<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             -----------------------

                                    FORM 10-Q
(Mark One)

[X]   QUARTERLY REPORT under SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT
      OF 1934

        For the quarter ended        March 22, 1998
                                                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

        For the transition period from ______________ to ______________.

                         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                           (I.R.S. Employee
 incorporation or organization)                          Identification No.)

          2901 TASMAN DRIVE - SUITE 109, SANTA CLARA, CALIFORNIA 95054
          ------------------------------------------------------------
              (Address of principal executives offices) (Zip Code)

       Registrant's telephone number, including area code: (408) 986-8661
                                                           --------------

--------------------------------------------------------------------------------
                 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    [ ] No

      APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  [ ] Yes   [ ] No 

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, $.001 par value, outstanding as of April
19, 1998 was 5,682,193.


<PAGE>   2
                               FRESH CHOICE, INC.

                                      INDEX


<TABLE>
<S>        <C>                                                                             <C>
PART I - FINANCIAL INFORMATION

      Item 1 - Financial Statements

           Condensed Consolidated Balance Sheets at March 22, 1998
           and December 28, 1997............................................................3

           Condensed Consolidated Statements of Operations for the Twelve Weeks
           ended March 22, 1998 and March 23, 1997 .........................................4

           Condensed Consolidated Statements of Cash Flow for the Twelve Weeks
           ended March 22, 1998 and March 23, 1997..........................................5

           Notes to Unaudited Condensed Consolidated Financial Statements...................6

      Item 2 - Management's Discussion and Analysis of Financial Condition
           and Results of Operations........................................................8

      Item 3 - Quantitative and Qualitative Disclosures About Market Risk..................15

PART II - OTHER INFORMATION

      Item 1 - Legal Proceedings...........................................................16
      Item 2 - Changes in Securities.......................................................16
      Item 3 - Defaults Upon Senior Securities.............................................16
      Item 4 - Submission of Matters to a Vote of Security Holders.........................16
      Item 5 - Other Information...........................................................16
      Item 6 - Exhibits and Reports on Form 8-K............................................16

SIGNATURES ................................................................................17


INDEX TO FORM 10-Q EXHIBITS................................................................18
</TABLE>


                                       2
<PAGE>   3
                          PART I. FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS


FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                      March 22,        December 28,
                                                                                        1998              1997
                                                                                    ------------       ------------
<S>                                                                                 <C>                <C>         
ASSETS                                                                               (Unaudited)

CURRENT ASSETS:
         Cash and cash equivalents                                                  $      1,333       $      2,415
         Receivables                                                                         107                124
         Inventories                                                                         467                461
         Pre-opening costs                                                                   101                130
         Prepaid expenses and other current assets                                           309                544
                                                                                    ------------       ------------

         Total current assets                                                              2,317              3,674

PROPERTY AND EQUIPMENT, net                                                               31,932             30,842

LEASE ACQUISITION COSTS, net                                                                 464                481

DEPOSITS AND OTHER ASSETS                                                                    647                611
                                                                                    ------------       ------------

TOTAL ASSETS                                                                        $     35,360       $     35,608
                                                                                    ============       ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
         Accounts payable                                                           $      1,827       $      2,271
         Accrued salaries and wages                                                        1,346              1,286
         Sales tax payable                                                                   842                525
         Other accrued expenses                                                            2,005              2,101
         Acquisition payable related to purchase of restaurants                              600                600
         Restructuring reserve                                                               649                721
         Current portion of capital lease obligations                                        159                 --
                                                                                    ------------       ------------

         Total current liabilities                                                         7,428              7,504

CAPITAL LEASE OBLIGATIONS                                                                    625                 --

OTHER LONG-TERM LIABILITIES                                                                1,636              1,786
                                                                                    ------------       ------------

         Total liabilities                                                                 9,689              9,290
                                                                                    ------------       ------------

STOCKHOLDERS' EQUITY
         Convertible preferred stock, $.001 par value;  3.5 million shares
                authorized; shares outstanding: 1998 and 1997-1,187,906                    5,175              5,175
         Common stock, $.001 par value; 15 million shares authorized;
                shares outstanding: 1998-5,682,193; 1997-5,682,193                        42,139             42,139
         Accumulated deficit                                                             (21,643)           (20,996)
                                                                                    ------------       ------------

         Total stockholders' equity                                                       25,671             26,318
                                                                                    ------------       ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $     35,360       $     35,608
                                                                                    ============       ============
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements


                                       3
<PAGE>   4
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)


<TABLE>
<CAPTION>
                                                                    Twelve Weeks Ended
                                                            -------------------------------
                                                              March 22,          March 23,
                                                                1998               1997
                                                            ------------       ------------
<S>                                                         <C>                <C>         

