SECURITIES AND EXCHANGE COMMISSION ~~Washington, D.C. 20549~~

Washington, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 12, 2001.
OR
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

~~Commission~~For ~~File~~the ~~Number~~quarterly ~~1-10576~~period ended October 4, 2001.

SANTA BARBARA RESTAURANT GROUP, INC. (Exact name of registrant as specified in its charter.) OR

Delaware (State or other jurisdiction of incorporation or organization)		33-0403086 (I.R.S. Employer Identification No.)
3938 State Street, Suite 200 Santa Barbara, California (Address of principal executive offices)		93105 (Zip Code)
Registrants telephone number, including area code: (805) 563-3644
360 South Hope Avenue, Suite C300 Santa Barbara, California (Former address of principal executive offices)		93105 (Zip Code)

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

~~Indicate~~Commission ~~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~~File ~~12 months~~Number ~~(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 / /~~ 1-10576

~~As of~~SANTA ~~August 6,~~BARBARA ~~2001,~~RESTAURANT ~~the registrant had 13~~GROUP,~~123,988~~ ~~shares outstanding of its Common Stock, $~~INC.~~08 par value.~~

(Exact ~~SANTA~~name ~~BARBARA~~of ~~RESTAURANT~~registrant ~~GROUP, INC. INDEX~~as specified TOin ~~FORM~~its ~~10-Q PART I~~charter. ~~FINANCIAL INFORMATION~~ )

		Page
Delaware	33-0403086
Item 1.	Consolidated Financial Statements:
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
	Consolidated Balance Sheets as of July 12, 2001 and December 28, 2000	3
3938 State Street, Suite 200 Santa Barbara, California	93105
	Consolidated Statements of Income for the twelve and twenty-eight weeks ended July 12, 2001 and July 13, 2000	4
(Address of principal executive offices)	(Zip Code)
	Consolidated Statements of Cash Flows for the twenty-eight weeks ended July 12, 2001 and July 13, 2000	5
(805) 563-3644
	Notes to Consolidated Financial Statements	6
(Registrants telephone number, including area code:)
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	9
360 South Hope Avenue, Suite C300 Santa Barbara, California	93105
Item 3.	Market Risk	14
(Former address of principal executive offices)	(Zip Code)
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
Item 6.	Exhibits and Reports on Form 8-K	15
Signature		16

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 ý No o

As of November ~~PART~~ 1, I2001, the registrant had 12,896,315 shares outstanding of its Common Stock, $.08 ~~FINANCIAL~~par ~~INFORMATION~~ value.

SANTA ~~Item~~BARBARA 1.RESTAURANT ~~Consolidated~~GROUP, ~~Financial Statements~~ INC.

INDEX ~~SANTA~~TO ~~BARBARA~~FORM ~~RESTAURANT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS~~ 10-Q

			July 12, 2001			December 28, 2000
PART I. FINANCIAL INFORMATION
			(Dollars in thousands) (unaudited)
Item 1.	Condensed Consolidated Financial Statements:
ASSETS
	Condensed Consolidated Balance Sheets as of October 4, 2001 and December 28, 2000
Current assets:
	Condensed Consolidated Statements of Income for the twelve and forty weeks ended October 4, 2001 and October 5, 2000
Cash and cash equivalents			$	1,449		$	8,375
	Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 4, 2001 and October 5, 2000
Short-term investments				1,294			1,755
	Notes to Condensed Consolidated Financial Statements
Accounts receivable, net of allowance for doubtful accounts of $271,000 and $293,000 in 2001 and 2000, respectively				806			1,223
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current portion of notes receivable				207			202
Item 3.	Market Risk
Current portion of related party notes receivable				30			30
	PART II. OTHER INFORMATION
Inventories				689			762
Item 1.	Legal Proceeding
Current deferred tax assets				626			626
Item 6.	Exhibits and Reports on Form 8-K
Prepaid expenses				999			499
Signature
Other current assets				204			760
		Total current assets		6,304			14,232
Property and equipment, net				31,112			29,542
Property under capital leases, net				1,338			1,417
Investment in affiliated company				689			852
Notes receivable, net				2,230			2,206
Related party notes receivable, net				70			70
Costs in excess of net assets of businesses acquired, net of accumulated amortization of $740,000 in 2001 and $520,000 in 2000				14,723			15,695
Deferred tax assets				7,049			7,109
Other assets				1,850			1,683
			$	65,365		$	72,806
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current installments of long-term debt		$	1,200		$	1,200
	Current portion of capital lease obligations			372			372
	Accounts payable and accrued expenses			4,400			4,280
	Accrued salaries, wages and employee benefits			1,776			2,137
	Other current liabilities			2,049			2,689
		Total current liabilities		9,797			10,678
	Long-term debt, less current installments			3,923			4,560
	Capital lease obligations, less current portion			831			1,064
	Other long-term liabilities			1,644			1,925
Shareholders' equity:
	Common stock, $.08 par value, authorized 50,000,000 shares; 16,796,327 and 20,736,330 shares issued and 13,123,988 and 16,802,892 shares outstanding in 2001 and 2000, respectively			1,344			1,659
	Additional paid in capital			66,394			73,617
	Less cost of treasury stock, 3,672,339 and 3,933,438 shares in 2001 and 2000, respectively			(5,231	)		(5,616	)
	Accumulated deficit			(13,427	)		(15,081	)
	Accumulated other comprehensive income			90			—
		Total shareholders' equity		49,170			54,579
			$	65,365		$	72,806

3PART I. FINANCIAL INFORMATION

~~The~~Item ~~accompanying~~1. ~~notes~~Condensed ~~are~~Consolidated Financial ~~an integral part of the consolidated financial statements.~~ Statements

4SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONDENSED ~~SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES~~ CONSOLIDATED ~~STATEMENTS~~BALANCE ~~OF INCOME (In thousands, except per share amounts) (unaudited)~~ SHEETS

				Twelve Weeks Ended July 12, 2001			Twelve Weeks Ended July 13, 2000			Twenty-eight Weeks Ended July 12, 2001			Twenty-eight Weeks Ended July 13, 2000
ASSETS
Revenues:
		October 4,			December 28,
	Company-operated restaurant operations			$	19,413		$	30,200		$	46,642		$	71,199
		2001			2000
	Franchised restaurants				445			983			1,108			2,190
		(Dollars in thousands)
	Other				20			66			46			178
		(unaudited)
		Total revenues			19,878			31,249			47,796			73,567
Current assets:
Restaurant operating costs:
Cash and cash equivalents		$	1,578		$	8,375
	Food and packaging				6,013			9,824			14,735			23,010
Short-term investments		1,294			1,755
	Payroll and other employee benefits				5,910			10,263			13,960			23,740
Accounts receivable, net of allowance for doubtful accounts of $253,000 and $293,000 in 2001 and 2000, respectively		848			1,223
	Occupancy and other operating costs				4,806			7,294			11,473			16,842
Current portion of notes receivable		211			202
		Total restaurant operating costs			16,729			27,381			40,168			63,592
Current portion of related party notes receivable		30			30
	Advertising				579			869			1,632			2,183
Inventories		687			762
	Pre-opening expenses				8			74			82			151
Current deferred tax assets		626			626
	General and administrative				1,587			2,451			3,738			6,028
Prepaid expenses		1,076			499
		Total			2,174			3,394			5,452			8,362
Other current assets		196			760
	Operating income				975			474			2,176			1,613
Total current assets		6,546			14,232
	Interest expense				(165	)		(236	)		(406	)		(536	)
Property and equipment, net		32,343			29,542
	Other income (expense), net				76			482			297			(451	)
Property under capital leases, net		1,343			1,417
	Income before income tax expense				886			720			2,067			626
Investment in affiliated company		--			852
	Income tax expense				177			152			413			125
Notes receivable, net		2,143			2,206
	Net income			$	709		$	568		$	1,654		$	501
Related party notes receivable, net		70			70
Basic net income per share				$	.05		$	.03		$	.11		$	.03
Costs in excess of net assets of businesses acquired, net of accumulated amortization of $835,000 in 2001 and $520,000 in 2000		14,092			15,695
Diluted net income per share				$	.05		$	.03		$	.11		$	.03
Deferred tax assets		8,461			7,109
Basic weighted average shares outstanding					13,291			18,362			14,458			18,424
Other assets		2,045			1,683
Diluted weighted average shares outstanding					13,746			18,462			14,968			18,524
		$	67,043		$	72,806
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt		$	1,200		$	1,200
Current portion of capital lease obligations		372			372
Accounts payable and accrued expenses		6,229			4,280
Accrued salaries, wages and employee benefits		1,880			2,137
Other current liabilities		1,937			2,689
Total current liabilities		11,618			10,678
Long-term debt, less current installments		3,623			4,560
Capital lease obligations, less current portion		786			1,064
Other long-term liabilities		1,601			1,925
Shareholders’ equity:
Common stock, $.08 par value, authorized 50,000,000 shares; 14,497,078 and 20,736,330 shares issued and 12,896,315 and 16,802,892 shares outstanding in 2001 and 2000, respectively		1,344			1,659
Additional paid in capital		66,442			73,617
Less cost of treasury stock, 1,600,763 and 3,933,438 shares in 2001 and 2000, respectively		(5,926		)	(5,616		)
Accumulated deficit		(12,445		)	(15,081		)
Total shareholders’ equity		49,415			54,579
		$	67,043		$	72,806

The accompanying notes are an integral part of the condensed consolidated financial statements.

4SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONDENSED ~~SANTA BARBARA RESTAURANT GROUP, INC. AND SUBSIDIARIES~~ CONSOLIDATED STATEMENTS OF ~~CASH FLOWS (Dollars in thousands) (unaudited)~~ INCOME

			Twenty-eight Weeks Ended July 12, 2001			Twenty-eight Weeks Ended July 13, 2000
Cash flows from operating activities:
	Net income		$	1,654		$	501
	Adjustments to reconcile net income to net cash flows provided by operating activities:
		Depreciation and amortization		2,426			3,355
		Loss on equity investment in affiliate		—			1,121
		Loss on disposal of property and equipment		—			43
	Changes in operating assets and liabilities:
		Accounts receivable		417			46
		Inventories, prepaids and other current assets		129			(16	)
		Accounts payable and accrued expenses		120			(988	)
		Accrued salaries, wages and employee benefits		(361	)		461
		Other current liabilities		(640	)		(885	)
	Net cash provided by operating activities			3,745			3,638
Cash flows from investing activities:
	Proceeds from maturity of short-term investments			782			245
	Purchases of short-term investments			—			(21	)
	Issuance of related party and notes receivable			(76	)		(70	)
	Collections on related party and notes receivable			47			2,046
	Net change in other assets			(175	)		(235	)
	Proceeds from sale of property and equipment			—			13
	Purchases of property and equipment			(3,697	)		(4,647	)
		Net cash used in investing activities		(3,119	)		(2,669	)
Cash flows from financing activities:
	Repayment of capital lease obligations			(233	)		(541	)
	Repayment of long-term debt			(637	)		(300	)
	Proceeds from long-term borrowings and net borrowings under line of credit			—			500
	Purchase of treasury stock			(6,401	)		(254	)
	Net change in other long-term liabilities			(281	)		(737	)
		Net cash used in financing activities		(7,552	)		(1,332	)
Net decrease in cash and cash equivalents				(6,926	)		(363	)
Cash and cash equivalents at beginning of period				8,375			3,371
Cash and cash equivalents at end of period			$	1,449		$	3,008
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
		Interest	$	405		$	553
		Income taxes	$	205		$	2

(In thousands, except per share amounts)

~~The accompanying notes are an integral part of the consolidated financial statements.~~ (unaudited)

	Twelve Weeks			Twelve Weeks			Forty Weeks			Forty Weeks
	Ended			Ended			Ended			Ended
	October 4,			October 5,			October 4,			October 5,
	2001			2000			2001			2000
Revenues:
Company-operated restaurant operations	$	19,555		$	26,288		$	66,197		$	97,487
Franchised restaurants	476			788			1,584			2,978
Other	19			66			65			244
Total revenues	20,050			27,142			67,846			100,709

Restaurant operating costs:
Food and packaging	6,167			8,541			20,902			31,551
Payroll and other employee benefits	5,950			8,583			19,910			32,323
Occupancy and other operating costs	4,958			6,358			16,431			23,200
Total restaurant operating costs	17,075			23,482			57,243			87,074

Advertising	749			845			2,381			3,028
Pre-opening expenses	96			116			178			267
Loss on sale of JB’s	--			2,992			--			2,992
General and administrative	1,505			2,571			5,243			8,599
Total	2,350			6,524			7,802			14,886

Operating income (loss)	625			(2,864		)	2,801			(1,251		)

Interest expense	(146		)	(211		)	(552		)	(747		)
Other income, net	605			1,256			902			805
Income (loss) before income tax expense	1,084			(1,819		)	3,151			(1,193		)
Income tax expense	102			243			515			368
Net income (loss)	$	982		$	(2,062	)	$	2,636		$	(1,561	)

Basic net income (loss) per share	$	.07		$	(.12	)	$	.19		$	(.09	)
Diluted net income (loss) per share	$	.07		$	(.12	)	$	.18		$	(.09	)
Basic weighted average shares outstanding	13,112			17,273			14,009			18,040
Diluted weighted average shares outstanding	13,820			17,373			14,585			18,140

The ~~SANTA~~accompanying ~~BARBARA~~notes ~~RESTAURANT~~are ~~GROUP, INC.~~an ~~AND~~integral ~~SUBSIDIARIES Notes~~part toof ~~Consolidated~~the ~~Financial~~condensed consolidated ~~Statements~~ financial statements.

SANTA BARBARA 1RESTAURANT GROUP, INC. ~~Company~~ AND SUBSIDIARIES

~~Santa~~CONDENSED ~~Barbara~~CONSOLIDATED ~~Restaurant~~STATEMENTS ~~Group, Inc.,~~OF ~~a Delaware corporation, and subsidiaries (the "Company") is engaged in the food service industry. As of~~CASH ~~July 12, 2001, the Company operated 25 Timber Lodge Steakhouse restaurants, 47 La Salsa restaurants, and five Green Burrito restaurants. The Company also franchises 35 Green~~ ~~Burrito stand-alone restaurants, 198 dual-concept restaurants, one Timber Lodge Steakhouse, and 46 La Salsa restaurants for a total of 357 restaurants.~~ FLOWS

(Dollars in ~~2. Financial Statements~~ thousands)

~~The accompanying~~ (unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America, the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K as of and for the year ended December 28, 2000. )

In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of results expected for a full year. Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform with the fiscal 2001 presentation.

	Forty			Forty
	Weeks Ended			Weeks Ended
	October 4,			October 5,
	2001			2000
Cash flows from operating activities:
Net income (loss)	$	2,636		$	(1,561	)
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	3,491			4,684
(Gain) loss on equity investment in affiliate	(547		)	1,456
Loss on sale of JB’s	--			2,992
Loss on disposal of property and equipment	--			(327		)
Provision for deferred income taxes	(808		)
Changes in operating assets and liabilities:
Accounts receivable	415			56
Inventories, prepaids and other current assets	62			(1,913		)
Accounts payable and accrued expenses	1,949			(1,594		)
Accrued salaries, wages and employee benefits	(257		)	571
Other current liabilities	(752		)	(99		)
Net cash provided by operating activities	6,189			4,265

Cash flows from investing activities:
Proceeds from maturity of short-term investments	1,868			245
Purchases of short-term investments	--			(35		)
Issuance of related party and notes receivable	(95		)	(152		)
Collections on related party and notes receivable	149			2,120
Net change in other assets	(410		)	1,266
Proceeds from sale of property and equipment	--			13
Purchases of property and equipment	(5,911		)	(6,429		)
Net cash used in investing activities	(4,399		)	(2,972		)

Cash flows from financing activities:
Repayment of capital lease obligations	(278		)	(725		)
Repayment of long-term debt	(937		)	(935		)
Proceeds from long-term borrowings and net borrowings underline of credit	--			950
Repurchase of common stock	(7,048		)	(1,353		)
Net change in other long-term liabilities	(324		)	(1,314		)
Net cash used in financing activities	(8,587		)	(3,377		)

Net decrease in cash and cash equivalents	(6,797		)	(2,084		)
Cash and cash equivalents at beginning of period	8,375			3,371
Cash and cash equivalents at end of period	$	1,578		$	1,287
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	555		$	373
Income taxes	$	572		$	2

The accompanying 3.notes ~~Segment~~are ~~and~~an ~~Related~~integral ~~Information~~ part of the condensed consolidated financial statements.

~~The~~Notes ~~Company~~to ~~currently~~Condensed ~~operates two reportable segments: Steakhouse and Quick Serve Mexican. During fiscal 2000, a third reportable segment, Family Dining, was~~Consolidated ~~comprised of the Company's JB's and Galaxy Diner restaurants. The sale of this segment was completed on November 13, 2000. The Steakhouse segment is comprised of Timber Lodge Steakhouse which~~ ~~serves~~Financial dinner only. The Quick Serve Mexican segment is comprised of La Salsa and Green Burrito restaurants. The Company evaluates the performance of its operating segments based on income (loss) before income taxes. Statements

~~Summarized financial information concerning the Company's reportable segments is shown in the following table~~1. The corporate assets consist of corporate cash and cash equivalents, short-term investments, investments in affiliated companies, corporate notes receivable, and deferred income taxes for all periods presented. The corporate component of segment profit (loss) before tax includes Company

6Santa Barbara Restaurant Group, Inc., a Delaware corporation, and subsidiaries (the “Company”) is engaged in the food service industry. As of October 4, 2001, the Company operated 25 Timber Lodge Steakhouse restaurants, 49 La Salsa restaurants, and five Green Burrito restaurants. The Company also franchises 35 Green Burrito stand-alone restaurants, 197 dual-concept restaurants, one Timber Lodge Steakhouse, and 46 La Salsa restaurants for a total of 358 restaurants. Subsequent to quarter end, six franchised La Salsa restaurants have closed.

