UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10KSB

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

     For the fiscal year ended September 28, 1996
                                                               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 1-6836

                          Flanigan's Enterprises, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Florida                                               59-0877638
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(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

2841 Cypress Creek Road, Fort Lauderdale, Florida                 33309
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(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code, (954) 974-9003

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.10 Par Value                    American Stock Exchange
-----------------------------                    -----------------------
Title of each class                               Name of each exchange
                                                  on which registered

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (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. Yes X No

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant was $2,831,326 as of December 19, 1996.

There were 907,000  shares of the  Registrant's  Common Stock ($0.10) Par Value)
outstanding as of September 28, 1996.

                       DOCUMENTS INCORPORATED BY REFERENCE 

Information  contained in the  Registrant's  1997 definitive  proxy material has
been  incorporated  by  reference in Items 10, 11, 12 and 13 of Part III of this
Annual Report on Form 10-KSB.

                         Exhibit Index Begins on Page 32
                                        1
<PAGE>
                                     PART I

Item 1.  Business.


General

         Flanigan's  Enterprises,  Inc.,  (the  "Company")  owns and/or operates
restaurants with lounges,  package liquor stores and an  entertainment  oriented
club (collectively the "units").  At September 28, 1996, the Company operated 14
units,  including one unit operated by the Company  pursuant to Court Order, and
had  interests  in seven  additional  units  which have been  franchised  by the
Company.  The table  below sets out the  changes in the type and number of units
being operated.
<TABLE>
<CAPTION>
                                                 FISCAL     FISCAL
                                                  YEAR       YEAR      NOTE
TYPES OF UNITS                                    1995       1996     NUMBER
--------------                                    ----       ----     ------
<S>                                                <C>       <C>       <C>                                
Combination package and restaurant ........         4         4
Restaurant only ...........................         5         5        (1)(2)
Package store only ........................         1         4        (3)(4)(5)
Lounge only ...............................         1         0        (6)
Combination package and lounge ............         2         0        (4)
Clubs .....................................         2         1        (7)

TOTAL - Company operated units ............        15        14

FRANCHISED - units ........................         9         7        (3)(8)
</TABLE>

Notes:

         (1) During the fiscal year 1995, the Company became the owner,  through
foreclosure,  of a lounge previously sold by the Company,  which lounge had been
operated by a wholly owned subsidiary of the Company as a receiver  appointed by
the Court since fiscal year 1994.  The Company  tried to operate this store as a
restaurant under its "Flanigan's Cafe" concept, but since it was not possible to
operate it up to the same standards of the Company's other restaurants, the unit
was closed April 10,  1996.  During the fourth  quarter,  a contract was entered
into by the landlord for the sale of the real property and  improvements of this
location.  Simultaneously therewith, a separate contract was entered into by the
Company for the sale of its liquor license to the same buyer. At closing,  which
occurred  during the first quarter of fiscal 1997, the Company's  lease for this
store was vacated.

         (2) Also  during the first  quarter of fiscal  year 1996,  the  Company
began  operating  a  restaurant  under the  "Flanigan's  Seafood  Bar and Grill"
servicemark as general partner and fifty percent owner of a limited  partnership
established for such purpose.

         (3)  During  the  first  quarter  of fiscal  year  1996 one  franchisee
terminated  its  franchise  agreement  and returned its  franchised  unit to the
Company. The Company immediately began operating the package liquor store of the
returned franchise unit.

                                        2

<PAGE>
         (4) During the second  quarter of fiscal year 1996 the  Company  closed
its last two lounges at combination  package and lounge units,  but continues to
operate  the  package  liquor  stores.  The two  lounges  were  only  marginally
profitable, with declining revenues.

         (5) During  fiscal year 1995,  the Company was granted  possession of a
store  previously  sold by the Company and began  operating  the package  liquor
store. The Company continues to operate this unit pursuant to Court Order.

         (6)  During the second  quarter of fiscal  year 1996,  the lease on one
unit operated by the Company as a lounge only expired and the Company was unable
to renew the same upon suitable terms.

         (7) Through  September  20, 1996,  the Company  operated its  remaining
Pennsylvania  club,  (Store  #850,  King of  Prussia,  Pennsylvania),  which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company  acted as  general  partner.  The lease for this unit had only  thirteen
months  remaining,  with no more  renewal  options and  revenues  were down as a
result  of  competition  from  some  expensive  new  clubs  constructed  on  the
waterfront.  An opportunity arose to sell the lease,  leasehold improvements and
liquor license to Dick Clark Restaurants,  Inc. With the approval of the Limited
Partners,  the sale of the unit was  consummated  on  September  20,  1996 for a
purchase  price of  $500,000.  The  Company had one club (in  Atlanta,  Georgia)
remaining at fiscal yearend 1996.

         (8) Also during fiscal year 1996 one franchise  expired and the Company
declined  to offer the  franchisee  the option of  executing  its new  franchise
agreement.

         During the first  quarter of fiscal  1996,  one  additional  franchisee
agreed to a termination of its Franchise  Agreement and while its restaurant did
not formerly operate under the "Flanigan's  Seafood Bar and Grill"  servicemark,
the franchisee  agreed to  de-identify  the same to avoid any confusion with the
Company's  restaurants.  The franchisee  continued to operate its package liquor
store under a new Franchise  Agreement with the Company which included a license
to use the servicemark "Big Daddy's  Liquors" only.  During the third quarter of
fiscal  year  1996,  this  franchisee  notified  the  Company  of its  intent to
terminate the new Franchise Agreement and return the franchised unit,  including
restaurant, to the Company.

         In order to induce the  franchisee to continue  operating its franchise
through  the end of the fiscal  year,  the  Company  agreed to reduce the weekly
sublease rent and suspend all weekly  payments on account of its purchase  money
chattel mortgage. In the interim, the Company determined that the cost necessary
to convert this unit to a "Flanigan's Seafood Bar and Grill" restaurant exceeded
the funds available to the Company and on September 30, 1996,  subsequent to the
end of fiscal year 1996,  the franchise  was sold to a related  third party,  in
lieu of its return to the  Company.  The  initial  shareholder  interest  of all
officers and directors,  which was comprised of the Chairman and a member of his
family,  represented one hundred percent of the initial invested capital. It was
also agreed that the Company  would manage the  franchise  for the related third
party, pursuant to a management agreement. Subsequent to the closing of the sale
of the franchise, the

           


                                        3

<PAGE>
Company accepted the offer of another related  franchisee,  who is also a member
of the Board of  Directors  of the  Company,  to pay the sum of $150,000 for the
right to buy this franchise from the related third party,  renovate the same and
act as manager. As part of this transaction,  the Company agreed to continue the
reduced sublease rent, the waiver of any franchise  royalties and the suspension
of mortgage payments through March, 1997.  Thereafter,  the Company will receive
the same  weekly  payment as  previously  paid by the former  franchisee  during
fiscal year 1996. It is also anticipated that the Company will be an investor in
the  franchise,  as will other  related  parties,  including  but not limited to
officers, directors and/or their families.

         All of the Company's  package liquor stores,  restaurants and clubs are
operated on leased properties. As a result of significant escalations of rent on
certain of such leased  properties and on leased  properties that were not being
operated by the Company,  on November 4, 1985 the  Company,  not  including  its
subsidiaries,  filed a Voluntary  Petition in the United States Bankruptcy Court
for the Southern  District of Florida seeking to reorganize  under Chapter 11 of
the Federal Bankruptcy Code. On May 5, 1987 the Company's Plan of Reorganization
as amended and modified ("the Plan") was confirmed by the Bankruptcy  Court.  On
December 28, 1987 the Company was officially  discharged  from  bankruptcy.  See
Note  2 to  the  consolidated  financial  statements  for a  discussion  of  the
bankruptcy  proceedings to date and Item 7 for a discussion of the effect of the
bankruptcy proceedings herein.

         The Company was  incorporated  in Florida in 1959 and operated in South
Florida as a chain of small cocktail lounges and package liquor stores. By 1970,
the Company had established a chain of "Big Daddy's"  lounges and package liquor
stores between Vero Beach and Homestead, Florida. From 1970 to 1979, the Company
expanded its package liquor store and lounge operations  throughout  Florida and
opened clubs in five other "Sun Belt" states. In 1975, the Company  discontinued
most of its package  store  operations  in Florida  except in the South  Florida
areas of Dade,  Broward,  Palm Beach and Monroe  Counties.  In 1982 the  Company
expanded its club operations into the Philadelphia, Pennsylvania area as general
partner of several limited partnerships organized by the Company. In March 1985,
the Company began franchising its package liquor stores and lounges in the South
Florida  area.  See Note 10 to the  consolidated  financial  statements  and the
discussion of franchised units on page 5.

         During fiscal year 1987,  the Company began  renovating  its lounges to
provide full restaurant food service, and subsequently  renovated and added food
service to most of its lounges.  The restaurant  concept,  as the Company offers
it,  has been so well  received  by the  public  that food  sales now  represent
approximately 74.9% of total restaurant sales.

         The Company's  package liquor stores  emphasize high volume business by
providing  customers  with a wide  variety  of  brand  name  and  private  label
merchandise at discount  prices.  The Company's  restaurants  provide  efficient
service of alcoholic  beverages  and full food service with  abundant  portions,
reasonably priced, served in a relaxed friendly atmosphere.



                                                                





                                       4
<PAGE>
         The  Company's  principal  sources of revenue  are the sale of food and
alcoholic beverages.

         The Company  conducts its  operations  directly and through a number of
wholly owned subsidiaries. The operating subsidiaries are as follows:
<TABLE>
<CAPTION>
     SUBSIDIARY                                      STATE OF INCORPORATION
     ----------                                      ----------------------
<S>                                                          <C>
Flanigan's Management Services, Inc.                         Florida
Flanigan's Enterprises. Inc. of Georgia                      Georgia
Seventh Street Corp.                                         Florida
Big Daddy's #48 Inc.                                         Florida
Flanigan's Enterprises, Inc. of Pa                           Pennsylvania
</TABLE>
         The income derived and expenses incurred by the Company relating to the
aforementioned  subsidiaries are  consolidated for accounting  purposes with the
income and expenses of the Company in the consolidated  financial  statements in
this Form 10-KSB.

         The  Company's  executive  offices are located in a leased  facility at
2841 Cypress Creek Road, Fort Lauderdale, Florida 33309 and its telephone
number at such address is (954) 974-9003.

Corporate Reorganization

         As  noted  in  Note  2 to the  consolidated  financial  statements,  on
November 4, 1985, the Company,  not including any of its  subsidiaries,  filed a
Voluntary  Petition  in the  United  States  Bankruptcy  Court for the  Southern
District  of  Florida  seeking to  reorganize  under  Chapter 11 of the  Federal
Bankruptcy  Code. The primary purposes of the petition were (1) to reject leases
which were  significantly  above market rates and (2) to reject leases on closed
units which had been repossessed by, or returned to the Company.  On May 5, 1987
the Company's  Plan of  Reorganization  as amended and modified was confirmed by
the Bankruptcy Court. On December 28, 1987 the Company was officially discharged
from  bankruptcy.  See Note 2 to the  consolidated  financial  statements  for a
discussion of the bankruptcy  proceedings to date and Item 7 for a discussion of
the effect of the bankruptcy proceedings herein.

Financial Information Concerning Industry Segments

         The Company's business is carried out principally in two segments:  the
restaurant  segment,  which was the  restaurant  and lounge segment prior to the
closing of the remaining lounges during fiscal year 1996, and the package liquor
store segment.

         Financial information broken into these two principal industry segments
for the two fiscal years ended  September 30, 1995 and September 28, 1996 is set
forth in the consolidated financial statements which are attached hereto, and is
incorporated herein by reference.

The Company's Package Liquor Stores and Restaurants

         The Company's package liquor stores are operated under the "Big Daddy's
Liquors"  servicemark  and the  Company's  restaurants  are  operated  under the


                                       5
<PAGE>
servicemark  "Flanigan's  Seafood Bar and Grill".  The Company's  package liquor
stores  emphasize  high  volume  business  by  providing  customers  with a wide
selection of brand name and private label liquors,  beer and wines.  The Company
has a policy of meeting  the  published  sales  prices of its  competitors.  The
Company provides extensive sales training to its package liquor store personnel.
Most  package  liquor  stores are open six or seven days a week from  9:00-10:00
a.m. to 9:00-10:00 p.m.,  depending upon demand and local law. A small number of
the Company's units have "night windows" with extended evening hours.

         The  Company's  restaurants  offer  full  food and  alcoholic  beverage
service  with  approximately  74.9% of  their  sales  being  food  items.  These
restaurants  are operated under the  "Flanigan's  Seafood Bar and Grill" service
mark.  Although these restaurants provide a neighborhood  atmosphere,  they have
the degree of  standardization  prevalent in casual  dining  restaurant  chains,
including menu. The interior decor is nautical with numerous fishing and boating
pictures and decorations.  Drink prices may vary between locations to meet local
conditions.  Food prices are standardized.  The restaurants'  hours of operation
are from 11:00 a.m. to 1:00 - 5:00 a.m. The Company  continues to develop strong
customer  recognition  of its  "Flanigan's  Seafood Bar and Grill"  service mark
through very competitive pricing and efficient and friendly service.

         The Company's  package liquor stores and  restaurants  were designed to
permit minor modifications  without significant capital  expenditures.  However,
from time to time the Company is required to redesign and refurbish its units at
significant cost. See Item 2, Properties and Item 7 for further discussion.

Franchised Package Liquor Stores and Lounges

         In March of 1985, the Company's  Board of Directors  approved a plan to
sell, on a franchise basis, up to 26 of the Company's  package liquor stores and
lounges in the South Florida area.  Under the terms of the franchise  plan,  the
Company  sold  the  liquor  license,  furniture,  fixtures  and  equipment  of a
particular  unit,  entered  into a  sublease  for the  business  premises  and a
franchise  agreement,  whereby  the  franchisee  licensed  the  right to use the
Company's  servicemarks  "Big Daddy's  Liquors" and "Big Daddy's Lounges" in the
operation of its business.  Investors  purchasing units were required to execute
ten year franchise  agreements  with a thirty day  cancellation  provision.  The
franchise agreement also provided for a royalty to the Company, in the amount of
1% of gross sales,  plus a  contribution  to  advertising,  in an amount between
1-1/2 - 2% of gross sales. In most cases,  the sublease  agreement  provided for
rent in  excess  of the  amount  paid by the  Company,  in order to  realize  an
additional return of between 2% - 3% of gross sales,  depending upon a number of
factors,  including but not limited to the  performance of the  particular  unit
sold and its expected sales growth.

         As of the end of fiscal year 1986, ten units had been franchised.  Four
of these units were  franchised  to members of the family of the Chairman of the
Board. The Company had limited response to its franchise  offering and suspended
its franchise plan at the end of fiscal year 1986.



                                         





                                       6
<PAGE>
         During  fiscal  year  1988,  two  franchisees  (one  of  whom is on the
Company's Board of Directors) exercised the thirty day cancellation clause under
the franchise  agreement and related  documents  and returned  their  franchised
units to the  Company.  No gain or loss was  recognized  on these  returns.  The
Company has been profitably operating these two units.

         During fiscal year 1990,  the Company  completed a foreclosure  to take
one franchise back,  reducing the number of franchised units to seven. This unit
was sold  pursuant to a private  offering to a  Subchapter S  corporation  whose
president  was the Chairman and whose  investors  included  three  directors and
members of the Chairman's  family.  This unit was managed by the Company through
the end of fiscal year 1992. In the first quarter of fiscal year 1993, the Board
of  Directors  agreed to  purchase  this unit  from the group of  investors.  In
purchasing  this unit,  the Board of  Directors  determined  that the  projected
profitability  would provide a fair return on investment,  whereas  without this
purchase,  the Company would only have received its 4% management  fee until the
Subchapter S corporation received its full investment back from this unit.

         During  fiscal  year  1991,  the  Company  sold one unit to the  unit's
manager,  an unaffiliated  third party,  who had been operating it pursuant to a
management  agreement  since 1987. This unit consisted of a package liquor store
and  restaurant,   which  restaurant  was  not  operating  under  the  Company's
"Flanigan's Seafood Bar and Grill" service mark. The Company also entered into a
franchise  agreement  with the  manager,  licensing  the use of the "Big Daddy's
Liquors"  service mark for the liquor package store in exchange for a royalty in
the amount of 1% of gross  sales.  Although  the Company  counted this unit as a
franchise, the Company did not consider this transaction a part of its franchise
plan.  During the fiscal  year 1995,  the manager  executed  the  Company's  new
franchise  agreement for the operation of his restaurant  under the  "Flanigan's
Seafood Bar and Grill" service mark, as more fully described  below. At the same
time the former  manager also  executed a new  franchise  agreement for a second
restaurant  opened  since the  purchase of the unit from the Company  during the
fiscal year 1991.

