension thereof, or if such plan is
not accepted by the requisite numbers of creditors and equity holders entitled
to vote on the plan within 180 days of the Filing Date or any extension of such
period, other parties in interest in the Chapter 11 Case may be permitted to
propose their own plan or plans of reorganization.   The failure to have a plan of reorganization approved by the
Bankruptcy Court could result in a liquidation of the Companys remaining
assets.  Furthermore, there can be no
assurance that there will be any improvement in the Companys financial
condition or results of operations upon consummation of a plan of
reorganization.  During the Chapter 11
Case, the Company has incurred, and will continue to incur, significant costs
associated with the reorganization, including, but not limited to, professional
fees and other cash demands typical in bankruptcy proceedings.  These costs, which will be expensed as
incurred, are expected to significantly affect the Companys results of
operations and decrease assets available for use in the reorganization.  Further, the Chapter 11 filing, and the
potential adverse publicity associated with it, may have adverse effects on the
Companys business and ability to reorganize. 
Customers counts in the Companys remaining restaurants declined
following the announcement of the Chapter 11 filing, and they may continue to
decline as the result of publicity surrounding the filing.  In addition, the Companys current vendors
may attempt to cancel services or renegotiate existing arrangements as a result
of the Chapter 11 filing.

In
addition, the Company has not yet proposed its plan of reorganization, and it
is uncertain at this time what will be the effect of the plan on its creditors
and stockholders.  The Company does not
know if the plan will provide for payment of the whole or part of the claims of
its creditors, nor whether the current equity securities will remain
intact.  Moreover, the Company may be
unable to develop, prosecute, confirm and consummate a plan of reorganization,
and may incur unanticipated expenses of and liabilities associated with
bankruptcy.  The Company may also incur additional, unknown claims, as part of its
bankruptcy proceeding that it cannot currently determine.  If such claims are filed, they would reduce
the amount available for distribution to the Companys creditors and
stockholders.

Operating Losses and
Historical Declines in Comparable Store Sales.  The Companys quarterly and
annual operating results and same store sales have fluctuated significantly in
the past and are likely to fluctuate significantly in the future.  The Company has reported a loss for the last
two years and for the first twenty-four weeks of 2004 and there can be no
assurance that the Company will be profitable over the long or short term.

The
Companys comparable store sales decreased for the three fiscal years of 2001
through 2003 and have decreased 1.7% in the first twenty-four weeks of
2004.  This trend has continued with
comparable store sales down 8.9% for the first four-week period of the third
quarter.  There can be no assurance that
the comparable store sales declines experienced in 2001 through 2003, and
through the first twenty-four weeks of 2004, will not continue or not decline
further.

Operating as a Going Concern.  The accompanying condensed consolidated
financial statements have been prepared assuming that the Company will continue
to operate as a going concern, which contemplates continuity of operations,
timely payment for services by customers, control of operating costs and
expenses and the realization of asset sales and liquidation of liabilities and
commitments.  The bankruptcy filing and
related circumstances, including the closure of ten stores, the Companys
default on certain pre-petition debt, the losses from operations, as well as
current economic conditions, raise substantial doubts about the Companys
ability to continue as a going concern. 
The appropriateness of reporting on a going concern basis is dependent
upon, among other things, the availability of sufficient capital to meet
expenses, confirmation of a plan of reorganization, future profitable
operations, customer and employee retention and the ability to generate
sufficient cash from operations and financing sources to meet the Companys
obligations as they become due.  The
Company has assumed all of the foregoing. 
Should some or all of these assumptions prove to be unfounded or prove
to be untrue in the future, the Companys results of operations and financial
condition will be adversely affected and its ability to continue as a going
concern will be doubtful.

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NASDAQ Delisting.  In July 2004 the Companys common stock was
delisted from the NASDAQ National Market. 
The Companys common stock is quoted on the NASD Over-the-Counter (OTC)
bulletin board quotation service.  This
has reduced the market and liquidity of the Companys common stock and
consequently the ability of stockholders and broker/dealers to purchase and
sell shares of the Companys stock in an orderly manner or at all.  The volume of trading in the Companys stock
has continued to decline since its bankruptcy filing.  Trading in the Companys common stock through market makers and
quotation on the OTC Bulletin Board entails other risks.  Due in part to the decreased trading price
of the Companys common stock and absence of analyst coverage, the trading
price of the Companys common stock may change quickly, and market makers may
not be able to execute trades as quickly as they could when the common stock
was listed on the NASDAQ National Market.

Ability to Obtain
Additional Financing.  The Company believes it will need to
obtain additional financing to fund the operations during the Chapter 11
proceedings. The Company believes it has sufficient capital to fund its operations
through August 2004.  It is attempting
to finance its unmet capital needs after August 2004 through some combination
of vendor and debtor in possession financing. 
There can be no assurance that additional capital will be available on
terms acceptable to the Company, or at all. 
Failure to raise sufficient additional capital would have a material
adverse effect on the Companys ability to operate as a going concern or to
restructure in Chapter 11.

Employee Retention During
Bankruptcy.  The success of the Company depends on the
efforts of key management personnel. 
The Companys success will depend on its ability to motivate and retain
its key crewmembers and to attract qualified personnel, particularly general
managers, for its restaurants during the Chapter 11 proceedings.  In addition, the loss of the services of any other key administrative
personnel could materially adversely affect the Companys ability to manage its
affairs while in bankruptcy.

Loan Covenants.The Company did not achieve the
required minimum debt service coverage or maximum debt to tangible net worth
ratios as required under the Companys lending agreements.  Failure to achieve these covenants gives the
bank the right, subject to the automatic stay in effect during the bankruptcy
case, to declare the loans in default and to demand payment of the $1,850,000
of outstanding debt under its secured loan and the $500,000 outstanding debt
under its revolving line of credit.

