<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 June 15, 1997

                                       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, ifchanged 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 PROCEEDINGSDURING 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 July
13, 1997 was 5,668,625.






<PAGE>   2

                               FRESH CHOICE, INC.

                                      INDEX

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



     Item 1 - Financial Statements

         Condensed Consolidated Balance Sheets at June 15, 1997
         and December 29, 1996............................................................................3

         Condensed Consolidated Statements of Operations for the Twelve and
         Twenty-Four Weeks ended June 15, 1997 and June 16, 1996 .........................................4

         Condensed Consolidated Statements of Cash Flow for the Twenty-Four Weeks
         ended June 15, 1997 and June 16, 1996............................................................5

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

     Item 2 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations.......................................................................10


PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings..........................................................................21
     Item 2 - Changes in Securities......................................................................21
     Item 3 - Defaults Upon Senior Securities............................................................21
     Item 4 - Submission of Matters to a Vote of Security Holders........................................21
     Item 5 - Other Information..........................................................................22
     Item 6 - Exhibits and Reports on Form 8-K...........................................................22


SIGNATURES...............................................................................................23


INDEX TO FORM 10-Q
EXHIBITS.................................................................................................24
</TABLE>











                                       2


<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
                                                                            June 15,   December 29,
                                                                             1997         1996
                                                                           -------      -------
                                                                         (Unaudited)  
<S>                                                                        <C>          <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                $ 5,717      $ 5,647
  Receivables                                                                  141          218
  Inventories                                                                  459          432
  Pre-Opening costs                                                            --            23
  Prepaid expenses and other current assets                                    396          513
                                                                           -------      -------
  Total current assets                                                       6,713        6,833

PROPERTY AND EQUIPMENT, net                                                 30,622       29,509

LEASE ACQUISITION COSTS, net                                                   521          556

DEPOSITS AND OTHER ASSETS                                                      486          268
                                                                           -------      -------  
TOTAL                                                                      $38,342      $37,166
                                                                           =======      =======

LIABILITIES AND STOCKHOLDERS EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                         $ 3,357      $ 2,077
  Accrued salaries and wages                                                 1,427        1,445
  Sales tax payable                                                            841          462
  Other accrued expenses                                                     3,303        2,790
  Restructuring reserve                                                      2,373        2,696
  Current portion of capital lease obligations                                  31           89
                                                                           -------      -------
  Total current liabilities                                                 11,332        9,559

OTHER LONG TERM LIABILITIES                                                  1,465        1,691
                                                                           -------      -------
Total Liabilities                                                           12,797       11,250
                                                                           -------      -------

STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value; 3.5 million shares
  authorized; shares outstanding: ;1997 and 1996 -- 1,187,906                5,175        5,175
Common stock, $.001 par value; 15 million shares authorized;
  shares outstanding: ;1997 -- 5,668,625; 1996 -- 5,660,826                 42,115       42,070
Accumulated deficit                                                        (21,745)     (21,329)
                                                                           -------      -------
Total stockholders equity                                                   25,545       25,916
                                                                           -------      -------
TOTAL                                                                      $38,342      $37,166
                                                                           =======      =======
</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 amounts)
(Unaudited)

<TABLE>
<CAPTION>
                                             Twelve Weeks Ended    Twenty-Four Weeks Ended
                                             -------------------   -----------------------
                                             June 15,   June 16,     June 15,    June 16, 
                                               1997       1996         1997        1996
                                             --------   --------     --------    --------
<S>                                           <C>        <C>          <C>        <C>
NET SALES                                     $17,379    $18,793      $33,485    $36,854

COST AND EXPENSES:
  Cost of sales                                 4,716      5,050        9,105     10,103
  Restaurant operating expenses:
    Labor                                       5,319      5,931       10,376     11,837
    Occupancy and other                         5,003      5,247       10,252     10,531
  Depreciation and amortization                   697        772        1,398      1,589
  General and administrative expense            1,444      1,635        2,850      3,431 
                                              -------    -------      -------    -------
  Total costs and expenses                     17,179     18,635       33,981     37,491
                                              -------    -------      -------    -------

OPERATING INCOME (LOSS)                           200        158         (496)      (637)
                                              -------    -------      -------    ------- 
Interest income                                    37          1           89          1
Interest expense                                   (4)       (64)          (9)      (135)
                                              -------    -------      -------    -------  
Interest income (expense), net                     33        (63)          80       (134)
                                              -------    -------      -------    -------

INCOME (LOSS) BEFORE INCOME TAXES                 233         95         (416)      (771)

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

NET INCOME (LOSS)                             $   233    $    95      $  (416)   $  (771)
                                              =======    =======      =======    =======  

Net income (loss) per common share            $  0.03    $  0.02      $ (0.07)   $ (0.14) 
                                              =======    =======      =======    ======= 

