FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                          Washington, DC      20549

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

                 For the quarterly period ended March 28, 2004

                                     OR

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

              For transition period from            to
                                         ---------     --------
                       Commission file number  000-20040
                       ---------------------------------
                             THE KRYSTAL COMPANY
-----------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                 TENNESSEE                        62-0264140
                 ---------                        ----------
      (State or other jurisdiction of      (IRS Employer identification
       incorporation or organization)       Number)

                  One Union Square, Chattanooga, TN   37402
-----------------------------------------------------------------------------
         (Address of principal executive offices, including zip code)

                                (423) 757-1550
-----------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

    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 Registrant was required to file
    such reports), and (2) has been subject to such filing requirements
    for the past 90 days.

               YES  X                     NO
                   ----                       ----

    Indicate by check mark whether the registrant is an accelerated filer
    (as defined in Rule 12b-2 of The Exchange Act).

               YES                        NO   X
                   ----                       ----

This report is filed by the Company pursuant to Section 15(d) of the Securities
Exchange Act of 1934.  The Company has 100 shares of common stock outstanding
held of record by Port Royal Holdings, Inc. as of March 28, 2004.

                             THE KRYSTAL COMPANY
                             -------------------
                                March 28, 2004
                                --------------
                        PART I.  FINANCIAL INFORMATION
                        ------------------------------

The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading.  These condensed financial statements should be read in
conjunction with the Company's latest annual report on Form 10-K.

In the opinion of management of the Company, all normal and recurring
adjustments necessary to present fairly (1) the financial position of The
Krystal Company and Subsidiaries as of March 28, 2004 and December 28, 2003,
and (2) the results of their operations and cash flows for the three months
ended March 28, 2004 and March 30, 2003 have been included.  The results of
operations for the interim period ended March 28, 2004 are not necessarily
indicative of the results for the full year.

Certain written and oral statements made by or on behalf of the Company may
constitute "forward-looking" statements as defined under the Private
Securities Litigation Reform Act of 1995 (the "PSLRA").  The PSLRA contains a
safe harbor in making such disclosures.  These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from the Company's historical experience and its present
expectations or projections, including the following: any statements regarding
future sales or expenses, any statements regarding the continuation of
historical trends and any statements regarding the Company's future liquidity
and capital resources needs.  Without limiting the foregoing, the words
"believe", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements.  These risks and
uncertainties include, but are not limited to, unanticipated economic changes,
interest rate movements, changes in governmental policies, the impact of
competition, changes in consumer tastes, increases in costs for food and/or
labor, the availability and adequate supply of hourly-paid employees, the
ability of the Company to attract and retain suitable franchisees, the rate of
growth of new franchise restaurant openings, the Company's ability to obtain
funding sufficient to meet operational requirements and capital expenditures
and the impact of governmental regulations.  The Company cautions that such
factors are not exclusive.  Caution should be taken not to place undue reliance
on any such forward-looking statements since such statements speak only as of
the date of the making of such statements and are based on certain expectations
and estimates of the Company which are subject to risks and changes in
circumstances that are not within the Company's control.  The Company does
not undertake to update forward-looking statements other than as required by
law.  The information provided herein should be read in conjunction with
information provided in the Company's Form 10-K for the fiscal year ended
December 28, 2003.


         PART I. FINANCIAL INFORMATION
         -----------------------------

Item I.  Financial Statements

                THE KRYSTAL COMPANY AND SUBSIDIARIES
                ------------------------------------
                    CONSOLIDATED BALANCE SHEETS
                    ---------------------------
                          (In thousands)


                                              March 28,    December 28,
                                                2004          2003
                                             ---------     ----------
ASSETS                                      (Unaudited)
------
CURRENT ASSETS:
   Cash and temporary investments            $  6,652       $  2,771
   Receivables, net                             1,228          1,518
   Inventories                                  2,383          2,589
   Deferred income taxes                        5,100          5,100
   Prepayments and other                          834            912
                                             --------       --------
     Total current assets                      16,197         12,890
                                             --------       --------

PROPERTY, BUILDINGS, AND EQUIPMENT, net        90,752         91,579
                                             --------       --------
LEASED PROPERTIES, net                          4,249          4,412
                                             --------       --------
OTHER ASSETS:
   Goodwill                                    36,186         36,186
   Deferred financing costs, net                1,035          1,182
   Other                                          646            668
                                             --------       --------
     Total other assets                        37,867         38,036
                                             --------       --------
       TOTAL ASSETS                          $149,065       $146,917
                                             ========       ========

See accompanying notes to consolidated condensed financial statements.















                THE KRYSTAL COMPANY AND SUBSIDIARIES
                ------------------------------------
               CONSOLIDATED BALANCE SHEETS (CONTINUED)
               ---------------------------------------
                         (In thousands) (Unaudited)

                                              March 28,     December 28,
                                                2004           2003
LIABILITIES AND SHAREHOLDER'S EQUITY        -----------     ----------
------------------------------------       (Unaudited)

CURRENT LIABILITIES:
   Accounts payable                          $  4,422       $  5,250
   Accrued liabilities                         24,945         22,857
   Current portion of capital
     lease obligations                            648            687
                                             --------       --------
     Total current liabilities                 30,015         28,794
                                             --------       --------

LONG-TERM DEBT, excluding current portion      60,980         60,980
                                             --------       --------
CAPITAL LEASE OBLIGATIONS, excluding
   current portion                              4,565          4,697
                                             --------       --------
DEFERRED INCOME TAXES                           8,279          8,506
                                             --------       --------
OTHER LONG-TERM LIABILITIES                     7,746          7,903
                                             --------       --------
SHAREHOLDER'S EQUITY:
   Common stock, without par value;
     100 shares authorized, issued
     and outstanding at March 28, 2004,
     and at December 28, 2003                  35,000         35,000
   Accumulated other comprehensive loss       ( 6,576)       ( 6,576)
   Retained earnings                            9,056          7,613
                                             --------       --------
     Total shareholder's equity                37,480         36,037
                                             --------       --------
       TOTAL LIABILITIES AND
         SHAREHOLDER'S EQUITY                $149,065       $146,917
                                             ========       ========

See accompanying notes to consolidated condensed financial statements.










