<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 13, 1999
                                       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 July
13, 1999 was 5,741,697.


<PAGE>   2
                               FRESH CHOICE, INC.

                                      INDEX


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

    Item 1 - Financial Statements

        Condensed Consolidated Balance Sheets at June 13, 1999
        and December 27, 1998.....................................................................3

        Condensed Consolidated Statements of Operations for the Twelve and Twenty-Four Weeks
        ended June 13, 1999 and June 14, 1998 ....................................................4

        Condensed Consolidated Statements of Cash Flow for the Twenty-Four Weeks
        ended June 13, 1999 and June 14, 1998.....................................................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..........................17

PART II - OTHER INFORMATION

    Item 1 - Legal Proceedings...................................................................18
    Item 2 - Changes in Securities...............................................................18
    Item 3 - Defaults Upon Senior Securities.....................................................18
    Item 4 - Submission of Matters to a Vote of Security Holders.................................18
    Item 5 - Other Information...................................................................18
    Item 6 - Exhibits and Reports on Form 8-K....................................................18


SIGNATURES ......................................................................................19


INDEX TO FORM 10-Q EXHIBITS .....................................................................20
</TABLE>


                                       2
<PAGE>   3
                          PART I. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
(Unaudited)                                                                 June 13,        December 27,
                                                                              1999               1998
                                                                          -------------      -------------
<S>                                                                       <C>                <C>
ASSETS
CURRENT ASSETS:
      Cash and cash equivalents                                           $       2,007      $       1,830
      Receivables                                                                   119                126
      Inventories                                                                   577                571
      Pre-opening costs, net                                                          -                 70
      Prepaid expenses and other current assets                                     405                503
                                                                          -------------      -------------
      Total current assets                                                        3,108              3,100
PROPERTY AND EQUIPMENT, net                                                      27,953             29,168
LEASE ACQUISITION COSTS, net                                                        372                406
DEPOSITS AND OTHER ASSETS                                                           548                531
                                                                          -------------      -------------
TOTAL ASSETS                                                              $      31,981      $      33,205
                                                                          =============      =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
      Accounts payable                                                    $       2,210      $       3,324
      Accrued salaries and wages                                                  1,382              1,335
      Sales tax payable                                                             778                876
      Other accrued expenses                                                      1,532              1,995
      Restructuring reserve                                                         664              1,257
      Line of credit borrowings                                                       -              1,155
      Current portion of long-term obligations                                      668                359
                                                                          -------------      -------------
      Total current liabilities                                                   7,234             10,301
CAPITAL LEASE OBLIGATIONS                                                         1,050              1,171
OTHER LONG-TERM LIABILITIES                                                       1,567              1,787

LONG-TERM DEBT                                                                    2,425                  -
                                                                          -------------      -------------
      Total liabilities                                                          12,276             13,259
                                                                          -------------      -------------
STOCKHOLDERS' EQUITY
      Convertible preferred stock, $.001 par value;  3.5 million
            shares authorized; shares outstanding: 1999 and
            1998-1,187,906                                                        5,175              5,175
      Common stock, $.001 par value; 15 million shares authorized;
            shares outstanding: 1999-5,741,697; 1998-5,718,847                   42,257             42,210
      Accumulated deficit                                                       (27,727)           (27,439)
                                                                          -------------      -------------
      Total stockholders' equity                                                 19,705             19,946
                                                                          -------------      -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $      31,981      $      33,205
                                                                          =============      =============
</TABLE>


The December 27, 1998 amounts are derived from the Company's audited financial
statements

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 13,       June 14,       June 13,       June 14,
                                                                            1999           1998           1999           1998
                                                                         ----------     ----------     ----------     ----------
<S>                                                                      <C>            <C>            <C>            <C>
NET SALES                                                                $   17,141     $   17,366     $   33,932     $   33,558

COSTS AND EXPENSES:
       Cost of sales                                                          4,217          4,597          8,295          8,837
       Restaurant operating expenses:
              Labor                                                           5,443          5,651         11,027         11,041
              Occupancy and other                                             5,204          5,439         10,517         10,492
       Depreciation and amortization                                            819            851          1,624          1,669
       General and administrative expenses                                    1,222          1,252          2,491          2,561

                                                                         ----------     ----------     ----------     ----------
              Total costs and expenses                                       16,905         17,790         33,954         34,600
                                                                         ----------     ----------     ----------     ----------

OPERATING INCOME (LOSS)                                                         236           (424)           (22)        (1,042)

       Interest income                                                           15              -             25              8
       Interest expense                                                        (115)           (43)          (220)           (80)
                                                                         ----------     ----------     ----------     ----------

       Interest income (expense), net                                          (100)           (43)          (195)           (72)
                                                                         ----------     ----------     ----------     ----------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT
            OF CHANGE IN ACCOUNTING PRINCIPLE                                   136           (467)          (217)        (1,114)

Cumulative effect of change in accounting principle - adoption
       of SOP 98-5, "Reporting on the Costs of Start-Up Activities"               -              -            (70)             -
                                                                         ----------     ----------     ----------     ----------

NET INCOME (LOSS)                                                        $      136     $     (467)    $     (287)    $   (1,114)
                                                                         ==========     ==========     ==========     ==========

