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

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

     For the fiscal year ended September 27, 1997
                                                            
                                       OR

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

     For the transition period from              to

                         Commission File Number 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 $5,027,763 as of December 11, 1997.

There were 907,000  shares of the  Registrant's  Common Stock ($0.10) Par Value)
outstanding as of September 27, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

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

Item 1.  Business.


General

         Flanigan's  Enterprises,  Inc.,  (the  "Company")  owns and/or operates
restaurants with lounges,  package liquor stores and an  entertainment  oriented
club (collectively the "units").  At September 27, 1997, the Company operated 14
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.
<TABLE>
<CAPTION>

                                              FISCAL    FISCAL
                                               YEAR      YEAR      NOTE
TYPES OF UNITS                                 1996      1997     NUMBER
--------------                                 ----      ----     ------
<S>                                              <C>      <C>     <C>
Combination package and restaurant ........       4        4
Restaurant only ...........................       5        5      (1)(2)
Package store only ........................       4        4      (3)
Clubs .....................................       1        1      (4)
TOTAL - Company operated units ............      14       14

FRANCHISED - units ........................       7        7

</TABLE>

Notes:

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

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

         (3) During  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.
<PAGE>
         (4) Through  September  20, 1996,  the Company  operated its  remaining
Pennsylvania  club,  (Store  #850,  King of  Prussia,  Pennsylvania),  which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company  acted as  general  partner.  The lease for this unit had only  thirteen
months  remaining,  with no more  renewal  options and  revenues  were down as a
result  of  competition  from  some  expensive  new  clubs  constructed  on  the
waterfront.  An opportunity arose to sell the lease,  leasehold improvements and
liquor license to Dick Clark Restaurants,  Inc. With the approval of the Limited
Partners,  the sale of the unit was  consummated  on  September  20,  1996 for a
purchase  price of  $500,000.  The  Company had one club (in  Atlanta,  Georgia)
remaining at fiscal yearend 1997.

         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 77.0% 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.

         The  Company's  principal  sources of revenue  are the sale of food and
alcoholic beverages.
<PAGE>
         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 28, 1996 and September 27, 1997 is set
forth in the consolidated financial statements which are attached hereto, and is
incorporated herein by reference.

The Company's Package Liquor Stores and Restaurants

         The Company's package liquor stores are operated under the "Big Daddy's
Liquors"  servicemark  and the  Company's  restaurants  are  operated  under the
servicemark  "Flanigan's  Seafood Bar and Grill".  The Company's  package liquor
stores  emphasize  high  volume  business  by  providing  customers  with a wide
selection of brand name and private label liquors,  beer and wines.  The Company
has a policy of meeting  the  published  sales  prices of its  competitors.  The
<PAGE>
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  77.0% 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 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
<PAGE>
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
has been  profitably  operating the package liquor store of the franchised  unit
but has not reopened the lounge.  The lease agreement for the business  premises
expired on December 31, 1995 and the Company  occupies the same on an oral month
to month lease  agreement  paying its prorata share of the real  property  taxes
monthly and insuring the property.  Subsequent to the end of the fiscal year the
Company  received written  notification  from the landlord of the termination of
the oral month to month lease agreement as of December 31, 1997.

         During the third  quarter of fiscal  year  1996,  another  unaffiliated
franchisee  expressed  its  intent  to  terminate  its new  franchise  agreement
(package liquor store only) and to return its unit, including restaurant, to the
Company.  In order to induce the franchisee to continue  operating its franchise
through  the end of the fiscal  year,  the  Company  agreed to reduce the weekly
sublease rent and suspend all weekly  payments on account of its purchase  money
chattel mortgage. In the interim, the Company determined that the cost necessary
to convert this unit to a "Flanigan's Seafood Bar and Grill" restaurant exceeded
the funds  available to the Company and on September 30, 1996,  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
<PAGE>
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 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 1996, all existing franchisees who operate
restaurants  under the  "Flanigan's  Seafood Bar and Grill" or other  authorized
service marks have executed new franchise agreements.

         During  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.
Subsequent to the end of fiscal year 1997 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.
<PAGE>
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 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. The
Company  projects that the renovation to the restaurant will be complete and the
restaurant open for business in mid March 1998.

         In order to ensure that the Company has 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.  Subsequent to the end of the fiscal year the
Company  closed on its loan from Barnett  Bank in the amount of  $500,000,  with
interest at prime rate. Equal quarterly principal payments will begin March, 31,
1998 and 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.

Clubs

         As of the end of  fiscal  year  1996,  the  Company  owned  one club in
Atlanta Georgia, which was operated by an unaffiliated third party, as discussed
below. In addition, until September 20, 1996, the Company operated its remaining
Pennsylvania  club,  (Store  #850,  King of  Prussia,  Pennsylvania),  which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company  acted as  general  partner.  The lease for this unit had only  thirteen
months  remaining,  with no more renewal  options,  and revenues  were down as a
result  of  competition  from  some  expensive  new  clubs  constructed  on  the
waterfront.  An opportunity arose to sell the lease,  leasehold improvements and
liquor license to Dick Clark Restaurants,  Inc. With the approval of the Limited
Partners,  the sale of the unit was  consummated  on  September  20,  1996 for a
purchase  price of  $500,000.  The  Company had one club (in  Atlanta,  Georgia)
remaining at fiscal yearend 1997.
<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%
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  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.
<PAGE>
         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 some  instances,  a unit may be required to apply for separate
licenses  in order to sell beer and wine,  to sell  mixed  drinks and to provide
facilities for dancing or live entertainment.

         In the  State of  Florida,  which  represents  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  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.
<PAGE>
         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.  It is anticipated  that
the Company will face  administrative  charges  from the DABT,  but will only be
subject to a civil fine,  which will not have a materially  adverse  effect upon
the Company.  At its meeting on September  4, 1997,  the Board of Directors  was
advised  of the  pending  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 September 27, 1997, through
the present time, the Company has had no significant  pending matters  initiated
by the beverage authorities concerning any of the Company's licenses which might
be expected to result in a revocation of a liquor  license or other  significant
actions against the Company.

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

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

Insurance

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

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

         An accrual for the Company's estimated liability on liability claims is
included in the  consolidated  balance sheets in the caption  "Accrued and Other
Current Liabilities".  A significant  unfavorable judgment or settlement against
the  Company  in  excess  of  its  liability  insurance  coverage  could  have a
materially adverse effect on the Company.
<PAGE>
         Through the end of the 1990 fiscal year,  the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows  persons  injured by an "obviously  intoxicated  person" to bring a civil
action  against the business which served  alcoholic  beverages to an "obviously
intoxicated  person".  Florida  has  restricted  its dram  shop law by  statute,
permitting persons injured by an "obviously intoxicated person" to bring a civil
action  against the business which served  alcoholic  beverages to a minor or an
individual known to be habitually addicted to alcohol. Dram shop claims normally
involve traffic  accidents and the Company generally does not learn of dram shop
claims  until after a claim is filed and the  Company  then  vigorously  defends
these  claims on the  grounds  that its  employees  did not serve an  "obviously
intoxicated  person".  Damages in most dram shop claims are substantial.  During
fiscal year 1996, the Company favorably settled the two dram shop cases,  (three
dram shop claims), relating to one incident filed against the Company in Florida
during  fiscal  years  1994 and 1995.  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  September  27, 1997 the  Company  owned and
operated  nine  restaurants,  eight of which had formerly  been lounges and were
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
<PAGE>
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.
Subsequent  to the end of  fiscal  year  1997,  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  325  persons,  of which 218 were
full-time and 107 were part-time.  Of these  employees,  25 were employed at the
Company's  corporate offices.  Of the remaining  employees,  28 were employed in
package liquor stores, and 272 in restaurants.