~~corporate general and administrative expenses, interest income and our equity income (loss) generated from our investments in affiliated companies for all periods presented~~2. Financial Statements

	Family Dining			Steakhouse			Quick Serve Mexican			Corporate			Total
	(Dollars in thousands)
Twelve Weeks Ended July 12, 2001
Revenues	$	—		$	10,055		$	9,823		$	—		$	19,878
Interest income		—			23			7			71			101
Interest expense		—			(33	)		(132	)		—			(165	)
Depreciation and amortization		—			553			499			—			1,052
Pre-opening expenses		—			—			8			—			8
Segment profit before tax	$	—		$	252		$	610		$	24		$	886
Twelve Weeks Ended July 13, 2000
Revenues	$	11,798		$	9,740		$	9,711		$	—		$	31,249
Interest income		45			23			13			171			252
Interest expense		(84	)		(11	)		(141	)		—			(236	)
Depreciation and amortization		482			494			449			—			1,425
Pre-opening expenses		—			74			—			—			74
Segment profit (loss) before tax	$	(477	)	$	172		$	650		$	375		$	720
Twenty-eight Weeks Ended July 12, 2001
Revenues	$	—		$	25,965		$	21,831		$	—		$	47,796
Interest income		—			58			12			250			320
Interest expense		—			(76	)		(330	)		—			(406	)
Depreciation and amortization		—			1,282			1,144			—			2,426
Pre-opening expenses		—			32			50			—			82
Segment profit before tax		—			1,087			828			152			2,067
Total assets as of July 12, 2001	$	—		$	33,388		$	21,860		$	10,117		$	65,365
Twenty-eight Weeks Ended July 13, 2000
Revenues	$	28,255		$	23,442		$	21,870		$	—		$	73,567
Interest income		97			39			32			260			428
Interest expense		(197	)		(25	)		(314	)		—			(536	)
Depreciation and amortization		1,133			1,129			1,093			—			3,355
Pre-opening expenses		—			151			—			—			151
Segment profit (loss) before tax		(886	)		862			1,332			(682	)		626
Total assets as of December 28, 2000	$	—		$	34,705		$	26,240		$	11,861		$	72,806

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America, the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K as of and for the year ended December 28, 2000.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered 4 necessary for a fair presentation have been included. Operating ~~Related~~results ~~Party~~for ~~Notes~~interim ~~Receivable~~ periods are not necessarily indicative of results expected for a full year. Certain prior year amounts in the accompanying condensed consolidated financial statements have been reclassified to conform with the fiscal 2001 presentation.

~~During the third quarter of fiscal 1999, the Company issued promissory notes to certain executives in the total amount of $153,000~~3. Segment Asand ofRelated ~~July 12, 2001, the outstanding balance of such notes is $100,000.~~ Information

The Company currently operates two reportable segments: Steakhouse and Quick Serve Mexican. During fiscal 2000, a third reportable 5 segment, Family Dining, was comprised of the Company’s JB’s and Galaxy Diner restaurants. The ~~Comprehensive~~sale ~~Income~~ of this segment was completed on November 13, 2000. The Steakhouse segment is comprised of Timber Lodge Steakhouse which serves dinner only. The Quick Serve Mexican segment is comprised of La Salsa and Green Burrito restaurants. The Company evaluates the performance of its operating segments based on income (loss) before income taxes.

~~The~~Summarized financial ~~Company~~information ~~applies~~concerning the ~~provisions~~Company’s ofreportable ~~Statement~~segments ofis ~~Financial~~shown ~~Accounting~~in the ~~Standards~~following ~~("SFAS") No~~table. ~~130,~~ The ~~"Reporting Comprehensive Income", which establishes~~corporate ~~rules~~ assets ~~for~~consist ~~the reporting and display~~ of ~~comprehensive~~corporate ~~income~~cash and ~~its~~cash ~~components.~~equivalents, ~~SFAS~~short-term ~~No. 130~~investments, investments ~~requires unrealized gains and losses~~ in ~~debt~~affiliated ~~and~~companies, ~~equity~~corporate ~~securities~~notes ~~adjustments~~receivable, ~~which~~and ~~are reported~~deferred ~~separately~~ income intaxes ~~stockholders'~~for ~~equity,~~all toperiods ~~be included in other comprehensive income~~presented. The ~~Total~~corporate ~~comprehensive~~component ~~income~~of ~~was~~segment ~~$800,000~~profit ~~for~~(loss) ~~the~~before ~~twelve~~tax ~~weeks ended~~includes ~~July 12,~~ corporate ~~2001~~general and ~~$1.7 million~~administrative ~~for~~expenses, ~~the~~interest ~~twenty-eight~~income ~~week~~and ~~period~~our ~~ending~~equity income ~~July 12,~~(loss) ~~2001.~~generated ~~The~~from ~~Company~~our ~~had~~investments noin ~~other~~affiliated ~~comprehensive~~companies ~~income items~~ for ~~the twelve and twenty-eight weeks~~all ~~ended~~ periods ~~July 13, 2000~~presented.

	Family						Quick Serve
	Dining			Steakhouse			Mexican			Corporate			Total
				(Dollars in thousands)
Twelve Weeks Ended October 4, 2001
Revenues	$	--		$	10,082		$	9,968		$	--		$	20,050
Interest income	--			13			5			63			81
Interest expense	--			(34		)	(112		)	--			(146		)
Depreciation and amortization	--			553			512			--			1,065
Pre-opening expenses	--			37			59			--			96
Segment profit before tax	$	--		$	(72	)	$	592		$	564		$	1,084

Twelve Weeks Ended October 5, 2000
Revenues	$	7,479		$	10,024		$	9,639		$	--		$	27,142
Interest income	26			5			58			33			122
Interest expense	(65		)	(10		)	(136		)	--			(211		)
Depreciation and amortization	360			498			491			--			1,349
Pre-opening expenses	--			107			9			--			116
Segment profit (loss) before tax	$	(446	)	$	78		$	369		$	(1,820	)	$	(1,819	)

Forty Weeks Ended October 4, 2001
Revenues	$	--		$	36,047		$	31,799		$	--		$	67,846
Interest income	--			71			17			313			401
Interest expense	--			(110		)	(442		)	--			(552		)
Depreciation and amortization	--			1,835			1,656			--			3,491
Pre-opening expenses	--			69			109			--			178
Segment profit before tax	--			1,015			1,420			716			3,151
Total assets as of October 4, 2001	$	--		$	33,078		$	23,234		$	10,731		$	67,043

Forty Weeks Ended October 5, 2000
Revenues	$	35,734		$	33,466		$	31,509		$	--		$	100,709
Interest income	123			49			218			314			704
Interest expense	(262		)	(35		)	(450		)	--			(747		)
Depreciation and amortization	1,493			1,627			1,564			--			4,684
Pre-opening expenses	--			258			9			--			267
Segment profit (loss) before tax	(1,521		)	1,009			1,924			(2,605		)	(1,193		)
Total assets as of December 28, 2000	$	--		$	34,705		$	26,240		$	11,861		$	72,806

64. Related ~~Calculation~~Party ofNotes ~~Earnings per Share~~ Receivable

		Twelve Weeks Ended July 12, 2001		Twelve Weeks Ended July 13, 2000			Twenty-eight Weeks Ended July 12, 2001			Twenty-eight Weeks Ended July 13, 2000
		(In thousands, except share and per share amounts)
Basic Earnings Per Share:
Numerator
	Net income	$	709	$	568		$	1,654		$	501
Denominator
	Weighted average shares outstanding		13,291		18,462			14,508			18,524
	Escrowed restricted shares		—		(100	)		(50	)		(100	)
	Basic weighted average shares outstanding		13,291		18,362			14,458			18,424
	Basic earnings per share:	$	.05	$	.03		$	.11		$	.03
Diluted Earnings Per Share:
Numerator
	Net income	$	709	$	568		$	1,654		$	501
Denominator
	Basic weighted average shares outstanding		13,291		18,362			14,458			18,424
Incremental common shares attributable to:
	Escrowed restricted shares		—		100			50			100
	Outstanding options		455		—			460			—
			455		100			510			100
Diluted weighted average shares outstanding			13,746		18,462			14,968			18,524
Diluted earnings per share		$	.05	$	.03		$	.11		$	.03

During the third quarter of fiscal 1999, the Company issued promissory notes to certain executives in the total amount of $153,000. As of October 4, 2001, the outstanding balance of such notes is $100,000.

~~For the twelve and twenty-eight week periods ended July 12, 2001 and July 13, 2000,~~ 5.~~9 million and 6.7 million shares, respectively, relating to the possible~~ Calculation ~~exercise~~ of ~~outstanding~~Earnings ~~stock options and warrants were not included in the computation of diluted earnings~~ per ~~share as their effect would have been anti-dilutive.~~ Share

7. Sale of JB's Family Restaurants, Inc.

	Twelve		Twelve			Forty			Forty
	Weeks Ended		Weeks Ended			Weeks Ended			Weeks Ended
	October 4, 2001		October 5, 2000			October 4, 2001			October 5, 2000
	(In thousands, except share and per share amounts)
Basic Earnings Per Share:
Numerator
Net income (loss)	$	982	$	(2,062	)	$	2,636		$	(1,561	)

Denominator
Weighted average shares outstanding	13,112		17,373			14,042			18,140

Escrowed restricted shares	--		(100		)	(33		)	(100		)

Basic weighted average shares outstanding	13,112		17,273			14,009			18,040
Basic earnings (loss) per share:	$	.07	$	(.12	)	$	.19		$	(.09	)

Diluted Earnings Per Share:
Numerator
Net income (loss)	$	982	$	(2,062	)	$	2,636		$	(1,561	)

Denominator
Basic weighted average shares outstanding	13,112		17,273			14,009			18,040

Incremental common shares attributable to:
Escrowed restricted shares	--		100			33			100
Outstanding options	708		--			543			--
	708		100			576			100

Diluted weighted average shares outstanding	13,820		17,373			14,585			18,140
Diluted earnings (loss) per share	$	.07	$	(.12	)	$	.18		$	(.09	)

OnFor the ~~November 13,~~twelve ~~2000~~and ~~the~~forty ~~Company~~week ~~completed~~periods ~~the~~ended ~~sale~~October of4, ~~its~~2001 ~~JB's~~and October ~~Family~~5, ~~Restaurants~~2000, ~~Inc.~~ ~~("JB's") subsidiary~~5.6 ~~JB's~~million ~~financial~~and ~~information~~7.0 ismillion ~~included in~~shares, ~~all~~respectively, ~~prior~~relating ~~year comparisons up~~ to the ~~closing~~possible ~~date.~~exercise ~~The operations~~ of ~~JB's~~outstanding ~~generated~~stock ~~revenues~~options ~~of $11.8 million~~ and ~~$28.2 million~~warrants ~~for~~were ~~the twelve and twenty-eight week periods ended~~not ~~July 13,~~ included ~~2000,~~in ~~and~~the ~~losses~~computation ~~from operations (before taxes)~~ of ~~$477,000~~diluted ~~and~~earnings ~~$886,000~~per ~~for~~share ~~the~~as ~~twelve~~their ~~and~~effect ~~twenty-eight~~would have ~~week~~been ~~periods ended July 13, 2000~~anti-dilutive.

