SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15 (d)

of the Securities Exchange Act of 1934

FOR QUARTER ENDED DECEMBER 12, 2004

COMMISSION FILE NUMBER 1-7323

FRISCH’S RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

OHIO	31-0523213
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2800 GILBERT AVENUE, CINCINNATI, OHIO	45206
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 513-961-2660

Not Applicable

Former name, former address and former fiscal year, if changed since last report

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 total number of shares outstanding of the issuer’s no par common stock, as of December 27, 2004 was: 5,050,429

TABLE OF CONTENTS

			PAGE
PART I - FINANCIAL INFORMATION
	ITEM 1.	FINANCIAL STATEMENTS
		CONSOLIDATED STATEMENT OF EARNINGS	3
		CONSOLIDATED BALANCE SHEET	4 - 5
		CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY	6
		CONSOLIDATED STATEMENT OF CASH FLOWS	7
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8 -21
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22 -28
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
	ITEM 4.	CONTROLS AND PROCEDURES	29
PART II - OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS	30
	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	30 -32
SIGNATURE			32

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)

	Twenty-eight weeks ended				Twelve weeks ended
	December 12, 2004		December 14, 2003		December 12, 2004		December 14, 2003
Revenue
Sales	$	150,809,640	$	137,128,770	$	66,747,477	$	60,091,494
Other		733,428		658,135		310,573		292,366
Total revenue		151,543,068		137,786,905		67,058,050		60,383,860
Costs and expenses
Cost of sales
Food and paper		52,752,737		46,495,688		23,338,433		20,290,257
Payroll and related		50,192,330		46,345,476		22,199,684		20,458,182
Other operating costs		30,758,207		27,879,171		13,203,667		12,319,982
		133,703,274		120,720,335		58,741,784		53,068,421
Administrative and advertising		7,576,408		6,914,684		3,251,647		2,956,241
Interest		1,446,664		1,316,295		640,568		582,628
Total costs and expenses		142,726,346		128,951,314		62,633,999		56,607,290
Earnings before income taxes		8,816,722		8,835,591		4,424,051		3,776,570
Income taxes		3,174,000		3,137,000		1,680,000		1,366,000
NET EARNINGS	$	5,642,722	$	5,698,591	$	2,744,051	$	2,410,570
Earnings per share (EPS) of common stock:
Basic net earnings per share	$	1.12	$	1.15	$	.54	$	.48
Diluted net earnings per share	$	1.10	$	1.12	$	.53	$	.47

The accompanying notes are an integral part of these statements.

3

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet

ASSETS

	December 12, 2004 (unaudited)		May 30, 2004
Current Assets
Cash	$	1,276,473	$	294,410
Receivables
Trade		1,245,444		1,384,798
Other		402,573		381,090
Inventories		4,645,939		4,381,814
Prepaid expenses and sundry deposits		2,214,082		2,076,319
Prepaid and deferred income taxes		1,024,427		1,024,427
Total current assets		10,808,938		9,542,858
Property and Equipment
Land and improvements		57,594,031		50,250,328
Buildings		80,219,972		75,040,561
Equipment and fixtures		83,516,971		77,673,937
Leasehold improvements and buildings on leased land		20,100,228		19,751,361
Capitalized leases		7,519,109		7,388,580
Construction in progress		509,273		6,918,091
		249,459,584		237,022,858
Less accumulated depreciation and amortization		106,321,038		101,302,386
Net property and equipment		143,138,546		135,720,472
Other Assets
Goodwill		740,644		740,644
Other intangible assets		1,367,552		1,122,982
Investments in land		1,148,293		1,148,293
Property held for sale		1,015,785		1,160,785
Net cash surrender value-life insurance policies		4,714,303		4,600,873
Other		2,796,741		2,811,047
Total other assets		11,783,318		11,584,624
	$	165,730,802	$	156,847,954

The accompanying notes are an integral part of these statements.

4

LIABILITIES AND SHAREHOLDERS’ EQUITY

	December 12, 2004 (unaudited)		May 30, 2004
Current Liabilities
Long-term obligations due within one year
Long-term debt	$	7,386,321	$	6,230,801
Obligations under capitalized leases		558,896		508,520
Self insurance		1,618,183		1,310,191
Accounts payable		13,466,529		13,380,257
Accrued expenses		8,113,011		8,238,293
Income taxes		590,617		436,265
Total current liabilities		31,733,557		30,104,327
Long-Term Obligations
Long-term debt		37,801,070		35,226,734
Obligations under capitalized leases		3,448,356		3,221,384
Self insurance		1,740,140		2,384,893
Deferred income taxes		4,130,082		3,540,082
Deferred compensation and other		3,124,043		2,903,974
Total long-term obligations		50,243,691		47,277,067
Commitments		—		—
Shareholders’ Equity
Capital stock
Preferred stock - authorized, 3,000,000 shares without par value; none issued		—		—
Common stock - authorized, 12,000,000 shares without par value; issued, 7,500,676 and 7,490,845 shares - stated value - $1		7,500,676		7,490,845
Additional contributed capital		62,171,323		61,976,027
		69,671,999		69,466,872
Retained earnings		46,899,395		42,920,243
		116,571,394		112,387,115
Less cost of treasury stock (2,450,351 and 2,458,022 shares)		32,817,840		32,920,555
Total shareholders’ equity		83,753,554		79,466,560
	$	165,730,802	$	156,847,954

5

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders’ Equity

Twenty-eight weeks ended December 12, 2004 and December 14, 2003

(Unaudited)

	Common stock at $1 per share - Shares and amount		Additional contributed capital			Retained earnings			Treasury shares			Total
Balance at June 1, 2003		7,420,763		60,926,377			34,490,774			(33,072,188	)		69,765,726
Net earnings for twenty-eight weeks		—		—			5,698,591			—			5,698,591
Stock options exercised - new shares issued		55,249		582,054			—			—			637,303
Stock options exercised - treasury shares re-issued		—		(12,813	)		—			80,358			67,545
Tax benefit from stock options exercised		—		262,903			—			—			262,903
Other treasury shares re-issued		—		18,180			—			44,495			62,675
Employee stock purchase plan		—		(41,884	)		—			—			(41,884	)
Cash dividends - $.31 per share		—		—			(1,545,928	)		—			(1,545,928	)
Balance at December 14, 2003		7,476,012		61,734,817			38,643,437			(32,947,335	)		74,906,931
Net earnings for twenty-four weeks		—		—			4,830,419			—			4,830,419
Stock options exercised - new shares issued		14,833		172,329			—			—			187,162
Stock options exercised - treasury shares re-issued		—		3,710			—			26,780			30,490
Tax benefit from stock options exercised		—		103,566			—			—			103,566
Employee stock purchase plan		—		(38,395	)		—			—			(38,395	)
Cash dividends - $.11 per share		—		—			(553,613	)		—			(553,613	)
Balance at May 30, 2004		7,490,845		61,976,027			42,920,243			(32,920,555	)		79,466,560
Net earnings for twenty-eight weeks		—		—			5,642,722			—			5,642,722
Stock options exercised - new shares issued		9,831		146,995			—			—			156,826
Stock options exercised - treasury shares re-issued		—		(6,819	)		—			69,173			62,354
Other treasury shares re-issued		—		38,862			—			33,542			72,404
Tax benefit from stock options exercised		—		48,870			—			—			48,870
Employee stock purchase plan		—		(32,612	)		—			—			(32,612	)
Cash dividends - $.33 per share		—		—			(1,663,570	)		—			(1,663,570	)
Balance at December 12, 2004	$	7,500,676	$	62,171,323		$	46,899,395		$	(32,817,840	)	$	83,753,554

The accompanying notes are an integral part of these statements.

6

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Twenty-eight weeks ended December 12, 2004 and December 14, 2003

(unaudited)

	2004			2003
Cash flows provided by (used in) operating activities:
Net earnings	$	5,642,722		$	5,698,591
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization		6,230,249			5,735,769
Loss (gain) on disposition of assets		(30,317	)		213,750
		11,842,654			11,648,110
Changes in assets and liabilities:
Accounts receivable		117,871			(4,789	)
Inventories		(264,125	)		(128,331	)
Prepaid expenses and sundry deposits		(137,763	)		939,479
Other assets		(149,640	)		(939,133	)
Accounts payable		(469,264	)		2,394,118
Accrued expenses		(125,282	)		(480,536	)
Accrued and deferred income taxes		744,352			963,120
Tax benefit from stock options exercised		48,870			262,903
Self insured obligations		(336,761	)		(413,395	)
Other liabilities		220,069			104,400
		(351,673	)		2,697,836
Net cash provided by operating activities		11,490,981			14,345,946
Cash flows provided by (used in) investing activities:
Additions to property and equipment		(13,138,614	)		(15,145,154	)
Proceeds from disposition of property		242,360			10,208
Proceeds from litigation settlement		—			1,700,000
Change in other assets		(233,030	)		(689,467	)
Net cash (used in) investing activities		(13,129,284	)		(14,124,413	)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings		7,500,000			3,500,000
Payment of long-term debt and capital lease obligations		(4,030,572	)		(3,162,183	)
Cash dividends paid		(1,108,034	)		(994,169	)
Proceeds from stock options exercised - new shares issued		156,826			637,303
Proceeds from stock options exercised - treasury shares re-issued		62,354			67,545
Other treasury shares re-issued		72,404			62,675
Employee stock purchase plan		(32,612	)		(41,884	)
Net cash provided by financing activities		2,620,366			69,287
Net increase in cash and equivalents		982,063			290,820
Cash and equivalents at beginning of year		294,410			1,133,443
Cash and equivalents at end of quarter	$	1,276,473		$	1,424,263
Supplemental disclosures:
Interest paid	$	1,660,828		$	1,492,159
Income taxes paid (net of refunds, if any)		2,381,137			1,910,980
Dividends declared but not paid		555,536			551,759
Lease transactions capitalized		537,777			—

The accompanying notes are an integral part of these statements.