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

                                    POSITIONS AND OFFICES                                            OFFICE OR POSITION
   NAME                             CURRENTLY HELD                              AGE                       HELD SINCE
   ----                             --------------                              ---                       ----------
<S>                                 <C>                                         <C>                            <C>
Joseph G. Flanigan                  Chairman of the Board
                                    of Directors, Chief
                                    Executive Officer,
                                    and President                               68                             1959

William Patton                      Vice President
                                    Community Relations                         74                             1975

Mary C. Reymann                     Vice President Finance
                                    Controller
                                    and Secretary                               73                             1980

Edward A. Doxey                     Treasurer                                   56                             1992

Jeffrey D. Kastner                  Assistant Secretary                         44                             1995
</TABLE>

Item 2. Properties

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

         The majority of the Company's leases contained rent escalation  clauses
based  upon  the  consumer  price  index  which  made the  continued  profitable
operation of many of these  locations  impossible and  jeopardized the financial
position of the Company.  As a result of the Company's  inability to renegotiate
these leases,  on November 4, 1985 the Company,  not including its subsidiaries,
filed a  Voluntary  Petition  in the  United  States  Bankruptcy  Court  for the
Southern  District  of Florida  seeking to  reorganize  under  Chapter 11 of the
Federal Bankruptcy Code. The primary purpose of the reorganization was to reject
and/or renegotiate the leases on such properties.

         On January 11, 1986,  the  Bankruptcy  Court entered its Order granting
the Company's  motions to reject  thirteen leases and the Company was successful
in  negotiating  a  termination  of three other  leases.  On April 7, 1986,  the
Bankruptcy Court granted the Company's  motions to reject two additional  leases
and two more leases were rejected by the Company's failure to assume the same by
May 22, 1986. In addition,  during the pendency of the  bankruptcy  proceedings,
the  Company  was  successful  in  renegotiating  a  substantial  number  of the
Company's  remaining  leases,  generally  amending  the terms to five years with
three five year renewal  options and deleting cost of living rental  adjustments
in exchange  for rents based upon the "fair market  rental" for each  particular
location.  The Company  believes that the units  retained,  especially  with the
aforementioned  lease  modifications,  are  adequate to support its  operations,
including any damages as a result of its bankruptcy proceedings.
<PAGE>
         All of the Company's  units require  periodic  refurbishing in order to
remain  competitive.  The Company has  budgeted  $300,000  for its  refurbishing
program for fiscal year 1998. See Item 7, "Liquidity and Capital Resources", for
discussion of the amounts spent in fiscal year 1997.

         The following table summarizes the Company's properties as of September
27, 1997 including franchise locations, clubs and Company managed locations.
<TABLE>
<CAPTION>

                                            Square                     License
Name and Location                           Footage         Seats      Owned by                     Lease Terms
-----------------                           -------         -----      --------                     -----------
<S>                                         <C>              <C>       <C>                       <C>
Big Daddy's Liquors #9 (2)
Flanigan's Enterprises, Inc.
1550 W. 84th Street                                                                              8/1/71 to 12/31/99
Hialeah, Florida                            4,300            130       Company                   options to 12/31/2009

Big Daddy's Liquors #10 (2)(4)
Flanigan's Enterprises, Inc.
15191-93 South Dixie Highway                                                                     Month to month
Miami, Florida                              3,500             84       Company                   terminated 1/1/98

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

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 12/31/98
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 12/31/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                            Square                     License
Name and Location                           Footage         Seats      Owned by                     Lease Terms
-----------------                           -------         -----      --------                     -----------
<S>                                         <C>              <C>       <C>                       <C>
Big Daddy's Liquors #22 (2)(4)
Flanigan's Enterprises, Inc.
2600 W. Davie Boulevard                                                                          12/16/68 to 12/31/2000
Fort Lauderdale, Florida                    4,100             150      Company                   options to 12/31/2010

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

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

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

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

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             60       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             210      Company                   options to 1/1/2060
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                            Square                     License
Name and Location                           Footage         Seats      Owned by                     Lease Terms
-----------------                           -------         -----      --------                     -----------
<S>                                         <C>              <C>       <C>                       <C>
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
</TABLE>


         (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.

<PAGE>
Item 3. Legal Proceedings.

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

         Through the end of the 1990 fiscal year,  the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows  persons  injured by an "obviously  intoxicated  person" to bring a civil
action  against  the  business  which  had  served  alcoholic  beverages  to  an
"obviously  intoxicated  person".  Florida has  restricted  its dram shop law by
statute permitting persons injured by an "obviously intoxicated person" to bring
a civil action  against the business which had served  alcoholic  beverages to a
minor or an  individual  known to be habitually  addicted to alcohol.  Dram shop
claims  normally  involve traffic  accidents and the Company  generally does not
learn of dram shop  claims  until  after a claim is filed and the  Company  then
vigorously  defends  these claims on the grounds that its employee did not serve
an  "obviously  intoxicated  person".  Damages  in most  dram  shop  claims  are
substantial. During fiscal year 1997, the Company favorably settled the two dram
shop cases,  (three dram shop claims) relating to one incident filed against the
Company in Florida  during fiscal years 1994 and 1995.  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 approval prior to the hearing on confirmation.
<PAGE>
         In addition to the  rejection  of leases,  the Company  also sought its
release from lease  agreements  for  businesses  sold,  which sales included the
assignment  of the leases for the business  premises.  While  several  landlords
whose leases had been assigned did file claims against the Company, the majority
did not, which resulted in the Company being released from its guarantees  under
those leases. The Company has also been successful in negotiating the limitation
or release of the lease  guarantees of those  landlords who filed claims,  which
settlements   received  Bankruptcy  Court  approval  prior  to  the  hearing  on
confirmation.

         On  February  5,  1987,   the  Company   filed  its  Amended   Plan  of
Reorganization and Amended Disclosure  Statement,  which documents were approved
by the Committee. On February 25, 1987, the Company further modified its Amended
Plan of  Reorganization  to  secure  the  claims  of  Class 6  Creditors  (Lease
Rejection) and Class 8 Creditors  (Lease Guarantee  Rejections).  The Bankruptcy
Court approved the Amended Disclosure Statement by Order dated March 7, 1987 and
scheduled  the  hearing  to  consider   confirmation  of  the  Amended  Plan  of
Reorganization  on April 13, 1987. On April 10, 1987, in order to insure receipt
of the  necessary  votes to approve  its  Amended  Plan of  Reorganization,  the
Company agreed to a further  modification of its Amended Plan, whereby creditors
of Classes 6 and 8 will receive $813,000 prorata as additional damages 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 1997 the  Company  did not
submit any matter to a vote of security holders.
<PAGE>
                                     PART II

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

                               RANGE OF PER SHARE MARKET PRICES

                                       FISCAL 1996                        FISCAL 1997
                                       -----------                        -----------

                                    High             Low              High              Low
<S>                                <C>              <C>              <C>               <C>
         First quarter             4-5/8            3-1/8            5-7/8             4-3/4
         Second quarter            5-3/8            3-3/4            4-3/4             4
         Third quarter             5-7/8            4-3/8            4-7/8             3-5/8
         Fourth quarter            5-7/16           4-5/8            10-3/16           7-1/4
</TABLE>


         The Company's  shares are traded on the American Stock Exchange,  under
the symbol  BDL. No  dividends  were paid to  shareholders  from the date of the
initial public offering in August 1969,  through the fiscal year ended September
27, 1975. Cash dividends of 20 cents and 10 cents per share were paid on January
12,  1976 and July 5, 1976,  respectively.  No  dividends  were paid  during the
period July 5, 1976 to March 15, 1988.  During fiscal year 1988, a cash dividend
of 10 cents per share was paid on March 15, 1988.  No  dividends  were paid from
March 16, 1988 through the fiscal year ended September 27, 1997.