86. Sale of JB’s Family Restaurants, Inc.

On November 13, 2000 the Company completed the sale of its JB’s Family Restaurants, Inc. (“JB’s”) subsidiary. ~~Item~~ JB’s 2financial information is included in all prior year comparisons up to the closing date. The ~~Management'~~operations of JB’s ~~Discussion~~generated revenues of $7.5 million and ~~Analysis~~$35.7 ofmillion ~~Financial~~for ~~Condition~~the twelve and forty ~~Results~~week periods ended October 5, 2000, and losses from operations (before taxes) of ~~Operations~~ $446,000 and $1,521,000 for the twelve and forty week periods ended October 5, 2000.

Item 2. Management’s ~~Overview~~ Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis should be read in conjunction with the unaudited consolidated financial statements and the notes thereto. The results of operations for the twelve and twenty-eight week periods ended July 13, 2000, include twelve and twenty-eight weeks of operating results for JB's which was sold on November 13, 2000 (see note 7 to Consolidated Financial Statements). The reduction of 55 Company-operated and 30 franchised restaurants associated with the sale are the principal reasons for the significant differences when comparing results of operations for the twelve and twenty-eight week periods ended July 12, 2001 with the results of operations for the twelve and twenty-eight week periods ended July 13, 2000. The comparability of future periods will also be affected by the aforementioned transaction. The costs associated with opening and integrating new restaurants or underperforming or unprofitable restaurants, if any, acquired or otherwise operated by the Company, may have a material adverse effect on the Company's results of operations. Overview

The following Management’s Discussion and Analysis should be read in conjunction with the unaudited consolidated financial statements and the notes ~~Results~~ thereto. The results of ~~Operations~~ operations for the twelve and forty week periods ended October 5, 2000, include twelve and forty weeks of operating results for JB’s which was sold on November 13, 2000 (see note 6 to Condensed Consolidated Financial Statements). The reduction of 55 Company-operated and 30 franchised restaurants associated with the sale are the principal reasons for the significant differences when comparing results of operations for the twelve and forty week periods ended October 4, 2001 with the results of operations for the twelve and forty week periods ended October 5, 2000. The comparability of future periods will also be affected by the aforementioned transaction. The costs associated with opening and integrating new restaurants or underperforming or unprofitable restaurants, if any, acquired or otherwise operated by the Company, may have a material adverse effect on the Company’s results of operations.

TheResults following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of certain items included in the Company's unaudited consolidated statements of income for the twelve and twenty-eight week periods ended July 12, 2001 and July 13, 2000. The twelve week periods ended July 12, 2001 and July 13, 2000 are referred to throughout this document as the second quarter of fiscal 2001 and 2000, respectively. Operations

			Twelve Weeks Ended July 12, 2001		Twelve Weeks Ended July 13, 2000(1)		Twenty-Eight Weeks Ended July 12, 2001		Twenty-Eight Weeks Ended July 13, 2000(1)
Revenues:
	Company-operated restaurant operations		97.7	%	96.6	%	97.7	%	96.8	%
	Franchised restaurants and other		2.3		3.4		2.3		3.2
		Total revenues	100.0		100.0		100.0		100.0
Restaurant operating costs:(2)
	Food and packaging		31.0		32.5		31.6		32.3
	Payroll and other employee benefits		30.4		34.0		29.9		33.3
	Occupancy and other operating costs		24.8		24.2		24.6		23.7
			86.2		90.7		86.1		89.3
Advertising(2)			3.0		2.9		3.5		3.1
Pre-opening expenses(2)			—		0.2		0.2		0.2
General and administrative			8.0		7.8		7.8		8.2
Operating income			4.9		1.5		4.6		2.2
Interest expense			(0.8	)	(0.8	)	(0.8	)	(0.7	)
Other income (expense), net			0.4		1.5		0.6		(0.6	)
Income before income taxes			4.5		2.3		4.3		0.9
Income tax expense			0.9		0.5		0.9		0.2
Net income			3.6	%	1.8	%	3.5	%	0.7	%

The following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of certain items included in the Company’s unaudited condensed consolidated statements of income for the twelve and forty week periods ended October 4, 2001 and October 5, 2000. The twelve week periods ended October 4, 2001 and October 5, 2000 are referred to throughout this document as the third quarter of fiscal 2001 and 2000, respectively.

	Twelve Weeks		Twelve Weeks		Forty		Forty
	Ended		Ended		Weeks Ended		Weeks Ended
	October 4, 2001		October 5, 2000(1)		October 4, 2001		October 5, 2000(1)
Revenues:
Company-operated restaurant operations	97.5	%	96.9	%	97.6	%	96.8	%
Franchised restaurants and other	2.5		3.1		2.4		3.2
Total revenues	100.0		100.0		100.0		100.0

Restaurant operating costs: (2)
Food and packaging	31.5		32.5		31.6		32.4
Payroll and other employee benefits	30.4		32.6		30.1		33.1
Occupancy and other operating costs	25.4		24.2		24.8		23.8
	87.3		89.3		86.5		89.3
Advertising (2)	3.8		3.2		3.6		3.1
Pre-opening expenses(2)	0.5		0.4		0.3		0.3
Loss on sale of JB’s	--		11.0		--		3.0
General and administrative	7.5		9.5		7.7		8.5

Operating income (loss)	3.1		(10.6	)	4.1		(1.2	)
Interest expense	(0.7	)	(0.8	)	(0.8	)	(0.7	)
Other income, net	3.0		4.6		1.3		0.8
Income (loss) before income taxes	5.4		(6.7	)	4.6		(1.2	)
Income tax expense	0.5		0.9		0.8		0.4
Net income (loss)	4.9	%	(7.6	)%	3.9	%	(1.5	)%

(1) ~~Results~~Includes ~~of Operations for~~ the ~~Twelve~~operating ~~Weeks~~results ~~Ended~~of ~~July 12,~~JB’s ~~2001~~for ~~as Compared to~~ the ~~Twelve~~entire ~~Weeks~~fiscal ~~Ended July 13,~~ 2000 period presented.

~~Revenues from Company-operated restaurants decreased $10.8~~(2) ~~million to $19.4 million for the second quarter of fiscal 2001 as compared with~~ ~~revenues~~ As ofa ~~$30.2 million~~percentage ~~during the second quarter~~ of ~~fiscal 2000. The decrease in~~ revenues isfrom ~~primarily attributable to the sale of JB's in fiscal 2000, which generated $11.5 million in revenues during the second quarter ended July 13, 2000. La Salsa same~~Company-~~store~~operated ~~sales increased 4~~restaurants.~~4% during the second quarter of 2001. Timber Lodge Steakhouse and Green Burrito same-store sales decreased by 5.8% and 3.9%, respectively during the second quarter of 2001.~~

~~Revenues~~Results ~~from franchised restaurants decreased $538,000 to $445,000 for the second quarter of fiscal 2001 as compared with revenues of $983,000 during the second quarter of fiscal~~ ~~2000. The decrease in revenues from franchised restaurants is principally due to the sale~~ of ~~JB's~~Operations ~~which~~for ~~generated $347,000 in franchise royalties in~~ the ~~second~~Twelve ~~quarter~~Weeks ofEnded ~~fiscal~~October ~~2000. Additionally~~4, ~~royalties~~ ~~earned~~2001 ~~from dual-concept restaurants declined by $106,000~~ as aCompared ~~result of the Company's decision~~ to ~~reduce~~ the ~~dual-concept royalty rate from four percent of revenues~~ to Twelve ~~three~~Weeks ~~percent~~Ended ofOctober ~~revenues~~5, ~~in exchange for a reduction in services provided by the Company.~~ 2000

~~Food and~~Revenues ~~packaging costs as a percentage of revenue~~ from Company-operated restaurants decreased $6.7 million to 31$19.0%6 million for the third ~~second~~ quarter of fiscal 2001 as compared with 32revenues of $26.5%3 ~~during~~million during the ~~second~~ third quarter of fiscal 2000. The decrease in ~~food~~revenues ~~and~~is ~~packaging~~primarily ~~costs~~attributable asto athe ~~percentage~~sale of ~~revenue~~JB’s ~~from~~in ~~Company-operated~~fiscal 2000, ~~restaurants~~which ~~for~~generated ~~the~~$7.3 ~~second~~million ~~quarter~~in ofrevenues ~~fiscal~~during ~~2001~~the asthird ~~compared~~quarter ~~with~~of fiscal ~~the~~2000. La ~~prior~~Salsa ~~year,~~same-store issales ~~primarily~~ increased ~~due~~3.0% toduring athe ~~260~~third ~~and~~quarter ~~180~~of ~~basis~~2001. Timber ~~point~~Lodge ~~reduction~~Steakhouse inand ~~costs~~Green atBurrito Lasame-store ~~Salsa~~sales decreased ~~and~~by ~~Timber~~7.7% ~~Lodge~~and ~~Steakhouse restaurants~~2.3%, respectively, ~~due~~during tothe ~~favorable~~third ~~pricing~~quarter ~~negotiated~~of ~~on purchase contracts for key food products~~2001.