NET SALES                                                   $     16,192       $     16,106

COSTS AND EXPENSES:
         Cost of sales                                             4,240              4,389
         Restaurant operating expenses:
                Labor                                              5,390              5,057
                Occupancy and other                                5,053              5,249
         Depreciation and amortization                               818                701
         General and administrative expenses                       1,309              1,406
                                                            ------------       ------------

                Total costs and expenses                          16,810             16,802
                                                            ------------       ------------

OPERATING LOSS                                                      (618)              (696)

         Interest income                                               8                 52
         Interest expense                                            (37)                (5)
                                                            ------------       ------------

         Interest income (expense), net                              (29)                47
                                                            ------------       ------------

LOSS BEFORE INCOME TAXES                                            (647)              (649)

         Provision for (benefit from) income taxes                    --                 --
                                                            ------------       ------------

NET LOSS                                                    $       (647)      $       (649)
                                                            ============       ============

Basic net loss per common share                             $      (0.11)      $      (0.11)
                                                            ============       ============

Shares used in computing basic per share amounts                   5,682              5,661
                                                            ============       ============

Diluted net loss per common share                           $      (0.11)      $      (0.11)
                                                            ============       ============

Shares used in computing diluted per share amounts                 5,682              5,661
                                                            ============       ============
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements


                                       4
<PAGE>   5
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)


<TABLE>
<CAPTION>
                                                                          Twelve Weeks Ended
                                                                    ------------------------------
                                                                      March 22,         March 23,
                                                                        1998              1997
                                                                    ------------      ------------
<S>                                                                 <C>               <C>          

OPERATING ACTIVITIES:
Net loss                                                            $       (647)     $       (649)
Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities:
           Depreciation and amortization                                     878               754
           Loss on disposal of property                                       78                11
           Deferred rent                                                    (146)             (102)
           Change in operating assets and liabilities:
                Receivables                                                   17                30
                Inventories                                                   (6)               13
                Pre-opening costs                                             (1)               --
                Prepaid expenses and other current assets                    235               211
                Accounts payable                                            (444)             (231)
                Accrued salaries and wages                                    60               (91)
                Other accrued expenses                                       221               211
                Restructuring reserve                                        (72)             (174)
                                                                    ------------      ------------

      Net cash provided by (used in) operating activities                    173               (17)
                                                                    ------------      ------------

INVESTING ACTIVITIES:
      Capital expenditures                                                (1,985)             (386)
      Deposits and other assets                                              (54)                5
                                                                    ------------      ------------

      Net cash used in investing activities                               (2,039)             (381)
                                                                    ------------      ------------

FINANCING ACTIVITIES:
      Common stock sales                                                      --                 1
      Capital lease obligations - borrowings                                 828                --
      Capital lease obligations - repayments                                 (44)              (29)
                                                                    ------------      ------------

      Net cash provided by (used in) financing activities                    784               (28)
                                                                    ------------      ------------

DECREASE IN CASH AND CASH EQUIVALENTS                                     (1,082)             (426)

CASH AND CASH EQUIVALENTS:
      Beginning of period                                                  2,415             5,647
                                                                    ------------      ------------

      End of period                                                 $      1,333      $      5,221
                                                                    ============      ============

Supplemental Disclosure of Cash Flow Information:
      Cash paid during the period for interest                      $         19      $          6
                                                                    ============      ============
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements


                                       5
<PAGE>   6
FRESH CHOICE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
For the Twelve Weeks Ended March 22, 1998 and March 23, 1997


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, 1997.


2.    NET LOSS PER SHARE

            During December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings per Share" and retroactively
restated prior period earnings per share (EPS) for the change. SFAS 128 requires
a dual presentation of basic and diluted EPS. Basic EPS for the periods
presented is computed by dividing net loss by the weighted average of common
shares outstanding. Diluted EPS for all periods presented is the same as basic
EPS since all other potential dilutive securities are excluded as they are
antidilutive.

            The Company excluded potentially dilutive securities for each period
presented from its diluted EPS computation because either the exercise price of
the securities exceeded the average fair value of the Company's common stock or
the Company had net losses, and, therefore, these securities were anti-dilutive.
A summary of the excluded potential dilutive securities as of the end of each
period follows:

<TABLE>
<CAPTION>
                                           March 22,      March 23,
(In thousands)                               1998           1997
                                         ------------   ------------
<S>                                      <C>            <C>

Potential Dilutive Securities

    Stock options                                 582            534
    Stock warrants                                732            732
    Convertible preferred stock                 1,188          1,188
</TABLE>


3.    INCOME TAXES

            The Company recorded no income tax benefit from its operating losses
during the twelve weeks ended March 22, 1998 and March 23, 1997. The Company has
provided valuation allowances against its net deferred tax assets which consist
primarily of the tax benefit related to operating loss carryforwards and
non-deductible asset write-downs and restructuring accruals. The Company will
continue to provide a valuation allowance for its deferred tax assets until it
becomes more likely than not, in management's assessment, that the Company's
deferred tax assets will be realized.