Shares used in computing per share amounts      6,854      5,686        5,662      5,605
                                              =======    =======      =======    =======  
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements






                                       4








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

<TABLE>
<CAPTION>
                                                             Twenty-Four Weeks
                                                            --------------------
                                                            June 15,    June 16,
                                                              1997        1996
                                                            --------    --------
<S>                                                         <C>         <C>
OPERATING ACTIVITIES:
Net loss                                                    $  (416)    $  (771)
Adjustments to reconcile net loss to
  net cash used in operations:
    Depreciation and amortization                             1,502       1,700
    Issuance of common stock for consulting services              -         325
    Loss on disposal of property                                 33          20
    Deferred rent                                              (217)       (115)
    Changes in operating assets and liabilities:
      Receivables                                                77         (26)
      Inventories                                               (27)         18
      Prepaid expenses and other current assets                 117         (52)
      Preopening costs                                            -         134
      Income taxes refundable                                     -       1,557
      Accounts payable                                        1,280      (1,115)
      Accrued salaries and wages                                (18)        447
      Other accrued expenses                                    292        (173)
      Restructuring reserve                                    (323)     (1,140)
                                                            -------     -------
Net cash provided by operating activities                     2,300         809
                                                            -------     -------

INVESTING ACTIVITIES:
Capital expenditures                                         (1,998)     (1,081)
Deposits and other assets                                      (218)       (248)
                                                            -------     -------
Net cash used in investing activities                        (2,216)     (1,329)
                                                            -------     -------

FINANCING ACTIVITIES:
Common stock sales                                               45          75
Notes payable and line of credit borrowings, net                 (1)          -
Capital lease obligations - repayments                          (58)       (236)
                                                            -------     -------
Net cash used in financing activities                           (14)       (161)
                                                            -------     -------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 70        (681)

CASH AND CASH EQUIVALENTS:
Beginning of period                                           5,647       1,294
                                                            -------     -------
End of period                                               $ 5,717     $   613
                                                            =======     =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest                    $    10     $    37
                                                            =======     =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition payable related to purchase of restaurants      $   600     $     -
                                                            =======     =======
</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
and Twenty-Four Weeks Ended June 15, 1997 and June 16, 1996


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 to 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 29, 1996.


2.      EARNINGS PER SHARE

                Earnings per common and equivalent share is based on the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common share equivalents, which are common stock
options and warrants assumed converted using the treasury stock method and
preferred stock using the if-converted method, have been excluded from the
earnings per share computation for the twenty-four weeks ended June 15, 1997 and
June 16, 1996 as they would be anti-dilutive.


3.      INCOME TAXES

                The Company recorded no tax benefit from its operating loss
during the twenty-four weeks ended June 15, 1997 and June 16, 1996. 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.


4.      BANK LINE OF CREDIT

                On July 9, 1997, the Company amended its bank line of credit
agreement, increasing the available amount to $5,000,000 and extending the term
until May 27, 1998. Borrowings under the line of credit bear interest at the
prime rate (8.5% at June 15, 1997) plus 1% and are secured by the Company's
personal property and by executed Deeds of Trust on certain Company-owned real
estate. Borrowings under the line of credit are limited to $3,500,000 until the
bank records Deeds of Trust and receives appraisals indicating minimum values on
certain Company-owned real estate (which the Company anticipates receiving in
the third quarter) and are further limited to a multiple of the Company's
earnings before interest, taxes, depreciation and amortization ($4,404,000 at
June 15, 1997). The agreement also provides an option for the Company to convert
borrowings, up to $3,500,000, to a 48-month term loan at any time prior to the
maturity date of May 27, 1998. Borrowings under the term loan bear interest at
the prime rate plus 1.75%.





                                       6


<PAGE>   7


                The agreement requires the Company to achieve a minimum earnings
before interest, taxes, depreciation and amortization for the 1997 fiscal year,
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. The Company was in compliance with these covenants at June 15, 1997. The
Company had no borrowing under line of credit arrangements at June 15, 1997.


4.      RESTRUCTURING RESERVE

                The following table sets forth the Company's restructuring
reserves and their respective balances at December 31, 1995, December 29, 1996
and June 15, 1997.

<TABLE>
<CAPTION>
                                           Balance        Provided                               Balance      Utilized    Balance
                                         December 31,    (Reserved)  Utilized   Reclassified   December 29,    to date    June 15,
(In thousands)                               1995         in 1996    in 1996      in 1996          1996        in 1997      1997
                                         ------------    ---------   --------   ------------   ------------   --------    --------
                                               <S>         <C>        <C>              <C>           <C>         <C>        <C>
1995 Restructuring Reserve

Restaurant closures:

  Non-cash write-down of
    restaurant assets to estimated
    fair value and other related
    costs                                      $  308      $  (250)   $     -          $   -         $   58      $ (11)     $   47

  Estimated cash costs associated
    with restaurant closures and
    settlement of lease obligations             4,450       (1,442)    (1,243)             -          1,765       (230)      1,535