~~Payroll~~Revenues from ~~and~~ franchised ~~other~~restaurants ~~employee benefits~~ decreased as$312,000 ~~a percentage of revenue from Company-operated restaurants~~ to ~~30.4%~~$476,000 for the ~~second~~third quarter of fiscal 2001 as compared with ~~34.0%~~revenues ~~for~~ of $788,000 during the ~~second~~third quarter of fiscal 2000. The decrease in ~~payroll~~revenues from ~~and~~franchised ~~other~~restaurants ~~employee~~is ~~benefits~~principally asdue ato ~~percent~~the sale of ~~revenue~~JB’s ~~from~~which generated ~~Company-operated~~$244,000 ~~restaurants~~in ~~for~~franchise royalties in the ~~second~~third quarter of fiscal 2000. Additionally, ~~2001~~royalties ~~as compared with~~earned ~~the~~ from ~~prior~~dual-concept ~~year,~~restaurants isdeclined ~~primarily~~by ~~attributable~~$8,000 toas ~~sale~~a result of ~~JB'~~the Company’s decision into ~~fiscal~~reduce ~~2000,~~the ~~which~~dual-concept ~~operated~~royalty ~~with~~rate ~~higher~~from ~~payroll~~four ~~and~~percent ~~benefit~~of ~~costs~~revenues to asthree a percent of revenues ~~(41.1%)~~in ~~during~~exchange ~~the~~for ~~second~~a ~~quarter~~reduction ofin ~~fiscal~~services provided ~~2000.~~ by the Company.

~~Occupancy~~ Food and ~~other operating~~ packaging costs ~~increased~~ as a percentage of revenue from Company-operated restaurants todecreased 24to 31.85% for the ~~second~~third quarter of fiscal 2001 as compared with 2432.25% ~~for~~ during the third ~~second~~ quarter of fiscal 2000. The decrease ~~increase~~ in ~~occupancy~~food and ~~other~~packaging ~~operating~~ costs as a ~~percent~~percentage of revenue from Company-operated restaurants isfor ~~primarily~~the ~~attributable~~second toquarter ~~increased~~of ~~rental~~fiscal ~~utility~~2001 as compared with the prior ~~costs~~ year, ~~depreciation,~~is primarily due to a 170 and ~~insurance~~90 ~~expenses~~basis point reduction in costs at La Salsa and Timber Lodge Steakhouse. restaurants, respectively, primarily due to favorable pricing negotiated on purchase contracts for key food products and continued operating improvements.

~~Advertising~~Payroll and other employee ~~costs~~ benefits decreased as a ~~percent~~percentage of revenue from Company-operated restaurants to 30.4% for the ~~second~~third quarter of fiscal 2001 ~~have~~as ~~remained~~compared ~~constant~~with 32.6% for the third quarter of fiscal 2000. The decrease in payroll and other employee benefits as ~~compared~~a percent of revenue from Company-operated restaurants for the second quarter of fiscal 2001 as compared with the prior year ~~period~~, ~~due~~is primarily attributable to ~~management'~~ the sale of JB’s ~~objective~~in tofiscal 2000, ~~spend~~which ~~approximately~~operated ~~three~~with tohigher ~~four~~payroll and benefit costs as a percent of revenues ~~restaurant~~(40.4%) ~~sales~~during onthe ~~advertising.~~third quarter of fiscal 2000.

~~Pre-opening~~Occupancy and other operating ~~expenses~~ costs ~~decreased~~increased ~~$66,000~~as toa ~~$8,000~~percentage of revenue from Company-operated restaurants to 25.4% for the ~~second~~third quarter of fiscal 2001 as compared towith ~~$74,000~~24.2% for the ~~second~~ third quarter of fiscal 2000. The ~~decrease~~increase isin occupancy ~~due~~and ~~to the~~other ~~reduction~~operating incosts ~~the~~as ~~number~~a percent of ~~conversions~~revenue from Company-operated restaurants is primarily attributable to increased rental, utility, depreciation, and ~~new~~insurance ~~openings~~expenses inat ~~fiscal~~La ~~2001~~Salsa ~~versus~~and ~~fiscal~~Timber ~~2000~~Lodge Steakhouse.

~~General and~~Advertising ~~administrative~~ costs ~~were~~as ~~$1.6 million~~a orpercent of ~~8.0%~~revenue offrom ~~total~~Company-operated ~~revenues~~restaurants for the ~~second~~third quarter of fiscal 2001 ashave ~~compared~~increased ~~with~~to $23.~~5 million or 7.~~8% ofas ~~total revenues~~compared ~~for~~to ~~the~~3.2% ~~second~~in ~~quarter~~the ofprior ~~fiscal~~year ~~2000~~period. Timber ~~The~~Lodge ~~decrease in general~~ and ~~administrative~~La ~~costs~~Salsa isremained ~~attributable~~constant at to4.4% ~~the~~and ~~sale~~3.3% of ~~JB's~~revenue, ~~in fiscal 2000~~respectively, ~~which~~as ~~incurred~~compared ~~$799,000~~to inthe ~~general~~previous ~~and~~year, ~~administrative~~ while ~~costs~~JB’s inadvertising ~~the~~cost ~~second~~was ~~quarter~~1.3% ofduring ~~fiscal~~the ~~2000.~~prior year period.

10Pre-opening expenses decreased $20,000 to $96,000 for the third quarter of fiscal 2001 as compared to $116,000 for the third quarter of fiscal 2000. During the third quarter of fiscal 2001, two new La Salsa restaurants opened. During the prior year period there were no new restaurant openings.

General and administrative ~~Interest~~ costs ~~expense~~were ~~remained~~$1.5 atmillion 0or 7.85% of total revenues ~~or $165,000~~ for the ~~second~~third quarter of fiscal 2001, as compared towith $~~236,000~~2.6 million or 9.5% of total revenues for the third ~~second~~ quarter of fiscal 2000. The decrease in ~~interest~~ ~~expense~~general ~~dollars~~and administrative costs is ~~due~~attributable to the sale of JB'’s in fiscal 2000., which incurred $735,000 in general and administrative costs in the third quarter of fiscal 2000.

~~Other income~~Interest (expense), ~~net,~~was ~~primarily~~at 0.7% ~~reflects~~of ~~interest~~total ~~income~~revenues onor ~~invested cash~~$146,000 ~~short-term~~for ~~investments, notes receivable and~~ the ~~Company's~~third ~~proportionate share of earnings or losses earned by our equity investments in affiliated companies. During the second~~ quarter of fiscal 2001, ~~other~~as compared ~~income, net, decreased $406,000~~ to $76211,000, asor ~~compared to $482~~0.8%,~~000~~ ~~during~~ for the ~~second~~third quarter of fiscal 2000. The ~~current~~decrease ~~quarter~~in ~~income is comprised primarily of~~ interest ~~income~~expense asdollars ~~compared~~is due primarily to ~~the~~a ~~same~~reduction ~~period~~of ~~last~~debt ~~year~~as ~~which~~a ~~also~~result ~~included~~of the ~~recognition~~sale of ~~Checkers~~JB’s ~~notes receivable discount amortized to income upon the note pay-off and other gains on investments~~ in ~~affiliates~~fiscal 2000.

~~The~~Other income (expense), net, primarily reflects interest income on invested cash, short-term investments, notes receivable and the Company'’s ~~effective~~proportionate ~~tax~~share ~~rates~~of ~~for~~earnings or losses earned by our equity investments in affiliated companies. During the ~~twelve~~third ~~week~~quarter ~~periods~~of ~~ended~~fiscal ~~July 12~~2001, other ~~2001~~income, ~~and~~net, ~~July 13~~decreased $651,000 to $605,000 as compared to $1.3 million during the third quarter of fiscal 2000. The ~~were~~current ~~20%~~quarter income is comprised primarily of the recognition of gain of $547,000 on sale of stock in an affiliated company and ~~21%~~interest income of $81,000. The ~~respectively~~prior year period included the recognition of a gain on sale of Checkers stock of $1.2 million and interest income of $122,000.

Income tax expense for the twelve week period ended October 4, 2001 includes an $808,000 tax benefit ~~Results~~ related ofto ~~Operations~~eliminating its valuation allowance for ~~the~~deferred ~~Twenty-eight~~tax ~~Weeks~~assets ~~Ended~~arising from ~~July 12,~~net operating losses that occurred prior to fiscal 2001, aspartially ~~Compared~~offset by a $455,000 tax expense to reflect the ~~Twenty~~Company’s 42% effective tax rate on a year-~~eight~~to-date ~~Weeks~~basis. The ~~Ended~~Company’s effective ~~July 13~~tax rate for the twelve week period ended October 5, 2000 was 20%.

