FURRS BISHOPS INC, S-1/A, 1996-08-07

FURRS BISHOPS INC
S-1/A, 1996-08-07
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As filed with the Securities and Exchange Commission on August 7, 1996
Registration No. 333-4576

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

FURR'S/BISHOP'S, INCORPORATED
(Exact name of registrant as specified in its charter)

DELAWARE 5812 75-2350724
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

6901 QUAKER AVENUE
LUBBOCK, TEXAS 79413
(806) 792-7151
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

KEVIN E. LEWIS
FURR'S/BISHOP'S, INCORPORATED
6901 QUAKER AVENUE
LUBBOCK, TEXAS 79413
(806) 792-7151
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

WITH A COPY TO:
PATRICK J. FOYE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000

Approximate date of commencement of proposed sale of securities to the public:
From time to time after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. (X)

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

FURR'S/BISHOP'S, INCORPORATED

Cross reference Sheet Showing Location in Prospectus
of Information Required by Form S-1

Registration Statement Item Location in Prospectus

A. Information About the Transaction

1. Forepart of Registration Facing Page; Cross
Statement and Outside Front Reference Sheet; Front
Cover Page of Prospectus Cover Page

2. Inside Front and Outside Inside Front Cover Page
Back Cover Pages of
Prospectus

3. Summary Information, Risk Prospectus Summary; Risk
Factors and Ratio of Factors
Earnings to Fixed Charges

4. Use of Proceeds Use of Proceeds

5. Determination of Offering *
Price

6. Dilution *

7. Selling Security Holders Selling Security Holders

8. Plan of Distribution Plan of Distribution

9. Description of Securities Description of Capital
to be Registered Stock

10. Interests of Named Experts Legal Matters; Experts
and Counsel

11. Information With Respect to Outside Front Cover Page;
the Registrant Available Information;
Prospectus Summary;
Background; The
Restructuring; Business;
Risk Factors; Market for
Common Stock and Related
Stockholder Matters;
Selected Historical
Financial Data;
Management's Discussion
and Analysis of Results
of Operations and
Financial Condition;
Management; Security
Ownership of Certain
Beneficial Owners and
Management; Description
of Capital Stock;
Financial Statements

12. Disclosure of Commission *
Position on Indemnification
for Securities Act
Liabilities

________________________
* Omitted because the item is inapplicable or the answer is negative.

[FLAG]

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.

SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED AUGUST 7, 1996

PROSPECTUS

FURR'S/BISHOP'S, INCORPORATED

44,751,247 SHARES OF COMMON STOCK
________________________

This Prospectus relates to the public offering by the selling
security holders (the "Selling Security Holders") of 44,751,247
shares (the "Shares") of common stock, par value $.01 per share
("Common Stock"), of Furr's/Bishop's, Incorporated, a Delaware
corporation (the "Company").

On July 31, 1996, the last reported sale price of a share of
Common Stock on the New York Stock Exchange was $1-3/8.

SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN RISKS
INVOLVED IN THE PURCHASE OF THE SHARES.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________

The Selling Security Holders directly or through agents,
dealers or underwriters may sell the Shares from time to time on
terms to be determined at the time of sale. To the extent
required, the specific Shares to be sold, the names of the
Selling Security Holders, the respective purchase prices and
public offering prices, the names of any agent, dealer or
underwriter and applicable commissions or discounts with respect
to a particular offering will be set forth in an accompanying
Prospectus Supplement or, if appropriate, a post-effective
amendment to the Registration Statement of which this Prospectus
is a part. See "Plan of Distribution." Each of the Selling
Security Holders reserves the sole right to accept or to reject,
in whole or in part, any proposed purchase of the Shares.

The Company will not receive any proceeds from this
offering but, by agreement, will pay substantially all expenses
of this offering, other than the commissions or discounts of
underwriters, dealers or agents, but including the fees and
disbursements of one counsel to certain of the Selling Security
Holders. The Selling Security Holders, and any underwriters,
dealers or agents that participate with the Selling Security
Holders in the distribution of the Shares, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received
by them and any profit on the resale of the Shares purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" and
"Description of the Capital Stock" for a description of
indemnification arrangements between the Company and the Selling
Security Holders and indemnification arrangements for
underwriters. ________________

THE DATE OF THIS PROSPECTUS IS AUGUST 7, 1996.

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING
MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
PURCHASE ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO PURCHASE ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN
ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED HEREBY
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF.

AVAILABLE INFORMATION

The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements, and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be
inspected and copied at the public reference facilities
maintained by the Commission Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the
Commission at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048 and are available at http://www.sec.gov on
the world wide web. Copies of such material also can be obtained
from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, material filed by the Company can
also be inspected at the offices of the New York Stock Exchange
("NYSE"), 20 Broad Street, Seventh Floor, New York, New York 10005.

The Company has filed with the Commission a Registration
Statement on Form S-1 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Shares. This
Prospectus does not contain all the information set forth or
incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations
of the Commission. For further information, reference is made to
the Registration Statement and the exhibits filed or incorporated
as a part thereof, which are on file at the offices of the
Commission and may be obtained upon payment of the fee prescribed
by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this
Prospectus as to the contents of other documents referred to
herein are complete in all material respects, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or
such other document, and each such statement is qualified in all
respects by such reference.

CONCURRENT FILING

Cafeteria Operators, L.P., a Delaware limited partnership
and indirect wholly owned partnership subsidiary of the Company
("Cafeteria Operators"), has filed a separate Registration
Statement (File No. 333-4578) with the Commission with respect to
up to $42,299,505.79 aggregate principal amount of 12% Senior
Secured Notes ("12% Notes"), which may be offered from time to
time for the accounts of the holders of the 12% Notes. The
holders of such 12% Notes include certain of the Selling Security
Holders. See "Background; The Restructuring."

_________________________________________________________

TABLE OF CONTENTS

Page Page

Prospectus Summary . . . . . . 4 Executive Compensation . . . 26
Risk Factors . . . . . . . . . 7 Market for Common Stock and
Use of Proceeds . . . . . . . 10 Related Stockholder Matters. 29
Background; The Restructuring. 10 Dividend Policy . . . . . . . 29
Selected Historical Financial Security Ownership of
Information . . . . . . . . 12 Certain Beneficial
Management's Discussion and Owners and Management . . . 30
Analysis of Results of Selling Security Holders . . . 33
Operations and Financial Plan of Distribution . . . . . 35
Condition . . . . . . . . 13 Description of Capital Stock . 36
Business . . . . . . . . . . 18 Certain Relationships and
Management . . . . . . . . . 24 Related Transactions . . . . 37
Legal Matters . . . . . . . . . 38
Experts . . . . . . . . . . . . 38

PROSPECTUS SUMMARY

The following is a summary of certain information contained
elsewhere in this Prospectus. It is not, and is not intended to
be complete. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained
elsewhere in this Prospectus. Unless otherwise defined,
capitalized terms used in this Summary have the meanings ascribed
to them elsewhere in this Prospectus. Prospective purchasers are
encouraged to read carefully all of the information contained in
this Prospectus in its entirety.

THE COMPANY

Furr's/Bishop's, Incorporated, a Delaware corporation (the
"Company"), through its subsidiaries, is one of the largest
operators of family-style cafeteria restaurants in the United
States (based on the number of cafeterias operated). The Company
believes that its cafeterias and buffet, which are operated under
the "Furr's" and "Bishop's" names, are well recognized in their
regional markets for their value, convenience, food quality and
friendly service. The Company's 110 cafeterias and one buffet
are located in thirteen states in the Southwest, West and
Midwest. The Company also operates two specialty restaurants in
Lubbock, Texas under the name Zoo-Kini's Soups, Salads and Grill.
In addition, the Company operates Dynamic Foods, its food
preparation, processing and distribution division in Lubbock,
Texas. Dynamic Foods provides approximately 85% of the food and
supply requirements of the Company's cafeteria and buffet
restaurants. Dynamic Foods also sells pre-cut produce, bakery
items, meats and seafood and various prepared foods to the
restaurant, food service and retail markets. See "Business."
The principal executive offices of the Company are located at
6901 Quaker Avenue, Lubbock, Texas 79413, and the telephone
number is (806) 792-7151. Unless the context otherwise requires,
all references in this Prospectus to the "Company" include the
Company and its subsidiaries.

BACKGROUND; THE RESTRUCTURING

The Company recently completed a comprehensive restructuring
of its and its subsidiaries' financial obligations (the
"Restructuring"). As part of the Restructuring, Cafeteria
Operators, L.P., a Delaware limited partnership and indirect
wholly owned partnership subsidiary of the Company ("Cafeteria
Operators"), executed the Amended and Restated Indenture (the
"Indenture") dated as of November 15, 1995 between Cafeteria
Operators and Fleet National Bank of Massachusetts (f/k/a Shawmut
Bank, N.A.), as trustee, pursuant to which, among other things,
the terms of $40.0 million aggregate principal amount outstanding
under Cafeteria Operators' 11% Senior Secured Notes due June 30,
1998 (the "11% Notes") issued pursuant to the Indenture dated as
of March 27, 1992 between the Company and Shawmut Bank, N.A., as
collateral agent (the "Old Indenture"), were amended, with the
consent of the holders of the 11% Notes at such time (the
"Original 11% Noteholders"), to constitute $40.0 million (subject
to the issuance of additional notes in payment of the first
interest installment) aggregate principal amount of 12% Senior
Secured Notes ("12% Notes") issued pursuant to the Indenture. In
addition, Cafeteria Operators issued a 12% Note in the original
principal amount of $1.7 (plus interest) million to the Trustees
of General Electric Pension Trust ("GEPT") in settlement of a
$5.4 million judgment against Furr's/Bishop's Cafeterias, L.P., a
Delaware limited partnership and indirect wholly owned
partnership subsidiary of the Company ("FBLP"). As part of the
Restructuring, Wells Fargo Bank, National Association ("Wells
Fargo") received an option to purchase 2.5% of the outstanding
Common Stock (the "Wells Fargo Option") in satisfaction of
approximately $6.1 million principal amount (plus approximately
$1.6 million of accrued and unpaid interest) of indebtedness of a
subsidiary of the Company.

As a result of the Restructuring, indebtedness of Cafeteria
Operators in the amount of approximately $153 million aggregate
principal amount (plus approximately $46.6 million in accrued and
unpaid interest) outstanding under the Old Indenture was
exchanged by holders on January 2, 1996 of the 11% Notes (the
"Exchanging 11% Noteholders" and together with the Original 11%
Noteholders, the "former 11% Noteholders") for an aggregate of
95% of the limited partnership interests of Cafeteria Operators
and the right to put to the Company their 95% limited partnership
interests in Cafeteria Operators in exchange for 95% of the
outstanding Common Stock (the "Put Option"). In addition,
outstanding warrants to purchase capital stock of the Company
held by certain of the Exchanging 11% Noteholders were cancelled.

On March 12, 1996, a majority of the Exchanging 11%
Noteholders exercised the Put Option and, accordingly, all
Exchanging 11% Noteholders put their aggregate 95% limited
partnership interests to the Company in exchange for 95% of the
outstanding Common Stock. On March 15, 1996, Wells Fargo
exercised the Wells Fargo Option thereby becoming the beneficial
owner of 2.5% of the outstanding Common Stock. As of the date of
this Prospectus, the Exchanging 11% Noteholders no longer own any
limited partnership interests of Cafeteria Operators; however,
they and their successors and assigns own an aggregate of 95.0%
of the outstanding Common Stock. See "Background; The
Restructuring" and "Risk Factors -- Ownership of the Company."

RISK FACTORS
For a discussion of certain factors that should be considered
in evaluating an investment in the Shares, see "Risk Factors" on
page 7.

SUMMARY FINANCIAL DATA

The following table presents, in summary form, certain
historical financial data derived from the audited and unaudited
historical consolidated financial statements of the Company and
subsidiaries. The interim unaudited historical financial
statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. In
management's opinion, all adjustments and eliminations,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial statements have been made.
The results of operations for such interim period are not
necessarily indicative of the results for the full year. The
data should be read in conjunction with the historical financial
statements, and the respective notes thereto, and "Management's
Discussions and Analysis of Results of Results Condition,"
included elsewhere herein. See "Selected Historical Financial
Information" and "Management's Discussion and Analysis of Results
Condition."

FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Thirteen Thirteen
weeks ended weeks ended Year ended Year ended Year ended Year ended Year ended
April 2 April 4 Jan. 2, Jan. 3, Dec. 28, Jan. 2, Dec. 28
1996 1995 1996 1995 1993 1993 1991(1)

<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:

Net Sales . . . . . $ 48,817 $ 52,754 $ 210,093 $ 225,186 $253,700 $268,057 $267,602

Gross Profit . . . 33,651 35,907 142,330 154,998 177,910 189,391 187,560

Income (Loss) Before
Interest, Taxes and
Extraordinary Items 2,091 600 (11,274) 3,554 (143,115) 20,092 (11,853)

Net Income (Loss)
from Continuing
Operations . . . . 2,025 (6,117) (38,863) (21,342) (166,140) (2,359) (31,758)

Net Income (Loss)
Per Common Share . 0.04 (0.13) (0.80) (0.44) (3.42) (0.05) (0.65)

Balance Sheet Data:

Cash . . . . . . . 2,040 1,880 986 1,492 2,921 9,363 8,252

Net Working Capital
Deficiency . . . . (20,812) (253,950) (20,672) (248,854) (234,764) (7,193) (17,200)

Total Assets . . . 78,332 96,195 78,038 95,917 105,052 253,376 256,350

Total Debt . . . . 79,903 202,617 80,951 202,661 203,074 203,468 193,495

Stockholders' Equity
(Deficit) . . . . . (43,834) (199,454) (45,874) (193,337) (176,360) (1,896) 355

(1) Includes Predecessor Entities for the thirteen weeks ended March 30, 1991.
</TABLE

RISK FACTORS

In considering the matters set forth in this Prospectus,
prospective investors should carefully consider, among other
things, the significant factors described below which are
associated with the Shares before making an investment in the
Shares.

CAPITAL EXPENDITURES

The Company currently plans to make significant capital
expenditures in each of the next three fiscal years to remodel
existing cafeterias, implement special programs to enhance
customer traffic and develop new restaurants. See "Business --
Capital Expenditure Program." The Company believes that its
planned capital expenditure program is necessary to enable the
Company and its subsidiaries to increase revenues and attain
profitability in order to service their respective remaining
obligations under outstanding debt instruments. Such debt
instruments limit the Company's ability to make future capital
expenditures. There can be no assurance that the Company will be
able to complete its capital expenditure program, service its
financial obligations and meet the financial covenants contained
in outstanding debt instruments. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition."

LEVERAGE

As of January 2, 1996, the Company's total consolidated
indebtedness was approximately $81.0 million and its
stockholders' deficit was approximately $45.9 million. At such
date, the Company's consolidated total assets were approximately
$78.0 million.

In addition to certain customary affirmative covenants, the
Indenture contains covenants that, among other things, restrict
the ability of Cafeteria Operators and each of its subsidiaries,
subject to certain exceptions contained therein, to incur debt,
make distributions to the Company or transfer assets. The
restrictions may limit the ability of the Company to expand its
business and take other actions that the Company considers to be
in its best interest.

The Company and its subsidiaries presently have significant
annual interest expense payment obligations under outstanding
debt instruments. The ability of the Company and its
subsidiaries to satisfy their respective obligations are
dependent upon their future performances, which will be subject
to financial, business and other factors affecting the business
and operations of the Company, including factors beyond the
control of the Company and its subsidiaries, such as prevailing
economic conditions. Over the long term, the Company's
performance will be dependent upon, among other things, its
ability to implement successfully its expansion strategies and
control costs. See "Business -- Capital Expenditure Program" and
"Management's Discussion and Analysis of Results of Operations
and Financial Condition -- Liquidity and Capital Resources." If
the Company is unable to comply with the terms of outstanding
debt instruments and any future debt instruments and fails to
generate sufficient cash flow from operations in the future, it
may be required to refinance all or a portion of its existing
debt or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any
additional financing could be obtained, particularly in view of
the Company's anticipated high levels of debt and the fact that a
significant portion of Cafeteria Operators' assets, representing
substantially all of the Company's consolidated tangible assets
have been pledged as collateral to secure indebtedness. These
factors could have a material adverse effect on the marketability
and value of the Shares.

OWNERSHIP OF THE COMPANY

As a result of the Restructuring, the Selling Security
Holders own approximately 88.8% of the outstanding Common Stock.
The Selling Security Holders, however, are comprised of fifteen
separate holders (or groups of affiliated holders) who are
entitled to, and intend to, vote separately upon all matters
submitted to a vote of security holders of the Company (including
any mergers, sales of all or substantially all of the assets of
the Company or Cafeteria Operators and going private
transactions). There are no agreements, arrangements or
understandings among any of the Selling Security Holders
concerning the voting or disposition of any of such Common Stock
or any other matter regarding the Company or which might be the
subject of a vote of the Company's stockholders. Also, no
Selling Security Holder (or affiliated group of Selling Security
Holders) is a beneficial owner of more than 18% of the Common
Stock; accordingly, no single Selling Security Holder or
affiliated group could itself approve any matter regarding the
Company or which might be the subject of a vote of the
stockholders. Certain of the Selling Security Holders, who
currently hold 12% Notes, were former 11% Noteholders. See
"Background; The Restructuring."