                                       6
<PAGE>   7
4.    RESTRUCTURING RESERVE

            The following table sets forth the Company's restructuring reserves
and their respective balances at December 29, 1996, December 28, 1997 and March
22, 1998.


<TABLE>
<CAPTION>
                                                Balance      Provided                       Balance      Utilized        Balance
(In thousands)                             December 29,    (Reversed)       Utilized   December 28,       to date      March 22,
                                                   1996       in 1997        in 1997           1997       in 1998           1998
                                           ------------  ------------   ------------   ------------  ------------   ------------
<S>                                        <C>           <C>            <C>            <C>           <C>            <C>         
1995 Reserve:

 Restaurant closures:

 Non-cash write-down of restaurant
  assets to estimated fair value and
  other related costs                      $         58  $        (58)  $         --   $         --  $         --   $         --

 Estimated cash costs associated
  with restaurant closures and
  settlement of lease obligations                 1,765          (674)          (370)           721           (72)           649
                                           ------------  ------------   ------------   ------------  ------------   ------------
 1995 reserve                                     1,823          (732)          (370)           721           (72)           649
                                           ------------  ------------   ------------   ------------  ------------   ------------

 1996 Reserve:

 Restaurant closures:

 Non-cash write-down of restaurant
  assets to estimated fair value and
  other related costs                                28           (28)            --             --            --             --

 Estimated cash costs associated
  with restaurant closures and
  settlement of lease obligations                   845          (254)          (591)            --            --             --
                                           ------------  ------------   ------------   ------------  ------------   ------------
 1996 reserve                                       873          (282)          (591)            --            --             --
                                           ------------  ------------   ------------   ------------  ------------   ------------

 1997 Impairment:
 Non-cash write-down of restaurant
  assets to estimated fair value                     --         1,014         (1,014)            --            --             --
                                           ------------  ------------   ------------   ------------  ------------   ------------
 Total reserves                            $      2,696  $         --   $     (1,975)  $        721  $        (72)  $        649
                                           ============  ============   ============   ============  ============   ============
</TABLE>


            The Company has substantially completed a restructuring plan
previously announced at the end of fiscal year 1995. As of March 22, 1998, the
1995 restructuring reserve balance consisted primarily of the estimated cash
costs to settle one remaining lease obligation. The Company believes the balance
at March 22, 1998 is adequate to cover the remaining costs to be incurred in
connection with the lease obligation.

            The Company closed no restaurants in 1997, but identified one other
restaurant, which was previously impaired in connection with the Company's
restructuring plan, for closure in 1998 at the expiration of its lease term. The
restaurant closed following the end of the first quarter of 1998 with no
material impact on the Company's financial position.


                                       7
<PAGE>   8
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 weeks ended March 22, 1998 as compared to the twelve weeks ended March
23, 1997. 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, 1997 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, 1997.

            Certain statements set forth in this discussion and analysis of
financial condition and results of operations including anticipated store
openings, planned capital expenditures 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 herein. In particular, the Company's plans to open new restaurants
could be affected by the Company's ability to locate suitable restaurant sites,
construct new restaurants in a timely manner and obtain additional financing.

Liquidity and Capital Resources

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

            For the twelve weeks ended March 22, 1998, the Company invested
$1,985,000 in property and equipment, primarily for new and remodeled
restaurants, which was funded from existing cash balances, cash flow from
operations, and equipment lease financing. The Company opened one new restaurant
in Houston, Texas in the second quarter of 1998 and has a restaurant in Fort
Worth, Texas under construction. In addition, the Company has executed lease
commitments for an additional restaurant in Houston, Texas and a restaurant in
San Antonio, Texas. The Company remodeled three restaurants during the first
quarter of 1998 and has completed the remodeling of two additional restaurants
in the second quarter as of April 19, 1998. The Company currently plans to
remodel an additional seven restaurants in 1998. The Company is utilizing many
of the elements from its Zoopa restaurant decor in both its new and remodeled
restaurants.

            At March 22, 1998, the Company had a $600,000 acquisition payable
related to its purchase in May 1997 of the Zoopa trade name and three Zoopa
restaurants in Bellevue, Tacoma and Tukwila, Washington. The Company paid
$1,250,000 upon closing of the purchase in May 1997 and agreed to make an
additional payment one year after closing of between $550,000 and $950,000
depending on the achievement of restaurant sales levels. The Company will record
an additional liability when the amount, if any, is determinable.