Item 6.  Selected Financial Data.

         Not required.

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

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

         In comparison  to fiscal year 1996, at September 27, 1997,  the Company
was still operating 14 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 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.
<PAGE>
Liquidity and Capital Resources

Cash Flows

         The following  table is a summary of the  Company's  cash flows for the
two years ended September 27, 1997.
<TABLE>
<CAPTION>

                                                               Fiscal
                                                             Years Ended
                                                      1996                1997
                                                     -------            -------
                                                            (in thousands)
<S>                                                  <C>                <C>
Net cash provided by
  operating activities ...................           $   531            $ 2,094
Net cash used in
 investing activities ....................              (277)            (1,291)
Net cash used in
 financing activities ....................              (143)              (266)
                                                     -------            -------
Net increase in cash
  and cash equivalents ...................               111                537
Cash and cash equivalents:
  Beginning of year ......................               686                797
                                                     -------            -------
  End of year ............................           $   797            $ 1,334
                                                     =======            =======
</TABLE>

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

         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.

         Subsequent to fiscal  yearend 1997 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,  commencing 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.
<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
will  recognize the year 2000 as 1900 or not at all. This inability to recognize
or  properly  treat  the year 2000 may cause our  systems  to  process  critical
financial and operational information incorrectly.

         During the current  fiscal year the Company began its evaluation of the
modifications needed to meet this challenge.  It has not yet incurred any costs,
and has not  determined  what  costs  could be  incurred  in 1998 and 1999.  The
Company is also  communicating  with its major  suppliers  to  understand  their
intended solutions to this issue.

         If the Company's  remediation plan is not successful,  there could be a
significant  disruption  to  the  Company's  ability  to  transact  business  as
efficiently  as it does at the present time. 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 $613,000 and $1,468,000 during fiscal years
1996 and  1997,  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 plans to improve this
real  property  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.  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 1997. The
budget for fiscal year 1998  includes  approximately  $300,000 for this program.
The Company believes that improved  operations will provide the cash to continue
the refurbishing program.

Property and Equipment

         The  Company's  property  and  equipment,   at  cost  less  accumulated
depreciation and amortization,  was $2,634,000 at September 28, 1996 compared to
$3,544,000 at September 27, 1997. The Company's liquor licenses less accumulated
amortization  were  $349,000  at  September  28,  1996  compared  to $358,000 at
September 27, 1997. The Company's  leased  property under capital  leases,  less
accumulated  amortization,  was  $195,000  at  September  28,  1996  compared to
$162,000 at September 27, 1997.  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.
<PAGE>
Long term debt

         The  Company's  long term debt was  $21,000 at fiscal year end 1996 and
$896,000 at fiscal  yearend  1997.  The increase in long term debt  includes the
purchase money mortgage of $485,000 included as a part of the purchase price for
the real  property  adjacent  to the  Company's  restaurant  at 4 North  Federal
Highway, Hallandale and the $375,000 borrowed from private investors.

         The  Company  repaid  long term debt,  capital  lease  obligations  and
Chapter 11 damages in the amount of $355,000  and  $340,000 in fiscal years 1996
and 1997, respectively.


Working capital

         The table below summarizes the current assets,  current liabilities and
working capital for fiscal years 1996 and 1997:
<TABLE>
<CAPTION>

                                                 Sept. 28,           Sept. 27,
         Item                                      1996                1997
         ----                                   ----------           ---------
<S>                                             <C>                  <C>
         Current assets                         $2,522,000           $3,000,000
         Current liabilities                     2,158,000            2,658,000
         Working capital                           364,000              342,000
</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 1998.

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

Income Taxes

         Financial  Accounting Standards Board Statement No. 109, Accounting for
Income Taxes  requires,  among other things,  recognition of future tax benefits
measured at enacted  rates  attributable  to  deductible  temporary  differences
between  financial  statement and income tax bases of assets and liabilities and
to tax net operating loss  carryforwards  to the extent that realization of said
benefits is more likely than not. For  discussion  regarding  the  Company's net
operating loss  carryforwards  refer to Note 4 in the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 27, 1997.
<PAGE>
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. During fiscal year 1996, the Company favorably settled the three
insured dram shop claims [two lawsuits  relating to one  incident],  against the
Company in Florida  and  subsequent  to the end of fiscal  year 1996,  favorably
settled its remaining uninsured dram shop claim against a limited partnership in
Pennsylvania and the Company, as general partner. See page 12 and 19 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  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. The Company also intends to try to collect the
award of damages  in the  Summary  Final  Judgment  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.
<PAGE>
         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  subsequent  to the end of
fiscal  year 1997 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 Weeks Ended
Sales                                     Sept. 28, 1996                Sept. 27, 1997
-----                                   -------------------          ------------------- 
<S>                                     <C>          <C>             <C>          <C>
Restaurant, food                        $ 9,588       50.1%          $ 9,648       50.2%
Restaurant, bar                           3,220       16.8%            2,888       15.0%
Non-Restaurant, bar                         234        1.2%               -
Package goods                             6,112       31.9%            6,681       34.8%
                                        -------      -----           -------      -----
Total                                    19,154      100. %           19,217      100. %

Franchise revenues                          629                          591
Owner's fee                                 150                          150
Joint venture income                         65                          168
Other operating income                      186                          194
                                        -------                      -------
Total revenues                          $20,184                      $20,320

</TABLE>

         As the table above  illustrates,  total revenues have increased for the
fiscal  year  ended  September  27,  1997 when  compared  to fiscal  year  ended
September 28, 1996.
<PAGE>
         During the second  quarter of fiscal  year 1996,  the lease on one unit
operated by the Company as a lounge only,  expired and the Company was unable to
renew same upon suitable  terms.  Also during the second quarter of fiscal 1996,
the Company closed its last two lounges at combination package and lounge units,
but continued to operate the package  liquor  stores.  Bar business,  without an
accompanying  restaurant,  continued to decline to the point of being marginally
profitable. The Company could not foresee this trend reversing and the two units
were not suitable for conversion to restaurants.  The closing of these units was
responsible for the absence of non-restaurant bar sales in fiscal year 1997.

         Restaurant food sales represented 50.1% of total sales in the fifty-two
weeks ended September 28, 1996 as compared to 50.2% in the comparable  period of
fiscal year 1997.  The weekly  average of same store  restaurant  food sales was
$182,170  and $184,272  for the  fifty-two  week period of fiscal years 1996 and
1997 respectively, an increase of 1.2%.