In addition, as a part of the Restructuring, Original 11%
Noteholders designated for nomination a majority of the members
of the Board of Directors of the Company. These directors were
duly nominated and elected by holders of the former classes of
the Company's capital stock at a meeting of the stockholders held
prior to the Exchanging 11% Noteholders having exercised the Put
Option. Such directors will generally have the power to direct
the Company's operations. None of such directors, however, is
affiliated with any former 11% Noteholder and there is no
agreement, understanding or arrangement among any of the former
11% Noteholders or any such director concerning any matter
regarding the governance of the Company. In addition, Kevin E.
Lewis and E.W. Williams, Jr., directors of the Company, are
Selling Security Holders.

HISTORY OF OPERATING LOSSES

Until fiscal year 1995, the Company had not reported net
income since its inception in 1991. The Company has reported net
losses from continuing operations of approximately $2.4 million,
$166.1 million and $21.3 million for the fiscal years 1992, 1993
and 1994, respectively. After giving effect to the
Restructuring, the Company reported net loss from continuing
operations of approximately $38.9 million for fiscal year 1995.
See "Selected Historical Financial Information."

NO ANTICIPATED STOCKHOLDER DISTRIBUTIONS

The Company does not anticipate paying cash distributions in
the foreseeable future. The Company's ability to pay cash
dividends on the Common Stock will depend on the future
performance of the Company and its subsidiaries. Such future
performance will be subject to financial, business and other
factors affecting the business and operations of the Company and
its subsidiaries, including factors beyond the control of the
Company and its subsidiaries, such as prevailing economic
conditions. In addition, under terms of the Indenture, Cafeteria
Operators and its subsidiaries may not distribute funds to the
Company, unless, immediately after giving effect to such
distribution, (i) no default or event of default shall have
occurred or be continuing and (ii) the aggregate amount of all
outstanding restricted payments and restricted investments as of
such date exceeds the difference of (a) fifty percent (50%) of
consolidated net income for the period beginning January 2, 1996
and ending the last day of the last full fiscal quarter and
(b)(x) one hundred percent (100%) of consolidated net income for
the last four full fiscal quarters (or, under certain
circumstances, a shorter period) if consolidated net income for
such period is a loss, or (y) zero, if consolidated net income
for such period is not a loss. The Company believes that any
refinancing or other indebtedness incurred by the Company or its
subsidiaries would contain restrictions on the payment of
dividends and making of cash distributions on equity securities
generally similar to those in the Indenture. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

HOLDING COMPANY STRUCTURE

The Company is a holding company with no operations, the
principal assets of which are general and limited partnership
interests in and capital stock of its subsidiaries. The
operations of the Company are conducted through its subsidiaries,
including Cafeteria Operators and, therefore, the Company is and
will continue to be dependent on dividends, distributions or
other intercompany transfers of funds from its subsidiaries to
allow the Company to service its indebtedness, meet its other
obligations and pay dividends, if any, on the Common Stock. The
Indenture contains restrictions on the ability of Cafeteria
Operators to make distributions or other intercompany transfers
to the Company, and it is likely that any refinancing or other
indebtedness incurred by subsidiaries will contain similar
restrictions. There can be no assurance that funds generated
from future operations of the Company and its subsidiaries will
be sufficient to meet their respective debt service and other
obligations or that the performances of its subsidiaries will be
sufficient to satisfy the financial covenants contained in the
Indenture or to allow the Company to pay dividends on the Common
Stock. In addition, the Company does not anticipate cash being
available to pay dividends in the foreseeable future because
Cafeteria Operators will retain its earnings to fund capital
expenditures.

SHARES AVAILABLE FOR FUTURE ISSUANCE

As part of the Restructuring, the Company issued to
stockholders an aggregate of approximately 40,527,933 five-year
warrants, each whole warrant being entitled to purchase one share
of Common Stock at an exercise price of $.074 per Share (the
"Warrants"). The Warrants expire on January 2, 2001. After
giving effect to the fifteen-to-one reverse stock split on March
22, 1996, the Warrants are exercisable into approximately
2,701,862 shares of Common Stock at an exercise price of $1.11
per share. In addition, the Company has 2,702,720 shares of
Common Stock, after giving effect to the reverse stock split,
available for issuance pursuant to the 1995 Stock Option Plan of
the Company. No prediction can be made as to the effect, if any,
that future issuances of shares, the availability of shares for
future issuance or the Warrants may have on the prevailing market
prices of the Common Stock from time to time.

The Selling Security Holders own approximately 88.8% of the
outstanding Common Stock. Any of the Selling Security Holders
may from time to time determine to sell Shares for any reason,
subject to compliance with federal securities laws. Issuance or
sales of substantial amounts of Common Stock, or the perception
that such sales or issuances could occur, could adversely effect
prevailing market prices for the Common Stock.

LEVENSON LITIGATION

On August 11, 1995, a complaint was filed in the District
Court of Travis County, Texas by former chairman of the board of
the Company, Michael J. Levenson, both individually and on behalf
of his minor son Jonathan Jacob Levenson, James Rich Levenson,
Benjamin Aaron Levenson, S.D. Levenson, General Consulting Group,
Inc. and Cerros Morado (such lawsuit being the "Levenson
Litigation"). The complaint names as defendants the Company,
Cafeteria Operators, FBLP, Cavalcade & Co., Inc., a dissolved
Delaware corporation and former general partner of Cafeteria
Operators ("CCI"), individual members of the board of directors
of the Company, Houlihan, Lokey, Howard & Zukin, KL Park,
Associates, L.P., a Delaware limited partnership controlled by
Kevin E. Lewis, Chairman, President and Chief Executive Officer
of the Company ("KL Park"), KL Group, Inc., a Delaware
corporation controlled by Mr. Lewis ("KL Group"), Skadden, Arps,
Slate, Meagher & Flom, certain Original 11% Noteholders, Deloitte
& Touche LLP, Kmart Corporation ("Kmart") and certain partners
and employees of the foregoing.

The complaint alleges, among other things, that the Company
and certain defendants conspired to wrest control of the Company
away from the Levensons by fraudulently inducing them to transfer
their working control of the Company through a series of
transactions in which the Levensons transferred capital stock of
the Company and stock options in the Company to KL Park and KL
Group. Plaintiffs initially sought actual damages of
approximately $16.4 million, as well as punitive damages. In a
Third Amended Petition filed on January 15, 1996, plaintiffs
sought an unspecified amount of actual damages, alleging only
that their actual damages claim is "no more than $400 million."
The Company's management believes the allegations are completely
without merit and intends to defend the action vigorously.

On October 6, 1995, the Levensons filed a Notice of Non-Suit
as to certain of the defendants, including the Company, Cafeteria
Operators, FBLP, CCI and specific individual members of the Board
of Directors (other than William E. Prather and Kevin E. Lewis).
As a result of such Notice of Non-Suit, the named entities and
individuals are no longer defendants in the Levenson Litigation.

The Company is required under certain circumstances to
indemnify certain of the defendants originally named in the
Levensons' complaint, including the individual members of the
Board of Directors, former 11% Noteholders, KL Group, KL Park and
Kmart, from and against all claims, actions, suits and other
legal proceedings, damages, costs, interest, charges, counsel
fees and other expenses and penalties which such entity may
sustain or incur to any person whatsoever by reason of or arising
out of the Levenson Litigation. The Company is not required to
indemnify KL Group and KL Park for any judgements and settlements
in respect of the Levenson Litigation and under no circumstances
will the Company be obligated to indemnify any party for any
liability resulting from such party's willful misconduct or bad
faith. On June 7, 1996, the Company, the Parent and Kevin E.
Lewis entered into the Consulting and Indemnity Agreement and
General Release pursuant to which the Company and the Parent
agreed to release any claims it may have against Mr. Lewis and to
indemnify and hold harmless Mr. Lewis, to the fullest extent
permitted by law, from and against all judgements, costs,
interest, charges, counsel fees and other expenses relating to or
in connection with any claims, actions, suits and other
proceedings by reason of or arising out of any action or inaction
by Mr. Lewis in his capacity as an officer, director, employee or
agent of the Parent and its affiliates, including the Company,
except to the extent that such claim or indemnification arises
directly from any claim or cause of action that the Parent or its
affiliates may have that relates to or arises from Mr. Lewis'
knowingly fraudulent, dishonest or willful misconduct, or receipt
of any personal profit or advantage that he is not legally
entitled to receive.

The amount of legal fees and other expenses paid in respect
of the Levenson Litigation decreases the amount of cash available
to the Company to pay its outstanding indebtedness and other
obligations. As of April 2, 1996, the Company had paid
approximately $960 thousand in legal fees and other expenses in
respect of the Levenson Litigation. In addition, claims for
indemnification of fees and expenses aggregating approximately
$632,828 have been submitted to the Company by former 11%
Noteholders, which, to date, have not been paid. An adverse
judgment against the Company or any of the other defendants which
the Company is required to indemnify, a settlement by any
defendant which the Company is required to indemnify or the
continued payment of substantial legal fees and other expenses
would likely have a material adverse effect against the Company.

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of
the Common Stock offered pursuant to this Prospectus. The
Selling Security Holders will receive all of the net proceeds
from any sale of the Shares offered hereby.

BACKGROUND; THE RESTRUCTURING

The Company recently completed a comprehensive restructuring
of its and its subsidiaries' financial obligations (the
"Restructuring"). As part of the Restructuring, Cafeteria
Operators, L.P., a Delaware limited partnership and indirect
wholly owned partnership subsidiary of the Company ("Cafeteria
Operators"), executed the Amended and Restated Indenture (the
"Indenture") dated as of November 15, 1995 between Cafeteria
Operators and Fleet National Bank of Massachusetts (f/k/a Shawmut
Bank, N.A.), as trustee, pursuant to which, among other things,
the terms of $40.0 million aggregate principal amount outstanding
under Cafeteria Operators' 11% Senior Secured Notes due June 30,
1998 (the "11% Notes") issued pursuant to the Indenture dated as
of March 27, 1992 between the Company and Shawmut Bank, N.A., as
collateral agent (the "Old Indenture"), were amended, with the
consent of the holders of the 11% Notes at such time (the
"Original 11% Noteholders"), to constitute $40.0 million (subject
to the issuance of additional notes in payment of the first
interest installment) aggregate principal amount of 12% Senior
Secured Notes ("12% Notes") issued pursuant to the Indenture. In
addition, Cafeteria Operators issued a 12% Note in the original
principal amount of $1.7 million to the Trustees of General
Electric Pension Trust ("GEPT") in settlement of a $5.4 million
judgment (plus interest) against Furr's/Bishop's Cafeterias,
L.P., a Delaware limited partnership and indirect wholly owned
partnership subsidiary of the Company ("FBLP"). As part of the
Restructuring, Wells Fargo Bank, National Association ("Wells
Fargo") received an option to purchase 2.5% of the outstanding
Common Stock (the "Wells Fargo Option") in satisfaction of
approximately $6.1 million principal amount (plus approximately
$1.6 million of accrued and unpaid interest) of indebtedness of a
subsidiary of the Company.

On March 12, 1996, a majority of the Exchanging 11%
Noteholders exercised the Put Option and, accordingly, all
Exchanging 11% Noteholders put their aggregate 95% limited
partnership interests to the Company in exchange for 95% of the
outstanding Common Stock. On March 15, 1996, Wells Fargo
exercised the Wells Fargo Option thereby becoming the beneficial
owner of 2.5% of the outstanding Common Stock. As of the date of
this Prospectus, the Exchanging 11% Noteholders no longer own any
limited partnership interests of Cafeteria Operators, however,
they and their successors and assigns own an aggregate of 95.0%
of the outstanding Common Stock. See "Background; The
Restructuring" and "Risk Factors -- Ownership of the Company."

The Company and Cafeteria Operators have agreed to indemnify
and hold harmless certain parties in the Restructuring against
certain potential claims, actions and liabilities (and related
costs and expenses, including counsel fees) in connection with
the Restructuring. The Company is not aware of any such claim,
action or liability. In addition, the Company and Cafeteria
Operators have agreed to pay, and have paid, certain expenses
(including legal fees and expenses) of certain parties in
connection with the Restructuring.

CERTAIN INCOME TAX RAMIFICATIONS OF THE RESTRUCTURING

As described above, the Restructuring was a complex series
of transactions which had a variety of federal income tax
implications for the Company. The Recapitalization likely
resulted in an ownership change (within the meaning of Section
382 of the Internal Revenue Code), which is likely to
substantially restrict the ability of the Company to utilize
existing net operating loss carryovers to offset future income.
In addition, although the Company believes that such possibility
is unlikely, no assurance can be given that the Internal Revenue
Service might not successfully recharacterize the
Recapitalization in a manner which would reduce certain tax
attributes of the Company and the other partners of Cafeteria
Operators (all of which are subsidiaries of the Company) in an
amount equal to the excess of the outstanding amount of 11% Notes
outstanding prior to the Recapitalization over the fair market
value of the 11% Notes at such time.

SELECTED HISTORICAL FINANCIAL INFORMATION

The following table presents summary historical consolidated
financial data derived from the audited and unaudited historical
financial statements of the Company and subsidiaries. The
interim unaudited historical financial statements have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. In management s opinion, all
adjustments and eliminations, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial
statements have been made. The results of operations for such
interim period are not necessarily indicative of the results for
the full year. The data should be read in conjunction with the
historical financial statements of the Company and the respective
notes thereto, and "Managements Discussion and Analysis of
Results of Operations and Financial Condition," included
elsewhere in this Prospectus.

</TABLE>
<TABLE>
<CAPTION>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
SUMMARY FINANCIAL DATA

(Dollars in thousands, except per share data)

Thirteen Thirteen Year ended
weeks weeks -------------------------------------------------------------
ended ended
April 2, April 4, Jan. 2, Jan. 3, Dec. 28, Jan. 2, Dec. 28
1996 1995 1996 1995 1993 1993 1991(1)
-------- --------- --------- ---------- ----------- -------- --------
Statement of
Operations Data:

<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales ............................ $ 48,817 $ 52,754 $ 210,093 $ 225,186 $ 253,700 $ 268,057 $ 267,602

Gross Profit ......................... 33,651 35,907 142,330 154,998 177,910 189,391 187,560

Income (Loss) Before Interest,
Taxes, and Extraordinary Items ....... 2,091 600 (11,274) 3,554 (143,115) 20,092 (11,853)

Net Income (Loss) from
Continuing Operations ................ 2,025 (6,117) (38,863) (21,342) (166,140) (2,359) (31,758)

Net Income (Loss) Per Common
Share ................................ 0.04 (0.13) (0.80) (0.44) (3.42) (0.05) (0.65)

Balance Sheet Data:

Cash ................................. 2,040 1,880 986 1,492 2,921 9,363 8,252

Net Working Capital
Deficiency ........................... (20,812) (253,950) (20,672) (248,854) (234,764) (7,193) (17,200)

Total Assets ......................... 78,332 96,195 78,038 95,917 105,052 253,376 256,350

Total Debt ........................... 79,903 202,617 80,951 202,661 203,074 203,468 193,495

Stockholders' Equity (Deficit) ....... (43,834) (199,454) (45,874) (193,337) (176,360) (1,896) 355

(1) Includes Predecessor Entities for the thirteen weeks ended March 30, 1991.

</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

The Company's fiscal year is a 52-53 week year. Fiscal 1995
included 52 weeks and fiscal 1994 included 53 weeks. During
1993, the Company changed its fiscal year to end on the Tuesday
nearest December 31. Prior years ended on the Saturday nearest
December 31. This change resulted in fiscal 1993 ending on
December 28, 1993 and including 51 weeks and 3 days.

The following table sets forth certain statement of
operations data and restaurant data for the periods indicated
(dollars in thousands, except sales per unit):

<TABLE>
<CAPTION>
Thirteen Thirteen
weeks weeks Year
ended ended Year Year ended
April April ended ended Dec.
2, 4, Jan 2, Jan 3, 28,
1996 1995 1996 1995 1993

Statement of operations data:
<S> <C> <C> <C> <C> <C>
Sales $48,817 $52,754 $ 210,093 $ 225,186 $ 253,700
Costs and expenses
Cost of sales
(excluding
depreciation) 15,166 16,847 67,763 70,188 75,790
As a percent
of sales 31.1% 31.9% 32.3% 31.2% 29.9%
Selling, general and
administrative 29,211 31,967 127,329 137,910 158,523
As a percent
of sales 59.8% 60.6% 60.6% 61.2% 62.5%
Depreciation and
amortization 2,349 3,340 14,002 11,320 13,923
Special charges 12,273 2,214 13,100
Goodwill write-off - - - - 135,479

Total costs and
expenses 46,726 52,154 221,367 221,632 396,815
Operating income
(loss) 2,091 600 (11,274) 3,554 (143,115)
Interest expense 66 6,717 27,589 24,896 23,025
Loss before extraordinary
credit $2,025 $ (6,117) $(38,863) $(21,342) $(166,140)

Restaurant Units in
Operation:
Beginning of period 129 142 147
Opened - 1 -
Closed (14) (14) (5)

End of Period 115 129 142

Restaurant units
reserved to be closed
at the end of period 2 4 13

Average weekly sales
per restaurant unit
(for units open at
year end and which
operated the full
year) $ 32,916 $ 32,533 $ 33,970

</TABLE>

On January 2, 1996, at a special meeting, stockholders
approved the Restructuring. A series of financial restructuring
transactions resulted in the recognition of a $170,239
extraordinary credit in the fiscal year ended January 2, 1996.