7

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Second Quarter Fiscal 2005, Ended December 12, 2004

NOTE A – ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Description of the Business

Frisch’s Restaurants, Inc. (The Company) is a regional company that operates and licenses others to operate full service family-style restaurants under the name “Frisch’s Big Boy”, and operates grill buffet style restaurants under the name “Golden Corral” under certain licensing agreements. All restaurants currently operated by the Company are located in various regions of Ohio, Kentucky and Indiana. Plans are in place to expand Golden Corral operations into certain parts of Michigan, Pennsylvania and West Virginia.

The Company owns the trademark “Frisch’s” and has exclusive, irrevocable ownership of the rights to the “Big Boy” trademark, trade name and service mark in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. Substantially all of the Frisch’s Big Boy restaurants also offer “drive-thru” service. The Company also licenses Big Boy restaurants to other operators, currently in certain parts of Ohio, Kentucky and Indiana. In addition, the Company operates a commissary and food manufacturing plant near its headquarters in Cincinnati, Ohio that services all Big Boy restaurants operated by the Company, and is available to supply restaurants licensed to others.

Consolidation Practices

The accompanying consolidated financial statements include the accounts of Frisch’s Restaurants, Inc. and all of its subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, these interim financial statements include all adjustments (all of which were normal and recurring) necessary for a fair presentation of all periods presented. In addition, certain reclassifications may have been made to prior year information to conform to the current year presentation.

Fiscal Year

The Company’s fiscal year is the 52 or 53 week period ending on the Sunday nearest to the last day of May. The first quarter of each fiscal year contains sixteen weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, an additional week is added to the fourth quarter, which results in a 53 week fiscal year.

Use of Estimates

The preparation of financial statements requires management to use estimates and assumptions to measure certain items that affect the amounts reported. These judgments are based on knowledge and experience about past and current events, and assumptions about future events. Although management believes its estimates are reasonable and adequate, future events affecting them may differ markedly from current judgment.

Some of the more significant items requiring the use of estimates include liabilities for self insurance and deferred executive compensation, value of intangible assets, and the carrying values of long-lived assets and long-lived assets to be disposed of.

Cash and Cash Equivalents

Highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Outstanding checks in the amount of $704,000 were included in accounts payable as of May 30, 2004.

Receivables

The Company values its trade notes and accounts receivable on the reserve method. The reserve balance was $30,000 as of December 12, 2004 and May 30, 2004. The reserve is monitored for adequacy based on historical collection patterns and write-offs, and current credit risks.

8

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories, comprised principally of food items, are valued at the lower of cost, determined by the first-in, first-out method, or market.

Accounting for Rebates

Cash consideration received from certain food vendors is treated as a reduction of cost of sales and is recognized in the same period the Company sells the food.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided principally on the straight-line method over the estimated service lives, which range from ten to 25 years for buildings or components thereof and five to ten years for equipment. Leasehold improvements are depreciated over ten to 25 years or the remaining lease term, whichever is shorter. Software is depreciated over three to ten years. Interest on borrowings is capitalized during active construction periods of major capital projects. Capitalized interest was $114,000 and $159,000 respectively, for the 28 weeks ended December 12, 2004 and December 14, 2003, and was $69,000 and $83,000 respectively, for the twelve weeks ended December 12, 2004 and December 14, 2003. In addition, capitalization of the value of certain employees’ time who worked on the implementation of the Company’s enterprise information system was $96,000 and $219,000 respectively, for the 28 weeks ended December 12, 2004 and December 14, 2003, and was zero and $141,000 respectively, for the twelve weeks ended December 12, 2004 and December 14, 2003.

The cost of land not yet in service is included in “construction in progress” if construction has begun or if construction is likely within the next twelve months. Estimated remaining expenditures for new restaurant construction that was in progress as of December 12, 2004 totaled approximately $2,147,000, for one Golden Corral restaurant. No Big Boy restaurants were under construction at December 12, 2004. The cost of land on which construction is not likely within the next twelve months is classified as “Investments in land” in the consolidated balance sheet.

Certain surplus property is currently held for sale. All of the surplus property is stated at the lower of cost or market and is classified as “Property held for sale” in the consolidated balance sheet. Market values are generally determined by real estate brokers and/or the Company’s judgment.

Impairment of Assets

Under Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company considers a history of cash flow losses on a restaurant-by-restaurant basis to be its primary indicator of potential impairment. Carrying values are reviewed for impairment when events or changes in circumstances indicate that the assets’ carrying values may not be recoverable from the estimated future cash flows expected to result from the properties’ use and eventual disposition. When undiscounted expected future cash flows are less than carrying values, an impairment loss is recognized equal to the amount by which the carrying values exceed the net realizable values of the assets. Net realizable values are generally determined by estimates provided by real estate brokers and/or the Company’s past experience in disposing of unprofitable restaurant properties. Management believes that this policy is the Company’s only critical accounting policy because of its potential for significant impact on the financial condition and results of the Company’s operations.

No impairment losses were recorded during any of the periods presented in the accompanying consolidated financial statements.

9

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Restaurant Closing Costs

Any liabilities associated with exit or disposal activities initiated after December 31, 2002 are recorded in accordance with Statement of Financial Accounting Standards No. 146 (SFAS 146) “Accounting for Obligations Associated with Disposal Activities.” SFAS 146 requires that liabilities be recognized for exit and disposal costs only when the liabilities are incurred, rather than upon the commitment to an exit or disposal plan. No significant disposal costs were incurred for the two restaurants that have been permanently closed since December 31, 2002, as the leases for both locations expired upon closing or shortly thereafter.

Statement of Financial Accounting Standards No. 143 (SFAS 143) “Accounting for Asset Retirement Obligations” is applicable to legal obligations associated with the retirement of certain tangible long-lived assets. The adoption of SFAS 143 on June 2, 2003 did not materially impact the Company’s financial statements.

Goodwill and Other Intangible Assets, Including Licensing Agreements

Acquired goodwill is tested annually for impairment and also whenever an impairment indicator arises. Impairment losses are recorded when impairment is determined to have occurred. As of December 12, 2004 and May 30, 2004, the carrying amount of goodwill acquired in prior years was $741,000, which is net of $308,000 amortized in prior years.

Intangible assets having a finite useful life are subject to amortization, and are tested annually for impairment. The Company’s other intangible assets consist principally of initial franchise fees paid for each new Golden Corral restaurant the Company opens. Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method over the 15-year term of each individual restaurant’s franchise agreement. The fees are ratably amortized at $2,667 per year per restaurant, or approximately $77,000 per year in each of the next five years for the 29 Golden Corral restaurants in operation as of December 12, 2004. Amortization for the 28 weeks ended December 12, 2004 and December 14, 2003 was $39,000 and $31,000 respectively, and was $17,000 and $14,000 respectively, for the twelve weeks ended December 12, 2004 and December 14, 2003. The remaining balance of other intangible assets, including fees paid for future Golden Corral restaurants, is not currently being amortized because these assets have indefinite or as yet to be determined useful lives.

An analysis of other intangible assets follows:

	December 12, 2004			May 30, 2004
	(in thousands)
Golden Corral initial franchise fees subject to amortization	$	1,160		$	1,040
Less accumulated amortization		(213	)		(174	)
Carrying amount of Golden Corral initial franchise fees subject to amortization		947			866
Current portion of Golden Corral initial franchise fees subject to amortization		(77	)		(69	)
Golden Corral fees not yet subject to amortization		345			180
Other		153			146
Total other intangible assets	$	1,368		$	1,123

The franchise agreements with Golden Corral Franchising Systems, Inc. also require the Company to pay fees based on defined gross sales. These costs are charged to operations as incurred.

10

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

Revenue from restaurant operations is recognized upon receipt of payment from customers. Revenue from the sale of gift cards is deferred for recognition until redeemed by the customer. Revenue from the sale of commissary products to Big Boy restaurants licensed to other operators is recognized upon shipment of product. Revenue from franchise fees, based on sales of Big Boy restaurants licensed to other operators, is recorded on the accrual method as earned. Initial franchise fees are recognized as revenue when the fees are deemed fully earned and non-refundable, ordinarily upon the execution of the license agreement, in consideration of the Company’s services to that time.

New Store Opening Costs

New store opening costs consist of new employee training costs, the cost of a team to coordinate the opening and the cost of certain replaceable items such as uniforms and china. New store opening costs are charged to expense as incurred. Opening costs for the 28 weeks ended December 12, 2004 and December 14, 2003 were $1,050,000 ($786,000 for Golden Corral and $264,000 for Big Boy) and $947,000 ($887,000 for Golden Corral and $60,000 for Big Boy), respectively. For the twelve weeks ended December 12, 2004 and December 14, 2003, opening expenses were $327,000 ($282,000 for Golden Corral and $45,000 for Big Boy) and $513,000 ($476,000 for Golden Corral and $37,000 for Big Boy), respectively.

Benefit Plans

The Company has two qualified defined benefit pension plans covering all of its eligible employees. (Hourly restaurant employees hired after December 31, 1998 are ineligible to enter the qualified defined benefit pension plans. Instead, these employees are offered participation in a 401(k) savings plan with a matching 40 percent employer cash contribution.) Qualified defined benefit pension plan benefits are based on years-of-service and other factors. The Company’s funding policy is to contribute at least annually amounts sufficient to satisfy legal funding requirements plus such additional tax-deductible amounts deemed advisable under the circumstances. Contributions are intended to provide not only for benefits attributed to service-to-date, but also for those expected to be earned in the future. In addition, the Company has an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) that provides a supplemental retirement benefit to the executive officers of the Company and certain other “highly compensated employees” whose benefits under the qualified plans are reduced when their compensation exceeds Internal Revenue Code imposed limitations or when elective salary deferrals are made to the Company’s non-qualified Executive Savings Plan. Prepaid pension benefit costs (see Note E – Pension Plans) and Executive Savings Plan assets are the principal components of “Other long-term assets” in the balance sheet.