Lease Renewals.  As
existing restaurant leases expire, the Company must negotiate new leases or
lease extensions in order to continue operations at existing restaurants.  There can be no assurance that the Company
will be able to renew these leases on favorable terms or at all.  If the Company is unable to obtain favorable
terms on new leases or extensions on existing leases, it would increase costs
and reduce the Companys operating margins. 
Moreover, if the Company is unable to renew existing leases and is
unable to find suitable alternate locations, the Companys revenue and
operating results would be adversely affected.

Geographic Concentration.  As
of July 23, 2004, 37 of the Companys 46 restaurants were located in
California, primarily in Northern California. 
Accordingly, the Company is susceptible to fluctuations in its business
caused by adverse economic conditions in this region.  In addition, net sales at certain of the Companys restaurants
have been adversely affected when a new Company restaurant has been opened in
relatively close geographic proximity. 
There can be no assurance that expansion within existing or future
geographic markets will not adversely affect the individual financial
performance of Company restaurants in such markets or the Companys overall
results of operations.  In addition,
given the Companys present geographic concentration in Northern California,
adverse weather conditions, changes in the work force, increased utility costs
or other external factors in the region or negative publicity relating to an
individual Company restaurant could have a more pronounced adverse effect on
results of operations than if the Companys restaurants were more broadly
dispersed.

Sensitivity to Economic
Conditions and Consumer Spending.  The restaurant industry
historically has been subject to substantial cyclical variation.  The California economy has slowed and there
has been a downturn in the general economy and a decline in consumer spending
in the restaurant industry.  A continued
decline could have a material adverse effect on the Companys financial
performance, as restaurant sales tend to decline during recessionary
periods.  A prolonged economic downturn
could alter customers purchasing decisions, which most likely would have a
material adverse impact on the Companys revenue and results of operations.

18

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Seasonality and Quarterly
Fluctuations The Companys
restaurants have typically experienced seasonal fluctuations, as
disproportionate amounts of net sales and net income are generally realized in
the second and third fiscal quarters. 
Because of the seasonality of the Companys business, the fourth quarter
has the lowest average sales of any quarter of the year.  The decline in average sales results in a
substantial decline in the Companys profits due to the significant amount of fixed
and semi-fixed costs inherent in operating restaurants.  In addition, the Companys quarterly results
of operations have been, and may continue to be, materially impacted by the
timing of new restaurant openings, restaurant closings and impairment charges.  The fourth quarter normally includes 16
weeks of operations as compared with 12 weeks for each of the three prior
quarters.  As a result of these factors,
net sales and net income in the fourth quarter are not comparable to results in
each of the first three fiscal quarters, and net sales can be expected to
decline in the first quarter of each fiscal year in comparison to the fourth
quarter of the prior fiscal year.

Expansion.  The Company believes its future growth depends to a significant
degree on its ability to open new restaurants and to operate such restaurants
profitably.  The Company currently has no development
plans for 2004 or beyond.  The
Companys ability to successfully resume an expansion strategy will depend upon
a variety of factors, many of which may be beyond the Companys control,
including the Companys ability to locate suitable restaurant locations,
negotiate acceptable lease terms, obtain required government approvals,
construct new restaurants in a timely manner, attract, train and retrain
qualified and experienced personnel and management, operate its restaurants
profitably and obtain additional capital to finance expansion and  equipment costs, as well as general economic
conditions and the degree of competition in the particular market.

Any future expansion plans by the Company may
include entering new geographic regions in which the Company has no previous
operating experience.  There can be no
assurance that the Fresh Choice concept will be successful in new geographic
regions.  In addition the Company
expects intense competition for restaurant sites, which may result in the
Company having difficulty leasing desirable sites on terms that are acceptable
to the Company. The Company expects that in some cases competitors may be
willing to pay more than the Company for sites.  These circumstances may make it difficult for the Company to
achieve any new store growth objectives.

Restaurant Industry.  The
restaurant industry is affected by changes in consumer tastes, as well as
national, regional and local economic conditions and demographic trends.  The performance of individual restaurants,
including the Companys restaurants, may be affected by factors such as traffic
patterns, demographic considerations, and the type, number and location of
competing restaurants.  In addition,
factors such as inflation, increased food, labor and crewmember benefit costs,
and the availability of experienced management and hourly crewmembers may also adversely
affect the restaurant industry in general and the Companys restaurants in
particular.  Restaurant operating costs
are affected by increases in the minimum hourly wage, unemployment tax rates,
and various federal, state and local governmental regulations, including those
relating to the sale of food and alcoholic beverages.  There can be no assurance that the restaurant industry in
general, and the Company in particular, will be successful.

Competition.  The
Companys restaurants compete with the rapidly growing mid-price, full-service
casual dining segment; with traditional limited-service buffet, soup, and salad
restaurants; and, increasingly, with fast-casual and quick-service
outlets.  The Companys competitors
include national and regional chains, as well as local owner-operated restaurants.  Key competitive factors in the industry are
the quality and value of the food products offered, quality and speed of
service, price, dining experience, restaurant location and the ambiance of
facilities.  Many of the Companys
competitors have been in existence longer than the Company, have a more
established market presence, and have substantially greater financial,
marketing and other resources than the Company, which may give them certain
competitive advantages.  The Company
believes that its ability to compete effectively will continue to depend in
large measure upon its ability to offer a diverse selection of high-quality,
fresh food products with an attractive price/value relationship.  In addition, if and when the Company resumes
expansion, it expects intense competition for restaurant sites, which may
result in the Company having difficulty leasing desirable sites on terms that
are acceptable to the Company.  The
Company expects that in some cases competitors may be willing to pay more than
the Company for sites.