THIRTEEN WEEKS ENDED APRIL 2, 1996

Results of operations. Sales for the first fiscal quarter
of 1996 were $48.8 million, a decrease of $3.9 million from the
same quarter of 1995. Operating income for the first quarter of
1996 was $2.1 million compared to $600 thousand in the prior
year. Net income for the first quarter of 1996 was $2.0 million
compared to a net loss of $6.1 million in the first quarter of
1995. During the first quarter of 1996, sales were negatively
impacted primarily by including fewer units in the operating
results.

Sales. Restaurant sales in comparable units were 0.3% lower
in the first quarter of 1996 than the same quarter of 1995.
Sales for the first fiscal quarter were $3.3 million lower than
the prior year due to there being 12 fewer units included in
operating results. Sales in the first quarter included $837
thousand of Dynamic Foods sales to third parties.

Cost of sales. Excluding depreciation, cost of sales was
31.1% of sales for the first quarter of 1996 as compared to 31.9%
for the same quarter of 1995. The decrease in the percentage of
revenues was the result of changes in the menu mix and lower
product costs.

Selling, general and administrative. Selling, general and
administrative ("SG&A") expense was lower in the aggregate by
$2.8 million in the first quarter of 1996 due primarily to there
being fewer units included in the operating results. SG&A
expense was $2.4 million lower than the prior year due to there
being 12 fewer units included in operating results. The change
in SG&A expense included increases of $409 thousand in salaries,
wages and related benefits, and decreases of $1.1 million in
marketing expense.

Depreciation and amortization. Depreciation and
amortization expense was lower by $991 thousand in the first
quarter of 1996 due to the reduction of certain depreciable
assets in 1995 in accordance with Statement of Financial
Accounting Standard No. 121 and the reduction in the useful lives
of certain depreciable assets in the prior year.

Interest expense. Interest expense was lower than the prior
year by $6.7 million as a result of the Restructuring. In
accordance with Statement of Financial Accounting Standard No.
15, the restructured debt was recorded at the sum of all future
principal and interest payments and there is no recognition of
interest expense thereon.

FIFTY-TWO WEEKS ENDED JANUARY 2, 1996

Results of operations. Sales for the fifty-two week fiscal
year ended January 2, 1996 were $210.1 million, a decrease of
$15.1 million from the fifty-three week fiscal year ended January
3, 1995. The operating loss for the fiscal year ended 1995 was
$11.3 million compared to income of $3.6 million in fiscal year
1994. The operating results of fiscal 1995 included special
charges of $12.3 million compared to $2.2 million in the prior
year. Net loss before extraordinary items for fiscal 1995 was
$38.9 million, compared to $21.3 million for fiscal 1994.

Sales. Restaurant sales in comparable units were 2.2% lower
in fiscal 1995 than 1994. For the units that were open for the
entire year, average weekly sales were $32,916 in fiscal 1995.
Sales in 1995 were lower than the prior year by $6.8 million as a
result of sixteen fewer units being included in the results of
operations in the current year and were lower by $2.7 million as
a result of three fewer specialty restaurants being included in
the results of operations in the current year. Sales were lower
in fiscal 1995 by approximately $3.7 million due to there being
one less week than the prior fiscal year. Sales in fiscal year
1995 included $4.6 million of Dynamic Foods sales to third
parties and $1.9 million from the two Zoo-Kini's Soups, Salads
and Grill restaurants.

Cost of sales. Excluding depreciation, cost of sales was
32.3% of revenues for fiscal year 1995 compared to 31.2% for
fiscal year 1994. The increase in the percentage of revenues was
the result of continued changes in the menu mix designed to
improve food quality and variety and to create a better value for
the guest.

Selling, general and administrative. SG&A expense was lower
in the aggregate by $10.6 million in fiscal year 1995 compared to
fiscal year 1994. Of the decrease, $6.3 million was due to
operating results including sixteen fewer units and $2.0 million
due to operating three fewer specialty restaurants. SG&A expense
includes decreases of $2.8 million in salaries, wages and related
benefits, $3.5 million in marketing expense, including discounts,
$902 thousand in taxes, and $442 thousand in travel and related
expenses. SG&A expense includes increases of $878 thousand in
professional service expenses and $417 thousand in repair and
maintenance expenses. Corporate overhead expense in fiscal 1995
(included in the variances above) was $1.0 million lower than the
prior year.

Special charges. The loss from operations for the fiscal
year ended January 2, 1996 includes special charges of $12.3
million, which includes charges to reserves of $4.5 million
related to the closing of fourteen units, including two units to
be closed in future periods, and adjustments to the units
previously reserved. Also included is $7.8 million to recognize
the write-down of certain assets to estimated fair values in
accordance with the adoption of SFAS 121. The loss from
operations for the fiscal year ended January 3, 1995 includes
special charges of $2.7 million resulting primarily from the
closing of one buffet restaurant and one specialty restaurant and
a credit of $442 thousand related to the settlement of a lawsuit.

Depreciation and amortization. Depreciation and
amortization expense was $2.7 million higher than the prior year,
due primarily to the reduction in the estimated useful lives of
certain depreciable assets.

Interest expense. Interest expense was $2.7 million higher
than the prior year as a result of the deferral of the interest
payments that were due on dates from December 31, 1993, through
and including December 31, 1995 and the related interest thereon,
as well as the interest on the GEPT judgement.

Extraordinary credit. The results of fiscal year 1995
include an extraordinary credit of $170.2 million relating to the
reduction of debt in a series of financial restructuring
transactions.

FIFTY-THREE WEEKS ENDED JANUARY 3, 1995

Results of operations. Sales for the fifty-three week
fiscal year ended January 3, 1995 were $225.2 million, a decrease
of $28.5 million from the fifty-one and one half week fiscal year
ended December 28, 1993. Operating income for fiscal year 1994
was $3.6 million compared to an operating loss of $143.1 million
in fiscal year 1993. The net loss for fiscal year 1994 was $21.3
million compared to a net loss of $166.1 million in fiscal year
1993. The losses in fiscal 1993 include the effect of the
Company's decision to write off $135.5 million of goodwill. (See
discussion below.) During fiscal year 1994, sales were
negatively impacted by several factors including fewer units
included in the operating results, extreme winter weather early
in the year, and increased competition in the Company's major
markets and a reduced price, value oriented marketing campaign.
Fiscal 1994 sales were positively impacted by the inclusion of
one and one half additional weeks of operating results.

Sales. The average guest count in comparable units was 5.4%
lower in fiscal year 1994 than fiscal year 1993 due, in part, to
extreme winter weather early in the year, while the average guest
ticket was 1.7% lower reflecting price reductions and value
oriented marketing. For the units that were open for the entire
year, average weekly sales were $32,533 in fiscal 1994. Sales in
1994 were lower than the prior year by $16.1 million as a result
of eighteen fewer units being included in the results of
operations in the current year. Sales were also lower by $2.8
million due to the sale of one unit and the loss of another unit
in a fire in February of 1994. Sales were lower by $2.3 million
due to the closing of one specialty restaurant and the
disposition of two others. Sales were higher in fiscal 1994 by
approximately $5.9 million due to an additional one and one half
week of operating results. Sales in fiscal year 1994 included
$3.9 million of Dynamic Foods sales to third parties, $2.7
million from the three El Paso Bar-B-Que restaurants (for the
first two quarters only) and $2.1 million from the two Zoo-Kini's
Soups, Salads and Grill restaurants.

Cost of sales. Excluding depreciation, cost of sales was
31.2% of sales for fiscal year 1994 compared to 29.9% for fiscal
year 1993. The increase in the percentage of revenues was the
result of changes in the menu mix designed to improve food
quality and variety and to create a better value for the guest.

Selling, general and administrative. Selling, general and
administrative expense was lower in the aggregate by $20.6
million in fiscal year 1994 than in fiscal year 1993. SG&A
expense in 1994 was $13.2 million lower than the prior year due
to operating results including eighteen fewer units and was lower
by $1.8 million due to operating results including three fewer
specialty restaurants during the year. SG&A was also lower than
in fiscal year 1993 by $1.6 million due to the sale of one unit
and the loss of another unit in a fire in 1994. The change in
SG&A expense also included increases of $688 thousand from one
additional Zoo-Kini unit and $1.6 million in salaries, wages and
related benefits, and supplies and taxes were higher in the
aggregate by $495 thousand. Marketing expense was $3.0 million
lower than the prior year, professional fees were lower by $2.0
million and moving, travel, public relations, insurance and
utility expenses were lower by an aggregate of $1.4 million.
Corporate overhead expense in fiscal year 1994 (included in the
variances above) was $2.3 million lower than the prior year.
SG&A expense in fiscal 1993 was offset in part by a gain of $1.3
million related to the termination of a lease agreement.

Special Charges. The loss from operations for the fiscal
year ended January 3, 1995 includes special charges of $2.7
million resulting primarily from the decision to close one buffet
restaurant and one specialty restaurant and adjustments to units
previously reserved to be closed. Also included is a credit of
$442 thousand related to the settlement of a lawsuit previously
filed against the Company by the Internal Revenue Service.

The operating results of fiscal 1993 include special charges
aggregating $13.1 million. These charges include approximately
$8.0 million related to store closings, $1.5 million of estimated
operating and financial restructuring costs, $1.5 million for
writing down the values of certain non-operating assets, $741
thousand of estimated costs related to certain lawsuits, $761
thousand for writing down the values of certain operating assets
and $515 thousand for severance amounts payable to the former
Chairman of the Board.

Goodwill. After a careful analysis of the Company's
financial condition, as part of management's periodic review of
the carrying amount of goodwill, the Company determined at the
end of fiscal 1993, based upon historical operating trends, and
without anticipating the effects of any potential restructuring
of its debts and other obligations, that its projected results
would not support the future recovery of the Company's goodwill
balance of $135.5 million. Accordingly, the Company wrote off
its goodwill balance in the fourth quarter of 1993.

Depreciation and amortization. Depreciation and
amortization expense was lower by $2.6 million in fiscal year
1994 due primarily to the elimination of goodwill amortization at
the end of fiscal 1993.

Interest expense. Interest expense was higher than the
prior year by $1.9 million primarily as a result of the deferral
of the interest payments that were due on December 31, 1993,
March 31, 1994, June 30, 1994, September 30, 1994 and December
31, 1994 and the related interest thereon, as well as the
interest on the GEPT judgement.

NEW ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board
adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which
requires companies to adopt a method of accounting for valuing
compensation attributable to stock options. SFAS 123 is
effective for fiscal years beginning after December 15, 1995. As
allowed under the provisions of SFAS 123, the Company has elected
to continue accounting for such compensation as provided by
Accounting Principles Board Opinion No. 25, which will not have
any effect on the Company's consolidated financial statements,
except for additional disclosure.

Effective January 2, 1996, the Company adopted the
provisions of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121") and recorded a
special charge of $7.8 million to recognize the write-down of
certain assets in property, plant and equipment to estimated fair
value, based on expected future cash flows. SFAS 121 requires
that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1995, cash provided from operating activities
of the Company was $9.5 million compared to $6.3 million in 1994.
Cash used for the payment of interest was approximately $48
thousand in 1995 compared to $286 thousand during 1994. On
December 30, 1993, $10.6 million of interest that was due
December 31, 1993, was deferred until January 15, 1995 and
remained unpaid until such interest was forgiven in partial
exchange for limited partnership interests issued to former 11%
Noteholders in the Restructuring on January 2, 1996. Also, $10.6
million of interest payments due on June 30, 1994, December 31,
1994, June 30, 1995 and December 31, 1995 were unpaid or deferred
until the Restructuring on January 2, 1996. Likewise, $437
thousand of interest due on March 31, 1994, $439 thousand of
interest due on September 30, 1994, March 31, 1995 and September
30, 1995 on the 9% Note was deferred until the Restructuring on
January 2, 1996. The Company made capital expenditures of $8.0
million during 1995 compared to $5.7 million during 1994. Cash,
temporary investments and marketable securities were $986
thousand at January 2, 1996 compared to $1.5 million at January
3, 1995. The cash balance at both dates included $800 thousand
which was restricted pursuant to collateral requirements in a
letter of credit agreement. The current ratio of the Company was
.30:1 at January 2, 1996 compared to .047:1 at January 3, 1995.
The Company's total assets at January 2, 1996 aggregated $78.0
million compared to $95.9 million at January 3, 1995.

The Company's restaurants are a cash business. Funds
available from cash sales are not needed to finance receivables
and are not generally needed immediately to pay for food,
supplies and certain other expenses of the restaurants.
Therefore, the business and operations of the Company have not
historically required proportionately large amounts of working
capital, which is generally common among similar restaurant
companies. Should Dynamic Foods continue to expand its sales to
third parties, the accounts receivable and inventory related to
such sales could require the Company to maintain additional
working capital.

Cafeteria Operators has outstanding $78.4 million of 12%
Notes due December 31, 2001, including $32.9 million of accrued
interest. Under the terms of the 12% Notes, a semi-annual cash
interest payment of approximately $2.7 million is due on each
March 31 and September 30. The obligations of Cafeteria
Operators under the 12% Notes are secured by a security interest
in and a lien on substantially all of the personal property of
the Partnership and mortgages on all fee (but not leasehold) real
properties of Cafeteria Operators (to the extent such properties
are mortgageable).

Additionally, Cavalcade Foods, Inc., an indirect wholly
owned partnership subsidiary of the Company ("CFI") has
outstanding the non-recourse note in the principal amount of $2.0
million. The note is secured by certain real estate in Lubbock,
Texas held by Cavalcade Development, L.P., an indirect wholly
owned partnership subsidiary of the Company .

The Company intends to pursue a program of remodeling
existing cafeterias, opening new restaurants, and possibly
acquiring existing restaurants or food service companies. The
Company anticipates expending approximately $9 million in fiscal
1996 to remodel existing cafeterias and open new restaurants and
to make other capital expenditures. No assurance can be given
that the Company will generate sufficient funds from operations
or obtain alternative financing sources to enable it to make the
anticipated capital expenditures.

Cafeteria Operators, the sponsor of the Cavalcade Pension
Plan, has agreed to provide for funding at least two-thirds of
the $4.6 million of the unfunded current liability which existed
at the end of fiscal 1992 by the end of 1998. If the agreed upon
funding is not satisfied by the minimum required annual
contributions, as adjusted for the deficit reduction contribution
and determined under Section 412 of the Internal Revenue Code,
the Company will make contributions in excess of the minimum
annual requirement.

On November 15, 1993, the Company entered into the Amendment
to Master Sublease Agreement, dated as of December 1, 1986, with
Kmart pursuant to which, among other things, the aggregate
monthly rent for the period August 1, 1993 through and including
December 31, 1996 was reduced by approximately $1.6 million
annually, and the aggregate monthly rent for the period January
1, 1997 through and including December 31, 1999 was reduced by
approximately $1.2 million annually; provided that, during such
period, among other things, Kevin E. Lewis remains as Chairman of
the Board of the Company. On June 7, 1996, the Company and the
Parent entered into an agreement with Mr. Lewis pursuant to which
Mr. Lewis will resign as Chairman of the Board on December 31,
1996, unless requested by the Board of Directors to continue
until December 31, 1997. See "Management -- Executive
Compensation -- Employment and Consulting Arrangements." As a
consequence of this action, the Company anticipates entering into
negotiations with Kmart to modify the amendment to remove the
provisions requiring Mr. Lewis to remain as Chairman of the Board
until the end of 1999. No assurance can be given that Kmart will
agree to such modification.

BUSINESS

GENERAL

The Company, through its subsidiaries, is one of the largest
operators of family-style cafeteria restaurants in the United
States. The Company believes that its cafeterias and buffet,
which are operated under the "Furr's" and "Bishop's" names, are
well recognized in their regional markets for their value,
convenience, food quality and friendly service. The Company's
110 cafeterias and one buffet are located in thirteen states in
the Southwest, West and Midwest. The Company also operates two
specialty restaurants in Lubbock, Texas under the name Zoo-Kini's
Soups, Salads and Grill. In addition, the Company operates
Dynamic Foods, its food preparation, processing and distribution
division in Lubbock, Texas. Dynamic Foods provides in excess of
85% of the food and supply requirements of the Company's
cafeteria and buffet restaurants. Dynamic Foods also sells pre-
cut produce, bakery items, meats and seafood and various prepared
foods to the restaurant, food service and retail markets.

FAMILY DINING DIVISION

The Family Dining Division consists of the Company's 110
cafeterias and one pay-at-the-door buffet-style restaurant.

Cafeterias. Cafeterias occupy a long standing niche in the
food service industry, providing the customer with a pleasant,
moderately-priced alternative to fast-food chains and
conventional full-service restaurants. The Company's cafeterias
offer a wide variety of meals appealing to a broad range of
personal tastes, including chicken, beef, fish and pasta entrees;
soup, salad and vegetable choices; non-alcoholic beverages; and
freshly baked pies and cakes. The food is prepared for serving
by the individual cafeteria. The Company's cafeterias are
generally characterized by quick service and modest prices per
guest. Guest tickets for the fiscal years ended January 2, 1996
and January 3, 1995 averaged approximately $5.14 and $5.06,
respectively. The Company's cafeterias average approximately
10,000 square feet in size and have average seating capacity for
approximately 300 guests. Virtually all of the Company's
cafeterias feature "All-You-Can-Eat" at a fixed price all day,
every day, as well as the traditional "a la carte" pricing
alternative.