Basic net income (loss) per common share before
       cumulative effect of change in accounting principle               $     0.02     $    (0.08)    $    (0.04)    $    (0.20)
Cumulative effect of change in accounting principle                               -              -          (0.01)             -
                                                                         ----------     ----------     ----------     ----------
Basic net income (loss) per common share                                 $     0.02     $    (0.08)    $    (0.05)    $    (0.20)
                                                                         ==========     ==========     ==========     ==========
Shares used in computing basic per share amounts                              5,723          5,686          5,721          5,684
                                                                         ==========     ==========     ==========     ==========

Diluted net income (loss) per common share before
       cumulative effect of change in accounting principle               $     0.02     $    (0.08)    $    (0.04)    $    (0.20)
Cumulative effect of change in accounting principle                               -              -          (0.01)             -
                                                                         ----------     ----------     ----------     ----------
Diluted net income (loss) per common share                               $     0.02     $    (0.08)    $    (0.05)    $    (0.20)
                                                                         ==========     ==========     ==========     ==========
Shares used in computing diluted per share amounts                            6,930          5,686          5,721          5,684
                                                                         ==========     ==========     ==========     ==========
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements


                                       4
<PAGE>   5
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
(Dollars in thousands)
(Unaudited)                                                             Twenty-Four Weeks Ended
                                                                     ----------------------------
                                                                      June 13,          June 14,
                                                                        1999              1998
                                                                     ----------        ----------
<S>                                                                  <C>               <C>

OPERATING ACTIVITIES:
Net loss                                                             $     (287)       $   (1,114)
Adjustments to reconcile net loss to
    net cash used in operating activities:
        Depreciation and amortization                                     1,737             1,769
        Cumulative effect of change in accounting principle                  70                 -
        Issuance of stock options for consulting services                    17                 -
        Loss on disposal of property                                         10               170
        Deferred rent                                                      (212)             (247)
        Change in operating assets and liabilities:
            Receivables                                                       7               (31)
            Inventories                                                      (6)              (29)
            Pre-opening costs                                                 -               (36)
            Prepaid expenses and other current assets                        98               186
            Accounts payable                                             (1,114)             (789)
            Accrued salaries and wages                                       47                39
            Other accrued expenses                                         (562)              139
            Restructuring reserve                                          (593)             (721)
                                                                     ----------        ----------
    Net cash used in operating activities                                  (788)             (664)
                                                                     ----------        ----------

INVESTING ACTIVITIES:
    Capital expenditures                                                   (466)           (3,390)
    Deposits and other assets                                               (57)             (186)
                                                                     ----------        ----------
    Net cash used in investing activities                                  (523)           (3,576)
                                                                     ----------        ----------

FINANCING ACTIVITIES:
    Common stock sales                                                       30                31
    Line of credit borrowings (repayments), net                          (1,155)              940
    Long term debt - borrowings                                           2,695                 -
    Capital lease obligations - borrowings                                  100             1,265
    Capital lease obligations - repayments                                 (182)              (93)

                                                                     ----------        ----------
    Net cash provided by financing activities                             1,488             2,143
                                                                     ----------        ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            177            (2,097)

CASH AND CASH EQUIVALENTS:
    Beginning of period                                                   1,830             2,415
                                                                     ----------        ----------
    End of period                                                    $    2,007        $      318
                                                                     ==========        ==========

Supplemental Disclosure of Cash Flow Information:
    Cash paid during the period for interest                         $      210        $       49
                                                                     ==========        ==========
</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 and Twenty-Four Weeks Ended June 13, 1999 and June 14, 1998

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/A for the fiscal
year ended December 27, 1998.

2.      NET INCOME (LOSS) PER SHARE

                Basic EPS excludes potentially dilutive securities and is
computed by dividing the Company's net loss by the weighted average of its
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. The Company converts common stock
options and warrants into dilutive potential shares using the treasury stock
method and converts preferred stock into dilutive potential shares using the "if
converted" method.

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


<TABLE>
<CAPTION>
                                                  Twelve Weeks Ended            Twenty-Four Weeks Ended
                                                -----------------------        ------------------------
(In thousands, except per share amounts)         June 13,     June 14,          June 13,      June 14,
                                                   1999         1998              1999          1998
                                                ----------   ----------        ----------    ----------
<S>                                             <C>          <C>               <C>           <C>
Net income (loss)                               $      136   $     (467)       $     (287)   $   (1,114)
                                                ==========   ==========        ==========    ==========

Basic Net Income (Loss) per Common Share
   Average common shares outstanding                 5,723        5,686             5,721         5,684
                                                ==========   ==========        ==========    ==========

Diluted Net Income (Loss) per Common Share
   Stock options                                        19            -                 -             -
   Convertible preferred stock                       1,188            -                 -             -
                                                ----------   ----------        ----------    ----------
   Total shares and dilutive shares                  6,930        5,686             5,721         5,684
                                                ==========   ==========        ==========    ==========
Basic net income (loss) per common share        $     0.02   $    (0.08)       $    (0.05)   $    (0.20)
                                                ==========   ==========        ==========    ==========
Diluted net income (loss) per common share      $     0.02   $    (0.08)       $    (0.05)   $    (0.20)
                                                ==========   ==========        ==========    ==========
</TABLE>