                     THE KRYSTAL COMPANY AND SUBSIDIARIES
                     ------------------------------------
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     -------------------------------------
                           (In thousands) (Unaudited)

                                          For The Three Months Ended
                                          --------------------------
                                             March 28,   March 30,
                                               2004        2003
                                             --------    --------
REVENUES:
  Restaurant sales                           $ 61,968    $ 56,646
  Franchise fees                                  119         293
  Royalties                                     1,693       1,639
                                              -------     -------
                                               63,780      58,578
                                              -------     -------
COST AND OTHER EXPENSES (INCOME):
  Cost of restaurant sales                     50,222      46,962
  Advertising expense                           2,603       2,374
  Depreciation and amortization
    expenses                                    2,613       2,792
  General and administrative
    expenses                                    4,503       4,943
  (Gain)loss on sale of assets                     80      (   39)
  Other income, net                            (  232)     (  122)
                                              -------     -------
                                               59,789      56,910
                                              -------     -------
OPERATING INCOME                                3,991       1,668
INTEREST EXPENSE, net                          (1,811)     (1,999)
                                              -------     -------
INCOME (LOSS) BEFORE INCOME TAXES               2,180      (  331)

(PROVISION FOR)BENEFIT FROM
INCOME TAXES                                   (  737)         65
                                              -------     -------
NET INCOME (LOSS)                            $  1,443    $ (  266)
                                              =======     =======
  See accompanying notes to consolidated condensed financial statements.








                    THE KRYSTAL COMPANY AND SUBSIDIARIES
                    ------------------------------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                    -------------------------------------
                            (In thousands) (Unaudited)

                                                  For The Three Months Ended
                                                 -----------------------------
                                                   March 28,      March 30,
                                                     2004           2003
                                                  ---------       ---------
OPERATING ACTIVITIES:
  Net income (loss)                               $  1,443        $(   266)
  Adjustments to reconcile net income (loss)
  to net cash provided by (used in)
  operating activities-
    Depreciation and amortization                    2,613           2,792
    Change in deferred taxes                       (   227)        (   470)
    (Gain) loss on sale of assets                       80         (    39)
  Changes in operating assets and liabilities:
    Receivables, net                                   290             389
    Inventories                                        206              40
    Prepayments and other                               78             130
    Accounts payable                               (   828)        ( 2,462)
    Accrued liabilities                              2,088         ( 1,438)
    Other, net                                          32             443
                                                  --------        --------
      Net cash provided by (used in)
        operating activities                         5,775         (   881)
                                                  --------        --------
INVESTING ACTIVITIES:
    Additions to property, buildings,
      and equipment                                ( 1,760)        ( 2,435)
    Proceeds from sale of property,
      buildings, and equipment                          37           1,829
                                                  --------         -------
      Net cash used in investing activities        ( 1,723)        (   606)
                                                  --------         -------
FINANCING ACTIVITIES:
    Net payments under revolving
      credit facility                                  --          (   312)
    Principal payments of
      capital lease obligations                    (   171)        (   306)
                                                  --------         -------
      Net cash used in financing activities        (   171)        (   618)
                                                  --------        --------
NET INCREASE (DECREASE) IN CASH AND
  TEMPORARY INVESTMENTS                              3,881         ( 2,105)

CASH AND TEMPORARY INVESTMENTS,
   beginning of period                               2,771          10,690
                                                 ---------         -------
CASH AND TEMPORARY INVESTMENTS,
   end of period                                  $  6,652        $  8,585
                                                   =======         =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Cash paid during the period for:
     Interest                                     $    104        $    301
                                                   =======         =======
     Income taxes                                 $    351        $    677
                                                   =======         =======

 See accompanying notes to consolidated condensed financial statements.




                   THE KRYSTAL COMPANY AND SUBSIDIARIES
                   ------------------------------------
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
       ----------------------------------------------------------------

A.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Activities --

The Krystal Company ("Krystal") (a Tennessee corporation) is engaged primarily
in the development, operation and franchising of quick-service restaurants in
the Southeastern United States.  The Company recognizes revenues from
restaurant sales upon delivery of the product to the customer.

Principles of Consolidation --

The accompanying consolidated financial statements include the accounts of
Krystal and its subsidiaries (hereinafter referred to collectively as "the
Company").  Certain advertising cooperatives in which the Company has a
controlling interest are consolidated with the Company.  All significant
intercompany balances and transactions have been eliminated.  The Company
is wholly-owned by Port Royal Holdings, Inc.

Cash and temporary investments --

The Company considers repurchase agreements and other temporary cash
investments with a maturity of three months or less to be temporary
investments.

Accounts Receivable and the Allowance for Doubtful Accounts --

The Company's accounts receivable consist primarily of amounts due from
franchisees for royalties, advertising and purchases.  The Company monitors
the amounts due from franchisees continually and maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of any of
the Company's franchisees to make required payments.  This estimate is based
on the Company's assessment of the collectibility of specific accounts
as well as a general allowance based on historical trends, the financial
condition of the franchisees and the aging of the receivables.  Accounts
are charged off when deemed uncollectible.   The Company has good
relationships with its franchisees and high collection rates.  The
Company generally does not require collateral.  If the future financial
condition of the Company's franchisees were to deteriorate, resulting in
their inability to make their required payments, increases in the
allowance for doubtful accounts may be required.  The allowance for doubtful
accounts was $754,000 at March 28, 2004 and $956,000 at March 30, 2003.