Control by Major Shareholder.  Crescent Real Estate Equities Limited
Partnership (Crescent) holds 1,187,906 shares of Series B non-voting
convertible preferred stock, which is convertible into Series A voting
convertible preferred stock at any time at the option of the holder.  Upon conversion, holders of Series A
preferred stock would be entitled to vote with common stockholders and would
have a separate right to approve certain corporate actions, such as amending
the Companys Certificate of Incorporation or Bylaws, effecting a merger or
sale of the Company, or making a

19

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fundamental change in the Companys business activity.  In addition, because the Company did not
achieve a specified earnings target in 1998, the holders of Series A preferred
stock, if any, would have the right to elect a majority of the Companys Board
of Directors.  Crescent has entered into
a letter agreement waiving this right until the date that Crescent elects to
sell, transfer, convey or otherwise dispose of all its shares.  These factors could have the effect of
delaying, deferring or preventing a change in control of the Company and, as a
result, could discourage acquisition bids for the Company and limit the price
that investors are willing to pay for shares of common stock.

Critical Accounting Policies

Our
accounting policies are more fully described in Note 1 of the Companys audited
December 28, 2003 financial statements. 
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (US GAAP)
requires management to make estimates and assumptions that affect reported
amounts of assets, liabilities, revenues and expenses and related disclosures
of contingent assets and liabilities as of the dates and for the periods
presented.  Management believes the
following accounting policies, among others, represent its more critical or
complex estimates and assumptions used in preparation of its consolidated
financial statements.

The
Company evaluates its estimates and assumptions on an on-going basis and
believes its estimates and assumptions are reasonable based on historical
experience and other factors.  However,
actual results could differ from those estimates and these differences could be
material to the consolidated financial statements.  The accounting policies management has identified as critical or
complex accounting policies are described below.

Long-lived assets impairment.  The Company reviews its long-lived assets
related to each restaurant annually for impairment, or whenever events or
changes in circumstances indicate that the carrying amount of a restaurant and
the related equipment may not be recoverable. 
The Company considers a history of operating losses to be its primary
indicator of potential impairment; therefore new restaurants are generally not
identified for impairment until a sufficient operating history has been
developed.  Assets are grouped and
evaluated for impairment at the lowest level for which there are identifiable
cash flows, the individual restaurants. 
Impairment evaluations require an estimation of cash flows over the
remaining useful life of the restaurants. 
If the long-lived assets of a restaurant, generally consisting of
leasehold improvements and equipment, are not recoverable based upon forecasted
undiscounted cash flows, the Company writes down an impaired restaurant to its
estimated fair value, which becomes its new cost basis.  Generally, management considers the present
value of a restaurants projected future cash flows and estimated sales values
of a restaurants long-lived assets in determining fair value.  Considerable management judgment is
necessary to estimate projected future operating cash flows and the fair value
of impaired assets.  Accordingly, if
actual results vary from such estimates, significant future impairment could
result.

In
the second quarter of 2004, the Company identified ten additional restaurants
where the projected undiscounted cash flows, based upon recent results,
indicated that the carrying amount of fixed assets would not be recovered.  The Company, subsequent to quarter end,
decided to either sell or close six of these restaurants.  The impairment charge related to these
restaurants was $6,060,000.  Additional
impairment charges of $894,000 were recorded for restaurants whose assets were
previously partially impaired as it was determined based upon revised
projections, which reflected deteriorating results, that the carrying value of
the remaining equipment would not be recovered.  If sales continue to deteriorate in other restaurants additional
impairment charges may be required.

In
addition, accounting principles generally accepted in the United States of
America, (US GAAP), requires that the operating losses of underperforming
restaurants be recorded in the periods incurred.  US GAAP also requires that reserves for store closures and lease
termination costs for any restaurant to be closed not be recognized until a restaurant
ceases operations.  Accordingly, the
Company recorded a charge of $300,000 for the estimated cash costs associated
with the restaurant closure and settlement of lease obligation for the
restaurant closed in the second quarter. 
The Company will record a charge of approximately $3.5 million in the
third quarter for the expected liabilities from rejection of the leases for the
ten restaurants closed in early July 2004. 
Additionally, if the Company closes restaurants in the future, prior to
lease expirations, the Company may incur significant store closure and lease
termination charges in the period such restaurants close.

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Workers
Compensation Claims Accrual.  The Company records estimates for workers compensation claims
under its workers compensation program. 
The Company evaluates the adequacy of these accruals by evaluating information
periodically provided by its insurance carrier regarding the Companys
historical experience and trends relating to insurance claims and payments and
general industry experience regarding the expectation of future trends in
claims development. If such information indicates that the accruals are
overstated or understated, the Company will reduce or provide additional
accruals as appropriate. If a greater number of claims occur in comparison to
the amount of claims estimated or medical costs increase beyond anticipated costs,
additional charges may be required in the period such determination was
made.  The accrual for such claims was
$833,000 at June 13, 2004 versus $836,000 at December 28, 2003.

Discontinued
Operations. Considerable management judgment is necessary to determine whether
a closed restaurant should be classified as discontinued operations.  In general, the Company considers the extent
to which the restaurants operations and cash flow are expected to be absorbed
by other currently operated restaurants or replaced with a new restaurant in
making this determination.  A closed
restaurant, or group of restaurants, which is located in an isolated market and
not replaced, would generally be classified as discontinued operations.  The Company did not consider the closure of
the restaurant in the second quarter a discontinued operation as a significant
portion of the closed restaurant sales were absorbed by another currently
operating restaurant, management anticipates that as a result of the closing of
ten restaurants in the third quarter that it will have discontinued operations
in future quarters.

Income
taxes.The
Companys net deferred tax assets consist primarily of the tax benefit related
to operating loss carryforwards, alternative minimum tax credits and asset
write-downs, in connection with store asset impairments, that are not
deductible for tax purposes until the assets are disposed.  The Company has provided valuation allowances
against its deferred net tax assets based on managements most recent
assessment that it is not deemed more likely than not that the deferred tax
assets will be realized.  If future
assessments by management were to determine that the Company would be able to
realize its deferred tax assets in excess of their net recorded amounts, an
adjustment to the deferred tax assets could result in an increase in net income
in the period such determination was made.