Management believes that the "Furr's" and "Bishop's" names
are widely recognized in their regional markets. Management's
emphasis on consistent food quality, variety, cleanliness and
service has led to a loyal guest base. The Company's customer
base consists principally of people over 45 years of age,
shoppers, working people and young families.

The Company considers its cafeteria business to be a
relatively mature business, but believes that earnings growth can
be achieved through successful implementation of its cost
control, remodeling, marketing and growth strategies. Since the
fourth quarter of fiscal 1992, the Company has undertaken
programs to increase cafeteria traffic by remodeling existing
cafeterias and repositioning the cafeteria concept to attract a
wider array of customers. The Company believes that for a
relatively modest capital investment of approximately $100,000 to
$150,000 per unit, it can freshen the appearance of an existing
cafeteria and thereby enhance its customer appeal. An average
cafeteria remodeling project lasts for a four to six week period
and can typically be accomplished without closing the restaurant.

Virtually all cafeterias offer the choice of "All-You-Can-
Eat" and "a la carte" pricing options. As a result, customers
choose the pricing and dining format which they find most
attractive. The Company's goal is to be the value leader in its
segment. The Company has also introduced "Kids' Bars" to all of
its cafeterias and buffets. The "Kids' Bar" is a free-standing
service area at which children under 10 may serve themselves, on
child-size plates, from foods selected to appeal directly to
children. The Company believes that the installation of "Kids'
Bars" increases the attractiveness of the Company's cafeterias
and buffet to younger family diners.

Buffet. The Company's buffet-style restaurant features
traditional American and ethnic foods at a fixed price that
entitles each guest to unlimited servings of all menu items and
beverages. Food items are served in a "scatter bar" format at
buffet islands centrally located in the restaurant's food service
area. The "scatter-bar" buffet format emphasizes customer choice
by allowing customers to select at their own pace in self
selected portions, thereby improving the restaurant experience
for the guest. The buffet unit is approximately 10,000 square
feet in size and has seating capacity for approximately 300
guests. Guest tickets for the fiscal years ended January 2, 1996
and January 3, 1995 averaged approximately $5.26 and $5.12,
respectively.

ZOO-KINI'S SOUPS, SALADS AND GRILL

The Company's two Zoo-Kini's Soups, Salads and Grill
restaurants are located in Lubbock, Texas. The concept has
appealed to younger age groups than the cafeterias and is
particularly well-liked by high school and college students, as
well as baby boomers. Zoo-Kini's Soups, Salads and Grill
restaurants are known for an extensive Soup, Salad and Potato
Bar, as well as a selection of healthy grilled items and
specialty foods. Selected specials are added to the menu on a
daily basis. Zoo-Kini's Soups, Salads and Grill restaurants
offer full table service and serve several varieties of wine and
beer as well as flavored cappuccino and espresso. Mixed drinks
are available, but do not represent a significant portion of
sales. There is no bar area in either restaurant, but an outdoor
patio area at one location with seating for 55 serves as a bar
during the warmer months.

Zoo-Kini's Soups, Salads and Grill restaurants are known for
the signature neon animals in their windows and a large interior
mural emphasizing wildlife themes. Zoo-Kini's Soups, Salads and
Grill restaurants are currently approximately 4,700 square feet
in size and have seating capacity for 135-200 guests. Guest
tickets for the fiscal years ended January 2, 1996 and January 3,
1995 averaged approximately $5.96 and $5.78, respectively.

MARKETING AND ADVERTISING

The Company's marketing program utilizes a variety of media
to attract customers to the Company's restaurants and to create a
targeted image for the Company's restaurants. First, the Company
utilizes point of sale advertising within its restaurants, to
focus customers on the various food items and promotions being
offered at the restaurant. Billboard advertising, newspaper and
direct mail programs within the communities in which the Company
has a large presence are used to direct customers to the
Company's restaurants and to promote specific programs, including
the one-price "All-You-Can-Eat" concept. Radio and television
advertisements are also used by the Company to enhance its image
with respect to food quality and value pricing and to support and
introduce new concepts or programs at its restaurants. The
Company frequently uses all of its marketing tools together to
introduce or promote one concept or program. In addition, store
managers and other personnel are encouraged to participate in
local public relations and promotional efforts.

DYNAMIC FOODS

The Company operates Dynamic Foods, a food preparation,
processing and distribution facility in Lubbock, Texas which
supplies in excess of 85% of the food and supply requirements of
the Company's family dining restaurants, providing the Company
with uniform quality control and the ability to make volume
purchases. In addition, management believes that there is
significant potential for utilizing the available excess capacity
at Dynamic Foods by increasing sales to third parties of pre-cut
produce and other prepared foods or through other transactions.

Dynamic Foods prepares and processes approximately 250
separate food items, including over 50 salad and other fresh
vegetable offerings under the "Dynamic Foods" and "Furr's Carry
Out Kitchen" labels. Currently, approximately 90% of Dynamic
Food's manufacturing output is used at the Company's restaurants
and the remainder is sold to third parties.

In 1993, Dynamic Foods commenced third party sales of pre-
cut produce, meats and seafood, bakery goods and other prepared
foods and entrees. In fiscal years 1993, 1994 and 1995, third
party sales by Dynamic Foods aggregated $1.7 million, $3.9
million and $4.6 million, respectively.

RESTAURANT MANAGEMENT

The success of each restaurant's operation is largely
dependent upon the quality of in-store management and mid-level
supervisory management. Experienced and well trained in-store
management is important to assure good service, quality food and
the cleanliness of each restaurant, to control costs, and to
monitor local eating habits and traffic.

Each cafeteria and buffet is operated under the supervision
of a general manager, a food and beverage manager and one or two
associate managers. Each cafeteria generally employs between 40
and 70 workers of whom approximately 33% are part-time workers.
The buffet-style restaurant typically employs fewer persons as
the "scatter-bar" concept reduces service staffing requirements.

The general managers of the Company's family dining
restaurants report to twelve regional managers who report to the
Vice President, Field Operations, who reports to the Chief
Executive Officer of the Company. The general managers have
responsibility for day-to-day operations, including food
ordering, labor scheduling, menu planning, customer relations and
personnel hiring and supervision. The regional managers visit
each restaurant regularly and work with the in-store managers to
evaluate maintenance of overall operating standards. They also
make quality control checks, train personnel in operating
procedures and evaluate procedures developed by cafeteria and
buffet personnel for possible use in all Company owned family
dining units.

The management team for a Zoo-Kini's Soups, Salads & Grill
restaurant consists of one general manager and two or three
assistant managers. Each specialty restaurant employs a high
proportion of part-time hourly employees, most of whom work for
an average hourly wage significantly less than employees earn at
cafeterias and buffets, due to the larger possible tip income at
the restaurants. Working in concert with the general managers,
the Company's senior management defines operational and
performance objectives for each specialty restaurant.

SERVICE MARKS AND TRADEMARKS

The Company utilizes and is dependent upon certain
registered service marks, including "Furr's Cafeterias" and
"Bishop Buffets", and a stylized "F" trademarked by Furr's. The
Company has applied for trademark registration for its Zoo-Kini's
Soups, Salads and Grill restaurants as well as its Dynamic Foods
manufacturing division. Other trademarks are current and are
renewable on dates ranging from July 1996 to February 2008. The
Company is not aware of any party who could prevail in a contest
of the validity of such service marks and trademarks. In October
1994, the Company licensed the use of its "El Paso Bar-B-Que
Company" and related trademarks to M&B Restaurants, L.C. under a
License and Development Agreement. The agreement requires M&B
Restaurants, L.C. to pay royalties and new unit opening fees on
25 units required to be opened over the term of the agreement.

SEASONALITY

Customer volume on a Company-wide basis at most established
restaurants is generally somewhat lower in the winter months, due
primarily to weather conditions in certain of the markets for the
Company's restaurants. As a consequence, the first and fourth
quarters of the year historically produce lower sales and results
of operations. A harsh winter season has a negative effect on
the Company's revenues, results of operations and liquidity.

WORKING CAPITAL REQUIREMENTS

The Company's restaurants are a cash business. Funds
available from cash sales are not needed to finance receivables
and are generally not needed immediately to pay for food,
supplies and certain other expenses of the restaurants.
Therefore, the business and operations of the Company have not
historically required proportionately large amounts of working
capital, which is generally common among similar restaurant
companies. Should Dynamic Foods continue to expand its sales to
third parties, the accounts receivables and inventory related to
such sales could require it to maintain additional working
capital. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources."

COMPETITION

The food service business is highly competitive in each of
the markets in which the Company's restaurants operate and is
often affected by changes in consumer tastes, economic conditions
and demographic and local traffic patterns. In each area in
which the Company's restaurants operate, there is a large number
of other food service outlets including other cafeterias, buffets
and fast-food and limited-menu restaurants which compete directly
and vigorously with the Company's restaurants in all aspects,
including quality and variety of food, price, customer service,
location and the quality of the overall dining experience.

Neither the Company nor any of its competitors has a
significant share of the total food service market in any area in
which the Company competes. The Company believes that its
principal competitors are other cafeterias and buffets;
moderately-priced, conventional restaurants, fast-food outlets,
and eat-at-home alternatives. Many of the Company's competitors,
including its primary cafeteria and buffet competitors, have
greater financial resources, lower total debt-to-equity ratios
and lower debt costs than does the Company. The Company competes
with other food service outlets for management personnel based on
salary, opportunity for advancement and stability of employment.
The Company believes it offers existing and prospective
management personnel an attractive compensation and benefits
package with opportunity for advancement in a stable segment of
the food service industry.

The food manufacturing and distribution business is highly
competitive and many of Dynamic Foods' competitors are large
regional or national food processors and distributors with
significantly greater financial resources than the Company.
Accordingly, there can be no assurance that Dynamic Foods will be
able to penetrate the food distribution market or generate
significantly higher revenue or increase the profitability of the
Company.

CAPITAL EXPENDITURE PROGRAM

During the fiscal years ended January 2, 1996, January 3,
1995 and December 28, 1993, the Company expended $8.0 million,
$5.7 million and $15.7 million, respectively, principally to
maintain and remodel existing cafeterias, convert selected units
to buffets or specialty formats and improve the facility operated
by Dynamic Foods. The Company believes that the aggregate level
of capital expenditures over such period has been below that
required to expand the Company's cafeteria operations and to
remodel existing cafeterias as required by competitive conditions
in the restaurant industry. The Company's capital expenditure
program is necessary to enable the Company and its subsidiaries
to increase their revenue and profitability.

Subject to its ability to generate necessary funds from
operations or to obtain funds from other sources, the Company
intends to pursue an active program of remodeling existing
restaurants and opening new restaurants. The Company anticipates
expending approximately $9 million in each of fiscal years 1996
and 1997 to open new restaurants, remodel existing cafeterias and
make other capital expenditures. No assurance can be given that
the Company will generate sufficient funds from operations or
obtain alternative financing to enable it to make the desired
capital expenditures. The Company's ability to open new
restaurants will also depend, among other things, upon its
ability to secure appropriate store locations on favorable terms
and to identify, hire and train personnel for expansion. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations --Liquidity and Capital Resources."

EMPLOYEES

As of March 13, 1996, the Company employed approximately
6,400 persons, of whom approximately 4,000 were employed on a
full-time basis. The Company employed approximately 400 persons
as managers or assistant managers of its restaurants, twelve
persons as regional managers and approximately 75 persons in
executive, administrative or clerical positions in the corporate
office. None of the Company's employees are covered by
collective bargaining agreements. The Company believes that its
relations with its employees are satisfactory.

The majority of the Company's restaurants pay average wages
in excess of the current minimum wage standards. However, any
future increase in the federal minimum wage could have the effect
of increasing the Company's labor costs. In recent years, the
market for those employees who have traditionally been employed
in the restaurant industry has become increasingly competitive
due to fewer persons entering this category of wage earner and
the increased government regulation of immigrants entering and
working in the United States. In response to this decrease in
the available labor pool, the Company has increased its average
hourly wage and expanded its hiring and training efforts.

REGULATION

The Company's restaurants are subject to numerous federal,
state and local laws affecting health, sanitation, waste water,
fire and safety standards, as well as to state and local
licensing regulating the sale of alcoholic beverages.

The Federal Americans With Disabilities Act prohibits
discrimination on the basis of disability in public
accommodations and employment. Such Act became effective as to
public accommodations and employment in 1992. Because of the
absence of comprehensive regulations thereunder, the Company is
unable to predict the extent to which the Act may affect the
Company; however, the Company could be required to expend funds
to modify its restaurants in order to provide service to, or make
reasonable accommodations for the employment of, disabled
persons.

The Company believes that it is in substantial compliance
with applicable laws and regulations governing its operations.

PROPERTIES AND RESTAURANT LOCATIONS

The following table sets forth the number of restaurants
that the Company operates in certain states as of March 28, 1996.

STATE NUMBER OF RESTAURANTS
Arkansas 2
Arizona 8
California 5
Colorado 10
Iowa 7
Illinois 2
Kansas 8
Missouri 3
Nebraska 1
New Mexico 15
Nevada 2
Oklahoma 11
Texas 39
113

Site Selection. The Company generally intends to open new
restaurants or reposition existing restaurants in markets in
which the Company's restaurants are presently located and in
adjacent markets, in order to improve the Company's competitive
position and increase operating margins by obtaining economies of
scale in merchandising, advertising, distribution, purchasing and
supervision. The primary criteria considered by the Company in
selecting new locations are a high level of customer traffic,
convenience to both lunch and dinner customers in demographic
groups that tend to favor the Company's restaurants, and the
occupancy cost of the proposed restaurant. The ability of the
Company to open new restaurants depends on a number of factors,
including its ability to find suitable locations and negotiate
acceptable leases, its ability to attract and retain a sufficient
number of qualified restaurant managers, and the availability of
sufficient financing. The Company actively and continuously
attempts to identify and negotiate leases for additional new
locations.

Properties. Fifty-four of the Company's restaurants are
leased from third parties, another 34 are subleased under a
master sublease agreement, 16 are owned and are situated on land
leased from third parties and nine are owned in fee simple. Most
of the leases have initial terms of from 10 to 20 years and
contain provisions permitting renewal for one or more specified
terms at specified rental rates. Some leases provide for fixed
annual rent plus rent based on a percentage of sales. The
average restaurant contains approximately 10,000 square feet and
seats approximately 300 guests.

Dynamic Foods' food manufacturing and distribution facility
contains approximately 175,000 square feet and is situated on
approximately 24 acres owned in fee simple by the Company in
Lubbock, Texas. In addition, a grocery warehouse of
approximately 36,000 square feet, a truck terminal of
approximately 7,200 square feet and a sales office of
approximately 4,000 square feet are located adjacent to the
distribution facility.

The Company's executive offices in Lubbock, Texas consist of
approximately 34,000 square feet situated on approximately three
acres of land owned in fee simple by the Company. The Company
believes that its properties will be adequate to conduct its
current operations for the foreseeable future.

The Company owns in fee simple approximately 19 acres of
land in Lubbock, Texas at the corner of Flint Avenue and 50th
Street, which was formerly Monterey Shopping Center. This land
has been designated to be sold by the Company. In addition, the
Company leases one property from a third party and seven under a
master sublease, owns eight buildings situated on land leased
from third parties and owns three buildings on land owned in fee
simple, which are not used in the Company's restaurant business
and are periodically leased to third parties.

The Company, from time to time, considers whether
dispositions of certain of its assets, including real estate
owned in fee simple and leasehold interests, or potential
acquisitions of assets would be beneficial or appropriate for the
long-term goals of the Company and in order to increase
stockholder value.

LEGAL PROCEEDINGS

(1) The Internal Revenue Service (the "Service") has
examined the federal income tax returns of certain subsidiaries
of the Company, including (i) Foods (for the tax years ended
December 31, 1986, 1987, 1988, and 1989), (ii) Cavalcade
Holdings, Inc. (for the tax years ended June 30, 1985, 1986,
1987, 1988, 1989 and 1990), (iii) CFI as successor in interest to
Bishop Buffets, Inc. (for the tax period ended December 27,
1986), (iv) CFI as successor in interest to Furr's Cafeterias,
Inc. (for the period December 27, 1986), and (v) CCI (for the tax
years ended December 31, 1987, 1988 and 1989).

The Service has asserted federal income tax deficiencies of
up to $5.5 million plus interest from the date such amounts were
deemed payable, with respect to several of the above tax returns.
Petitions have been filed to dispute the claims. The cases are
on the calendar for trial September 30, 1996.

(2) On August 11, 1995, a complaint was filed in the
District Court of Travis County, Texas by former chairman of the
board of the Company, Michael J. Levenson, both individually and
on behalf of his minor son Jonathan Jacob Levenson, James Rich
Levenson, Benjamin Aaron Levenson, S.D. Levenson, General
Consulting Group, Inc. and Cerros Morado. The complaint named as
defendants the Company, Cafeteria Operators, Furr's/Bishop's
Cafeterias, L.P., Cavalcade & Co., individual members of the
Board of Directors, Houlihan, Lokey, Howard & Zukin, Inc., KL
Park, KL Group, Skadden, Arps, Slate, Meagher & Flom, certain of
the then current and certain Original 11% Noteholders, Deloitte &
Touche LLP, Kmart and certain partners and employees of the
foregoing.