         During  fiscal year 1992,  one  unaffiliated  franchisee  expressed  an
interest in selling  his unit or  returning  it to the  Company  pursuant to the
terms of its  franchise  agreement  and  related  documents.  As a result of the
substantial   investment  necessary  to  upgrade  and  renovate  this  unit,  an
affiliated  group of investors  formed a Subchapter S corporation  and purchased
this unit from the  franchisee.  The  shareholder  interest of all  officers and
directors represents 42% of the total invested capital. The shareholder interest
of the Chairman's  family  represents an additional  47.5% of the total invested
capital. The Company continues to receive the same royalties,  rent and mortgage
payments as it had received from the unaffiliated franchisee.

         During  fiscal  year  1996,  one  franchisee  exercised  the thirty day
cancellation  clause under the  franchise  agreement  and related  documents and
returned its  franchised  unit to the  Company.  The  franchisee  had operated a
package liquor store and lounge under the "Big Daddy's" servicemark. The Company
has been  profitably  operating the package liquor store of the franchised  unit
but has not reopened the lounge.  The lease agreement for the business  premises
expired on December 31, 1995 and the Company occupies





                                                                
                                       7
<PAGE>
the same on an oral month to month lease  agreement  paying its prorata share of
the real  property  taxes  monthly and insuring the  property.  Either party may
terminate  the oral month to month  lease  agreement  upon  seven  days  advance
written notice.

         During fiscal year 1996, one franchise expired and the Company declined
to offer the franchisee the option of executing its new franchise agreement.

         During the third  quarter of fiscal  year  1996,  another  unaffiliated
franchisee  expressed  its  intent  to  terminate  its new  franchise  agreement
(package liquor store only) and to return its unit, including restaurant, to the
Company.  In order to induce the franchisee to continue  operating its franchise
through  the end of the fiscal  year,  the  Company  agreed to reduce the weekly
sublease rent and suspend all weekly  payments on account of its purchase  money
chattel mortgage. In the interim, the Company determined that the cost necessary
to convert this unit to a "Flanigan's Seafood Bar and Grill" restaurant exceeded
the funds available to the Company and on September 30, 1996,  subsequent to the
end of fiscal year 1996,  the franchise  was sold to a related  third party,  in
lieu of its return to the  Company.  The  initial  shareholder  interest  of all
officers and  directors,  which was comprised of the Chairman and a member of is
family,  represented one hundred percent of the initial invested capital. It was
also agreed that the Company  would manage the  franchise  for the related third
party, pursuant to a management agreement. Subsequent to the closing of the sale
of the franchise,  the Company accepted the offer of another related franchisee,
who is also a member of the Board of Directors of the Company, to pay the sum of
$150,000  for the right to buy this  franchise  from the  related  third  party,
renovate the same and act as manager.  As part of this transaction,  the Company
agreed to  continue  the  reduced  sublease  rent,  the waiver of any  franchise
royalties  and  the  suspension  of  mortgage  payments  through  March,   1997.
Thereafter,  the Company will receive the same weekly payment as previously paid
by the former  franchisee  during fiscal year 1996. It is also  anticipated that
the Company will be an investor in the franchise, as will other related parties,
including but not limited to officers, directors and/or their families.

         The units that continue to be franchised are doing well and continue to
generate income for the Company.  Many of the units that were originally offered
as  franchises  have been sold  outright  and are no longer  being  operated  as
Flanigan's or Big Daddy's stores.

Franchised Restaurants

         During  fiscal  year 1995,  the  Company  completed  its new  franchise
agreement for a franchisee to operate a restaurant under the "Flanigan's Seafood
Bar and Grill"  service mark  pursuant to a license  from the  Company.  The new
franchise  agreement  was drafted  jointly with  existing  franchisees  with all
modifications  requested  by  the  franchisees  incorporated  therein.  The  new
franchise  agreement  provides  the Company  with the ability to maintain a high
level of food  quality  and  service at its  franchised  restaurants,  which are
essential  to a successful  franchise  operation.  A  franchisee  is required to
execute a new  franchise  agreement for the balance of the term of its lease for
the business premises,  extended by the franchisee's  continued occupancy of the







                                       8
<PAGE>
business premises thereafter,  whether by lease or ownership.  The new franchise
agreement  provides for a royalty to the Company in the amount of  approximately
3% of gross sales, plus a contribution to advertising in an amount between 1-1/2
to 3% of gross sales. In most cases,  the Company does not sublease the business
premises to the  franchisee  and in those  cases  where it does,  the Company no
longer receives rent in excess of the amount paid by the Company.

         As of the end of fiscal year 1996, all existing franchisees who operate
restaurants  under the  "Flanigan's  Seafood Bar and Grill" or other  authorized
service marks have executed new franchise agreements.

         During  the first  quarter  of fiscal  year  1996,  the  Company  began
operating a restaurant under the "Flanigan's Seafood Bar and Grill" service mark
as general partner and fifty percent owner of a limited partnership  established
for  such  purpose.   The  limited  partnership   agreement  gives  the  limited
partnership the right to use the "Flanigan's Seafood Bar and Grill" service mark
while the Company  acts as general  partner  only.  No franchise  agreement  was
executed and the Company does not consider this unit one of its franchises.

Clubs

         At the  beginning of fiscal 1991,  the Company  operated  entertainment
oriented clubs in the Philadelphia, Pennsylvania area, and one in Georgia.

         The club  operated by the Company in Florida  closed in December  1990,
upon the termination of its lease agreement for the business premises.

         In May 1991, the Company voluntarily closed its club in Marina Del Rey,
California  due to the  continuing  harassment  and  discrimination  by the  Los
Angeles Police Department. The Company sought relief through the Trial Court and
the California Supreme Court, but did not prevail.

         During fiscal year 1991, the Company also negotiated its resignation as
General  Partner of CIC Investors  #870,  Ltd., the owner and operator of a club
located at 532 S. Second Street, Philadelphia, Pennsylvania, and surrendered the
operation of the club to CR Management  Enterprises,  Inc. on July 26, 1991. The
Company's  resignation as General  Partner was effective  January 26, 1992. As a
part of its agreement,  the Company was  responsible  for all obligations of the
limited  partnership  accruing prior to July 26, 1991,  which are now limited to
insured personal injury claims arising prior to that date, which have been filed
in court.  During  the fiscal  year  1994,  the  Company  learned  that the club
operated by CIC  Investors  #870,  Ltd.  closed and the limited  partnership  no
longer had any assets.  Furthermore,  in the defense of several of these actions
the Company did not receive the  cooperation of the successor  general  partner,
nor the landlord of the  business  premises,  and as a result,  the Company will
only defend  actions and pay  judgments  and/or  settlements  which  include the
Company and/or any of its subsidiaries.  An accrual for the Company's  estimated
liability  on these  insured  liability  claims is included in the  consolidated
balance sheets in the caption "Accrued and Other Current Liabilities".



                                                                





                                       9
<PAGE>
         During  fiscal  year  1992,  the  Company,  as  General  Partner of CIC
Investors  #880 Ltd.,  negotiated  with the landlord to terminate  the lease for
Store #880,  Granite  Run Mall,  Media,  Pennsylvania  and the club closed as of
December 31, 1991.  The liquor  license  formerly used at the club,  which had a
value of approximately  $100,000,  was surrendered as partial  consideration for
the termination of the lease. In addition,  the Company agreed to pay all rental
arrearages  through  October  31,  1991  ($84,318),  payable  $10,000  upon  the
execution of a lease termination  agreement,  an additional  $10,000 thirty days
thereafter  and the balance in thirty-six  monthly  payments of $1,787,  without
interest.  The balance of the rental  arrearages were paid in full during fiscal
year 1995.

         As of the end of  fiscal  year  1995,  the  Company  owned  one club in
Atlanta Georgia, which was operated by an unaffiliated third party, as discussed
below. In addition, until September 20, 1996, the Company operated its remaining
Pennsylvania  club,  (Store  #850,  King of  Prussia,  Pennsylvania),  which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company  acted as  general  partner.  The lease for this unit had only  thirteen
months  remaining,  with no more renewal  options,  and revenues  were down as a
result  of  competition  from  some  expensive  new  clubs  constructed  on  the
waterfront.  An opportunity arose to sell the lease,  leasehold improvements and
liquor license to Dick Clark Restaurants,  Inc. With the approval of the Limited
Partners,  the sale of the unit was  consummated  on  September  20,  1996 for a
purchase  price of  $500,000.  The  Company had one club (in  Atlanta,  Georgia)
remaining at fiscal yearend 1996.

Operation of Units by Unaffiliated Third Parties

         During  fiscal  year  1992,  the  Company  entered  into  a  Management
Agreement  with Mardi Gras  Management,  Inc. for the operation of the Company's
club in Atlanta,  Georgia  through the balance of the initial term of the lease,
unless sooner  terminated by Mardi Gras Management,  Inc. upon thirty days prior
written notice,  with or without cause. Mardi Gras Management,  Inc. assumed the
management of this club  effective  November 1, 1991 and is currently  operating
the  club  under an  adult  entertainment  format.  Pursuant  to the  Management
Agreement, the Company receives a monthly owner's fee of $12,500.

Operations and Management

         The Company emphasizes  systematic operations and control of all units.
Each  unit has its own  manager  who is  responsible  for  monitoring  inventory
levels, supervising sales personnel, food preparation and service in restaurants
and  generally  assuring  that the unit is managed in  accordance  with  Company
guidelines  and  procedures.  The Company has in effect an incentive  cash bonus
plan for its managers and salespersons based upon various performance  criteria.
The  Company's  operations  are  supervised  by  area  supervisors.   Each  area
supervisor  supervises  the  operations of the units within his or her territory
and visits those units to provide  on-site  management  and  support.  There are
three area  supervisors  responsible  for  package  store,  restaurant  and club
operations in specific geographic districts.



                                                                




                                       10
<PAGE>
         All  of the  Company's  managers  and  salespersons  receive  extensive
training in sales techniques.

         The Company arranges for independent third parties,  or "spotters",  to
inspect  each unit in order to evaluate  the unit's  operations,  including  the
handling of cash transactions.

Purchasing and Inventory

         The package liquor  business  requires a constant  substantial  capital
investment in inventory in the units. Liquor inventory purchased can normally be
returned only if defective or broken.

         All  Company  purchases  of  liquor  inventory  are  made  through  its
purchasing  department  from the  Company's  corporate  headquarters.  The major
portion of inventory is purchased under individual purchase orders with licensed
wholesalers and distributors who deliver the merchandise  within one to two days
of the  placing of an order.  Frequently,  there is only one  wholesaler  in the
immediate  marketing  area with an exclusive  distributorship  of certain liquor
product lines.

         Substantially  all of the Company's  liquor inventory is shipped by the
wholesalers  or  distributors  directly  to the  Company's  units.  The  Company
significantly  increases  its inventory  prior to Christmas,  New Year's Eve and
other holiday periods.

         Pursuant  to Florida  law,  the Company  pays for its liquor  purchases
within ten days of delivery.

         All  negotiations  with food  suppliers  are  handled by the  Company's
purchasing department at the Company's corporate headquarters. This ensures that
the best  quality and prices  will be  available  to each unit.  Orders for food
products are prepared by each unit's kitchen  manager and reviewed by the unit's
general  manager  before being placed with the approved  vendor.  Merchandise is
delivered by the supplier directly to each unit. Orders are placed several times
a week to insure product freshness.
Food inventory is primarily paid for monthly.

Government Regulation

         The  Company  is  subject  to  various  federal,  state and local  laws
affecting its business.  In  particular,  the units  operated by the Company are
subject to licensing and regulation by the alcoholic  beverage control,  health,
sanitation,  safety and fire  department  agencies in the state or  municipality
where located.

         Alcoholic  beverage control  regulations  require each of the Company's
units to apply to a state  authority  and,  in  certain  locations,  county  and
municipal  authorities,  for a license or permit to sell alcoholic  beverages on
the premises.  In some  instances,  a unit may be required to apply for separate
licenses  in order to sell beer and wine,  to sell  mixed  drinks and to provide
facilities for dancing or live entertainment.

         In the State of  Florida,  which  represents  the vast  majority of the
total  liquor  licenses  held by the  Company,  liquor  licenses are issued on a



                                       11
<PAGE>
"quota  license"  basis.  Quota licenses are issued on the basis of a population
count established from time to time under the latest applicable census.  Because
the total number of liquor  licenses  available  under a quota license system is
limited,  the  licenses  have  purchase  and resale  value based upon supply and
demand in the  particular  areas in which they are  issued.  The  Florida  quota
licenses  held by the Company  allow the sale of liquor for  on-premises  and/or
off-premises  consumption.  In the other  states in which the Company  operates,
licensed   establishments  do  not  have  quota   restrictions  for  on-premises
consumption  and such  licenses are issued to any applicant who meets all of the
state and local licensing  requirements based upon extensive license application
filings and investigations of the applicant.

         All licenses  must be renewed  annually and may be revoked or suspended
for cause at any time. Suspension or revocation may result from violation by the
licensee  or its  employees  of any  federal,  state or local law or  regulation
pertaining to alcoholic beverage control. Alcoholic beverage control regulations
relate to  numerous  aspects of the daily  operations  of the  Company's  units,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale  purchasing,  inventory control,  handling,  storage and dispensing of
alcoholic  beverages,  internal  control and  accounting and collection of state
alcoholic beverage taxes.

         As the sale of  alcoholic  beverages  constitutes  a large share of the
Company's  revenue,  the failure to receive or retain, or a delay in obtaining a
liquor  license in a particular  location could  adversely  affect the Company's
operations  in that  location and could impair the  Company's  ability to obtain
licenses elsewhere.

         The  Company is subject  in  certain  states to "dram  shop" or "liquor
liability" statutes,  which generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served
alcoholic  beverages to such person.  See Item 1,  Insurance,  and Item 3, Legal
Proceedings, for further discussion.

         The Company maintains a continuous program of training and surveillance
from its corporate  headquarters to assure compliance with all applicable liquor
laws and regulations.  During the fiscal year ended September 28, 1996,  through
the present time, the Company has had no significant  pending matters  initiated
by the beverage authorities concerning any of the Company's licenses which might
be expected to result in a revocation of a liquor  license or other  significant
actions against the Company.

         The Company is not aware of any statute,  ordinance, rule or regulation
under  present  consideration  which would  significantly  limit or restrict its
business as now conducted.  However,  in view of the number of  jurisdictions in
which the Company does business,  and the highly  regulated nature of the liquor
business,  there can be no  assurance  that  additional  limitations  may not be
imposed in the future, even though none are presently anticipated.

         Federal  and state  environmental  regulations  have not had a material
effect on the Company's operation.



                                                               



                                       12
<PAGE>
Insurance

         The  Company has  general  liability  insurance  which  incorporates  a
semi-self-insured  plan under  which the  Company  assumes  the full risk of the
first $50,000 of exposure per  occurrence.  The Company's  insurance  carrier is
responsible  for  $1,000,000   coverage  per  occurrence   above  the  Company's
self-insured deductible, up to a maximum aggregate of $2,000,000,  per year. The
Company is self-insured against liability claims in excess of $1,000,000.

         The Company's  general  policy is to settle only those  legitimate  and
reasonable  claims  asserted  and to  aggressively  defend  and go to trial,  if
necessary,  on frivolous and unreasonable  claims. The Company has established a
select  group of  defense  attorneys  which  it uses in  conjunction  with  this
program.  Under the Company's current liability  insurance policy,  any expenses
incurred by the Company in defending a claim, including adjusters and attorney's
fees, are a part of the $50,000 self-insured retention.

         An accrual for the Company's estimated liability on liability claims is
included in the  consolidated  balance sheets in the caption  "Accrued and Other
Current Liabilities".  A significant  unfavorable judgment or settlement against
the  Company  in  excess  of  its  liability  insurance  coverage  could  have a
materially adverse effect on the Company.