       Diluted EPS presented for the twelve weeks ended June 14, 1998 and for
the twenty-four weeks ended July 13, 1999 and June 14, 1998 are the same as
basic EPS since the Company had net losses and, therefore, all potential
dilutive securities are anti-dilutive and are excluded from the computation. The
following table presents the total dilutive securities which the company
excluded 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:


                                       6
<PAGE>   7
<TABLE>
<CAPTION>
                                                              Twelve Weeks Ended          Twenty-Four Weeks Ended
                                                           -------------------------     -------------------------
                                                            June 13,       June 14,       June 13,       June 14,
(In thousands)                                                1999           1998           1999           1998
                                                           -------------------------     -------------------------
<S>                                                        <C>            <C>            <C>            <C>
Potential Dilutive Securities

       Stock options                                              631            576            717            576
       Stock warrants                                             732            732            732            732
       Convertible preferred stock                                  -          1,188          1,188          1,188
</TABLE>

3.      INCOME TAXES

                The Company recorded no income tax benefit from its operating
losses during the twenty-four weeks ended June 13, 1999 and June 14, 1998, due
to valuation allowances against its net deferred tax assets. The Company's net
deferred taxes consist primarily of the tax benefit related to operating loss
carryforwards and non-deductible asset write-downs in connection with
restructuring reserves. 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.      BORROWING ARRANGEMENTS

                During the second quarter ended June 13, 1999, the Company
increased its borrowings under its loan and security agreement ("Agreement")
from $2,623,000 to $2,695,000. Under the terms of the Agreement, the Company may
borrow up to $2,330,000 against the value of certain Company-owned real estate
secured by deeds of trust and up to $1,670,000 against the value of any of the
Company's restaurant equipment in which the lender has established a first
priority perfected security interest, subject to a maximum available borrowing
against each restaurant. As of July 13, 1999 the Company had a maximum of
$2,950,000 available for borrowing under the Agreement of which it had borrowed
$2,695,000. Of the total amount borrowed, $270,000 was included in the current
portion of long-term obligations.

                The Agreement requires the Company to maintain a minimum net
worth and debt service coverage ratio and to not exceed maximum interest and
debt to cash flow ratios and limits its aggregate indebtedness. The Agreement
also requires approval before paying dividends and limits the Company's fixed
asset acquisitions based on its operating cash flows. The Company was in
compliance with the loan agreement covenants at June 13, 1999.

5.      RESTRUCTURING AND RESTAURANT CLOSURE RESERVE

                The Company's restructuring reserve of $1,257,000 at December
27, 1998 consisted of the estimated cash costs to settle the lease obligations
at three closed restaurants, the estimated cash costs to close and settle the
lease obligation at one other restaurant identified for closure and the
estimated cash costs to close two additional restaurants at the end of their
lease terms in 1999.

                The Company made payments of $593,000 in the first twenty-four
weeks of 1999 primarily in accordance with the terms of negotiated lease
settlements for the three closed restaurants. The Company negotiated the lease
settlements at amounts substantially provided for in the restructuring reserve.

                At June 13, 1999, the Company's restructuring reserve of
$664,000 consisted of the estimated cash costs to close and settle the lease
obligation at one other restaurant identified for closure and the estimated cash
costs to close two additional restaurants at the end of their lease terms in
1999.


                                       7
<PAGE>   8
6.      ADOPTION OF SOP 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES"

                In 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities," which requires companies to expense the costs of start-up
activities and organization costs as incurred. The Company adopted SOP 98-5
effective the beginning of fiscal 1999 and expensed $70,000 of unamortized
pre-opening costs at the time of adoption. The Company's pre-opening costs
consist of the direct costs associated with opening a new restaurant, including
the costs of hiring and training the initial workforce. The Company accounted
for the adoption of SOP 98-5 as the cumulative effect of a change in accounting
principle.

7.      CONVERTIBLE PREFERRED STOCK

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

                In fiscal 1998, the Company failed to achieve a specified
earnings target (before interest, taxes, depreciation and amortization) of at
least $5,500,000 which constituted an event of default of the terms of the
preferred stock agreement and which triggered the right of the Series A
preferred stockholders to elect a majority of the Company's Board of Directors.
The holder of the Series B preferred stock has not initiated any action to
convert such shares into shares of Series A preferred stock nor has it exercised
its right to elect a majority of the Board of Directors. Such holder has
notified the Company that it has no present intention of exercising such right;
however, it has not waived any of its rights under the agreement.

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
twenty-four weeks ended June 13, 1999. 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 27, 1998 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/A for the fiscal year ended December 27, 1998.

                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, specifically including the effect of problems
associated with the Year 2000, 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. Among the risks and uncertainties are the continuation of
positive comparable store sales; future profitability; the Company's successful
efforts to close, sell or improve operating results of underperforming stores
which depend on many factors not within the Company's control such as the
negotiation of settlements of existing lease obligations under acceptable terms;
the ability to obtain additional financing on favorable terms; and the Company's
ability to locate suitable restaurant sites and construct new restaurants in a
timely manner.

Liquidity and Capital Resources

                The Company's primary capital requirements have been for the
expansion of its restaurant operations and remodeling of its restaurants. The
Company has traditionally financed these requirements with funds from equity


                                       8
<PAGE>   9
offerings, cash flow from operations, landlord allowances, capital equipment
leases 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.