The complaint alleged, among other things, that the Company
and certain defendants conspired to wrest control of the Company
away from the Levensons by fraudulently inducing them to transfer
their working control of the Company through a series of
transactions in which the Levensons transferred Old Class B
Common Stock and stock options in the Company to KL Park and KL
Group. Plaintiffs initially sought actual damages of
approximately $16.4 million, as well as punitive damages. In a
Third Amended Petition filed January 15, 1996, plaintiffs sought
an unspecified amount of actual damages, alleging only that their
actual damages claim is "no more than $400 million." The
Company's management believes the allegations are completely
without merit and intends to defend the action vigorously.

On October 6, 1995, the Levensons filed a Notice of Non-Suit
as to certain of the defendants, including the Company, Cafeteria
Operators, Furr's/Bishop's Cafeterias, L.P., Cavalcade & Co. and
specific individual members of the Board of Directors (other than
William E. Prather and Kevin E. Lewis) and amended their
complaint. As a result of such Notice of Non-Suit, the named
entities and individuals are no longer defendants in the Levenson
litigation.

The Company is required to indemnify certain of the
defendants originally named in the Levensons' complaint,
including the individual members of the Board of Directors,
former 11% Noteholders, KL Group, KL Park and Kmart, from and
against all claims, actions suits and other legal proceedings,
damages, costs, interest, charges, counsel fees and other
expenses and penalties which such entity may sustain or incur to
any person whatsoever by reason of or arising out of the Levenson
Litigation. The Company is not required to indemnify KL Group
and KL Park for any judgments or settlements in respect of the
Levenson Litigation and under no circumstances will the Company
be obligated to indemnify any party for any liability resulting
from such party's willful misconduct or bad faith. On June 7,
1996, the Company, the Parent and Kevin E. Lewis entered into the
Consulting and Indemnity Agreement and General Release pursuant
to which the Company and the Parent agreed to release any claims
it may have against Mr. Lewis, and to indemnify and hold harmless
Mr. Lewis, to the fullest extent permitted by law, from and
against all judgements, costs, interest, charges, counsel fees
and other expenses relating to or in connection with any claims,
actions, suits and other proceedings by reason of or arising out
of any action or inaction by Mr. Lewis in his capacity as an
officer, director, employee or agent of the Parent and its
affiliates, including the Company, except to the extent that such
claim or indemnification arises directly from any claim or cause
of action that the Parent or its affiliates may have that relates
to or arises from Mr. Lewis' knowingly fraudulent, dishonest or
willful misconduct, or receipt of any personal profit or
advantage that he is not legally entitled to receive. See "Risk
Factors -- Levenson Litigation."

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The names and ages of all current directors and executive
officers of the Company are set forth below. The business
address of each of the directors and executive officers listed
below is c/o Furr's/Bishop's, Incorporated, 6901 Quaker Avenue,
Lubbock, Texas 79413. Pursuant to an agreement with the Company
and the Parent, Kevin E. Lewis will resign as President and Chief
Executive Officer by September 30, 1996 and Chairman of the Board
on December 31, 1996, unless requested by the Board of Directors
to continue until December 31, 1997. See "Management --
Executive Compensation -- Employment and Consulting Agreements."
The Board of Directors has begun a search for an individual to
serve as President and Chief Executive Officer of the Company.

Name Age Position

DIRECTORS:

Russell A. Belinsky 36 Director
Suzanne Hopgood 47 Director
Kevin E. Lewis 31 Chairman, President and Chief
Executive Officer
Gilbert C. Osnos 66 Director
Kenneth F. Reimer 56 Director
Sanjay Varma 42 Director
E.W. Williams, Jr. 69 Director

OTHER EXECUTIVE OFFICERS:

Donald M. Dodson 58 Vice President, Operations Services
Jim H. Hale 54 Vice President, Field Operations
Alton R. Smith 43 Executive Vice President

Russell A. Belinsky has been Managing Director of Chanin and
Company since 1990. The company is a specialty investment
banking firm, providing a wide range of services to middle market
companies in the areas of financially distressed situations,
mergers and acquisitions and private placements. Mr. Belinsky is
currently a director of Fairfield Communities, Inc., one of the
nation's leading vacation ownership companies.

Suzanne Hopgood has served as President of the Hopgood Group
since founding the company in 1985. The company provides
consulting and brokerage services to clients with hotel
investments.

Kevin E. Lewis was elected Chairman of the Board of the
Company on June 24, 1993 and President and Chief Executive
Officer of the Company in July 1994. Prior to serving as
Chairman of the Board of the Company, Mr. Lewis was a managing
director in the New York office of Houlihan, Lokey, Howard &
Zukin, Inc., an investment banking firm, where he had previously
served as a Senior Vice President (December 1991 - April 1993),
Vice President (1989 - 1991) and Associate (1988 - 1989). Mr.
Lewis was a director of the LVI Group, Inc. from December 1991 to
May 1993 and has been a director of Robertson-Ceco Corporation
since July, 1993.

Gilbert C. Osnos has been President of Gilbert C. Osnos &
Co., Inc. since 1981, and a partner in Grisanti Galef & Osnos
Associates since 1981. Mr. Osnos was a director of the
Turnaround Management Association from 1988 to 1993 and a
director of Trivest Financial Services Corporation and Reprise
Capital from 1989 to 1991. Mr. Osnos has served on the boards of
directors of Mrs. Fields, Inc. since 1993 and American Mirrex
since March 1996.

Kenneth F. Reimer has been Chairman and CEO of Reimer
Enterprises, Inc., since 1993. Mr. Reimer was a director of S A
Holdings, Inc. from 1993 to 1995. Prior to that, Mr. Reimer was
CEO, President and a director of Roma Corporation from 1984 to 1993.

Sanjay Varma has been a partner in Crescent Real Estate
Equities, Ltd. since 1994. Mr. Varma was Executive Vice
President of Walt Disney Company, responsible for the Euro Disney
Resort from 1989-1994 and Walt Disney World Resorts from 1986-
1989. Prior to 1986, Mr. Varma was Area Vice President of Food &
Beverage for the Marriott Hotels where he worked for eight years.

E.W. Williams, Jr. is Chairman of the Board of the Citizens
Bank in Slaton, Texas and Bank of Commerce in McLean, Texas;
Chairman of the Executive Committee of the Hale County State
Bank, Plainview, Texas and First National Bank in Clayton, New
Mexico. Mr. Williams is also Chairman of LubCo BancShares, Inc.,
HaleCo BancShares, Inc., GrayCo BancShares, Inc. and Union
Bancshares, Inc. and is Chairman of the Board of Coyote Lake
Feedyard, Inc., Muleshoe, Texas. Mr. Williams has held each of
these positions for longer than five years. Mr. Williams was
previously a director and executive committee member of the Texas
Tech University President's Council; founder of the West Texas
A&M University President's Council, and was previous director of
the Southern Methodist University Foundation and Alumni
Association. Mr. Williams also served as Chairman of the
Amarillo Hospital District. Mr. Williams currently has farming
and ranching interests in Garza County and Bailey County, Texas.

Donald M. Dodson has been Vice President of Operations
Services since 1993 and was formerly Vice President Food and
Beverage from 1990 until 1993. He was Vice President of
Operations from 1987 to 1990. Mr. Dodson joined the Company in
1958 and managed several cafeterias before becoming a District
Manager in 1968.

Jim H. Hale has been Vice President of Field Operations
since April 1996 and was formerly Regional Vice President of
Operations from 1975. Mr. Hale joined the Company in 1964 and
managed several cafeterias before being promoted to regional
management.

Alton R. Smith has been Executive Vice President of the
Company since 1993, Secretary since 1995 and was formerly
Executive Vice President and Chief Financial Officer from 1989
until 1993. He was Vice President and Controller between 1986
and 1989. Prior to 1986, Mr. Smith served as Controller and
Assistant Secretary from 1985 until 1986. Mr. Smith was
Assistant Controller and Assistant Secretary from 1982 to 1985,
Director of Taxation from 1978 to 1982 and Tax Manager from 1974
to 1978. He is a certified public accountant and joined the
Company in 1974.

EXECUTIVE COMPENSATION

There is shown below information concerning the annual and
long-term compensation for services in all capacities to the
Company and its subsidiaries for the fiscal years ended January
2, 1996, January 3, 1995 and December 28, 1993 of those persons
who were, at January 2, 1996 (i) the chief executive officer,
(ii) the four other most highly compensated executive officers of
the Company and its subsidiaries for the 1995 fiscal year (the
"Named Officers"):

<TABLE>
<CAPTION>
Summary Compensation Table

Annual Compensation Long-Term
------------------- ---------
Compensation
Awards Payouts
Stock Long-Term
Name and Principal Options Incentive All Other
Position Year Salary Bonus Other (Shares) Payouts Compensation
-------- ---- ------ ----- ----- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin E. Lewis 1995 406,539 50,000 - - - -
Chairman, President and 1994 463,400 42,000 - - - -
Chief Executive 1993 251,853(a) - - - - -
Officer

Alton Smith 1995 120,994 5,000 - - - -
Executive 1994 121,500 - - - - -
Vice President 1993 121,500 - - 15,000 - -

Jim Hale 1995 106,474 19,000 - - - -
Regional 1994 100,000 8,395 - - - -
Vice President 1993 91,250 21,047 - - - -

Donald M. Dodson 1995 120,994 2,500 - - - -
Vice President 1994 125,000 10,000 - - - -
Operations Services 1993 135,563 - - - - -

Kenneth Rue 1995 116,154 3,390 - - - -
Regional 1994 120,000 8,438 - - - -
Vice President 1993 114,695 19,136 - - - -

- --------------------------
(a) The salary of Mr. Lewis includes a partial year beginning June, 1993.

</TABLE>

Option Grants

No grants of stock options were made during the fiscal year
ended January 2, 1996 to the Named Officers which are reflected
in the Summary Compensation Table. No stock appreciation rights
were granted during fiscal 1995.

Option Exercises and Fiscal Year-End Values

At January 2, 1996, there were no options outstanding. All
options that had been granted to executive officers in prior
years had terminated either by the termination of the employee or
by agreement between the Company and the holders of the options.

Certain Compensation Plans

The Company has a qualified defined benefit pension plan
(the "Pension Plan") covering employees and former employees of
Cafeteria Operators and its affiliates, including those who were
participants in the Kmart Corporation Employees' Retirement
Pension Plan (the "Kmart Pension Plan"). The Pension Plan
assumed all of the obligations of the Kmart Pension Plan relating
to benefits that accrued for employees and former employees of
certain of the Company's subsidiaries through the consummation of
the acquisition of such subsidiaries from Kmart. Kmart agreed to
transfer an amount of plan assets equal to the actuarially
computed accumulated benefits applicable to the Furr's and
Bishop's employees in the Kmart Pension Plan.

Benefits for service prior to 1987 were based on the
provisions of the Kmart Pension Plan and are frozen for such
service. Effective December 31, 1988, the Pension Plan was
frozen for highly compensated participants and effective June 30,
1989 benefit accruals of all participants in the Pension Plan
were frozen indefinitely.

The Pension Plan covers all employees who are at least 21
years old and have one year or more of participation service and
is integrated with Social Security. A participant's benefit
under the Pension Plan will be the greater of (i) a benefit
provided by the participant's "cash balance account" defined
below, or (ii) the sum of (x) the participant's accrued benefit
under the Kmart Pension Plan plus (y) for each year of service
after 1986, 0.75% of the participant's "considered pay" for the
year plus (z) 0.75% of considered pay exceeding the Social
Security integration level for the year. "Considered pay" is
comprised of total W-2 compensation, excluding extraordinary
items, such as moving expenses and imputed income, and including
pre-tax amounts deferred under the Employees' Savings Plan
described below. The Social Security integration level is one-
half of the Social Security Taxable Wage Base for the year,
rounded to the next highest $1,000. A participant's cash balance
account will contain an amount equal to the sum of (i) 2% of 1986
considered pay multiplied by the number of years of benefit
service prior to 1987, plus (ii) 2% of considered pay for each
year thereafter, plus (iii) 6% interest per annum. The normal
form of benefit under the Pension Plan will be a life annuity for
an unmarried participant and a 50% joint and survivor annuity in
the case of a married participant. Alternatively, participants
may elect an optional form of payment which is the actuarial
equivalent of the life annuity. Participants are fully vested in
accrued benefits under the Pension Plan after five years of
vesting service. Unreduced benefits are payable at age 65, or,
if earlier, when age plus years of service equals ninety.

The following table shows the amounts payable using the
pension plan formula and the benefits accrued under the
predecessor plans.

Approximate Annual Pension at Age 65*

Current Total Service As of 12/31/88
Compensation 5 Years 15 Years 25 Years 35 Years

$ 75,000 $ 3,700 $ 9,500 $15,400 $21,400
100,000 5,000 13,500 21,800 30,100
125,000 6,300 17,300 28,000 38,600
150,000 7,700 21,100 34,200 47,200
175,000 9,000 25,000 40,300 55,700
200,000 10,400 28,800 46,500 64,200
225,000 11,700 32,600 52,700 72,800
325,000 17,000 48,300 77,800 94,023

* Estimates of frozen pension plan benefits.

The total plan years of service at June 30, 1989 (the date
benefit accruals were frozen) of the five Named Officers of the
Company and its subsidiaries are Kevin E. Lewis 0, Alton R. Smith
15, Donald M. Dodson 31, Jim H. Hale 26, and Kenneth B. Rue 26.
If Mr. Smith, Mr. Dodson, Mr. Hale and Mr. Rue were to retire on
their respective retirement dates, they would receive monthly
payments of $848, $3,265, $2,027 and $2,401, respectively.

Cafeteria Operators established an Employees 401K Plan which
is qualified under Sections 401(a) and 401(k) of the Code (the
"401K Plan"). Under the 401K Plan, participants may elect to
make pre-tax contributions, in an amount equal to from 1% to 12%
of "considered pay", which consists of total W-2 compensation for
personal services, excluding extraordinary pay, such as moving
expenses and imputed income. Pre-tax contributions were limited
to $9,240 in 1995. Additionally, Cafeteria Operators may make
discretionary contributions to the 401K Plan. Employees will be
eligible to participate in the 401K Plan at age 21 with one year
of participation service.

Participants' contributions are always fully vested. The
Board of Directors will either designate Cafeteria Operators and
the Company contributions as fully vested when made, or Cafeteria
Operators and the Company contributions will be subject to a
vesting schedule under which 100% of Cafeteria Operators and the
Company contributions are vested after seven years. Employee
contributions may be invested either in a fixed income fund,
consisting of guaranteed interest contracts and government
securities, or five different equity funds with various growth
and income objectives. Loans from participants' pre-tax accounts
are permitted after two years of participation.

Participants may generally receive their vested account
balances at the earlier of retirement or separation from service.

Non-employee directors of the Company receive a fee of
$1,500 per month and $1,000 per board meeting attended as
compensation for their services. In addition, non-employee
directors who are members of any Committee of the Board receive
$500 for each meeting attended. Notwithstanding the foregoing,
non-employee director compensation shall not exceed $30,000 in
any fiscal year.

The Board of Directors adopted, and on January 2, 1996 the
stockholders approved, the 1995 Stock Option Plan authorizing an
aggregate of 40,540,795 shares of Common Stock (the "1995 Option
Plan"). After giving effect to the reverse stock split, there
are 2,702,720 shares of Common Stock reserved for issuance
pursuant to the 1995 Option Plan. A Committee of the Board of
Directors administers the 1995 Option Plan, including determining
the employees to whom awards will be made, the size of such
awards and the specific terms and conditions applicable to
awards, such as vesting periods, circumstances of forfeiture and
the form and timing of payment. Grants including stock options,
stock appreciation rights and restricted stock may be made to
selected employees of the Company and its subsidiaries and non-
employee directors of the Company. There are no options
outstanding under the 1995 Option Plan.

Employment and Consulting Arrangements

On January 25, 1995, each of Kevin E. Lewis, Alton R. Smith,
Donald M. Dodson, Carlene Stewart, John R. Egenbacher and Danny
K. Meisenheimer entered into an employment agreement with the
Company pursuant to which he or she shall be paid an annual base
salary of $420,000, 125,000, 125,000, 115,000, 115,000 and
95,000, respectively, for the period ending January 25, 1996. If
such persons' employment shall be terminated by the Company
without cause or by such employee under certain circumstances,
the Company shall pay to such employee his or her annual base
salary in effect on the date of termination for the then
remaining term in a lump sum payable on the date of termination.
On June 16, 1995, the Board of Directors voted to extend the
agreements for the individuals set forth above, except Kevin E.
Lewis, at his request, until a date six months after the
consummation of the Restructuring. As a result, the remaining
employment agreements terminated on July 2, 1996 and Mr. Lewis's
agreement expired by its terms on January 25, 1996.