            During the twelve weeks ended March 22, 1998, the Company had
available the full amount under its $5,000,000 bank line of credit agreement
which expires in May 1998. Borrowings under the line of credit bear interest at
the prime rate (8.5% at March 22, 1998) plus 1% and are secured by the Company's
personal property and by deeds of trust on certain Company-owned real estate.
Borrowings under the line of credit are limited to the lesser of $5,000,000 or
three times the Company's earnings before interest, taxes, depreciation and
amortization. The agreement also provides an option for the Company to convert
borrowings up to $3,500,000 to 


                                       8
<PAGE>   9
a four-year term loan any time prior to the maturity date of May 1998.
Borrowings under the term loan bear interest at the prime rate plus 1.75%. The
bank line of credit agreement requires the Company to maintain a minimum
tangible net worth, to not exceed a maximum debt to net tangible worth ratio
and, for the term loan, to maintain a minimum debt service coverage ratio. The
agreement also contains a maximum fixed asset acquisition limit. At March 22,
1998, the Company had no borrowings under the bank line of credit and was in
compliance with all covenants. This Company is in discussion to renew the line
of credit with the bank.

            During the twelve weeks ended March 22, 1998, the Company entered
into equipment leases providing $828,000 in financing under capital lease
agreements that expire in 2001.

            Operating activities during the twelve weeks ended March 22, 1998
provided $173,000 which is net of $72,000 in cash costs related to the Company's
1995 restructuring plan.

            As of March 22, 1998, the Company has incurred aggregate cash costs
of $2,793,000 in connection with restaurant closures and the related settlements
of lease obligation under a restructuring plan begun in December 1995. Under the
plan, the Company closed or sold eleven restaurants (three in 1995 and eight in
1996) and has settled the lease obligations with the landlords for all but one
of the restaurants. The Company closed no restaurants in 1997, but identified
one other restaurant, which was previously impaired in connection with the
Company's restructuring plan, for closure in 1998 at the expiration of its lease
term. The restaurant closed following the end of the first quarter of 1998 with
no material impact on the Company's financial position. At March 22, 1998, the
Company had a $649,000 balance in the restructuring reserve for the estimated
cash costs to settle the remaining lease obligation. The Company believes the
balance is adequate to cover the remaining costs to be incurred under the plan.

            Long-term debt at March 22, 1998 consisted of $625,000 of capital
lease obligations and a $118,000 note for site construction costs which is
included in other long-term liabilities on the balance sheet.

            The Company's outstanding Series B non-voting 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, any holders of Series A
preferred stock 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 the event of a failure by the
Company to achieve earnings targets (before interest, taxes, depreciation and
amortization) of at least $5,500,000 in 1998 (subject to adjustment under
certain circumstances by the Company's board of directors), any Series A
preferred stockholders could elect a majority of the Company's board of
Directors. Upon achievement of certain per-share market price test, the Company
may force a mandatory conversion of the Series A preferred stock to common
stock. No shares of Series C preferred stock are currently outstanding, but an
option to purchase such shares is outstanding. All shares of Series A, Series B
and Series C preferred stock are senior to the Company's common stock with
respect to dividends and with respect to distribution on liquidation.

                   The Company's continued growth depends to a significant
degree on its ability to open new restaurants and to operate such restaurants
profitably. The Company intends to continue its restaurant expansion, assuming
its financial performance continues to improve. The Company's ability to
implement an expansion strategy will depend upon a variety of factors, including
the continued success of efforts to restore profitability and the Company's
ability to obtain funds. See "Business Risks" included herein. The Company
believes its operating cash requirements and near-term capital requirements for
restaurant remodeling and expansion can be met through existing cash balances,
cash provided by operations, equipment lease financing and its amended line 


                                       9
<PAGE>   10
of credit and term loan agreement. The Company may continue to seek additional
debt or equity financing to provide greater flexibility toward improving its
operating performance and continuing expansion.


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. The Federal minimum wage
increased effective September 1, 1997, and the State of California minimum wage
increased effective March 1, 1998. In addition, the cost of food commodities
utilized by the Company are 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 can 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.


Year 2000 Software Requirements

            The Company has completed a review of all its restaurant and
corporate computer systems for compliance with the year 2000. The Company has
determined that certain of its existing computer systems use only two digits to
identify a year in the date field and, as a result, may improperly identify the
year 2000 in calculating and processing information. The Company recognizes this
system design could cause certain systems to potentially fail or create
erroneous results by or at the year 2000 but believes its current strategic
information plan is addressing the problem.

            The Company is currently in the process of migrating its critical
processing and information requirements to outsourced processing companies whose
software is represented to be year 2000 compliant. The Company expects to
complete this system migration, begun in 1997, during 1998 with no significant
incremental costs. In accordance with its strategic information plan, the
Company is already replacing certain restaurant systems, primarily its
restaurant point of sale system, used for capturing and transmitting data to the
outsourced systems, with year 2000 compliant systems. The Company expects to
have the critical restaurant systems in place by approximately the end of 1998
at an estimated cost of $500,000 which is to be capitalized in accordance with
normal policy and is being funded through operating cash flow.