                At the beginning of fiscal 1999, the Company entered into a
$4,000,000 loan and security agreement (the "Agreement") with a finance company.
The Agreement expires on December 29, 2001 and provides for one-year renewals
thereafter. Under the terms of the Agreement, the Company may borrow up to
$2,330,000 against the value of certain Company-owned real estate secured by
deeds of trust and up to $1,670,000 against the value of any of the Company's
restaurant equipment in which the lender has established a first priority
perfected security interest, subject to a maximum available borrowing against
each restaurant. During the twenty-four weeks ended June 13, 1999, the Company
borrowed $2,695,000 under the Agreement and used $1,155,000 of the amount
borrowed to pay off its bank line of credit. At June 13, 1999, the Company had
$2,695,000 of long-term debt borrowed under the terms of the Agreement, of which
$270,000 was included in the current portion of long-term obligations. As of
July 13, 1999, the Company had a maximum of $2,950,000 available for borrowing
under the Agreement of which it had borrowed $2,695,000.

                Borrowings under the Agreement initially bear interest at the
prime rate (7.75% at June 13, 1999) plus 1.25% and, once repaid, can be
re-borrowed unless converted to a term loan. Outstanding borrowings, if any, on
the first and second anniversaries of the Agreement convert into term loans
which bear interest at the prime rate plus 1.75% and become payable monthly
based on a five-year amortization schedule. All borrowings, including any term
loans, are fully payable on December 29, 2001. Aggregate borrowings in excess of
$2,500,000 bear an additional 0.5% interest. The Agreement also provides for a
monthly collateral monitoring fee and a 0.5% unused line fee.

                The Agreement requires the Company to maintain a minimum net
worth and debt service coverage ratio and to not exceed maximum interest and
debt to cash flow ratios and limits its aggregate indebtedness. The Agreement
also requires approval before paying dividends and limits the Company's fixed
asset acquisitions based on its operating cash flows. The Company was in
compliance with the loan agreement covenants at June 13, 1999.

                Long-term debt at June 13, 1999 also included $1,448,000 of
capital lease obligations, of which $398,000 was included in the current portion
of long term obligations, and a $117,000 note for site construction costs, which
is included in other long-term liabilities.

                Operating activities for the twenty-four weeks ended June 13,
1999 used $788,000 which included a $1,114,000 reduction in accounts payable and
$593,000 of restructuring reserve payments, primarily in accordance with the
terms of negotiated lease settlements for three closed restaurants. The Company
negotiated the lease settlements at amounts substantially provided for in the
restructuring reserve.

                The Company's restructuring reserve of $664,000 at June 13, 1999
consisted of the estimated cash costs to close and settle the lease obligation
at one other restaurant identified for closure and the estimated cash costs to
close two additional restaurants at the end of their lease terms in 1999.

                For the twenty-four weeks ended June 13, 1999, the Company
invested $466,000 in property and equipment, including restaurant point of sale
systems in connection with its strategic information systems plan. The Company
did not remodel any restaurants in the first twenty-four weeks of 1999, but
expects to resume its remodeling program in the second half of 1999. In
addition, the Company opened a test Fresh Choice Express in Fort Worth, Texas in
the third quarter of 1999.

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


                                       9
<PAGE>   10
holders of a majority of the outstanding Series A preferred stock will have a
separate right to approve certain corporate actions.

                In fiscal 1998, the Company failed to achieve a specified
earnings target (before interest, taxes, depreciation and amortization) of at
least $5,500,000 which constituted an event of default of the terms of the
preferred stock agreement and which triggered the right of the Series A
preferred stockholders to elect a majority of the Company's Board of Directors.
The holder of the Series B preferred stock has not initiated any action to
convert such shares into shares of Series A preferred stock nor has it exercised
its right to elect a majority of the Board of Directors. Such holder has
notified the Company that it has no present intention of exercising such right;
however, it has not waived any of its rights under the agreement.

                The Company's continued growth depends to a significant degree
on its ability to open new restaurants and to operate such restaurants
profitably. Although the Company currently has no further new restaurant
development plans for 1999, the Company intends to resume its restaurant
expansion, assuming its financial performance improves. 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 fiscal 1999 capital requirements
can be met through existing cash balances, cash provided by operations and it
borrowing arrangements. The Company may continue to seek additional debt or
equity financing to provide greater flexibility toward improving its operating
performance and resuming restaurant 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, the State of California minimum wage
increased effective March 1, 1998 and the State of Washington minimum wage
increased effective January 1, 1999. The Company raised prices in response to
these increases. No further minimum wage increases are scheduled. 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 may be offset through pricing and other cost control efforts; however,
there is no assurance that the Company would be able to pass such costs on to
its guests or that even if it were able to do so, it could do so in a short
period of time.

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. 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. At June 13, 1999, the Company had the new point of sale
systems in 15 of its 52 locations. The Company expects to complete its point of
sale installations by the end of 1999. In addition, the Company is currently
completing the testing of the year 2000 upgrade for its labor management
software. The labor management software upgrade program is expected to be
completed and year 2000 compliant by the end of 1999. The estimated cost of
$500,000 for year 2000 compliance


                                       10
<PAGE>   11
upgrades will be capitalized in accordance with normal policy and will be funded
either through operating cash flow, equipment lease financing or borrowings
under the Company's loan and security agreement.