The executive officers of the Company and certain other “highly compensated employees” began receiving comparable pension benefits commencing in the year 2000, through a non-qualified Non Deferred Cash Balance Plan instead of accruing additional benefits under the qualified defined benefit pension plans and the SERP. (Also see Note E – Pension Plans.)

Self Insurance

The Company self-insures its Ohio workers’ compensation claims up to $300,000 per claim. Initial self insurance liabilities are accrued based on prior claims history. An annual review of claims experience is performed during the first quarter of ensuing fiscal years and adjustments are made to the self insurance liabilities to more closely reflect annual claims experience. Favorable claims experience allowed reserves to be lowered by $614,000 and $710,000 respectively, during the first quarters of fiscal years 2005 and 2004.

Fair Value of Financial Instruments

With the exception of long-term debt (see Note B - Long-Term Debt), the carrying value of the Company’s financial instruments approximates fair value.

11

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Taxes are provided on all items included in the statement of earnings regardless of when such items are reported for tax purposes. The provision for income taxes in all periods has been computed based on management’s estimate of the effective tax rate for the entire year.

Stock Based Compensation

The Company accounts for stock options using the intrinsic value method of measuring compensation expense prescribed by Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock Based Compensation.” No stock based employee compensation cost is included in net income, as all options granted during the periods presented herein had an exercise price equal to the market value of the stock on the date of the grant. In accordance with Statement of Financial Standards No. 148 (SFAS 148), “Accounting for Stock Based Compensation – Transition and Disclosure,” the following table presents the effect on net income and earnings per share if the Company had accounted for stock options using the fair value recognition provisions of SFAS 123:

	28 weeks ended				12 weeks ended
	Dec. 12, 2004		Dec. 14, 2003		Dec. 12, 2004		Dec. 14, 2003
	(in thousands, except per share data)
Net Income, as reported	$	5,643	$	5,699	$	2,744	$	2,411
Deduct: total stock-based employee compensation expense determined under fair value based method for all grants (a), net of tax effects		258		180		130		91
Pro forma net income	$	5,385	$	5,519	$	2,614	$	2,320
Earnings per share
Basic – as reported	$	1.12	$	1.15	$	.54	$	.48
Basic – pro forma	$	1.07	$	1.11	$	.52	$	.46
Diluted – as reported	$	1.10	$	1.12	$	.53	$	.47
Diluted – pro forma	$	1.05	$	1.08	$	.51	$	.45

(a) For a summary of options granted, refer to the stock option section of Note D – Capital Stock.

The estimated total stock-based employee compensation expense was determined using the modified Black-Scholes option pricing model with the following weighted average assumptions:

	28 weeks ended						12 weeks ended
	Dec. 12, 2004			Dec. 14, 2003			Dec. 12, 2004			Dec. 14, 2003
Dividend yield		1.61	%		1.87	%		1.61	%		1.87	%
Expected volatility		29	%		27	%		29	%		27	%
Risk free interest rate		3.82	%		2.57	%		3.35	%		2.94	%
Expected lives		5 years			5 years			5 years			5 years
Weighted average fair value of options granted	$	8.13		$	4.32		$	6.79		$	5.80

12

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A - ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board revised Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock Based Compensation.” The revised SFAS 123 (SFAS 123(R)), “Share-Based Payment,” supersedes Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees.” SFAS 123(R) requires the fair value of stock options issued to be expensed. It is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, which will be the Company’s second quarter of fiscal year 2006.

Statement of Financial Accounting Standards No. 151 (SFAS 151), “Inventory Costs,” clarifies accounting for abnormal amounts of idle facility expense, freight, handling costs and spoilage. SFAS 151 is effective for inventory costs incurred during fiscal years that begin after June 15, 2005. Earlier application is permitted. Its adoption is not expected to have any material impact on the Company’s earnings.

The Company reviewed all significant newly issued accounting pronouncements, including Statements of Financial Accounting Standards Nos. 152 “Accounting for Real Estate Time Sharing Transactions” and 153 “Exchanges of Nonmonetary Assets,” and concluded that, other than those disclosed herein, no material impact is anticipated on the financial statements as a result of future adoption.

NOTE B - LONG-TERM DEBT

	December 12, 2004				May 30, 2004
	Payable within one year		Payable after one year		Payable within one year		Payable after one year
	(in thousands)
Construction Draw Facility -
Construction Phase Loans	$	—	$	—	$	—	$	—
Term Loans		7,386		27,801		6,231		25,227
Bullet Loan		—		10,000		—		10,000
Revolving Credit Loan		—		—		—		—
	$	7,386	$	37,801	$	6,231	$	35,227

The portion payable after one year matures as follows:

	December 12, 2004		May 30, 2004
	(in thousands)
Period ending in 2006	$	7,682	$	6,664
2007		6,912		6,376
2008		15,915		15,684
2009		3,753		4,059
2010		2,320		1,616
Subsequent to 2010		1,219		828
	$	37,801	$	35,227

The Construction Draw Facility is an unsecured draw credit line that provides for borrowing of up to $61,500,000 to construct and open Golden Corral restaurants. As of December 12, 2004, $9,000,000 remained available to be borrowed before the Facility expires September 1, 2006, unless extended. It is subject to a ¹/4 percent unused commitment fee. Under the terms of the Facility, funds borrowed are initially governed as a Construction Phase Loan, with interest determined by a pricing matrix that uses changeable basis points, determined by certain of the

13

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE B – LONG TERM DEBT (CONTINUED)

Company’s financial ratios. The basis points are added to or subtracted from one of various indices chosen by the Company. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly. Within six months of the completion and opening of each restaurant, the balance outstanding under each Construction Phase Loan must be converted to a Term Loan amortized over a period not to exceed seven years. Upon conversion, the Company may select a fixed interest rate over the chosen term or may choose among various adjustable rate options. All funds borrowed under the Facility as of December 12, 2004 have been converted to Term Loans. Fixed interest rates have been chosen for all of the Term Loans, the weighted average of which is 6.15 percent. All of the Term Loans are being repaid in 84 equal monthly installments of principal and interest aggregating $780,000, expiring in various periods ranging from May 2006 through January 2012. Prepayments of the Term Loans are permissible upon payment of sizeable prepayment fees and other amounts. Any outstanding Construction Phase Loan that has not been converted into a Term Loan shall mature and be payable in full on September 1, 2006, unless extended.

The $10,000,000 Bullet Loan is secured by mortgages on the real property of six Golden Corral restaurants. It matures and is payable in one installment on December 31, 2007. In December 2004, the Company exercised its option to convert the loan from variable rated interest to a fixed rate of 5.57 percent for the remainder of the term. Interest is payable monthly in arrears.

A $5,000,000 unsecured Revolving Credit Loan is in place that is intended to fund temporary working capital needs. The loan, none of which was outstanding as of December 12, 2004, is subject to a 30 consecutive day out-of-debt period each year. It matures on September 1, 2006, unless extended. Interest is determined by the same pricing matrix used for Construction Phase Loans under the Construction Draw Facility, the basis points from which are added to or subtracted from one of various indices chosen by the Company. The loan is subject to a ¹/4 percent unused commitment fee. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly.

These loan agreements contain covenants relating to tangible net worth, interest expense, cash flow, debt levels, capitalization changes, asset dispositions, investments and restrictions on pledging certain restaurant operating assets. The Company was in compliance with all loan covenants as of December 12, 2004. Compensating balances are not required by these loan agreements.

The fair values of any outstanding balances in the Construction Phase of the Construction Draw Facility or the Revolving Credit Loan approximate carrying value as of December 12, 2004 and May 30, 2004, as the current provisions of the loans call for variable rated interest. The fair value of the Bullet Loan also approximates carrying value as of December 12, 2004 and May 30, 2004. Its fixed rate was determined in December 2004. The fair values of the fixed rate Term Loans shown in the following table are based on fixed rates that would be available for loans with identical terms and maturities, if borrowed at December 12, 2004 and May 30, 2004:

	December 12, 2004				May 30, 2004
	Carrying value		Fair value		Carrying value		Fair value
	(in thousands)
Construction Draw Facility -
Term Loans	$	35,187	$	35,570	$	31,458	$	31,822
Bullet Loan		10,000		10,000		10,000		10,000

14

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C - LEASED PROPERTY

The Company occupies certain of its restaurants pursuant to lease agreements. The majority of the leases are for fifteen or twenty years and contain renewal options for ten to fifteen years, and/or have favorable purchase options. As of December 12, 2004, eleven of the Company’s 28 leased restaurant locations have been capitalized. Delivery equipment is also held under capitalized leases expiring during periods through 2012. Amortization of capitalized lease assets is computed on the straight-line method over the primary terms of the leases. An analysis of the capitalized leased property follows:

	Asset balances at
	December 12, 2004			May 30, 2004
	(in thousands)
Restaurant facilities	$	6,306		$	6,306
Equipment		1,213			1,083
		7,519			7,389
Less accumulated amortization		(5,936	)		(6,116	)
	$	1,583		$	1,273

As of December 12, 2004, seventeen of the Company’s restaurant properties are occupied pursuant to operating leases, four of which are ground leases for Golden Corral restaurants. Another Golden Corral ground lease has been entered into for a restaurant to open in the spring of 2005 (currently under construction). The operating lease table below includes scheduled payments for this lease, even though payments will not begin until the restaurant opens. The Company also occupies office space under an operating lease that expires during 2013, with renewal options available through 2023. The Company has the option to purchase the property in 2023. Total rental expense of operating leases was $869,000 and $773,000 respectively, for the 28 weeks ended December 12, 2004 and December 14, 2003, and was $370,000 and $333,000 respectively, during the twelve weeks ended December 12, 2004 and December 14, 2003.