         The same store weekly  average for restaurant bar sales was $60,269 for
the twelve  months ended  September  28, 1996 compared to $55,530 for the twelve
months ended  September  27, 1997, a decrease of 7.9%.  The  Company's  emphasis
during the past few years has been towards increasing its restaurant food sales,
which caters to a family  oriented  business.  This accounts for the decrease in
weekly average of same store restaurant bar sales.

         Package goods sales have reversed the decline of prior years  remaining
stable at a weekly  average of same store  sales of $117,546  for the  fifty-two
weeks of fiscal year 1996 compared to $118,434 for the fifty-two weeks of fiscal
year 1997.

         Although  the  amount   received  from   franchisees  for  royalty  and
bookkeeping  fees increased for fiscal year 1997,  franchise  related  revenues,
which were  $629,000 for fiscal year 1996,  declined to $591,000 for fiscal year
1997.  The decline is related to the  expiration  of one franchise at the end of
fiscal year 1996 and the temporary  suspension of sublease rent and royalties on
another  franchised  unit that was sold to a related  party  rather  than  being
returned to the  Company.  The new  franchisee  is again  paying the full weekly
amounts due.

         Owner's fee represents fees received pursuant to a Management Agreement
from the operation of a club owned by the Company in Atlanta, Georgia.

         During  the first  quarter  of fiscal  year  1996,  the  Company  began
operating a restaurant under the "Flanigan's  Seafood Bar and Grill" servicemark
as general partner and fifty percent owner of a limited partnership  established
for such purpose.  During fiscal year 1996 the Company  received  $65,000 as its
share of income,  compared to $164,000, the majority of joint venture income for
fiscal year 1997.

         The gross profit  margin for  restaurant  sales was 61.5% and 63.3% for
the twelve months of fiscal years 1996 and 1997, respectively.

         The gross profit  margin for package  goods sales during the  fifty-two
weeks  ended  September  28,  1996 and  September  27, 1997 was 26.4% and 26.8%,
respectively.

         Overall gross profits were 50.8% for the twelve months ended  September
28, 1996 compared to 50.6% for the same period in fiscal year 1997.
<PAGE>
Operating Costs and Expenses

         Operating  costs and expenses for the fifty-two  weeks ended  September
28, 1996 were $19,731,000  compared to $19,268,000 for the same period in fiscal
year 1997.  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  $5,574,000 and $5,580,000 for the twelve months of fiscal years
1996 and 1997, respectively.

         Occupancy costs,  which include rent, common area maintenance,  repairs
and taxes were  $949,000 and $927,000 for the twelve months of fiscal years 1996
and 1997, respectively.

         Selling,  general and  administrative  expenses were $3,782,000 for the
fifty-two  weeks ended September 28, 1996 and $3,270,000 for the fifty-two weeks
ended  September  27, 1997.  The net  decrease of 13.5% in selling,  general and
administrative  expenses was achieved through management's careful monitoring of
the same and a more favorable  worker's  compensation  experience in fiscal year
1997.

Other Income and Expense

         Other income and expense  totaled  $339,000 and $54,000 in fiscal years
1996 and 1997 respectively.

         The increase of $22,000 in interest  expense on long-term  debt,  which
was $69,000 and $91,000 for the  fifty-two  weeks of fiscal years 1996 and 1997,
respectively,  is attributed to the increase in long-term  debt.  The decline of
$8,000 in  interest  expense on  obligations  under  capital  leases,  which was
$62,000  and  $54,000  for the  fifty-two  weeks of fiscal  years 1996 and 1997,
respectively, is the result of declining principal balances of capital leases in
general.

         Fiscal year 1996 included a recovery of $53,000 from insured losses,  a
gain of $50,000 on a  repossession  and $66,000 in income from the  Pennsylvania
partnership and the recognition of $114,000 in deferred gains.  The Pennsylvania
unit was sold at the end of fiscal year 1996.

         As discussed on page 9, the sale of the lease,  leasehold  improvements
and liquor license of the club in King of Prussia was completed on September 20,
1996 and the Company  realized a gain of $135,000  from its  investment  in this
limited partnership. Also, as discussed on page 7, the Company received $150,000
in fiscal year 1997 from the sale of its right to manage a franchise.

         The  category  "Other,  net" was $124,000  for the  fifty-two  weeks of
fiscal year 1996 and $-0- for the  fifty-two  weeks of fiscal year 1997.  Other,
net in the  consolidated  statements of income consists of the following for the
twelve months ended September 28, 1996 and September 27, 1997:
<PAGE>
<TABLE>
<CAPTION>

                                                         Fiscal year ending
                                                    Sept. 28,          Sept. 27,
                                                       1996              1997
                                                    ---------         ---------
<S>                                                 <C>               <C>
Non-franchise related rental income ........        $  32,000         $  32,000
Loss on retirement of fixed assets .........          (79,000)          (19,000)
Gain on sale of liquor licenses ............           26,000              --
Gain on repossession of store ..............           50,000              --
Adjustment on sale of Pennsylvania
         limited partnership ...............             --             (31,000)
Insurance recovery .........................           53,000            13,000
Miscellaneous ..............................           42,000             5,000
                                                    ---------         ---------
                                                    $ 124,000         $    --
                                                    =========         =========
</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 28, 1996 and September
27, 1997,  which include each of the two years in the period ended September 27,
1997 and the  independent  certified  public  accountants'  report  thereon  are
incorporated by reference from the 1997 Annual Report to Shareholders,  included
herein.

Item 9. Disagreements on Accounting and Financial Disclosure.

         (Not Applicable.)
<PAGE>
                                    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  1998  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
1998 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 1998 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 1998  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 1998 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 1997 or subsequent to yearend.

<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).

(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.)
<PAGE>
(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 (Attached).

(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 (attached).

(10)(w)  Stipulated  Agreed  Order  of  Dismissal  upon  Mediation  with  former
franchisee (attached).

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

(13) Registrant's Form 10-KSB  constitutes the Annual Report to Shareholders for
fiscal year ended September 27, 1997.

(22)(a)  Company's  subsidiaries  are set  forth in this  Annual  Report on Form
10-KSB.
<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 12/15/1997                                     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.
<TABLE>
<CAPTION>
<S>                                           <C>                               <C>
         /s/JOSEPH G. FLANIGAN                Chairman of the Board,            Date  12/15/1997
         ---------------------                Chief Executive Officer
         Joseph G. Flanigan                   and President
                                              

         /s/MARY C. REYMANN                   Vice President Finance,           Date  12/15/1997
         ------------------                   Controller
         Mary C. Reymann                      Secretary and Director
                                              

         /s/CHARLES KUHN                      Director                          Date  12/15/1997
         ---------------
         Charles Kuhn

         /s/GERMAINE M. BELL                  Director                          Date  12/15/1997
         -------------------         
         Germaine M. Bell

         /s/CHARLES E. MCMANUS                Director                          Date  12/15/1997
         ---------------------
         Charles E. McManus

         /s/JEFFREY D. KASTNER                Assistant Secretary               Date  12/15/1997
         ---------------------                and Director
         Jeffrey D. Kastner                   

         /s/WILLIAM PATTON                    Vice President, Public            Date  12/15/1997
         -----------------                    Relations and Director
         William Patton                       

         /s/JAMES G. FLANIGAN                 Director                          Date  12/15/1997
         --------------------
         James G. Flanigan

         /s/PATRICK J. FLANIGAN               Director                          Date  12/15/1997
         ----------------------
         Patrick J. Flanigan

</TABLE>
<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 28, 1996 and September 27, 1997

      Consolidated Statements of Income for the Years Ended September 28, 1996
      and September 27, 1997

      Consolidated Statements of Stockholders' Investment for the Years Ended
      September 28, 1996 and September 27, 1997

      Consolidated Statements of Cash Flows for the Years Ended September 28,
      1996 and September 27, 1997

      Notes to Consolidated Financial Statements

SCHEDULE:

         II  Valuation and Qualifying Accounts for the Years Ended September 28,
             1996 and September 27, 1997

         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.
<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 28,
1996 and September 27, 1997, 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  28, 1996 and  September  27,  1997,  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 the audits of the basic financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.