         Through the end of the 1990 fiscal year,  the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows  persons  injured by an "obviously  intoxicated  person" to bring a civil
action  against the business which served  alcoholic  beverages to an "obviously
intoxicated  person".  Florida  has  restricted  its dram  shop law by  statute,
permitting persons injured by an "obviously intoxicated person" to bring a civil
action  against the business which served  alcoholic  beverages to a minor or an
individual known to be habitually addicted to alcohol. Dram shop claims normally
involve traffic  accidents and the Company generally does not learn of dram shop
claims  until after a claim is filed and the  Company  then  vigorously  defends
these  claims on the  grounds  that its  employees  did not serve an  "obviously
intoxicated  person".  Damages in most dram shop claims are substantial.  During
fiscal year 1996, the Company favorably settled the two dram shop cases,  (three
dram shop claims), relating to one incident filed against the Company in Florida
during  fiscal years 1994 and 1995.  Subsequent  to the end of fiscal year 1996,
the Company favorably  settled its remaining  uninsured dram shop claim asserted
against one of the limited  partnerships  in  Pennsylvania  and the Company,  as
general  partner.  At the present  time,  there are no dram shop claims  pending
against the Company.

Competition and the Company's Market

         The liquor and the  hospitality  industry is highly  competitive and is
often affected by changes in taste and entertainment trends among the public, by
local,  national,  and economic  conditions  affecting  spending habits,  and by
population and traffic  patterns.  The Company believes that the principal means
of competition  among package  liquor stores is price and that, in general,  the
principal means of competition  among  restaurants  and clubs include  location,
type and quality of facilities,  type and quality of entertainment  offered, and
type, quality and price of beverage and food served.





                                       13
<PAGE>
         The Company's package liquor stores compete directly or indirectly with
local retailers and discount "superstores". Due to the competitive nature of the
liquor  industry in South Florida,  the Company has had to adjust its pricing to
stay  competitive,  including  meeting  all  competitor's  advertisements.  Such
practices will continue in the package liquor business. It is the opinion of the
Company's  management that the Company has a competitive  position in its market
because of widespread consumer recognition of the "Big Daddy's" and "Flanigan's"
names.

         The Company's club competes  directly or indirectly with other lounges,
clubs  and  other   establishments   serving  liquor.  The  Company's  principal
competitors are local  establishments,  but also include clubs owned by national
and regional chains that are much larger than the Company.  The Company believes
that the principal  competitive factor of its club is the distinctiveness of its
entertainment concepts and its experienced management.

         As previously  noted,  at yearend the Company owned and operated  eight
restaurants  which had formerly  been lounges and were  renovated to provide for
full food service.  Early in the first quarter of fiscal 1996, the Company began
operating a restaurant under the "Flanigan's  Seafood Bar and Grill" servicemark
as general partner and fifty percent owner of a limited partnership  established
for such  purpose,  bringing the total number of  restaurants  operated to nine.
These restaurants  compete directly with other restaurants serving liquor in the
area. The Company's  restaurants are  competitive  due to four factors;  product
quality,  portion size,  moderate pricing and a  standardization  throughout the
Company owned restaurants and most of the franchises.

         The Company's  business is subject to seasonal effects,  in that liquor
purchases tend to increase during the holiday  seasons.  The liquor industry and
the Company's liquor business have also been adversely  affected by the physical
fitness awareness.

Trade Names

         The Company operates principally under three trade names: "Flanigan's",
"Big Daddy's",  and "Flanigan's  Seafood Bar and Grill".  Throughout Florida the
Company's  package  liquor stores are operated  under the "Big Daddy's  Liquors"
servicemark.  The Company's  rights to the use of the "Big Daddy's"  servicemark
are set forth  under a consent  decree of a Federal  Court  entered  into by the
Company in settlement of federal  trademark  litigation.  The consent decree and
the settlement  agreement allow the Company to continue,  and expand, its use of
the "Big Daddy's"  service mark in connection with limited food and liquor sales
in Florida. The consent decree further contained a complete restriction upon all
future sales of distilled spirits in Florida under the "Big Daddy's" name by the
other party who has a federally registered service mark for "Big Daddy's" use in
the restaurant business.  The Federal Court retained jurisdiction to enforce the
consent decree.  The Company has acquired a registered  federal trademark on the
principal register for its "Flanigan's" service mark.

                                                               








                                       14
<PAGE>
         The standard  symbolic  trademark  associated  with the Company and its
facilities  is the bearded face and head of "Big Daddy"  which is  predominantly
displayed  at all  "Flanigan's"  facilities  and all  "Big  Daddy's"  facilities
throughout  the  country.  The face  comprising  this  trademark  is that of the
Company's founder, Joseph "Big Daddy" Flanigan, and it is a federally registered
trademark owned by the Company.

Employees

         As of year end, the Company  employed  340  persons,  of which 266 were
full-time and 74 were  part-time.  Of these  employees,  25 were employed at the
Company's  corporate offices.  Of the remaining  employees,  34 were employed in
package liquor stores, and 281 in restaurants.

         None  of  the  Company's   employees  are   represented  by  collective
bargaining  organizations.  The  Company  considers  its labor  relations  to be
favorable.
<TABLE>
<CAPTION>
                                              EXECUTIVE OFFICERS OF THE REGISTRANT

                                    POSITIONS AND OFFICES                    OFFICE OR POSITION
         NAME                       CURRENTLY HELD                 AGE          HELD SINCE
         ----                       --------------                 ---          ----------
<S>                                 <C>                            <C>              <C>
Joseph G. Flanigan                  Chairman of the Board
                                    of Directors, Chief
                                    Executive Officer,
                                    and President                  67               1959

William Patton                      Vice President
                                    Community Relations            73               1975

Mary C. Reymann                     Vice President Finance
                                    Controller
                                    and Secretary                  72               1980

Edward A. Doxey                     Treasurer                      55               1992

Jeffrey D. Kastner                  Assistant Secretary            43               1995

</TABLE>
Item 2. Properties

         The  Company's   operations  are  all  conducted  on  leased  property.
Initially,  most of these  properties  were leased by the  Company on  long-term
ground and building leases with the buildings either  constructed by the lessors
under  build-to-suit  leases or constructed by the Company.  A relatively  small
number of  business  locations  involve  the lease or  acquisition  of  existing
buildings.  In almost every instance where the Company  initially owned the land
or the  building  on  leased  property,  the  Company  entered  into a sale  and
lease-back  transaction  with investors to recover a substantial  portion of its
per unit investment.

         The majority of the Company's leases contained rent escalation  clauses
based  upon  the  consumer  price  index  which  made the  continued  profitable


                                       15
<PAGE>
operation of many of these  locations  impossible and  jeopardized the financial
position of the Company.  As a result of the Company's  inability to renegotiate
these leases,  on November 4, 1985 the Company,  not including its subsidiaries,
filed a  Voluntary  Petition  in the  United  States  Bankruptcy  Court  for the
Southern  District  of Florida  seeking to  reorganize  under  Chapter 11 of the
Federal Bankruptcy Code. The primary purpose of the reorganization was to reject
and/or renegotiate the leases on such properties.

         On January 11, 1986,  the  Bankruptcy  Court entered its Order granting
the Company's  motions to reject  thirteen leases and the Company was successful
in  negotiating  a  termination  of three other  leases.  On April 7, 1986,  the
Bankruptcy Court granted the Company's  motions to reject two additional  leases
and two more leases were rejected by the Company's failure to assume the same by
May 22, 1986. In addition,  during the pendency of the  bankruptcy  proceedings,
the  Company  was  successful  in  renegotiating  a  substantial  number  of the
Company's  remaining  leases,  generally  amending  the terms to five years with
three five year renewal  options and deleting cost of living rental  adjustments
in exchange  for rents based upon the "fair market  rental" for each  particular
location.  The Company  believes that the units  retained,  especially  with the
aforementioned  lease  modifications,  are  adequate to support its  operations,
including any damages as a result of its bankruptcy proceedings.

         All of the Company's  units require  periodic  refurbishing in order to
remain  competitive.  The Company has  budgeted  $350,000  for its  refurbishing
program for fiscal year 1997. See Item 7, "Liquidity and Capital Resources", for
discussion of the amounts spent in fiscal year 1996.

         The following table summarizes the Company's properties as of September
28, 1996 including franchise locations, clubs and Company managed locations.
<TABLE>
<CAPTION>
                                       Square                     License
Name and Location                      Footage         Seats      Owned by         Lease Terms
-----------------                      -------         -----      --------         -----------
<S>                                   <C>               <C>       <C>            <C>
Big Daddy's Liquors #9 (2)         
Flanigan's Enterprises, Inc.
1550 W. 84th Street                                                              8/1/71 to 12/31/99
Hialeah, Florida                       4,300            130       Company        options to 12/31/2009

Big Daddy's Liquors #10 (2)(4)
15191-93 South Dixie Highway
Miami, Florida                         3,500             84       Company        Month to month

Big Daddy's Liquors #14 (2)(3)
Big Daddy's #14, Inc.
2041 N.E. Second Street                                                          6/1/79 to 6/1/99
Deerfield Beach, Florida               3,320             90       Franchisee     options to 2009







                                                                


                                       16
<PAGE>
<CAPTION>
Name and Location                      Footage         Seats      Owned by         Lease Terms
-----------------                      -------         -----      --------         -----------
<S>                                   <C>               <C>       <C>            <C>
Big Daddy's Liquors #15 (3)                 
CIC Investors #15 Inc.
1479 E. Commercial Boulevard                                                     3/12/76 to 8/31/01
Fort Lauderdale, Florida               4,000            90         Franchisee    options to 8/31/2011

Big Daddy's Liquors #18 (2)(3)(5)
Twenty-Seven Birds, Corp.
2721 Bird Avenue                                                                 2/15/72 to 12/31/2000
Miami, Florida                         4,300           100        Franchisee     options to 12/31/2010

Big Daddy's Liquors #19 (2)(4)
Flanigan's Enterprises, Inc.
2505 N. University drive                                                         3/1/72 to 12/31/2000
Hollywood, Florida                     4,500           160        Company        option to 12/31/2005

Big Daddy's Liquors #20 (2)                                                      7/15/68 to 12/31/96
Flanigan's Enterprises, Inc.                                                     options to 12/31/2005
13205 Biscayne Boulevard                                                         Additional Lease
North Miami, Florida                   5,100           140        Company        5/1/69 to 12/31/96
                                                                                 options to 12/31/2005

Big Daddy's Liquors #22 (2)(4)
Flanigan's Enterprises, Inc.
2600 W. Davie Boulevard                                                          12/16/68 to 12/31/2000
Fort Lauderdale, Florida               4,100           150        Company        options to 12/31/2010

Flanigan's Cafe #27
Flanigan's Enterprises, Inc.
732-734 N.E. 125th Street
North Miami, Florida                   3,000            90        Company        7/1/50 to 6/30/2049

Big Daddy's Liquors #31 (2)
Flanigan's Enterprises, Inc.
4 North Federal Highway                                                          9/6/68 to 12/31/2000
Hallandale, Florida                    4,600           150        Company         options to 12/31/2010

Big Daddy's Liquors #33 (2)(3)(5)                                                11/1/68 to 10/31/1998
Guppies, Inc.                                                                    options to 10/31/2003
45 South Federal Highway                                                         New lease
Boca Raton, Florida                    4,620           130        Franchisee     11/1/2003 to 12/31/2009

Big Daddy's Liquors #34 (1)
Flanigan's Enterprises, Inc.
9494 Harding Avenue                                                              5/29/71 to 5/28/97
Surfside, Florida                      3,000            50        Company        option to 5/28/2002

Big Daddy's Liquors #36 (2)                                                      3/10/87 to 12/31/2000
Flanigan's Enterprises, Inc.                                                     Additional leases
102 North Dixie Highway                                                          4/29/87 to 12/31/2000
Lake Worth, Florida                    4,600            60        Company        option to 12/31/2005

                                                          
                                     

                                       17
<PAGE>
<CAPTION>
                                       Square                     License
Name and Location                      Footage         Seats      Owned by         Lease Terms
-----------------                      -------         -----      --------         -----------
<S>                                   <C>               <C>       <C>            <C>
Big Daddy's Liquors #37 (4)
Flanigan's Enterprises, Inc.
1720 North Andrews Avenue                                                         6/1/69 to 5/31/99
Fort Lauderdale, Florida               4,100            80        Company         options to 5/31/2019

Big Daddy's Liquors #40 (2)
Flanigan's Enterprises, Inc.
5450 North State Road #7                                                          4/1/71 to 12/31/2000
Fort Lauderdale, Florida               4,600           140        Company         option to 12/31/2005

Big Daddy's Liquors #43 (2)(3)(5)
BD 43 Corporation
2500 E. Atlantic Avenue                                                           12/1/72 to 11/30/97
Pompano Beach, Florida                 4,500            90        Franchisee      options to 2012

Big Daddy's Liquors #47 (6)(8)
Flanigan's Enterprises, Inc.
8600 Biscayne Boulevard                                                           12/21/68-1/1/2010
Miami, Florida                         6,000           210        Prior Owner     options to 1/1/2050

Flanigan's Lounge #600 (7)
Powers Ferry Landing                                                              5/1/76 to 4/30/2001
Atlanta, Georgia                      10,000           400        Company         option to 4/30/2006


     (1)      License subject to chattel mortgage.

     (2)      License pledged to secure lease rental.

     (3)      Franchised by Company.

     (4)      Former franchised unit returned and now operated by the Company.

     (5)      Lease assigned to franchisee.

     (6)      Lease  originally  assigned  to  unaffiliated  third  parties.
              During the  fiscal  year,  the  Company  purchased  37% of the
              leasehold interest from the unaffiliated third parties.

     (7)      Location managed by an unaffiliated third party.

     (8)      Business operated by the Company pursuant to Court Order.

</TABLE>


                                                                






                                       18
<PAGE>
Item 3. Legal Proceedings.

         Due  to  the  nature  of  the  business,   the  Company  is  sued  from
time-to-time by patrons,  usually for alleged personal injuries occurring at the
Company's  business  locations.   The  Company  has  liability  insurance  which
incorporates a  semi-self-insured  plan under which the Company assumes the full
risk of the first $50,000 of exposure per  occurrence.  The Company's  insurance
carrier  is  responsible  for  $1,000,000  coverage  per  occurrence  above  the
Company's self-insured  deductible,  up to a maximum aggregate of $2,000,000 per
year. Certain states have liquor liability (dram shop) laws which allow a person
injured by an "obviously  intoxicated  person" to bring a civil suit against the
business  (or  social  host) who had served  intoxicating  liquors to an already
"obviously  intoxicated  person".  The Company's  insurance coverage relating to
this type of incident is limited.

         Through the end of the 1990 fiscal year,  the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows  persons  injured by an "obviously  intoxicated  person" to bring a civil
action  against  the  business  which  had  served  alcoholic  beverages  to  an
"obviously  intoxicated  person".  Florida has  restricted  its dram shop law by
statute permitting persons injured by an "obviously intoxicated person" to bring
a civil action  against the business which had served  alcoholic  beverages to a
minor or an  individual  known to be habitually  addicted to alcohol.  Dram shop
claims  normally  involve traffic  accidents and the Company  generally does not
learn of dram shop  claims  until  after a claim is filed and the  Company  then
vigorously  defends  these claims on the grounds that its employee did not serve
an  "obviously  intoxicated  person".  Damages  in most  dram  shop  claims  are
substantial. During fiscal year 1996, the Company favorably settled the two dram
shop cases,  (three dram shop claims) relating to one incident filed against the
Company in Florida  during fiscal years 1994 and 1995.  Subsequent to the end of
fiscal year 1996,  the Company  favorably  settled its remaining  uninsured dram
shop claim asserted against one of the limited  partnerships in Pennsylvania and
the Company,  as general  partner.  At the present time,  there are no dram shop
claims pending against the Company.

         On November 4, 1985 the Company, not including its subsidiaries,  filed
a Voluntary  Petition in the United  States  Bankruptcy  Court for the  Southern
District  of  Florida  seeking to  reorganize  under  Chapter 11 of the  Federal
Bankruptcy  Code.  The Petition,  identified as case no.  85-02594-BKC-AJC,  was
filed in Fort Lauderdale, Florida. By Order of the Court dated November 4, 1985,
the Company was appointed  "debtor in  possession".  The Company's  action was a
result of  significant  escalations  of rent on certain of the Company's  leases
which made continued  profitable  operations at those  locations  impossible and
jeopardized  the  Company's  financial  position.   The  major  purpose  of  the
reorganization was to reject such leases.