~~Revenues~~Results of ~~from~~Operations ~~Company-operated restaurants decreased $24.6 million to $46.6 million~~ for the ~~twenty-eight~~Forty ~~weeks~~Weeks ~~ended~~Ended ~~July 12~~October 4, 2001 as ~~compared~~ ~~with~~Compared ~~revenues of $71.2 million during the twenty-eight weeks ended July 13, 2000. The decrease in revenues is primarily attributable~~ to the ~~sale of JB's in fiscal~~ ~~2000, which generated $27.5 million in revenues during the twenty-eight week period ended July 13, 2000. Same-store sales for Company-operated restaurants increased 4.5% at~~ LaForty ~~Salsa,~~Weeks ~~while~~Ended ~~decreasing~~October ~~3.0% at Timber Lodge Steakhouse and~~ 5~~.4% at Green Burrito for the twenty-eight weeks ended July 12~~, ~~2001 as compared to the comparable period last year.~~ 2000

Revenues from Company-operated ~~franchised~~ restaurants decreased $131.1 3 million to $166.1 2 million for the ~~twenty-eight~~ forty weeks ended ~~July 12~~October 4, 2001 as compared with revenues of $297.2 5 million during the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The decrease in revenues ~~from franchised restaurants~~ is ~~principally~~primarily ~~due~~attributable to the sale of JB'’s in fiscal 2000, which generated $~~791,000~~34.7 million in ~~franchise~~ ~~royalties~~revenues during the ~~prior~~forty ~~year~~ week period ended October 5, ~~coupled~~2000. Same-store ~~with~~sales afor ~~$214~~Company-operated restaurants increased 4.0% at La Salsa,~~000 year~~ ~~over~~while ~~year~~decreasing ~~reduction~~4.4% inat ~~dual-concept~~Timber ~~restaurant~~Lodge ~~royalties~~Steakhouse and 4.7% at Green Burrito for the forty weeks ended October 4, 2001 as compared to the comparable period last year.

~~Food~~Revenues from ~~and~~ franchised ~~packaging~~restaurants ~~costs~~decreased as$1.4 amillion ~~percentage~~to of$1.6 ~~revenue~~million ~~from Company-operated restaurants~~ for the ~~twenty-eight~~ forty weeks ended ~~July 12~~October 4, 2001 ~~decreased to 31.6%~~ as compared with ~~32.~~revenues of $3~~% for~~.0 million during the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The decrease in ~~food~~revenues ~~and packaging costs as a percentage of revenue~~ from ~~Company-operated~~franchised restaurants is ~~primarily~~principally due to athe ~~190~~sale ~~and~~of ~~100~~JB’s ~~basis~~which ~~point reduction~~generated in$1.0 ~~costs~~million atin Lafranchise ~~Salsa~~royalties ~~and~~during the ~~Timber~~prior ~~Lodge~~year ~~Steakhouse restaurants~~period, ~~respectively,~~coupled ~~due~~with toa ~~favorable~~$222,000 ~~pricing~~year ~~negotiated~~over onyear ~~purchase~~reduction ~~contracts~~in dual-concept ~~for~~restaurant ~~key food products~~royalties..

~~Payroll~~ Food and ~~other~~packaging costs ~~employee benefits decreased~~ as a percentage of revenue from Company-operated restaurants for the forty ~~twenty-eight~~ weeks ended ~~July 12~~October 4, 2001 decreased to 2931.96% as compared with 3332.34% for the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The decrease in ~~payroll~~food and ~~other~~packaging ~~employee~~costs ~~benefits~~ as a ~~percent~~percentage of revenue from Company-operated restaurants is ~~attributable~~primarily todue ~~sale of~~a ~~JB's~~180 inand ~~fiscal~~100 ~~2000,~~basis ~~which~~point reduction ~~operated~~in ~~with~~costs ~~higher~~at ~~payroll~~La Salsa and ~~benefit~~Timber ~~costs~~Lodge asSteakhouse arestaurants, respectively, ~~percent~~due ofto ~~revenues~~favorable ~~(39.9%)~~pricing ~~for~~negotiated ~~the~~on ~~twenty-eight~~purchase ~~week~~contracts ~~period~~for ~~ended~~key food ~~July 13,~~products ~~2000.~~and continued operating improvements.

~~Occupancy~~ Payroll and other ~~operating~~employee benefits ~~costs~~decreased ~~for the twenty-eight weeks ended July 12, 2001,~~ as a percentage of revenue from Company-operated restaurants for ~~increased~~the forty weeks ended October 4, 2001 to 2430.61% as compared with 2333.71% for the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The ~~increase~~decrease in ~~occupancy~~payroll and other ~~operating~~employee ~~costs~~benefits as a percent of revenue from Company-operated restaurants is attributable to sale of JB’s in ~~increased~~ fiscal ~~rental~~2000, ~~utility~~which ~~costs,~~operated ~~depreciation,~~with ~~and~~higher ~~insurance~~payroll ~~expenses~~and atbenefit Lacosts ~~Salsa~~as ~~and~~a ~~Timber~~percent of ~~Lodge~~revenues ~~Steakhouse~~(40.0%) for the forty week period ended October 5, 2000.

~~Advertising~~Occupancy and other operating costs for the forty weeks ended October 4, 2001, as a ~~percent~~percentage of revenue from Company-operated restaurants ~~for~~increased to 24.8% as compared with 23.8% for the ~~twenty-eight~~forty weeks ended ~~July 12,~~October ~~2001~~5, ~~have~~2000. The ~~remained~~increase ~~constant~~in asoccupancy ~~compared~~and ~~with~~other ~~the~~operating ~~prior~~costs as a percent of ~~year,~~ revenue ~~due~~from toCompany-operated ~~management's~~restaurants ~~objective~~is attributable to ~~spend~~increased ~~approximately~~rental, utility, ~~three~~depreciation, toand ~~four~~insurance ~~percent~~expenses ofat ~~restaurant~~La ~~sales~~Salsa onand ~~advertising.~~Timber Lodge Steakhouse.

11Advertising costs as a percent of revenue from Company-operated restaurants for the forty weeks ended October 4, 2001, have increased to 3.6% as compared with 3.1% in the prior year. The increase is primarily attributable to JB’s, which had advertising costs of 2.0% in the prior year.

For the ~~twenty-eight~~forty weeks ended October ~~July 12~~4, 2001, pre-opening expenses decreased $6989,000 to $82178,000 as compared to $~~151~~267,000 for the ~~twenty-eight~~forty weeks ended ~~July 13~~ October 5, 2000. During ~~The~~the ~~decrease~~forty isweeks ~~due~~ended toOctober ~~the~~4, 2001, ~~reduction~~five innew ~~the~~La ~~number~~Salsa ofrestaurants ~~conversions~~opened, ~~and~~compared ~~new~~to ~~openings~~one inTimber ~~fiscal~~Lodge opening ~~2001~~during ~~versus~~the ~~fiscal~~same ~~2000.~~period of the prior year.

General ~~and~~ and administrative costs were $35.7 2 million or 7.87% of total revenues for the ~~twenty-eight~~ forty weeks ended ~~July 12~~October 4, 2001, as compared with $68.0 6 million or 8.25% of total revenues for the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The decrease in general and administrative costs is attributable to the sale of JB'’s in fiscal 2000, which incurred $2.1 8 million in general and administrative costs for the ~~twenty-eight~~forty week period ended ~~July 13~~October 5, 2000.

Interest expense for the forty ~~twenty-eight~~ weeks ended ~~July 12~~October 4, 2001 was $~~406~~552,000 or 0.8% of total revenues as compared to $~~536~~747,000 or 0.7% of total revenues for the ~~twenty-eight~~ forty weeks ended October ~~July 13~~5, 2000. The decrease in interest expense dollars is primarily due to a reduction of debt as a result of the sale of JB'’s in fiscal 2000.

Other ~~income~~ ~~(expense)~~income, net, primarily reflects interest income on invested cash, short-term investments, notes receivable and the Company'’s proportionate share of earnings or losses earned by our equity investments in affiliated companies. For the ~~twenty-eight~~forty weeks ended ~~July 13~~October 4, ~~2000~~2001 other income ~~(expense)~~, net, increased $~~748~~97,000 to $~~297~~902,000 as compared to another ~~expense~~income, net, of $~~451~~805,000 for the ~~twenty-eight~~forty weeks ended ~~July 13~~October 5, 2000. The ~~prior~~current year ~~period~~includes ~~included~~a ~~losses~~gain on ~~equity~~the ~~investments~~sale of stock in ~~the~~an ~~amount~~affiliated company of $~~1.1 million~~547,000 ~~offset primarily~~and byinterest income of $401,000. The prior year period included interest income earned on invested cash and notes receivable of $704,000 and a $~~129~~210,000 net gain on equity investments and sale of stock in an affiliated company~~, and recognition of the Checkers notes receivable discount amortized to income upon the note payoff in fiscal 2000~~.

The Company'’s effective tax rate for the ~~twenty-eight~~forty week ~~periods~~period ended ~~July 12~~October 4, 2001 ~~and~~includes ~~July 13~~an $808,000 tax benefit related to the reversal of the Company’s reserves against its deferred tax asset, offsetting the 42% effective tax rate. The Company’s effective tax rate for the forty week period ended October 5, 2000 was 20%.

Effect of Inflation

Food and labor costs are significant costs exposed to inflationary factors in the Company's operations. Many of the Company's employees are paid hourly rates related to the statutory minimum wage; therefore, increases in the minimum wage increase the Company's costs. In addition, most of the Company's leases require it to pay base rents with escalation provisions based on the consumer price index, in addition to percentage rentals based on revenues, and to pay taxes, maintenance, insurance, repairs, and utility costs, all of which are expenses subject to inflation. The Company has generally been able to offset the effects of inflation and increases in the minimum wage through small menu price increases. There can be no assurance that the Company will be able to continue to offset the effects of inflation through menu price increases.