Impaired restaurants:

  Non-cash write-down of assets
    to estimated fair value at
    other restaurants and other
    related costs                                 326         (326)         -              -              -                      -

Other costs, primarily consulting
  and professional fees related to
  the restructuring plan:

    Cash costs                                     26          (51)      (109)           134              -                      -

    Non-cash costs                                156            -        (22)          (134)             -                      -
                                               ------      -------    -------          -----         ------      -----      ------
1995 restructuring reserve                      5,266       (2,069)    (1,374)             -          1,823       (241)      1,582
                                               ------      -------    -------          -----         ------      -----      ------

1996 Restructuring Reserve

Restaurant closures:

  Non-cash write-down of
    restaurant assets to estimated
    fair value and other related
    costs                                           -          650       (622)             -             28                     28

  Estimated cash costs associated
    with restaurant closures and
    settlement of lease obligations                 -          968       (123)             -            845        (82)        763
                                               ------      -------    -------          -----         ------      -----      ------
1996 restructuring reserve                          -        1,618       (745)             -            873        (82)        791
                                               ------      -------    -------          -----         ------      -----      ------
Total restructuring reserve                    $5,266      $  (451)   $(2,119)         $   -         $2,696      $(323)     $2,373
                                               ======      =======    =======          =====         ======      =====      ======
</TABLE>



                                       7



<PAGE>   8


                In December 1995, the Company finalized and announced a
restructuring plan which called for closing as many as ten of the Company's
restaurants, of which seven restaurants were included in a reserve for closures,
and a partial write-down of assets to estimated fair value for thirteen other
restaurants. The Company recorded a $23,932,000 restructuring charge in 1995 in
connection with the plan.

                By the end of 1996, the Company had closed six of the seven
restaurants identified for closure and had decided not to close the seventh
restaurant based on its improved operating performance. The Company's decision
not to close one restaurant resulted in a $451,000 reversal of previously
recorded restructuring expense. The Company reversed an additional $1,618,000 of
previously recorded restructuring expense due to lower than estimated cash
payments to settle lease obligations at five closed restaurants. At June 15,
1997, the 1995 restructuring reserve balance consisted of the estimated cash
costs to settle the lease obligation at one restaurant.

                During 1996, the Company identified and closed or sold five
additional restaurants for a total of eleven closed restaurants. The Company
recorded an additional $1,618,000 restructuring charge for two of the
restaurants. A third closed restaurant, which was included in the 1995 asset
impairment reserve, did not require a cash settlement with the landlord for
lease obligations, and the Company charged its remaining net assets to
operations at the time the restaurant closed in 1996. The Company sold two
restaurants in the Washington D.C. market at the end of 1996 for $750,000 and
recorded a gain of $446,000. At June 15, 1997, the 1996 restructuring reserve
balance consisted of the estimated cash costs to settle the lease obligation at
one restaurant.

                The Company has identified no other restaurants for closure as
of July 13, 1997, and believes the balances at June 15, 1997 are adequate to
cover the remaining estimated costs to be incurred under the plans.


5.      PURCHASE OF ZOOPA RESTAURANTS

                On May 1, 1997, the Company completed the purchase of three
Zoopa restaurants in Bellevue, Tacoma and Tukwila, Washington. The three
restaurants, which will continue to operate under the Zoopa name, offer a
self-service format similar to Fresh Choice restaurants including salads, hot
pasta dishes, soups, bakery goods and desserts. The Company paid $1,250,000 upon
closing of the purchase 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 has recorded a $600,000 acquisition payable
in other accrued liabilities and will record an additional liability when the
amount, if any, is determinable.


6.       RECENTLY ISSUED ACCOUNTING STANDARD

                In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). The Company is required to adopt SFAS 128 in the fourth quarter of
fiscal 1997 and will restate at that time earnings per share (EPS) data for
prior periods to conform with SFAS 128.
Earlier application is not permitted.

                SFAS 128 replaces current EPS reporting requirements and
requires a dual presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income by the weighted average of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.










                                       8

<PAGE>   9


                Pro forma amounts for basic and diluted EPS assuming SFAS 128
had been in effect for the twelve and twenty-four weeks ended June 15, 1997 and
June 16, 1996 are as follows. The Company has excluded potential common shares,
which are common stock options and warrants assumed converted using the treasury
stock method and preferred stock assumed converted using the if-converted
method, from the computation of diluted net loss per common share for the
twenty-four weeks ended June 15, 1997 and June 16, 1996 as they would be
anti-dilutive.