Property
and equipment. Property and equipment are stated at cost.  Depreciation and amortization are computed
using the straight-line method over the estimated useful lives of the assets
which range from 5 to 30 years or the lease term of a restaurant including
option periods, as appropriate, not to exceed 25 years.

Overview

The
Companys operations have produced losses on declining same store sales for
most of the past three years.  In
addition, the Companys new restaurants, opened during the same time period,
have not performed up to the Companys expectations and have suffered
significant losses.  The Companys
comparable store sales improved in the first quarter of 2004 and the Company
expected that this positive trend would continue into the second and third
quarters, traditionally the Companys strongest sales periods.

The
Companys comparable store sales did not continue to improve as the Company
expected.  Instead, comparable store
sales were down 4.8% in the second quarter of 2004 versus the same quarter a
year-ago.  In fact, the sales trend grew
worse during the second quarter with comparable store sales down, versus the
comparable year-ago period, 2.3% in the first four-week period of the second
quarter, 3.5% in the second four-week period and 8.6% in the last four-week
period of the quarter.  This trend has
continued with comparable store sales down 8.9% for the first four-week period
of the third quarter.

In
addition, sales at the Companys newer restaurants did not improve as expected
and continued to perform below expectations. 
Average restaurant sales at the Companys five newer locations, open for
both lunch and dinner and not included in comparable store sales, were 46.1%
below the comparable store sales average for the second quarter.

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These
declining sales trends resulted in reduced earnings and cash flow.  As a result of the reduced earnings and cash
flow, the Company failed to achieve the required minimum debt service coverage
or maximum debt to tangible net worth ratios required under the Companys
lending agreements.  Failure to achieve
these covenants gave the bank the right, subject to the automatic stay in
effect during the bankruptcy case, to declare the Companys loans in default and
to demand payment of the $1,850,000 of outstanding debt under its secured loan
and the $500,000 outstanding debt under its revolving line of credit.

The
Companys internal projections indicated the Company would not generate
sufficient cash to cover operating and capital requirements for the remainder
of fiscal 2004.  The Company, therefore,
decided to close ten cash flow negative restaurants in early July and file for
protection under Chapter 11 of the Bankruptcy Code on July 12, 2004.

Results of Operations

The following table sets forth items in the
Companys statements of operations as a percentage of sales and certain
operating data for the periods indicated:

|                                            |  | Twelve Weeks Ended |        | Twenty-Four Weeks Ended | 
|------------------------------------------- |  | ------------------ | ------ | ----------------------- | 
|                                            |  |                    |        |                         | 
|(Dollars in thousands)                      |  | June 13, 2004      |        | June 15, 2003           | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|NET
  SALES                                 |  | $                  | 17,696 |                         | 
|                                            |  |                    |        |                         | 
|COSTS
  AND EXPENSES:                       |  |                    |        |                         | 
|Cost
  of sales                             |  |                    | 3,976  |                         | 
|Restaurant operating expenses:              |  |                    |        |                         | 
|Labor                                       |  |                    | 6,180  |                         | 
|Occupancy and other                         |  |                    | 6,025  |                         | 
|General and administrative expenses         |  |                    | 1,218  |                         | 
|Depreciation and amortization               |  |                    | 803    |                         | 
|Store closure and asset impairment expenses |  |                    | 7,254  |                         | 
|Restaurant
  opening costs                  |  |                    | -      |                         | 
|                                            |  |                    |        |                         | 
|Total
  costs and expenses                  |  |                    | 25,456 |                         | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|OPERATING
  LOSS                            |  |                    | (7,760 | )                       | 
|                                            |  |                    |        |                         | 
|Interest
  income                           |  |                    | -      |                         | 
|Interest
  expense                          |  |                    | (132   | )                       | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|Interest
  expense, net                     |  |                    | (132   | )                       | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|LOSS
  BEFORE INCOME TAXES                  |  |                    | (7,892 | )                       | 
|Provision
  for income taxes                |  |                    | -      |                         | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|NET
  LOSS                                  |  | $                  | (7,892 | )                       | 
|                                            |  |                    |        |                         | 
|                                            |  |                    |        |                         | 
|Number
  of restaurants:                    |  |                    |        |                         | 
|Open
  at beginning of period               |  |                    | 57     |                         | 
|                                            |  |                    |        |                         | 
|Open
  at end of period                     |  |                    | 56     |                         | 
|                                            |  |                    |        |                         | 

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Results of Operations: 
Twelve Weeks Ended June 13, 2004Compared to Twelve Weeks Ended June 15, 2003

Net Sales.  Net sales for the quarter ended June 13, 2004 were $17,696,000, a
decrease of $1,183,000, or 6.3%, from sales of $18,879,000 for the quarter
ended June 15, 2003. The primary components of the net decrease in sales were:

|(In
  thousands)                                          |  |   |        |  
|--------------------------------------------------------- |  | - | ------ | -
|                                                          |  |   |        |  
|Decrease in sales from six
  new Fresh Choice restaurants |  | $ | (227   | )
|                                                          |  |   |        |  
|Decrease in comparable
  Fresh Choice restaurant sales    |  |   | (819   | )
|                                                          |  |   |        |  
|Decrease in sales from
  closed restaurants               |  |   | (205   | )
|                                                          |  |   |        |  
|Increase in sales in Fresh
  Choice Express restaurants   |  |   | 68     |  
|                                                          |  |   |        |  
|                                                          |  |   |        |  
|                                                          |  | $ | (1,183 | )
|                                                          |  |   |        |  

The
Company had an average of 52.1 Fresh Choice restaurants in the second quarter
of 2004 compared to 52.0 Fresh Choice restaurants in the second quarter of
2003.  Sales at the Companys 46
comparable Fresh Choice restaurants, which include restaurants open at least 18
months, decreased 4.8% in the second quarter of 2004 versus the second quarter
of 2003.  Comparable store guest counts
decreased 9.0%, while the comparable store average check increased 4.7% to
$8.04, reflecting price increases and lower coupon discounts.