New Accounting Pronouncements

In June ~~1998~~ 2001, the Financial Accounting Standards Board ~~("FASB")~~ issued Statement of Financial Accounting Standards (SFAS) No. ~~133~~ 141, ~~"Accounting~~“Business ~~for Derivative~~Combinations”, ~~Instruments~~and SFAS No. 142, “Goodwill and ~~Hedging~~Other ~~Activities"~~Intangible ~~("SFAS 133")~~Assets”. SFAS ~~133~~ ~~establishes~~No. ~~accounting~~141 requires ~~and~~that ~~reporting~~all ~~standards~~business ~~for~~combinations ~~derivative~~be ~~instruments,~~accounted ~~including~~for ~~derivative~~under ~~instruments~~a ~~embedded~~single method in – ~~other~~the ~~contracts,~~purchase ~~and~~method. Use ~~hedging~~of ~~activities.~~the pooling-of-interests ~~SFAS 133,~~method asis ~~amended~~no bylonger permitted. SFAS ~~138,~~ isNo. ~~effective~~141 ~~for~~requires ~~all~~the ~~fiscal~~purchase ~~quarters~~method ofbe ~~fiscal~~used ~~years~~for ~~beginning~~business combinations initiated after June 15 30, ~~2000~~2001. SFAS ~~The~~No. ~~Company adopted~~142 ~~this~~requires ~~standard~~that ongoodwill ~~January 1~~no longer be amortized as an expense against earnings, ~~2001~~but instead, ~~and~~should ~~the~~be ~~application~~reviewed ofperiodically ~~this~~for impairment. Under ~~accounting~~SFAS ~~standard~~No. ~~did~~142, ~~not~~the amortization ~~have~~of agoodwill ~~material~~ceases ~~impact~~upon onadoption of the ~~Company's~~Statement ~~financial~~and ~~position,~~is ~~results~~effective for offiscal ~~operations~~years orbeginning ~~liquidity.~~after December 15, 2001.

InThe Company has ~~June 2001,~~ historically ~~the~~amortized ~~Financial~~its ~~Accounting~~goodwill ~~Standards~~over ~~Board~~its ~~issued~~estimated ~~Statement~~useful oflife. Beginning ~~Financial~~with ~~Accounting~~the ~~Standards~~adoption (of SFAS) No. ~~141~~ 142, the ~~"Business~~Company ~~Combinations",~~will ~~and~~cease ~~SFAS No~~amortizing its goodwill. ~~142,~~ The ~~"Goodwill~~Company ~~and~~recorded ~~Other~~amortization ~~Intangible~~expenses ~~Assets".~~in ~~SFAS~~the ~~No. 141~~amount ~~requires~~of $520,000 ~~that~~for ~~all~~the ~~business~~year ~~combinations~~ended beDecember ~~accounted~~28, 2000, $95,000 for ~~under~~the atwelve ~~single~~weeks ended ~~method—~~October 4, 2001, and $315,000 for the ~~purchase~~forty ~~method.~~weeks ~~Use~~ended ofOctober 5, 2001. While the Company has not ~~pooling-of-interests~~ completely ~~method~~analyzed isthe noimpact ~~longer~~of ~~permitted.~~adopting SFAS ~~No.~~ 141 ~~requires~~and 142, to the ~~purchase~~extent ~~method~~that no beimpairment ~~used~~charges ~~for~~are ~~business~~recorded ~~combinations~~upon ~~initiated~~adoption ~~after~~or ~~June 30~~application of SFAS No. 142, similar amounts of amortization will not be recorded in future periods.

12The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” in September 2001. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Management has not assessed whether the application of this standard will have a material effect on the Company’s financial position, results of operations or liquidity.

The Financial ~~2001.~~ Accounting ~~SFAS~~Standards ~~No. 142~~Board ~~requires~~issued ~~that~~Statement ~~goodwill~~of noFinancial ~~longer~~Accounting beStandards (“SFAS”) ~~amortized~~No. as144, an“Accounting ~~expense~~for ~~against~~the ~~earnings,~~Impairment ~~but~~or ~~instead,~~Disposal ~~should~~of beLong-Lives Assets” ~~reviewed~~in ~~periodically~~October ~~for impairment~~2001. ~~Under~~ SFAS No. ~~142,~~ ~~the~~144 ~~amortization~~ addresses offinancial ~~goodwill~~accounting ~~ceases~~and ~~upon~~reporting ~~adoption~~for the impairment or disposal of long-lived ~~the~~assets. SFAS ~~Statement~~No. ~~and~~144 is effective for fiscal years beginning after December 15, 2001. Management has not assessed whether the application of this standard will have a material effect on the Company’s financial position, results of operations or liquidity.

~~The Company~~Liquidity has historically amortized its goodwill over its estimated useful life. Beginning with the adoption of SFAS No. 142, the Company will cease amortizing its goodwill. The Company recorded amortization expenses in the amount of $520,000 for the year ended December 28, 2000, $94,000 for the twelve weeks ended July 12, 2001, and ~~$220,000~~Capital for the twenty-eight weeks ended July 12, 2001. While the Company has not completely analyzed the impact of adopting SFAS 141 and 142, to the extent that no impairment charges are recorded upon adoption or application of SFAS No. 142, similar amounts of amortization will not be recorded in future periods. Resources

The Company had cash and cash equivalents of approximately $1.6 million at October 4, 2001 and $8.4 million at December 28, ~~Liquidity~~ 2000. The decrease in cash and ~~Capital~~cash ~~Resources~~ equivalents is primarily due to the use of approximately $5.9 million to fund purchases of equipment and other capital improvements and $8.6 million utilized in financing activities, partially offset by $6.2 million provided by operating activities and cash received from the sale of investments in the amount of $1.9 million. The Company has eliminated its valuation allowance for deferred tax assets arising from net operating losses that occurred prior to fiscal 2001, and is recording tax expense at a 42% effective tax rate. It is expected that cash outlays for taxes will be at a substantially lower rate than 42% due to utilization of net operating loss carryforwards.

~~The~~Net ~~Company had~~ cash ~~and~~provided by ~~cash~~operating ~~equivalents~~activities ofwas ~~approximately~~ $16.4 2 million atduring ~~July 12~~the forty week period ended October 4, 2001 ~~and~~which ~~$8.4 million~~included atnet ~~December 28,~~income ~~2000~~of $2.6 ~~The decrease~~million inand ~~cash~~depreciation and amortization ~~cash~~of ~~equivalents~~$3.5 ismillion. Investing ~~primarily~~activities ~~due~~required to the ~~use~~Company ofto ~~approximately~~use $35.7 9 million toin cash to fund ~~purchases~~capital ofadditions ~~equipment~~partially ~~and~~offset ~~other~~by ~~capital~~proceeds ~~improvements~~from ~~and~~the ~~$7.6 million~~sale ~~utilized~~of ininvestments ~~financing~~ in ~~activities,~~the ~~partially~~amount ~~offset~~of by $31.7 9 million. Financing ~~provided~~activities byincluded ~~operating~~the ~~activities~~use ~~and~~of ~~cash~~$7.0 ~~received~~million ~~from~~of ~~the~~cash ~~sale~~to ofacquire 4.0 ~~investments~~million inshares of the ~~amount~~Company’s ofstock and $~~782~~937,000. of cash to pay down long-term debt.

~~Net cash~~During ~~provided~~the byfirst ~~operating~~forty ~~activities~~weeks ~~was~~ended ~~$3.7 million~~October ~~during~~4, 2001, the ~~twenty-eight~~Company opened ~~week~~three ~~period~~new ~~ended~~La ~~July 12,~~Salsa ~~2001~~restaurants ~~which~~at ~~included~~a ~~net~~cost ~~income~~ of approximately $~~1.7 million~~350,000 ~~and~~per ~~depreciation~~ restaurant and ~~amortization~~acquired two restaurants which were converted to the La Salsa concept for a total cost of approximately $2270,000 per restaurant.~~4 million.~~ The ~~Investing~~Company ~~activities~~also ~~required~~re-imaged eight La Salsa restaurants during the ~~Company~~first tothree ~~use~~quarters of fiscal 2001 at an average cost of approximately $345,000 per restaurant.7 ~~million~~ The inCompany ~~cash~~plans to ~~fund~~remodel ~~capital~~eight ~~additions~~to ~~partially~~ten ~~offset~~additional byLa ~~proceeds~~Salsa restaurants ~~from~~during ~~the~~fiscal ~~sale~~2001. The of Company ~~investments~~also inplans ~~the~~to ~~amount~~open approximately five new La Salsa restaurants at a cost of approximately $~~782~~350,000. ~~Financing~~each ~~activities~~during ~~included~~ the ~~use~~remainder of ~~$6.4 million~~fiscal of2001, ~~cash~~and is currently negotiating leases to ~~acquire~~further ~~3.6 million~~expand ~~shares~~La ofSalsa in fiscal 2002. In addition, the Company's ~~stock~~plans ~~and~~to ~~$637,000~~open one new Timber Lodge Steakhouse restaurant at a cost of ~~cash~~approximately to$2.0 ~~pay~~million ~~down~~ during ~~long-term~~fiscal ~~debt~~2001.