<TABLE>
<CAPTION>
                Twelve Weeks Ended      Twenty-Four Weeks Ended
                -------------------     -----------------------
Pro Forma       June 15,   June 16,      June 15,      June 16,
  EPS             1997      1996           1997          1996
----------      -------------------     -----------------------
<S>             <C>         <C>          <C>           <C>
 Basic           $0.04      $0.02        $(0.07)       $(0.14)

Diluted          $0.03      $0.02        $(0.07)       $(0.14)

</TABLE>





                                       9
<PAGE>   10



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 15, 1997 as compared to the twelve and
twenty-four weeks ended June 16, 1996. 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 29, 1996 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 29, 1996.

                This Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934, including statements about the ability of the Company to improve
restaurant sales and its overall profitability; the ability of the Company to
obtain funds to pursue its future plans; the ability of the Company to implement
its growth plans; competitive pressures in the food-service marketplace; the
changing tastes of consumers; the effect of general economic conditions;
fluctuations in quarterly results; planned new restaurant openings and future
expansion; availability of suitable lease sites; customer receptiveness to new
products, the new restaurant interior design and the new Zoopa format;
improvements in unit economics; and the ability of the Company to secure and
retain the services of experienced personnel. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth herein.

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 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.

                On May 1, 1997, the Company purchased the three Zoopa
restaurants for $1,250,000 and an additional payment one year later of between
$550,000 and $950,000 depending on the achievement of restaurant sales levels.
The Company has recorded a $600,000 acquisition payable in other accrued
liabilities and will record an additional liability when the amount, if any, is
determinable. The three restaurants, which will continue to operate under the
Zoopa name, offer a self-service format similar to Fresh Choice restaurants
including salads, hot pasta dishes, soups, bakery goods and desserts.

                For the twenty-four weeks ended June 15, 1997, the Company
invested $2,598,000 in property and equipment including the purchase of the
three Zoopa restaurants in Bellevue, Tacoma and Tukwila, Washington, spending on
remodels which are typically required every five to seven years and spending on
replacement fixtures and equipment. These investments were funded from both
existing cash balances and the short term liability related to the purchase of
the Zoopa restaurants.

                As of June 15, 1997, the Company had incurred aggregate cash
costs of $2,298,000 in connection with restaurant closures and the related
settlements of lease obligations in connection with a restructuring program
begun in December 1995. Cash costs incurred during the twenty-four weeks ended
June 15, 1997 totaled $312,000. The Company has identified no other restaurants
for closure, and believes the restructuring reserve balances totaling $2,373,000
at June 15, 1997 are adequate to cover the remaining estimated costs to be
incurred under the program.











                                       10


<PAGE>   11


                During the twenty-fours weeks ended June 16, 1997, operating
activities provided $2,300,000, including a $1,280,000 increase in accounts
payable related to the timing of payments to a major vendor.

                  On July 9, 1997, the Company amended its bank line of credit
agreement, increasing the available amount to $5,000,000 and extending the term
until May 27, 1998. Borrowings under the line of credit bear interest at the
prime rate (8.5% at June 15, 1997) plus 1% and are secured by the Company's
personal property and by executed Deeds of Trust on certain Company-owned real
estate. Borrowings under the line of credit are limited to $3,500,000 until the
bank records Deeds of Trust and receives appraisals indicating minimum values on
certain Company-owned real estate (which the Company anticipates receiving in
the third quarter) and are further limited to a multiple of the Company's
earnings before interest, taxes, depreciation and amortization ($4,404,000 at
June 15, 1997). The agreement also provides an option for the Company to convert
borrowings, up to $3,500,000, to a 48-month term loan at any time prior to the
maturity date on May 27, 1998. Borrowings under the term loan bear interest at
the prime rate plus 1.75%.

                The agreement requires the Company to achieve a minimum earnings
before interest, taxes, depreciation and amortization, 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. The Company was
in compliance with these covenants at June 15, 1997. The Company had no
borrowing under line of credit arrangements at June 15, 1997.

                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 $3,500,000 in 1997 and $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. The Series A, Series B and Series
C preferred stock are convertible, at the holders' option, into Common Stock on
a one-for-one basis. 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. In addition to the three Zoopa restaurants purchased in the greater
Seattle, Washington market during the 12 weeks ended June 15, 1997, the Company
has signed leases for two new restaurants in Houston and San Antonio, Texas with
openings scheduled for the fourth quarter of 1977. The Company intends to
continue its restaurant expansion, assuming its financial performance continues
to improve and additional financing can be obtained. 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 and its recently amended line of credit and term
loan 









                                       11

<PAGE>   12

agreement. The Company may continue to seek additional debt or equity
financing to provide greater flexibility toward improving its operating
performance and continuing expansion.

                  Long-term debt at June 15, 1997 consists of a $118,000 note
for site construction costs which is included in other long-term liabilities on
the balance sheet.


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. Currently, there are
further scheduled increases in the federal and State of California minimum wage.
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.


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:

               Recent Operating Losses and Declines in Comparable Real 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 additional operating losses in each subsequent quarter ending with
the first quarter of 1996. Although the Company reported operating profits in
the second and third quarters of 1996, it returned to an operating loss for the
fourth quarter and reported a loss for the full year 1996. In 1997, the Company
reported an operating loss in its first quarter and a profit in the second
quarter but continued to report an operating loss for the first half of the
year.