Future minimum lease payments under capitalized leases and operating leases, including residual value guarantees on certain of the capitalized leases, having an initial or remaining term of one year or more follow:

Period ending December 12,	Capitalized leases			Operating leases
	(in thousands)
2005	$	934		$	1,587
2006		779			1,541
2007		2,781			1,368
2008		192			1,204
2009		119			1,130
2010 to 2025		253			8,877
Total		5,058		$	15,707
Amount representing interest		(1,051	)
Present value of obligations		4,007
Portion due within one-year		(559	)
Long-term obligations	$	3,448

15

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D - CAPITAL STOCK

2003 Stock Option and Incentive Plan

Shareholders approved the 2003 Stock Option and Incentive Plan (the “2003 Incentive Plan” or “Plan”) on October 6, 2003. The 2003 Incentive Plan provides for several forms of awards including stock options, stock appreciation rights, stock awards including restricted and unrestricted awards of stock, and performance awards. The Plan will continue in effect until terminated by the Board of Directors. Subject to adjustment for changes in capitalization, the maximum number of shares of common stock that the Plan may issue is 800,000. The Plan provides that the total number of shares of common stock covered by options plus the number of stock appreciation rights granted to any one individual may not exceed 80,000 during any fiscal year. Additionally, no more than 80,000 shares of common stock may be issued in payment of performance awards denominated in shares, and no more than $1,000,000 in cash (or fair market value, if paid in shares) may be paid pursuant to performance awards denominated in dollars, granted to any one individual during any fiscal year if the awards are intended to qualify as performance based compensation. Employees of the Company and non-employee directors of the Company are eligible to be selected to participate in the Plan. Participation is based on selection by the Compensation Committee (the Committee) of the Board of Directors. Although there is no limit to the number of participants in the Plan, there are approximately 40 persons currently participating in the Plan.

Options to purchase shares of the Company’s common stock permit the holder to purchase a fixed number of shares at a fixed price. When options are granted, the Committee determines the number of shares subject to the option, the term of the option which may not exceed ten years, the time or times when the option will become exercisable and the price per share that a participant must pay to exercise the option. No option will be granted with an exercise price that is less than 100 percent of fair market value on the date of the grant.

Stock appreciation rights (SAR’s) are rights to receive payment, in cash, shares of common stock or a combination of the two, equal to the excess of (1) the fair market value of a share of common stock on the date of exercise over (2) the price per share of common stock established in connection with the grant of the SAR (the reference price). The reference price must be at least 100 percent of the common stock’s fair market value on the date the SAR is granted. SAR’s may be granted by the Committee in its discretion to any participant, and may have terms no longer than ten years.

Stock awards are grants of shares of common stock that may be restricted (subject to a holding period or other conditions) or unrestricted. The Committee determines the amounts, vesting, if any, terms and conditions of the awards, including the price to be paid, if any, for restricted awards and any contingencies related to the attainment of specified performance goals or continued employment or service. The Committee may also grant performance awards to participants. Performance awards are the right to receive cash, common stock or both, at the end of a specified performance period, subject to satisfaction of the performance criteria and any vesting conditions established for the award.

Options to purchase 7,000 shares were granted in October 2004. As of December 12, 2004, no other awards (meaning any form of stock option, stock appreciation right, restricted stock award, unrestricted stock award or performance award) had been granted under the 2003 Stock Option and Incentive Plan.

Other Stock Option Plans

The 1993 Stock Option Plan is not affected by the adoption of the 2003 Stock Option and Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for stock dividends paid in earlier years) of the common stock of the Company for a ten year period beginning May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the availability of options to be granted to October 4, 2008. As of December 12, 2004, 6,204 shares remained available to be optioned. Of the 556,228 cumulative shares optioned to date, 377,077 remain outstanding as of December 12, 2004.

16

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D - CAPITAL STOCK (CONTINUED)

Shares may be optioned to employees at not less than 75 percent of fair market value on the date granted. The Amended Plan added a provision for automatic, annual stock option grants of 1,000 shares to each of the Company’s non-employee directors. The per share exercise price for options granted to non-employee directors must equal 100 percent of fair market value on the date of grant. The Amended Plan also added a Company right to repurchase shares acquired on exercise of options if an optionee chooses to dispose of such shares. Stock appreciation rights are not provided for under the Amended Plan. All outstanding options under the 1993 Plan were granted at fair market value and expire ten years from the date of grant. Outstanding options to the President and Chief Executive Officer generally vest in six months, while options granted to non-employee directors vest after one year. Outstanding options granted to other key employees vest in three equal annual installments.

The 1984 Stock Option Plan expired May 8, 1994. The final 14,090 outstanding options expired in June 2003, ten years from the date originally granted.

The changes in outstanding and exercisable options involving all Plans are summarized below:

	28 weeks ended
	December 12, 2004				December 14, 2003
	No. of shares		Weighted avg. price per share		No. of shares		Weighted avg. price per share
Outstanding at beginning of year	319,993		$	15.97	321,665		$	13.96
Granted during the 28 weeks	81,000		$	29.37	91,000		$	19.28
Exercised during the 28 weeks	(14,997	)	$	14.61	(61,249	)	$	11.40
Expired during the 28 weeks	—		$	—	(14,090	)	$	14.38
Forfeited during the 28 weeks	(1,919	)	$	18.94	(500	)	$	17.17
Outstanding at end of quarter	384,077		$	18.84	336,826		$	15.82
Exercisable at beginning of year	227,314		$	14.94	233,156		$	13.21
Exercisable at end of quarter	260,571		$	15.58	204,147		$	13.99

Stock options outstanding and exercisable as of December 12, 2004 for all Plans:

Range of Exercise Prices per Share	No. of shares	Weighted average price per share		Weighted average remaining life in years
Outstanding:
$ 8.31 to $13.00	72,814	$	10.62	5.36 years
$13.01 to $18.00	65,754	$	13.76	6.57 years
$18.01 to $24.20	165,009	$	19.35	8.05 years
$24.21 to $30.13	80,500	$	29.36	9.54 years
$ 8.31 to $30.13	384,077	$	18.84	7.60 years
Exercisable:
$ 8.31 to $13.00	72,814	$	10.62	—
$13.01 to $18.00	65,754	$	13.76	—
$18.01 to $24.20	122,003	$	19.52	—
$24.21 to $30.13	0		0	—
$ 8.31 to $30.13	260,571	$	15.58	—

17

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D - CAPITAL STOCK (CONTINUED)

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee Stock Purchase Plan) in October 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to purchase shares of the Company’s common stock through payroll deduction. Immediately following the end of each semi-annual offering period, participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares at the beginning of the offering period or at the end of the offering period. The Plan authorizes a maximum of 1,000,000 shares that may be purchased on the open market or from the Company’s treasury. As of October 31, 2004 (latest available data), 99,011 shares had been purchased through the Plan. Shares purchased through the Plan are held by the Plan’s custodian until withdrawn or distributed. As of October 31, 2004, the custodian held 39,769 shares on behalf of employees.

A total of 58,492 common shares (as adjusted for changes in capitalization in earlier years) were reserved for issuance under the non-qualified Executive Savings Plan when it was established in 1993. As of December 12, 2004, 49,374 shares remained in the reserve, including 8,038 shares allocated but not issued to participants.

There are no other outstanding options, warrants or rights.

Treasury Stock

As of December 12, 2004, the Company’s treasury held 2,450,351 shares of the Company’s common stock. From September 1998 through January 2002, 1,135,286 shares of the Company’s common stock were repurchased at a cost of $12,162,000 pursuant to repurchase programs authorized by the Company’s Board of Directors. No shares were repurchased under the two-year authorization that expired October 7, 2004.

Most of the remaining shares held in the treasury were acquired in August 1997 pursuant to the terms of a modified “Dutch Auction” self-tender offer.

Earnings Per Share

Basic earnings per share is based on the weighted average number of outstanding common shares during the period presented. Diluted earnings per share includes the effect of common stock equivalents, which assumes the exercise and conversion of dilutive stock options.

	Basic earnings per share			Stock equivalents	Diluted earnings per share
	Weighted average shares outstanding	EPS			Weighted average shares outstanding	EPS
28 weeks ended:
December 12, 2004	5,036,682	$	1.12	116,355	5,153,037	$	1.10
December 14, 2003	4,974,983	$	1.15	121,174	5,096,157	$	1.12
12 weeks ended:
December 12, 2004	5,039,103	$	.54	105,119	5,144,222	$	.53
December 14, 2003	4,989,325	$	.48	138,805	5,128,130	$	.47

18

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E - PENSION PLANS

As discussed more fully in Note A – Accounting Policies, the Company sponsors two qualified defined benefit pension plans plus an unfunded non qualified Supplemental Executive Retirement Plan (SERP) for “highly compensated employees” (HCE’s). The following table shows the components of net periodic pension cost for all periods presented in these consolidated financial statements:

	28 weeks ended						12 weeks ended
Net periodic pension cost components	Dec. 12, 2004			Dec. 14, 2003			Dec. 12, 2004			Dec. 14, 2003
	(in thousands)
Service cost	$	1,042		$	935		$	421		$	414
Interest cost		811			703			327			312
Expected return on plan assets		(1,053	)		(836	)		(425	)		(367	)
Amortization of prior service cost		38			37			15			16
Amortization of loss		207			236			87			90
Net periodic pension cost	$	1,045		$	1,075		$	425		$	465
Weighted average discount rate		6.5	%		6.5	%		6.5	%		6.5	%
Weighted average rate of compensation increase		5.0	%		5.0	%		5.0	%		5.0	%
Weighted average expected long-term rate of return on plan assets		8.5	%		8.5	%		8.5	%		8.5	%

Contributions to the Plans are expected to exceed $2,125,000 for fiscal 2005. Contributions for fiscal 2004 were $2,304,000, of which $304,000 was paid in fiscal 2005.

