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 October 3, 1998
                                                               OR
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  
        EXCHANGE ACT OF 1934 For the transition period from to

                         Commission File Number 1-6836

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

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

   2841 Cypress Creek Road, Fort Lauderdale, Florida              33309
--------------------------------------------------------------------------------
        (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 $4,611,537 as of December 7, 1998.

There were 930,000  shares of the  Registrant's  Common Stock ($0.10) Par Value)
outstanding as of October 3, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

Information  contained in the  Registrant's  1998 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
<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 October 3, 1998, the Company  operated 13
units, 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.

                                          FISCAL           FISCAL
                                           YEAR             YEAR           NOTE
TYPES OF UNITS                             1997             1998          NUMBER
--------------------------------------------------------------------------------
Combination package and restaurant           4               4
Restaurant only                              5               5            (1)(2)
Package store only                           4               3            (3)(4)
Clubs                                        1               1
--------------------------------------------------------------------------------
TOTAL - Company operated units.             14              13

FRANCHISED - units                           7               7


Notes:

         (1) 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.

         (2) During the fourth quarter of fiscal year 1997, the Company formed a
limited  partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside,  Florida and renovate the same for operation
under the "Flanigan's  Seafood Bar and Grill"  servicemark.  The Company acts as
general  partner and forty  percent  owner of the  partnership.  The  restaurant
opened in the second quarter of fiscal year 1998.

         (3) During  fiscal year 1995,  the Company was granted  possession of a
store  previously  sold by the Company and began  operating  the package  liquor
store pursuant to Court Order.  During the first quarter of fiscal year 1997 the
Company  acquired  ownership of this store through  foreclosure and continues to
operate the package liquor store.

         (4) 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
profitably  operated the package liquor store of the franchised unit but did not
reopen the lounge. The lease agreement for the business

                                        2

<PAGE>
premises  expired on December  31, 1995 and the Company  occupied the same on an
oral  month to month  lease  agreement,  paying  its  prorata  share of the real
property  taxes monthly and insuring the property until April 1998 when the oral
month to month lease  agreement was  terminated and the package liquor store was
closed.

         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 11 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 78.6% 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.


                                        3

<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:

SUBSIDIARY                                       STATE OF INCORPORATION
----------                                       ----------------------

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

         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  27, 1997 and October 3, 1998 is set
forth in the consolidated financial statements which are attached hereto, and is
incorporated herein by reference.



                                        4
<PAGE>
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
"Flanigan's  Seafood Bar and Grill"  servicemark.  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  78.6% of  their  sales  being  food  items.  These
restaurants  are  operated  under  the   "Flanigan's   Seafood  Bar  and  Grill"
servicemark.  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"  servicemark
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

                                        5

<PAGE>
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.

         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" servicemark.  The Company also entered into a
franchise  agreement  with the  manager,  licensing  the use of the "Big Daddy's
Liquors"  servicemark  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 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 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
profitably operated the package liquor store of the franchised unit

                                        6
<PAGE>
but did not reopen the lounge.  The lease  agreement  for the business  premises
expired on December 31, 1995 and the Company  occupied the same on an oral month
to month lease  agreement  paying its prorata share of the real  property  taxes
monthly and insuring the property  until April 1998 when the oral month to month
lease agreement was terminated and the package liquor store was closed.

         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 fiscal year 1996,  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,  during the first
quarter of fiscal year 1997, 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,  another related franchisee, who is also a member of the Board
of Directors of the Company, paid the Company the sum of $150,000 to approve his
purchase of this  franchise  from the related third party and for the Company to
relinquish  its  right  to act as  manager  of the  franchise.  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. Since April 1, 1997 the Company has received the same weekly
payment as  previously  paid by the former  franchisee  during fiscal year 1996.
During the third quarter of fiscal year 1997 this related party formed a limited
partnership  to own this  franchise  and through  which it raised the  necessary
funds to renovate the  restaurant.  The Company is an investor in the franchise,
as are  other  related  parties,  including  but not  limited  to  officers  and
directors of the Company and 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

                                        7
<PAGE>
franchisee's continued occupancy of the 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 1998, 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  fiscal year 1996,  the  Company's  franchise  agreement  with a
member of Mr.  Flanigan's  family expired and the Company  declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997,  the Company filed suit against the  franchisee for
servicemark infringement, seeking injunctive relief and monetary damages. During
the first quarter of 1998 a Stipulated  Agreed Order of Dismissal Upon Mediation
was issued  whereby  the Company  received  $110,000  and the former  franchisee
agreed to cease all use of the  "Flanigan's"  servicemark  and other trade dress
features common to the Company owned and/or franchised restaurants.

Investment in Joint Ventures

         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  limited  partnership   agreement  gives  the  limited
partnership the right to use the "Flanigan's  Seafood Bar and Grill" servicemark
while the Company acts as general partner only.

         As previously discussed,  during the third quarter of fiscal year 1997,
a related party formed a limited  partnership to own a certain franchise in Fort
Lauderdale, Florida, through which it raised the necessary funds to renovate the
restaurant.   The  Company  is  a  twenty-five  percent  owner  of  the  limited
partnership as are other related parties,  including but not limited to officers
and directors of the Company and their families.

         During the fourth  quarter of fiscal year 1997,  the  Company  formed a
limited  partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside,  Florida and renovate the same for operation
under the "Flanigan's  Seafood Bar and Grill"  servicemark.  The Company acts as
general partner of the limited partnership and is also a forty-two percent owner
of the same, as are other related parties, including but not limited to officers
and  directors  of the  Company  and their  families.  The  limited  partnership
agreement gives the limited partnership the right to use the "Flanigan's Seafood
Bar and  Grill"  servicemark  for a fee  equal  to 3% of  gross  sales  from the
operation of the  restaurant,  while the Company acts as general  partner  only.
This restaurant opened in the second quarter of fiscal year 1998.




                                        8
<PAGE>
         In order to ensure that the Company had adequate  cash reserves in view
of its investment in the restaurant discussed above, and for other improvements,
during the second quarter of fiscal year 1997, the Board of Directors authorized
the  Company to borrow up to  $1,200,000  at an  interest  rate of twelve  (12%)
percent  per annum and fully  amortized  over five (5) years.  During the fourth
quarter  of fiscal  year  1997,  the  Company  borrowed  $375,000  from  private
investors,  in units  of  $5,000,  which  loan is fully  secured  with  specific
receivables owned by the Company.  During the first quarter of fiscal year 1998,
the Company closed on its loan from Barnett Bank in the amount of $500,000, with
interest at prime rate. Equal quarterly principal payments began March, 31, 1998
and will continue quarterly for three (3) years.  Interest is payable monthly on
the outstanding  principal  balance.  The loan is also fully secured with liquor
licenses owned by the Company.

         In the third  quarter of fiscal year 1998,  the Company  entered into a
lease  agreement for a restaurant in Kendall,  Florida and a separate  agreement
for the  purchase of the  furniture,  fixtures  and  equipment  of the  existing
restaurant.  The lease agreement and separate agreement are each contingent upon
the Company  applying for and receiving zoning variances from Miami Dade County,
Florida.  Subsequent  to the end of the fiscal year,  the Company  submitted its
application  for zoning  variances to Miami Dade County,  Florida,  which zoning
variances were  unanimously  granted at a hearing on November 18, 1998. Upon the
expiration of the applicable appeal period, the granting of the zoning variances
will be final.  At the same time,  the Company  raised  funds  through a private
offering  for a  limited  partnership  to be  formed,  to own and  renovate  the
restaurant  for  operation  of the same under the  "Flanigan's  Seafood  Bar and
Grill"  servicemark.  The  Company  will act as general  partner of the  limited
partnership  and also plans to be a forty  percent owner of the same, as well as
other  related  parties,  including but not limited to officers and directors of
the Company and their families.  The limited partnership agreement will give the
limited  partnership  the right to use the  "Flanigan's  Seafood  Bar and Grill"
servicemark  for a fee equal to 3% of the gross sales from the  operation of the
restaurant,  while the Company acts as general  partner only. It is  anticipated
that the restaurant will be renovated and open for business by June 1, 1999.

Clubs

         As of the end of  fiscal  year  1998,  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.



                                        9
<PAGE>
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.  During  fiscal  year 1997,  the
Company agreed to modify the Management Agreement to give Mardi Gras Management,
Inc.  one five year renewal  option to extend the term of the same  provided the
Company is satisfied with the financial condition of Mardi Gras Management, Inc.
within its sole discretion, and Mardi Gras Management, Inc. agreed to modify the
owner's  fee to  $150,000  per year  versus ten  percent of gross sales from the
club, whichever is greater.  Pursuant to the Management Agreement,  as modified,
the Company  receives a monthly  owner's fee of $12,500,  subject to  adjustment
each year on or about July 1, for any additional  rent due as a result of 10% of
the gross sales exceeding $150,000 for the prior 12 month period.

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.