Franchise and License Agreements --

Franchise or license agreements are available for single Krystal restaurants
and multi-unit development agreements are available for the development of
several Krystal restaurants over a specified period of time.  The multi-unit
development agreement establishes the number of restaurants the franchisee or
licensee is to construct and open in the franchised area during the term of
the agreement.  At March 28, 2004, there were 177 franchised or licensed
restaurants and at March 30, 2003, there were 180 franchised or licensed
restaurants.

Franchisees and licensees are required to pay the Company an initial franchise
or license fee plus a weekly royalty and service fee of 4.5% to 6.0% of
the restaurants' gross receipts, depending on the duration of the franchise
agreement.  The initial franchise and license fees are recorded as income when
the related restaurants begin operations.  Royalty and service fees, which are
based on restaurant sales of franchisees and licensees, are recognized as
earned.  Franchise fees received prior to the opening of the restaurant are
deferred and included in accrued liabilities on the consolidated balance
sheet.  At March 28, 2004 and March 30, 2003, total deferred franchise
and license fees were approximately $681,000 and $1,006,000, respectively.

Advertising --

The Company incurs expenditures for television, radio and print advertising to
support its products.  This advertising maintains the important brand
franchise with the consuming public.  The Company allocates a
percentage of the necessary supporting advertising expenses to each dollar of
sales by charging a percentage of sales on an interim basis based upon
anticipated annual sales and advertising expenditures (in accordance with
Accounting Principles Board Opinion No. 28) and adjusting that accrual to
the actual expenses incurred at the end of the year.


Fair Market Value of Financial Instruments --

The carrying amount reflected in the consolidated balance sheets for cash and
temporary investments, accounts receivable and accounts payable approximate
their respective fair values based on the short-term nature of these
instruments.

Benefit Plans --

The determination of obligations and expenses under the Company's retirement
and postretirement benefit plans is dependent on the selection of certain
assumptions used by actuaries in calculating such amounts.  Those assumptions
include among others, the discount rate, expected return on plan assets and the
expected rates of increase in employee compensation and health care costs.  In
accordance with accounting principles generally accepted in the United States,
actual results that differ from assumptions are accumulated and amortized over
future periods and, therefore, generally affect our recognized expense and
the recorded obligation in such periods.  Significant differences in actual
experience or significant changes in the assumptions used may materially
affect the pension and postretirement obligations and future expenses.

On September 30, 2003, the Company amended its retirement plan to eliminate
future accrual of additional pension benefits for active employees.  The
amendment, resulted in a curtailment gain of $1.7 million.  The curtailment
gain was recorded in the Company's fiscal fourth quarter ending
December 28, 2003.

Effective with the change in the retirement plan, the Company established a
defined contribution employee benefit plan subject to IRS code 401(k).  This
plan covers substantially all employees of the Company.  Participants may
contribute a percentage of their compensation as allowed under applicable
laws.  The plan provides for a matching contribution of up to 3.0% of the
employees' salary by the Company.  Participants are 100% vested in participant
contributions and become vested in Company matching contributions over a
period of six years.

The following table represents a summary of the components of net annual
pension cost for the three months ended March 28, 2004 (in thousands).


                                        Three months ended
                                        ------------------
                                    (a)March 28,  March 30,
                                         2004        2003
                                       --------   --------
  Service costs (net of employee
    contribution)                       $   0     $  280
  Interest cost                           575        593
  Expected return on assets              (700)      (656)
  Amortization of unrecognized
    prior service cost                      0       ( 59)
  Amortization of unrecognized
    net loss (gain)                       225        385
                                        -----     ------
  Net annual pension cost               $ 100     $  543
                                        =====     ======

(a) March 28, 2004 expense is an estimate based on prior year data.  Actual
    expense will be determined by June 30, 2004.

Accumulated Other Comprehensive Loss --

Accumulated other comprehensive loss is comprised of a minimum pension
liability of $6.6 million, net of taxes, at March 28, 2004 and
December 28, 2003.

Stock Compensation --

The Company has elected to follow the intrinsic value method of accounting
for stock-based compensation under APB Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"), and related interpretations.
Because the exercise price on the date of grant was equal to the fair
market value of the stock, no compensation expense has been recognized
under ABP No. 25.

Had compensation cost been determined in accordance with SFAS No. 123,
the Company's net income (loss) would have been adjusted to the pro forma
amounts indicated below:

                              The three months ended
                              ----------------------
                              March 28,   March 30,
                                2004         2003
                               --------    --------
                                 (In thousands)
 Net Income (Loss):
  As reported                  $ 1,443    $  ( 266)
  Stock compensation expense     (  19)      (  19)
                               -------     -------
  Pro forma                    $ 1,424    $ ( 285)
                               =======     =======

Use of Estimates --

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 and the differences could be material.

B.  RECENT ACCOUNTING PRONOUNCEMENTS -

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003.  For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after December 15, 2003.  The Company
adopted FIN 46 as of March 28, 2004 and the adoption did not have any impact
on the Company's financial statements.

In December 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 132R, "Employers' Disclosures about Pensions and Other
Postretirement Benefits."  This statement retains the disclosure requirements
contained in SFAS No. 132, which it replaces.  SFAS 132R also requires
additional disclosures about the assets, obligations, cash flows and net
periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans.  Those disclosures include information
describing the types of plan assets, investment strategy, measurement dates,
plan obligations, cash flows and components of net periodic benefit cost
recognized during interim periods.  This statement is effective for financial
statements with fiscal years ending after December 15, 2003.  The interim-
period disclosures required by this statement are effective for interim
periods beginning after December 15, 2003.  The Company adopted the
disclosure provisions of SFAS 132R in fiscal 2003.