         On January 11, 1986, the Bankruptcy Court granted the Company's motions
to reject  thirteen  leases and the Company was  successful in  negotiating  the
termination of three additional  leases.  On April 7, 1986, the Bankruptcy Court
granted the Company's motion to reject two additional leases and two more leases
were  automatically  rejected  due to the  Company's  failure to assume the same
prior to May 22, 1986. During the fiscal year ended October 3, 1987, the Company
negotiated  a  formula  with the  Official  Committee  of  Unsecured  Creditors,
("Committee"), which formula was used to calculate lease rejection damages under




                                       19
<PAGE>
the Company's  Amended Plan of  Reorganization.  Stipulations  were filed by the
Company  with all but three of these  unsecured  creditors,  which  stipulations
received Bankruptcy Court approval prior to the hearing on confirmation.

         In addition to the  rejection  of leases,  the Company  also sought its
release from lease  agreements  for  businesses  sold,  which sales included the
assignment  of the leases for the business  premises.  While  several  landlords
whose leases had been assigned did file claims against the Company, the majority
did not, which resulted in the Company being released from its guarantees  under
those leases. The Company has also been successful in negotiating the limitation
or release of the lease  guarantees of those  landlords who filed claims,  which
settlements   received  Bankruptcy  Court  approval  prior  to  the  hearing  on
confirmation.

         On  February  5,  1987,   the  Company   filed  its  Amended   Plan  of
Reorganization and Amended Disclosure  Statement,  which documents were approved
by the Committee. On February 25, 1987, the Company further modified its Amended
Plan of  Reorganization  to  secure  the  claims  of  Class 6  Creditors  (Lease
Rejection) and Class 8 Creditors  (Lease Guarantee  Rejections).  The Bankruptcy
Court approved the Amended Disclosure Statement by Order dated March 7, 1987 and
scheduled  the  hearing  to  consider   confirmation  of  the  Amended  Plan  of
Reorganization  on April 13, 1987. On April 10, 1987, in order to insure receipt
of the  necessary  votes to approve  its  Amended  Plan of  Reorganization,  the
Company agreed to a further  modification of its Amended Plan, whereby creditors
of Classes 6 and 8 will receive $813,000 prorata as additional  damages in years
8 and 9 of the Amended  Plan. On April 13, 1987,  the Company's  Amended Plan of
Reorganization  was  confirmed  and the  Bankruptcy  Court  entered its Order of
Confirmation on May 5, 1987.

         Pursuant  to the  terms  of the  Amended  Plan of  Reorganization,  the
Effective  Date of the same was June 30,  1987.  As of that  date,  confirmation
payments  totaling  $1,171,925 were made by the Company's  Disbursing Agent with
$647,226 being retained in escrow for disputed claims  ($1,819,151  total).  The
Bankruptcy Court ratified the disbursements  made by the Disbursing Agent by its
Order dated December 21, 1987.

         On  December  28,  1987,  the  Bankruptcy  Court  entered its Notice of
Discharge of the Company.

         During fiscal 1991 and again during fiscal 1992,  the Company and Class
6 and Class 8  Creditors  under the  Company's  Amended  Plan of  Reorganization
modified the schedule for the payment of bankruptcy damages, reducing the amount
of the  quarterly  payments  by  extending  the term of the  same,  but  without
reducing the total amount of bankruptcy damages. The modification to the payment
schedule provided the Company with needed capital.


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

         During  the  fourth  quarter of fiscal  year 1996 the  Company  did not
submit any matter to a vote of security holders.


                                                                




                                       20
<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
Matters.
<TABLE>
<CAPTION>

                        RANGE OF PER SHARE MARKET PRICES 

                               FISCAL 1995           FISCAL 1996
                               -----------           -----------

                              High      Low      High        Low
                              ----      ---      ----        ---
<S>                          <C>       <C>       <C>        <C>
First quarter .............  3-7/8     2-1/8     4-5/8      3-1/8
Second quarter ............  3         2-1/4     5-3/8      3-3/4
Third quarter .............  4-1/8     2-1/4     5-7/8      4-3/8
Fourth quarter ............  4-3/4     2-3/4     5-7/16     4-5/8
</TABLE>
The Company's  shares are traded on the American Stock Exchange,  under
the symbol  BDL. No  dividends  were paid to  shareholders  from the date of the
initial public offering in August 1969,  through the fiscal year ended September
27, 1975. Cash dividends of 20 cents and 10 cents per share were paid on January
12,  1976 and July 5, 1976,  respectively.  No  dividends  were paid  during the
period July 5, 1976 to March 15, 1988.  During fiscal year 1988, a cash dividend
of 10 cents per share was paid on March 15, 1988.  No  dividends  were paid from
March 16, 1988 through the fiscal year ended September 28, 1996.

Item 6.  Selected Financial Data.

         Not required.

Item 7.   Management's Discussion and Analysis of Financial Condition and
Results of Operations.

         At September 30, 1995, the Company was operating 15 units including one
unit  operated by the Company  pursuant to Court Order,  and had interests in an
additional  nine units which had been  franchised  by the Company.  Of the units
operated  by the  Company,  four were  combination  package  liquor  stores  and
restaurants,  two were combination package liquor stores and lounges,  five were
restaurants only, one was a lounge only and one was a package liquor store only.
The unit  operated by the Company  pursuant to Court Order was a package  liquor
store only.  There were two clubs,  one of which was managed by an  unaffiliated
third party in Atlanta, Georgia, and the other which was operated by the Company
as general partner of a limited partnership.

         In comparison to September 30, 1995 at September 28, 1996,  the Company
was operating 14 units,  including one unit operated by the Company  pursuant to
Court  Order,  and had  interests  in an  additional  seven units which had been
franchised  by the  Company.  Of the units  operated by the  Company,  four were
combination  package liquor stores and restaurants,  five were restaurants only,
and four were  package  liquor  stores  only.  The unit  operated by the Company
pursuant to Court  Order was a package  liquor  store  only.  There was one club
operated by an unaffiliated third party under a management agreement.

                                                                
                                       21
<PAGE>
Liquidity and Capital Resources

Cash Flows

         The following  table is a summary of the  Company's  cash flows for the
two years ended September 28, 1996.
<TABLE>
<CAPTION>
                                                                 Fiscal
                                                                Years Ended
                                                         ----------------------
                                                          1995             1996
                                                          ----             ----- 
                                                             (in thousands)
<S>                                                      <C>              <C>
Net cash provided by
  operating activities .......................           $ 499            $ 531
Net cash provided by (used in)
 investing activities ........................              19             (277)
Net cash used in
 financing activities ........................            (700)            (143)
                                                         -----            -----
Net (decrease) increase in cash
  and cash equivalents .......................            (182)             111
Cash and cash equivalents:
  Beginning of year ..........................             868              686
                                                         -----            -----
  End of year ................................           $ 686            $ 797
                                                         =====            =====
</TABLE>
         Adjustments  to net income to  reconcile  to cash flows from  operating
activities in fiscal year 1995 include a provision for  uncollectible  notes and
mortgages of $97,000 and the  recognition of $250,000 in deferred gain,  most of
which resulted from the payment of a balloon mortgage receivable.  Also included
is a $60,000  provision  for reserves for self  insurance  and a $31,000 loss on
retirement of fixed assets.

         Adjustments  to net income to  reconcile  to cash flows from  operating
activities in fiscal year 1996 include a provision for  uncollectible  notes and
mortgages of $104,000 and the  recognition  of $114,000 in deferred  gain.  Also
included is a $53,000  loss on the  retirement  of fixed  assets,  and a gain of
$135,000 from the sale of the assets of the Pennsylvania limited partnership.

Improvements

         Capital  expenditures  were  $348,000 and $613,000  during fiscal years
1995 and 1996, respectively.  The capital expenditures were for refurbishment of
lounges,  including  conversion of a lounge to the  "Flanigan's  Cafe"  concept,
upgrading  existing units serving food,  improvements  to package liquor stores,
upgrading  the  corporate  computer  system  and other  improvements.  Except as
otherwise noted all of the money for additions came from operations.

         During  fiscal  year  1995,  the  Company  became  the  owner,  through
foreclosure,  of a lounge previously sold by the Company,  which lounge had been
operated by a wholly owned subsidiary of the Company as a receiver  appointed by
the Court since fiscal year 1994. After acquiring ownership

                                                               
                                       22
<PAGE>
of the lounge,  the Company converted the same to its "Flanigan's Cafe" concept,
but since it was not  possible  to  operate it up to the same  standards  of the
Company's  other  restaurants,  the unit was closed April 10,  1996.  During the
fourth quarter,  a contract was entered into by the landlord for the sale of the
real property and  improvements  of this  location.  Simultaneously  therewith a
separate  contract  was  entered  into by the Company for the sale of its liquor
license to the same buyer.  At closing,  which occurred during the first quarter
of fiscal 1997, the Company's lease for this store was vacated.

         All of the Company's  units require  periodic  refurbishing in order to
remain  competitive.  During  fiscal 1992,  as cash flow  improved,  the Company
embarked on a refurbishing program which continued through fiscal year 1996. The
budget for fiscal year 1997  includes  approximately  $350,000 for this program.
The Company believes that improved  operations will provide the cash to continue
the refurbishing program.

Property and Equipment

         The  Company's  property  and  equipment,   at  cost  less  accumulated
depreciation and amortization,  was $2,772,000 at September 30, 1995 compared to
$2,634,000 at September 28, 1996. The Company's liquor licenses less accumulated
amortization  were  $338,000  at  September  30,  1995  compared  to $349,000 at
September 28, 1996. The Company's  leased  property under capital  leases,  less
accumulated  amortization,  was  $227,000  at  September  30,  1995  compared to
$195,000 at September 28, 1996.  The  Company's  leased  property  under capital
leases has continued to decline  because any new leases the Company  enters into
are operating  leases,  and thus there are no additions to capital leases.  Also
contingent  liability on capital leases  amounting to $111,000 expired in fiscal
year 1995.

Long term debt

         The  Company's  long term debt was $81,000 at fiscal  yearend  1995 and
$21,000 at fiscal yearend 1996.

         The  Company  repaid  long term debt,  capital  lease  obligations  and
Chapter 11 damages in the amount of $444,000  and  $355,000 in fiscal years 1995
and 1996, respectively.

Working capital

         The table below summarizes the current assets,  current liabilities and
working capital for fiscal years 1995 and 1996:
<TABLE>
<CAPTION>
                                                  Sept. 30,            Sept. 28,
         Item                                       1995                  1996
         ----                                    ----------            ---------
<S>                                              <C>                  <C>
Current assets .......................           $2,118,000           $2,522,000
Current liabilities ..................            2,081,000            2,158,000
Working capital ......................               37,000              364,000
</TABLE>




                                                               
                                       23
<PAGE>
         During  fiscal  year 1991 and again in fiscal  year 1992,  the  Company
refinanced  existing debt due Class 6 and Class 8 Creditors  under the Company's
Amended  Plan by  extending  the  payment  schedule  to the year  2002,  thereby
reducing the payments  from $500,000 per year to $200,000 per year for two years
and thereafter to $300,000 per year until paid,  but without  reducing the total
amount of bankruptcy damages.

         Management  believes  that  positive  cash  flow from  operations  will
adequately fund operations,  debt reductions and planned capital expenditures in
fiscal year 1997.

         The Company's Amended Plan of Reorganization  was prepared to allow the
Company to meet its obligations from cash generated from operations. The Amended
Plan was approved by a majority of the creditors and confirmed by the Bankruptcy
Court on May 5, 1987 and the Company was officially  discharged  from bankruptcy
on December  28,  1987.  As noted  above,  during  fiscal year 1991 and again in
fiscal year 1992, the Class 6 and Class 8 Creditors agreed to refinance existing
debt by extending their payment schedule.  See Bankruptcy  Proceedings below and
Note 2 to the consolidated financial statements.

Income Taxes

          Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes  requires,  among other things,  recognition of future tax benefits
measured at enacted  rates  attributable  to  deductible  temporary  differences
between  financial  statement and income tax bases of assets and liabilities and
to tax net operating loss  carryforwards  to the extent that realization of said
benefits is more likely than not. For  discussion  regarding  the  Company's net
operating loss  carryforwards  refer to Note 4 in the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 28, 1996.

Bankruptcy Proceedings

         As noted above and in Note 2 to the consolidated  financial statements,
on November 4, 1985,  Flanigan 's  Enterprises,  Inc.,  not including any of its
subsidiaries,  filed a Voluntary  Petition in the United States Bankruptcy Court
for the Southern  District of Florida seeking to reorganize  under Chapter 11 of
the Federal  Bankruptcy  Code. The primary  purposes of the Petition were (1) to
reject  leases  which were  significantly  above  market rates and (2) to reject
leases on closed units which had been repossessed by or returned to the Company.

         During  fiscal year 1986 the Company  terminated or rejected 34 leases.
Many of the leases  remaining were  renegotiated to five year terms,  with three
five year renewal  options at fair market  rental.  As was their right under the
Bankruptcy  Code,  the  landlords of  properties  rejected by the Company  filed
claims for losses or damages sustained as a result of the Company's rejection of
such  leases.  The amount of such damages is limited by federal law. The Company
outlined a schedule for payment of these  damages in the Amended  Plan. As noted
above, the Amended Plan was approved by the Bankruptcy Court on May 5, 1987. The
gross amount of damages payable to creditors for rejected leases was $4,278,000.
Since the damage payments were to be made over nine years,  the total amount due
was

                                                               




                                       24
<PAGE>
discounted  at a  rate  of  9.25%.  See  Note 2 to  the  consolidated  financial
statements for the current payment schedule of these damages.

Other Legal Matters

         Through the end of fiscal year 1990, the Company was uninsured for dram
shop liability. During fiscal year 1996, the Company favorably settled the three
insured dram shop claims [two lawsuits  relating to one  incident],  against the
Company in Florida  and  subsequent  to the end of fiscal  year 1996,  favorably
settled its remaining uninsured dram shop claim against a limited partnership in
Pennsylvania  and the  Company,  as  general  partner.  See page 13 for  further
discussion regarding dram shop suits.

         During fiscal years 1993 and 1994, the Company paid the 1991,  1992 and
1993 real property  taxes, in the aggregate  amount of $40,242,  as guarantor of
the sublease for a store sold in 1990. During fiscal year 1994, the Company also
paid a  non-related  third  party the sum of  $14,991 as  reimbursement  of real
property taxes  erroneously  paid on a second folio number for the real property
taxes for the same store for 1990 through 1992. The payment of the 1991 and 1992
real property taxes were evidenced by two promissory  notes,  one for each year,
which each  provide  that the entire  principal  balance and  accrued  interest,
calculated at the rate of nine percent per annum, will be due in full on January
1, 2010, which is the date the sublease expires. A default under the sublease is
a default under the  promissory  note,  entitling the Company to accelerate  the
entire principal balance and all accrued interest; and if the assignee meets all
obligations of the sublease through its expiration date (January 1, 2010),  then
each  promissory  note will be forgiven.  The  Company's  reimbursement  of real
property  taxes  erroneously  paid by a non-related  third party  ($14,991),  is
secured by a mortgage  on real  property  owned by an  affiliated  entity of the
assignee.  The Company agreed to review  financial  records of the assignee each
year to see if the  profitability  thereof warranted the Company paying the real
property taxes to subsidize the same.

         During fiscal year 1995, the Company learned that the assignee was five
months in arrears in the  payment of rent to the  Sublessors  ($35,527)  and had
failed to pay the annual  ground rent which was due  January 1, 1995  ($19,400),
notwithstanding promises that all rental payments would be current by January 1,
1995.

         The Company  demanded  payment of all  arrearages  or the return of the
store.  While  negotiating  the return of the  store,  the  assignee  closed the
package  liquor  store and removed  all  inventory.  The Company  filed suit for
eviction  and  was  granted  immediate  possession  of  the  business  premises,
including  furniture,  fixtures,  equipment  and liquor  license,  to reopen and
preserve the business of the package liquor store. As a result of the default of
the sublease, the two promissory notes given the Company for paying the 1991 and
1992 real property  taxes for this store  immediately  came due in full.  During
fiscal year 1995,  the Company paid the annual ground rent which was due January
1, 1995 and began making monthly payments to the sublessors  commencing February
1, 1995.  During  fiscal year 1995,  the Company also began paying an additional
one half  month's  rent to the  sublessors  along with  current  monthly rent on
account of the rental  arrearages.  The Company continues to operate the package
liquor  store and  anticipates  doing so  throughout  the  litigation  and after
acquiring

                                                               


                                       25
<PAGE>
ownership  thereof through the litigation.  Subsequent to the end of fiscal year
1996, the Company entered into a Stipulation with the assignee, the principal of
the  assignee  and an entity  affiliated  with the  assignee,  whereby an Agreed
Summary Final Judgment was  immediately  entered in favor of the Company against
the assignee,  the principal of the assignee and an entity  affiliated  with the
assignee,  jointly  and  severally,  for the full amount due the Company and the
foreclosure of the Company's security interest in the assets of the assignee. It
is  anticipated  that the Company  will  acquire  ownership of the assets of the
assignee at the foreclosure sale, including the liquor license.