Miami, Florida,
     November 26, 1997.
<PAGE>
<TABLE>
<CAPTION>
                   FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS

                     SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997

                                                                ASSETS

                                                              1996         1997
                                                          ---------     ----------
<S>                                                      <C>            <C>
CURRENT ASSETS:
         Cash and cash equivalents .................     $  797,000     $1,334,000
         Receivables, less allowance for
           uncollectible  amounts and deferred
           gains,  including  related party
           receivables  of $3,000 and $24,000
           (before  allowances  and deferred gains)
           in 1996 and 1997, respectively ..........        486,000         80,000
         Inventories ...............................        911,000      1,253,000
         Prepaid expenses ..........................        328,000        333,000
                                                         ----------     ----------
         Total current assets ......................      2,522,000      3,000,000
                                                         ----------     ----------

PROPERTY AND EQUIPMENT, net ........................      2,634,000      3,544,000
                                                         ----------     ----------

LEASED PROPERTY UNDER CAPITAL LEASES,
         less accumulated amortization of
         $678,000 and $711,000 in 1996
         and 1997, respectively ....................        195,000        162,000
                                                         ----------     ----------

OTHER ASSETS:
         Liquor licenses, less accumulated
           amortization of $83,000 and
           $90,000 in 1996 and 1997, respectively ..        349,000        358,000
         Notes and mortgages receivable, less
           allowance for  uncollectible  amounts and
           deferred  gains,  including related party
           receivables of -0- and $197,000 (before
           allowances and  deferred gains)
           in 1996 and 1997, respectively ..........         76,000        168,000
         Investment in joint ventures ..............        120,000        987,000
         Other .....................................        413,000        163,000
                                                         ----------     ----------
         Total other assets ........................        958,000      1,676,000
                                                         ----------     ----------
TOTAL ASSETS .......................................     $6,309,000     $8,382,000
                                                         ==========     ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS

                     SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997

                      LIABILITIES AND STOCKHOLDERS' INVESTMENT

                                    (continued)

                                                            1996            1997
                                                      -----------      -----------
<S>                                                   <C>              <C>
CURRENT LIABILITIES:
         Accounts payable .......................     $   582,000      $   859,000
         Accrued and other current liabilities ..         820,000        1,304,000
         Current portion of long-term debt ......          16,000           84,000
         Current obligations under capital
           leases ...............................          61,000           70,000
         Current portion of damages payable on
           terminated or rejected leases ........         249,000          259,000
         Due to Pennsylvania limited
           partnership ..........................         430,000           82,000
                                                      -----------      -----------
         Total current liabilities ..............       2,158,000        2,658,000
                                                      -----------      -----------
LONG-TERM DEBT, net of current portion ..........           5,000          812,000
                                                      -----------      -----------
OBLIGATIONS UNDER CAPITAL LEASES,
         net of current portion .................         387,000          319,000
                                                      -----------      -----------
DAMAGES PAYABLE ON TERMINATED OR
         REJECTED LEASES, net of current portion        1,212,000          954,000
                                                      -----------      -----------

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 1996 and 1997 ..............         210,000          210,000
         Capital in excess of par value .........       6,395,000        6,395,000
         Retained earnings ......................         753,000        1,846,000
         Less - Treasury stock, at cost,
           1,192,000 shares in 1996 and 1997 ....      (4,811,000)      (4,812,000)
                                                      -----------      -----------
         Total stockholders' investment .........       2,547,000        3,639,000
                                                      -----------      -----------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT ..     $ 6,309,000      $ 8,382,000
                                                      ===========      ===========


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

                        CONSOLIDATED STATEMENTS OF INCOME

          FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997


                                                      1996               1997
                                                 ------------      ------------
<S>                                              <C>               <C>
REVENUES:
         Restaurant food sales .............     $  9,588,000      $  9,648,000
         Restaurant bar sales ..............        3,220,000         2,888,000
         Lounge bar sales ..................          234,000              --
         Package goods sales ...............        6,112,000         6,681,000
         Franchise-related revenues ........          629,000           591,000
         Owner's fee .......................          150,000           150,000
         Joint venture income ..............           65,000           168,000
         Other operating income ............          186,000           194,000
                                                 ------------      ------------
                                                   20,184,000        20,320,000
                                                 ------------      ------------
COSTS AND EXPENSES:
         Cost of merchandise sold -
           restaurants and lounges .........        4,927,000         4,604,000
           package goods ...................        4,499,000         4,887,000
         Payroll and related costs .........        5,574,000         5,580,000
         Occupancy costs ...................          949,000           927,000
         Selling, general and
                  administrative expenses ..        3,782,000         3,270,000
                                                 ------------      ------------
                                                   19,731,000        19,268,000
                                                 ------------      ------------
         Income from operations ............          453,000         1,052,000
                                                 ------------      ------------
OTHER INCOME (EXPENSE):
         Interest expense on obligations
           under capital leases ............          (62,000)          (54,000)
         Interest expense on long-term
           debt and damages payable ........          (69,000)          (91,000)
         Interest income ...................           31,000            43,000
         Management fees from
           Pennsylvania limited
           partnership .....................           66,000              --
         Gain on sale of Pennsylvania
           limited partnership .............          135,000              --
         Sale of management rights .........             --             150,000
         Recognition of deferred gains .....          114,000             6,000
         Other, net ........................          124,000              --
                                                 ------------      ------------
                                                      339,000            54,000
                                                 ------------      ------------
         Income before provision for
           income taxes ....................          792,000         1,106,000

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

                        CONSOLIDATED STATEMENTS OF INCOME

          FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997

                                   (continued)


                                                          1996            1997
                                                      ----------      ----------
<S>                                                   <C>             <C>
PROVISION FOR INCOME TAXES .....................           6,000          13,000
                                                      ----------      ----------

         Net income ............................      $  786,000      $1,093,000
                                                      ==========      ==========
NET INCOME
         PER COMMON SHARE:

         Primary ...............................      $      .80      $     1.17
                                                      ==========      ==========
         Fully diluted .........................      $      .80      $     1.08
                                                      ==========      ==========

WEIGHTED AVERAGE SHARES
         AND EQUIVALENT SHARES OUTSTANDING:

         Primary ...............................         984,000         935,000
                                                      ==========      ==========
         Fully diluted .........................         986,000       1,009,000
                                                      ==========      ==========


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

                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

                                    FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997


                                                     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 30, 1995 ...............     2,099,000   $   210,000   $ 6,685,000    $   (33,000)     1,246,000    $ 5,010,000