            The Company has also contacted outside entities with which it
interacts electronically and has requested information regarding whether or not
their systems are or will be year 2000 compliant. The Company plans to monitor
the progress of outside entities that are in the process of developing year 2000
compliance, but it does not believe there is a material risk to the Company if
these entities do not achieve compliance.


Business Risks

            Certain characteristics and dynamics of the Company's business and
of financial markets in general create risks to the Company's long-term success
and to predictable financial results. These risks include:

            Operating Losses and Declines in Comparable Store Sales. The
Company's profitability began to decline in the second half of 1994. In the
fourth quarter of 1994, the Company reported its first operating loss, and
reported operating losses in both 1995 and 1996 and reported a modest profit in
1997. In 1998, the Company again reported an operating loss in its seasonally
low-volume first quarter.


                                       10
<PAGE>   11
            Beginning late in the third quarter of fiscal 1994, the Company
began reporting comparable store sales declines. Comparable store sales have
continued to decline in each quarter through the end of 1997. The Company
reported comparable store sales declines of 4.6%, 15.3%, 5.9% and 2.7% for
fiscal years 1994, 1995, 1996 and 1997, respectively, and a comparable store
sales decline of 10.3% in the first quarter of 1998. There can be no assurance
that comparable store sales will improve or that the Company will return to
long-term profitability.

            Expansion. The Company experienced substantial growth prior to
mid-1995, having opened 14 restaurants in 1993, 15 restaurants in 1994, and
seven in 1995. In 1995, the Company suspended its expansion plans after opening
seven restaurants, reviewed the operating performance of all of its restaurants,
and identified certain restaurants which did not meet its expectations for
operating performance. As a result, in December 1995 the Company announced a
restructuring plan to close as many as ten restaurants. The Company has closed
or sold eleven restaurants to date, including three at the end of 1995, and
eight in 1996. The Company closed no restaurants in 1997, but identified one
other restaurant for closure in 1998 at the expiration of its lease term. The
restaurant closed following the end of the first quarter of 1998 with no
material impact on the Company's financial position.

            The Company opened one Fresh Choice restaurant in 1996 and in 1997,
acquired the Zoopa trade name and three Zoopa restaurants and opened an
additional two new Zoopa restaurants. In 1998, the Company opened one new Zoopa
restaurant following the close of the first quarter. The Company believes its
growth depends to a significant degree on its ability to open new restaurants
and to operate such restaurants profitably. While the Company intends to
continue its expansion, assuming its financial performance continues to improve,
there can be no assurance that the Company will be able to continue expansion.
The Company's ability to implement successfully its expansion strategy will
depend on a variety of factors, including the selection and availability of
affordable sites, the selection and availability of capital to finance
restaurant expansion and equipment costs, the ability to hire and train
qualified management and personnel, the ability to control food and other
operating costs, and other factors, many of which are beyond the Company's
control.

            On a long-term basis, the Company intends to expand its operations
in markets outside of California, assuming its financial performance continues
to improve. The Company's expansion plans may include entering new geographic
regions in which the Company has no previous operating experience. There can be
no assurance that the concept will be successful in regions outside of
California, where tastes and restaurant preferences may be different. As of May
6, 1998, the Company had opened or purchased eight restaurants in Texas, six
restaurants in the state of Washington and three restaurants in the Washington,
D.C. metropolitan area. Of the eleven restaurants closed or sold, two were in
Texas, one was in the state of Washington, five were in California, and three
were in the Washington, D.C. metropolitan area (where the Company no longer
operates).

            Geographic Concentration. As of May 6, 1998, 42 of the Company's 53
restaurants are located in California, primarily in the San Francisco Bay Area.
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, and such
pressure may continue to depress annual comparable store sales. 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 in the region or negative publicity relating to an individual
Company restaurant could have a more pronounced adverse affect on net sales than
if the Company's restaurants were more broadly dispersed.


                                       11
<PAGE>   12
            Volatility of Stock Price. The market price of the Company's Common
Stock has fluctuated substantially since the initial public offering of the
Common Stock in December 1992. Changes in general conditions in the economy, the
financial markets or the restaurant industry, natural disasters or other
developments affecting the Company or its competitors could cause the market
price of the Company's Common Stock to fluctuate substantially. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. This volatility has had significant effect on the market prices of
securities issued by many companies, including the Company, for reasons
sometimes unrelated to the operating performance of these companies. Any
shortfall in the Company's net sales or earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's Common Stock in any given period.
Additionally, such shortfalls may not become apparent until late in the fiscal
quarter, which could result in an even more immediate and significant adverse
effect on the trading price of the Company's Common Stock.

            Seasonality and Quarterly Fluctuations. The Company's restaurants
have typically experienced seasonal fluctuations, as a disproportionate amount
of net sales and net income are generally realized in the second and third
fiscal quarters. 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 and restaurant closings. 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 and net income can be expected to decline in the first
quarter of each fiscal year in comparison to the fourth quarter of the prior
fiscal year. Comparable store sales, which have been negative for four
consecutive years, may continue to be negative.