         In addition to the above store,  during  fiscal year 1994,  the Company
paid the 1991 and 1992 real property  taxes in the aggregate  amount of $13,987,
as guarantor of the lease of another  store sold in prior years.  During  fiscal
year 1994,  the rental  payments for this store  decreased to a point where they
did not even  equal  the  current  rent  and the  Company  instituted  evictions
proceedings.  The Company,  through a wholly  owned  subsidiary,  was  appointed
receiver of the assignee's business.  During fiscal year 1995, the Court entered
a Final Judgment in favor of the Company foreclosing the statutory landlord lien
subrogated to the Company.  The Company acquired  ownership of the assets of the
assignee at the  foreclosure  sale,  including the liquor  license.  The Company
tried to operate the store as a restaurant under its "Flanigan's  Cafe" concept,
but it was not  possible to operate up to the same  standards  as the  Company's
other  restaurants  and the unit was closed April 10, 1996.  During  fiscal year
1996,  a contract  was  entered  into by the  landlord  for the sale of the real
property and improvements of this location. Simultaneously therewith, a separate
contract was entered  into by the Company for the sale of its liquor  license to
the same  buyer.  The sale was closed  during the first  quarter of fiscal  year
1997,  thereby  relieving  the  Company of all further  liability  for the lease
agreement for this location.

         During fiscal year 1995,  the Company paid the monthly rent due June 1,
1995 through September 30, 1995, as guarantor of the lease of another store sold
in prior  years.  The assignee of the  business  vacated the  business  premises
during  fiscal year 1995 and the landlord  actively  sought a new tenant but was
unable to find a new tenant  prior to  September  30,  1995,  the date the lease
expired.  During fiscal year 1996, the Company  foreclosed its security interest
in the assets of the assignee,  which security interest was given to the Company
to secure its guarantee of the lease for this location.  Through its foreclosure
action, the Company acquired ownership of the assets of the assignee,  including
the liquor  license.  The value of the liquor license more than offsets the rent
paid by the Company on account of this store and the cost of the litigation.

         During  fiscal  year 1995,  a lawsuit  was filed  against  the  Company
alleging  age  discrimination  in its hiring of  restaurant  assistant  managers
during  fiscal year 1994.  During  fiscal  year 1996 the  lawsuit was  favorably
settled by the Company.

         During fiscal year 1996, two claims were filed against the Company with
the Equal Employment  Opportunity  Commission  alleging sexual harassment and/or
discrimination. In the first claim, a former employee initially alleged that the
Company permitted sexual harassment to continue at one of its restaurants. After







                                       27
<PAGE>
the former employee was  transferred to another  restaurant,  she resigned,  and
thereafter  amended her complaint to allege that she was forced to resign due to
retaliatory conduct on the part of the Company.  The Company disputes this claim
and is vigorously defending the same.

         In the second claim, a former  employee  alleged that her position with
the Company was changed due to her pregnancy.  The Equal Employment  Opportunity
Commission  failed to make a  determination  on this claim  within  one  hundred
eighty  (180) days of its filing and  subsequent  to the end of the fiscal  year
1996,  this claimant filed suit against the Company.  The Company  disputes this
claim and is vigorously defending the same.
<TABLE>
<CAPTION>


Results of Operation

REVENUES:
                                                 Fifty-Two Weeks Ended
                                  --------------------------------------------
Sales                                Sept. 30, 1995           Sept. 28, 1996
-----                             --------------------     -------------------
<S>                               <C>           <C>        <C>          <C>   
Restaurant, food ............     $ 9,065        51.2%     $ 9,588       50.1%
Restaurant, bar .............       3,316        18.7%       3,220       16.8%
Non-Restaurant, bar .........         470         2.7%         234        1.2%
Package goods ...............       4,845        27.4%       6,112       31.9%
                                  -------       -----      -------      -----
Total .......................      17,696       100.0%      19,154      100.0%

Franchise revenues ..........         460                      629
Owner's fee .................         150                      150
Joint venture income ........          --                       65
Other operating income ......         204                      186
                                  -------                  -------
Total revenues ..............     $18,510                  $20,184
</TABLE>
         As the table above  illustrates,  total revenues have increased for the
fiscal  year  ended  September  28,  1996 when  compared  to fiscal  year  ended
September 30, 1995.  The increases are in restaurant  food sales,  package sales
and franchise related revenue.

         As  previously  discussed on page three,  during the second  quarter of
fiscal  year 1996,  the lease on one unit  operated  by the  Company as a lounge
only, expired and the Company was unable to renew same upon suitable terms. Also
during the second quarter the Company closed its last two lounges at combination
package and lounge units,  but continues to operate the package  liquor  stores.
Bar business,  without an accompanying  restaurant,  continued to decline to the
point of being  marginally  profitable.  The Company can not foresee  this trend
reversing and the two units are not suitable for conversion to restaurants.  The
closing of these  units is  responsible  for the decline in  non-restaurant  bar
sales in fiscal year 1996 when compared to fiscal year 1995.





                                                                
                                       27
<PAGE>
         Restaurant food sales represented 51.2% of total sales in the fifty-two
weeks ended September 30, 1995 as compared to 50.1% in the comparable  period of
fiscal year 1996.  The decrease in  percentage of food sales to total sales is a
result of the increase in the  percentage  of package  goods  sales.  The weekly
average of same store  restaurant  food sales was  $174,094 and $182,170 for the
fifty-two week period of fiscal years 1995 and 1996 respectively, an increase of
4.6 %.

         The same store weekly  average for restaurant bar sales was $63,550 for
the twelve  months ended  September  30, 1995 compared to $60,269 for the twelve
months ended September 28, 1996, a decrease of 5.2%.

         The  Company's  emphasis  during  the past few years  has been  towards
increasing  its  restaurant  food  sales,  which  caters  to a  family  oriented
business.  This  accounts  for  the  increased  weekly  average  of  same  store
restaurant  food sales,  as well as for the  decrease in weekly  average of same
store restaurant bar sales.

         Package goods sales have reversed the decline of prior years going from
a weekly  average of same  store  sales of $93,212  for the  fifty-two  weeks of
fiscal year 1995 to $101,220  for the  fifty-two  weeks of fiscal year 1996,  an
increase of 8.6 %. The improvement in package goods sales is attributed to three
factors.  The Company has improved its wine  selection and made its pricing more
competitive, while the decline in the liquor market appears to have stabilized.

         Franchise  related  revenues  show a 36.7 % increase for the  fifty-two
week  period of fiscal year 1996 as  compared  to the  fifty-two  week period of
fiscal year 1995.  This  increase is a result of the new royalty  fees that were
introduced with the new Franchise Agreement that was discussed on pages 8 and 9.

         Owner's fee represents fees received pursuant to a management agreement
for the operation of a club owned by the Company in Atlanta, Georgia.

         During  the first  quarter  of fiscal  year  1996,  the  Company  began
operating a restaurant under the "Flanigan's  Seafood Bar and Grill" servicemark
as general partner and fifty percent owner of a limited partnership  established
for such  purpose.  The Company  earned  $65,000  during fiscal year 1996 as its
share of income.

         The gross profit margin for  restaurant and lounge sales remained level
at  62.2%  and  62.2%  for the  twelve  months  of  fiscal  years  1995 and 1996
respectively.

         The gross profit  margin for package  goods sales during the  fifty-two
weeks  ended  September  30,  1995 and  September  28, 1996 were 25.8% and 26.3%
respectively.

         Overall gross profits were 52.2% for the twelve months ended  September
30, 1995 compared to 50.8% for the same period in fiscal year 1996. The decrease
of 1.4% is a result of a higher ratio of package good sales to total sales.


                                                               





                                       28
<PAGE>
Operating Costs and Expenses

         All discussion  below of operating  costs,  payroll costs and occupancy
costs for the fifty-two  weeks ended  September 28, 1996 includes costs from the
unit  that the  Company  received  through  foreclosure  and the  unit  that was
returned to the Company by its franchisee.

         Operating  costs and expenses for the fifty-two  weeks ended  September
30, 1995 were  $18,241,000  compared to  $19,731,000  for the same period in the
current fiscal year. Operating expenses are comprised of the cost of merchandise
sold,  payroll and  related  costs,  occupancy  costs and  selling,  general and
administrative expenses.

         Payroll and related costs, which include workers compensation insurance
premiums,  were  $5,071,000 and $5,574,000 for the twelve months of fiscal years
1995 and 1996  respectively,  an  increase  of  $503,000.  Although  the Company
experienced an increase in restaurant payroll in general, there were three other
factors involved in the increase in payroll and related costs. The payrolls from
the two  recently  acquired  units  were  responsible  for  some  added  payroll
expense,and  the Company hired an attorney at the beginning of fiscal year 1996,
which  attorney is also a member of the Board of  Directors.  The increase  from
adding the  attorney  to the payroll was offset by an  equivalent  reduction  in
legal expense.

         Occupancy costs,  which include rent, common area maintenance,  repairs
and taxes were  $857,000 and $949,000 for the twelve months of fiscal years 1995
and 1996  respectively,  with the increase of $92,000  primarily  accounted  for
because of the addition of the previously  mentioned units and a decrease in the
reduction from capital leases to expense.

         Selling,  general and  administrative  expenses were $3,859,000 for the
fifty-two  weeks ended September 30, 1995 and $3,782,000 for the fifty-two weeks
ended  September  28,  1996,  a  decrease  of  $77,000  overall.   As  discussed
previously,  the Company has two  additional  units this fiscal year that it did
not have in fiscal year 1995. The selling,  general and administrative  expenses
for these two units total  $80,000.  If the total expenses for the twelve months
of fiscal year 1996 were  adjusted by these added  expenses,  the  comparison to
fiscal year 1995 would reveal that  management has been able to accomplish a net
decrease in selling, general and administrative expenses of $157,000.

Other Income and Expense

         The decline of $12,000 in interest  expense on long-term debt which was
$81,000  and  $69,000  for the  fifty-two  weeks of fiscal  years  1995 and 1996
respectively,  is attributed to the reduction of long-term  debt. The decline of
$6,000 in interest expense on obligations under capital leases which was $68,000
and $62,000 for the fifty-two weeks of fiscal years 1995 and 1996  respectively,
is the result of declining principal balances of capital leases in general.

         Management fees from the Pennsylvania  limited partnership were $77,000
and $66,000 for the twelve  months ended  September  30, 1995 and  September 28,
1996 respectively.


                                                                



                                       29
<PAGE>
         As discussed on page 10, the sale of the lease,  leasehold inprovements
and liquor license of the club in King of Prussia was completed on September 20,
1996 and the  Company  realized a gain of  $135,000  on its  investment  in this
limited partnership.

         Other net was $46,000 for the  fifty-two  weeks of fiscal year 1995 and
$124,000  for  the  fifty-two  weeks  of  fiscal  year  1996.  Other  net in the
consolidated  statements  of income  consists  of the  following  for the twelve
months ended September 30, 1995 and September 28, 1996:
<TABLE>
<CAPTION>
                                                         Fiscal year ending
                                                     ---------------------------
                                                      Sept. 30,        Sept. 28,
                                                        1995             1996
                                                     ----------       ----------
<S>                                                  <C>              <C>
Non-franchise related rental income ..........       $  71,000        $  32,000
Loss on retirement of fixed assets ...........            --            (79,000)
Gain on sale of liquor licenses ..............          30,000           26,000
(Loss) gain on repossession of store .........         (55,000)          50,000
Insurance recovery ...........................            --             53,000
Miscellaneous ................................            --             42,000
                                                     ---------        ---------
                                                     $  46,000        $ 124,000
                                                     =========        =========
</TABLE>


Trends

         During the next twelve months management  expects a continued  increase
in restaurant food and package sales and  anticipates  that expenses will remain
constant,  thereby increasing  overall profits.  The Company intends to add more
restaurants as cash becomes available.

Other Matters

         Impact of Inflation

         The Company does not believe that inflation has had any material effect
during the past two years.  To the extent  allowed by  competition,  the Company
recovers increased costs by increasing prices.

         Post Retirement Benefits Other Than Pensions

         The Company  currently  provides no post retirement  benefits to any of
its employees,  therefore Financial Accounting Standards Board Statement No. 106
has no effect on the Company's financial statements.

Item 8. Financial Statements and Supplementary Data.

         Financial statements of the Company at September 30, 1995 and September
28, 1996,  which include each of the two years in the period ended September 28,
1996 and the  independent  certified  public  accountants'  report  thereon  are
incorporated by reference from the 1996 Annual Report to Shareholders,  included
herein.

                                       30
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure.

         (Not Applicable.)



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

         The information set forth under the caption  "Election of Directors" in
the  Company's  definitive  Proxy  Statement  for its  1997  Annual  Meeting  of
Shareholders,  to be filed with the Securities and Exchange  Commission pursuant
to regulation 14A under the Securities and Exchange Act of 1934, as amended (the
1997 Proxy Statement),  is incorporated herein by reference. See also "Executive
Officers of the Registrant" included in Part I hereof.

Item 11.  Executive Compensation.

         The information set forth in the 1997 Proxy Statement under the caption
"Executive Compensation" is incorporated by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         The  information  set forth under the caption  "Security  Ownership  of
Certain  Beneficial  Owners  and  Management"  in the 1997  Proxy  Statement  is
incorporated by reference.

Item 13.  Certain Relationships and Related Transactions

         The  information  set forth under the caption  "Election  of  Directors
Certain Relationships and Related Transactions" in the 1997 Proxy Statement
is incorporated by reference.


                                     PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

 (a) 1. Financial Statements
                  All the financial statements, financial statement schedule and
                  supplementary   data  listed  in  the  accompanying  Index  to
                  Financial  Statements  and  Schedule are filed as part of this
                  Annual Report.

   2. Exhibits

                  The exhibits listed on the accompanying  Index to Exhibits are
                  filed as part of this Annual Report.

 (b)     Reports on Form 8-K

                  No reports on form 8-K were filed during the fourth quarter of
                  fiscal 1996 or subsequent to yearend.



                                                                
                                       31
<PAGE>




                                Index to Exhibits
                                 Item 14 (a) (2)


                                   Description


(2)  Plan of  Reorganization,  Amended  Disclosure  Statement,  Amended  Plan of
Reorganization,   Modification  of  Amended  Plan  of   Reorganization,   Second
Modification  of  Amended  Plan  of  Reorganization,  Order  Confirming  Plan of
Reorganization, (Item 7 (c) of Quarterly Report on Form 8-K filed May 5, 1987 is
incorporated herein by reference).

(3) Restated Articles of Incorporation (Part IV, Item 14 (a)(2) of Annual Report
on Form 10-K filed on December 29, 1982 is incorporated herein by reference).

(3)  By-laws  (Part IV,  Item 14 (a)(2) of Annual  Report on Form 10-K  filed on
December 29, 1982 is incorporated herein by reference).

(10)(a)(1)  Employment Agreement with Joseph G. Flanigan (Exhibit A of the Proxy
Statement dated January 27, 1988 is incorporated herein by reference).

(10)(a)(2)  Form of  Employment  Agreement  between  Joseph G.  Flanigan and the
Company (as ratified and amended by the  stockholders at the 1988 annual meeting
is incorporated herein by reference).

(10)(c) Consent  Agreement  regarding the Company's  Trademark  Litigation (Part
7(c)(19)  of the Form  8-K  dated  April  10,  1985 is  incorporated  herein  by
reference).

(10)(d) King of Prussia (#850) Partnership Agreement (Part 7 (c)(19) of the Form
8-K dated April 10, 1985 is incorporated herein by reference).

(10)(o) Management Agreement for Atlanta,  Georgia (#600) (Item 14 (a)(10)(o) of
the Form 10-K dated October 3, 1992 is incorporated herein by reference).

(10)(p) Settlement Agreement with Former Vice Chairman of the Board of Directors
(re  #5)  (Item  14  (a)(10)(p)  of the  Form  10-K  dated  October  3,  1992 is
incorporated herein by reference).

(10)(q)  Hardware   Purchase   Agreement  and  Software  License  Agreement  for
restaurant  point of sale system.  (Item  14(a)(10)(g)  of the Form 10-KSB dated
October 2, 1993 is incorporated herein by reference).