         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

                                       10

<PAGE>
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  ensure  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 the  State of  Florida,  which  represents  all but one of the total
liquor  licenses  held by the  Company,  liquor  licenses are issued on a "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 State of Georgia, the other state 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

                                       11
<PAGE>
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  fourth  quarter  of fiscal  year  1997,  the
Division of Alcoholic Beverages and Tobacco (DABT), subpoenaed several employees
of the Company to inquire  about three cash  purchases of inventory  made by the
Company in calendar  years 1995 and 1996 from a distributor,  without  invoices.
The total purchase  price for the inventory was $5,100.  The Company was charged
administratively  by the DABT for  failing  to have  invoices  from  these  cash
purchases,  but subsequent to the end of fiscal year 1998 the Company entered in
a settlement  agreement with the DABT and paid a fine of $4,000.  At its meeting
on September 4, 1997, the Board of Directors was advised of the investigation by
the DABT  and  unanimously  passed  a  resolution  prohibiting  management  from
purchasing  inventory  without an  invoice  and in cash.  Otherwise,  during the
fiscal year ended October 3, 1998, through the present time, the Company has had
no  significant  pending  matters  initiated by the DABT  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.

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.


                                       12
<PAGE>
         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 1997,  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  industries are highly  competitive and
are 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 include location,  type and
quality of facilities and type, quality and price of beverage and food served.

         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.

         As previously  noted, at October 3, 1998 the Company owned and operated
nine restaurants, seven of which had formerly been lounges and were

                                       13
<PAGE>
renovated to provide for full food service.  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"  servicemark 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  servicemark 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.

         During  fiscal year 1996,  the  Company's  franchise  agreement  with a
member of Mr.  Flanigan's  family expired and the Company  declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997,  the Company filed suit against the  franchisee for
servicemark infringement, seeking injunctive relief and monetary damages. During
the first  quarter of fiscal year 1998, a  Stipulated  Agreed Order of Dismissal
Upon Mediation was issued whereby the Company  received  $110,000 and the former
franchisee  agreed to cease all use of the  "Flanigan's"  servicemark  and other
dress features common to the Company owned and/or franchised restaurants.

         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  389  persons,  of which 316 were
full-time and 73 were  part-time.  Of these  employees,  25 were employed at the
Company's  corporate offices.  Of the remaining  employees,  35 were employed in
package liquor stores, and 329 in restaurants.


                                       14
<PAGE>
         None  of  the  Company's   employees  are   represented  by  collective
bargaining  organizations.  The  Company  considers  its labor  relations  to be
favorable.


                      EXECUTIVE OFFICERS OF THE REGISTRANT


                         POSITIONS AND OFFICES                OFFICE OR POSITION
     NAME                   CURRENTLY HELD          AGE           HELD SINCE
     ----                   --------------          ---           ----------

Joseph G. Flanigan       Chairman of the Board
                         of Directors, Chief
                         Executive Officer,
                         and President               69              1959

William Patton           Vice President
                         Community Relations         75              1975

Edward A. Doxey          Chief Financial Officer     57              1992
                         and Secretary

Jeffrey D. Kastner       Assistant Secretary         45              1995




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
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.


                                       15
<PAGE>
         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  $255,000  for its  refurbishing
program for fiscal year 1999. See Item 7, "Liquidity and Capital Resources", for
discussion of the amounts spent in fiscal year 1998.

         The following table  summarizes the Company's  properties as of October
3, 1998 including franchise locations, a club 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 #11
#11 Corporation
330 Southern Blvd.
W. Palm Beach, FL 33405                     5,000             150      Franchisee                5/15/97 to 5/14/2000

Big Daddy's Liquors #12
Galeon Tavern, Inc
2401 10th Avenue North                                                                           11/15/92 to 11/15/2002
Lake Worth, FL 33461                        5,000             180      Franchisee                option to 11/15/2012

Flanigan's Seafood Bar & Grill #13 
CIC Investors #13, Inc.
1549 N.W. Le June Rd.
Miami, FL 33126                             5,000             200      Joint Venture             N/A

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

</TABLE>



                                       16

<PAGE>
<TABLE>
<CAPTION>
                                            Square                     License
Name and Location                          Footage           Seats     Owned by                      Lease Terms
-----------------                          -------           -----     --------                      -----------
<S>                                         <C>               <C>      <C>                       <C> 
Big Daddy's Liquors #15 (3)(5)
CIC Investors #15 Ltd.
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 12/31/99
Flanigan's Enterprises, Inc.                                                                     options to 12/31/2006
13205 Biscayne Boulevard                                                                         Additional Lease
North Miami, Florida                        5,100             140      Company                   5/1/69 to 12/31/99
                                                                                                 options to 12/31/2006

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             200      Company                   options to 12/31/2010

Flanigan's Cafe #27 (9)
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)
Guppies, Inc.                                                                                    11/1/68 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
Surfside, Florida                           3,000             N/A      Company                   5/29/97 to 5/28/2002


</TABLE>
                                       17

<PAGE>
<TABLE>
<CAPTION>
                                            Square                     License
Name and Location                          Footage           Seats     Owned by                      Lease Terms
-----------------                          -------           -----     --------                      -----------
<S>                                         <C>               <C>      <C>                       <C> 
Big Daddy's Liquors #36 (2)                                                                      3/10/87 to 12/31/2000
Flanigan's Enterprises, Inc.                                                                     Additional lease
102 North Dixie Highway                                                                          4/29/87 to 12/31/2000
Lake Worth, Florida                         4,600             N/A      Company                   option to 12/31/2005

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 11/30/2002
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             N/A      Company                   options to 1/1/2060

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

Flanigan's Seafood Bar & Grill #60 
CIC Investors #60, Ltd.
9516 Harding Ave.
Surfside, FL 93154                          6800              200      Joint Venture             8/1/97 - 12/31/2011

Flanigan's Seafood Bar & Grill #70 
CIC Investors #70, Ltd.
12790 S.W 88 Street                                                                              4/1/98 - 3/31/2008
Kendall, Miami, FL 33186                    4850              161      Joint Venture             Options to 3/31/2028


</TABLE>


                                       18
<PAGE>
       (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  fiscal  year 1996,  the Company  purchased  37% of the
                leasehold  interest from the  unaffiliated  third parties.  An
                additional 11% was purchased during fiscal year 1997, bringing
                the total interest purchased to 48%.

       (7)      Location managed by an unaffiliated third party.

       (8)      Business  formerly  operated by the Company  pursuant to Court
                Order,  until December 31, 1996,  when the Company  reacquired
                ownership of the business through foreclosure.

       (9)      Store was closed May 1998.  The  Company  entered  into a five
                year sub-lease agreement,  with two five year options, with an
                unaffiliated third party who will operate a restaurant at this
                location commencing December 24, 1998.


                                       19

<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 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  1997,  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
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

                                       20
<PAGE>
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 was also  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 under the
terms 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 1998 the  Company  did not
submit any matter to a vote of security holders.


                                       21
<PAGE>
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.


                        RANGE OF PER SHARE MARKET PRICES

                                  FISCAL 1997                     FISCAL 1998
                               -------------------           -------------------

                               High           Low             High          Low
                               ----           ---             ----          ---

         First quarter         5-7/8         4-3/4           12-3/4        7-3/8
         Second quarter        4-3/4         4               13-1/2        7-1/8
         Third quarter         4-7/8         3-5/8           13-1/4       10-3/4
         Fourth quarter       10-3/16        7-1/4           11-3/8        8-1/4

         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 October 3, 1998.  Subsequent to the
end of the fiscal year 1998, the Board of directors  declared a cash dividend of
20 cents per share to  shareholders  of record on January  4,  1999,  payable on
February 1, 1999.

Item 6.  Selected Financial Data.

         Not required.

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

         At September 27, 1997, the Company was operating 14 units.  The Company
acquired  ownership of the assets of a unit formerly  operated under Court Order
which unit is included in the total of stores being operated,  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 formerly  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.

         In comparison to fiscal year 1997, at October 3, 1998,  the Company was
operating  13 units.  The Company  acquired  ownership of the assets of the unit
formerly  operated  under  Court  Order  which unit is  included in the total of
stores being operated,  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 three were package  liquor stores only.  The unit  formerly  operated by the
Company  pursuant to Court Order was a package liquor store only.  There was one
club operated by an unaffiliated third

                                       22
<PAGE>
party under a management agreement.

Liquidity and Capital Resources

Cash Flows

         The following  table is a summary of the  Company's  cash flows for the
years ended September 27, 1997 and October 3, 1998.
<TABLE>
<CAPTION>
                                                              Fiscal
                                                            Years Ended
                                                     ---------------------------
                                                       1997               1998
                                                     -------           ---------
                                                           (in thousands)
<S>                                                  <C>                <C>    
Net cash provided by
  operating activities                               $ 2,094            $ 1,060
Net cash used in
 investing activities                                 (1,291)              (760)
Net cash used in
 financing activities                                   (266)              (166)
                                                     -------            -------
Net increase in cash
  and cash equivalents                                   537                134
Cash and cash equivalents:
  Beginning of year                                      797              1,334
                                                     -------            -------
  End of year                                        $ 1,334            $ 1,468
                                                     =======            =======
</TABLE>

         Adjustments  to net income to  reconcile  to cash flows from  operating
activities in fiscal year 1997 include a provision for  uncollectible  notes and
mortgages  receivable  of  $21,000.  Also  included  is a  $19,000  loss  on the
retirement of fixed assets,  a reduction of $58,000 in the accrual for potential
liability  claims and $150,000  received from the sale of the rights to manage a
franchise.