Net
sales per Fresh Choice restaurant open for both lunch and dinner averaged
$336,000 in the second quarter of 2004, a decrease of 6.4% over net sales per
restaurant of $358,000 in the second quarter of 2003.  The 6.4% decline in net sales per restaurant is the result of a
4.8% decrease in the 46 comparable Fresh Choice restaurants combined with the
lower than expected sales per restaurant from the five newer Fresh Choice
restaurants, open for both lunch and dinner, not included in comparable store
sales.  Sales at these restaurants were
46.1% below the comparable store average sales.

Costs and Expenses.  Cost of sales (food and beverage costs) was
22.5% of sales in the second quarter of 2004 compared to 23.2% in the second
quarter of 2003.  Food and beverage
costs declined as a percentage of sales due to the combined effect of
controlling food cost per guest and increases in the average check.

Restaurant Operating Expenses.  Restaurant operating expenses (labor,
occupancy and other) were 68.9% of sales in the second quarter of 2004 compared
to 65.9% of sales in the second quarter of 2003, an increase of 3.0% of sales.

Labor
costs as a percentage of sales were 34.9% for the second quarter of 2004
compared to 34.0% in the second quarter of 2003.  Labor costs, as a percentage of sales, were higher primarily due
to lower average restaurant sales and a higher average wage.

Occupancy
and other expenses as a percentage of sales were 34.0% for the second quarter
of 2004 compared to 31.9% of sales in the second quarter of 2003, an increase
of 2.1% of sales.  This increase is due
primarily to the higher occupancy costs as a percent of average restaurant
sales resulting from the decline in comparable store sales and the lower than
expected sales from the Companys newer restaurants.

Depreciation and Amortization.  Depreciation and amortization expenses in
the second quarter of 2004 were 4.5% of sales, an increase of 0.1% as a
percentage of sales.  The increase is
the net result of the decline in average restaurant sales partially offset by a
decline in depreciation dollars due to older restaurants assets becoming fully
depreciated and the impairment of assets in fiscal 2003.

General and Administrative Expenses.  General and administrative expenses were
6.9% of sales in the second quarter of 2004, the same as the second quarter of 2003.  The percentage of sales remained the same
despite the

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reduction
in spending compared to last year due to the decline in sales.  During the second quarter of 2003 the
Company eliminated eleven mid-level management and clerical positions or approximately
30% of its corporate office staff.  The
second quarter of 2003 includes an approximately $50,000 charge for severance
costs.

Store Closure and Asset Impairment Expenses.  In the second quarter, the Company recorded
a non-cash impairment charge of $6,954,000 for the write-down of buildings,
leasehold improvements and equipment to fair value for eighteen of the
Companys restaurants. The Company closed ten of these restaurants in the third
quarter (eight of which had been previously impaired). The Company intends to
either sell or discontinue operations at four of the other impaired
restaurants. Fifteen of the impaired locations are located in Southern
California, Texas and Washington, which are outside of the Companys core northern
California markets.  The ten closed
restaurants were operating at negative cash flows and were currently projected
to incur future negative cash flows. 
The impairment charge for the eighteen restaurants was required because
the carrying amounts of the impaired assets were not recoverable from their
currently projected undiscounted cash flows. 
The impairment loss was calculated as the difference between the
carrying amount and fair value of the assets. In addition, the Company closed
one previously impaired restaurant in the second quarter and recorded a
$300,000 charge for the estimated cash costs associated with the restaurant
closure and settlement of the lease obligation.

Restaurant Opening Costs.  The Company had no restaurant opening costs
in the second quarter of 2004 versus $44,000 in the second quarter of
2003.  The Company opened no new
locations in the second quarter of 2004.

Interest Expense, net.  Interest expense, net was  $132,000 the second quarter of 2004 compared
to $105,000 in the second quarter of 2003. This increase is due to the
write-off of $45,000 of unamortized loan fees for the bank debt classified as
current due to the Company not meeting certain loan covenants.  Interest expense consists of fees related to
securing the Companys borrowing arrangements and interest expense on
outstanding borrowings and capital lease obligations.

Income Taxes.  The Company recorded no tax benefit from its operating loss in
the second quarter of 2004 or the second quarter of 2003 due to valuation
allowances against its net deferred tax assets.  The Companys net deferred tax assets consist primarily of the
tax benefit related to operating loss carryforwards, alternative minimum tax
credits and asset write-downs, in connection with store asset impairments, that
are not deductible for tax purposes until the assets are disposed.  The Company will continue to provide a full
valuation allowance for its deferred tax assets until it becomes more likely
than not, in managements assessment, that any portion of the Companys
deferred tax assets will be realized.