(10)(a)(3)  Key Employee  Incentive  Stock  Option Plan  (Exhibit A of the Proxy
Statement dated January 26, 1994 is incorporated herein by reference).







                                                               
                                       32
<PAGE>
(10)(r)  Limited  Partnership  Agreement of CIC  Investors  #13,  Ltd.,  between
Flanigan's Enterprises,  Inc., as General Partner and fifty percent owner of the
limited partnership,  and Hotel Properties, LTD. (Item 14 (a)(10)(r) of the Form
10-KSB dated September 30, 1995 is incorporated herein by reference.)

(10)(s) Form of Franchise  Agreement between Flanigan's  Enterprises,  Inc., and
Franchisees.  (Item 14 (a)(10)(s) of the Form 10-KSB dated September 30, 1995 is
incorporated herein by reference.)

(10)(t) Licensing  Agreement between Flanigan's  Enterprises,  Inc. and James B.
Flanigan,  dated  November 4, 1996,  for  non-exclusive  use of the  servicemark
"Flanigan's" in the Commonwealth of Pennsylvania.

(11) Statement regarding  computation of per share earnings is set forth in this
Annual Report on Form 10-KSB.

(13) Registrant's Form 10-KSB  constitutes the Annual Report to Shareholders for
fiscal year ended September 28, 1996.

(22)(a)  Company's  subsidiaries  are set  forth in this  Annual  Report on Form
10-KSB.



                                                               

































                                       33
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) 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.

                                                   Flanigan's Enterprises, Inc.
                                                            Registrant

                                                   By: JOSEPH G. FLANIGAN  
Date 12/20/1995                                        -------------------
                                                       Joseph G. Flanigan
                                                       Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                 <C>                                   <C>
/s/JOSEPH G. FLANIGAN               Chairman of the Board,                Date 12/20/1995
---------------------               Chief Executive Officer
Joseph G. Flanigan                  and President
                                          

/s/MARY C. REYMANN                  Vice President Finance,               Date 12/20/1995
------------------                  Controller                     
Mary C. Reymann                     Secretary and Director 
                                    

/s/CHARLES KUHN                     Director                              Date 12/20/1995
----------------           
Charles Kuhn

/s/GERMAINE M. BELL                 Director                              Date 12/20/1995
-------------------
Germaine M. Bell

/s/CHARLES E. MCMANUS               Director                              Date 12/20/1995
---------------------
Charles E. McManus

/s/JEFFREY D. KASTNER               Assistant Secretary                   Date 12/20/1995
---------------------               and Director
Jeffrey D. Kastner 

/s/WILLIAM PATTON                   Vice President, Public                Date 12/20/1995
------------------                  Relations and Director
William Patton

/s/JAMES G. FLANIGAN                Director                              Date 12/20/1995
---------------------
James G. Flanigan

/s/PATRICK J. FLANIGAN              Director                              Date 12/20/1995
---------------------- 
Patrick J. Flanigan
</TABLE>
                                       34
<PAGE>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE


FINANCIAL STATEMENTS:

       Report of Independent Certified Public Accountants

       Consolidated Balance Sheets -- September 30, 1995 and September 28, 1996

       Consolidated Statements of Income for the Years Ended September 30, 1995
       and September 28, 1996

       Consolidated Statements of Stockholders' Investment for the Years Ended
       September 30, 1995 and September 28, 1996

       Consolidated Statements of Cash Flows for the Years Ended September 30,
       1995 and September 28, 1996

       Notes to Consolidated Financial Statements

SCHEDULE:

         II  Valuation and Qualifying Accounts for the Years Ended September 30,
           1995 and September 28, 1996

         Schedules,  other than the schedule  listed  above,  are not  submitted
         because they are not applicable,  not required, or because the required
         information  is included in the  consolidated  financial  statements or
         notes thereto.

         Individual  financial  statements of the  registrant  have been omitted
         because  the  registrant  is  primarily  an  operating  company and the
         subsidiaries  included in the  consolidated  financial  statements  are
         wholly owned.






                                                                  
















                                       35
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
    Flanigan's Enterprises, Inc.:

We have  audited the  accompanying  consolidated  balance  sheets of  Flanigan's
Enterprises,  Inc. (a Florida  corporation) and subsidiaries as of September 30,
1995 and September 28, 1996, and the related consolidated  statements of income,
stockholders'  investment  and  cash  flows  for the  years  then  ended.  These
consolidated  financial  statements  and the schedule  referred to below are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  and schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Flanigan's  Enterprises,  Inc.
and subsidiaries as of September 30, 1995 and September 28, 1996 and the results
of their  operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
financial statements and schedule is presented for the purpose of complying with
the  Securities  and  Exchange  Commission's  rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.





Miami, Florida,
December 12, 1996.





                                                                   






                                       36
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                    SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                                     ASSETS

                                                             1995           1996
                                                         ----------     ----------
<S>                                                      <C>            <C>
CURRENT ASSETS:
         Cash and cash equivalents .................     $  686,000     $  797,000
         Receivables, less allowance for
           uncollectible  amounts and deferred
           gains,  including  related party
           receivables  of $16,000 and $3,000
           (before  allowances  and deferred  gains)
           in 1995 and 1996, respectively ..........        235,000        486,000
         Inventories ...............................        824,000        911,000
         Prepaid expenses ..........................        373,000        328,000
                                                         ----------     ----------
         Total current assets ......................      2,118,000      2,522,000
                                                         ----------     ----------

PROPERTY AND EQUIPMENT, net ........................      2,772,000      2,634,000
                                                         ----------     ----------

LEASED PROPERTY UNDER CAPITAL LEASES,
         less accumulated amortization of
         $741,000 and $678,000 in 1995
         and 1996, respectively ....................        227,000        195,000
                                                         ----------     ----------

OTHER ASSETS:
         Liquor licenses, less accumulated
           amortization of $95,000 and
           $83,000 in 1995 and 1996, respectively ..        338,000        349,000
         Notes and mortgages receivable, less
           allowance for  uncollectible  amounts and
           deferred  gains, including related party
            receivables of $70,000 and -0- (before
            allowances and deferred gains)
            in 1995 and 1996, respectively .........         85,000         76,000
         Investment in joint venture ...............           --          120,000
         Other .....................................        324,000        413,000
                                                         ----------     ----------
         Total other assets ........................        747,000        958,000
                                                         ----------     ----------
                                                         $5,864,000     $6,309,000
                                                         ==========     ==========
</TABLE>

                                   (Continued)


                                       37
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                    SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                    LIABILITIES AND STOCKHOLDERS' INVESTMENT

                                   (continued)

                                                           1995            1996
                                                     ------------     -----------
<S>                                                  <C>              <C>
CURRENT LIABILITIES:
         Accounts payable ......................     $   756,000      $   582,000
         Accrued and other current liabilities .         865,000          820,000
         Current portion of long-term debt .....          60,000           16,000
         Current obligations under capital
           leases ..............................          54,000           61,000
         Current portion of damages payable on
           terminated or rejected leases .......         240,000          249,000
         Due to Pennsylvania limited
           partnership .........................         106,000          430,000
                                                     -----------      -----------
         Total current liabilities .............       2,081,000        2,158,000
                                                     -----------      -----------
LONG-TERM DEBT, net of current portion .........          21,000            5,000
                                                     -----------      -----------
OBLIGATIONS UNDER CAPITAL LEASES,
         net of current portion ................         448,000          387,000
                                                     -----------      -----------
DAMAGES PAYABLE ON TERMINATED OR
         REJECTED LEASES, net of current portion       1,462,000        1,212,000
                                                     -----------      -----------

COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)

STOCKHOLDERS' INVESTMENT:
         Common stock, par value $.10,
           authorized 5,000,000 shares,
           issued and outstanding 2,099,000
           shares in 1995 and 1996 .............         210,000          210,000
         Capital in excess of par value ........       6,685,000        6,395,000
         (Accumulated deficit) retained earnings         (33,000)         753,000
         Less - Treasury stock, at cost,
           1,246,000 and 1,192,000 shares
           in 1995 and 1996, respectively ......      (5,010,000)      (4,811,000)
                                                     -----------      -----------
         Total stockholders' investment ........       1,852,000        2,547,000
                                                     -----------      -----------
                                                     $ 5,864,000      $ 6,309,000
                                                     ===========      ===========

The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
</TABLE>
                                       38
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

          FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996


                                                      1995               1996
                                                 ------------      ------------
<S>                                              <C>               <C>
REVENUES:
         Restaurant food sales .............     $  9,065,000      $  9,588,000
         Restaurant bar sales ..............        3,316,000         3,220,000
         Lounge bar sales ..................          470,000           234,000
         Package goods sales ...............        4,845,000         6,112,000
         Franchise-related revenues ........          460,000           629,000
         Owners fee ........................          150,000           150,000
         Joint venture income ..............             --              65,000
         Other operating income ............          204,000           186,000
                                                 ------------      ------------
                                                   18,510,000        20,184,000
                                                 ------------      ------------
COSTS AND EXPENSES:
         Cost of merchandise sold -
                  restaurants and lounges ..        4,858,000         4,927,000
                  package goods ............        3,596,000         4,499,000
         Payroll and related costs .........        5,071,000         5,574,000
         Occupancy costs ...................          857,000           949,000
         Selling, general and
                  administrative expenses ..        3,859,000         3,782,000
                                                 ------------      ------------
                                                   18,241,000        19,731,000
                                                 ------------      ------------
         Income from operations ............          269,000           453,000
                                                 ------------      ------------
OTHER INCOME (EXPENSE):
         Interest expense on obligations
           under capital leases ............          (68,000)          (62,000)
         Interest expense on long-term
           debt and damages payable ........          (81,000)          (69,000)
         Interest income ...................           60,000            31,000
         Management fees from
           Pennsylvania limited
           partnership .....................           77,000            66,000
         Gain on sale of Pennsylvania
           limited partnership .............             --             135,000
         Recognition of deferred gains .....          250,000           114,000
         Other, net ........................           46,000           124,000
                                                 ------------      ------------
                                                      284,000           339,000
                                                 ------------      ------------
         Income before provision for
           income taxes ....................          553,000           792,000

                                   (continued)
</TABLE>
                                       39
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

          FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                                   (continued)


                                                           1995           1996
                                                       ----------       --------
<S>                                                    <C>              <C>
PROVISION FOR INCOME TAXES .....................            3,000          6,000
                                                       ----------       --------

         Net income ............................       $  550,000       $786,000
                                                       ==========       ========
NET INCOME
         PER COMMON SHARE:

         Primary ...............................       $      .60       $    .80
                                                       ==========       ========
         Fully diluted .........................       $      .59       $    .80
                                                       ==========       ========

WEIGHTED AVERAGE SHARES
         AND EQUIVALENT SHARES OUTSTANDING:

         Primary ...............................          921,000        984,000
                                                       ==========       ========
         Fully diluted .........................          928,000        986,000
                                                       ==========       ========

The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
  



















                                     40
<PAGE>
<TABLE>
<CAPTION>
                                          FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

                                  FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996


                                        COMMON STOCK                                                   TREASURY STOCK
                                        ------------                                                   --------------

                                                                                 (Accumulated
                                                                Capital in         Deficit)
                                  Number of                      Excess of         Retained         Number of
                                   Shares         Amount         Par Value         Earnings          Shares           Amount
                                   ------         ------         ---------         --------          ------           ------
<S>                               <C>           <C>             <C>              <C>                <C>            <C>  
BALANCE, October 1, 1994 ..       2,099,000     $   210,000     $ 6,685,000      $  (583,000)       1,168,000      $ 4,773,000
Net income ................            --              --              --            550,000             --               --

Purchase of 78,000 shares
   of treasury stock ......            --              --              --               --             78,000          237,000
                                  ---------     -----------     -----------      -----------        ---------      -----------
BALANCE, September 30, 1995       2,099,000         210,000       6,685,000          (33,000)       1,246,000        5,010,000

Net income ................            --              --              --            786,000             --               --

Purchase of 39,000 shares
   of treasury stock ......            --              --              --               --             39,000          173,000
Exercise of stock options .            --              --          (290,000)            --            (93,000)        (372,000)
                                  ---------     -----------     -----------      -----------        ---------      -----------
BALANCE, September 28, 1996       2,099,000     $   210,000     $ 6,395,000      $   753,000        1,192,000      $ 4,811,000
                                  =========     ===========     ===========      ===========        =========      ===========



The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>

                                        
















                                       41
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

          FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                                                          1995            1996
                                                       ---------      ---------
<S>                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

         Net income ..............................     $ 550,000      $ 786,000
         Adjustments to reconcile net income
         to net cash provided by
         operating activities:
           Depreciation and amortization .........       635,000        659,000
           Provision for uncollectible
             notes and mortgages receivable ......        97,000        104,000
           Provision for potential
             uninsured claims ....................        60,000         12,000
           Recognition of deferred gains
             and other deferred income ...........      (250,000)      (114,000)
           (Gain) loss on property,
             equipment and liquor licenses .......       (31,000)        53,000
           Gain from sale of Pennsylvania
             limited partnership .................          --         (135,000)

         Changes in assets and liabilities:

           Decrease (increase)in receivables .....        86,000       (235,000)
           Increase in inventories ...............      (104,000)       (87,000)
           (Increase) decrease in prepaid expenses       (63,000)        45,000
           Increase in other assets ..............      (161,000)      (326,000)
           Decrease in accounts payable ..........       (19,000)      (174,000)
           Decrease in accrued
             and other current liabilities .......      (301,000)       (57,000)
                                                       ---------      ---------
         Net cash provided by
           operating activities ..................       499,000        531,000
                                                       ---------      ---------

                                   (continued)



                                                                  










                                       42
<PAGE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

          FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                                   (continued)

                                                           1995          1996
                                                        ---------      --------
<S>                                                     <C>            <C>
CASH FLOWS FROM INVESTING ACTIVITIES:

         Net proceeds from sale of property
           and equipment and liquor licenses .....        24,000         10,000
         Collections on notes and
           mortgages receivable ..................       343,000        290,000
         Purchase of property and equipment ......      (348,000)      (613,000)
         Investment in joint venture .............          --         (120,000)
         Proceeds from sale of Pennsylvania
           limited partnership ...................          --          156,000
                                                        --------       --------

         Net cash provided by (used in)
           investing activities ..................        19,000       (277,000)
                                                        --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Payments of long-term debt ..............      (126,000)       (60,000)
         Payments of obligations under
           capital leases ........................       (86,000)       (54,000)
         Payments of damages payable on
           terminated or rejected leases .........      (232,000)      (241,000)
         Change in amount due to Pennsylvania
           limited partnership ...................       (19,000)       303,000
         Purchase of treasury stock ..............      (237,000)      (173,000)
         Proceeds from exercise of options .......          --           82,000
                                                        --------       --------

         Net cash used in
           financing activities ..................      (700,000)      (143,000)
                                                        --------       --------

                                   (continued)



                                                                  









                                       43
<PAGE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

          FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996

                                   (continued)

                                                           1995           1996
                                                        ---------      ---------
<S>                                                     <C>            <C>
NET (DECREASE) INCREASE IN CASH AND
         CASH EQUIVALENTS .........................      (182,000)       111,000

CASH AND CASH EQUIVALENTS,
         BEGINNING OF YEAR ........................       868,000        686,000
                                                        ---------      ---------
CASH AND EQUIVALENTS,
         END OF YEAR ..............................     $ 686,000      $ 797,000
                                                        =========      =========

Supplemental disclosures of cash flow information:

         Cash paid during the year for:

           Interest ...............................     $ 149,000      $ 131,000
           Income taxes ...........................         7,000          6,000

         Noncash Activities:


           Reduction of capital lease assets
           and obligations due to amendment
           and termination of original lease
           term ...................................     $  96,000      $    --

           Retirement of fully depreciated
           equipment ..............................     $ 326,000      $  51,000

           Write-off of fully reserved
           mortgage receivable ....................     $ 258,000      $    --

           Exchange of note receivable
           for liquor license .....................     $  33,000      $  50,000


The accompanying notes to consolidated financial statements are an integral part
of these statements.

</TABLE>







                                       44
<PAGE>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996


(1)      NATURE OF OPERATIONS:

         Incorporated in 1959, Flanigan's Enterprises, Inc. ("Flanigan's" or the
"Company")  began  operations  in South  Florida  as a chain  of small  cocktail
lounges and package  liquor  stores.  At September  28,  1996,  the Company owns
and/or operates five full-service restaurants,  four package liquor stores, four
combination  full-service  restaurants and package liquor stores in Florida, and
one club in Georgia,  for which Flanigan's receives an owner's fee pursuant to a
management   agreement.   The  Company's  restaurants  are  operated  under  the
"Flanigan's Seafood Bar and Grill" trademark, while the Company's package stores
are  operated  under the "Big  Daddy's  Liquors"  trademark.  Additionally,  the
Company holds interests in seven franchised units.