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

Purchase of 39,000 shares of treasury stock          --            --            --             --           39,000        173,000

Exercise of stock options .................          --            --        (290,000)          --          (93,000)      (372,000)
                                              -----------   -----------   -----------    -----------    -----------    -----------
BALANCE, September 28, 1996 ...............     2,099,000       210,000     6,395,000        753,000      1,192,000      4,811,000

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
                                              ===========   ===========   ===========    ===========    ===========    ===========


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

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

            FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997


                                                            1996             1997
                                                        -----------      -----------
<S>                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

         Net income ...............................     $   786,000      $ 1,093,000
         Adjustments to reconcile net income
         to net cash provided by
         operating activities:
           Depreciation and amortization ..........         659,000          619,000
           Provision for uncollectible
             notes and mortgages receivable .......         104,000           21,000
           Change in provision for potential
             uninsured claims .....................          12,000          (58,000)
           Recognition of deferred gains
             and other deferred income ............        (114,000)          (6,000)
           Loss on property, equipment
             and liquor licenses ..................          53,000           19,000
           Gain on sale of Pennsylvania
             limited partnership ..................        (135,000)            --
           Sale of management rights ..............            --           (150,000)

         Changes in assets and liabilities:

           (Increase) decrease in receivables .....        (235,000)         328,000
            Increase in inventories ...............         (87,000)        (175,000)
            Decrease (increase) in prepaid expenses          45,000           (5,000)
           (Increase) decrease in other assets ....        (326,000)          38,000
           (Decrease) increase in accounts payable         (174,000)         277,000
           (Decrease) increase in accrued
             and other current liabilities ........         (57,000)          93,000
                                                        -----------      -----------
         Net cash provided by
           operating activities ...................         531,000        2,094,000
                                                        -----------      -----------

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

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997

                                                              (continued)

                                                             1996              1997
                                                        ----------       ----------
<S>                                                     <C>              <C>
CASH FLOWS FROM INVESTING ACTIVITIES:

         Net proceeds from sale of property,
           equipment, liquor licenses
           and management rights ..................          10,000           95,000
         Collections on notes and
           mortgages receivable ...................         290,000           56,000
         Purchase of property and equipment .......        (613,000)        (983,000)
         Investment in joint ventures .............        (120,000)        (428,000)
         Proceeds (adjustment) from sale
           of Pennsylvania limited partnership ....         156,000          (31,000)
                                                         ----------       ----------

         Net cash used in
           investing activities ...................        (277,000)      (1,291,000)
                                                         ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES:

         Borrowings of long-term debt .............            --            423,000
         Payments of long-term debt ...............         (60,000)         (33,000)
         Payments of obligations under
           capital leases .........................         (54,000)         (59,000)
         Payments of damages payable on
           terminated or rejected leases ..........        (241,000)        (248,000)
         Change in amount due to Pennsylvania
           limited partnership ....................         303,000         (348,000)
         Purchase of treasury stock ...............        (173,000)          (1,000)
         Proceeds from exercise of options ........          82,000             --
                                                         ----------       ----------

         Net cash used in
           financing activities ...................        (143,000)        (266,000)
                                                         ----------       ----------

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

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997

                                      (continued)


                                                               1996             1997
                                                            ----------      ----------
<S>                                                         <C>              <C>
NET INCREASE IN CASH AND
         CASH EQUIVALENTS ............................         111,000         537,000

CASH AND CASH EQUIVALENTS,
         BEGINNING OF YEAR ...........................         686,000         797,000
                                                            ----------      ----------
CASH AND CASH EQUIVALENTS,
         END OF YEAR .................................      $  797,000      $1,334,000
                                                            ==========      ==========


Supplemental disclosures of cash flow information:

         Cash paid during the year for:

           Interest ..................................      $  131,000      $  142,000
           Income taxes ..............................           6,000          18,000

         Noncash Activities:

           Retirement of fully depreciated
           equipment .................................      $   51,000      $  235,000

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

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

           Investment in joint ventures ..............      $     --        $  439,000

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

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


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

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997


(1)      NATURE OF OPERATIONS:

         Incorporated in 1959, Flanigan's Enterprises, Inc. ("Flanigan's" or the
"Company")  began  operations  in South  Florida  as a chain  of small  cocktail
lounges and package  liquor  stores.  At September  27,  1997,  the Company owns
and/or operates five full-service restaurants,  four package liquor stores, four
combination  full-service  restaurants and package liquor stores in Florida, and
one club in Georgia,  for which Flanigan's receives an owner's fee pursuant to a
management   agreement.   The  Company's  restaurants  are  operated  under  the
"Flanigan's  Seafood  Bar and Grill"  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 $1,114,000. 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.
<PAGE>
         As of September  27, 1997,  damages  payable on  terminated or rejected
leases, including imputed interest, mature as follows:


                Fiscal                                         Amount
                ------                                         ------

                  1998                                       $  300,000
                  1999                                          300,000
                  2000                                          300,000
                  2001                                          300,000
                  2002                                          120,000
                                                              ---------
                                                              1,320,000

                  Less - Amount representing
                           interest                            (107,000)
                                                             ---------- 
                                                             $1,213,000
                                                             ==========

(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 28, 1996 and September 27, 1997,  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.
<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  28, 1996 and  September  27,  1997,  consisted  of the
following:
<TABLE>
<CAPTION>
                                             Useful
                                             Lives                   1996                    1997
                                            ----------           -----------             -----------
<S>                                         <C>                  <C>                     <C>
         Land and land improvements            N/A               $      -                $   630,000

         Furniture and equipment            3 -7 years             4,548,000               4,839,000
         Leasehold interests and
           improvements                     See below              4,595,000               4,929,000
                                                                   ---------               ---------
                                                                   9,143,000              10,398,000
         Less - accumulated
           depreciation and
           amortization                                           (6,509,000)             (6,854,000)
                                                                   ---------               ---------
                                                                 $ 2,634,000             $ 3,544,000
                                                                 ===========             ===========
</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.  Upon adoption in its interim  financial
statements  for the quarter  ending  December  27,  1997,  the  Company  will be
required to restate previously  reported earnings per share data to conform with
the  requirements  of SFAS No.  128.  Had the  provisions  of SFAS No.  128 been
applicable to the  accompanying  consolidated  financial  statements,  basic and
diluted  earnings per share would have been $.87 and $.86 in 1996,  respectively
and $1.21 and $1.18 in 1997, respectively.
<PAGE>
         (h) Use of Estimates in the Preparation of Financial Statements-

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

         (i) 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 APB 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 1996 and 1997 are as follows:


                                              1996                       1997
                                            ---------                 ---------

         Federal                            $  1,000                 $   8,000
         State                                 5,000                     5,000
                                            --------                  --------
                                            $  6,000                 $  13,000
                                            ========                  ========

<PAGE>
         A reconciliation  of income tax computed at the statutory  federal rate
to income tax expense is as follows:
<TABLE>
<CAPTION>
                                                          1996                1997
                                                       ---------            ---------
<S>                                                    <C>                  <C>
Tax provision at the
  statutory rate of 34% ....................           $ 269,000            $ 376,000

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

Benefit of operating loss
  carryforward .............................            (251,000)            (383,000)

Other ......................................             (15,000)              17,000

                                                       ---------            ---------
                                                       $   6,000            $  13,000
                                                       =========            =========
</TABLE>
         In  fiscal  1991  and  prior   years,   the  Company   generated   loss
carryforwards  for both financial  statement and tax purposes.  At September 27,
1997, the available tax loss  carryforward is  approximately  $3,075,000,  which
expires between 2002 and 2006.