               Beginning late in the third quarter of fiscal 1994, the Company
began reporting significant comparable real store sales declines. Comparable
real store sales continued to decline in each quarter of 1995 compared to the
respective quarters in the prior year, although the magnitude of these declines
lessened in the third and fourth quarters of 1995. The Company reported a 0.3%
decline in comparable real store sales in the first quarter of 1996. Beginning
in the second quarter of 1996, the magnitude of the declines in comparable real
store sales increased until the current quarter. Following the introduction of a
one-price system and termination of discount programs, the Company reported an
8.6%, 17.0% and 14.5% decline in comparable real store sales in the second,
third and fourth quarters of 1996, respectively, and a 10.4% and 4.5% decline in
the first and second quarters, respectively, of 1997. There can be no assurance
that comparable real 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 11 restaurants to date, including three at the end of 1995, and eight in
1996. The Company has identified no







                                       12

<PAGE>   13

further restaurants for closure, although it continues to review the performance
of each of its restaurants. The Company opened one restaurant in 1996, and in
the second quarter of 1997, the Company purchased three Zoopa restaurants in
Bellevue, Tacoma and Tukwila, Washington which will continue to operate under
the Zoopa name and store model. These three restaurants offer a self-service
format similar to Fresh Choice restaurants with similar menu offerings. The
Company believes its growth depends to a significant degree on its ability to
open new restaurants and to operate such restaurants profitably. During the
second quarter of 1997, the Company signed leases for two new restaurants in
Houston and San Antonio, Texas with openings scheduled for the fourth quarter.
The Company intends to utilize the Zoopa name and restaurant format in these new
restaurants. While the Company intends to continue its expansion, assuming its
financial performance continues to improve and additional funding can be
obtained, there can be no assurance as to whether the Company will continue its
expansion. The Company's ability to implement successfully its expansion
strategy depends 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 success of the Zoopa store
model, 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 additional markets outside of California, assuming its financial
performance improves. The Company's expansion plans include entering new
geographic regions in which the Company has no previous operating experience.
The Company opened five restaurants in Texas, three restaurants in the state of
Washington and three restaurants in the Washington, D.C. metropolitan area
during fiscal years 1993, 1994 and 1995. Of the eleven restaurants closed or
sold by the Company, 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). The Company may expand using either the
Fresh Choice or Zoopa formats but there can be no assurance these concepts or
any future formats will be successful.

               Geographic Concentration. As of June 15, 1997, 43 of the
Company's 51 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 real
store sales. The Company expects additional sales pressure may be experienced at
the individual restaurants if it continues to expand within existing market
areas. There can be no assurance that such continued 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.

               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





                                       13

<PAGE>   14


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. However, in 1995, the fourth quarter included 17 weeks to
accommodate the Company's fiscal year-end date, the last Sunday in December,
which fell on December 31, 1995. 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 real store sales, which have been negative in
11 of the last 12 quarters, 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. In recent years,
several senior corporate office employees left the Company. The Company is
currently assessing its management needs, and has hired personnel to fill those
positions which it believes are necessary to provide continuity of direction for
the Company and to execute the Company's business plan. There can be no
assurance that these new employees will be able to perform effectively, or that
significant management turnover will not continue in the future.

               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 employee 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.

               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 its success in restoring profitability and
its ability to








                                       14

<PAGE>   15

continue to obtain funds. The Company believes its near-term capital
requirements can be met through its existing cash balances, cash provided by
operations, and its available bank line of credit including the the option to
convert up to $3,500,000 into a 48-month term loan any time prior to the
maturity date of the line of credit in May 1998. 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.


































                                       15

<PAGE>   16
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,                 Twenty-four Weeks Ended
                                           --------------------------------------------------------------------------  
(Dollars in thousands)                       June 15, 1997      June 16, 1996       June 15, 1997       June 16, 1996
                                           ---------------     ---------------     ---------------     ---------------    
<S>                                        <C>                <C>                <C>               <C>
NET SALES                                  $17,379  100.0 %    $18,793  100.0 %    $33,485  100.0 %   $36,854  100.0 %