C. SEGMENT REPORTING

The Company operates in two defined reportable segments: restaurants and
franchising.  The restaurant segment consists of the operations of all
Company-owned restaurants and derives its revenues from retail sales of food
products to the general public.  The franchising segment consists of franchise
sales and support activities and derives its revenues from fees related to the
sales of franchise and development agreements and collection of royalties from
franchisees of the Krystal brand.  All of the Company's revenues are derived
within the United States.

The accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies.


Segment information is as follows:

                                                    For the Three Months Ended
------------------------------------------------------------------------------
                                                     March 28,     March 30,
(in thousands)                                         2004          2003
------------------------------------------------------------------------------
Revenues:
   Restaurants                                       $ 61,968       $ 56,646
   Franchising                                          1,812          1,932
-----------------------------------------------------------------------------
Total segment revenues                               $ 63,780       $ 58,578
=============================================================================

Depreciation and Amortization:
   Restaurants                                       $  2,600       $  2,751
   Franchising                                              1              1
-----------------------------------------------------------------------------
Total segment depreciation and amortization          $  2,601       $  2,752
=============================================================================

Interest expense:
   Restaurant                                        $  1,819       $  2,024
   Franchising                                              0              0
-----------------------------------------------------------------------------
Total segment interest expense                       $  1,819       $  2,024
=============================================================================

Operating income:
   Restaurant                                        $  2,604       $    210
   Franchising                                          1,247          1,335
----------------------------------------------------------------------------
Total segment operating income                       $  3,851       $  1,545
============================================================================

                                                     March 28,    December 28,
                                                       2004          2003
-----------------------------------------------------------------------------
Capital Expenditures:
   Restaurants                                       $  1,749       $ 10,760
   Franchising                                             11              2
-----------------------------------------------------------------------------
Total segment capital expenditures                   $  1,760       $ 10,762
=============================================================================

Total Assets:
   Restaurants                                       $146,532       $144,246
   Franchising                                          1,005          1,130
-----------------------------------------------------------------------------
Total segment assets                                 $147,537       $145,376
=============================================================================

A reconciliation of segment depreciation and
  amortization to consolidated depreciation and
  amortization is as follows:
-------------------------------------------------------------------------------
                                                     March 28,      March 30,
                                                       2004            2003
-------------------------------------------------------------------------------
Segment depreciation and amortization                $  2,601       $  2,752
Unreported segments (1)                                    12             40
-------------------------------------------------------------------------------
Total consolidated depreciation and amortization     $  2,613       $  2,792
===============================================================================
A reconciliation of segment operating
  income to total operating income is as follows:

Operating income:
   Restaurant                                        $  2,604       $    210
   Franchising                                          1,247          1,335
   Unreported segments (1)                                140            123
----------------------------------------------------------------------------
Total operating income                               $  3,991       $  1,668
============================================================================

A reconciliation of segment total assets to
  consolidated total assets is as follows:
-------------------------------------------------------------------------------
                                                     March 28,    December 28,
                                                       2004           2003
-------------------------------------------------------------------------------
Total segment assets                                 $147,537       $145,376
Unreported segments (1)                                 1,528          1,541
-------------------------------------------------------------------------------
Total consolidated assets                            $149,065       $146,917
===============================================================================

(1)  Unreported segments do not meet the quantitative thresholds for segment
reporting.

D.   INDEBTEDNESS

Senior Secured Credit Agreement--

0n June 30,2003, the Company amended its existing $25.0 million credit
agreement (the "Credit Facility").  The amended Credit Facility,
which provides for borrowing up to $25.0 million, is made up of $19.85 million
in available credit and $5.15 million in outstanding letters of credit.  The
amendment eliminated the term loan feature and modified certain other terms and
conditions.  The existing term loan balance at September 28, 2003 was
repaid in full with an initial borrowing under the line of credit.  The
prepayment of the $13.3 million term loan portion resulted in a prepayment
penalty of $533,000 and the retirement of $164,000 of deferred financing
costs, which were charged to expense in the quarter ended September 28, 2003.
There was no amount outstanding under the facility at March 28, 2004.  The
amended Credit Facility matures June 29, 2004 and the Company expects to
refinance or renew the Credit Facility.  See Note F below for subsequent events.

Borrowings under the amended Credit Facility bear interest rates, at the
option of the Company, and depending on the certain financial covenants,
equal to either (a) the greater of the prime rate, or the federal
funds rate plus 0.5%, plus a margin (which ranges from 0.00% to 1.0%) or
(b) the rate offered in the Eurodollar market for amounts and periods
comparable to the relevant loan, plus a margin (which ranges from 1.50%
to 2.75% and is determined by certain financial covenants.

The amended Credit Facility contains restrictive covenants including, but not
limited to (a) the Company's required maintenance of a minimum amount of
tangible net worth; (b) the Company's required maintenance of certain levels
of funded debt coverage; (c) limitations regarding additional indebtedness;
(d) the Company's required maintenance of a minimum amount of fixed charges
coverage; (e) limitations regarding consolidated capital expenditures and
(f) limitations regarding liens on assets.  The Company was in compliance with
or has received waivers on all covenants at March 28, 2004.

Essentially all assets of the Company are pledged as collateral on the
Credit Facility.  Additionally, the Credit Facility is guaranteed by Port
Royal through a secured pledge of all of the Company's common stock held by
Port Royal and the common stock of each existing and future subsidiary of the
Company.