         In  addition  to net  operating  loss  carryforwards,  the  Company has
deferred tax assets amounting to  approximately  $427,000 at September 27, 1997,
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:

         Deferred tax item                                                      
<TABLE>
<CAPTION>
                                                     Tax Effect           Tax Effect
                                                        1996                  1997
                                                     -----------          ----------- 
<S>                                                  <C>                  <C>  
Book/tax differences in
  property and equipment ...................         $   275,000          $   268,000
Receivable allowances ......................              55,000               42,000
Leases, capitalized for books only .........              86,000               77,000
Accruals for potential
  uninsured claims .........................              54,000               34,000
Discount on damages payable ................             (54,000)             (37,000)
Other, net .................................             117,000               43,000
Net operating loss carryforward,
  tax effected .............................           1,428,000            1,045,000

Valuation allowance ........................          (1,961,000)          (1,472,000)
                                                     -----------          -----------
                                                     $     ---            $    --- 
                                                     ===========          ===========
</TABLE>
<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 1997 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>      
              1998                                    $  118,000                 $   1,312,000              $    740,000
              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
              Thereafter                                 233,000                     2,298,000                 1,491,000
                                                      ----------                 -------------               -----------
              Total                                   $  624,000                 $   6,427,000               $ 3,910,000
                                                                                 =============               ===========
              Less - Amount representing
                     interest                           (235,000)
                                                      ----------
              Present value of minimum
                    lease payments                    $  389,000
                                                      ==========
</TABLE>

         Total rent expense for all operating  leases  (including  those with an
initial  term of less  than one  year and net of  subleases)  was  $634,000  and
$622,000 in 1996 and 1997, 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 1996 and  1997.
Remaining rental commitments included in future minimum rental payments required
under these leases are approximately $656,000 as of September 27, 1997.
<PAGE>
(6)      RECEIVABLES:

         Receivables,  net of allowances for uncollectible  amounts and deferred
gains, consists of the following at September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>

                                                                                                    1996                     1997
                                                                                                 ---------                ----------
<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                                                                          $ 365,000                $ 129,000

         Notes and mortgages  receivable from related parties,  bearing interest
           at rates ranging from 10% to 14% and due
           in varying installments through 2001                                                      3,000                  221,000

         Various noninterest-bearing
           receivables currently due                                                               466,000                  124,000
                                                                                                 ---------                ---------
                                                                                                   834,000                  474,000

           Less  -         Deferred gains                                                         (109,000)                (102,000)

                           Allowance for
                             uncollectible amounts                                                (163,000)                (124,000)
                                                                                                 --------                 ---------
                                                                                                   562,000                  248,000
         Amount representing current portion                                                       486,000                   80,000
                                                                                                 ---------                ---------
                                                                                                 $  76,000                $ 168,000
                                                                                                 =========                =========
</TABLE>
         The majority of the notes and mortgages  receivable  represent  amounts
owed to the Company for store operations  which were sold.  Unless a significant
amount  of cash is  received  on the  sale,  a pro rata  portion  of the gain is
deferred and recognized only as payments on the notes and mortgages are received
by the Company. Any losses on sales of stores are recognized  currently.  During
fiscal 1996 and 1997, $114,000 and $6,000, respectively,  of deferred gains were
recognized on collections of such notes receivable.

         Receivables at September 27, 1997 mature as follows:

                           1998                                 $ 174,000
                           1999                                    41,000
                           2000                                    45,000
                           2001                                    47,000
                           2002                                    53,000
                           Thereafter                             114,000
                                                                ---------
                                                                $ 474,000
                                                                =========
(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.
<PAGE>
         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,  and 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:
<TABLE>
<CAPTION>


                                                        9/28/96               9/27/97
                                                      ----------            ----------
<S>                                                   <C>                   <C>
Current assets ...........................            $   66,000            $1,374,000
Noncurrent assets ........................               249,000             1,936,000
Current liabilities ......................                82,000               176,000
Noncurrent liabilities ...................                  --                 629,000
Revenues .................................             1,976,000             3,258,000
Income from operations ...................             1,254,000             2,118,000
Net income ...............................               135,000               419,000

</TABLE>
(8)      ACCRUED AND OTHER CURRENT LIABILITIES:

         Accrued  and other  current  liabilities  consist of the  following  at
September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>

                                                          1996                  1997
                                                      ----------            ---------- 
<S>                                                   <C>                   <C>
Property taxes ...........................            $   94,000            $   72,000
Salaries and wages .......................               253,000               340,000
Franchisee advance funds .................                67,000                57,000
Potential uninsured claims ...............               159,000               101,000
Investment in joint venture ..............                  --                 439,000
Other ....................................               247,000               295,000
                                                      ----------            ----------
                                                      $  820,000            $1,304,000
                                                      ==========            ==========
</TABLE>
         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.
<PAGE>
(9)      LONG-TERM DEBT:
<PAGE>
         Long-term  debt  consists of the  following at  September  28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
                                                                                                   1996                      1997
                                                                                                 ---------                 ---------
<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


         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


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

<CAPTION>

                                                        1996             1997
                                                     ---------        ----------
<S>                                                  <C>              <C>
Other notes payable, bearing interest at
  rates ranging from 7-1/4% to 10%, due in
  varying installments through 1997 ..........          21,000             --
                                                     ---------        ---------
                                                        21,000          896,000

Less - Current portion .......................         (16,000)         (84,000)
                                                     ---------        ---------
                                                     $   5,000        $ 812,000
                                                     =========        =========
</TABLE>
         Long-term debt at September 27, 1997 matures as follows:


                       Year                                     Amount
                       ----                                   ---------
                       1998                                   $ 84,000
                       1999                                     95,000
                       2000                                    106,000
                       2001                                     98,000
                       2002                                     94,000
                   Thereafter                                  419,000
                                                               -------
                                                              $896,000
                                                              ======== 

<PAGE>
(10)     COMMITMENTS AND CONTINGENCIES:

          Guarantees

         The Company is contingently  liable for annual rentals in the amount of
approximately   $556,000  at  September  27,  1997,  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, 1997, 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, 1998.  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 1996, no bonus was earned under the  Employment  Agreement.  For
fiscal  year 1997,  a bonus of $78,000 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.


(11)     FRANCHISE PROGRAM:

         At September  27,  1997,  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
<PAGE>
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.  The Company recorded management fee income related to this
agreement of $66,000 in 1996,  included as  "Management  fees from  Pennsylvania
limited partnership" in the accompanying 1996 consolidated statement of income.

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

(13)     STOCK OPTION PLANS:

         Employment Agreement - Chairman of the Board

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

         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.  The
options expire December 31, 2001.