Results of Operations: 
Twenty-Four Weeks Ended June 13, 2004Compared to Twenty-Four Weeks Ended June 15, 2003

Net Sales.  Net sales for the twenty-four weeks ended June 13, 2004 were
$35,717,000 a decrease of $846,000, or 2.3%, from sales of $36,563,000 for the
twenty-four weeks ended June 15, 2003. The primary components of the net
decrease in sales were:

|(In
  thousands)                                            |  |   |      |  
|----------------------------------------------------------- |  | - | ---- | -
|                                                            |  |   |      |  
|Decrease in sales from
  eight new Fresh Choice restaurants |  | $ | (216 | )
|                                                            |  |   |      |  
|Decrease in sales from
  closed restaurants                 |  |   | (217 | )
|                                                            |  |   |      |  
|Decrease in comparable
  Fresh Choice restaurant sales      |  |   | (547 | )
|                                                            |  |   |      |  
|Increase in sales in Fresh
  Choice Express restaurants     |  |   | 134  |  
|                                                            |  |   |      |  
|                                                            |  |   |      |  
|                                                            |  | $ | (846 | )
|                                                            |  |   |      |  

The
Company had an average of 52.5 Fresh Choice restaurants in the first two
quarters of 2004 compared to 51.2 Fresh Choice restaurants in the first two quarters of 2003.  Sales at the Companys 44 comparable Fresh
Choice

24

---

---

restaurants, which include restaurants open at least 18 months,
decreased 1.7% in the first two quarters of 2004 versus the first two quarters
of 2003.  Comparable store guest counts
decreased 4.4%, while the comparable store average check increased 2.9% to
$7.93, reflecting price increases and lower coupon discounts.

Net
sales per Fresh Choice restaurant open for both lunch and dinner averaged $671,000 in the first two quarters of 2004, a
decrease of 4.5% over net sales per restaurant of $703,000 in the first two
quarters of 2003.  The 4.5%
decline in net sales per restaurant is the result of a 1.7% decrease in the 44
comparable Fresh Choice restaurants combined with the lower than expected sales
per restaurant from the seven newer Fresh Choice restaurants, open for both
lunch and dinner, not included in comparable store sales.  Sales at these restaurants were 39.7% below
the comparable store average sales.

Costs and Expenses.  Cost of sales (food and beverage costs) was
22.5% of sales in the first two quarters of 2004 compared to 23.0% in the first
two quarters of 2003.  Food and beverage
costs declined as a percentage of sales due to the combined effect of
controlling food cost per guest and increases in the average check.

Restaurant Operating Expenses.  Restaurant operating expenses (labor,
occupancy and other) were 68.5% of sales in the first two quarters of 2004
compared to 66.3% of sales in the first two quarters of 2003, an increase of
2.2% of sales.

Labor
costs as a percentage of sales were 35.1% for the first two quarters of 2004
compared to 34.2% in the first two quarters of 2003.  Labor costs, as a percentage of sales, were higher primarily due
to lower average restaurant sales, a higher average wage, and higher workers
compensation and medical benefits costs.

Occupancy
and other expenses as a percentage of sales were 33.4% for the first two
quarters of 2004 compared to 32.1% of sales in the first two quarters of 2003,
an increase of 1.3% of sales.  This
increase is due primarily to the higher occupancy costs as a percent of average
restaurant sales resulting from the decline in comparable store sales and the
lower than expected sales from the Companys newer restaurants.

Depreciation and Amortization.  Depreciation and amortization expenses in
the first two quarters of 2004 were 4.4% of sales, the same as the first two
quarters of 2003.  The flat percentage
is the net result of the decline in average restaurant sales offset by a
decline in depreciation dollars due to older restaurants assets becoming fully
depreciated and the impairment of assets in fiscal 2003.

General and Administrative Expenses.  General and administrative expenses were
6.8% of sales in the first two quarters of 2004 compared to 7.3% of sales in
the first two quarters of 2003.  The
decrease is primarily the result of reduced spending compared to last
year.  During the second quarter of 2003
the Company eliminated eleven mid-level management and clerical positions or
approximately 30% of its corporate office staff.  The second quarter of 2003 includes an approximately $50,000
charge for severance costs.

Store Closure and Asset ImpairmentExpenses.  In
the second quarter, the Company recorded a non-cash impairment charge of
$6,954,000 for the write-down of buildings, leasehold improvements and
equipment to fair value for eighteen of the Companys restaurants. The Company
closed ten of these restaurants in the third quarter (eight of which had been
previously impaired). The Company intends to either sell or discontinue
operations at four of the other impaired restaurants. Fifteen of the impaired
locations are located in Southern California, Texas and Washington, which are
outside of the Companys core northern California markets.  The ten closed restaurants were operating at
negative cash flows and were currently projected to incur future negative cash
flows.  The impairment charge for the
eighteen restaurants was required because the carrying amounts of the impaired
assets were not recoverable from their currently projected undiscounted cash flows.  The impairment loss was calculated as the
difference between the carrying amount and fair value of the assets. In
addition, the Company closed one previously impaired restaurant in the second
quarter and recorded a $300,000 charge for the estimated cash costs associated
with the restaurant closure and settlement of the lease obligation.

25

---

---

Restaurant Opening Costs.  The Company had no restaurant opening costs
in the first two quarters of 2004 versus $236,000 in the first two quarters of
2003.  The Company opened no new locations
in the first two quarters of 2004.

Interest Expense, net.  Interest expense, net was  $224,000 in the first two quarters of 2004
compared to $182,000 in the first two quarters of 2003. This includes the
$45,000 of unamortized loan fees for the bank debt classified as current due to
the Company not meeting certain loan covenants in the second quarter. Interest
expense consists of fees related to securing the Companys borrowing
arrangements and interest expense on outstanding borrowings and capital lease
obligations.

Income Taxes.  The Company recorded no tax benefit from its operating loss in
the first twenty-four weeks of 2004 or the first twenty-four weeks of 2003 due
to valuation allowances against its net deferred tax assets.  The Companys net deferred tax assets
consist primarily of the tax benefit related to operating loss carryforwards,
alternative minimum tax credits and asset write-downs, in connection with store
asset impairments, that are not deductible for tax purposes until the assets
are disposed.  The Company will continue
to provide a full valuation allowance for its deferred tax assets until it
becomes more likely than not, in managements assessment, that any portion of
the Companys deferred tax assets will be realized.