         Adjustments  to net income to  reconcile  to cash flows from  operating
activities in fiscal year 1998 include a loss of $37,000 from the  retirement of
the Company's  general ledger system.  Also included is a $124,000  reduction of
allowance for bad debts.

         During the first quarter of fiscal year 1998, the Company closed on its
loan  from  Barnett  Bank in the  principal  amount  of  $500,000,  being  fully
amortized  over three years with interest  accruing at the prime rate charged by
Barnett Bank to its  commercial  customers.  The loan is payable in twelve equal
quarterly  installments  of  principal,  each in the  amount of  $41,667,  which
commenced March 31, 1998,  with interest  payable  monthly.  The Company pledged
twelve liquor  licenses as collateral,  which liquor  licenses have an estimated
fair market value of approximately  $550,000. The Company used the proceeds from
the loan to help fund a portion of the  investment  in a joint venture in fiscal
year 1998.



                                       23
<PAGE>
The Year 2000 Issue

         The Company has assessed and continues to assess the impact of the Year
2000 Issue on its reporting  systems and operations.  The Year 2000 Issue exists
because many computer  systems and  applications  currently  use two-digit  date
fields to designate a year. As the century date occurs,  date sensitive  systems
may recognize  the year 2000 as 1900 or not at all. This  inability to recognize
or  properly  treat the year 2000 may cause the  Company's  systems  to  process
critical financial and operational information incorrectly.

         During the third  quarter of fiscal year 1998,  in order to resolve the
Year 2000 issue,  the Company  contracted  to install a Great Plains  accounting
package to replace the  accounting  software  presently in use. As of the end of
the fiscal  year 1998 the  Company has  expended  approximately  $100,000 on the
installation  of the  program  and  estimates  the  total  cost  to  approximate
$125,000.  The Company  expects to have the new  accounting  package to be fully
functional in January 1999.

         The  Company  utilizes  POSitouch  cash  registers  in  its  restaurant
operations and Omron cash registers in its package stores.  The registers record
revenues,  calculate  inventory values and track  inventories.  Both systems are
year 2000 compliant.

         The Company has confirmed  with each of its major  suppliers  that they
will be 2000  compliant by the end of 1999.  The Company does not rely solely on
computer  systems to transact  business  with its suppliers and does not use any
computer operated production lines.

Improvements

         Capital  expenditures  were $1,468,000 and $808,000 during fiscal years
1997 and  1998,  respectively.  The  capital  expenditures  were  for  upgrading
existing units serving food, improvements to package liquor stores and upgrading
the corporate computer system. During the third quarter of fiscal year 1997, the
Company  closed on its purchase of the real property  adjacent to its restaurant
located at 4 N. Federal  Highway,  Hallandale.  The Company  improved  this real
property in fiscal 1998 as additional  parking for customers of its  restaurant.
The  purchase  price was  $620,000,  with the seller  holding a  purchase  money
mortgage in the amount of  $485,000.  The purchase of and  improvements  to this
property  are included in the capital  expenditures  of  $1,468,000  in 1997 and
improvements  to this  property  are  included  in the capital  expenditures  of
$808,000 in 1998.  Except as otherwise noted all of the money for additions came
from operations.

         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 1998. The
budget for fiscal year 1999  includes  approximately  $255,000 for this program.
The Company believes that improved  operations will provide the cash to continue
the refurbishing program.




                                       24
<PAGE>
Property and Equipment

         The  Company's  property  and  equipment,   at  cost  less  accumulated
depreciation and amortization,  was $3,544,000 at September 27, 1997 compared to
$3,717,000 at October 3, 1998. The Company's  liquor  licenses less  accumulated
amortization were $358,000 at September 27, 1997 compared to $384,000 at October
3, 1998. The Company's  leased property under capital leases,  less  accumulated
amortization, was $162,000 at September 27, 1997 compared to $129,000 at October
3, 1998.  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.

Long term debt

         The Company  closed on its  $500,000  loan with Barnett Bank during the
first  quarter of fiscal year 1998 and repaid  principal of $125,000  during the
fiscal year. The Company repaid long term debt,  including the Barnett Bank note
payable,  capital  lease  obligations  and  Chapter  11 damages in the amount of
$340,000 and $692,000 in fiscal years 1997 and 1998, respectively.

Working capital

         The table below summarizes the current assets,  current liabilities and
working capital for fiscal years 1997 and 1998:
<TABLE>
<CAPTION>

                                            Sept. 27,                  Oct. 3,
         Item                                 1997                       1998
         ----                              ----------                 ----------
<S>                                        <C>                        <C>       
         Current assets                    $3,000,000                 $3,456,000
         Current liabilities                2,658,000                  2,242,000
         Working capital                      342,000                  1,214,000
</TABLE>

         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 1999.

         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.

                                       25

<PAGE>
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 to the  consolidated  financial
statements for fiscal year ended October 3, 1998.

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  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. In fiscal year 1997, the Company favorably settled its remaining
uninsured dram shop claim against a limited  partnership in Pennsylvania and the
Company, as general partner. See page 12 and 13 for further discussion regarding
dram shop suits.

         During fiscal year 1996, the Company was forced to continue its lawsuit
against  the  assignee  of a sold  store in 1990  when the  assignee  failed  to
amicably  return the package  liquor store in order to regain  possession of the
business premises, including furniture,  fixtures, equipment and liquor license,
and for damages for unpaid real property taxes, rent and damages to the business
premises. During the first quarter of fiscal year 1997, the parties entered into
a  Stipulation,  whereby the Court entered an Agreed  Summary Final Judgment for
Eviction,  Damages  and  Foreclosure  of  Security  Agreement,  ("Summary  Final
Judgment"),  through which the furniture, fixtures, equipment and liquor license
at this

                                       26

<PAGE>
location were sold at foreclosure sale and through which the Company received an
award of damages  against  the  assignee,  the  principal  of the  assignee  who
personally  guaranteed  its  obligations,  and  the  affiliated  entity  of  the
assignee, which also guaranteed its obligations to the Company. During the first
quarter of fiscal year 1997, the Company reacquired  ownership of the furniture,
fixtures,  equipment and liquor license,at this location,  as well as possession
of the business  premises through the foreclosure sale. The Company operated the
package liquor store  throughout  the  litigation  and continues  doing so after
acquiring ownership of the same.

         During fiscal year 1996, two claims were filed against the Company with
the Equal Employment  Opportunity Commission ("EEOC") 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 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.  During the
first  quarter of fiscal year 1997,  the EEOC  closed its files on these  claims
taking no action.  From the date the EEOC closed its file,  the former  employee
had  ninety  days to  file  suit in  Federal  Court,  which  she  failed  to do.
Similarly,  an action  under  Florida  law is barred  by a one year  statute  of
limitations.

         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  disputed this
claim and vigorously defended the same. During the fourth quarter of fiscal year
1997, the former  employee's  attorney  withdrew and during the first quarter of
fiscal  year 1998 the  lawsuit  was  dismissed  due to the failure of the former
employee to retain substitute counsel.

Results of Operations
<TABLE>
<CAPTION>
REVENUES (in thousands):
                                       Fifty-Two                Fifty-Three
                                      Weeks Ended               Weeks Ended
Sales                               Sept. 27, 1997              Oct. 3, 1998
-----                           ---------------------      --------------------
<S>                             <C>             <C>        <C>            <C>  
Restaurant, food                $ 9,648         50.2%      $10,628        52.0%
Restaurant, bar                   2,888         15.0%        2,891        14.0%
Package goods                     6,681         34.8%        6,901        33.8%
                                -------        -----       -------       -----
Total                            19,217        100.0%       20,420       100.0%

Franchise revenues                  591                        761
Owner's fee                         150                        173
Joint venture income                168                        207
Other operating income              194                        206
                                -------                    -------
Total revenues                  $20,320                    $21,767


</TABLE>

                                       27
<PAGE>
         As the table above  illustrates,  total revenues have increased for the
fiscal year ended October 3, 1998 when  compared to fiscal year ended  September
27, 1997.

         During the third  quarter of fiscal  year 1998 the  Company  closed its
restaurant  in  North  Miami  which   operated  under  the   "Flanigan's   Cafe"
servicemark. Subsequent to the end of fiscal year 1998, the Company entered into
a sublease for the property with an unaffiliated third party.

         Restaurant food sales represented 50.2% of total sales in the fifty-two
weeks ended  September  27, 1997 as  compared to 52.1% in the  fifty-three  week
period of fiscal year 1998.  The weekly  average of same store  restaurant  food
sales was $182,174 and  $197,132  for the  fifty-two  week period of fiscal year
1997 and the fifty-three weeks of fiscal year 1998, an increase of 8.2%.