            Dependence on Key Personnel. 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 employees and to attract qualified
personnel, particularly general managers, for its restaurants. The Company faces
significant competition in the recruitment of qualified employees.

            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
employees benefit costs, and the availability of experienced management and
hourly employees 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
self-service buffet, soup, and salad restaurants; and, increasingly, with
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.


                                       12
<PAGE>   13
            Ability to Obtain Additional Financing. The Company intends to
continue restaurant expansion, assuming its financial performance continues to
improve. The Company's ability to implement an expansion strategy will depend
upon a variety of factors, including the success of its restructuring plan in
restoring profitability and its ability to obtain funds. The Company believes
its near-term capital requirements can be met through its existing cash
balances, cash provided by operations, its available bank line of credit and
equipment leases. However, the Company may seek additional financing to provide
greater flexibility toward improving its operating performance. There can be no
assurance that the Company will be able to obtain additional financing when
needed on acceptable terms or at all.


Results of Operations

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


<TABLE>
<CAPTION>
                                                                      Twelve Weeks Ended
                                                   --------------------------------------------------------
(In thousands)                                           March 22, 1998                  March 23, 1997
                                                   ------------------------        ------------------------
<S>                                                <C>              <C>            <C>              <C>    

NET SALES                                          $ 16,192         100.0 %        $ 16,106           100.0%

COSTS AND EXPENSES:
         Cost of sales                                4,240          26.2 %           4,389            27.3%
         Restaurant operating expenses:
                Labor                                 5,390          33.3 %           5,057            31.4%
                Occupancy and other                   5,053          31.2 %           5,249            32.6%
         Depreciation and amortization                  818           5.1 %             701             4.4%
         General and administrative expenses          1,309           8.0 %           1,406             8.6%
                                                   ------------------------        ------------------------

                Total costs and expenses             16,810         103.8 %          16,802           104.3 
                                                   ------------------------        ------------------------

OPERATING LOSS                                         (618)           (3.8)%          (696)           (4.3)%

         Interest income                                  8             - %              52             0.3%
         Interest expense                               (37)           (0.2)%            (5)              -%
                                                   ------------------------        ------------------------

         Interest income (expense), net                 (29)           (0.2)%            47             0.3%
                                                   ------------------------        ------------------------

LOSS BEFORE INCOME TAXES                               (647)           (4.0)%          (649)           (4.0)%

         Benefit from income taxes                       --             - %              --               -%
                                                   ------------------------        ------------------------

NET LOSS                                           $   (647)           (4.0)%      $   (649)           (4.0)%
                                                   ========================        ========================

Number of restaurants:
         Open at beginning of period                     53                              48
                                                   ========                        ========
         Open at end of period                           53                              48
                                                   ========                        ========
</TABLE>


                                       13
<PAGE>   14
The following table presents the components of average operating income on a per
restaurant basis, based on the average number of restaurants open during the
period:


<TABLE>
<CAPTION>
                                                                            Twelve Weeks Ended
                                                      -------------------------------------------------------------
(In thousands)                                             March 22, 1998                      March 23, 1997
                                                      --------------------------         --------------------------
<S>                                                   <C>                <C>             <C>                <C>    
NET SALES                                             $      306           100.0%       $      336            100.0%

COSTS AND EXPENSES:
         Cost of sales                                        80            26.2%               91             27.3%
         Restaurant operating expenses:
                Labor                                        102            33.3%              105             31.4%
                Occupancy and other                           95            31.2%              110             32.6%
         Depreciation and amortization                        15             5.1%               15              4.4%
         General and administrative expenses                  25             8.0%               29              8.6%
                                                      -----------      ----------         ----------      ---------

                Total costs and expenses                     317           103.8%              350            104.3%
                                                      --------------------------         --------------------------

OPERATING LOSS                                        $      (11)           (3.8)%       $     (14)            (4.3)%
                                                      ==========================         ==========================

Average restaurants open                                   53.00                             48.00
                                                      ===========                        ==========   
</TABLE>


Results of Operations:  Twelve Weeks Ended March 22, 1998
Compared to Twelve Weeks Ended March 23, 1997

            Net Sales. Net sales for the first quarter ended March 22, 1998 were
$16,192,000, an increase of $86,000, or 0.5%, from sales of $16,106,000 for the
first quarter ended March 23, 1997. The primary components of the net increase
in sales were:

<TABLE>
<S>                                                         <C>        
Incremental sales from new or acquired restaurants          $ 1,748,000
Decline in comparable store sales                            (1,662,000)
                                                            -----------
                                                            $    86,000
                                                            ===========
</TABLE>

            The increase in sales for the first quarter of 1998 resulted from
the addition of five new restaurants in 1997 offset by a comparable-store sales
decline versus 1997 of 10.3% for the quarter. Comparable store customer counts,
which include only restaurants open and operated by the Company at least 18
months, declined 12.4%. The comparable store average check was $6.90 in the
first quarter, an increase of 2.4% versus the first quarter of 1997. 