Senior Notes--

In September 1997, the Company issued $100.0 million in unsecured 10.25% senior
notes ("the Notes") which mature on October 1, 2007.  The Notes pay interest
semi-annually on April 1 and October 1 of each year.  The Notes are redeemable
at the option of the Company at prices decreasing from 105 1/8% of the
principal amount on April 1, 2002 to 100% of the principal amount on
April 1, 2005.  Additionally, upon a change of control of the Company, the
holders of the Notes will have the right to require the Company to purchase
all or a portion of the Notes at a price equal to 101% of the original
principal amount. The proceeds of the Notes were used to fund the acquisition
of the Company by Port Royal.

During fiscal 2002, the Company purchased and retired $39.0 million aggregate
par value of its Notes.

E.   COMMITMENTS AND CONTINGENCIES

The Company is a party to various legal proceedings incidental to its
business.  The ultimate disposition of these matters is not presently
determinable but will not, in the opinion of management and the Company's
legal counsel, have a material adverse effect on the Company's financial
condition or results of operations.

F.   SUBSEQUENT EVENTS

On May 10, 2004, the Company announced it has commenced a tender offer for
all of its Notes and its intention to refinance its Credit Facility.  The
funds for the tender offer and refinancing are expected to be obtained through
a new $90 million senior secured credit facility.  The proposed transactions
are subject to the successful completion of syndication efforts, definitive
transaction documents and customary closing conditions.  The closing of the
transaction is expected to occur during the second quarter of 2004. If the
foregoing refinancing transaction is completed, the Company would not have
any outstanding Notes and would seek to terminate its obligation to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

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

The following discussion should be read in conjunction with the consolidated
financial statements of the Company (including the notes thereto) contained
elsewhere in this report.

Executive Overview --

The Company is an owner, operator and franchisor of quick-service
restaurants.  The Company's revenues are derived primarily from sales by
Company-owned restaurants.  Royalties and franchise fees from franchisees
have been a relatively small, but growing, portion of the Company's revenues.

Cost of restaurant sales is comprised of food and paper costs, labor and all
other restaurant costs for Company-owned restaurants.  Depreciation and
amortization and general and administrative expenses relate primarily to
Company owned restaurants and to the Company's franchise sales
and support functions.  Other income and expense include income from the
Company's Realty Division for the net of rent income and rent expenses for
the units subleased to a third party.

The Company's restaurant strategy is to improve restaurant operations through
a focused approach to critical customer issues in the Company's restaurants.
In 2003, the Company launched a program targeted at the fundamentals of
restaurant operations: hiring good people, offering quick, efficient and
courteous service, serving a meaningful variety of the best foods obtainable,
properly cooked, and operating spotlessly clean restaurants.

The Company's franchise strategy is to continue to develop our current markets,
as well as explore and support introduction into pioneer markets in Texas,
North Carolina, South Carolina, Virginia and South Florida.  Management
expects the development of new franchise restaurants in pioneer markets
will make up approximately half of total new franchise units.

In 2003 and 2002, the Company entered into a series of transactions designed
to reduce debt, increase flexibility and strengthen the Company's financial
condition.  The net proceeds from these transactions were primarily used to
repurchase a portion of the Company's Senior Notes and other debt and capital
leases.

The following table reflects certain key operating statistics which impact the
Company's financial results:

                             KEY OPERATING STATISTICS

                   (Dollars in thousands, except average check)

                                                For The Three
                                                Months Ended
                                            --------------------
                                            March 28,   March 30,
                                              2004        2003
                                            ---------   --------- -
RESTAURANT SALES:
  Company owned                             $ 61,968   $ 56,646
  Franchise                                   35,521     34,359
                                            --------   --------
SYSTEMWIDE RESTAURANT SALES                 $ 97,489   $ 91,005
  Percent change                                7.13%   (  4.03%)

COMPANY RESTAURANT STATISTICS:

  Number of restaurants                          245        245

  Restaurant Sales                          $ 61,968   $ 56,646
    Percent change                              9.40%     (7.13%)

  Percent change in same restaurant sales       9.76%     (6.93%)

Selected components are --

Cost of restaurant sales                    $ 50,222   $ 46,962
    As a percent of restaurant sales           81.05%     82.90%

  Food and paper cost                       $ 18,749   $ 16,618
    As a percent of restaurant sales           30.26%     29.34%

  Direct labor                              $ 13,150   $ 12,442
    As a percent of restaurant sales           21.22%     21.96%

  Other labor costs                         $  4,905   $  4,441
    As a percent of restaurant sales            7.92%      7.84%

  Average check                             $   4.91   $   4.70
    Percent change                              4.47%      0.00%

FRANCHISE SYSTEM STATISTICS:

  Number of restaurants                          177        180

  Restaurant Sales                          $ 35,521   $ 34,359
    Percent change                              3.38%      1.57%

  Percent change in same restaurant sales       4.23%     (6.41%)

  Average check                             $   5.15   $   5.01
    Percent change                              2.79%      0.40%



          Comparison of the Three Months Ended March 28, 2004
          ---------------------------------------------------
               to the Three Months Ended March 30, 2003
               ----------------------------------------


                            RESULTS OF OPERATIONS
                            ---------------------

Total system wide Krystal restaurant sales, which included restaurant sales of
$62.0 million for Company-owned units and $35.5 million for franchised units,
for the three months ended March 28, 2004 increased 7.1% to $97.5 million
compared to $91.0 million for the same period in 2003.

Total Company revenues increased $5.2 million to $63.8 million in the three
months ended March 28, 2004 compared to the same period in 2003.  The
increase was primarily due to a $5.3 million increase in restaurant sales,
offset somewhat by a decrease of $120,000 in franchise fees and royalties.
The increase in restaurant sales was primarily due to a 9.76% increase in same
restaurant sales for the period.  The Company operated 245 restaurants at
March 28, 2004 and at March 30, 2003.