         The same store weekly  average for restaurant bar sales was $50,909 for
the  fifty-two  weeks  ended  September  27,  1997  compared  to $51,151 for the
fifty-three  weeks  ended  October 3,  1998,  an  increase  of less than 1%. 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 has
accounted for minimal change in the weekly average of same store  restaurant bar
sales.

         Package goods sales have reversed the decline of prior years with sales
increasing at a weekly average of same store sales of $111,708 for the fifty-two
weeks of fiscal  year 1997  compared to $121,645  for the  fifty-three  weeks of
fiscal year 1998, an increase of 8.9%.

         Franchise revenue increased from $591,000 for the fifty-two weeks ended
September 27, 1997 to $761,000 for the fifty-three  week period ended October 3,
1998.  The increase in franchise  revenue  resulted  from the opening of a joint
venture  restaurant in the second quarter of fiscal year 1998 and the resumption
of the sublease  rent and  royalties at the start of the third quarter of fiscal
year 1997 on a franchised  unit that was sold to a related  party in fiscal year
1997.

         Owner's fee represents fees received pursuant to a Management Agreement
from the  operation  of a club owned by the  Company in  Atlanta,  Georgia.  The
Management  Agreement was amended  effective  July 1, 1996,  whereby the Company
also  receives ten percent of annual  sales  exceeding  $1,500,000  per annum as
additional owner's fees.

         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.  During fiscal year 1997 the Company received  $168,000 as its
share of income, compared to $242,000.

During the third quarter of 1997, the Company began operating a restaurant under
the  "Flanigan's  Seafood  Bar and  Grill"  servicemark  as the  franchisor  and
twenty-five percent owner of a limited partnership established for such purpose.
During  fiscal  year 1997,  the Company  did not  recognize  any income from the
partnership  as  compared  to  receiving  $31,000 as its share of the income for
fiscal 1998.

                                       28
<PAGE>
         During  the second  quarter of fiscal  year  1998,  the  Company  began
operating a restaurant under the "Flanigan's  Seafood Bar and Grill" servicemark
as general partner and forty-two  percent of a limited  partnership  established
for such purpose. The Company reports its income and investment under the equity
method of  accounting  and recorded a loss of $66,000 for fiscal year 1998.  The
loss is attributable to pre-opening costs and expenditure of certain  intangible
costs as required by SOP 98-5, "reporting on the costs of start-up activities".

         The gross profit  margin for  restaurant  sales was 63.3% and 62.3% for
the fiscal years 1997 and 1998, respectively.

         The gross profit  margin for package  goods sales during the  fifty-two
weeks ended September 27, 1997 and the  fifty-three  weeks ended October 3, 1998
was 26.9% and 26.0%, respectively.

         Overall  gross  profits were 50.6% for the fiscal year ended  September
27, 1997 compared to 50.0% for the fiscal year ended October 3, 1998.

Operating Costs and Expenses

         Operating  costs and expenses for the fifty-two  weeks ended  September
27, 1997 were  $19,268,000  compared to  $20,383,000  for the  fifty-three  week
period in fiscal year 1998.  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  $5,580,000  and  $5,964,000  for  fiscal  years  1997 and 1998,
respectively.  The 6.9% increase was  attributable to increases in salaries paid
to the restaurant and package division employees.

         Occupancy costs,  which include rent, common area maintenance,  repairs
and  taxes  were  $927,000  and  $1,047,000  for  fiscal  years  1997 and  1998,
respectively.  The  12.9%  increase  was  attributable  to an  increase  in real
property taxes as well as rental increases related with the Company's  operating
leases.

         Selling,  general and  administrative  expenses were $3,270,000 for the
fifty-two  weeks ended  September 27, 1997 and  $3,163,000  for the  fifty-three
weeks ended  October 3, 1998.  The net decrease of 3.3% in selling,  general and
administrative  expenses was achieved through management's careful monitoring of
the same and decreased insurance costs in fiscal year 1998.

Other Income and Expense

         Other  income and expense  totaled  $54,000 and $37,000 in fiscal years
1997 and 1998 respectively.

         The  increase  of $66,000 in  interest  expense on  long-term  debt and
damages  payable,  which was $91,000 and  $157,000  for the  fifty-two  weeks of
fiscal year 1997 and fifty-three weeks of fiscal year 1998, is attributed to the
increase in long-term debt. The decline of $8,000 in interest

                                       29
<PAGE>
expense on obligations  under capital leases,  which was $54,000 and $46,000 for
the  fiscal  years  1997 and 1998,  respectively,  is the  result  of  declining
principal balances of capital leases in general.

         The Company realized  $110,000 of income in the first quarter of fiscal
year 1998 from the settlement of litigation.

         The category  "Other,  net" was $-0- for the fifty-two  weeks of fiscal
year 1997 and $162,000 for the fifty-three weeks of fiscal year 1998. Other, net
in the consolidated statements of income consists of the following for the years
ended September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
                                                               Fiscal
                                                             Years Ended
                                                    ---------------------------
                                                       1997              1998
                                                    ---------         ---------
<S>                                                 <C>               <C>      
Non-franchise related rental income                 $  32,000         $  45,000
Loss on retirement of fixed assets                    (19,000)          (37,000)
Settlement of litigation                                 --             110,000
Adjustment on sale of Pennsylvania
         limited partnership                          (31,000)             --
Insurance recovery                                     13,000              --
Miscellaneous                                           5,000            44,000
                                                    ---------         ---------
                                                    $    --           $ 162,000
                                                    =========         =========
</TABLE>
Trends

         During the next twelve months management  expects a continued  increase
in income from  investments in joint ventures 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 27, 1997 and October
3, 1998, which include each of the two years in the period ended October 3, 1998
and  the  independent   certified   public   accountants'   report  thereon  are
incorporated by reference from the 1998 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  1999  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
1999 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 1999 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 1999  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 1999 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 1998 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.  (Item 14 (a)(10)(t) of the
Form 10-KSB dated September 28, 1996 is incorporated herein by reference.)

(10)(u) Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28,
1997,  between B.D. 15 Corp. as General Partner and numerous  limited  partners,
including Flanigan's  Enterprises,  Inc. as a limited partner owning twenty-five
percent of the limited  partnership (Item 14 (a)(10)(u) of the Form 10-KSB dated
September 27, 1997 is incorporated herein by reference.)

(10)(v) Limited Partnership  Agreement of CIC Investors #60, Ltd., dated July 8,
1997,  between  Flanigan's  Enterprises,  Inc., as General  Partner and numerous
limited partners,  including Flanigan's  Enterprises,  Inc. as a limited partner
owning forty percent of the limited  partnership (Item 14 (a)(10)(v) of the Form
10-KSB dated September 27, 1997 is incorporated herein by reference.)

(10)(w)  Stipulated  Agreed  Order  of  Dismissal  upon  Mediation  with  former
franchisee  (Item 14 (a)(10)(w)  of the Form 10-KSB dated  September 27, 1997 is
incorporated herein by reference.)

(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 October 3, 1998.

(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

Date  1/7/1999                                     By: /s/JOSEPH G. FLANIGAN 
                                                       --------------------- 
                                                       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.

/s/JOSEPH G. FLANIGAN          Chairman of the Board,          Date  1/7/1999
---------------------          Chief Executive Officer
Joseph G. Flanigan             and President          
                               

/s/EDWARD A. DOXEY             Chief Financial Officer         Date  1/7/1999
------------------             and Secretary
Edward A. Doxey                

/s/CHARLES KUHN                Director                        Date  1/7/1999
---------------
Charles Kuhn

/s/GERMAINE M. BELL            Director                        Date  1/7/1999
-------------------
Germaine M. Bell

/s/CHARLES E. MCMANUS          Director                        Date  1/7/1999
---------------------
Charles E. McManus

/s/JEFFREY D. KASTNER          Assistant Secretary             Date  1/7/1999 
---------------------          and Director
Jeffrey D. Kastner             

/s/WILLIAM PATTON              Vice President, Public          Date  1/7/1999
-----------------              Relations and Director
William Patton                 

/s/JAMES G. FLANIGAN           Director                        Date  1/7/1999
--------------------
James G. Flanigan

/s/PATRICK J. FLANIGAN         Director                        Date  1/7/1999
----------------------
Patrick J. Flanigan



                                       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 27, 1997 and October 3, 1998

         Consolidated  Statements  of Income for the Years Ended  September  27,
         1997 and October 3, 1998

         Consolidated Statements of Stockholders' Investment for the Years Ended
         September 27, 1997 and October 3, 1998

         Consolidated Statements of Cash Flows for the Years Ended September 27,
         1997 and October 3, 1998

         Notes to Consolidated Financial Statements

SCHEDULE:

         II       Valuation  and   Qualifying   Accounts  for  the  Years  Ended
                  September 27, 1997 and October 3, 1998

         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 27,
1997 and October 3, 1998,  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 27, 1997 and October 3, 1998, 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  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 our 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.