Compensation expense (not included in the net periodic pension cost described above) relating to the Non Deferred Cash Balance Plan (see Note A – Accounting Policies) was $275,000 and $270,000 respectively, during the 28 weeks ended December 12, 2004 and December 14, 2003, and was $124,000 and $116,000 respectively, for the twelve weeks ended December 12, 2004 and December 14, 2003. Contributions of $521,000 and $489,000 respectively, were made to the Plan in December 2004 and December 2003.

The Company also sponsors two 401(k) plans and a non-qualified Executive Savings Plan for certain HCE’s who have been disqualified from participation in the 401(k) plans (see Note A – Accounting Policies). In the 28 weeks ended December 12, 2004 and December 14, 2003, matching contributions to the 401(k) plans amounted to $91,000 and $85,000 respectively, and were $38,000 and $36,000 respectively, during the twelve weeks ended December 12, 2004 and December 14, 2003. Matching contributions to the Executive Savings Plan were $12,000 and $8,000 respectively, during the 28 weeks ended December 12, 2004 and December 14, 2003, and were $4,000 and $3,000 respectively, during the twelve weeks ended December 12, 2004 and December 14, 2003.

The Company does not sponsor post retirement health care benefits.

19

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE F – SEGMENT INFORMATION

The Company has two reportable segments within the restaurant industry: Big Boy restaurants and Golden Corral restaurants. Financial information by operating segment is as follows:

	28 weeks ended						12 weeks ended
	Dec. 12, 2004			Dec. 14, 2003			Dec. 12, 2004			Dec. 14, 2003
	(in thousands)
Sales
Big Boy	$	100,594		$	95,429		$	45,401		$	42,260
Golden Corral		50,216			41,700			21,346			17,831
	$	150,810		$	137,129		$	66,747		$	60,091
Earnings from operations before income taxes
Big Boy	$	12,182		$	11,921		$	5,929		$	5,253
Opening expense		(264	)		(60	)		(45	)		(37	)
Total Big Boy		11,918			11,861			5,884			5,216
Golden Corral		2,468			2,213			854			874
Opening expense		(786	)		(887	)		(282	)		(476	)
Total Golden Corral		1,682			1,326			572			398
Administrative expense		(4,070	)		(3,693	)		(1,703	)		(1,547	)
Interest expense		(1,447	)		(1,316	)		(641	)		(582	)
Other – net		734			658			311			292
Total Corporate Items		(4,783	)		(4,351	)		(2,033	)		(1,837	)
	$	8,817		$	8,836		$	4,423		$	3,777
Depreciation and amortization
Big Boy	$	3,884		$	3,863		$	1,688		$	1,597
Golden Corral		2,346			1,873			1,053			811
	$	6,230		$	5,736		$	2,741		$	2,408
Capital expenditures
Big Boy	$	5,973		$	5,337		$	2,746		$	3,602
Golden Corral		7,166			9,808			1,394			4,488
	$	13,139		$	15,145		$	4,140		$	8,090

	As of
	Dec. 12, 2004		May 30, 2004
Identifiable assets
Big Boy	$	88,911	$	84,680
Golden Corral		76,820		72,168
	$	165,731	$	156,848

20

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G – CONTINGENCIES

Litigation

The construction of a Golden Corral restaurant in Canton, Ohio was halted in August 2001 in order to assess structural concerns. In March 2002, a final assessment of the defects resulted in the Company’s decision to construct a new building on another part of the lot. (The restaurant finally opened for business in January 2003.) On July 30, 2002, the general contractor that built the defective building filed a demand for arbitration against the Company seeking $294,000 plus interest, fees, and costs it claims is owed by the Company under the construction contract. The Company denies the claim and has filed a counterclaim against the general contractor alleging defective construction and claiming damages, lost profits, interest and costs in excess of $1,000,000. The Company is vigorously prosecuting this claim and believes that it will ultimately prevail.

On August 29, 2002, the Company filed a separate lawsuit against the architect that designed the defective building alleging negligent design and claiming damages, lost profits, interest and costs in excess of $2,500,000. In July 2003, the Company resolved all claims, counterclaims and cross claims against the trial court defendants, including the architect and the architect’s structural engineering consultant. The defendants agreed to pay the Company the sum of $1,700,000 in full and final settlement of all claims. The Company received the settlement funds in full during the first quarter of fiscal year 2004 and the case was dismissed.

The Company is also subject to various claims and suits in the ordinary course of business. The Company does not believe that any ultimate liability for such claims will have a material impact on its earnings, cash flows or financial position.

Other

The Company is contingently liable for the performance of certain leases that have been assigned or sub-let to third parties. The average annual obligation of these leases approximate $50,000 over the next five years. In the event of default by the assignees or sub-lessees, the Company generally has the right to re-assign or sub-let the properties.

As of December 12, 2004, the Company had two outstanding letters of credit totaling $175,000 in support of its self-insurance program. (See Note A - Accounting Policies.)

NOTE H - RELATED PARTY TRANSACTIONS

A Big Boy licensed restaurant owned by an officer and director of the Company and two Big Boy licensed restaurants owned by children and other family members of an officer and directors of the Company pay to the Company franchise and advertising fees, employee leasing and other fees, and make purchases from the Company’s commissary.

The total paid to the Company by these three restaurants amounted to $2,705,000 and $2,415,000 respectively, during the 28 weeks ended December 12, 2004 and December 14, 2003, and was $1,216,000 and $1,075,000 respectively, during the twelve weeks ended December 14, 2003 and December 15, 2002. The amount owed to the Company from these restaurants was $156,000 and $116,000 respectively, as of December 12, 2004 and May 30, 2004. Amounts due are always settled within 28 days of billing.

All related party transactions described herein were effected on substantially similar terms as transactions with persons having no relationship with the Company.

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company’s Second Quarter of Fiscal 2005 consists of the twelve weeks ended December 12, 2004, and compares with the twelve weeks ended December 14, 2003, which constituted the Second Quarter of Fiscal 2004. The First Half of Fiscal 2005 consists of the 28 weeks ended December 14, 2003, and compares with the 28 weeks ended December 14, 2003, which constituted the First Half of Fiscal 2004. The first half of the Company’s fiscal year normally accounts for a disproportionate share of annual revenue and earnings because it contains 28 weeks whereas the second half of the year normally contains only 24 weeks. The twelve week third quarter in particular is a disproportionately smaller share of annual revenue and earnings because it spans most of the winter season from mid December through early March. Additionally, severe winter weather can have a prominent negative impact upon revenue and earnings during the third quarter. Operations consist of two reportable segments within the restaurant industry: “Big Boy” restaurants and “Golden Corral” restaurants.

Total revenue for the Second Quarter of Fiscal 2005 was a record $67,058,000, an increase of $6,674,000, or 11.1 percent higher than the Second Quarter of Fiscal 2004. Net earnings for the Second Quarter of Fiscal 2005 were a record $2,744,000, or diluted earnings per share (EPS) of $.53. Comparable net earnings from the Second Quarter of Fiscal 2004 were $2,411,000, or $.47 diluted EPS.

Total revenue for the First Half of Fiscal 2005 was a record $151,543,000, an increase of $13,756,000, or 10 percent higher than the First Half of Fiscal 2004. Net earnings for the First Half of Fiscal 2005 were $5,643,000, or $1.10 diluted EPS. Comparable net earnings from the First Half of Fiscal 2004 were $5,699,000, or $1.12 diluted EPS.

Record earnings in the Second Quarter of Fiscal 2005 pulled results for the First Half of Fiscal 2005 nearly even with the First Half of Fiscal 2004, overcoming disappointing first quarter 2005 results. The second quarter improvement was driven by higher margins in Big Boy restaurants, principally the result of higher sales levels.

Results for the first halves of both years were positively impacted by favorable claims experience in the Company’s self insurance program. Self insurance reserves were lowered by $614,000 ($393,000 net after income tax, or $.08 diluted EPS) in the First Quarter of Fiscal 2005, while the First Quarter of Fiscal 2004 received the benefit of a $710,000 adjustment ($458,000 net after income tax, or $.09 diluted EPS).

Results of Operations

The Company’s revenues consist primarily of retail restaurant sales. Big Boy sales also include wholesale sales from the Company’s commissary to restaurants licensed to other operators. Total revenue also includes franchise and other fees, the amounts of which are not material to any of the periods discussed herein.