Company-owned same restaurant sales increased 9.76%, compared to the same
period in 2003.  The increase was primarily attributable to an increase in
restaurant volume and a 2.18% price increase for the three months ended
March 28, 2004 compared to the same period in 2003.  The average customer
check for Company owned restaurants was $4.91 for the three months ended
March 28, 2004 compared to $4.70 for the same period in 2003.

Franchise fee income was $119,000 in the three months ended March 28, 2004
compared to $293,000 for the same period in 2003.  Franchise fees are
recorded upon the opening of franchise restaurants and upon the transfer,
extension, renewal or default of franchise agreements.  The Company's
franchisees opened two and five franchised restaurants in the three months
ended March 28, 2004 and March 30, 2003, respectively.  The Company recognized
$37,500 and $80,000 in franchise fees upon termination of a multi-unit
development agreement in the three months ended March 28, 2004 and
March 30, 2003, respectively.  Royalty revenue increased 3.3% to $1.7 million
in the three months ended March 28, 2004 from $1.6 million in the same period
in 2003.  The increase in royalty revenue, which is earned based on a
percentage of sales by franchise restaurants, was due to a 3.4% increase in
franchise restaurant sales in the three months ended March 28, 2004 compared
to the same period in 2003.

Cost of restaurant sales was $50.2 million for the three months ended
March 28, 2004 compared to $47.0 million for the same period in 2003.
Food and paper costs as a percent of restaurant sales increased to 30.3% in
the three months ended March 28, 2004 from 29.3% in the same period in
2003.  The increase in food and paper costs as a percent of restaurant sales
resulted primarily from increases in beef prices offset somewhat by 2.18% menu
price increases.  Direct labor as a percent of restaurant sales decreased to
21.22% for the three months ended March 28, 2004 from 21.96% for the same
period in 2003.  Average hourly wage was $6.26 for the three months ended
March 28, 2004 and $6.33 for the same period in 2003.

Advertising expense increased 9.6% to $2.6 million in the three months ended
March 28, 2004 from $2.4 million in the same period in fiscal 2003.
Advertising expense is accrued based on 4.2% of restaurant sales and will
vary with the volume of such sales. The Company is a member of advertising
cooperative arrangements with franchise operators in certain markets where
franchise operators have a significant presence.  Advertising cooperatives
are consolidated with the Company in those markets where the Company has a
controlling interest in the cooperative.

Depreciation and amortization expenses decreased $179,000, or 6.4%, to $2.6
million in the three months ended March 28, 2004 compared to the same
period in 2003.

General and administrative expenses for the three months ended March 28, 2004
were $4.5 million compared to $4.9 million for the same period in fiscal 2003.
The decrease resulted primarily from a $365,000 decrease in expense associated
with the Company's defined and postretirement benefit plans and employee
severance expenses in the three months ended March 28, 2004 compared to the
same period in 2003.  The decrease in expense associated with the defined
benefit plan was primarily a result of a plan amendment and the decrease in
postretirement benefit plan expense was primarily a result of a plan
curtailment.

Other income, net increased $110,000 or 90.2%, to $232,000 in the three months
ended March 28, 2004 compared to $122,000 in the same period in 2003.  This
change resulted primarily from a payment received by the Company in the first
quarter of 2004 in exchange for the early termination of a lease under which
the Company leased certain real property to a third party.

Interest expense, net of interest income, decreased $188,000 to $1.8 million in
the three months ended March 28, 2004 from $2.0 million in the same period
in 2003.  This decrease resulted primarily from the Company's lower borrowings
under its Credit Facility during the quarter ended March 28, 2004 compared to
the same period in 2003.

The Company's income tax expense increased for the three months ended
March 28, 2004 by $802,000 to $737,000 compared to a $65,000 benefit in the
same period in 2003.  The effective income tax rate for the three months ended
March 28, 2004 was less that the statutory rate primarily as the result of
utilization of tax credits.


                  LIQUIDITY AND CAPITAL RESOURCES
                  -------------------------------

The Company does not maintain significant inventories or accounts receivables
since substantially all of its restaurants' sales are for cash.  Royalties
from franchisees, which are payable weekly, and other receivables from
franchisees are closely monitored by the Company.  The Company typically
receives several weeks of trade credit in purchasing food and supplies which is
standard in the restaurant business.  The Company normally operates with
working capital deficits (current liabilities exceeding current assets) and had
a working capital deficit of $13.8 million at March 28, 2004, compared to a
working capital deficit of $15.9 million at December 28, 2003.  The decrease
in the deficit relates primarily to the accumulation of cash to repay the
Company's semi-annual interest obligation on its senior notes due on
April 1, 2004.

Capital expenditures totaled approximately $1.8 million in the three months
ended March 28, 2004, as compared to $2.4 million in the same period in
2003.  The Company opened two new restaurants during the three months ended
March 28, 2004 compared to none opened during the same period in fiscal 2003.
Management estimates that capital expenditures will be approximately $10.3
million during the remainder of 2004.  Capital expenditures for the remainder
of the current year are expected to include the refurbishment and remodeling
of certain restaurants and ongoing capital improvements.

0n June 30,2003, the Company amended its existing $25.0 million credit
agreement (the "Credit Facility").  The amended Credit Facility,
which provides for borrowing up to $25.0 million, is made up of $19.85 million
in available credit and $5.15 million in outstanding letters of credit.  The
amendment eliminated the term loan feature and modified certain other terms and
conditions.  The existing term loan balance at September 28, 2003 was
repaid in full with an initial borrowing under the line of credit.  The
prepayment of the $13.3 million term loan portion resulted in a prepayment
penalty of $533,000 and the retirement of $164,000 of deferred financing
costs, which were charged to expense in the quarter ended September 28, 2003.
The amended Credit Facility matures June 29, 2004 and the Company expects to
refinance or renew the Credit Facility.