/s/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
     December 10, 1998.





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

                             CONSOLIDATED BALANCE SHEETS

                       SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                                       ASSETS

                                                            1997            1998
                                                         ----------     -----------
<S>                                                      <C>            <C>       
CURRENT ASSETS:
         Cash and cash equivalents                       $1,334,000     $1,468,000
         Receivables, less allowance for
           uncollectible  amounts and deferred
           gains, including related party
           receivables  of $24,000 and $25,000
           (before  allowances and deferred gains)
           in 1997 and 1998, respectively                    80,000        320,000
         Inventories                                      1,253,000      1,237,000
         Prepaid expenses                                   333,000        431,000
                                                         ----------     ----------
         Total current assets                             3,000,000      3,456,000
                                                         ----------     ----------

PROPERTY AND EQUIPMENT, net                               3,544,000      3,717,000
                                                         ----------     ----------

LEASED PROPERTY UNDER CAPITAL LEASES,
         less accumulated amortization of
         $711,000 and $744,000 in 1997
         and 1998, respectively                             162,000        129,000
                                                         ----------     ----------

OTHER ASSETS:
         Liquor licenses, less accumulated
           amortization of $90,000 and
           $98,000 in 1997 and 1998, respectively           358,000        384,000
         Notes and mortgages receivable, less
           allowance for  uncollectible  amounts and
           deferred  gains, including related party
           receivables of $197,000 and $173,000
           (before allowances and deferred gains)
           in 1997 and 1998, respectively                   168,000        161,000
         Investment in joint ventures                       987,000        937,000
         Other                                              163,000        259,000
                                                         ----------     ----------
         Total other assets                               1,676,000      1,741,000
                                                         ----------     ----------
TOTAL ASSETS                                             $8,382,000     $9,043,000
                                                         ==========     ==========
</TABLE>


                                   (continued)


                                       37

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

                           CONSOLIDATED BALANCE SHEETS

                     SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                    LIABILITIES AND STOCKHOLDERS' INVESTMENT

                                   (continued)

                                                         1997             1998
                                                     -----------      -----------
<S>                                                  <C>              <C>        
CURRENT LIABILITIES:
         Accounts payable                            $   859,000      $   850,000
         Accrued and other current liabilities         1,304,000          752,000
         Current portion of long-term debt                84,000          241,000
         Current obligations under capital
           leases                                         70,000          101,000
         Current portion of damages payable on
           terminated or rejected leases                 259,000          268,000
         Due to Pennsylvania limited
           partnership                                    82,000           30,000
                                                     -----------      -----------
         Total current liabilities                     2,658,000        2,242,000
                                                     -----------      -----------
LONG-TERM DEBT, net of current portion                   812,000          793,000
                                                     -----------      -----------
OBLIGATIONS UNDER CAPITAL LEASES,
         net of current portion                          319,000          218,000
                                                     -----------      -----------
DAMAGES PAYABLE ON TERMINATED OR
         REJECTED LEASES, net of current portion         954,000          685,000
                                                     -----------      -----------

COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)

STOCKHOLDERS' INVESTMENT:
         Common stock, par value $.10,
           authorized 5,000,000 shares,
           issued and outstanding 2,099,000
           shares in 1997 and 1998                       210,000          210,000
         Capital in excess of par value                6,395,000        6,395,000
         Retained earnings                             1,846,000        3,234,000
         Less - Treasury stock, at cost,
           1,192,000 shares in 1997
           and 1,170,000 shares in 1998               (4,812,000)      (4,734,000)
                                                     -----------      -----------
         Total stockholders' investment                3,639,000        5,105,000
                                                     -----------      -----------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT       $ 8,382,000      $ 9,043,000
                                                     ===========      ===========
</TABLE>
         The  accompanying  notes to  consolidated  financial  statements are an
integral part of these balance sheets.


                                       38
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

           FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998


                                                      1997              1998
                                                 ------------      ------------
<S>                                              <C>               <C>         
REVENUES:
         Restaurant food sales                   $  9,648,000      $ 10,628,000
         Restaurant bar sales                       2,888,000         2,891,000
         Package goods sales                        6,681,000         6,901,000
         Franchise-related revenues                   591,000           761,000
         Owner's fee                                  150,000           173,000
         Joint venture income                         168,000           207,000
         Other operating income                       194,000           206,000
                                                 ------------      ------------
                                                   20,320,000        21,767,000
                                                 ------------      ------------
COSTS AND EXPENSES:
         Cost of merchandise sold -
           restaurants and lounges                  4,604,000         5,102,000
           package goods                            4,887,000         5,107,000
         Payroll and related costs                  5,580,000         5,964,000
         Occupancy costs                              927,000         1,047,000
         Selling, general and
                  administrative expenses           3,270,000         3,163,000
                                                 ------------      ------------
                                                   19,268,000        20,383,000
                                                 ------------      ------------
         Income from operations                     1,052,000         1,384,000
                                                 ------------      ------------
OTHER INCOME (EXPENSE):
         Interest expense on obligations
           under capital leases                       (54,000)          (46,000)
         Interest expense on long-term
           debt and damages payable                   (91,000)         (157,000)
         Interest income                               43,000            72,000
         Sale of management rights                    150,000              --
         Recognition of deferred gains                  6,000             6,000
         Other, net                                      --             162,000
                                                 ------------      ------------
                                                       54,000            37,000
                                                 ------------      ------------
         Income before provision for
           income taxes                             1,106,000         1,421,000

</TABLE>
                                   (continued)

                                       39
<PAGE>
<TABLE>
<CAPTION>
                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

           FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                                   (continued)


                                                          1997            1998
                                                      ----------      ----------
<S>                                                   <C>             <C>   
PROVISION FOR INCOME TAXES                                13,000          33,000
                                                      ----------      ----------

         Net income                                   $1,093,000      $1,388,000
                                                      ==========      ==========
NET INCOME
         PER COMMON SHARE:

         Basic                                        $     1.21      $     1.51
                                                      ==========      ==========
         Diluted                                      $     1.18      $     1.37
                                                      ==========      ==========

WEIGHTED AVERAGE SHARES
         AND EQUIVALENT SHARES OUTSTANDING:

         Basic                                           907,000         915,000
                                                      ==========      ==========
         Diluted                                         927,000       1,010,000
                                                      ==========      ==========

</TABLE>


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




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

                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

                                  FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998


                                               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, September 28, 1996       2,099,000     $   210,000     $ 6,395,000     $   753,000       1,192,000      $ 4,811,000

Net income                             --              --              --         1,093,000            --               --

Purchase of 160 shares
  of treasury stock                    --              --              --              --              --              1,000
                                -----------     -----------     -----------     -----------     -----------      -----------
BALANCE, September 27, 1997       2,099,000         210,000       6,395,000       1,846,000       1,192,000        4,812,000

Net income                             --              --              --         1,388,000            --               --

Exercised stock options                --              --              --              --           (22,000)         (78,000)
                                -----------     -----------     -----------     -----------     -----------      -----------
BALANCE, October 3, 1998          2,099,000     $   210,000     $ 6,395,000     $ 3,234,000       1,170,000      $ 4,734,000
                                ===========     ===========     ===========     ===========     ===========      ===========


</TABLE>


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


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

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                                                            1997             1998
                                                        -----------      -----------
<S>                                                     <C>              <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:

         Net income                                     $ 1,093,000      $ 1,388,000
         Adjustments to reconcile net income
         to net cash provided by
         operating activities:
           Depreciation and amortization                    619,000          655,000
           Provision for (reduction of)
             uncollectible notes and
             mortgages receivable                            21,000         (124,000)
           Change in provision for potential
             uninsured claims                               (58,000)            --
           Recognition of deferred gains
             and other deferred income                       (6,000)          (6,000)
           Loss on property, equipment
             and liquor licenses                             19,000           37,000
           Sale of management rights                       (150,000)            --

         Changes in assets and liabilities:

            Decrease (increase) in receivables              328,000         (151,000)
           (Increase) decrease in inventories              (175,000)          16,000
           (Increase) in prepaid expenses                    (5,000)         (98,000)
            Decrease (increase) in other assets              38,000          (96,000)
            Increase (decrease) in accounts payable         277,000           (9,000)
            Increase (decrease) in accrued
             and other current liabilities                   93,000         (552,000)
                                                        -----------      -----------
         Net cash provided by
           operating activities                           2,094,000        1,060,000
                                                        -----------      -----------

</TABLE>

                                   (continued)



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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

           FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                                   (continued)

                                                       1997            1998
                                                   ----------      ----------
<S>                                                  <C>             <C>      
CASH FLOWS FROM INVESTING ACTIVITIES:

         Net proceeds from sale of property,
           equipment, liquor licenses
           and management rights                       95,000            --
         Collections on notes and
           mortgages receivable                        56,000          48,000
         Purchase of property and equipment          (983,000)       (808,000)
         Investment in joint ventures                (428,000)           --
         Proceeds (adjustment) from sale
           of Pennsylvania limited partnership        (31,000)           --
                                                   ----------      ----------