            Net sales per restaurant averaged $306,000 in the first quarter of
1998, a decrease of 9.0% from net sales per restaurant of $336,000 in the first
quarter of 1997. First quarter sales in 1998 were adversely impacted by the El
Nino storms in the Company's core Northern California markets where 38 of the
Company's 52 restaurants are located, and the lack of television and radio
advertising which the Company ran for four weeks and six weeks, respectively,
during the first quarter last year.

            Costs and Expenses. Cost of sales (food and beverage costs) was
26.2% of sales in the first quarter of 1998 compared to 27.3% in the first
quarter of 1997, a decrease of 1.1% of sales. The Company continued to benefit
from its food program, developed and implemented in 1997, which manages food
costs through an efficient product rotation while maintaining a quality menu
offering to customers.


                                       14
<PAGE>   15
            Restaurant Operating Expenses. Restaurant operating expenses (labor,
occupancy and other) were 64.5% of net sales in the first quarter of 1998
compared to 64.0% of sales in the first quarter of 1997, an increase of 0.5% of
sales. 

            Labor costs were 1.9% of sales higher than last year, primarily due
to the fixed portion of labor cost which became a higher percentages of sales as
comparable store sales declined. 

            Occupancy and other costs were 1.4% of sales lower than the prior
year, primarily the result of lower advertising expenditures partially offset by
the impact of the comparable stores sales decline on these mostly fixed costs.
The Company invested 2.6% of sales in advertising this quarter versus 6.8% of
sales in the prior year quarter, a decrease of 4.2% of sales.

            Depreciation and Amortization. Depreciation and amortization
expenses increased $117,000 in first quarter of 1998 compared to the first
quarter of 1997 due to the five additional restaurants operating this year
compared to last year. The increase in depreciation and amortization as a
percentage of sales to 5.1% of sales in the first quarter of 1998 from 4.4% of
sales in the first quarter of 1997 is primarily the result of lower average unit
sales.

            General and Administrative Expenses. General and administrative
expenses decreased $97,000 for the first quarter of 1998 compared to the first
quarter of 1997 due to continued cost management in staffing levels and
expenses.

            Interest Income. The Company earned interest income primarily from
the investment in money market funds of the excess proceeds from its September
1996 sale of series B preferred stock to Crescent Real Estate Equities Limited
Partnership. Interest income decreased to $8,000 in the first quarter of 1998
compared to $52,000 in the first quarter of 1997 as the proceeds were used to
construct or purchase new restaurants and remodel existing restaurants.

            Interest Expense. Interest expense consists primarily of fees and
interest related to the Company's short-term line of credit facility and capital
lease obligations for equipment leases. Interest expense increased to $37,000 in
the first quarter of 1998 compared to $5,000 in the first quarter of 1997 due to
equipment leases at two of the Company's new restaurants and to fees related to
securing the Company's line of credit and term loan facility.

            Income Taxes. The Company recorded no tax benefit from its operating
losses for the first quarters of 1998 and 1997. The Company has provided
valuation allowances against its net deferred tax assets which consist primarily
of the tax benefit related to operating loss carryforwards and non-deductible
asset write-downs and restructuring accruals. The Company will continue to
provide a valuation allowance for its deferred tax assets until it becomes more
likely than not, in management's assessment, that the Company's deferred tax
assets will be realized.


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


                                       15
<PAGE>   16
                           PART II. OTHER INFORMATION


<TABLE>
<S>                                                                <C>
ITEM 1 - LEGAL PROCEEDINGS                                         Not Applicable.

ITEM 2 - CHANGES IN SECURITIES                                     Not Applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                           Not Applicable.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       Not Applicable.

ITEM 5 - OTHER INFORMATION                                         Not Applicable.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>

(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. No reports on Form 8-K were filed during the quarter
ended March 22, 1998.


                                       16
<PAGE>   17
                                   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
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)



                                    /S/ David E. Pertl
                                    --------------------------------------------
                                    David E. Pertl
                                    Vice President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


Dated:  May 6, 1998


                                       17
<PAGE>   18
                           INDEX TO FORM 10-Q EXHIBITS


EXHIBIT
NO.                                DESCRIPTION
--------------------------------------------------------------------------------

3.1     (1)     Restated Certificate of Incorporation of Fresh Choice, Inc.

3.2     (8)     Amended By-Laws of Fresh Choice, Inc. dated April 11, 1996

3.3     (10)    Certificate of Amendment of Restated Certificate of
                Incorporation of Fresh Choice, Inc.