Item 3  -
Quantitative and Qualitative Disclosures About Market Risk

The
Company is exposed to interest rate risk primarily through its borrowing
activities.  The Company has not used
derivative financial instruments to hedge such risks.  There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. 
The extent of this risk is not quantifiable or predictable because of
the variability of future interest rates and business financing
requirements.  If market rates were to
increase immediately by 10 percent from levels at June 13, 2004, the fair value
of the Companys borrowings would not be materially affected as borrowings are
primarily subject to variable interest rates.

Item 4  -
Controls and Procedures

Under the
supervision and with the participation of management, including the principal
executive and principal financial officers, the Company evaluated the
effectiveness of its disclosure controls and procedures; as such term is
defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934, as amended. Based on this evaluation, its principal executive officer and
principal financial officer concluded that the Companys disclosure controls
and procedures were effective as of the end of the period covered by this
quarterly report. There were no changes in internal control over financial
reporting that would require additional disclosure under Regulation S-K 308(c).

PART II.OTHERINFORMATION

|Item 1 -
  Legal Proceedings               | Not
  Applicable.
|------------------------------------------ | -----------------
|                                           |                  
|Item 2 -
  Changes in Securities           | Not
  Applicable.
|                                           |                  
|Item 3 -
  Defaults upon Senior Securities | Not
  Applicable.

26

---

---

Item 4 -
Submission of Matters to a Vote of Security Holders

The
Company held its Annual Meeting of Stockholders on May 5, 2004.  The stockholders voted on proposals on:

(1) The election of two (2) Class III directors, Barry E. Krantz and Everett F.
Jefferson, to hold office for a three-year term and until their successors are
elected and qualified.  The proposal was
approved by the following vote:

| | Nominee              |  | For       |  | Withheld | 
| | -------------------- |  | --------- |  | -------- | 
| |                      |  |           |  |          | 
| |                      |  |           |  |          | 
| | Barry E. Krantz      |  | 5,855,662 |  | 88,564   | 
| |                      |  |           |  |          | 
| | Everett F. Jefferson |  | 5,867,162 |  | 77,064   | 

(2) The appointment of Grant Thornton LLP as the Companys independent
accountants for the fiscal year ending December 26, 2004.  The proposal was approved by the following
vote:

| | For       |  | Against |  | Abstain | 
| | --------- |  | ------- |  | ------- | 
| |           |  |         |  |         | 
| |           |  |         |  |         | 
| | 5,889,332 |  | 16,194  |  | 38,700  | 

|Item 5 - Other Information | Not
  Applicable.
|-------------------------- | -----------------

Item 6 -
Exhibits and Reports on Form 8-K

|(a) | Exhibits.  The exhibits listed in the accompanying
  index to Form 10-Q Exhibits are filed or incorporated by reference as part of
  this report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                  
|(b) | Reports on Form 8-K.  The registrant filed the following report
  on Form 8-K during the quarter ended June 13, 2004.                            
|    |                                                                                                                                                  
|    |                                                                                                                                                 

27

---

---

SIGNATURES

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

| | FRESH CHOICE, INC.                                    
| | ------------------------------------------------------
| | (Registrant)                                          
| |                                                       
| |                                                       
| | /S/ Everett F.
  Jefferson                            
| |                                                       
| | Everett F. Jefferson                                  
| | Chief Executive Officer                               
| | (Principal Executive
  Officer)                       
| |                                                       
| |                                                       
| | /S/ David E.
  Pertl                                  
| |                                                       
| | David E. Pertl                                        
| | Executive Vice President
  and Chief Financial Officer
| | (Principal Financial and
  Accounting Officer)        
| |                                                       

Dated:  July 28,2004

28

---

---

INDEX TO FORM 10-Q EXHIBITS

|Exhibit
  No. |      | Description
|------------- | ---- | -----------
|              |      |            
|              |      |            
|3.1           | (1)  |            
|              |      |            
|3.2           | (8)  |            
|              |      |            
|3.3           | (10) |            
|              |      |            
|3.4           | (10) |            
|              |      |            
|3.5           | (10) |            
|              |      |            
|3.6           | (10) |            
|              |      |            
|4.1           | (10) |            
|              |      |            
|10.1          | (1)  |            
|              |      |            
|10.2          | (2)  | (3)        
|              |      |            
|10.3          | (2)  | (3)        
|              |      |            
|10.8          | (8)  |            
|              |      |            
|10.18         | (6)  |            
|              |      |            
|10.19         | (6)  |            
|              |      |            
|10.26         | (11) | (3)        
|              |      |            
|10.27         | (11) | (3)        
|              |      |            
|10.28         | (11) | (3)        
|              |      |            
|10.34         | (13) | (3)        
|              |      |            
|10.36         | (14) |            
|              |      |            
|10.37         | (14) | (3)        
|              |      |            
|10.43         | (17) | (3)        
|              |      |            
|10.44         | (17) | (3)        
|              |      |            
|10.45         | (17) | (3)        
|              |      |            
|10.46         | (17) | (3)        
|              |      |            
|10.47         | (17) | (3)        
|              |      |            
|10.48         | (17) |            
|              |      |            
|10.49         | (17) |            