         Net cash used in
           investing activities                    (1,291,000)       (760,000)
                                                   ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:

         Borrowings of long-term debt                 423,000         500,000
         Payments of long-term debt                   (33,000)       (362,000)
         Payments of obligations under
           capital leases                             (59,000)        (70,000)
         Payments of damages payable on
           terminated or rejected leases             (248,000)       (260,000)
         Change in amount due to Pennsylvania
           limited partnership                       (348,000)        (52,000)
         Purchase of treasury stock                    (1,000)           --
         Proceeds from exercise of options               --            78,000
                                                   ----------      ----------

         Net cash used in
           financing activities                      (266,000)       (166,000)
                                                   ----------      ----------

</TABLE>

                                   (continued)



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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

           FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998

                                   (continued)

                                                         1997           1998
                                                      ----------     ----------
<S>                                                      <C>            <C>    
NET INCREASE IN CASH AND
         CASH EQUIVALENTS                                537,000        134,000

CASH AND CASH EQUIVALENTS,
         BEGINNING OF YEAR                               797,000      1,334,000
                                                      ----------     ----------
CASH AND CASH EQUIVALENTS,
         END OF YEAR                                  $1,334,000     $1,468,000
                                                      ==========     ==========

Supplemental disclosures of cash flow information:

         Cash paid during the year for:

           Interest                                   $  142,000     $  199,000
           Income taxes                                   18,000         33,000

         Noncash Activities:

           Retirement of unrealizable
           general ledger system,
           at net book value                                --       $   37,000

           Exchange of note receivable
           for sale of management rights              $  100,000     $     --

           Investment in joint ventures               $  439,000     $  (50,000)

           Write-off of fully reserved
           mortgage receivable                        $   60,000     $     --

           Exchange of note payable
           for purchase of land                       $  485,000     $     --

           Receipt of liquor license in
           connection with litigation
           settlement                                       --       $   35,000

</TABLE>

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


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     SEPTEMBER 27, 1997 AND OCTOBER 3, 1998


(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 October 3, 1998, the Company owns and/or
operates five  full-service  restaurants,  three  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"  servicemark  while the  Company's  package
stores are operated under the "Big Daddy's Liquors"  servicemark.  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  $953,000.  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 October 3,  1998,  damages  payable  on  terminated  or  rejected
leases, including imputed interest, mature as follows:


                  Fiscal                                       Amount
                  ------                                       ------
                  1999                                        300,000
                  2000                                        300,000
                  2001                                        300,000
                  2002                                        119,000
                                                            --------- 
                                                            1,019,000

                  Less - Amount representing
                           interest                           (66,000)
                                                            ---------
                                                            $ 953,000
                                                            ========= 

(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  31,  1970  (the  date
Accounting  Principles Board ("APB") Opinion No. 17 became effective),  amounted
to $145,000 at  September  27, 1997 and October 3, 1998,  and are not  amortized
unless an impairment in value is indicated. The cost of liquor licenses acquired
subsequent to October 31, 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 27, 1997 and October 3, 1998, consisted of the following:
<TABLE>
<CAPTION>
                                                Useful
                                                 Lives                   1997                      1998
                                               ----------            -----------               -----------   
<S>                                            <C>                   <C>                       <C>        
         Land and land improvements               N/A                $   630,000               $   816,000

         Furniture and equipment               3 -7 years              4,839,000                 4,951,000
         Leasehold interests and
           improvements                        See below               4,929,000                 5,309,000
                                                                     -----------               -----------
                                                                      10,398,000                11,076,000
         Less - accumulated
           depreciation and
           amortization                                               (6,854,000)               (7,359,000)
                                                                     -----------               ==---------
                                                                     $ 3,544,000               $ 3,717,000
                                                                     ===========               ===========
</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 Ventures-

         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 are adjusted by dividends and the
Company's share of undistributed earnings or losses.

         (g)  Newly Issued Accounting Pronouncement-

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per
Share".  SFAS No. 128 supersedes the previous  standard  (Accounting  Principles
Board Opinion No. 15),  modifies the methodology  for  calculating  earnings per
share, and is effective for annual and interim periods ending after December 15,
1997;  early adoption is not permitted.  Earnings Per Share for fiscal year 1998
have been  calculated  under SFAS No. 128 and have been restated  under SFAS No.
128 for fiscal year 1997.

         Statement of Financial  Accounting  Standards No. 131 ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information", was issued
by the  Financial  Accounting  Standards  Board  in June  1997.  This  statement
establishes  standards for  reporting of selected  information  about  operating
segments in annual  financial  statements  and  requires  reporting  of selected
information  about  operating  segments in interim  financial  reports issued to
shareholders. SFAS 131 is effective for fiscal years beginning

                                       47

<PAGE>
after  December 15, 1997.  The Company will adopt SFAS 131 beginning  October 4,
1998. Adoption of this standard will not have a material effect on the Company's
existing segment reporting disclosures.

         (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) Stock-based Compensation-

         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
Stock-Based  Compensation,"  ("SFAS No. 123")  encourages,  but does not require
companies  to record  compensation  plans using a fair value based  method.  The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value based method  prescribed in Accounting  Principles Board Opinion
No. 25,  "Accounting for Stock issued to Employees".  Accordingly,  compensation
cost for stock  options is measured as the excess,  if any, of the quoted market
price of the  corporation's  stock at the date of the grant  over the  amount an
employee must pay to acquire the stock.

         (j) Long-Lived Assets-

         The Company continually evaluates whether events and circumstances have
occurred  that may warrant  revision  of the  estimated  life of its  intangible
assets and other  long-lived  assets or  whether  the  remaining  balance of its
intangible  assets and other long-lived  assets should be evaluated for possible
impairment.  When such factors, events or circumstances indicate that intangible
assets should be evaluated for possible impairment, the Company uses an estimate
of undiscounted  cash flow over the remaining lives of the intangible  assets in
measuring their recoverability.

(4)      INCOME TAXES:

         The  Company  accounts  for  its  income  taxes  using  SFAS  No.  109,
"Accounting  for Income  Taxes".  Under  this  method,  deferred  tax assets and
liabilities  are  determined  based  on the  difference  between  the  financial
statement  and tax bases of assets and  liabilities,  using enacted tax rates in
effect for the year in which the differences are expected to reverse.

         The  components of the Company's  provision for income taxes,  which is
all current, for the fiscal years ended 1997 and 1998 are as follows:

                                        1997                       1998
                                      ---------                 ---------

         Federal                      $   8,000                 $   29,000
         State                            5,000                      4,000
                                      ---------                 ----------
                                      $  13,000                 $  33,000
                                      =========                 ==========

                                       48

<PAGE>
         A reconciliation  of income tax computed at the statutory  federal rate
to income tax expense is as follows:
<TABLE>
<CAPTION>
                                               1997          1998
                                            ---------      --------- 
<S>                                         <C>            <C>      
          Tax provision at the
            statutory rate of 34%           $ 376,000      $ 483,000

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

          Change in valuation allowance      (383,000)      (489,000)

          Other                                17,000         36,000
                                            ---------      ---------
                                            $  13,000      $  33,000
                                            =========      =========
</TABLE>

         In  fiscal  1991  and  prior   years,   the  Company   generated   loss
carryforwards for both financial statement and tax purposes. At October 3, 1998,
the available tax loss carryforward is approximately  $1,400,000,  which expires
between 2002 and 2006.

         In  addition  to net  operating  loss  carryforwards,  the  Company has
deferred  tax assets  amounting  to  approximately  $428,000 at October 3, 1998,
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
                                                 1997            1998
                                             -----------      -----------
<S>                                          <C>              <C>        
      Book/tax differences in
        property and equipment               $   268,000      $   321,000
      Receivable allowances                       42,000             --
      Leases, capitalized for books only          77,000           65,000
      Accruals for potential
        uninsured claims                          34,000             --
      Discount on damages payable                (37,000)         (22,000)
      Other, net                                  43,000           64,000
      Net operating loss carryforward,
        tax effected                           1,045,000          555,000

      Valuation allowance                     (1,472,000)        (983,000)
                                             -----------      -----------
                                             $        --      $        --
                                             ===========      ===========
</TABLE>

                                       49
<PAGE>
(5)      LEASES:

         The Company leases a substantial portion of the land and buildings used
in its  operations  under leases with initial  terms  expiring  between 1999 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.

         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>       
              1999                                     109,000                   1,178,000                   598,000
              2000                                      77,000                     924,000                   549,000
              2001                                      55,000                     454,000                   352,000
              2002                                      32,000                     261,000                   180,000
              2003                                      32,000                     261,000                   180,000
         Thereafter                                    203,000                   2,137,000                 1,311,000
                                                     ---------                  ----------                ----------
         Total                                       $ 508,000                  $5,215,000                $3,170,000
                                                                                ==========                ==========
         Less - Amount representing
           interest                                   (189,000)
                                                     ---------
         Present value of minimum
           lease payments                            $ 319,000
                                                     =========

</TABLE>
         Total rent expense for all operating  leases  (including  those with an
initial  term of less  than one  year and net of  subleases)  was  $622,000  and
$672,000 in 1997 and 1998, 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  $251,000  in 1997 and  1998.
Remaining rental commitments included in future minimum rental payments required
under these leases are approximately $405,000 as of October 3, 1998.