3.4     (10)    Certificate of Designation of Series A Voting Participating
                Convertible Preferred Stock of Fresh Choice, Inc.

3.5     (10)    Certificate of Designation of Series B Non-Voting Participating
                Convertible Preferred Stock of Fresh Choice, Inc.

3.6     (10)    Certificate of Designation of Series C Non-Voting Participating
                Convertible Preferred Stock of Fresh Choice, Inc.

4.1     (10)    Registration Rights Agreement dated September 13, 1996 between
                Fresh Choice, Inc. and Crescent Real Estate Equities Limited
                Partnership

10.1    (1)     Form of Indemnity Agreement for directors and officers

10.2    (2)(3)  Second Amended and Restated 1988 Stock Option Plan

10.3    (2)(3)  1992 Employee Stock Purchase Plan

10.4    (1)     Series A Preferred Stock Purchase Agreement dated August 10,
                1988

10.5    (1)     Series B Preferred Stock Purchase Agreement dated July 21, 1989

10.6    (1)     Series C Preferred Stock Purchase Agreement dated January 15,
                1990

10.7    (1)     Master Lease and Warrant Agreement with Equitec Leasing Company
                and Warrant dated January 18, 1990

10.8    (8)     Preferred Stock Purchase Agreement with Crescent Real Estate
                Equities Limited Partnership dated April 26, 1996

10.9    (1)     Series D Preferred Stock Purchase Agreement dated April 17, 1991

10.10   (5)     Amendment No. 1 dated September 3, 1993 to the Business Loan
                Agreement dated September 3, 1993.

10.11   (5)     Amendment No. 2 dated November 15, 1993 to the Business Loan
                Agreement dated September 3, 1993.

10.12   (1)     Amendment dated December 1, 1992 to Preferred Stock Purchase
                Agreements

10.13   (4)     Business Loan Agreement dated September 3, 1993 with Bank of
                America National Trust and Savings Association

10.14   (5)     Amendment No. 4 dated March 31, 1995 to the Business Loan
                Agreement dated September 3, 1993


                                       18
<PAGE>   19
INDEX TO FORM 10-Q EXHIBITS continued


EXHIBIT
NO.                                DESCRIPTION
--------------------------------------------------------------------------------

10.15   (5)     Amendment No. 3 dated April 27, 1994 to the Business Loan
                Agreement dated September 3, 1993

10.16   (6)     Loan and Security Agreement dated December 20, 1995 with Silicon
                Valley Bank

10.17   (6)     Third Party Security agreement dated December 20, 1995 between
                Silicon Valley Bank and Moffett Design Corporation


10.18   (6)     Warrant to Purchase up to 75,000 Shares of the Company's Common
                Stock issued to Silicon Valley Bank on December 20, 1995

10.19   (6)     Common Stock Purchase Warrant to Purchase 100,000 Shares of the
                Company's Common Stock issued to Bain & Company, dated December
                15, 1995

10.20   (6)(3)  Employment Offer Letter to Robert Ferngren dated November 9,
                1995

10.21   (9)(3)  Amendment dated July 29, 1996 to Employment Offer Letter to
                Robert Ferngren

10.22   (10)(3) Severance Agreement with Charles A. Lynch dated July 18, 1996

10.23   (10)(3) Severance Agreement with David Anderson dated July 18, 1996

10.24   (10)(3) Severance Agreement with Tim G. O'Shea dated July 18, 1996

10.25   (10)(3) Severance Agreement with Joan M. Miller dated July 18, 1996

10.26   (11)(3) Employment Offer Letter to David E. Pertl dated January 24, 1997

10.27   (11)(3) Employment Offer Letter to Everett F. Jefferson dated January
                30, 1997

10.28   (11)(3) Amendment to Employment Offer Letter to Everett F. Jefferson
                dated February 10, 1997

10.29   (11)    Loan Modification Agreement dated November 27, 1996 with Silicon
                Valley Bank

10.30   (11)(3) Severance Agreement with Tina Freedman dated March 13, 1997

10.31   (12)    Agreement of Sale and Purchase dated April 2, 1997 with RUI One
                Corp.

10.32   (12)    Amendment to Loan and Security Agreement dated July 9, 1997 with
                Silicon Valley Bank

27      (7)     Financial Data Schedule


                                       19
<PAGE>   20
----------

(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.

(4)     Incorporated by reference from the Company's Annual Report on Form 10-K
        for the period ended December 26, 1993.

(5)     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 19, 1995.

(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.

(7)     Included in EDGAR filing only.

(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.

(9)     Incorporated by reference from the Exhibits with corresponding numbers
        filed with the Company's Quarterly Report on Form 10-Q for the quarter
        ended June 16, 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.

(12)    Incorporated by reference from the Exhibits with corresponding numbers
        filed with the Company's Quarterly Report on Form 10-Q for the quarter
        ended June 15, 1997.


                                       20