         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.
<PAGE>
         At September  27,  1997,  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:
<TABLE>
<CAPTION>

                                                        1996               1997
                                                     --------           --------
<S>                                                   <C>                <C>
Outstanding at beginning of year ..........           191,632            146,540
Options granted ...........................            48,000             45,350
Options exercised .........................           (93,092)              --
                                                     --------           --------
Outstanding at end of year ................           146,540            191,890
                                                     --------           --------
Exercisable at end of year ................           146,540            191,890
</TABLE>


         Weighted  average option  exercise price  information  for fiscal years
1996 and 1997 is as follows:
<TABLE>
<CAPTION>

                                                             1996            1997
                                                           --------        --------
<S>                                                        <C>             <C>
Outstanding at beginning of year ...............           $   2.95        $   4.51
Granted during the year ........................               3.68            4.95
Exercised during the year ......................                .88         --
                                                           --------        --------
Outstanding at end of year .....................               4.51            4.61
                                                           --------        --------
Exercisable at end of year .....................           $   4.51        $   4.61
</TABLE>

         Significant  options  groups  outstanding  at  September  27,  1997 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                     46,450                     46,450             $  6.50                   5 yrs
          4/19/94                     52,000                     52,000             $  3.50                   2 yrs
         12/21/95                     30,000                     30,000             $  3.25                   3 yrs
          3/14/96                     18,000                     18,000             $  4.38                   4 yrs
          1/08/97                     45,350                     45,350             $  4.95                   4 yrs
</TABLE>
<PAGE>
         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  would have  decreased
accordingly.  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:
<TABLE>
<CAPTION>
                                                  1996                 1997
                                                --------             --------
<S>                                             <C>                  <C>
         Pro forma net income                   $    711             $  1,017
         Pro forma earnings
           per share (primary)                  $    .72             $   1.09
         Pro forma earnings
           per share (fully diluted)            $    .72             $   1.01
         Pro forma weighted average fair
           value of options granted             $   1.58             $   1.81
         Expected life (years)                         5                    5
         Risk-free interest rate                     5.5%                 5.9%
         Expected volatility                          39%                  39%
</TABLE>

         Because the SFAS No. 123 method of  accounting  has not been applied to
options  granted prior to January 1, 1995, the resulting pro forma  compensation
cost may not be representative of that to be expected in future years.

(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>


                                                              ---------------------------------------------------------
                                                                       1996                                1997
                                                              --------------------------         ------------------------
                                                                                 Fully                              Fully
                                                              Primary           Diluted          Primary           Diluted
                                                              -------           -------          -------           -------
<S>                                                           <C>              <C>              <C>              <C>  
         Weighted average shares outstanding                   897,000           897,000          907,000          907,000

         Incremental shares after
           application of the treasury
           stock method or modified
           treasury stock method, as
           applicable                                           87,000            89,000           28,000          102,000
                                                             ---------         ---------        ---------        ---------

         Shares used in calculation of
           net income per common share                         984,000           986,000          935,000        1,009,000
                                                             =========         =========        =========        ==========
</TABLE>
<PAGE>
(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  1996 and  1997,  the  Company  incurred  legal  fees of
approximately $96,000 (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.

(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. The restaurant  operations include bar sales from cocktail lounges
(in 1996), restaurant bar sales and food sales.

         Information  concerning the revenues and operating income for the years
ended September 28, 1996 and September 27, 1997, 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.
<PAGE>
<TABLE>
<CAPTION>

                                                    1996                 1997
                                               ------------        ------------
<S>                                            <C>                 <C>
OPERATING REVENUES:
         Retail package stores .........       $  6,112,000        $  6,681,000
         Restaurants ...................         13,042,000          12,535,000
         Other revenues ................          1,030,000           1,104,000
                                               ------------        ------------
Total operating revenues ...............       $ 20,184,000        $ 20,320,000
                                               ============        ============

INCOME FROM OPERATIONS RECONCILED TO
INCOME BEFORE INCOME TAXES:
Operating income:
         Retail package stores .........       $    303,000        $    448,000
         Restaurants ...................          1,220,000           1,224,000
                                               ------------        ------------
                                                  1,523,000           1,672,000
         Corporate expenses,
           net of other revenues .......         (1,070,000)           (620,000)
                                               ------------        ------------
Operating income .......................            453,000           1,052,000
         Interest expense ..............           (131,000)           (101,000)
         Other .........................            470,000             155,000
                                               ------------        ------------
Income before income taxes .............       $    792,000        $  1,106,000
                                               ============        ============

IDENTIFIABLE ASSETS:
         Retail package stores .........       $  1,622,000        $  1,944,000
         Restaurants ...................          2,260,000           2,969,000
                                               ------------        ------------
                                                  3,882,000           4,913,000
         Corporate .....................          2,427,000           3,469,000
                                               ------------        ------------
Consolidated totals ....................       $  6,309,000        $  8,382,000
                                               ============        ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                        1996             1997
                                                    ----------        ----------
<S>                                                 <C>               <C>
CAPITAL EXPENDITURES:
         Retail package stores .............        $  199,000        $   85,000
         Restaurants .......................           350,000         1,288,000
                                                    ----------        ----------
                                                       549,000         1,373,000
         Corporate .........................            64,000            95,000
                                                    ----------        ----------
Total capital expenditures .................        $  613,000        $1,468,000
                                                    ==========        ==========


DEPRECIATION AND AMORTIZATION:
         Retail package stores .............        $  114,000        $   97,000
         Restaurants .......................           428,000           416,000
                                                    ----------        ----------
                                                       542,000           513,000
         Corporate .........................           117,000           106,000
                                                    ----------        ----------
Total depreciation and amortization ........        $  659,000        $  619,000
                                                    ==========        ==========
</TABLE>

(17)     OTHER, NET:

         Other,  net in the  consolidated  statements  of income  consist of the
         following  for the years ended  September  28, 1996 and  September  27,
         1997:
<TABLE>
<CAPTION>

                                                       1996              1997
                                                    ---------         ---------
<S>                                                 <C>               <C>
Non-franchise related rental income ........        $  32,000         $  32,000
Loss on retirement of fixed assets .........          (79,000)          (19,000)
Gain on repossession of store ..............           50,000              --
Gain on sale of liquor licenses ............           26,000              --
Insurance recovery .........................           53,000            13,000
Adjustment on sale of Pennsylvania
         limited partnership ...............             --             (31,000)
Miscellaneous ..............................           42,000             5,000
                                                    ---------         ---------
                                                    $ 124,000         $    --
                                                    =========         =========
</TABLE>
(18)     SUBSEQUENT EVENTS:

         In December 1997, the Company borrowed  $500,000 from Barnett Bank. The
loan is 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,  commencing  March 31, 1998,
with interest payable monthly. The Company has pledged twelve liquor licenses as
collateral.
<PAGE>
         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.
Subsequent  to the end of fiscal 1997,  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.

         Subsequent to yearend the Company received written  notification from a
landlord that an oral month to month lease  agreement for a package liquor store
the Company is currently operating,  will terminate as of December 31, 1997. The
Company  does not expect to  recognize  any gain or loss on the  closing of this
store.
<PAGE>
<TABLE>
<CAPTION>
                                                                                                   SCHEDULE II
                                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                          FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997



         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 28, 1996
         Allowance for uncollectible
           notes and mortgages receivable        $ 291,000        $  104,000        $ (232,000)      $ 163,000
                                                 =========        ==========        ==========       =========

FOR THE YEAR ENDED SEPTEMBER 27, 1997
         Allowance for uncollectible
           notes and mortgages receivable        $ 163,000        $   21,000        $ (60,000)       $ 124,000
                                                 =========        ==========        =========        =========
</TABLE>