                The Company has completed surveying all of its vendors and has
received confirmation that all programs and systems used by vendors are, or will
be by year-end, year 2000 compliant.

                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. However, there can be no assurance
that the systems of other entities will be converted timely, or that a failure
to convert by another entity will not have a material adverse effect on the
Company. As part of its continuous monitoring process, the Company will
implement contingency plans as necessary. These plans could include, but are not
limited to, alternate product suppliers, manual recording and accumulation of
restaurant transactions, and restriction of the tender types accepted at the
restaurants.

                The Company believes it has an effective plan in place to
anticipate and resolve any potential year 2000 issues in a timely manner. In the
event, however, that the Company does not properly identify year 2000 issues and
remediation and testing is not conducted on a timely basis with respect to the
year 2000 issues that are identified, there can be no assurance that year 2000
issues will not materially and adversely affect the Company. In addition,
disruptions in the economy generally resulting from year 2000 issues also could
materially and adversely affect the Company.

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 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. The Company reported a modest
profit in 1997 but again incurred an operating loss in 1998 and, although
profitable in the second quarter, the Company reported an operating loss for the
first half of 1999.

                Beginning late in the third quarter of fiscal 1994, the Company
began reporting comparable store sales declines. Comparable store sales
continued to decline in each quarter through the end of 1998. The Company
reported comparable store sales declines of 4.6%, 15.3%, 5.9%, 2.7% and 4.8% for
fiscal years 1994, 1995, 1996, 1997 and 1998, respectively. For the first
twenty-four weeks of 1999, the Company reported a comparable store sales
increase of 3.8%, however, there can be no assurance that comparable store sales
will continue to 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 closed or
sold eleven restaurants, including three at the end of 1995 and eight in 1996.
The Company closed no restaurants in 1997 and closed one restaurant at the
expiration of its lease term in early 1998. In 1998, the Company announced a
plan to close an additional four previously impaired restaurants and for the
closure of two additional restaurants where it does not intend to renew the
leases. To date, three of these restaurant have been closed. 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 two additional restaurants were opened. The Company believes its growth
depends to a significant degree on its ability to open new restaurants and to
operate such restaurants profitably. The Company has opened a test Fresh Choice
Express in Fort Worth, Texas in the third quarter of 1999 and currently has no
further expansion plans for 1999. While the Company intends to resume its
expansion, assuming its financial performance improves, there can be no
assurance that the Company


                                       11
<PAGE>   12
will be able to continue expansion. The Company's ability to successfully
implement an 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.

                While on a long-term basis, the Company intends to expand its
operations in markets outside of California, assuming its financial performance
improves, there can be no assurance as to when or whether the Company will
resume its expansion. 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
July 13, 1999, the Company had opened or purchased ten restaurants in Texas,
including its test Fresh Choice Express, six restaurants in the state of
Washington and three restaurants in the Washington, D.C. metropolitan area. Of
the fifteen restaurants closed or sold, two were in Texas, two were in the state
of Washington, eight were in California, and three were in the Washington, D.C.
metropolitan area (where the Company no longer operates).

                Geographic Concentration. As of July 13, 1999, 40 of the
Company's 52 restaurants are located in California, primarily in Northern
California. Accordingly, the Company is susceptible to fluctuations in its
business caused by adverse economic conditions in this region. In addition, net
sales at certain of the Company's restaurants have been adversely affected when
a new Company restaurant has been opened in relatively close geographic
proximity, 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.

                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 were negative
for four consecutive years, may not continue the positive trend of the first
twenty-four weeks of 1999.

                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 crewmembers and to attract qualified
personnel, particularly general managers, for its restaurants. The Company faces
significant competition in the recruitment of qualified crewmembers.


                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


                                       12
<PAGE>   13
Company's restaurants, may be affected by factors such as traffic patterns,
demographic considerations, and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased food, labor and
crewmember benefit costs, and the availability of experienced management and
hourly crewmembers may also adversely affect the restaurant industry in general
and the Company's restaurants in particular. Restaurant operating costs are
affected by increases in the minimum hourly wage, unemployment tax rates, and
various federal, state and local governmental regulations, including those
relating to the sale of food and alcoholic beverages. There can be no assurance
that the restaurant industry in general, and the Company in particular, will be
successful.

                Competition. The Company's restaurants compete with the rapidly
growing mid-price, full-service casual dining segment; with traditional
limited-service buffet, soup, and salad restaurants; and, increasingly, with
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
resume restaurant expansion, assuming its financial performance improves. 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 and its borrowing arrangements. 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.

                Control by Major Shareholder. Crescent Real Estate Equities
Limited Partnership holds 1,187,906 shares of Series B non-voting convertible
preferred stock, which is convertible into Series A voting convertible preferred
stock at any time at the option of the holder. Upon conversion, holders of
Series A preferred stock would be entitled to vote with common stockholders and
would have a separate right to approve certain corporate actions, such as
amending the Company's Certificate of Incorporation or Bylaws, effecting a
merger or sale of the Company, or making a fundamental change in the Company's
business activity. In addition, because the Company did not achieve an earnings
target (before interest, taxes, depreciation and amortization) of $5,500,000 in
1998, the holders of Series A preferred stock have the right to elect a majority
of the Company's Board of Directors. These factors could have the effect of
delaying, deferring or preventing a change in control of the Company and, as a
result, could discourage acquisition bids for the Company and limit the price
that investors are willing to pay for shares of common stock.