                                       50

<PAGE>
(6)      RECEIVABLES:

         Receivables,  net of allowances for uncollectible  amounts and deferred
gains, consists of the following at September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>

                                                 1997            1998
                                               ---------      ---------
<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                                 $ 129,000      $ 107,000

Notes and mortgages  receivable from
  related parties,  bearing interest
  at rates ranging from 10% to 14% and due
  in varying installments through 2007           221,000        198,000

Various noninterest-bearing
  receivables currently due                      124,000        273,000
                                               ---------      ---------
                                                 474,000        578,000

  Less - Deferred gains                         (102,000)       (97,000)

         Allowance for
           uncollectible amounts                (124,000)          --
                                               ---------      ---------
                                                 248,000        481,000
Amount representing current portion               80,000        320,000
                                               ---------      ---------
                                               $ 168,000      $ 161,000
                                               =========      =========
</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
both  fiscal  1997  and  1998,  $6,000  of  deferred  gains  was  recognized  on
collections of such notes receivable.

         Receivables at October 3, 1998 mature as follows:

                1999                                    320,000
                2000                                     45,000
                2001                                     47,000
                2002                                     53,000
                2003                                     14,000
                Thereafter                               99,000
                                                      ---------
                                                      $ 578,000
                                                      =========


                                       51
<PAGE>
(7)      INVESTMENT IN JOINT VENTURES:

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

         During the third  quarter of fiscal year 1997, a related party formed a
limited  partnership  to own a certain  franchise in Fort  Lauderdale,  Florida,
through  which it raised the  necessary  funds to renovate the  restaurant.  The
Company is a twenty-five percent limited partner in the franchise. Other related
parties, including but not limited to, officers and directors of the Company and
their families, are also investors.

         During the fourth  quarter of fiscal year 1997,  the  Company  formed a
limited  partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside,  Florida and renovate the same for operation
under the "Flanigan's  Seafood Bar and Grill"  servicemark.  The Company acts as
general  partner of the limited  partnership and is also a forty percent limited
partner.  Other  related  parties,  including  but not limited to  officers  and
directors of the Company and their families are also investors.

         The following is a summary of condensed unaudited financial information
pertaining to the Company's joint venture investments:
 

                                           9/27/97        10/3/98
                                         ----------     ----------

              Current assets             $1,374,000     $  205,000
              Noncurrent assets           1,936,000      2,960,000
              Current liabilities           176,000        324,000
              Noncurrent liabilities        629,000        589,000
              Revenues                    3,258,000      6,083,000
              Income from operations      2,118,000      3,345,000
              Net income                    419,000        854,000







                                       52

<PAGE>
(8)      ACCRUED AND OTHER CURRENT LIABILITIES:

         Accrued  and other  current  liabilities  consist of the  following  at
September 27, 1997 and October 3, 1998:

                                               1997           1998
                                           ----------     ----------
           Property taxes                  $   72,000     $  115,000
           Salaries and wages                 340,000        231,000
           Franchisee advance funds            57,000         44,000
           Potential uninsured claims         101,000        101,000
           Investment in joint venture        439,000           --
           Other                              295,000        261,000
                                           ----------     ----------
                                           $1,304,000     $  752,000
                                           ==========     ==========

         Franchisee advance funds represent cash balances held by the Company on
behalf of franchisees  (see Note 11) for inventory  purchases to be made as part
of the Company-sponsored cooperative buying program.

(9)      LONG-TERM DEBT:

         Long-term  debt  consists of the  following at  September  27, 1997 and
October 3, 1998:
<TABLE>
<CAPTION>

                                                                                                  1997                       1998
                                                                                               ----------                 ----------
<S>                                                                                            <C>                        <C>      
         Mortgages payable,  secured by land,  bearing interest at 8% payable in
           monthly installments of principal and interest,
           maturing in April 2007                                                              $  480,000                 $ 353,000


         Note payable to  various  employees,  related  and  unrelated  parties,
           secured by various  receivables,  bearing interest at 12%, payable in
           monthly installments of principal and interest, maturing in
           July 2002                                                                              366,000                   306,000


         Note payable, secured by vehicles,
           bearing interest at 8.5%, payable
           in monthly installments of principal
           and interest, maturing in September 2000                                                50,000                        -0-



</TABLE>



                                       53

<PAGE>
<TABLE>
<CAPTION>

                                                                                                  1997                      1998
                                                                                               ----------                 ----------
<S>                                                                                            <C>                        <C>      
         Note payable,  Barnett Bank, secured by Liquor license bearing interest
           at the prime rate,  payable in quarterly  installments  of principal,
           monthly interest payments maturing in
           December 2000                                                                               -0-                  375,000
                                                                                                  -------                ----------
                                                                                                  896,000                 1,034,000

         Less - Current portion                                                                   (84,000)                 (241,000)
                                                                                                 --------                ----------
                                                                                                 $812,000                $  793,000
                                                                                                 ========                ==========

</TABLE>


         Long-term debt at October 3, 1998 matures as follows:

                         Year                                     Amount
                         ----                                   ---------
                         1999                                   $  241,000
                         2000                                      251,000
                         2001                                      137,000
                         2002                                       90,000
                         2003                                       12,000
                         Thereafter                                303,000
                                                                ----------
                                                                $1,034,000
                                                                ==========








                                       54

<PAGE>
(10)     COMMITMENTS AND CONTINGENCIES:

          Guarantees

         The Company is contingently  liable for annual rentals in the amount of
approximately  $494,000 at October 3, 1998, 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 (the
"Employment  Agreement")  with the Chairman of the Board,  which was ratified by
the stockholders at the Company's 1988 annual meeting.  The Employment Agreement
provides,  among other  things,  for annual  compensation  of $150,000,  through
December 31, 1998, renewable annually, as well as a bonus based on the Company's
cash flow,  as defined.  Subsequent  to year end, the  Employment  Agreement was
renewed  through  December 31, 1999.  This  Employment  Agreement was amended in
January 1997 to redefine a bonus equal to 15% of the  Company's  annual  pre-tax
income in excess of $650,000 and to grant stock options  (discussed in Note 13).
For fiscal  year 1997,  a bonus of $78,000  was earned and in fiscal year 1998 a
bonus of  $116,000  was  earned  under the  amended  Employment  Agreement.  The
Employment  Agreement  further  provides that in the event of  termination,  the
Chairman of the Board would be entitled to a maximum payment of $450,000.

         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 losses based on estimates  received from legal counsel and
historical  experience.  Such accrual is included in "Accrued and other  current
liabilities" in the accompanying consolidated financial statements.



                                       55

<PAGE>
(11)     FRANCHISE PROGRAM:

         At  October  3,  1998,  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,  five 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.  The Company is not  currently  offering  or  accepting  new
franchises.

(12)     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.

         On  September  20,  1996,  the  Partnership's   assets  were  sold  for
approximately  $500,000.  Liabilities  to the  limited  partners  and  remaining
liabilities  of the  Partnership  are included as "Due to  Pennsylvania  limited
partnership"  in the  accompanying  consolidated  balance  sheets.  Although the
Statutes of  Limitations  has passed,  there  remains one law suit which has not
been settled. Upon settlement,  the balance of the liability will be paid to the
limited partners.

(13)     STOCK OPTION PLANS:

         Employment Agreement - Chairman of the Board

         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
expired  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,
and the expiration date was extended to February 27, 2002.

         In  January  1997,  the  Company  amended  the  Chairman's   Employment
Agreement.  The amendment  grants the Chairman an  additional  option to acquire
4.99% of the common stock of the Company outstanding as of the date of exercise,
but not less  than  45,350  shares,  at the  option  price of $4.95  per  share,
representing the fair value at that date. The options expire December 31, 2001.




                                       56
<PAGE>
         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.  At the
Company's 1994 annual meeting,  the  stockholders  approved this plan. The stock
options vest over a period of one year.

         At October 3, 1998,  options for all of the shares of common stock that
were reserved for issuance to the Key Employee  Incentive  Stock Option Plan had
been issued.