COST AND EXPENSES:
  Cost of sales                              4,716   27.1 %      5,050   26.9 %      9,105   27.2 %    10,103   27.4 %
  Restaurant operating expenses: 
    Labor                                    5,319   30.6 %      5,931   31.6 %     10,376   31.0 %    11,837   32.1 %
    Occupancy and other                      5,003   28.8 %      5,247   27.9 %     10,252   30.6 %    10,531   28.6 %
  Depreciation and amortization                697    4.0 %        772    4.1 %      1,398    4.2 %     1,589    4.3 %
  General and administrative expenses        1,444    8.3 %      1,635    8.7 %      2,850    8.5 %     3,431    9.3 %
                                           ---------------     ---------------     ---------------    --------------- 
  Total costs and expenses                  17,179   98.8 %     18,635   99.2 %     33,981  101.5 %    37,491  101.7 %
                                           ---------------     ---------------     ---------------    ---------------
OPERATING INCOME (LOSS)                        200    1.2 %        158    0.8 %       (496)  (1.5)%      (637)  (1.7)%   
Interest income                                 37    0.2 %          1    --  %         89    0.3 %         1    --  %
Interest expense                                (4)  (0.0)%        (64)  (0.3)%         (9)  (0.0)%      (135)  (0.4)%
                                           ---------------     ---------------     ---------------    ---------------
Interest income (expense) net                   33    0.1 %        (63)  (0.3)%         80    0.3 %      (134)  (0.4)%
                                           ---------------     ---------------     ---------------    ---------------
INCOME LOSS BEFORE INCOME TAXES                233    1.3 %         95    0.5 %       (416)   1.2 %      (771)  (2.1)%
Provision for (benefit from) income taxes      --     --  %        --     --  %        --     --  %       --     --  %
                                           ---------------     ---------------     ---------------    ---------------
NET INCOME (LOSS)                          $   233    1.3 %    $    95    0.5 %    $  (416)  (1.2)%   $  (771)  (2.1)%
                                           ===============     ===============     ===============    =============== 
Number of restaurants:
        Open at beginning of period             48                  54                  48                 55
                                           =======             =======             =======            =======
        Open at end of period                   51                  53                  51                 53
                                           =======             =======             =======            =======
</TABLE>


               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,                 Twenty-four Weeks Ended
                                           ------------------------------------------------------------------------  
(Dollars in thousands)                      June 15, 1997      June 16, 1996      June 15, 1997      June 16, 1996
                                           ---------------    ---------------    ---------------    ----------------    
<S>                                        <C>                <C>                <C>                <C>
NET SALES                                  $   350  100.0%    $   350  100.0%    $   686  100.0 %    $   681  100.0 %

COST AND EXPENSES:
  Cost of sales                                 95   27.1%         94   26.9%        187   27.2 %        187   27.4 %
  Restaurant operating expenses:
    Labor                                      107   30.6%        111   31.6%        213   31.0 %        219   32.1 %
    Occupancy and other                        101   28.8%         98   27.9%        210   30.6 %        195   28.6 %
  Depreciation and amortization                 14    4.0%         14    4.1%         29    4.2 %         29    4.3 %
  General and administrative expenses           29    8.3%         30    8.7%         58    8.5 %         63    9.3 %
                                           -------  -----     -------  -----     -------  ------       -------  -----
  Total costs and expenses                     346   98.8%        347   99.2%        697  101.5 %        693  101.7 %
                                           -------  -----     -------  -----     -------  ------       -------  -----
OPERATING INCOME (LOSS)                    $     4    1.2%    $     3    0.8%    $   (11)  (1.5)%    $   (12)  (1.7)%
                                           ==============     ==============     ===============       ===============
Average restaurants open during the period   49.61              53.65              48.80               54.12
                                           =======            =======            =======             =======
</TABLE>







                                       16


<PAGE>   17

Results of Operations:  Twelve Weeks Ended June 15, 1997
Compared to Twelve Weeks Ended June 16, 1996

               Net Sales. Net sales for the second quarter ended June 15, 1997
were $17,379,000, a decrease of $1,414,000, or 7.5%, from sales of $18,793,000
for the second quarter ended June 16, 1996. The primary components of the net
decrease in sales were:

<TABLE>
<S>                                                                <C>
The absence of sales from eight restaurants closed in 1996         $(1,728,000)
Incremental sales from new or acquired restaurants                     828,000
Decline in sales for the 47 restaurants opened prior to 
  the second quarter of 1997                                          (514,000)
                                                                   -----------
                                                                   $(1,414,000)
                                                                   ===========
</TABLE>

               Comparable store sales declined 2.6% in the second quarter of
1997 compared to the second quarter of 1996. Comparable store customer counts,
which include only restaurants open and operated by the Company at least 18
months, declined 4.5%. The comparable store average check was $6.82 in the
second quarter, an increase of 2.0% versus the prior year quarter.

               Net sales per restaurant averaged $350,000 in the both the second
quarter of 1997 and the second quarter of 1996.

               Costs and Expenses. Cost of sales (food and beverage costs) was
27.1% of sales in the second quarter of 1997 compared to 26.9% in the second
quarter of 1996. At the beginning of the second quarter of 1997, the Company
offered a special Spring promotional menu which featured higher quality and
higher cost products, including artichokes and asparagas, which primarily
accounted for the small increase in food costs.