Changes in sales occur when new restaurants are opened and older restaurants are closed. Changes in customer counts and menu price increases affect changes in same store sales. Consolidated restaurant sales reached record heights during the Second Quarter of Fiscal 2005 and the First Half of Fiscal 2005:

	Second Quarter				First Half
	Dec. 12, 2004		Dec. 14, 2003		Dec. 12, 2004		Dec. 14, 2003
	(in thousands)
Big Boy sales	$	43,147	$	40,673	$	95,994	$	91,831
Wholesale sales to licensees		2,103		1,430		4,277		3,254
Other wholesale sales		151		157		323		344
Total Big Boy Sales		45,401		42,260		100,594		95,429
Golden Corral sales		21,346		17,831		50,216		41,700
Consolidated restaurant sales	$	66,747	$	60,091	$	150,810	$	137,129

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The same store sales increase in Big Boy restaurants was 3.2 percent higher than the Second Quarter of Fiscal 2004. The second quarter improvement elevated the First Half of Fiscal 2005 to 1.8 percent higher than the First Half of Fiscal 2004, erasing a disappointing.6 percent increase in the First Quarter of Fiscal 2005. Customer counts in the Second Quarter of Fiscal 2005 were about even with counts from the Second Quarter of Fiscal 2004, an improvement from a 1.8 percent decline reported in the first quarter. A generally improving economy and modest increases in consumer spending probably contributed to this increase. The average guest check continued to rise during the Second Quarter of Fiscal 2005, which included a menu price increase of 1.5 percent implemented near the end of the first quarter. For the First Half of Fiscal 2005, a 1 percent decline in customer counts was more than covered by a 2.8 percent rise in the average guest check. Another price increase is currently being planned for February 2005.

The rest of the Big Boy sales increases came from the combination of more restaurants in operation and higher wholesale sales. Wholesale sales have increased significantly in both the Second Quarter of Fiscal 2005 and the First Half of 2005, as sixteen Big Boy restaurants licensed in northwestern Ohio have begun purchasing food and supplies from the commissary.

The Company currently operates 89 Big Boy restaurants. This count includes one that opened in August 2004 and one that re-opened in September 2004 that had been closed for rebuilding since May 2004. Both of these restaurants also added greatly to the improvement in second quarter sales and margins. One older, low volume Big Boy restaurant was closed in November 2004. During the last twelve months, one other new Big Boy was opened in January 2004 and one restaurant was relocated to a superior site within the same neighborhood. Two new buildings are likely to be constructed during the next twelve months, consisting of one rebuild and one relocation.

The Golden Corral sales increases were primarily the result of more restaurants in operation:

	Second Qtr.		First Half
	2005	2004	2005	2004
In operation at beginning of period	27	22	26	20
Opened during the period	2	2	3	4
In operation at end of period	29	24	29	24
Total sales weeks during period	339	272	763	607

One Golden Corral restaurant was under construction as of December 12, 2004. It should open in April 2005. Four more should open over the remainder of 2005.

Golden Corral same store sales decreased 5.9 percent during the Second Quarter of Fiscal 2005, pushing the decline in same store sales for the First Half of Fiscal 2005 to 4.7 percent. There was no appreciable improvement in the decline in customer counts during the Second Quarter of Fiscal 2005 when compared with the First Quarter of Fiscal 2005. For the First Half of Fiscal 2005, a 10.4 percent decline in customer counts could not be overcome by a 6.4 percent higher average guest check. Management continues to believe that most of the drop in customer counts can be attributed to a short-term phenomenon called the “sister-store” effect that occurs when a new restaurant is built near an existing one, and that the long-term benefits of the overall market development strategies far outweigh the short-term effects. Menu price increases of 3.3 percent and 2.3 percent were implemented respectively in November 2003 and May 2004.

Following general industry practice, same store sales comparisons include only those restaurants that had been open for five full fiscal quarters prior to the start of the comparison periods. Accordingly, only 21 Golden Corral restaurants are included in the same store sales comparisons for the Second Quarter of Fiscal 2005, and only twenty are included in the comparison for the First Half of Fiscal 2005. The Company operated 29 Golden Corral restaurants at the end of the Second Quarter of Fiscal 2005.

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Earnings before income tax for both operating segments are highlighted below (also see note F to the consolidated financial statements):

	2nd Quarter				First Half
	Dec. 12, 2004		Dec. 14, 2003		Dec. 12, 2004		Dec. 14, 2003
	(in thousands)
Big Boy earnings before income tax	$	5,884	$	5,216	$	11,918	$	11,861
Golden Corral earnings before inc. tax		572		398		1,682		1,326
Total earnings before income tax	$	6,456	$	5,614	$	13,600	$	13,187

The operating percentages shown in the following table are percentages of restaurant sales (including Big Boy wholesale sales) rather than of total revenue. The table supplements the discussion that follows which addresses cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.

	12 weeks 12/12/04			12 weeks 12/14/03			28 weeks 12/12/04			28 weeks 12/14/03
	Total	Big Boy	GC	Total	Big Boy	GC	Total	Big Boy	GC	Total	Big Boy	GC
Sales	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0
Food and Paper	35.0	33.0	39.2	33.8	31.8	38.4	35.0	32.7	39.5	33.9	31.7	39.0
Payroll and Related	33.3	34.1	31.4	34.0	35.0	31.7	33.3	34.4	31.0	33.8	34.9	31.3
Other Operating Costs (including opening costs)	19.8	17.5	24.6	20.5	18.4	25.5	20.4	18.6	24.0	20.3	18.6	24.3
Gross Profit	11.9	15.4	4.8	11.7	14.8	4.4	11.3	14.3	5.5	12.0	14.8	5.4

The higher food and paper cost percentages for the Second Quarter of Fiscal 2005 and the First Half of Fiscal 2005 are the result of higher commodity costs, especially meat and dairy, for both the Big Boy and Golden Corral segments. Beef continues to be a highly volatile market. Import and export restrictions can cause wide fluctuations in cost. Golden Corral food cost percentages were lower in the Second Quarter of Fiscal 2005 than the first quarter, reflecting a drop in the price of sirloin top butts used on the Great Steaks Buffet. Despite the lower price of sirloin in the Second Quarter of Fiscal 2005, Golden Corral food costs were still much higher than a year ago. Food and paper cost percentages for the Golden Corral segment are much higher than the Big Boy segment because of the all-you-can-eat nature of the Golden Corral concept, as well as its use of steak as a featured item on the buffet. Menu price hikes, as discussed above, helped to counter the effects of higher food costs a certain degree. However, menu prices can not be raised high enough at once to offset the significant increases that have been seen on a wide range of products.

Self insured claims experience is reviewed and adjusted annually during the first quarter. The assumptions used to measure these adjustments can be complex and sometimes require management to exercise considerable judgment. However, management does not consider the adjustments made during the annual review to be critical to the fair presentation of the Company’s financial condition or its results of operations for the fiscal year taken as a whole. Payroll and Related Costs for the first halves of both fiscal years received the benefit of favorable claims experience, as self insurance liabilities were lowered by $614,000 during the First Quarter of Fiscal 2005 and by $710,000 in the First Quarter of Fiscal 2004.

Payroll and related cost percentages moved downward in the Second Quarter of Fiscal 2005 and the First Half of Fiscal 2005 for both the Big Boy and Golden Corral segments, even when the benefit of the self insurance reserve

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adjustments that were apportioned to payroll and related costs is excluded. There has been no appreciable change in average pay rates for either Big Boy or Golden Corral. Reduced percentages for Big Boy are primarily the result of higher sales while maintaining service hours at last year’s levels. A significant reduction of Golden Corral service hours worked is responsible for the Golden Corral percentage improvement in spite of lower sales. However, the rate of reduction was slowed down in the Second Quarter of Fiscal 2005 when compared with the First Quarter of 2005.

Although pressure is once again mounting for an increase in the minimum wage, the Company believes it is unlikely that Federal legislation will be enacted to raise the minimum wage in the near term. However, if such legislation is enacted, the Company would counter the effects with higher menu prices, together with tighter payroll standards and a reduction in hours worked. New overtime rules initiated by the U. S. Department of labor went into effect in August 2004. The new rules had a negligible impact on the Company.

Net periodic pension cost (computed under Statement of Financial Accounting Standards No. 132 (R)) was $425,000 and $465,000 respectively, in the Second Quarter of Fiscal 2005 and the Second Quarter of Fiscal 2004. Net periodic pension cost was $1,045,000 and $1,075,000 respectively, for the First Half of Fiscal 2005 and the First Half of Fiscal 2004. The decline in the expense reflects the halt of escalating costs over the past few years that resulted from earlier years’ poor return on equity investments held by the Company’s defined benefit pension plans. Costs should continue to taper downward in future years, assuming expected returns on investments are achieved. Company contributions to the plans will exceed $2,125,000 for fiscal year 2005.

Other operating costs include occupancy costs such as maintenance, rent, depreciation, property tax, insurance and utilities; field supervision; accounting and payroll preparation costs; franchise fees for Golden Corral restaurants; opening costs and many other restaurant operating expenses. As most of these expenses tend to be more fixed in nature, same store sales increases cause these costs to be a lower percentage of sales, as reflected in the above table for Big Boy, especially for the Second Quarter of Fiscal 2005. Lower opening costs, especially in the Second Quarter of Fiscal 2005, caused Golden Corral’s other operating costs to be a lower percentage of sales for both the Second Quarter of Fiscal 2005 and the First Half of Fiscal 2005, when compared with comparable periods in fiscal 2004.

No impairment of assets was recorded in either the First Half of Fiscal 2005 or the First Half of Fiscal 2004.

Administrative and advertising expense increased $295,000 during the Second Quarter of Fiscal 2005, or 10 percent higher than the Second Quarter of Fiscal 2004. The First Half of Fiscal 2005 increased $662,000 or 9.6 percent higher than the First Half of Fiscal 2004. The largest component of these increases is higher spending for advertising and marketing that is proportionate with higher sales levels, reflecting the Company’s long standing policy to spend a constant percentage of Big Boy and Golden Corral sales on advertising and marketing.

Interest expense increased $58,000 during the Second Quarter of Fiscal 2005, or 9.9 percent higher than the Second Quarter of Fiscal 2004. The First Half of Fiscal 2005 increased $130,000 or 9.9 percent higher than the First Half of Fiscal 2004. The increase was caused by the combination of higher debt and higher interest rates. In early December 2004, the Company exercised its option to convert a $10,000,000 Bullet Loan from variable rate interest to a fixed rate of 5.57 percent for the remainder of the term. The conversion will create a spike in interest costs in the near term.