                                       13
<PAGE>   14
Results of Operations

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


<TABLE>
<CAPTION>
                                                                                  Twelve Weeks Ended
                                                                     ---------------------------------------------
(Dollars in thousands)                                                   June 13, 1999           June 14, 1998
                                                                     ---------------------   ---------------------
<S>                                                                  <C>           <C>       <C>           <C>
NET SALES                                                            $ 17,141      100.0%    $ 17,366       100.0%

COSTS AND EXPENSES:
     Cost of sales                                                      4,217       24.6%       4,597        26.5%
     Restaurant operating expenses:
           Labor                                                        5,443       31.8%       5,651        32.5%
           Occupancy and other                                          5,204       30.4%       5,439        31.3%
     Depreciation and amortization                                        819        4.8%         851         4.9%
     General and administrative expenses                                1,222        7.0%       1,252         7.2%
                                                                     -------------------     ---------------------
           Total costs and expenses                                    16,905       98.6%      17,790       102.4%
                                                                     -------------------     ---------------------

OPERATING INCOME (LOSS)                                                   236        1.4%        (424)       (2.4)%

     Interest income                                                       15        0.1%           -           -%
     Interest expense                                                    (115)      (0.7)%        (43)       (0.3)%
                                                                     -------------------     ---------------------
     Interest income (expense), net                                      (100)      (0.6)%        (43)       (0.3)%
                                                                     -------------------     ---------------------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT
            OF CHANGE IN ACCOUNTING PRINCIPLE                             136        0.8%        (467)       (2.7)%

Cumulative effect of change in accounting principle - adoption
     of SOP 98-5, "Reporting on the Costs of Start-Up Activities"           -          -%           -           -%
                                                                     -------------------     ---------------------

NET INCOME (LOSS)                                                    $    136        0.8%    $   (467)       (2.7)%
                                                                     ===================     =====================

Number of restaurants:
     Open at beginning of period                                           51                      53
                                                                     ========                ========
     Open at end of period                                                 51                      53
                                                                     ========                ========
</TABLE>


<TABLE>
<CAPTION>
                                                                                 Twenty-Four Weeks Ended
                                                                     -----------------------------------------------
(Dollars in thousands)                                                   June 13, 1999              June 14, 1998
                                                                     ---------------------     ---------------------
<S>                                                                  <C>           <C>         <C>           <C>
NET SALES                                                            $ 33,932       100.0%     $ 33,558       100.0%

COSTS AND EXPENSES:
     Cost of sales                                                      8,295        24.4%        8,837        26.3%
     Restaurant operating expenses:
           Labor                                                       11,027        32.5%       11,041        32.9%
           Occupancy and other                                         10,517        31.0%       10,492        31.3%
     Depreciation and amortization                                      1,624         4.8%        1,669         5.0%
     General and administrative expenses                                2,491         7.4%        2,561         7.6%
                                                                     --------------------     ---------------------
           Total costs and expenses                                    33,954       100.1%       34,600       103.1%
                                                                     --------------------     ---------------------

OPERATING INCOME (LOSS)                                                  (22)        (0.1)%     (1,042)        (3.1)%

     Interest income                                                       25         0.1%           8            -%
     Interest expense                                                   (220)        (0.6)%        (80)        (0.2)%
                                                                     --------------------     ---------------------
     Interest income (expense), net                                     (195)        (0.5)%        (72)        (0.2)%
                                                                     --------------------     ---------------------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT
            OF CHANGE IN ACCOUNTING PRINCIPLE                           (217)        (0.6)%     (1,114)        (3.3)%

Cumulative effect of change in accounting principle - adoption
     of SOP 98-5, "Reporting on the Costs of Start-Up Activities"        (70)        (0.2)%          -            -%
                                                                     --------------------     ---------------------

NET INCOME (LOSS)                                                    $  (287)        (0.8)%   $ (1,114)        (3.3)%
                                                                     ====================     =====================

Number of restaurants:
     Open at beginning of period                                           51                       53
                                                                     ========                 ========
     Open at end of period                                                 51                       53
                                                                     ========                 ========
</TABLE>


                                       14
<PAGE>   15
                The following table presents the components of average operating
income (loss) 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 13, 1999       June 14, 1998        June 13, 1999        June 14, 1998
                                            ---------------    ----------------     ----------------     ----------------
<S>                                         <C>       <C>      <C>        <C>       <C>        <C>       <C>        <C>

NET SALES                                   $  336    100.0%   $  330     100.0%    $  665     100.0%    $  635     100.0%

COSTS AND EXPENSES:
     Cost of sales                              82     24.6%       87      26.5%       163      24.4%       167      26.3%
     Restaurant operating expenses:
           Labor                               107     31.8%      107      32.5%       216      32.5%       209      32.9%
           Occupancy and other                 102     30.4%      103      31.3%       206      31.0%       199      31.3%
     Depreciation and amortization              16      4.8%       16       4.9%        33       4.8%        32       5.0%
     General and administrative expenses        24      7.0%       24       7.2%        49       7.4%        48       7.6%
                                            ---------------    ----------------     ----------------     ----------------