               Restaurant operating expenses were 59.4% of net sales in the
second quarter of 1997 compared to 59.5% in the second quarter of 1996. Labor
costs were approximately 1.0% of sales below the prior year primarily due to
reduced restaurant level bonus payouts resulting from a new bonus plan
introduced in 1997 which ties bonus payouts to achieving planned profit
performance. This savings offset operating cost increases of approximately 0.9%
of sales resulting primarily from additional marketing and promotional programs
implemented in 1997.

               Depreciation and amortization decreased $75,000 in the second
quarter of 1997 compared to the second quarter of 1996. Curtailment of
restaurant expansion resulted in lower start-up cost amortization and the sale
or closure of restaurants in 1996 not previously impaired in connection with the
Company's 1995 restructuring plan resulted in lower depreciation.

               General and administrative expenses were $1,444,000 for second
quarter of 1997, a decrease of $191,000 from the second quarter of 1996 due to
continued cost management in staffing levels and expenses.

               Interest Income. In the second quarter of 1997, the Company
invested the balance of the proceeds from its September 1996 sales of Series B
preferred stock to Crescent Real Estate Equities Limited Partnership in money
market funds and earned $37,000 in interest income. The Company had no invested
cash balances and no interest income from invested cash balances during the
second quarter of 1996.

               Interest Expense. Interest expense was $4,000 in the second
quarter of 1997 compared to $64,000 in the second quarter of 1996. In 1997,
interest expense consisted of interest on the Company's remaining 







  
                                       17

<PAGE>   18

capital lease obligations and a site construction note included in other
long-term liabilities. In the prior year quarter, interest expense included
interest related to short-term line of credit borrowings to finance the
construction of one restaurant in addition to capital lease obligations and the
site construction note.

               Income Taxes. The Company recorded no tax expense in the second
quarters ended June 15, 1997 and June 16, 1996. 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.



Results of Operations:  Twenty-Four Weeks Ended June 15, 1997
Compared to Twenty-Four Weeks Ended June 16, 1996

               Net Sales. Net sales for the twenty-four weeks ended June 15,
1997 were $33,485,000, a decrease of $3,369,000, or 9.1%, from sales of
$36,854,000 for the comparable period of the prior year. The primary components
of the net decrease in sales were:


<TABLE>
               <S>                                                                <C>      
               The absence of sales from eight restaurants closed in 1996         $(3,537,000)

               Incremental sales from new or acquired restaurants                   1,191,000

               Decline in sales for the 47 restaurants opened prior to 1996        (1,023,000)
                                                                                  -----------
                                                                                  $(3,369,000)
                                                                                  ===========
</TABLE>



               Comparable store sales declined 2.3% in the first half of 1997
compared to the first half of 1996. Comparable store customer counts, which
include only restaurants open and operated by the Company at least 18 months,
declined 7.5%. The comparable store average check was $6.78 in the first half of
1997, an increase of 5.7% versus the same period in the prior year.

               In the prior year, the Company introduced its current one-price
system at the end of the first quarter, replacing its former two-tier pricing
system, and terminated certain discount programs during the second quarter.
These pricing changes contributed to the Company's higher average check
beginning with the second quarter of 1996.

               Net sales per restaurant averaged $686,000 in the first half of
1997 compared to $681,000 in the first half of 1996, an increase of 0.7%.

               Costs and Expenses. Cost of sales (food and beverage costs) was
27.2% of sales in the first half of 1997 compared to 27.4% in the first half of
1996. During the first quarter of the prior year, the Company had launched the
roll-out of a major food program that introduced new recipes and upgraded
existing ones based on market research and consumer trends. The program upgraded
the quality of the Company's product and resulted in increasing food costs per
customer throughout the remainder of 1996 and also in higher food costs per
customer in 1997. At the end of the prior year first quarter, the Company
introduced its current one-price system and, during the second quarter last
year, terminated certain discount programs. These pricing decisions produced a
higher average customer check that continued through the first half of 1997 and
kept food costs as a percentage of sales substantially even compared to the
prior year.





                                       18


<PAGE>   19


               Restaurant operating expenses were 61.6% of net sales in the
first half of 1997 compared to 60.7% in the first half of 1996. Labor savings of
approximately 1.1% of sales resulted from reduced restaurant level bonus payouts
resulting from a new bonus plan introduced in 1997 which ties bonus payouts to
achieving planned profit performance. Operating cost increases of approximately
2.0% of sales resulted primarily from the Company's first quarter 1997
investment in advertising, which included television support, and, to a lesser
extent, other marketing and promotion programs during the first half of 1997.
The absence of fixed costs on the eight restaurants closed or sold in the prior
year in connection with the Company's restructuring plan provided a partial
offset to the increase in operating costs.

               Depreciation and amortization decreased $191,000 in the first
half of 1997 compared to the first half of 1996. Curtailment of restaurant
expansion resulted in lower start-up cost amortization and the sale or closure
of restaurants not previously impaired in connection with the Company's 1995
restructuring plan resulted in lower depreciation.