~~During the~~The ~~first twenty-eight weeks ended July 12, 2001, the~~ Company believes ~~opened~~it ~~one~~will ~~new~~be Laable ~~Salsa~~to ~~restaurant~~meet atits aworking ~~cost~~capital ofrequirements ~~approximately~~through ~~$400,000 and acquired two restaurants which~~its ~~were~~ available ~~converted~~cash toand ~~the~~cash Laequivalents ~~Salsa~~and ~~concept~~cash ~~for~~flows afrom ~~total cost of approximately $270,000 per restaurant~~operations. The Company ~~also~~may ~~re-imaged~~require ~~four~~additional Lafunds ~~Salsa~~to support ~~restaurants~~its ~~during~~working ~~the~~capital ~~first~~requirements ~~half~~or offor ~~fiscal~~other ~~2001 at~~purposes, anincluding ~~average~~the opening ~~cost~~ of ~~approximately~~new ~~$61~~restaurants,~~000~~ ~~per~~remodeling ~~restaurant.~~of ~~The~~certain ~~Company~~restaurants, ~~plans~~acquisitions toand purchases ~~remodel~~of ~~three~~the toCompany’s ~~five~~common ~~additional~~stock, Laand ~~Salsa~~may ~~restaurants~~seek ~~during fiscal 2001. The Company also plans~~ to ~~open~~raise ~~approximately~~such additional ~~seven~~ funds ~~new~~through Lapublic ~~Salsa~~or ~~restaurants~~private atequity aand/or ~~cost~~debt ~~of approximately $350~~financing,~~000~~ ~~each during~~ the ~~remainder~~sale of assets ~~fiscal~~or ~~2001,~~from ~~and~~other ~~is currently negotiating leases to further expand La Salsa in fiscal 2002~~sources. In addition, ~~the~~ ~~Company~~much ~~plans~~of tothe ~~open~~real ~~one~~properties ~~new~~owned ~~Timber~~by ~~Lodge~~the ~~Steakhouse~~Company ~~restaurant~~and atused afor ~~cost~~its restaurant ofoperations ~~approximately $2.0 million during fiscal 2001.~~ are

~~The Company~~unencumbered ~~believes it will be able to meet its working capital requirements through its available cash~~ and ~~cash equivalents and cash flows from operations. The Company may require~~ ~~additional funds to support its working capital requirements or for other purposes, including the opening of new restaurants, remodeling of certain restaurants, acquisitions and purchases of the~~ Company's common stock, and may seek to raise such additional funds through public or private equity and/or debt financing, the sale of assets or from other sources. In addition, much of the real properties owned by the Company and used for its restaurant operations are unencumbered and could be used by the Company as collateral for debt financing; however, there can be no assurance that real estate financing or other financing will be available or that, if available, such financing will be obtainable on terms favorable or acceptable to the Company.

Cautionary ~~Cautionary~~ Statement

The foregoing Management'’s Discussion and Analysis of Financial Condition and Results of Operations contains various "“forward-looking statements"” within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21B of the Securities and Exchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectations or belief concerning future events, including the following: any statements regarding future restaurant openings or remodels, any statements regarding the continuation of historical trends, and any statements regarding the sufficiency of the Company’s cash balances and cash generated from operating and financing activities for the Company’s future liquidity and capital resource needs. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “should”, and similar expressions are intended to identify forward-looking statements.

13The Company’s actual results could differ materially from those stated or implied in the forward-looking statements included in the discussion of future operating results and expansion strategy and elsewhere in this report as a result, among other things, of the following:

~~Securities~~(i) ~~Exchange~~The ~~Act~~restaurant ofindustry ~~1933,~~is asa ~~amended,~~highly ~~and~~competitive ~~Section 21B~~industry ofwith ~~the~~many ~~Securities~~well established competitors; (ii) The Company’s results can be impacted by changes in consumer tastes and ~~Exchange~~the ~~Act~~level of ~~1934~~consumer acceptance of the Company’s restaurant concepts; local, asregional ~~amended.~~and ~~Forward-looking~~national ~~statements~~economic ~~represent~~conditions; the seasonality of the Company'’s ~~expectations~~business; ordemographic ~~belief concerning~~trends; ~~future~~traffic ~~events,~~patterns; ~~including~~consumer perception of food safety; employee availability; the ~~following:~~cost ~~any~~of ~~statements~~advertising ~~regarding~~and ~~future~~media; ~~restaurant~~government ~~openings~~actions orand ~~remodels,~~policies; ~~any~~inflation; ~~statements~~and ~~regarding~~increases in various costs; (iii) The Company’s ability to expand is dependent upon various factors such as the ~~continuation~~availability of ~~historical~~attractive ~~trends~~sites for new restaurants, ability to obtain appropriate real estate sites at acceptable prices; ability to obtain all governmental permits including zoning approvals and ~~any~~liquor ~~statements regarding~~licenses ~~the~~on ~~sufficiency~~a timely basis, impact of ~~the~~government ~~Company's~~moratoriums ~~cash~~or ~~balances~~approval ~~and~~processes ~~cash~~which ~~generated~~could ~~from~~result ~~operating~~in ~~and~~significant ~~financing~~delays, ~~activities~~ability ~~for~~to ~~the~~obtain ~~Company's~~all ~~future~~necessary ~~liquidity~~contractors and ~~capital~~subcontractors, ~~resource~~the ~~needs.~~ability ~~Without~~to ~~limiting~~generate ~~the foregoing~~or borrow funds, the ~~words~~ability ~~"believes"~~to negotiate suitable lease terms, ~~"anticipates"~~and the ability to recruit and train skilled management and restaurant employees. (iv) Price and availability of commodities and utilities, ~~"plans"~~including but not limited to such items as beef, ~~"expects"~~chicken, ~~"should"~~shrimp, and ~~similar~~cheese ~~expressions~~ are ~~intended~~subject to ~~identify~~fluctuations ~~forward-looking~~and ~~statements.~~could increase or decrease more than the Company expects; and/or (v) Weather and acts of God could result in construction delays and also adversely affect the results of one or more stores for an indeterminate amount of time.

The Company'sItem actual3. resultsMarket could differ materially from those stated or implied in the forward-looking statements included in the discussion of future operating results and expansion strategy and elsewhere in this report as a result, among other things, of the following: Risk

The Company has a term note payable and revolving note payable which bear interest at LIBOR plus 4.0% ~~Item~~ and 3.75%, ~~Market~~respectively. The ~~Risk~~ total debt outstanding under both agreements at October 4, 2001 is $4.8 million. A hypothetical increase of 100 basis points in short-term interest rates would result in a reduction of approximately $48,000 in annual pre-tax earnings.

~~The~~PART ~~Company~~II holds publicly-traded common stock of an affiliated restaurant company. The fair value of this security at July 12, 2001 was $689,000. The potential loss in fair value, using a hypothetical 10% and 20% decline in the price, is estimated to be approximately $69,000 and $138,000, respectively. Such loss in fair value would not impact the Company's financial position, results of operations or cash flows, unless the Company liquidated this investment.

~~Additionally, the~~OTHER Company has a term note payable and revolving note payable which bear interest at LIBOR plus 4.0% and 3.75%, respectively. The total debt outstanding under both agreements at July 12, 2001 is $5.1 million. A hypothetical increase of 100 basis points in short-term interest rates would result in a reduction of approximately $51,000 in annual pre-tax earnings. INFORMATION

14Item 1. Legal Proceedings

The Company is from time to time the subject of complaints or lawsuits from customers alleging illness, ~~PART~~ injury ~~II OTHER~~or ~~INFORMATION~~ other food quality, health or operational concerns. The Company also is the subject of claims or allegations from employees and franchisees from time to time. A lawsuit or claim could result in an adverse decision against the Company and could materially adversely affect the Company or its business.

Item 16. Exhibits ~~Legal~~and Reports ~~Proceedings~~ on Form 8-K

The Company is from time to time the subject of complaints or lawsuits from customers alleging illness, injury or other food quality, health or operational concerns. The Company also is the subject of claims or allegations from employees and franchisees from time to time. A lawsuit or claim could result in an adverse decision against the Company and could materially adversely affect the Company or its business. (a) Exhibits:

(i) 10.20 Form of ~~Item~~employment 4.agreement ~~Submission~~executed ofby Theodore ~~Matters~~Abajian toand aSanta ~~Vote~~Barbara ofRestaurant ~~Security~~Group, ~~Holders~~ Inc.

~~The~~(ii) 10.21 Stock ~~Annual~~Purchase ~~Meeting~~Agreement ofby ~~Stockholders~~and ofbetween the Company ~~was~~and ~~held~~CKE ~~on August 6~~Restaurants, ~~2001~~Inc. Atdated ~~the~~August ~~meeting~~20, ~~the following actions were taken by the stockholders~~2001.

~~Results of~~(b) Current ~~voting~~Reports ~~for~~on ~~the~~Form ~~Directors was as follows~~8-K:

~~William P~~(i) None. Foley, II Charles Rolles Frank P. Willey Burt Sugarman Andrew F. Puzder Norman N. Habermann Ronald B. Maggard For: 11,770,584 For: 11,762,456 For: 11,765,626 For: 11,743,756 For: 11,750,271 For: 11,748,756 For: 11,747,756 Withheld: 331,258 Withheld: 339,386 Withheld: 336,216 Withheld: 358,086 Withheld: 351,571 Withheld: 353,086 Withheld: 354,086

~~A proposal to approve an amendment to the Company's 1998 Stock Option Plan:~~ SIGNATURE

~~For:~~Pursuant ~~Against:~~to the ~~Abstain:~~requirements ~~7,795,401~~of ~~982,518~~the ~~124~~Securities Exchange Act of 1934,~~947~~ the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Item 6. Exhibits and Reports on Form 8-K

	Santa Barbara Restaurant Group, Inc.
	(Registrant)

Date:	By:	/s/ TED ABAJIAN
November 16, 2001		Ted Abajian
		President and Chief Executive Officer
		(Principal Executive, Financial and Accounting Officer)

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.

		SANTA BARBARA RESTAURANT GROUP, INC. (Registrant)
August 21, 2001		By:		/s/ TED ABAJIAN Ted Abajian President and Chief Executive Officer (Principal Executive, Financial and Accounting Officer)

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