           Total costs and expenses            331     98.6%      337     102.4%       667     100.1%       655     103.1%
                                            ---------------    ----------------     ----------------     ----------------

OPERATING INCOME (LOSS)                     $    5      1.4%   $   (7)     (2.4)%   $   (2)     (0.1)%   $  (20)     (3.1)%
                                            ===============    ================     ================     ================

 Average restaurants open                     51.0               52.7                 51.0                 52.8
                                            ======             ======               ======               ======
</TABLE>


Results of Operations:  Twelve Weeks Ended June 13, 1999
Compared to Twelve Weeks Ended June 14, 1998

                Net Sales. Net sales for the quarter ended June 13, 1999 were
$17,141,000, a decrease of $225,000, or 1.3%, from net sales of $17,366,000 for
the quarter ended June 14, 1998. The primary components of the net change in
sales were:

<TABLE>
<S>                                             <C>
Incremental sales from new restaurants          $ 159,000
Increase in comparable store sales                207,000
Absence of sales from closed restaurants         (591,000)
                                                ---------
                                                $(225,000)
                                                =========
</TABLE>

                The Company operated 51 restaurants in the second quarter of
1999 compared to 53 restaurants in the second quarter of 1998. Sales at the
Company's 47 comparable stores, which include restaurants open at least 18
months, increased 1.3% in the second quarter of 1999 versus the second quarter
of 1998. Comparable store guest counts decreased 5.9%, while the comparable
store average check increased 7.7% to $7.43, reflecting menu price increases and
a reduction in the level of discounting.

                Net sales per restaurant averaged $336,000 in the second quarter
of 1999, an increase of 1.8% over net sales per restaurant of $330,000 in the
second quarter of 1998.

                Costs and Expenses. Cost of sales (food and beverage costs) was
24.6% of sales in the second quarter of 1999 compared to 26.5% in the second
quarter of 1998, a decrease of 1.9% of sales. The decline is primarily the
result of the increased average check. In addition, food costs continued to
benefit from the Company's food program which manages food costs through an
efficient product rotation while maintaining a quality menu offering to guests,
from cost efficiencies experienced with new products and new production methods.

                Restaurant Operating Expenses. Restaurant operating expenses
(labor, occupancy and other) were 62.2% of sales in the second quarter of 1999
compared to 63.8% of sales in the second quarter of 1998, a decrease of 1.6% of
sales.


                                       15
<PAGE>   16
                Labor costs were 31.8% of sales in the second quarter of 1999
compared to 32.5% in the second quarter of 1998, a decrease of 0.7% of sales.
Labor costs as a percentage of sales benefited from the Company's higher average
check as well as labor savings from improved food production methods, offsetting
an increased average wage rate.

                Occupancy and other expenses were 0.9% of sales lower than last
year's second quarter. The decline is primarily the result of a reduction in
marketing expenditures and higher average sales on these mostly fixed costs.

                Depreciation and Amortization. Depreciation and amortization
expenses were 4.8% of sales in the second quarter of 1999 compared to 4.9% of
sales in the second quarter of 1998. This decrease is primarily a result of
higher average unit sales compared to the second quarter of 1998.

                General and Administrative Expenses. General and administrative
expenses were 7.0% of sales in the second quarter of 1999 compared to 7.2% of
sales in the second quarter of 1998. These expenses decreased $30,000 in the
second quarter of 1999 compared to the second quarter of 1998 as a result of
continued staffing and cost controls.

                Interest Income (Expense), Net. Interest income (expense), net
increased to $100,000 in the second quarter of 1999 compared to $43,000 in the
second quarter of 1998 due primarily to long-term borrowings in the current year
under the Company's new loan and security agreement and additional capital lease
obligations.

                Income Taxes. In the second quarter of 1999, the Company offset
currently taxable income with available net operating loss carryforwards and, as
a result, recorded no tax provision for its operating income. In the second
quarter of 1998, the Company recorded no tax benefit from its operating loss due
to valuation allowances against its net deferred tax assets.

Results of Operations:  Twenty-Four Weeks Ended June 13, 1999
Compared to Twenty-Four Weeks Ended June 14, 1998

                Net Sales. Net sales for the twenty-four weeks ended June 13,
1999 (first half of 1999) were $33,932,000, an increase of $374,000, or 1.1%,
from sales of $33,558,000 for the twenty-four weeks ended June 14, 1998 (first
half of 1998). The primary components of the net change in sales were:

<TABLE>
<S>                                             <C>
Incremental sales from new restaurants          $   480,000
Increase in comparable store sales                1,163,000
Absence of sales from closed restaurants         (1,268,000)
                                                -----------
                                                $   375,000
                                                ===========
</TABLE>

                The Company operated 51 restaurants in the first half of 1999
compared to 53 restaurants in the first half of 1998. Sales at the Company's 47
comparable stores, which include restaurants open at least 18 months, increased
3.8% in the first half of 1999 versus the first half of 1998. Comparable store
guest counts decreased 2.3%, while the comparable store average check increased
6.2% to $7.34, reflecting menu price increases and a reduction in the level of
discounting.