On June 7, 1996, the Company, the Parent and Kevin E. Lewis
entered into the Consulting and Indemnity Agreement and General
Release (the "Consulting Agreement") pursuant to which, among
other things, Mr. Lewis will resign as President and Chief
Executive Officer by September 30, 1996 and Chairman of the Board
on December 31, 1996, unless requested by the Board of Directors
to continue until December 31, 1997. After his resignation as
President and Chief Executive Officer, Mr. Lewis will serve as a
consultant to the Company until December 31, 1997. Pursuant to
the Consulting Agreement, Mr. Lewis will receive an annual base
salary of $350,000 pro-rated through the end of 1996 and $250,000
through the end of 1997. Mr. Lewis received $75,000 upon the
execution of the Consulting Agreement and is entitled to receive
$75,000 when he resigns as President and Chief Executive Officer
and $100,000 on December 31, 1997. In addition, Mr. Lewis is
entitled to receive $100,000 if requested to assist in certain
negotiations on behalf of the Company and additional compensation
based upon the success of such negotiations. Furthermore, the
Company agreed to pay, among other things, certain legal expenses
of Mr. Lewis incurred in connection with the negotiation of the
Consulting Agreement and certain travel and moving related
expenses. The Board of Directors has begun a search for an
individual to serve as President and Chief Executive Officer of
the Company.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Common Stock is traded on the NYSE under the symbol
"CHI." On March 14, 1996, stockholders approved a fifteen-to-one
reverse stock split of the Common Stock which became effective on
March 22, 1996. As of July 31, 1996, there were 48,325,400
shares of Common Stock outstanding and approximately 2,000 record
holders and no dividends had been declared.

The Company's capital stock previously consisted of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"),
Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), and Series A $9.00 Convertible Preferred Stock, par
value $.01 per share ("Convertible Preferred Stock"). As part of
the Restructuring, each share of Class A Common Stock, Class B
Common Stock and Convertible Preferred Stock were converted into,
among other things, the right to receive one, .95, and 1.15
shares of Common Stock, respectively. The Class A Common Stock
and the Convertible Preferred Stock were listed for trading on
the NYSE under the symbols "CHI" and "CHIpr," respectively.

The following table provides the high and low closing
prices, after giving effect to the Restructuring and the reverse
stock split, for the Class A Common Stock prior to January 2,
1996 and the Common Stock subsequent to such date for each
quarter of the last two fiscal years and the first quarter of
fiscal year 1996:

1996 1995 1994
High Low High Low High Low

First
Quarter $4.69 $1.50 $11.25 $3.75 $15.00 $11.25
Second
Quarter 7.50 4.22 12.19 6.09
Third
Quarter 7.03 3.75 11.25 5.16
Fourth
Quarter 6.09 2.11 11.25 2.34

DIVIDEND POLICY

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of
July 31, 1996, with respect to beneficial ownership of each
stockholder known by the Company to be the beneficial owner of
more than five percent of its equity securities.

NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES COMMON STOCK

Teachers Insurance 8,607,637 17.7
and Annuity
Association of America
730 Third Avenue
New York, NY 10011

EQ Asset Trust 1993 8,499,857(1) 17.5
1345 Avenue of the Americas
New York, NY 10105

John Hancock Mutual 5,477,994 11.3
Life Insurance Company
P.O. Box 111
Boston, MA 02117

The Northwestern 5,471,679 11.2
Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202

The Mutual Life 4,105,339 8.4
Insurance Company of
New York
1740 Broadway
New York, NY 10019

Principal Mutual 3,286,701 6.8
Life Insurance Company
711 High Street
Des Moines, IA 50392

Rock Finance, L.P. 2,998,860 6.2
1560 Sherman Avenue
Evanston, IL 60201

SC Fundamental Value 2,949,620(2) 6.1
Fund, L.P.
712 5th Avenue
New York, NY 10019

________________________________

(1) These shares of the Common Stock (the "Equitable Shares")
are held of record by EQ Asset Trust 1993, a Delaware
business trust (the "Trust). The Equitable Companies
Incorporated ("Equitable") is the beneficiary and owner
of the Trust. The Trust is managed by Alliance Capital
Management, L.P. ("Alliance") pursuant to a Collateral
Management Agreement. A wholly-owned subsidiary of
Equitable is the general partner of Alliance; through
wholly-owned subsidiaries, Equitable owns a majority of
the equity interest in Alliance. The Equitable Shares
and such Collateral Management Agreement have been
pledged to The Chase Manhattan Bank, N.A., as trustee for
the benefit and security of holders of certain notes of
the Trust.

AXA beneficially owns approximately 60.7% of Equitable's
outstanding common stock as well as certain convertible
preferred stock of Equitable. AXA is indirectly
controlled by the Mutuelles AXA (five French mutual
insurance companies, acting as a group). AXA and the
Mutuelles AXA and certain of their affiliates disclaim
beneficial ownership of the Equitable Shares.

(2) Excludes 1,502,322 shares held by SC Fundamental Value
BVI Ltd. Gary N. Siegler and Peter M. Collery,
controlling persons of the general partner of the SC
Fundamental Value Fund, L.P. and the investment manager
of the SC Fundamental BVI Ltd., may be deemed to be
beneficial owners of all shares held of record by such
entities.

The following table sets forth certain information, as of
July 31 1996, with respect to beneficial ownership of each
director, certain officers and all officers and directors as a
group. Unless otherwise indicated the business address of each
director and executive officer is 6901 Quaker Avenue, Lubbock,
Texas 79413.

NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES COMMON STOCK

Russell A. Belinsky 0 0.0
Donald M. Dodson 2,063(1) *
Jim H. Hale 5,764(2) *
Suzanne Hopgood 0 0.0
Kevin E. Lewis 837,032(3) 1.7
Gilbert C. Osnos 0 0.0
Kenneth F. Reimer 0 0.0
Alton Smith 696(4) *
Sanjay Varma 0 0.0
E.W. Williams, Jr. 44,934(5) 0.1

All officers and 900,813(6) 1.8
directors as a
group

_______________________
* Owns less than 0.01%
(1) Includes warrants to purchase 1,319 shares of common
stock at $1.11 per share.
(2) Includes warrants to purchase 3,691 shares of common
stock at $1.11 per share.
(3) Includes warrants to purchase 535,827 shares of common
stock at $1.11 per share.
(4) Includes warrants to purchase 445 shares of common stock
at $1.11 per share.
(5) Includes warrants to purchase 28,765 shares of common
stock at $1.11 per share.
(6) Includes warrants to purchase 573,342 shares of common
stock at $1.11 per share.

SELLING SECURITY HOLDERS

The following table provides certain information with
respect to the Shares held by each Selling Security Holder.
Except as otherwise noted in this Prospectus, none of the Selling
Security Holders listed below has had a material relationship
within the past three years with the Company or its subsidiaries,
other than as a result of the ownership or placement of the
Shares. As a result of the Restructuring, Selling Security
Holders own approximately 88.8% of the outstanding Common Stock.
Since the Selling Security Holders may sell all or some of their
Shares, no estimate can be made of the aggregate amount of Shares
that are to be offered hereby or that will be owned by each
Selling Security Holder upon completion of the offering to which
this Prospectus relates.

The Selling Security Holders are comprised of fifteen
separate holders (or groups of affiliated holders) who are
entitled to, and intend to, vote separately upon all matters
submitted to a vote of security holders of the Company (including
any mergers, sales of all or substantially all of the assets of
the Parent or the Company and going private transactions). There
are no agreements, arrangements or understandings among any of
the Selling Security Holders concerning the voting or disposition
of any of such Common Stock or any other matter regarding the
Company or which might be the subject of a vote of the Company's
stockholders. Also, no Selling Security Holder (or affiliated
group of Selling Security Holders) is a beneficial owner of more
than 18% of the Common Stock; accordingly, no single Selling
Security Holder or affiliated group could itself approve any
matter regarding the Company or which might be the subject of a
vote of the stockholders. Certain of the Selling Security
Holders, who currently hold 12% Notes, were former 11%
Noteholders. See "Background; The Restructuring."

In addition, as a part of the Restructuring, Original 11%
Noteholders nominated a majority of the members of the Board of
Directors of the Company. Such directors will generally have the
power to direct the Company's operations. None of such
directors, however, is affiliated with any former 11% Noteholder
and there is no agreement, understanding or arrangement among any
of the former 11% Noteholders or any such director concerning any
matter regarding the governance of the Company. In addition,
Kevin E. Lewis and E.W. Williams, Jr., directors of the Company,
are Selling Security Holders.

The Shares offered by his Prospectus may be offered from
time to time by the Selling Security Holders named below:

Aggregate Amount of Shares
Beneficially Owned and Being
Name Registered

Teachers Insurance and Annuity
Association of America 8,607,637

EQ Asset Trust 1993 8,499,857

John Hancock Mutual Life Insurance Company 5,477,994

The Northwestern Mutual Life Insurance
Company 5,471,679

The Mutual Life Insurance Company of New York 4,105,339

Principal Mutual Life Insurance Company 3,286,701

SC Fundamental Value Fund, L.P. 2,949,620

SC Fundamental Value BVI Ltd. 1,502,322

Wells Fargo Bank, National Association 1,216,224

The Ohio National Life Insurance Company 984,240

Century Life of America 956,271

Cerebus Partners, L.P. 657,053

The Copernicus Fund, L.P. 479,290

Kevin E. Lewis 301,205

Mark Zucker 239,646

E.W. Williams, Jr. 16,169

Equitable Real Estate, an affiliate of EQ Asset Trust
1993, is the owner of seven properties in Illinois, Iowa and
South Dakota which are leased by Cafeteria Operators. The
aggregate amount paid by Cafeteria Operators to Equitable Real
Estate in respect of periodic rental installments during fiscal
1995 was $641,402.97. Northwestern Mutual Life Insurance Company
is a 50% partner in Champion Investors, which owns property in
Champaign, Illinois which is leased by Cafeteria Operators. The
aggregate amount paid by Cafeteria Operators to Champion
Investors in respect of periodic rental installments during
fiscal 1995 was $54,374.65. Such lease was terminated on
December 31, 1995. Each of such leases was entered into by
Cafeteria Operators and the respective affiliate or related
person of such Selling Security Holder prior to the acquisition
by such Selling Security Holder of any equity interest in
Cafeteria Operators or the Company in connection with
Restructuring, and each such lease was negotiated at arm's length
on terms no less favorable to the Company than would have
obtained from an unrelated landlord.

PLAN OF DISTRIBUTION

The Company will receive none of the proceeds from this
offering. The Shares may be sold from time to time to purchasers
on the NYSE, in privately negotiated transactions or in the over-
the-counter market. The Selling Security Holders may from time
to time offer the Shares directly or through underwriters,
brokers, dealers or agents, pursuant to (a) a block trade in
which a broker or dealer will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its
account pursuant to this prospectus; (c) ordinary brokerage
transactions and transactions in which the broker or dealer
solicits purchasers. In effecting such sales, underwriters,
brokers or dealers engaged by the Selling Security Holders may
arrange for other brokers or dealers to participate in the
resales. Such sales may be effected at market prices and on
terms prevailing at the time of sale, at prices related to such
market prices, at negotiated prices or at fixed prices. In
addition, the Selling Security Holders may engage in hedging or
other similar transactions, and may pledge the Shares being
offered, and, upon default, the pledgee may effect sales of the
pledged shares pursuant to this prospectus. In connection with
any hedging transactions, broker-dealers may engage in short
sales of the Shares registered hereunder in the course of hedging
the positions they assume with Selling Security Holders. The
Selling Security Holders may also sell Common Stock short and
redeliver the Shares to close out such short positions. The
Selling Security Holders may also enter into option or other
transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares registered hereunder.
Underwriters, brokers, dealers and agents may receive
compensation in the form of underwriting discounts, concessions
or commissions from the Selling Security Holders or the
purchasers of Shares for whom they may act as agent. The Selling
Security Holders and any underwriters, dealers or agents that
participate in the distribution of Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any
profit on the sale of Shares by them and any discounts,
commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts
and commissions under the Securities Act.

At the time a particular offering of Shares is made, a
Prospectus Supplement or a post-effective amendment to the
Registration Statement, if required, will be distributed which
will set forth the aggregate amount and type of Shares being
offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts,
commissions and other terms constituting compensation from the
Selling Security Holders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.

To comply with the securities laws of certain jurisdictions,
if applicable, the Shares will be offered or sold in such
jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions the Shares may
not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with.

There is no assurance that the Selling Security Holders will
sell any of the Shares. In addition, any Shares covered by this
prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold pursuant to Rule 144 rather than
pursuant to this prospectus.

Pursuant to the Exchange Agreement (the "Exchange
Agreement") dated as of November 15, 1995 between the Company and
former 11% Noteholders, some of which are Selling Security
Holders, the Company will pay the expenses of former 11%
Noteholders incident to the offering and sale of the Shares to
the public, other than commissions, concessions and discounts of
underwriters, dealers or agents, but including the fees and
disbursements of one counsel to such Selling Security Holders.
In addition, the Company has agreed to indemnify the Selling
Security Holders, and, if requested, any underwriter they may
utilize against certain civil liabilities, including liabilities
under the Securities Act and, if such indemnification is
unavailable, to contribute to payments required to be made by any
of them in respect of such liabilities. The Exchange Agreement
requires the Company to keep the registration statement of which
this prospectus is a part continuously effective until the
earlier of (a) August 6, 1999, and (b) the date upon which all
Shares have either (i) been disposed of under this prospectus,
(ii) been distributed to the public pursuant to Rule 144 or Rule
145 under the Securities Act, (iii) been otherwise transferred
and subsequent disposition of them shall not require registration
or qualification of them under the Securities Act or any similar
state law then in force, or (iv) ceased to be outstanding.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Set forth below is a summary of the terms of the Common
Stock. This summary does not purport to be complete and is
qualified in its entirety by reference to the provisions of the
Amended and Restated Certificate of Incorporation of the Company
(as amended, the "Certificate of Incorporation") as currently in
effect. The Certificate of Incorporation currently authorizes
for issuance 70 million shares of capital stock, consisting of 65
million shares of Common Stock and 5 million shares of preferred
stock. The Board of Directors may authorize additional series of
preferred stock and fix the voting powers, dividend rates,
preferences and rights thereof. The Board of Directors has not
authorized the issuance of any series of preferred stock.

COMMON STOCK

The Company is presently authorized to issue 65 million
shares of Common Stock, par value $.01 per share. Holders of
Common Stock have no preemptive rights to purchase or subscribe
for securities of the Company and the Common Stock is not subject
to redemption by the Company or convertible. The Common Stock is
listed for trading on the NYSE under the symbol "CHI."

Dividends. The holders of Common Stock are entitled to
receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor. The Company
does not currently anticipate paying dividends on its Common
Stock in the foreseeable future. The Indenture restricts
payments from Cafeteria Operators to the Company under certain
circumstances thereby restricting the ability of the Company to
issue dividends to its stockholders. See "Risk Factors -- No
Anticipated Stockholder Distributions." Before declaring or
paying any dividend on the Common Stock, the Board of Directors
will consider the effect of any such declaration or payment on
the Company's expansion program and the Company's ability to pay
its other obligations in the future. See "Risk Factors Capital
Expenditures" and "Business Capital Expenditure Program." In
the event of the liquidation, dissolution or winding up of the
Company, the holders of Common stock will be entitled to share
ratably in any assets of the Company remaining after satisfaction
of outstanding liabilities.

Voting Rights. Except as provided by the DGCL as described
below, holders of Common Stock will be entitled to one vote for
each share held on all matters submitted to a vote of the
stockholders. The holders of a majority of the shares entitled
to vote shall constitute a quorum at a meeting of stockholders.
Cumulative voting for the election of directors is not permitted;
therefore, the holders of a majority of the Company's voting
securities can elect all members of the Board of Directors of the
Company. The DGCL provides that the holders of the outstanding
shares of a class of capital stock shall be entitled to vote as a
class upon a proposed amendment to the Certificate of
Incorporation, whether or not entitled to vote thereon by the
Certificate of Incorporation, if the amendment would increase or
decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences, or special rights of
the shares of such class so as to affect them adversely.

The transfer agent and registrar for the Common Stock is
Chemical Mellon Shareholder Services, 450 West 33rd Street, New
York, NY 10001.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS

Under Section 145 of the DGCL, a Delaware corporation has
the power, under specified circumstances, to indemnify its
directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact
that they were or are such directors, officers, employees or
agents, or against expenses incurred in any such action, suit or
proceedings. Article Fifth of the Certificate of Incorporation
provides the mandatory indemnification of directors and officers
to the fullest extent permitted by law, including Section 145 of
the DGCL.

Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director provided that such provision shall not eliminate or
limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 (relating to liability for
unauthorized acquisitions or redemption of, or dividends on,
capital stock) of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit. Article
Fifth of the Certificate of Incorporation contains such a
provision.

THE DELAWARE BUSINESS COMBINATION ACT.

Section 203 of the DGCL (the "Delaware Business Combination
Act") imposes a three-year moratorium on business combinations
(as defined in the Delaware Business Combination Act) between a
Delaware corporation and an "interested stockholder" (in general,
a stockholder owning 15% or more of a corporation's outstanding
voting stock) or an affiliate or associate thereof unless (i)
prior to an interested stockholder becoming such, the board of
directors of the corporation approved the business combination or
the transactions resulting in the interested stockholder becoming
such, (ii) upon consummation of the transaction resulting in an
interested stockholder becoming such, the interested stockholder
owns 85% of the voting stock outstanding at the time the
transaction commenced (excluding, from the calculation of
outstanding shares, shares beneficially owned by management,
directors and certain employee stock plans), or (iii) on or after
the date an interested stockholder became an interested
stockholder, such combination is approved by (a) the board of
directors and (b) holders of at least 66-2/3% of the outstanding
shares (other than those shares beneficially owned by the
interested stockholder) at a meeting of stockholders.