(2)      PETITION IN BANKRUPTCY:

         On November 4, 1985, Flanigan's Enterprises, Inc., not including any of
its  subsidiaries,  filed a voluntary  petition in the United States  Bankruptcy
Court for the Southern  District of Florida seeking to reorganize  under Chapter
11 of the Federal Bankruptcy Code.  Flanigan's was authorized to continue in the
management  and control of its  business  and  property as  debtor-in-possession
under the Bankruptcy Code. On May 5, 1987, Flanigan's Plan of Reorganization, as
amended and modified (the "Plan"),  was confirmed by the  Bankruptcy  Court.  On
December 28, 1987, Flanigan's was officially discharged from bankruptcy.

         The Bankruptcy Code allows the debtor-in-possession to either assume or
reject certain  liabilities,  leases,  or other executory  contracts  subject to
court  approval.  Lessors or other  parties to contracts  which are rejected are
entitled  to file  claims  for losses or  damages  sustained  as a result of the
rejection.  In fiscal 1986,  Flanigan's recorded estimated damages of $4,278,000
for  claims  for  losses as a result of  rejected  leases.  Because  the  damage
payments were to be made over nine years, the total amount due was discounted at
a rate of 9.25%,  Flanigan's then effective  borrowing rate.  During fiscal 1991
and 1992,  Flanigan's  renegotiated  the  payment of this  obligation  to extend
through  fiscal  2002 which  effectively  reduced  the  discount  rate to 3.71%.
Remaining  liabilities for damage  payments are included as "Damages  Payable on
Terminated or Rejected Leases" in the accompanying  consolidated balance sheets.
Based on the borrowing rates  currently  available to the Company for bank loans
with similar terms and average maturities,  the fair value of damages payable on
terminated or rejected leases is approximately $1,250,000. The fair value of all
other  financial  instruments  approximates  the  carrying  value on the balance
sheets, due to their short-term nature or market rates of interest.



                                                                   






                                       45
<PAGE>
         As of September  28, 1996,  damages  payable on  terminated or rejected
leases, including imputed interest, mature as follows:
<TABLE>
<CAPTION>
                  Fiscal                               Amount
                  ------                             ---------
                 <S>                                <C>
                  1997                              $  300,000
                  1998                                 300,000
                  1999                                 300,000
                  2000                                 300,000
                  2001                                 300,000
                  Thereafter                           120,000
                                                      ---------
                                                    $1,620,000

                  Less - Amount representing
                           interest                   (159,000)
                                                    ----------
                                                    $1,461,000
                                                    ==========
</TABLE>


(3)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         (a)  Basis of Consolidation -

         The  consolidated   financial   statements   include  the  accounts  of
Flanigan's  Enterprises,  Inc.  and its  subsidiaries,  all of which are  wholly
owned.  All  significant  intercompany   transactions  and  balances  have  been
eliminated  in  consolidation.  The  Company's  fiscal year ends on the Saturday
nearest September 30.

         (b)  Cash and Cash Equivalents -

         The  Company  considers  all  highly  liquid  debt  instruments  with a
maturity of three months or less at the date of purchase to be cash equivalents.

         (c)  Inventories -

         Inventories  are  stated  at lower of cost  (first  in,  first  out) or
market.

         (d)  Liquor Licenses -

         Liquor  licenses  purchased  prior to  October  30,  1970 (the date APB
Opinion No. 17 became  effective),  which totaled $145,000 at September 30, 1995
and  September  28, 1996,  are not  amortized  unless an  impairment in value is
indicated.  The cost of liquor licenses acquired subsequent to October 30, 1970,
is amortized over a period of 40 years.

                                                                   





                                       46
<PAGE>
         (e)  Property and Equipment -

         For financial reporting,  the Company uses the straight-line method for
providing depreciation and amortization on property and equipment.  Property and
equipment  at  September  30, 1995 and  September  28,  1996,  consisted  of the
following:
<TABLE>
<CAPTION>
                                      Useful
                                      Lives             1995            1996
                                    ----------      -----------     -----------
<S>                                 <C>             <C>             <C>
Furniture and equipment ......      3 -7 years      $ 4,402,000     $ 4,548,000
Leasehold interests and
  improvements ...............       See below        4,815,000       4,595,000
                                                    -----------     -----------
                                                      9,217,000       9,143,000
Less - accumulated
  depreciation and
  amortization ...............                       (6,445,000)     (6,509,000)
                                                    -----------     -----------
                                                    $ 2,772,000     $ 2,634,000
                                                    ===========     ===========
</TABLE>
         Leasehold  interests are amortized  over the minimum term of the lease.
Leasehold  improvements are amortized over the life of the lease up to a maximum
of 10  years.  If the  locations  are sold or  abandoned  before  the end of the
amortization period, the unamortized cost is expensed.

         (f)  Investment in Joint Venture-

         The equity  method of  accounting is used when the Company has a twenty
percent to fifty  percent  interest  in other  companies,  joint  ventures,  and
partnerships,  and can exercise significant influence.  Under the equity method,
original  investments  are recorded at cost and  adjusted by  dividends  and the
Company's share of undistributed earnings or losses.

         (g)  Accounting Pronouncements-

         In October 1995, the Financial  Accounting  Standards Board issued SFAS
No. 123, "Accounting for Stock-Based  Compensation",  which requires adoption in
fiscal  1997.  SFAS No. 123 requires  that the  Company's  financial  statements
include  certain  disclosures  about  stock-based  compensation  and permits the
adoption of a change in accounting for such arrangements.  Changes in accounting
for  stock-based  compensation  are optional and the Company plans to adopt only
the disclosure requirements in fiscal 1997.

         In March 1995, the Financial Accounting Standards Board issued SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed of", which requires  adoption in fiscal 1997. SFAS No. 121
establishes  accounting  standards  for the  impairment  of  long-lived  assets,
certain  identifiable  intangibles,  and  goodwill  related to those  assets and
certain  identifiable  intangibles  to be  disposed.  The Company  believes  the
adoption  of SFAS  No.  121 will not have a  material  effect  on the  Company's
financial condition or results of operations.

 
                                                                  
                                       47
<PAGE>
         (h) Use of Estimates in the Preparation of Financial Statements-

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

         (i)  Reclassifications-

         Certain  amounts  in the fiscal  1995  financial  statements  have been
reclassified to conform to the current year presentation.

(4)      INCOME TAXES:

         The  Financial   Accounting   Standards  Board  issued  SFAS  No.  109,
"Accounting for Income Taxes", which requires among other things, recognition of
future  tax  benefits  measured  at enacted  rates  attributable  to  deductible
temporary differences between financial statement and income tax bases of assets
and liabilities and to tax net operating loss  carryforwards  to the extent that
realization of said benefits is more likely than not.

         The  components of the Company's  provision for income taxes,  which is
all current, for the fiscal years ended 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                    1995                   1996
                                                  --------               ------- 
<S>                                               <C>                    <C>
Federal ...........................               $(4,000)               $ 1,000
State .............................                 7,000                  5,000
                                                  -------                -------
                                                  $ 3,000                $ 6,000
                                                  =======                =======
</TABLE>
         A  reconciliation  of income  taxes with the  amounts at the  statutory
federal rate follows:
<TABLE>
<CAPTION>
                                                      1995               1996
                                                   ---------          ----------
<S>                                                <C>                <C>
Tax provision at the
  statutory rate of 34% ..................         $ 188,000          $ 269,000

State income taxes, net of
  federal income tax benefit .............             5,000              3,000

Benefit of operating loss
  carryforward ...........................          (130,000)          (251,000)

Other ....................................           (60,000)           (15,000)

                                                   ---------          ---------
                                                   $   3,000          $   6,000
                                                   =========          =========
</TABLE>
                                       48
<PAGE>
         In fiscal 1991 and prior years the Company generated loss carryforwards
for both  financial  statement  and tax  purposes.  At September  28, 1996,  the
available  tax loss  carryforward  is  approximately  $4,201,000  which  expires
between 2002 and 2006.

         In  addition  to net  operating  loss  carryforwards,  the  Company has
deferred tax assets  amounting to  approximately  $533,000 at September 28, 1996
which arise  primarily due to  depreciation  recorded at different rates for tax
and book purposes, and capital leases,  allowances for uncollectible amounts and
accruals for potential  uninsured claims,  all recorded for financial  reporting
purposes but not recognized for tax purposes.  Because  realization of the total
amount of available  net  deferred  tax assets,  including  net  operating  loss
carryforwards,  is not "more  likely than not", a valuation  allowance  has been
provided as follows:
<TABLE>
<CAPTION>
Deferred tax item        
                                                 Tax Effect         Tax Effect
                                                     1995               1996
                                                 -----------        -----------
<S>                                              <C>                <C>
Book/tax differences in
  property and equipment .................       $   237,000        $   275,000
Receivable allowances ....................            99,000             55,000
Leases, capitalized for books only .......            93,000             86,000
Accruals for potential
  uninsured claims .......................           102,000             54,000
Discount on damages payable ..............           (74,000)           (54,000)
Other, net ...............................            99,000            117,000
Net operating loss carryforward,
  tax effected ...........................         1,679,000          1,428,000

Valuation allowance ......................        (2,235,000)        (1,961,000)
                                                 -----------        -----------
                                                 $     -            $     -
                                                 ===========        ===========
</TABLE>
(5)      LEASES

         The Company leases a substantial portion of the land and buildings used
in its  operations  under leases with initial  terms  expiring  between 1996 and
2049. Renewal options are available on many of the leases. In certain instances,
lease  rentals are subject to  cost-of-living  increases  or fair market  rental
appraisals  and/or sales  overrides.  Certain  properties are subleased  through
various expiration dates.

         Leased  property under capital  leases is amortized on a  straight-line
basis over the lease term, and interest expense (which is based on the Company's
incremental  borrowing  rate at the  inception  of the  lease) is accrued on the
basis of the outstanding capital lease obligation. Rentals relating to operating
leases are expensed currently.



                                                                   




                                       49
<PAGE>
         Future minimum lease  payments under capital leases and  noncancellable
operating  leases,  including  leases  under which the  Company is  contingently
liable, and noncancellable sublease income are as follows:
<TABLE>
<CAPTION>
                                                 Capital                 Operating              Sublease
                                                  Leases                  Leases                 Income
                                                ---------              -----------             ---------
         <S>                                    <C>                    <C>                    <C>
              1997                              $ 118,000              $ 1,197,000            $  758,000
              1998                                118,000                1,010,000               586,000
              1999                                109,000                  871,000               653,000
              2000                                 77,000                  701,000               504,000
              2001                                 55,000                  269,000               326,000
         Thereafter                               265,000                2,160,000             1,669,000
                                                ---------               ----------            ----------
         Total                                  $ 742,000              $ 6,208,000            $4,496,000
                                                                         =========             =========
         Less - Amount representing
           interest                              (294,000)
                                                ---------
         Present value of minimum
           lease payments                       $ 448,000
                                                =========
</TABLE>



         Total rent expense for all operating  leases  (including  those with an
initial  term of less  than one  year and net of  subleases)  was  $541,000  and
$634,000 in 1995 and 1996, respectively, and is included in "Occupancy costs" in
the accompanying consolidated statements of income.

         Aggregate  annual  rentals  under leases with related  parties,  net of
applicable sublease income, were approximately  $396,000 in 1995 and $251,000 in
1996.  Remaining rental  commitments  included in future minimum rental payments
required  under these leases were  approximately  $827,000 as of  September  28,
1996.





                                                                  














                                       50
<PAGE>
(6)      RECEIVABLES:

         Receivables,  net of deferred gains and  allowances  for  uncollectible
amounts,  consisted of the  following as of September 30, 1995 and September 28,
1996:
<TABLE>
<CAPTION>

                                                                                       1995                     1996
                                                                                    ---------                 --------- 
 <S>                                                                                <C>                       <C>       
 Notes and mortgages receivable from unrelated parties, bearing interest
   at rates ranging from 9% to 15% and due in varying installments
   through 2002                                                                     $ 519,000                 $ 365,000

 Mortgages receivable from sales
   of franchises to related parties,
   bearing interest at rates ranging
   from 9% to 15%                                                                      86,000                     3,000

 Various noninterest-bearing
   receivables currently due                                                          229,000                   466,000
                                                                                     --------                  --------
                                                                                      834,000                   834,000

   Less  -  Deferred gains                                                           (223,000)                 (109,000)

            Allowance for
            uncollectible amounts                                                    (291,000)                 (163,000)
                                                                                     --------                  --------
                                                                                      320,000                   562,000
 Amount representing current portion                                                  235,000                   486,000
                                                                                      -------                   -------
                                                                                    $  85,000                 $  76,000
                                                                                    =========                 =========
</TABLE>
         The majority of the notes and mortgages  receivable  represent  amounts
owed to the Company for store operations  which were sold.  Unless a significant
amount  of cash is  received  on the  sale,  a pro rata  portion  of the gain is
deferred and recognized only as payments on the notes and mortgages are received
by the Company. Any losses on sales of stores are recognized  currently.  During
fiscal 1995 and 1996,  $250,000 and $114,000,  respectively,  of deferred  gains
were recognized on collections of such notes receivable.

         Receivables at September 28, 1996 mature as follows:
<TABLE>
<CAPTION>
                           <S>                             <C>
                           1997                            $  756,000
                           1998                                19,000
                           1999                                 9,000
                           2000                                11,000
                           2001                                 9,000
                           Thereafter                          30,000
                                                           ----------
                                                           $  834,000
                                                           ==========
</TABLE>
                                       51
<PAGE>
         (7)      ACCRUED AND OTHER CURRENT LIABILITIES:

         Accrued and other current liabilities  consisted of the following as of
September 30, 1995 and September 28, 1996:
<TABLE>
<CAPTION>

                                                       1995               1996
                                                     --------           --------
<S>                                                  <C>                <C>
Property taxes ...........................           $110,000           $ 94,000
Salaries and wages .......................            214,000            253,000
Franchisee advance funds .................             82,000             67,000
Potential uninsured claims ...............            300,000            159,000
Other ....................................            159,000            247,000
                                                     --------           --------
                                                     $865,000           $820,000
                                                     ========           ========
</TABLE>


         Franchisee advance funds represent cash balances held by the Company on
behalf of franchisees  (see Note 10) for inventory  purchases to be made as part
of the Company-sponsored cooperative buying program.

         (8)      COMMITMENTS AND CONTINGENCIES:

          Guarantees

         The Company is contingently  liable for annual rentals in the amount of
approximately   $650,000  at  September  28,  1996,  for  lease  obligations  in
connection with the assignment of leases on stores sold. In the event of default
under any of these agreements,  the Company will have the right to repossess the
premises.

         Employment Agreement

         On June 3, 1987, the Company entered into an employment  agreement with
the  Chairman  of the  Board,  which was  ratified  by the  stockholders  at the
Company's 1988 annual meeting.  The agreement provides,  among other things, for
annual compensation of $150,000,  through December 31, 1996, renewable annually,
as well as a bonus based on the Company's cash flow, as defined.  For the fiscal
years  ended  1995 and  1996,  no bonus was  earned  under  the  agreement.  The
agreement further provides that in the event of termination, the Chairman of the
Board would be entitled to a maximum payment of $450,000.

         The  agreement  also  provides  for the  issuance  of stock  options to
purchase up to 93,092 shares of the Company's  common stock.  In December  1989,
the  Chairman's  option  exercise  prices were  reduced from a range of $4.00 to
$4.125 to $.875,  an exercise  price in excess of the then fair market  value of
the Company's common stock. In fiscal 1996, these options were exercised.


                                                                   




                                       52
<PAGE>
         During fiscal 1992,  additional options to purchase up to 46,540 shares
were  granted to the  Chairman  at an  exercise  price of $2.25 per share  which
expire February 27, 1997. Exercise prices at the dates of grant equaled the then
fair  market  value  of  the  Company's  common  stock;  therefore,  no  related
compensation  expense was recorded.  On February 25, 1994, the Chairman's option
exercise prices on the additional options were increased from $2.25 to $6.50.

         Key Employee Incentive Stock Option Plan

         In  December  1993,  the Board of  Directors  approved  a Key  Employee
Incentive  Stock Option Plan,  which  reserved  and  authorized  the issuance of
100,000 shares of the Company's common stock to eligible employees.