                Net sales per restaurant averaged $665,000 in the first half of
1999, an increase of 4.7% over net sales per restaurant of $635,000 in the first
half of 1998.

                Costs and Expenses. Cost of sales (food and beverage costs) was
24.4% of sales in the first half of 1999 compared to 26.3% in the first half of
1998, a decrease of 1.9% of sales. In addition to the increase in the Company's
average check, food and beverage costs per guest were lower in the first half of
1999 compared to the first half of 1998. Food costs continued to benefit from
the Company's food program which manages food costs through an efficient product


                                       16
<PAGE>   17
rotation while maintaining a quality menu offering to guests. In addition, food
costs benefited from cost efficiencies experienced with new products and new
production methods.

                Restaurant Operating Expenses. Restaurant operating expenses
(labor, occupancy and other) were 63.5% of sales in the first half of 1999
compared to 64.2% of sales in the first half of 1998, a decrease of 0.7% of
sales.

                Labor costs were 32.5% of sales in the first half of 1999
compared to 32.9% in the first half of 1998, a decrease of 0.4% of sales. Labor
costs as a percentage of sales benefited from the Company's higher average check
as well as labor savings from improved food production methods, offsetting the
negative impact of a higher average wage rate.

                Occupancy and other expenses were 0.3% of sales lower than the
prior year first half, primarily due to lower marketing costs and higher average
sales on these mostly fixed costs.

                Depreciation and Amortization. Depreciation and amortization
expenses were 4.8% of sales in the first half of 1999 compared to 5.0% of sales
in the first half of 1998. The decrease is primarily the result of higher
average store sales.

                General and Administrative Expenses. General and administrative
expenses were 7.4% of sales in the first half of 1999 compared to 7.6% of sales
in the first half of 1998. These expenses decreased $70,000 in the first half of
1999 compared to the first half of 1998 as a result of continued staffing and
cost controls.

                Interest Income (Expense), Net. Interest income (expense), net
increased to $195,000 in the first half of 1999 compared to $72,000 in the first
half of 1998 due primarily to long-term borrowings in the current year under the
Company's new loan and security agreement and additional capital lease
obligations.

                Income Taxes. The Company recorded no tax benefit from its
operating losses in the first half of 1999 and 1998 due to valuation allowances
against its net deferred tax assets.

                Cumulative Effect of Change in Accounting Principle. In 1998,
the American Institute of Certified Public Accountants issued Statement of
Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up Activities",
which requires companies to expense the costs of start-up activities and
organization costs as incurred. The Company adopted SOP 98-5 effective the
beginning of fiscal 1999 and expensed $70,000 of unamortized pre-opening costs
at the time of adoption. The Company's pre-opening costs consist of the direct
costs associated with opening a new restaurant, including the costs of hiring
and training the initial workforce. The Company accounted for the adoption of
SOP 98-5 as the cumulative effect of a change in accounting principle.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                The Company is exposed to interest rate risk primarily through
its borrowing activities. The Company has not used derivative financial
instruments to hedge such risks. There is inherent roll-over risk for borrowings
as they mature and are renewed at current market rates. The extent of this risk
is not quantifiable or predictable because of the variability of future interest
rates and business financing requirements. If market rates were to increase
immediately by 10 percent from levels at June 13, 1999, the fair value of the
Company's borrowings would not be materially affected as borrowings are
primarily subject to variable interest rates.


                                       17
<PAGE>   18
                                  PART II. OTHER INFORMATION


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

                The Company held its Annual Meeting of Stockholders on May
20,1999. The stockholders voted on proposals on:

                (1) The election of two Class I 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:

                Nominee                   In Favor                 Withheld
                -------                   --------                 --------

                Vern O. Curtis            4,710,967                270,302
                Charles L. Boppell        4,904,287                 76,982


                (2) The appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 26, 1999. The
proposal was approved by the following vote:

                For                       Against                  Abstain
                ---                       -------                  -------

                4,958,587                 12,306                   10,376

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 13, 1999.


                                       18
<PAGE>   19
                                   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
                              Senior Vice President and Chief Financial Officer
                              (Principal Financial and Accounting Officer)


    Dated:  July 26, 1999


                                       19
<PAGE>   20
                           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


                                       20
<PAGE>   21
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

10.33     (13)      Amendment to Loan and Security Agreement dated May 27, 1998
                    with Silicon Valley Bank

10.34     (13)(3)   Consulting Agreement with Charles A. Lynch dated April 17,
                    1998

10.35     (14)      Amendment to Loan and Security Agreement dated October 28,
                    1998 with Silicon Valley Bank

10.36     (14)      Loan and Security Agreement dated December 29, 1998 with
                    FINOVA Capital Corporation

10.37     (14)(3)   Form of Severance Agreement with Senior Vice Presidents

10.38     (14)(3)   Officer Incentive Plan for fiscal year 1999

27        (7)       Financial Data Schedule

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

(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.


                                       21
<PAGE>   22
(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.

(13)    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 14, 1998.

(14)    Incorporated by reference from the Exhibits with corresponding numbers
        filed with the Company's Annual Report on Form 10-K/A for the year ended
        December 27,1998.


                                       22