               General and administrative expenses were $2,850,000 for first
half of 1997, a decrease of $581,000 compared to expenses of $3,431,000 for the
second quarter of 1996. In the prior year, general and administrative expenses
included consulting fees paid to assist the Company in the development of its
strategic plan and other matters. General and administrative expenses were also
lower due to the Company's continued cost management in staffing levels and
expenses.

               Interest Income. During the first half of 1997, the Company
invested the balance of the proceeds from its September 1996 sales of Series B
preferred stock to Crescent Real Estate Equities Limited Partnership in money
market funds and earned $89,000 in interest income. The Company had no invested
cash balances and no interest income from invested cash balances during the
first half of 1996.

               Interest Expense. Interest expense was $9,000 in the first half
of 1997 compared to $135,000 in the first half of 1996. In 1997, interest
expense consisted solely of interest on the Company's remaining capital lease
obligations and a site construction note included in other long-term
liabilities. In the prior year, interest expense included interest and fees
related to short-term line of credit borrowings to finance the construction of
one restaurant in addition to capital lease obligations and the site
construction note.

               Income Taxes. The Company recorded no tax benefit from its
operating loss during the first half of 1997 and 1996. 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.








                                       19

<PAGE>   20

ITEM 3  -  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.




















                                       20



<PAGE>   21


                           PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

               On January 9, 1995, a class action lawsuit was filed in the
United States District Court for the Northern District of California, San Jose
division, naming the Company, certain of its directors, and current and former
officers as defendants. The lawsuit alleged that the defendants misrepresented
or failed to disclose material facts about the Company's operations and
financial results, which the plaintiffs contend resulted in an artificial
inflation of the price of the Company's stock. The suit was purportedly brought
on behalf of a class of purchasers of the Company's stock during the period from
July 15, 1993 to December 15, 1994. On March 20, 1995 the plaintiffs filed an
amended complaint, which added as defendants the co-lead underwriters of the
Company's initial and secondary public offerings and three securities analysts
employed by the underwriters. The amended complaint also expanded the alleged
class period to include purchasers of the Company's stock during the period from
December 8, 1992 to February 9, 1995. On December 7, 1995, the Court dismissed
the amended complaint, with leave for further amendment. Plaintiffs filed a
Second Amended Complaint on February 27, 1996. This complaint alleges that Fresh
Choice and certain of its current and former officers and directors
misrepresented or failed to disclose material facts about the Company's
operations and financial results during the period from February 15, 1994
through February 9, 1995, in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934.

               After the Company filed a motion to dismiss the Second Amended
complaint, the parties reached an agreement in principle to settle the lawsuit
in its entirety. The Court has issued an order preliminarily approving the
settlement and setting a hearing date for final approval. The settlement will be
funded by insurance proceeds. The Company continues to deny all allegations in
the lawsuit.

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

               The Company held its Annual Meeting of Stockholders on May 22,
1997. The stockholders voted on proposals on:

               (1) The election of two Class II directors to hold office for a
three-year term and until their respective successors are elected and qualified.
The proposal was approved by the following vote:

<TABLE>
<CAPTION>
         Nominee                        For                       Withheld
         -------                        ---                       --------
         <S>                            <C>                       <C>   
         Carl R. Hays                   4,908,005                 35,554
         Charles A. Lynch               4,906,320                 37,239
</TABLE>


                  (2) The appointment of Deliotte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 28, 1997. The
proposal was approved by the following vote:


<TABLE>
<CAPTION>
       For                        Against               Abstain
       ---                        -------               -------
       <S>                        <C>                   <C>   
       4,909,673                   14,183                 19,703
</TABLE>










                                       21

<PAGE>   22


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. No reports on Form 8-K were filed during the quarter
ended June 15, 1997.



















                                       22

<PAGE>   23



                                   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/ Charles A. Lynch
                                    -------------------------------------------
                                    Charles A. Lynch
                                    Chairman of the Board and Director
                                    (Principal Executive Officer)



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

     Dated:  July 30, 1997






















                                       23



<PAGE>   24

                           INDEX TO FORM 10-Q EXHIBITS


<TABLE>
<CAPTION>
  EXHIBIT
     NO.                                    DESCRIPTION
------------------------------------------------------------------------------------------------------
     <S>            <C>      <C>                                                                 
     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
</TABLE>







                                       24



<PAGE>   25



INDEX TO FORM 10-Q EXHIBITS continued

<TABLE>
<CAPTION>
   EXHIBIT
     NO.                                     DESCRIPTION
--------------------------------------------------------------------------------------------------

     <S>            <C>      <C>      
     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                   Agreement of Sale and Purchase dated April 2, 1997 with RUI One Corp.

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

     11.1                    Computation of Net Loss per Share

     27             (7)      Financial Data Schedule
</TABLE>



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






                                       25
<PAGE>   26

(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.


















                                       26