The Delaware Business Combination Act provides that the
term "business combination" in general means (i) mergers or
consolidations, (ii) sales, leases, exchanges or other transfers
of 10% or more of the aggregate assets of the corporation, (iii)
issuance or transfers by the corporation of any stock of the
corporation which would have the effect of increasing the
interested stockholder's proportionate share of the stock or any
class or series of the corporation, (iv) any other transaction
which has the effect of increasing the proportionate share of the
stock of any class or series of the corporation which is owned by
an interested stockholder, and (v) receipt by an interested
stockholder of the benefit (except proportionately as a
stockholder) of loans, advances, guarantees, pledges or other
financial benefits provided by the corporation.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On September 28, 1994, Cafeteria Operators and M&B
Restaurants, L.C . ("M&B") entered into a Lease and Sublease
Agreement (the "Lease") and a Trademark License and Development
Agreement (the "License"). Under the terms of the Lease,
Cafeteria Operators leases the two existing El Paso Bar-B-Que
facilities to M&B, a company controlled by William Prather,
formerly CEO of the Company, for an initial term ending December
31, 2003. Pursuant to the License, M&B agreed to pay opening
fees of $25,000 per unit and royalties based on sales on 31 units
required to be opened by December 31, 2003 and to acquire the
trademarks and other intangibles used by the El Paso Bar-B-Que
Company by December 31, 2003, but not earlier than December 31,
1997, for a cash payment of seven times the prior four quarterly
payments under the License. The Company received approximately
$16,000 in 1995 relating to the lease. On November 10, 1995,
Amendment One to Trademark License and Development Agreement (the
"Amendment") was executed. The Amendment modified to 25 the
number of new units required to be opened by December 31, 2003
and on which M&B agreed to pay opening fees and royalties. The
Amendment also modified the earliest buyout date to December 31,
1999. The Company and M&B have held preliminary discussions and
negotiations regarding the acceleration of the earliest buyout
date under the License and certain modifications to the Lease.

Chanin and Company received approximately $1.2 million
from the Company for providing investment banking services to the
former 11% Noteholders in connection with the Restructuring.
Russell A. Belinsky, who became a director of the Company on
January 2, 1996 following the Restructuring, is and, at all
relevant times, was a Managing Director of Chanin and Company.

As of March 31, 1996, Kenneth F. Reimer received
compensation of approximately $29,000 for certain consulting
activities on behalf of the Company during fiscal 1996.

LEGAL MATTERS

Certain legal matters in connection with the Shares
offered hereby are being passed upon for the Company by Skadden,
Arps, Slate, Meagher & Flom.

EXPERTS

The consolidated balance sheets as of January 2, 1996
and January 3, 1995 and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash
flows for the fifty-two week year ended January 2, 1996, the
fifty-three week year ended January 3, 1995 and the fifty-one and
one-half week year ended December 28, 1993, in this Prospectus,
have been audited by Deloitte & Touche LLP, independent certified
public accountants, as stated in their report appearing herein
and have been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.

FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE NO.

FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
Independent Auditors' Report F-2

Consolidated Balance Sheets, at April 2, 1996 (unaudited)
and for years ended January 2, 1996 and January 3, 1995 F-3

Consolidated Statements of Operations
Thirteen weeks ended April 2, 1996 (unaudited), thirteen
weeks ended April 4, 1995 (unaudited), fifty-two weeks
ended January 2, 1996, fifty-three weeks ended
January 3, 1995 and fifty-one and one-half weeks
ended December 28, 1993 F-5

Consolidated Statements of Stockholders' Equity (Deficit)
Years ended December 28, 1993, January 3, 1995, January 2,
1996 and thirteen weeks ended April 2, 1996 F-6

Consolidated Statements of Cash Flows
Thirteen weeks ended April 2, 1996 (unaudited), thirteen
weeks ended April 4, 1995 (unaudited), fifty-two weeks
ended January 2, 1996, fifty-three weeks ended January 3,
1995 and fifty-one and one-half weeks ended
December 28, 1993 F-7

Notes to Consolidated Financial Statements
Fifty-two weeks ended January 2, 1996,
fifty-three weeks ended January 3, 1995 and fifty-one
and one-half weeks ended December 28, 1993 F-9

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Furr's/Bishop's, Incorporated
Lubbock, Texas

We have audited the accompanying consolidated balance sheets of
Furr's/Bishop's, Incorporated and subsidiaries (the Company) as
of January 2, 1996 and January 3, 1995, and the related
consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the 52-week year ended January 2,
1996, the 53-week year ended January 3, 1995 and the 511/2-week
year ended December 28, 1993 for Furr's/Bishop's, Incorporated
and subsidiaries. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all
material respects, the consolidated financial position of
Furr's/Bishop's, Incorporated and subsidiaries, as of January 2,
1996 and January 3, 1995, and the consolidated results of their
operations and their cash flows for the 52-week year ended
January 2, 1996, the 53-week year ended January 3, 1995, and the
511/2-week year ended December 28, 1993 in conformity with
generally accepted accounting principles.

In our report dated March 2, 1995, we included an explanatory
paragraph which identified factors which raised substantial doubt
about the Company's ability to continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the
Company's shareholders approved a financial restructuring which
significantly reduced the Company's large debt burden and
resulting interest expense. Accordingly, our present opinion on
the January 3, 1995 and December 28, 1993 consolidated financial
statements, as expressed herein, is different from that expressed
in our previous report.

As discussed in Notes 1 and 14 to the consolidated financial
statements effective January 2, 1996, the Company changed its
method of accounting for impairment of long-lived assets and for
long-lived assets to be disposed of to conform to Statement of
Financial Accounting Standards No. 121.

/s/ Deloitte & Touche LLP
March 28, 1996
Dallas, Texas

FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
APRIL 2, 1996 (UNAUDITED), JANUARY 2, 1996 AND JANUARY 3, 1995
(Dollars in Thousands, Except Per Share Amounts)

April 2, January 2, January 3,
ASSETS 1996 1996 1995
(Unaudited)

CURRENT ASSETS:
Cash and cash equivalents ($800
restricted in both years) $ 2,040 $ 986 $ 1,492
Accounts and notes receivable
(net of allowance for doubtful
accounts of $27 and $64,
respectively) 603 746 901
Inventories 5,641 5,831 6,478
Prepaid expenses and other 1,573 1,355 3,476

Total current assets 9,857 8,918 12,347

PROPERTY, PLANT AND EQUIPMENT:
Land 10,424 10,424 10,424
Buildings 40,771 40,623 44,886
Leasehold improvements 21,062 21,139 20,228
Equipment 45,653 45,762 45,212
Construction in progress 1,353 442 282

119,263 118,390 121,032

Less accumulated depreciation and
amortization (53,732) (52,263) (40,099)

Total property, plant and equipment 65,531 66,127 80,933

OTHER ASSETS 2,944 2,993 2,637

TOTAL ASSETS $ 78,332 $ 78,038 $ 95,917

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Trade accounts payable $5,101 $5,074 $6,212
Other payables and accrued expenses 17,686 18,279 15,396
Accrued interest subject to
restructuring 35,048
Reserve for store closings -
current portion 2,372 2,396 1,948
Current maturities of long-term debt 5,510 3,841 144
Long-term debt classified as
current subject to restructuring 202,453

Total current liabilities 30,669 29,590 261,201

RESERVE FOR STORE CLOSINGS 3,217 3,443 1,531

LONG-TERM DEBT 74,393 77,110 64

OTHER PAYABLES, INCLUDING ACCRUED
PENSION COST 9,909 9,639 7,526

OTHER LIABILITY SUBJECT TO
RESTRUCTURING 5,408

EXCESS OF FUTURE LEASE PAYMENTS
OVER FAIR VALUE, NET OF
AMORTIZATION 3,978 4,130 4,961

MINORITY INTEREST IN SUBSIDIARY 563

COMMITMENTS AND CONTINGENCIES (Note 9)

MANDATORILY REDEEMABLE CLASS A
COMMON STOCK, 2,000,000 SHARES;
$4 PER SHARE REDEMPTION PRICE 8,000

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value;
5,000,000 shares authorized,
none issued

Convertible Preferred Stock,
$.01 par value; 7,000,000
shares authorized, 6,391,500
issued and outstanding in 1994 64

Common Stock, $.01 par value;
65,000,000 shares authorized,
48,648,955 issued and outstanding
in 1995 487 486

Class A Common Stock, $.01 par value
25,000,000 shares authorized,
2,663,125 issued and outstanding
in 1994 (2,000,000 shares subject
to mandatory redemption) 7

Class B Common Stock, $.01 par value;
13,000,000 shares authorized,
8,663,166 issued and outstanding
in 1994 87
Additional paid-in capital 55,855 55,841 38,090
Pension liability adjustment (5,283) (5,283) (3,291)
Accumulated deficit (94,893) (96,918) (228,294)

Total stockholders' equity
(deficit) (43,834) (45,874) (193,337)

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 78,332 $ 78,038 $ 95,917

<TABLE>
<CAPTION>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per-Share Amounts)

Unaudited Unaudited Fifty-One and
Thirteen Thirteen Fifty-Two Fifty-Three One-Half
Weeks Ended Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 2, April 4, January 2, January 3, December 28,
1996 1995 1996 1996 1996
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
REVENUES

Sales $ 48,817 $ 52,754 $ 210,093 $ 225,186 $ 253,700
----------- ----------- ----------- ----------- --------------
EXPENSES:

Cost of sales (excluding depreciation) 15,166 16,847 67,763 70,188 75,790
Selling, general and administrative 29,211 31,967 127,329 137,910 158,523
Depreciation and amortization 2,349 3,340 14,002 11,320 13,923
Special charges 12,273 2,214 13,100
Goodwill charge 135,479
----------- ----------- ----------- ----------- --------------
46,726 52,154 221,367 221,632 396,815
----------- ----------- ----------- ----------- --------------
Operating income (loss) 2,091 600 (11,274) 3,554 (143,115)

Interest expense 66 6,717 27,589 24,896 23,025

Income (loss) before extraordinary item 2,025 (6,117) (38,863) (21,342) (166,140)

Extraordinary item: Net gain
on financial restructuring 170,239
----------- ----------- ----------- ----------- --------------
Net income (loss) $ 2,025 $ (6,117) $ 131,376 $(21,342) $ (166,140)
=========== ========= ========== ========= ===========

Income (loss) per common share:
Primary:
Net income (loss) per share of common
stock before extraordinary item $ 0.04 $ (0.13) $ (0.80) $ (0.44) $ (3.42)
Extraordinary item per share of common
stock 3.50
----------- ----------- ----------- ----------- --------------

Net income (loss) per share of
common stock $ 0.04 $ (0.13) $ 2.70 $ (0.44) $ (3.42)
=========== =========== =========== =========== ==============

Fully diluted:
Net income (loss) per share of common
stock before extraordinary item $ 0.04 $ N/A $ (0.76) N/A N/A
Extraordinary item per share of common
common stock 3.32 N/A N/A

Net income (loss) per share of
common stock $ 0.04 $ N/A $ 2.56 N/A N/A
=========== =========== =========== =========== ==============

</TABLE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FISCAL YEARS ENDED DECEMBER 28, 1993, JANUARY 3, 1995 AND JANUARY 2, 1996
(Dollars in Thousands, Except Per-Share Amounts)

Convertible Additional Pension
Preferred Common Paid-In Liability Accumulated
Stock Stock Capital Adjustment Deficit Total
----- ----- ------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 2, 1993 $ 64 $ 94 $ 42,948 $ (4,190) $ (40,812) $ (1,896)

Net loss (166,140) (166,140)

Stock options and warrants 550 550

Adjust for GEPT subordinated units (5,408) (5,408)

Pension liability adjustment (3,466) (3,466)
----- ----- ------- ---------- ------- -----

BALANCE, DECEMBER 28, 1993 64 94 38,090 (7,656) (206,952) (176,360)

Net loss (21,342) (21,342)

Pension liability adjustment 4,365 4,365
----- ----- ------- ---------- ------- -----

BALANCE, JANUARY 3, 1995 64 94 38,090 (3,291) (228,294) (193,337)

Exchange of new common stock for
outstanding equity (64) (82) 8,227 8,081

Exercise of put option to acquire
95% of Common Stock 462 9,280 9,742

Exercise of option to acquire
2.5% of Common Stock 12 244 256

Net income 131,376 131,376

Pension liability adjustment (1,992) (1,992)
----- ----- ------- ---------- ------- -----

BALANCE, JANUARY 2, 1996 0 486 55,841 (5,283) (96,918) (45,874)

Warrants exercised 1 14 15
Net income 2,025 2,025
----- ----- ------- ---------- ------- -----

BALANCE, APRIL 2, 1996 $ 0 $ 487 $ 55,855 $ (5,283) $ (94,893) $ (43,834)
===== ======= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Fifty-One
(Unaudited) Fifty-Two Fifty-Three and One-Half
Thirteen Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 2, 1996 April 4, 1995 January 2, 1996 January 3, 1995 December 28, 1993
------------- ------------- --------------- --------------- -----------------

<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES:

Net income (loss) $ 2,025 $ (6,117) $ 131,376 $ (21,342) $ (166,140)
Adjustments to reconcile net income
(loss) to net cash from (used
in) operating activities:

Depreciation and amortization 2,349 3,340 14,002 11,320 13,923
Goodwill charge 135,479
(Gain) loss on sale of land,
property, plant and equipment
and other assets (28) 50 203 (25) (1,163)
Provision for (reversal of) closed
store reserves 92 (247) (339) (528) 296
Special charges 12,273 2,214 13,100
Deferred charges 203 10 499 853 284
Stock options issued as compensation 125
Net gain on financial restructuring (170,239)
Changes in operating assets and liabilities:
Decrease in restricted cash 1,200
(Increase) decrease in accounts and notes
receivable 143 (10) 155 961 (679)
Decrease in inventories 190 (321) 647 1,512 150
(Increase) decrease in prepaid expenses
and other (215) (797) (3,501) (3,157) 318
Increase (decrease) in trade accounts
payable 27 1,770 (1,138) (4,690) 4,980
Increase (decrease) in other payables
and accrued expenses (558) 5,359 26,163 20,008 10,121
Increase (decrease) in other payables,
including accrued pension cost 50 50 (547) (826)
Other (56)
------------- ------------- --------------- --------------- -----------------

Net cash from (used in) operating
activities 4,278 3,087 9,498 6,300 11,994

CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:

Capital expenditures (1,928) (2,136) (8,019) (5,695) (15,749)
Expenditures charged to reserve for
store closings (342) (466) (1,795) (2,353) (2,104)
Proceeds from the sale of land, property,
plant and equipment and other assets 59 4 41 1,026 969
Other, net 58 (9) (2) (33) (113)
------------- ------------- --------------- --------------- ---------------

Net cash used in investing
activities (2,153) (2,607) (9,775) (7,055) (16,997)

CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Repayment of bank loans (1,048) (44) $ (150) $ (413) $ (395)
Other, net (23) (48) (79) (261) 156
------------ ------------- --------------- ---------------- ----------
Net cash from (used in)
financing activities (1,071) (92) (229) (674) (239)
------------ ------------- --------------- ---------------- ----------

DECREASE IN UNRESTRICTED CASH
AND CASH EQUIVALENTS 1,054 388 (506) (1,429) (5,242)

UNRESTRICTED CASH AND CASH
EQUIVALENTS AT BEGINNING
OF PERIOD 186 692 692 2,121 7,363
------------ ------------- --------------- ---------------- ----------

UNRESTRICTED CASH AND CASH
EQUIVALENTS AT END
OF PERIOD $ 1,240 $ 1,080 $ 186 $ 692 $ 2,121
============ ============= ================ ================ ==========

SUPPLEMENTAL INFORMATION:

Interest paid, excluding SFAS 15 interest $ 8 $ 16 $ 48 $ 286 $ 11,463
============ ============= ================ ================ ==========
Stock warrants issued $ $ $ 81$ - $ 425
============ ============= ================ ================ ==========
Pension liability adjustment $ $ $ 1,992 $ (4,365) $ 3,466
============ ============= ================ ================ ==========
GEPT arbitration award $ $ $ (5,408) $ - $ 5,408
============ ============= ================ ================ ==========
</TABLE>

FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 2, 1996, JANUARY 3, 1995 AND DECEMBER 28, 1993
(Dollars in Thousands, Except Per-Share Amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - Furr's/Bishop's, Incorporated (the
"Company"), a Delaware corporation, operates cafeterias and
specialty restaurants through its subsidiary Cafeteria
Operators, L.P., a Delaware limited partnership (together
with its subsidiaries, the "Partnership"). The financial
statements presented herein are the consolidated financial
statements of Furr's/Bishop's, Incorporated and its majority
owned subsidiaries. All material intercompany transactions
and account balances have been eliminated in consolidation.

The financial statements at January 2, 1996 reflect the
results of a series of transactions relating to the financial
restructuring of the Company. (See Note 2).

Fiscal Year - The Company operates on a 52-53 week fiscal
year ending on the Tuesday nearest December 31. The fiscal
years ended January 2, 1996 and January 3, 1995 represent a
52-week year and a 53-week year, respectively. As of
December 28, 1993, the year end was changed from the Saturday
nearest December 31 to the Tuesday nearest December 31. As a
result, the fiscal year ended December 28, 1993 contains 51
weeks plus three days.

Nature of Business - The Company operates in a single
business segment, namely the operation of cafeterias and
restaurants which includes retailing, food processing,
warehousing and distribution of food products, and real
estate in thirteen states in the Southwest, West and Midwest
areas of the United States.