As a percentage of pre-tax earnings, the estimated effective tax rate for the entire year increased to 36 percent during the Second Quarter of Fiscal 2005, up from 34 percent in the first quarter. During the Second Quarter of Fiscal 2004, the rate was increased to 35.5 percent from 35 percent in the first quarter. These rates have been kept consistently low through the Company’s use of tax credits, principally the federal credit allowed for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.

Critical Accounting Policies

Two factors are required for an accounting policy to be deemed critical. The policy must be significant to the fair presentation of a company’s financial condition and its results of operations, and the policy must require management’s most difficult, subjective or complex judgments. Management believes that its policy used in accounting for the impairment of long-lived assets is the Company’s only critical accounting policy because of its potential for significant impact on financial condition and results of operations. A discussion of this policy can be found under the “Property and Equipment” caption of Note A to the consolidated financial statements.

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Liquidity and Capital Resources

Sales to restaurant customers provide the Company’s principal source of cash. The funds from sales are immediately available for the Company’s use, as substantially all sales to restaurant customers are received in cash or credit cards. Net earnings plus depreciation provide the primary source of cash provided by operating activities. Other sources of cash may include borrowing against credit lines, proceeds from employees’ exercising of stock options and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for discretionary objectives, including capital projects (principally restaurant expansion) and dividends.

The Company has historically maintained a strategic negative working capital position, a common practice in the restaurant industry. As significant cash flows are consistently provided by operations, and credit lines are readily available, the use of this practice should not hinder the Company’s ability to retire any of its obligations when due, including the aggregated obligations and commercial commitments shown in the table below.

Aggregated Information about Contractual Obligations and Commercial Commitments

December 12, 2004

		Payments due by period (in thousands)
		Total	year 1	year 2	year 3	year 4	year 5	more than 5 years
	Long-Term Debt	45,187	7,386	7,682	6,912	15,915	3,753	3,539
	Rent due under Capital Lease Obligations	5,058	934	779	2,781	192	119	253
1	Rent due under Operating Leases	15,707	1,587	1,541	1,368	1,204	1,130	8,877
	Unconditional Purchase Obligations	4,447	4,431	16	0
	Other Long-Term Obligations	None
	Total Contractual Cash Obligations	70,399	14,338	10,018	11,061	17,311	5,002	12,669

1 Not included are certain leases of former operating properties that the Company has assigned or sub-let to third parties. The average annual obligations of these leases approximate $50 over the next five years. The Company remains contingently liable for the performance of these leases. In the event of default by the assignees or sub-lessees, the Company generally retains the right to re-assign or re-sublet the properties.

The working capital deficit was $20,925,000 as of December 12, 2004. It was $20,348,000 as of September 19, 2004. The working capital deficit is expected to continue increasing at a modest, manageable pace as construction debt is prudently increased to supplement the use of internally generated cash to finance expansion plans. As of December 12, 2004, $9,000,000 remained available to be drawn against a Construction Draw Credit Facility, which expires September 1, 2006, unless extended. Additionally, a $5,000,000 working capital revolving line of credit (currently unused) is readily available if needed.

Operating cash flows were $11,491,000 in the First Half of Fiscal 2005, or $2,855,000 lower than the First Half of Fiscal 2004. The change is principally due to a decrease in accounts payable. Before including changes in assets and liabilities, cash flows from net earnings plus depreciation (and minimal asset dispositions) increased to $11,843,000 in the First Half of Fiscal 2005 from $11,648,000 in the First Half of Fiscal 2004.

Investing activities in the First Half of Fiscal 2005 included $13,139,000 in capital costs. The capital spending includes $7,166,000 for Golden Corral restaurants, principally for new restaurant construction and site acquisitions. Also included in the capital costs was $5,973,000 spent on Big Boy restaurants, consisting of new restaurant construction, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.

It is the Company’s policy to own the land on which it builds new restaurants; however, it is sometimes necessary to enter ground leases to obtain desirable land on which to build. Four of the 29 Golden Corral restaurants have been built on leased land. Another Golden Corral ground lease has been entered into for a restaurant that will open in the spring of 2005 (currently under construction). All of these leases have been accounted for as operating leases. As of

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December 12, 2004, the Company occupied a total of 28 restaurants pursuant to leases, eleven of which are capital leases under the provisions of Statement of Financial Accounting Standards No. 13 (SFAS 13), “Accounting for Leases” as amended.

Financing activities in the First Half of Fiscal 2005 included $7,500,000 of new debt borrowed against the Company’s credit lines. Scheduled and other payments of long-term debt and capital lease obligations amounted to $4,031,000 during the First Half of Fiscal 2005. Regular quarterly cash dividends paid to shareholders totaled $1,108,000. Dividends declared but not paid as of December 12, 2004 totaled $556,000. The Company expects to continue its 44 year practice of paying regular quarterly cash dividends.

The Company’s stock repurchase program expired October 7, 2004. It had authorized the repurchase of up to 500,000 shares of the Company’s common stock. No shares were acquired during the two year life of the program, as the price at which shares of the Company’s common stock had been traded did not warrant the utilization of the program.

Options to purchase 384,000 shares of the Company’s common stock remained outstanding as of December 12, 2004, including 261,000 fully vested shares at a weighted average price per share of $15.58. Proceeds of $219,000 were received during the First Half of Fiscal 2005 from employees and directors who acquired 15,000 shares through exercise of stock options granted by the Company’s 1993 Stock Option Plan. Shareholders approved the 2003 Stock Option and Incentive Plan in October 2003. Options to purchase 7,000 shares granted in October 2004 are included in the 384,000 options outstanding described above. The maximum number of shares that the new Plan may issue is 800,000.

No Big Boy restaurants were under construction as of December 12, 2004. Two buildings are likely to be constructed during the next twelve months, consisting of one rebuild and one relocation. The approximate cost to build and equip a new Big Boy restaurant ranges from $2,300,000 to $2,800,000, depending on land cost. Approximately one-fifth of the Company’s Big Boy restaurants are routinely renovated or decoratively updated each year at an average cost of $75,000 per restaurant. In addition, certain high-volume Big Boy restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies. A typical kitchen redesign costs approximately $125,000.

The Company reached a new agreement with Golden Corral Franchising Systems, Inc. in July 2004. The new agreement added 21 Golden Corrals to the development schedule, bringing the total to 62 restaurants to be in operation by December 31, 2011. Twenty-nine restaurants were in operation as of December 12, 2004. The build-out plan calls for five restaurants to be opened each year through December 2010, with the final three scheduled for 2011. Costs remaining to complete construction of the restaurant that was under construction as of December 12, 2004 were estimated at $2,147,000 as of December 12, 2004. On average, the cost to build and equip each Golden Corral restaurant is approximately $3,300,000, including land.

Risk Factors and Safe Harbor Statement

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) that are not historical facts are forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified in sentences that contain words such as “should”, “could”, “will”, “may”, “plan”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “believe” and similar words that are used to convey the fact that the statement being made is prospective and does not strictly relate to historical or present facts. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results. The Company undertakes no obligation to update any of the forward-looking statements that may be contained in this MD&A.

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels resulting in higher compliance costs to the Company. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to receive re-certification in ServSafe Training every five years.

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Other examples of risks and uncertainties facing the Company include, but are not limited to, the following: intense competition for customers; consumer perceptions of value, food quality and quality of service; changing consumer preferences, particularly based on concerns with nutritional content of the Company’s food or restaurant food in general; changing demographics in neighborhoods where the Company operates restaurants; changes in business strategy and development plans; the rising cost of quality sites on which to build restaurants; poor selection of restaurant sites; changes in the supply and cost of food; the effects of other inflationary pressures, especially higher costs for health care benefits and higher energy prices; rolling power outages; shortages of qualified labor; seasonal weather conditions, particularly during the winter months of the third quarter; natural disasters; fires or explosions; criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes; acts of terrorists or acts of war; civil disturbances and boycotts.

Risks and uncertainties also include rising variable interest rates; limitations on borrowing capacity; legal claims; changes in accounting standards; estimates used in preparing financial statements; disruptions to the business during transitions to new computer software; financial stability of technology vendors to support computer software over the long-term; unauthorized access to information systems; changes in governmental regulations regarding the environment; exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and minor labor regulations in particular; any future imposition by OSHA of costly ergonomics regulations on workplace safety; legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements; and legislation or court rulings that result in changes to tax codes.

The Company continually takes reasonable preventive measures to reduce its risks and uncertainties. However, the nature of some risks and uncertainties leaves the Company with little control. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of any affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company has no market risk exposure to interest rate changes as of December 12, 2004 as all of its debt is currently financed with fixed interest rates. The Company does not currently use derivative financial instruments to manage its exposure to changes in interest rates. The Company does not use foreign currency.

Big Boy restaurants utilize centralized purchasing and food preparation through the Company’s commissary. The Company believes the commissary operation ensures uniform product quality and safety, timeliness of distribution to restaurants and results in lower food and supply costs.

Food supplies are generally plentiful and may be obtained from any number of suppliers. Quality and price are the principal determinants of source. Commodity pricing affects the cost of many of the Company’s food products. Commodity pricing can be extremely volatile, affected by many factors, including import and export restrictions, production and the impact of weather on crops. Certain commodities, principally beef, chicken, pork, dairy products, fish, french fries and coffee, are generally purchased based upon market prices established with vendors. Purchase contracts for some of these items may contain contractual provisions that limit the price to be paid. The Company does not use financial instruments as a hedge against changes in commodity pricing.