On May 10, 2004, the Company announced it has commenced a tender offer for all
of its  Notes and its intention to refinance its Credit Facility.  The funds
for the tender offer and refinancing are expected to be obtained through a new
$90 million senior secured credit facility.  The proposed transactions are
subject to the successful completion of syndication efforts, definitive
transaction documents and customary closing conditions. The closing of the
transaction is expected to occur during the second quarter of 2004. If the
foregoing refinancing transaction is completed, the Company would not have
any outstanding Notes and would seek to terminate its obligation to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

At March 28, 2004, the Company had available cash of approximately $6.7
million, receivables of $1.2 million, and $19.9 million available under the
Company's line of credit.  In the opinion of management, these funds and funds
from operations will be sufficient to meet operating requirements, anticipated
capital expenditures and other obligations for the foreseeable future.


Contractual Obligations Table--

The following table summarizes the Company's contractual obligations at
March 28, 2004, and the effect such obligations are expected to have on the
Company's liquidity and cash flows in future periods (in thousands):


                                 Three Months Ended March 28, 2004
                     -------------------------------------------------------
                      Total      Maturity    Maturity    Maturity   Maturity
                                 less than    1-3 yrs    4-5 yrs   Over 5 yrs
                                   1 yr
                     --------    ---------   --------    --------   ---------

Senior Notes         $ 60,980    $   --      $   --      $60,980    $   --
Lines of Credit           --         --          --          --         --
Capital Lease
  Obligations           5,213        648       1,158         731      2,676
Operating Leases       73,143      7,638      13,491      10,553     41,461
                     --------    -------     -------     -------    -------
Total Commitments    $139,336    $ 8,286     $14,649     $72,264    $44,137
                     ========    =======     =======     =======    =======

Critical Accounting Policies --

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States,
which require management to make estimates that affect the amounts of
revenues, expenses, assets and liabilities reported.  The following are
critical accounting matters which are both very important to the portrayal
of the Company's financial condition and results and which require some of
management's most subjective and complex judgments.  The accounting for
these matters involves the making of estimates based on current facts,
circumstances and assumptions which, in management's judgment, could change
in a manner that would materially affect management's future estimates with
respect to such matters and, accordingly, could cause future reported
financial condition and results to differ materially from financial results
reported based on management's current estimates.

      Accounts Receivable.  The Company performs ongoing credit evaluations of
its franchisees based upon payment history and the franchisees current credit
worthiness.  The Company continuously monitors collections from its franchisees
and maintains a provision for estimated credit losses based upon its review of
its franchisees financial condition and other relevant franchisee specific
credit information.  While such credit losses have historically been within
the Company's expectations and the provisions established, it is possible that
its credit loss rates could be higher or lower in the future.


      Impairment of Long-Lived Assets and Goodwill.  The Company periodically
evaluates fixed assets and goodwill for indicators of potential impairment.
The Company's judgments regarding potential impairment are based on legal
factors, market conditions and operational performance.  Future events could
cause the Company to conclude that assets associated with a particular
operation are impaired.  Evaluating the extent of an impairment also requires
the Company to estimate future operating results and cash flows which also
require judgment by management.  Any resulting impairment loss could have a
material adverse impact on the Company's financial condition and results of
operations.

      Self-Insurance.  The Company is self-insured for the majority of its
group health insurance costs, workers' compensation insurance costs, and
general liabilities subject to specific retention levels.  The Company
estimates its liabilities for self insured claims based on historical loss
rates and evaluation of claims currently outstanding.  While the Company's
management believes that its assumptions are appropriate, significant
differences in its actual experience or significant changes in the Company's
assumptions may materially affect these self insured costs.

      Accounting for Income Taxes.  As part of the process of preparing the
Company's consolidated financial statements, the Company is required to
estimate its income taxes in each of the jurisdictions in which it operates.
This process involves the Company estimating its actual current tax exposure
together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes.  These differences result
in deferred tax assets and liabilities, which are included within the
Company's consolidated balance sheet.  While the Company's management believes
that its assumptions are appropriate, significant differences in its actual
experience or significant changes in its assumptions may materially affect
the Company's income tax provision.

      Pension and Other Postretirement Benefits.  The determination of the
Company's obligation and expense for pension and other postretirement
benefits is dependent on its selection of certain assumptions used by
actuaries in calculating such amounts.  Those assumptions are disclosed in
Note 6 to the consolidated financial statements and include, among others,
the discount rate, expected long-term rate of return on plan assets and rates
of increase in compensation levels and health care costs.  These assumptions
are periodically adjusted based on management's judgement and consultations
with actuaries and others.  In accordance with accounting principles
generally accepted in the United States, actual results that differ from the
Company's assumptions are accumulated and amortized over future periods and,
therefore, generally affect its recognized expense, recorded obligation and
funding requirements in future periods. While the Company's management
believes that its assumptions are appropriate, significant differences in
its actual experience or significant changes in its assumptions may
materially affect its pension and other postretirement benefit obligations
and its future expense.

      Franchise Revenue Recognition.  The Company recognize revenues related to
Franchise fees when the related stores are opened.  Changes in the timing of
planned store openings and defaults on agreements can have a material impact
on the timing of the recognition of such revenues.