         During  fiscal 1994,  52,000 stock  options were granted at an exercise
price of $3.50 per share,  which  expire  April 19,  1999.  During  fiscal 1996,
30,000 stock options were granted at an exercise price of $3.25 per share, which
expire  December 21, 2000,  and 18,000 stock options were granted at an exercise
price of $4.38,  which  expire March 14,  2001.  Exercise  prices at the date of
grant equaled or exceeded the fair market value of the  Company's  common stock;
therefore,  no related  compensation  expense  was  recorded.  No  options  were
exercised during fiscal 1994, 1995, or 1996.

         Litigation

         The Company is a party to various  litigation matters incidental to its
business. Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company.

         Certain  states  have  "liquor  liability"  laws  which  allow a person
injured by an  "intoxicated  person" to bring a civil suit  against the business
(or social host) who had served  intoxicating  liquors to an already  "obviously
intoxicated   person".   The  Company  has  general  liability  insurance  which
incorporates a  semi-self-insured  plan under which the Company assumes the full
risk of the first $50,000 of exposure per  occurrence.  The Company's  insurance
carrier  is  responsible  for  $1,000,000  coverage  per  occurrence  above  the
Company's self-insured deductible, up to a maximum aggregate of $2,000,000,  per
year.  The  Company  is  self-insured  against  liability  claims  in  excess of
$1,000,000. The extent of this coverage varies by year.

         Certain liquor  liability suits are still in the discovery  stage,  and
the potential liability to the Company has not been determined.  The Company has
accrued for potential  uninsured  losses based on estimates  received from legal
counsel and  historical  experience.  Such  accrual is included in "Accrued  and
other current liabilities - potential uninsured claims".



                                                                   










                                       53
<PAGE>
         (9)      LONG-TERM DEBT:

         Long-term  debt  consisted of the  following at September  30, 1995 and
September 28, 1996:
<TABLE>
<CAPTION>
                                                         1995           1996
                                                      --------         ---------
<S>                                                   <C>              <C>
Mortgage payable, bearing interest at
  12%, paid in full during 1996 ..............        $ 12,000         $   --

Note payable to former Vice-Chairman
  of the Board, bearing interest
  at 10%, paid in full during 1996 ...........          17,000             --

Other notes payable, bearing interest
  at rates ranging from 7-1/4% to
  10%, due in varying
  installments through 1998 ..................          52,000           21,000
                                                      --------         --------
                                                        81,000           21,000

Less - Current portion .......................         (60,000)         (16,000)
                                                      --------         --------
                                                      $ 21,000         $  5,000
                                                      ========         ========
</TABLE>
         Long-term debt at September 28, 1996 matures as follows:

<TABLE>
<CAPTION>
                Year                                     Amount
                ----                                   ---------
                <S>                                    <C>
                1997                                   $ 16,000
                1998                                      4,000
                1999                                      1,000
                                                        -------
                                                       $ 21,000
                                                        =======
</TABLE>












                                                                  



                                       54
<PAGE>
(10)     FRANCHISE PROGRAM:

         At September  28,  1996,  seven stores were  operated  under  franchise
agreements.  Under the  franchise  agreements,  the  Company  agrees to  provide
guidance, advice and management assistance to the franchisees.  The Company also
agrees  to  sponsor  and  manage  cooperative  buying  groups  on  behalf of the
franchisees for the purchase of inventory.  The franchise agreements provide for
fees to the Company of  approximately 3% of gross sales. Of the seven franchised
stores,  four are owned or operated by related parties.  When received,  initial
franchise fees are deferred and  recognized  ratably as payments are received on
the related notes.

(11)     DUE TO PENNSYLVANIA LIMITED PARTNERSHIP:

         Through September 20, 1996, the Company operated a club in Pennsylvania
through a limited  partnership (the "Partnership") in which the Company acted as
the general  partner.  The  Partnership  agreement  provided  the  Company  with
management fees of 49% of profit before depreciation and management fees, plus a
1% interest in the income of the Partnership.  The Company  recorded  management
fee income  related to this  agreement  of $77,000 and $66,000 in 1995 and 1996,
respectively,  included as management fees from Pennsylvania limited partnership
in the accompanying consolidated statements of income.

         On  September  20,  1996,  the  Partnership's   assets  were  sold  for
approximately $500,000. Such proceeds were received by the Company. Accordingly,
the  accompanying  consolidated  balance  sheet at September 28, 1996 reflects a
liability of $430,000 which includes the limited partners' proceeds for the sale
of the  Partnership's  assets,  the  limited  partners'  distributions  for 1996
operations,   and  a  reserve  for  the  Partnership's   remaining  liabilities.
Liabilities to the limited  partners for  distributions  for 1995 operations are
$106,000.  Liabilities to the limited  partners of the  Partnership as of fiscal
yearend 1995 and 1996, respectively, are included as due to Pennsylvania limited
partnership  on  the  accompanying  consolidated  balance  sheets.  The  Company
recognized a gain of $135,000 on the sale of the Partnership's  assets; the gain
is  included  as  gain  on  sale  of  Pennsylvania  limited  partnership  in the
accompanying consolidated statements of income.






                                                                   















                                       55
<PAGE>
(12)     INCOME PER COMMON SHARE:

         Net income per common share is calculated by dividing net income by the
weighted average number of shares and share equivalents outstanding.
<TABLE>
<CAPTION>
                                        -------------------------------------------
                                                1995                    1996
                                        -------------------     -------------------
                                                     Fully                   Fully
                                        Primary     Diluted     Primary     Diluted
                                        -------     -------     -------     ------- 
<S>                                     <C>         <C>         <C>         <C>
Weighted average shares outstanding     905,000     905,000     897,000     897,000

Incremental shares after
  application of the treasury
  stock method or modified
  treasury stock method, as
  applicable ......................      16,000      23,000      87,000      89,000
                                        -------     -------     -------     -------
Shares used in calculation of
  net income per common share .....     921,000     928,000     984,000     986,000
                                        =======     =======     =======     =======
</TABLE>
(13)     RELATED PARTY TRANSACTIONS:

         In  fiscal  1990,  the  Company's  Chairman  and a  relative  formed  a
corporation to manage one of the Company's  franchised  stores.  The corporation
continues to manage the franchised store.

         During  fiscal  1995 and  1996,  the  Company  incurred  legal  fees of
approximately  $89,000 and  $96,000  (in  salary),  respectively,  for  services
provided by a member of the Board of Directors.

         Also  see  Notes  5,  6,  9  and  10  for   additional   related  party
transactions.

(14)     BUSINESS SEGMENTS:

         The  Company  operates  principally  in two  segments - retail  package
stores and  restaurants  (and lounges in 1995).  The operation of package stores
consists of retail liquor sales.  The restaurant and lounge  operations  include
bar sales from cocktail lounges and food sales.

         Information  concerning the revenues and operating income for the years
ended September 30, 1995 and September 28, 1996, and identifiable assets for the
two segments in which the Company  operates,  are shown in the following  table.
Operating  income is total revenue less cost of  merchandise  sold and operating
expenses relative to each segment.  In computing  operating income,  none of the
following items have been included: interest expense, other non-operating income
and expense and income  taxes.  Identifiable  assets by segment are those assets
that are used in the Company's operations in each segment.  Corporate assets are
principally cash and notes and mortgages  receivable.  The Company does not have
any operations  outside of the United States and  intersegment  transactions are
not material.

                                       
                                       56
<PAGE>
<TABLE>
<CAPTION>
                                                     1995               1996
                                                ------------       ------------
<S>                                             <C>                <C>
OPERATING REVENUES:
         Retail package stores ...........      $  4,845,000       $  6,112,000
         Restaurants and lounges .........        12,851,000         13,042,000
         Other revenues ..................           814,000          1,030,000
                                                ------------       ------------
Total operating revenues .................      $ 18,510,000       $ 20,184,000
                                                ============       ============

INCOME FROM OPERATIONS RECONCILED TO
INCOME BEFORE INCOME TAXES:
Operating income:
         Retail package stores ...........      $    131,000       $    303,000
         Restaurants and lounges .........         1,338,000          1,220,000
                                                ------------       ------------
                                                   1,469,000          1,523,000
         Corporate expenses,
           net of other revenues .........        (1,200,000)        (1,070,000)
                                                ------------       ------------
Operating income .........................           269,000            453,000
         Interest expense ................          (149,000)          (131,000)
         Other ...........................           433,000            470,000
                                                ------------       ------------
Income before income taxes ...............      $    553,000       $    792,000
                                                ============       ============

IDENTIFIABLE ASSETS:
         Retail package stores ...........      $  1,515,000       $  1,622,000
         Restaurants and lounges .........         2,429,000          2,260,000
                                                ------------       ------------
                                                   3,944,000          3,882,000
         Corporate .......................         1,920,000          2,427,000
                                                ------------       ------------
Consolidated totals ......................      $  5,864,000       $  6,309,000
                                                ============       ============


</TABLE>
















                                       57
<PAGE>
<TABLE>
<CAPTION>
                                                          1995             1996
                                                       ---------        --------
<S>                                                    <C>              <C>
CAPITAL EXPENDITURES:
         Retail package stores ...............         $ 55,000         $199,000
         Restaurants and lounges .............          267,000          350,000
                                                       --------         --------
                                                        322,000          549,000
         Corporate ...........................           26,000           64,000
                                                       --------         --------
Total capital expenditures ...................         $348,000         $613,000
                                                       ========         ========


DEPRECIATION AND AMORTIZATION:
         Retail package stores ...............         $ 84,000         $114,000
         Restaurants and lounges .............          457,000          428,000
                                                       --------         --------
                                                        541,000          542,000
         Corporate ...........................           94,000          117,000
                                                       --------         --------
Total depreciation and amortization ..........         $635,000         $659,000
                                                       ========         ========
</TABLE>

(15)     OTHER, NET:

         Other,  net in the  consolidated  statements  of income  consist of the
         following  for the years ended  September  30, 1995 and  September  28,
         1996:
<TABLE>
<CAPTION>
                                                        1995             1996
                                                     ---------         --------
<S>                                                  <C>              <C>
Non-franchise related rental income ..........          71,000           32,000
Loss on retirement of fixed assets ...........            --            (79,000)
(Loss) gain on repossession of store .........         (55,000)          50,000
Gain on sale of liquor licenses ..............          30,000           26,000
Insurance recovery ...........................            --             53,000
Miscellaneous ................................            --             42,000
                                                     ---------        ---------
                                                     $  46,000        $ 124,000
                                                     =========        =========


</TABLE>








                                                                 
                                       58
<PAGE>
(16)     SUBSEQUENT EVENTS:

         Effective September 30, 1996, one franchised  combination package store
and restaurant  terminated its franchise agreement.  The franchise was sold to a
related third party (the "First  Purchaser"),  with the  Company's  agreement to
manage the franchise for this related  party.  The  management  agreement was to
provide the Company with management  fees equal to 50% of the  franchise's  cash
flow. Subsequent to the sale of the franchise, the Company accepted the offer of
another  franchisee  (the  "Manager"),  also a related  party,  to purchase  the
Company's  right to manage the franchise for the sum of $150,000.  Additionally,
the Manager also purchased the franchise from the First Purchaser.  (The Company
expects to record  $150,000 of income in the first quarter of fiscal 1997,  upon
the sale of the management rights.)

         To raise capital for the  renovations,  a Florida  limited  partnership
will be formed,  of which the Manager will be the general  partner.  The limited
partnership units will be sold as follows:  25% to Manager,  25% to the Company,
25% to related parties and 25% to unrelated parties.  The Manager will receive a
management fee of 50% of the franchise's cash flow. The Company will account for
this investment under the equity method of accounting.



                                                                   


































                                       59
<PAGE>
<TABLE>
<CAPTION>

                                                                                        SCHEDULE II
                            FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                    FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 28, 1996



           Col. A                               Col. B        Col. C        Col. D       Col. E
           ------                               ------        ------        ------       ------
                                                             Additions
                                              Balance at     Charged to                  Balance at
                                              Beginning      Cost and      Amounts        End of
         Description                          of Period      Expenses    Written off      Period
         -----------                          ---------      --------    -----------      ------
<S>                                           <C>           <C>           <C>            <C>                        
FOR THE YEAR ENDED SEPTEMBER 30, 1995
         Allowance for uncollectible
           notes and mortgages receivable     $ 452,000     $  97,000     $(258,000)     $ 291,000
                                              =========     =========     =========      =========

FOR THE YEAR ENDED SEPTEMBER 28, 1996
         Allowance for uncollectible
           notes and mortgages receivable     $ 291,000     $ 104,000     $(232,000)     $ 163,000
                                              =========     =========     =========      =========

</TABLE>



























                                                 60
<PAGE>
                            FLANIGAN'S [GRAPHIC-LOGO]
                               ENTERPRISES, INC.

VIA TELECOPY

November 4, 1996

Mr. James B. Flanigan
1309 Arrowmink road
Villanova, Pennsylvania 19085

Re: Servicemark "FLANIGAN'S"

Dear Jim:

I am in receipt of your letter of October 10, 1996,  in response to my letter of
September 26, 1996,  concerning your use of the servicemark  "Flanigan's" in the
Commonwealth of  Pennsylvania.  I am glad that you wish to amicably resolve this
dispute and hopefully, with this letter, this matter can be laid to rest.

As suggested in my letter of September 26, 1996,  and especially in view of your
request for a computer disk with Flanigan's  operating  manual,  it is adivsable
for us to memorialize our existing oral agreement with regard to your use of the
servicemark "Flanigan's".

Flanigan's  Enterprises,  Inc.  ("Flanigan's"),  has granted you, personally,  a
royalty  free,  non exclusive  license to use the  servicemark  "Flanigan's"  in
connection with restaurant  services at various locations in the Commonwealth of
Pennsylvania.  For  purposes  of this oral  agreement,  any  reference  to "you,
personally",  includes  any  proprietorship,  corporation,  general  or  limited
partnership or other entity in which you are an owner and in which you, together
with your wife,  Margaret,  and/or your daughters,  Eileen and Rita, own no less
than  fifty-one  (51%)  percent of such  business.  In  furtherance  of our oral
agreement,  you are required to maintain  certain minimum  standards of quality,
which you have maintained and will continue to do so in the future.

In the  connection  with this license,  Flanigan's has provided you with various
materials, whiich have been and will continue to be followed to assure that your
services are of good quality. Specifically, Flanigan's has provided you with its
operational manuals, so that Flanigan's can be assured that you will achieve and
continue  achieving  the high  standards  of  quality  and  service  offered  by
Flanigan's.

Additionally, based upon Joe's knowledge of your good business practices and the
fact that you and Joe are family,  I am certain that you have and will  maintain
the  high  standards  of  quality  and  service  that  are  associated  with the
servicemark "Flanigan's".



         2841 West Cypress Creek Road - Fort Lauderdale, Florida 33309
                  Broward: (305) 974-9003 - Fax (305) 974-2940







<PAGE>
Mr. James B. Flanigan
November 4, 1996
Page 2.

I trust that this letter  accurately sets forth Flanigan's  agreement for you to
use the servicemark  "Flanigan's" in connection with your restaurant services in
the Commonwealth of Pennsylvania,  as previously  discussed with Joe. Should you
have any questions concerning the oral agreement set forth herein, please do not
hesitate to give me a call to discuss the same. If you are in agreement with the
terms set forth  herein,  please  acknowledge  your  agreement by signing in the
space  provided  below and  returning a copy of this letter to my attention  via
telecopy,   with  the   original  by  U.S.   mail.   Please  note  that  in  the
acknowledgement  you  need  to  list  the  corporations  using  the  servicemark
"Flanigan's"  and that when you sign the  acknowledgement,  you are  signing for
yourself,  personally,  and as a  corporate  officer  and/or  director  of  each
corporation listed, thereby binding each corporation to the terms hereof.

Very truly yours,
FLANIGAN'S ENTERPRISES, INC.

/s/Jeffrey D. Kastner
---------------------
Jeffrey D. Kastner
General coulsel
JDK/lfk

cc: Joseph G. Flanigan, Chairman
    Mary C. Reymann, Vice President
    Ed Doxey, Treasurer



CONTENTS HEREOF acknowledged and agreed to:

/s/JAMES B. FLANIGAN
--------------------
JAMES B. FLANIGAN, individually and as
officer and/or director of the following corporations:
Boathouse, Inc.
---------------
Boathouse Too, Inc.
-------------------
Boathouse Three-Inc.
--------------------