For Golden Corral restaurants, the Company currently purchases substantially all food, beverage and other menu items from the same vendor that Golden Corral Franchising Systems, Inc. (the Franchisor) uses for its operations. Deliveries are made two to three times per week. Other vendors are available to provide products that meet the Franchisor’s specifications should the Company wish or need to make a change.

ITEM 4. CONTROLS AND PROCEDURES (Peters minutes of DCC)

The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) reviewed and evaluated the Company’s disclosure controls and procedures, as defined in Securities Exchange Act regulations 240.13a-15(e) and 240.15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 12, 2004.

The Company completed the second and final implementation phase of its enterprise information system in September 2004. Phase I of the implementation, which included new software modules for the General Ledger, Accounts Payable, Procurement, Inventory Control and Asset Management, was completed in April 2004. Phase II of the implementation incorporated Payroll and Human Resources modules into the system. Certain changes in the system of internal control were instituted to enhance the effectiveness of the system’s modules.

There were no other significant changes in the Company’s internal controls over financial reporting during the fiscal quarter ended December 12, 2004 that have materially affected, or are reasonably likely to affect, the Company’s Internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is the owner of a Golden Corral Restaurant located in North Canton, Ohio. In 2001, the Company’s general contractor, Fortney & Weygandt, Inc. (“Fortney”) constructed a Golden Corral Restaurant at the original location on the North Canton site. Complicated geological conditions at the site required that the restaurant be built on a structural slab (platform), which rested upon driven piles. The foundation system for the building had been designed by a Houston, Texas engineering firm, Maverick Engineering, Inc. (“Maverick”). Maverick was a subcontractor to the Company’s architect of record, LMH&T.

Shortly before the scheduled opening of the restaurant, it was discovered that, due to a combination of design and construction errors, the building had shifted, which caused separation of the building from its underground plumbing system. The Company elected to demolish the original structure, and subsequently built a new building on a different portion of the original parcel. The restaurant’s grand opening was, therefore, delayed until January 2003.

On July 30, 2002, the Company’s general contractor, Fortney, filed a Demand for Arbitration against the Company with the American Arbitration Association. Fortney sought recovery of its “outstanding contract balance,” in the sum of $293,638, plus interest, fees, and costs. Fortney contends that it is owed this money by the Company under the terms of the General Construction Contract. The Company has denied that it owes these monies to Fortney, and has filed a counterclaim against Fortney alleging defective construction. The Company’s claim against Fortney is for excess cost of construction, loss profit, interest and costs, in an amount exceeding $1,000,000.

On August 29, 2002, the Company filed a lawsuit in the Stark County, Ohio Court of Common Pleas against its former architect, LMH&T, alleging negligent design as a casual factor in the demise of the original structure. The Company sought damages including lost profits, interest, and costs exceeding $2,500,000. LMH &T brough into the lawsuit its structural engineering consultant, Maverick, as well as the Company’s soils consultant, Cowherd Banner Carlson Engineering (“CBC”).

In July 2003, the Company resolved all claims, counterclaims, and cross-claims, against and involving the trial court defendants. The trial court defendants, including LMH&T and Maverick, agreed to pay to the Company the sum of $1,700,000 in full and final settlement of all claims. The Company received the settlement funds in full during the first quarter of fiscal year 2004 and the case was dismissed.

The resolution between the Company and the trial court defendants (design team) is separate and apart from the dispute between Fortney and the Company, which is before the American Arbitration Association. In that action, Fortney continues to seek recovery of $293,638, plus interest, fees, and costs. The Company continues to seek the balance of its claim from Fortney.

From time to time, the Company is subject to various claims and suits in the ordinary course of business. The Company does not believe that any ultimate liability for such claims will have a material impact on its earnings, cash flows or financial position.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) EXHIBITS

3 (a) Third Amended Articles of Incorporation, filed as Exhibit (3) (a) to the Registrant’s Form 10-K Annual Report for 1993, is incorporated herein by reference.

3 (b) Code of Regulations, filed as Exhibit (3) (a) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.

3 (c) Amendments to the Code of Regulations adopted October 1, 1984, filed as Exhibit (3) (b) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.

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3 (d) Amendments to the Code of Regulations adopted October 24, 1996, filed as Exhibit (3) (c) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, is incorporated herein by reference.

10 (a) Intellectual Property Use and Noncompete Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, is incorporated herein by reference.

10 (b) Transfer Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, is incorporated herein by reference.

10 (c)1 First Amended and Restated Loan Agreement (Golden Corral) and Exhibit 10(c)2 Second Amended and Restated Loan Agreement (Revolving and Bullet Loans) between the Registrant and US Bank NA effective October 15, 2004, filed as exhibits 10(c)1 and 10(c)2 to the Registrant’s Form 10-Q Quarterly Report for September 19, 2004, are incorporated herein by reference.

10 (d) Area Development Agreement, Termination Agreement and Addendum effective July 20, 2004 between the Registrant and Golden Corral Franchising Systems, Inc., filed as Exhibit 10 (f) to the Registrant’s Form 10-K Annual Report for 2004, is incorporated herein by reference.

10 (e) Employment Agreement between the Registrant and Jack C. Maier effective May 29, 2000, filed as Exhibit (10) (d) to the Registrant’s Form 10-Q Quarterly Report for September 17, 2000, is incorporated herein by reference. *

10 (f) Employment Agreement between the Registrant and Craig F. Maier effective June 2, 2003, filed as Exhibit 10 (h) to the Registrant’s Form 10-K Annual Report for 2003, is incorporated herein by reference. *

10 (g) Frisch’s Executive Savings Plan effective November 15, 1993, filed as Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for September 17, 1995, is incorporated herein by reference. *

10 (h) Second Amendment to the Frisch’s Executive Savings Plan effective July 28, 2004, filed as Exhibit 10(h) to the Registrant’s Form 10-Q Quarterly Report for September 19, 2004, is incorporated herein by reference. *

10 (i) Frisch’s Executive Retirement Plan effective June 1, 1994, filed as Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for September 17, 1995, is incorporated herein by reference. *

10 (j) Amendment No. 1 to Frisch’s Executive Retirement Plan effective January 1, 2000, filed as Exhibit 10 (k) to the Registrant’s form 10-K Annual Report for 2003, is incorporated herein by reference.*

10 (k) 2003 Stock Option and Incentive Plan, filed as Appendix A to the Registrant’s Proxy Statement dated August 28, 2003, is incorporated herein by reference. *

10 (l) Forms of agreement to be used for stock options granted to employees and to non-employee directors under the Registrant’s 2003 Stock Option and Incentive Plan, filed as Exhibits 99.1 and 99.2 to the Registrant’s From 8-K dated October 1, 2004, are incorporated herein by reference. *

10 (m) Amended and Restated 1993 Stock Option Plan, filed as Exhibit A to the Registrant’s Proxy Statement dated September 9, 1998, is incorporated herein by reference. *

10 (n) Employee Stock Option Plan, filed as Exhibit B to the Registrant’s Proxy Statement dated September 9, 1998, is incorporated herein by reference. *

10 (o) Agreement between the Registrant and Craig F. Maier dated November 21, 1989, filed as

Exhibit (10) (g) to the Registrant’s Form 10-K Annual Report for 1990, is incorporated herein by reference. *

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10 (p) Frisch’s Nondeferred Cash Balance Plan effective January 1, 2000, filed as Exhibit (10) (r) to the Registrant’s Form 10-Q Quarterly Report for December 10, 2000, is incorporated herein by reference, together with the Trust Agreement established by the Registrant between Firstar Bank, N.A. (Trustee) (now known as US Bank) and Donald H. Walker (Grantor). There are identical Trust Agreements between Firstar Bank, N.A. (Trustee) (now known as US Bank) and Craig F. Maier, Paul F. McFarland, W. Gary King, Karen F. Maier, Ken C. Hull, Michael E. Conner, Todd M. Rion and certain other “highly compensated employees” (Grantors). *

10 (q) Senior Executive Bonus Plan effective June 2, 2003, filed as Exhibit (10) (s) to the Registrant’s Form 10-K Annual Report for 2003, is incorporated herein by reference.*

* denotes compensatory plan or agreement

15 Letter re: unaudited interim financial statements, is filed herewith.

31.1 Certification of Chief Executive Officer pursuant to rule 13a -14(a) is filed herewith.

31.2 Certification of Chief Financial Officer pursuant to rule 13a - 14(a) is filed herewith.

32.1 Section 1350 Certification of Chief Executive Officer is filed herewith.

32.2 Section 1350 Certification of Chief Financial Officer is filed herewith.

b). Reports on Form 8-K:

A Form 8-K was filed on October 1, 2004 reporting under item 1.01, Entry into a Material Definitive Agreement, to provide the forms of agreement to be used for stock options granted to employees and to non-employee directors under the Registrant’s 2003 Stock option and Incentive Plan. Copies of the forms of agreement were attached as Exhibits 99.1 and 99.2.

A Form 8-K was filed on October 18, 2004 reporting under item 2.02, Results of Operations and Financial Condition, the Registrant’s press release announcing financial results for the quarter ending September 19, 2004.

A Form 8-K was filed on October 19, 2004 reporting under item 2.03, Creation of a Direct Financial Obligation, the Registrant’s agreement to amend and restate its credit facilities with US Bank NA.

A Form 8-K was filed on January 10, 2005 reporting under item 2.02, Results of Operations and Financial Condition, the Registrant’s press release announcing financial results for the quarter ending December 12, 2004.

SIGNATURE

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.

	FRISCH’S RESTAURANTS, INC.                     (registrant)
DATE January 11, 2005
	BY	/s/ Donald H. Walker
		Donald H. Walker
		Vice President – Finance, Treasurer and Principal Financial and Accounting Officer

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