         Changes in outstanding  incentive stock options for common stock are as
follows:

                                                   1997            1998
                                                 -------         ------- 
            Outstanding at beginning of year     146,540         191,890
            Options granted                       45,350              --
            Options exercised                       --            22,900
                                                 -------         -------
            Outstanding at end of year           191,890         168,990
                                                 =======         =======
            Exercisable at end of year           191,890         168,990
                                                 =======         =======

         Weighted  average option  exercise price  information  for fiscal years
1997 and 1998 is as follows:

                                                     1997           1998
                                                   --------       --------
              Outstanding at beginning of year     $   4.51       $   4.61 
              Granted during the year                  4.95             -- 
              Exercised during the year                  --           3.46 
                                                   --------          ----- 
              Outstanding at end of year               4.61           4.77 
                                                   --------          ----- 
              Exercisable at end of year           $   4.61       $   4.77 
                                                                  




                                       57

<PAGE>
         Significant  options groups  outstanding at October 3, 1998 and related
weighted average price and life information are as follows:
<TABLE>
<CAPTION>


           Grant                     Options                    Options            Exercise                Remaining
           Date                     Outstanding               Exercisable            Price                Life (years)
         --------                   -----------               -----------          -------                ------------    
 <S>                                   <C>                        <C>                <C>                       <C>  
          2/25/94                     46,540                     46,450             $  6.50                   4 yrs
          4/19/94                     33,100                     52,000             $  3.50                   1 yr
         12/21/95                     26,000                     30,000             $  3.25                   2 yrs
          3/14/96                     18,000                     18,000             $  4.38                   3 yrs
          1/08/97                     45,350                     45,350             $  4.95                   3 yrs
</TABLE>
 
         The  Company  applies  APB  No.  25  and  related   interpretations  in
accounting for its stock-based compensation plans. Accordingly,  no compensation
cost has been recognized for its stock option plans.  Had  compensation  for the
Company's  stock-based  compensation plans been determined  pursuant to SFAS No.
123,  the  Company's  net  income  and  earnings  per share for 1997  would have
decreased  accordingly.  There is no impact on net income or earnings  per share
for the year ended 1998 as a result of the  application  of SFAS No.  123, as no
options were granted  during the current year.  Using the  Black-Scholes  option
pricing model for all options  granted after January 1, 1995,  the Company's pro
forma weighted average fair value of options granted,  with related assumptions,
are as follows:


                                                                1997
                                                             --------
         Pro forma net income                                $  1,017
         Pro forma earnings
           per share (basic)                                 $   1.09
         Pro forma earnings
           per share (diluted)                               $   1.01
         Pro forma weighted average fair
           value of options granted                          $   1.81
         Expected life (years)                                      5
         Risk-free interest rate                                  5.9%
         Expected volatility                                       39%



                                       58

<PAGE>
(14)     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>
                                                  1997                        1998
                                        -----------------------     -----------------------
                                           Basic        Diluted        Basic        Diluted
                                        ---------     ---------     ---------     ---------
<S>                                       <C>           <C>           <C>           <C>    
Weighted average shares outstanding       907,000       907,000       915,000       915,000

Incremental shares after
  application of the treasury
  stock method or modified
  treasury stock method, as
  applicable                                 --          20,000          --          95,000
                                        ---------     ---------     ---------     ---------

Shares used in calculation of
  net income per common share             907,000       927,000       915,000     1,010,000
                                        =========     =========     =========     =========
</TABLE>

(15)     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 1997 and 1998  respectively,  the Company  incurred legal
fees of approximately  $96,000 and $105,000 (in salary) for services provided by
a member of the Board of Directors.

         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.  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,  consisting  of  $50,000  cash  and a  $100,000  note
receivable.  Additionally,  the  Manager  formed  a  limited  partnership  which
purchased  the  franchise  from the  First  Purchaser.  The  Company  recognized
$150,000 of income in fiscal  1997,  which is  included  in "Sale of  management
rights" in the accompanying 1997 consolidated  statement of income.  The Company
also purchased a 25% interest in the limited partnership.

         Also see Notes 5, 6, 7, 9, 10, 11 and 13 for  additional  related party
transactions.


                                       59

<PAGE>
(16)     BUSINESS SEGMENTS:

         The  Company  operates  principally  in two  segments - retail  package
stores and  restaurants.  The  operation  of package  stores  consists of retail
liquor sales.

         Information  concerning the revenues and operating income for the years
ended  September 27, 1997 and October 3, 1998, 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.
<TABLE>
<CAPTION>
                                                     1997               1998
                                                ------------       ------------
<S>                                             <C>                <C>         
OPERATING REVENUES:
         Retail package stores                  $  6,681,000       $  6,901,000
         Restaurants                              12,535,000         13,519,000
         Other revenues                            1,104,000          1,347,000
                                                ------------       ------------
Total operating revenues                        $ 20,320,000       $ 21,767,000
                                                ============       ============

INCOME FROM OPERATIONS RECONCILED TO
INCOME BEFORE INCOME TAXES:
Operating income:
         Retail package stores                  $    448,000       $    173,000
         Restaurants                               1,224,000          1,378,000
                                                ------------       ------------
                                                   1,672,000          1,551,000
         Corporate expenses,
           net of other revenues                    (620,000)          (167,000)
                                                ------------       ------------
Operating income                                   1,052,000          1,384,000
         Interest expense,
           net of interest income                   (102,000)          (131,000)
         Other                                       156,000            168,000
                                                ------------       ------------
Income before income taxes                      $  1,106,000       $  1,421,000
                                                ============       ============

IDENTIFIABLE ASSETS:
         Retail package stores                  $  1,944,000       $  2,006,000
         Restaurants                               2,969,000          3,090,000
                                                ------------       ------------
                                                   4,913,000          5,096,000
         Corporate                                 3,469,000          3,947,000
                                                ------------       ------------
Consolidated totals                             $  8,382,000       $  9,043,000
                                                ============       ============
</TABLE>
                                       60
<PAGE>
<TABLE>
<CAPTION>
                                                      1997               1998
                                                  -----------        -----------
<S>                                               <C>                <C>        
CAPITAL EXPENDITURES:
         Retail package stores                    $    85,000        $     4,000
         Restaurants                                1,288,000            672,000
                                                  -----------        -----------
                                                    1,373,000            676,000
         Corporate                                     95,000            132,000
                                                  -----------        -----------
Total capital expenditures                        $ 1,468,000        $   808,000
                                                  ===========        ===========


DEPRECIATION AND AMORTIZATION:
         Retail package stores                    $    97,000        $    99,000
         Restaurants                                  416,000            435,000
                                                  -----------        -----------
                                                      513,000            534,000
         Corporate                                    106,000            121,000
                                                  -----------        -----------
Total depreciation and amortization               $   619,000        $   655,000
                                                  ===========        ===========
</TABLE>

(17)    OTHER, NET:

         Other,  net in the  consolidated  statements  of income  consist of the
         following for the years ended September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>


                                                       1997              1998
                                                    ---------         ---------
<S>                                                 <C>               <C>      
Non-franchise related rental income                 $  32,000         $  45,000
Loss on retirement of fixed assets                    (19,000)          (37,000)
Settlement of litigation                                 --             110,000
Insurance recovery                                     13,000              --
Adjustment on sale of Pennsylvania
         limited partnership                          (31,000)             --
Miscellaneous                                           5,000            44,000
                                                    ---------         ---------
                                                    $    --           $ 162,000
                                                    =========         =========


</TABLE>



                                       61
<PAGE>
(18)     SUBSEQUENT EVENTS:


         Subsequent  to the end of the  fiscal  year,  the  Board  of  Directors
declared a dividend of 20 cents per share to  shareholders  of record on January
4, 1999, which is on February 1, 1999.

         During the third quarter of fiscal year 1998, the Company  entered into
a lease agreement for a restaurant in Kendall,  Florida and a separate agreement
for the  purchase of the  furniture,  fixtures  and  equipment  of the  existing
restaurant.  The lease agreement and separate agreement are each contingent upon
the Company applying for and receiving zoning variances from Miami-Dade  County,
Florida. During the first quarter of fiscal year 1999, the Company submitted its
application for zoning  variances to Miami-Dade  County,  Florida,  which zoning
variances were  unanimously  granted at a hearing on November 18, 1998. With the
expiration of the applicable appeal period, the granting of the zoning variances
will be final. During the first quarter of fiscal year 1999, building plans were
also  submitted to Miami-Dade  County,  Florida and it is  anticipated  that the
building permits will be issued and construction  commenced by February 1, 1999,
with the renovated restaurant open for business by June 1, 1999.

         During the first quarter of fiscal year 1999, the Company purchased the
Management Agreement of a franchisee in Deerfield Beach, Florida, which included
the right to manage the franchised  restaurant,  effective December 1, 1998. The
purchase price for the Management  Agreement was $120,000,  plus one half of the
management fees earned by the Company  throughout the term of the same. Upon the
death of the former manager,  the Company has the option of purchasing the right
of the former manager to receive one half of the  management  fees earned by the
Company under the  Management  Agreement for a purchase  price of $120,000.  The
former manager also agreed to remain as the restaurant  manager through February
1, 1999.


                                       62

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

                                           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                     FOR THE YEARS ENDED SEPTEMBER 27, 1997 AND OCTOBER 3, 1998



                  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 27, 1997
                  Allowance for uncollectible
                    notes and mortgages receivable                    $ 163,000        $   21,000        $ (60,000)       $ 124,000
                                                                      =========        ==========        =========        =========


         FOR THE YEAR ENDED OCTOBER 3, 1998
                  Allowance for uncollectible
                    notes and mortgages receivable                    $ 124,000        $       -0-       $(124,000)       $      -0-
                                                                      =========        ==========        =========        =========


</TABLE>



                                       63