29

---

---

INDEX
TO FORM 10-Q EXHIBITS(continued)

|10.50 | (17) |     |  | Revolving
  Loan Agreement dated October 5, 2001 with Mid-Peninsula Bank                                                                                                                                                                              
|----- | ---- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.51 | (17) |     |  | Pledge
  Agreement dated October 5, 2001 with Mid-Peninsula Bank                                                                                                                                                                                      
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.52 | (17) |     |  | Promissory
  Note dated October 5, 2001 with Mid Peninsula Bank                                                                                                                                                                                       
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.55 | (18) | (3) |  | Non
  Qualified Deferred Compensation Plan of Fresh Choice, Inc. effective as of
  December 1, 2001                                                                                                                                                   
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.56 | (18) | (3) |  | Trust
  Agreement Under The Non Qualified Deferred Compensation Plan of Fresh Choice,
  Inc. dated December 17, 2001                                                                                                                                  
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.57 | (19) |     |  | Letter dated
  April 25, 2002 amending the Revolving Loan Agreement dated October 5, 2001
  with Mid-Peninsula Bank                                                                                                                                   
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.58 | (20) |     |  | Change in
  Terms Agreement dated June 3, 2002 amending the Revolving Loan Agreement
  dated October 5, 2001 with Mid-Peninsula Bank                                                                                                                  
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.59 | (21) |     |  | Letter dated
  December 10, 2002 amending the Revolving Loan Agreement dated October 5, 2001
  as amended June 3, 2002 with Mid-Peninsula Bank                                                                                                        
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.60 | (21) | (3) |  | 2003 Home
  Office Incentive Plan                                                                                                                                                                                                                     
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.61 | (22) |     |  | Letter dated
  April 7, 2003 amending the Revolving Loan Agreement dated October 5, 2001 as
  amended June 3, 2002 and December 10, 2002 with Mid-Peninsula Bank                                                                                      
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.62 | (23) |     |  | Letter dated
  August 13, 2003 amending the Revolving Loan Agreement dated October 5, 2001
  as amended June 3, 2002, December 10, 2002 and April 7, 2003 with
  Mid-Peninsula Bank.                                                                  
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.63 | (23) |     |  | Letter dated
  August 13, 2003 amending the Commercial Deed of Trust, Financial Security
  Agreement and Fixture Filing dated Aug 13, 2001 with Mid Peninsula Bank.                                                                                   
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.64 | (24) |     |  | Letter dated
  November 19, 2003 amending the Revolving Loan Agreement dated October 5, 2001
  as amended June 3, 2002, December 10, 2002, April 7, 2003 and August 13, 2003
  with Mid-Peninsula Bank.                                               
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.65 | (24) |     |  | Letter dated
  November 19, 2003 amending the Commercial Deed of Trust, Financial Security
  Agreement and Fixture Filing dated Aug 13, 2001 as amended August 13, 2003
  with Mid Peninsula Bank.                                                    
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.66 | (24) | (3) |  | 2004 Home
  Office Incentive Plan.                                                                                                                                                                                                                    
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.67 | (24) |     |  | Letter
  agreement dated December 11, 2003 whereby Crescent Real Estate Equities Ltd.
  (Crescent) agrees to not convert any of its shares of Series B Preferred
  into Series A Preferred so long as Crescent owns the Series B Preferred
  shares.
|      |      |     |  |                                                                                                                                                                                                                                                       
|10.68 | (25) |     |  | Change in
  Terms Agreement dated March 16, 2004 amending the Revolving Loan Agreement
  dated October 5, 2001 as amended June 3, 2002, December 10, 2002, April 7,
  2003, August 13,2003 and November 19, 2003 with Mid-Peninsula Bank.             

30

---

---

INDEX
TO FORM 10-Q EXHIBITS  (continued)

|10.69 | Letter dated
  May 13, 2004 amending the terms of the Revolving Loan Agreement dated October
  5, 2001 (as subsequently amended) and the Commercial Deed Of Trust, Financing
  Statement, Security Agreement and Fixture Filing dated August 13, 2001 (as
  subsequently amended) with Mid-Peninsula Bank.
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                           
|31.1  | Certification by the Chief
  Executive Officer of his responsibility for financial reports under section
  302 of the Sarbanes-Oxley Act.                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                           
|31.2  | Certification by the Chief
  Financial Officer of his responsibility for financial reports under section
  302 of the Sarbanes-Oxley Act.                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                           
|32.1  | Certification by the Chief
  Executive Officer of his responsibility for financial reports under section
  906 of the Sarbanes-Oxley Act                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                           
|32.2  | Certification by the Chief
  Financial Officer of his responsibility for financial reports under section
  906 of the Sarbanes-Oxley Act.                                                                                                                                                                 

|(1)  | Incorporated by reference
  from the Exhibits with corresponding numbers filed with the Companys
  Registration Statement on Form S-1 (No. 33-53904) filed October 29, 1992, as
  amended by Amendment No. 1 to Form S-1 (No. 33-53904) filed December 7, 1992,
  except that Exhibit 3.1 is incorporated by reference from Exhibit 3.1C and
  Exhibit 3.2 is incorporated by reference from Exhibit 3.2B.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(2)  | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended September 4,
  1994.                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(3)  | Agreements
  or compensatory plans covering executive officers and directors of Fresh
  Choice, Inc.                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(6)  | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 31, 1995.                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(8)  | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on form 10-Q for the quarter ended March 24, 1996.                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(10) | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended September 8,
  1996.                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(11) | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 29, 1996.                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(13) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended June 14, 1998.                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                            
|(14) | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 27, 1998.                                                                                                                                                                                                                                       

31

---

---

INDEX
TO FORM 10-Q EXHIBITS  (continued)

|(17) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended March 24, 2002.     
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                         
|(18) | Incorporated
  by reference from the Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 30, 2001.    
|     |                                                                                                                                                                         
|(19) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended March 24, 2002.     
|     |                                                                                                                                                                         
|(20) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended June 16, 2002.      
|     |                                                                                                                                                                         
|(21) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 29, 2002.        
|     |                                                                                                                                                                         
|(22) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended March 23, 2003.     
|     |                                                                                                                                                                         
|(23) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended September 7,
  2003.
|     |                                                                                                                                                                         
|(24) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Annual Report on Form 10-K for the year ended December 28, 2003.        
|     |                                                                                                                                                                         
|(25) | Incorporated
  by reference from Exhibits with corresponding numbers filed with the
  Companys Quarterly Report on Form 10-Q for the quarter ended March 21, 2004.     

32

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