Item 3. Quantitative and qualitative disclosures about market risks

Our market risk is limited to fluctuations in interest rates as it pertains to
our borrowings under our Credit Facility.  Borrowings under the amended Credit
Facility bear interest rates, at the option of the Company, and depending on
certain financial covenants, equal to either (a) the greater of the prime rate,
or the federal funds rate plus 0.5%,  plus a margin (which ranges from 0.25%
to 2.0%) or (b) the rate offered in the Eurodollar market for amounts and
periods comparable to the relevant loan, plus a margin (which ranges from
1.75% to 3.5% and is determined by certain financial covenants).

If the interest rates on our borrowings average 100 basis points (1.0%) more
in fiscal 2004 than they did in fiscal 2003, our interest expense would
increase and income before income taxes would decrease by approximately
$100,000.  This amount is determined solely by considering the impact of the
hypothetical change in the interest rate on our borrowing cost without
consideration for other factors such as actions management might take to
mitigate its exposure to interest rate changes.

The Company is also exposed to the impact of commodity price fluctuations
related to unpredictable factors such as weather and various other market
conditions outside its control.  From time to time, the Company enters into
commodity futures and option contracts to manage these fluctuations.  The
Company had no futures and options contracts as of March 28, 2004.

Item 4.   Controls and Procedures

        (a) Evaluation of Disclosure Controls and Procedures.  The Company's
Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) as of the end of the period
covered by this report.  Based on such evaluation, such officers have
concluded that, as of the end of the period covered by this report, the
Company's disclosure controls and procedures are effective in alerting them
on a timely basis to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
filings under the Exchange Act.

        (b) Changes in Internal Controls Over Financial Reporting.  During the
quarter ended March 28, 2004, there have not been any significant changes in the
Company's internal controls over financial reporting or in other factors that
could significantly affect such controls.

PART II     OTHER INFORMATION

Item 1.    Legal Proceedings

The Company is party to various legal proceedings incidental to its
business.  The ultimate disposition of these matters is not presently
determinable but will not, in the opinion of management, have a material
adverse effect on the Company's financial condition or results of operations.

Item 6.    Exhibits and Reports on Form 8-K

(a)   Exhibits-

      Rule 13a-14(a) certifications of Chief Executive Officer and Chief
      Financial Officer.  (Exhibits 31.1 and 31.2)

      Certifications pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Exhibit 32)

(b)   Reports on Form 8-K-

      No Form 8-K was filed by the registrant in the first quarter of 2004.



             THE KRYSTAL COMPANY AND SUBSIDIARY
             ----------------------------------
                        SIGNATURES
                        ----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.




                         THE KRYSTAL COMPANY
                         (Registrant)

Dated: May 12, 2004       /s/Larry D. Bentley
-----------------------   ------------------------
                          Larry D. Bentley
                         (Senior Vice President, Chief Financial
                          Officer and Principal Accounting Officer)




                           EXHIBIT INDEX
-------------------------------------------------------------------------------
        Exhibit No.                    Description of Exhibit
        -----------                    ----------------------

            31.1          Rule 13a-14(a) certification of Chief Executive
                          Officer

            31.2          Rule 13a-14(a) certification of Chief Financial
                          Officer

            32            Certification pursuant to 18 U.S.C. Section 1350, as
                          as adopted pursuant to Section 906 of the Sarbanes-
                          Oxley Act of 2002.



Exhibit 31.1
------------
                                CERTIFICATIONS
                                --------------

I, James F. Exum, Jr. Chief Executive Officer, certify that:

    1.   I have reviewed this quarterly report on Form 10-Q of The Krystal
Company;

    2.   Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

    3.   Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

    4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

      (a)  designed such disclosure controls and procedures, or caused such
disclosure controls and proceedings to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

      (b)  evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by this report based on such evaluation (the "Evaluation Date");
and

      (c)  disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected or is reasonably likely to
materially affect the registrant's internal control over financial reporting;
and

    5.  The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      (a)  all significant deficiencies and material weaknessess in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and

      (b)  any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.


Date:  May 12, 2004
                                          /s/James F. Exum, Jr.
                                          ---------------------------
                                          James F. Exum, Jr.
                                          Chief Executive Officer


Exhibit 31.2
------------

I, Larry D. Bentley, Senior Vice President and Chief Financial Officer,
certify that:

    1.   I have reviewed this quarterly report on Form 10-Q of The Krystal
Company;

    2.   Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

    3.   Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

    4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

      (a)  designed such disclosure controls and procedures, or caused such
disclosure controls and proceedings to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

      (b)  evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by this report based on such evaluation (the "Evaluation Date");
and

      (c)  disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected or is reasonably likely to
materially affect the registrant's internal control over financial reporting;
and

    5.  The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      (a)  all significant deficiencies and material weaknesses0 in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and

      (b)  any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.


Date:  May 12, 2004
                                          /s/Larry D. Bentley
                                          -----------------------
                                          Larry D. Bentley, Senior Vice
                                          President and Chief Financial
                                          Officer


Exhibit 32

                           CERTIFICATION
                           -------------

       Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
             (Subsections (a) and (b) of Section 1350,
             Chapter 63 of Title 18, United States Code)


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), each of the
undersigned officers of The Krystal Company, a Tennessee corporation
( the "Company"), does hereby certify, to such officer's knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended March 28, 2004
(the "Form 10-Q") of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information
contained in the Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of the Company.

Dated: May 12, 2004
                                    /s/James F. Exum, Jr.
                                    --------------------
                                    James F. Exum, Jr.,
                                    Chief Executive Officer

Dated: May 12, 2004
                                    /s/Larry D. Bentley
                                    -------------------
                                    Larry D. Bentley, Senior Vice President
                                    and Chief Financial Officer


The foregoing certification is being furnished solely pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
chapter 63 of title 18, United States Code) and is not being filed as part of
the Form 10-Q, or as a separate disclosure document.