Interim Unaudited Financial Information - The interim
unaudited historical financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. In management's opinion, all
adjustments and eliminations, consisting only of normal
recurring adjustments, necessary for a fair presentation of
the financial statements have been made. The results of
operations for such interim period are not necessarily
indicative of the results for the full year.

Cash and Cash Equivalents - The Company has a cash management
program which provides for the investment of excess cash
balances in short-term investments. These investments have
original or remaining maturities of three months or less at
date of acquisition, are highly liquid and are considered to
be cash equivalents for purposes of the consolidated balance
sheets and consolidated statements of cash flows.

Inventories - Inventories are stated at the lower of cost
(first-in, first-out method) or market.

Prepaid Expenses and Other - Direct costs comprising legal
and consulting fees of $2,144 relating to the restructuring
discussed in Note 2 were capitalized at January 3, 1995 and
as of January 2, 1996 were charged off as a part of the
extraordinary item. As of January 2, 1996 and January 3,
1995, this account balance included prepaid rent of $748 and
$762, respectively, along with other assets recorded in the
ordinary course of business.

Property, Plant and Equipment - Property, plant and equipment
is generally recorded at cost, while certain assets
considered to be impaired are recorded at the estimated fair
value. All property, plant and equipment is depreciated at
annual rates based upon the estimated useful lives of the
assets using the straight-line method. Restaurant equipment
is generally depreciated over a period of 1 to 5 years, while
the useful life of manufacturing equipment is considered to
be 5 to 10 years. Buildings are depreciated over a 30 year
useful life, while improvements to owned buildings have
estimated useful lives of 3 to 5 years. Provisions for
amortization of leasehold improvements are made at annual
rates based upon the estimated useful lives of the assets or
terms of the leases, whichever is shorter.

Excess of Cost Over Fair Value of Net Assets Acquired - The
excess of cost over the fair value of net assets acquired was
being amortized on the straight-line method over 40 years
(approximately 36 years as to goodwill resulting from the
March 1991 merger of Furr's/Bishop's Cafeterias, L.P. (the
"Holding Partnership") into the Company). Effective December
28, 1993, the remaining balance of goodwill was written off.
(See Note 3)

Valuation of Long-Lived Assets - Effective January 2, 1996,
the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121") and recorded a special charge of $7,772 to
recognize the write-down of certain assets in property, plant
and equipment to estimated fair value, based on expected
future cash flows. SFAS 121 requires that long-lived assets
and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.

Other Assets - A subsidiary of the Company owns a parcel of
land held for sale. The carrying value of this parcel of
land is recorded at the lower of cost or fair value less
selling costs.

Start-Up and Closing Costs of Restaurants - Start-up and
preopening costs incurred in connection with a new restaurant
becoming operational are charged to expense over the fiscal
year in which the unit is opened.

When the decision to close a restaurant is made, the present
value of all fixed and determinable costs are accrued. These
fixed and determinable costs consist primarily of obligations
defined in lease agreements such as rent and common area
maintenance, reduced by sublease income, if any. If a
decision is made to keep or reopen such restaurants, the
remaining costs are reversed.

Unfavorable Leases - For leases acquired through purchase,
the net excess of future lease payments over the fair value
of these payments is being amortized over the lives of the
leases to which the differences relate.

Income Taxes - Deferred income taxes are based on the
expected future tax consequences of temporary differences
between the book and tax bases of assets and liabilities.
These temporary differences relate principally to fixed
assets, closed store reserves and certain other accrual
items. The Company files a consolidated federal income tax
return which includes its subsidiaries and the taxable income
or loss from the Partnership.

Net Income Per Share - The weighted average number of shares
used in the primary net income per share computation was
48,648,955 for the year ended January 2, 1996, and for the
fully diluted computation was 51,350,817, including stock
warrants as common stock equivalents, in each case following
the reverse stock split.

For the years ended January 3, 1995 and December 28, 1993,
net income per share is restated using 48,648,955 shares,
which reflects the financial restructuring and the reverse
stock split and is the weighted average shares of common
stock and common stock equivalents (stock options and
warrants, when dilutive) outstanding at January 2, 1996.
Fully diluted earnings per share are not presented because
the effect of exercising outstanding stock options and
warrants would be antidilutive. The earnings per common
share in each year excludes any consideration of the
preferred stock dividend requirements, which were not paid
and were canceled as a part of the series of financial
restructuring transactions.

Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect reported amounts of certain assets, liabilities,
revenues and expenses as of and for the reporting periods and
actual results may differ from such estimates.

Reclassification - Certain amounts in the prior year
financial statements have been reclassified to conform with
current year classification.

2. RESTRUCTURING

On January 25, 1995, the Company announced that it had
entered into an Agreement in Principle dated as of January
24, 1995 (the "Agreement in Principle") among the Company,
its subsidiaries, the holders of the 11% Senior Secured Notes
of the Partnership, the holder of the 9% Note of Cavalcade
Foods (both as defined in Note 5), the Trustees of General
Electric Pension Trust ("GEPT"), and Kmart Corporation
("Kmart").

The Agreement in Principle sets forth the principal terms and
conditions relating to the proposed restructuring of the
Company. It provided for (i) the exchange of an aggregate of
approximately $249,344 of debt of the Partnership for the
issuance of $40,000 principal amount of new senior secured
notes of the Partnership due 2001 pursuant to a new indenture
and 95% of the limited partner interest of the Partnership,
(ii) the exchange of warrants to purchase an aggregate of
approximately 21.5% of the Company's common stock for options
to acquire an aggregate of 95% of a new class of common stock
of the Company ("Common Stock") and new five year warrants to
purchase an aggregate of 1% of the fully diluted Common
Stock, (iii) the exchange of $6,117 of other obligations of
the Partnership for the issuance of $1,700 principal amount
of new senior secured notes of the Partnership due 2001
pursuant to a new indenture, (iv) the exchange of $11,737 of
debt of Foods, an indirect subsidiary of the Company, for
options to acquire 2.5% of the Common Stock and an interest
in certain land owned by a subsidiary of the Company and (v)
the exchange of the Company's outstanding shares of Class A
Common, Class B Common and Convertible Preferred Stock for an
aggregate of 2.5% of the Common Stock and five year warrants
to purchase an aggregate of 4% of the fully diluted Common
Stock (together, the "Restructuring").

On March 2, 1995, the Company announced that the Independent
Committee of the Board and the full Board of Directors had
unanimously determined to recommend the following allocation
of the aggregate consideration offered to existing equity
holders in the Agreement in Principle: Holders of
Convertible Preferred Stock would receive 1.15 shares of
Common Stock (representing a 39% premium to the conversion
ratio for the Convertible Preferred Stock) and 2.04 warrants
to purchase Common Stock for each share of Convertible
Preferred Stock held by them; holders of Class A Common Stock
would receive 1.00 share of Common Stock and 1.78 warrants to
purchase Common Stock for each share of Class A Common Stock
held by them; and holders of Class B Common Stock would
receive 0.95 shares of Common Stock (representing a 5%
discount to the conversion ratio for the Class B Common
Stock) and 1.69 warrants to purchase Common Stock for each
share of Class B Common Stock held by them. All dividend
arrearages on the Convertible Preferred Stock and the Self
Tender Offer obligation would be eliminated in the proposed
restructuring. The Board members also informed the Company
that they intended to vote their shares in favor of the
proposed restructuring. The proposed restructuring was
subject to, among other things, the approvals of the
Company's Board of Directors, shareholders and creditors and
the negotiation and execution of definitive documentation.

The Restructuring became effective upon approval of the
stockholders at a meeting held January 2, 1996.

The Restructuring has been accounted for in accordance with
Statement of Financial Accounting Standard No. 15 "Accounting
by Debtors and Creditors for Troubled Debt Restructurings"
("SFAS 15"), under which the transactions include both a
partial settlement and modification of terms. The fair value
of the Common Stock and warrants issued in connection with
the Restructuring was estimated based upon discounted cash
flows anticipated from the reorganized business and was
recorded as partial settlement of the indebtedness. The
remaining indebtedness was recorded at the sum of all future
principal and interest payments and there will be no
recognition of interest expense in future periods. The
amounts of indebtedness subject to modification in excess of
the amount recorded in accordance with SFAS 15 was recorded
as an extraordinary credit, net of all expenses associated
with the Restructuring.

The amount of par value that was previously recorded for the
Class A Common Stock, Class B Common Stock and Convertible
Preferred Stock was reclassified to additional paid-in
capital and the Common Stock issued upon conversion of such
shares was recorded at their aggregate par value. The
Company's obligation to make the $8.0 million Self Tender
Offer was eliminated and this amount was reclassified to
additional paid-in capital.

As of the consummation of the Restructuring, the Company
owned less than 50% of the limited partnership interests of
the Partnership at January 2, 1996, and as a result, the
Partnership would no longer be included in the Company's
consolidated financial statements. However, subsequent to
year end, the holders of the limited partnership interests
exercised their put option and, on March 28, 1996, exchanged
their limited partnership interests for Common Stock of the
Company. On March 22, 1996, the Company effected a 15-to-1
reverse stock split. As a result of the materiality of this
series of financial restructuring transactions, the
Partnership is included in the consolidated financial
statements at January 2, 1996.

The Company recognized a net extraordinary gain of $170,239
in the period ended January 2, 1996, as a result of a series
of financial restructuring transactions which includes
reductions of debt and related interest and the issuance of
Common Stock. The extraordinary item is made up of the
following:

Long-term debt reclassified as current $ 202,453
Accrued interest subject to restructuring 62,409
Mandatorily Redeemable Common Stock 8,000
Other liabilities subject to restructuring 5,408
Accrued interest on liability subject to
restructuring 710
Minority interest in subsidiary 563
Deferred warrant costs 81
Par value of common and preferred stock canceled 158
Par value of common stock issued (486)
Long-term debt, issued for payment of interest (3,781)
Expenses related to series of financial
transactions (10,415)
Additional Paid-in Capital (17,751)
Long-term debt, including accrued interest (77,110)

3. GOODWILL

After a careful analysis of the Company's financial condition
as part of management's periodic review of the carrying
amount of goodwill, the Company determined at the end of
fiscal 1993, based upon historical operating trends, and
without anticipating the effects of any potential
restructuring of its debts and other obligations, that its
projected results would not support the future recovery of
its goodwill balance of $135,479. Accordingly, the Company
wrote off its goodwill balance in the fourth quarter of 1993.

4. OTHER PAYABLES AND ACCRUED EXPENSES

Included in other payables and accrued expenses are the
following:

January 2, January 3,
1996 1995

Salaries, wages and commissions $ 3,441 $ 3,983
Rent 1,072 1,121
Taxes other than income taxes 3,983 4,648
Restructuring expenses 4,795
Insurance 2,152 2,000
Gift certificates outstanding 1,045 1,218
Utilities 728 617
Other payables and accrued
expenses 1,063 1,809

$ 18,279 $ 15,396

5. NOTES PAYABLE AND LONG-TERM DEBT

In 1992, the Partnership consummated a restructuring with all
of the holders of the then outstanding indebtedness and
issued $187,422 of 11% Senior Secured Notes, due June 30,
1998 (the "11% Notes"), to replace its entire indebtedness,
including all interest accrued thereon. Additional 11% Notes
were issued in June 1992 for the $5,432 interest payment then
due. The 11% Notes were amended at various times in 1993 and
1994 to modify or waive covenants that were not being met,
including to allow the Company to receive a going concern
opinion, and to defer the due date of interest payments. The
last payment of interest by the Partnership on the 11% Notes
was June 30, 1993 and at January 2, 1996, before the series
of financial restructuring transactions, a total of $56,493
of interest was accrued and outstanding, and the Partnership
was in default on the 11% Notes since October 1994 due to,
among other things, missed payments of interest.

In 1992, Cavalcade Foods, Inc., an indirect subsidiary of the
Company ("Foods"), issued a 9% note for $9,435, due June 30,
1998 (the "9% Note") to replace its entire indebtedness,
including all interest accrued thereon. An additional 9%
Note was issued in September 1992 for the $444 interest
payment then due. On April 1, 1993, a principal payment of
$280 was made on the 9% Note. The 9% Note was amended in
1994 to allow for the deferral of certain interest payments.
The last payment of interest by Foods on the 9% Note was
September 30, 1993 and at January 2, 1996, before the series
of financial restructuring transactions, a total of $2,138
interest was accrued and outstanding, and Foods was in
default on the 9% Note since October 1994 due to, among other
things, missed payments of interest.

Effective January 2, 1996, as part of a series of financial
restructuring transactions, the Partnership issued $41,700 of
12% Senior Secured Notes, due December 31, 2001 (the "12%
Notes"), to replace $40,000 of 11% Notes and the interest
accrued thereon and to terminate a $5,408 judgement and the
interest accrued thereon. In January 1996, the Partnership
also issued $3,781 of 12% Notes as payment in kind for all
interest accrued as of January 2, 1996. All of the assets of
the Partnership are pledged as collateral security on behalf
of the holders of the 12% Notes. The Partnership also issued
limited partner interests equal to 95% of the outstanding
partnership interests in exchange for and in full
satisfaction of the remaining $152,854 of 11% Notes, together
with all interest accrued thereon.

Payments of interest on the 12% Notes will be due each March
31 and September 30. While payments of interest will be due
during the life of the 12% Notes, there will not be any
interest expense recorded under SFAS 15, as all of the
interest through maturity has been recorded as a liability.

Effective January 2, 1996, as part of a series of financial
restructuring transactions, Foods issued a 10% Non-recourse
Note in the amount of $2,000, due December 31, 2001 (the
"Non-recourse Note"), a $6,100 note payable (the "Option
Note") and a $1,500 note payable (the "Remaining Note") to
Wells Fargo Bank in exchange for and in full satisfaction of
the $9,599 of 9% Notes outstanding, together with all
interest accrued thereon. Certain land was pledged as
collateral on the Non-recourse Note and an option to purchase
2.5% of the Common Stock of the Company was pledged as
collateral on the Option Note. Wells Fargo foreclosed on the
Option Note and exercised its option to purchase 2.5% of the
Common Stock of the Company by transferring the Remaining
Note to the Company as payment.

The Company has other mortgages outstanding on certain real
estate properties totaling $57 due in 1996.

Long-term debt consists of the following:

Stated
Maturity January 2, January 3,
Date 1996 1995

12% Notes, including $32,913 interest
accrued through maturity 2001 $ 78,394
Non-recourse Note, including $500
interest accrued 2001 2,500
11% Notes 1998 $ 192,854
9% Note 1998 9,599
Real Estate Mortgages 1996 57 208

80,951 202,661

Current maturities of long-term debt (57) (144)
Long-term debt classified as current (202,453)
Interest classified as current
maturities of long-term debt (3,784)

Long-term debt $ 77,110 $ 64

At January 2, 1996, the scheduled aggregate amount of all
maturities of long-term debt and interest classified as long-
term debt for the next five years and thereafter is as follows:

1996 $ 3,841
1997 5,493
1998 5,493
1999 5,493
2000 5,493
Thereafter 55,138
$ 80,951

6. STOCKHOLDERS' EQUITY

Convertible Preferred Stock - The Convertible Preferred Stock
was entitled to cumulative cash dividends, payable quarterly,
subject to the declaration by the Board of Directors, of $1.17
per share annually. This stock ranked junior in right of
payment to all indebtedness of the Company and its subsidiaries
but ranked senior to common stock with respect to dividend
rights and rights on liquidation, winding up and dissolution.
The Convertible Preferred Stock was convertible into Class A
Common Stock at the rate of .827 shares of Class A Common Stock
per each Convertible Preferred Stock share converted, subject to
certain conditions. The Convertible Preferred Stock was
redeemable by the Company at any time or from time to time in
whole or in part at the Company's option at $9.00 per share
together with all accrued and unpaid dividends to the date fixed
for redemption. The Company's ability to purchase its equity or
pay dividends was subject to restrictions of its Amended and
Restated Certificate of Incorporation and General Corporation
Law of the State of Delaware. Holders of the Convertible
Preferred Stock had no voting rights unless six full quarterly
dividends were in arrears in whole or in part, at which time the
holders of the Convertible Preferred Stock, voting as a class,
were entitled to elect two directors to an expanded Board of
Directors. At January 2, 1996, the Company was seventeen full
quarterly dividends in arrears and all such arrearages were
canceled as a part of a series of financial restructuring
transactions. The Restructuring approved by stockholders on
January 2, 1996 resulted in converting each outstanding share of
Convertible Preferred Stock into 1.15 shares of Common Stock and
2.04 warrants, as described in Note 2.

Common Stock - Pursuant to the terms of its Amended and Restated
Certificate of Incorporation, the Company was to have commenced
a tender offer for at least 2,000,000 shares of Class A Common
Stock of the Company at a price of $4.00 per share, net to the
seller in cash (the "Self Tender Offer"). The Company's Amended
and Restated Certificate of Incorporation prohibited the Company
from purchasing any of its shares of Class A Common Stock
pursuant to the Self Tender Offer, or otherwise, while
arrearages existed on the payment of dividends on its Series A
Convertible Preferred Stock. Accordingly, the Company
determined not to commence a Self Tender Offer to purchase at
least 2,000,000 shares of Class A Common Stock at $4.00 per
share on or before September 8, 1991, as provided for in its
Amended and Restated Certificate of Incorporation. The Self
Tender Offer remained an obligation of the Company, subject to
the restrictions of its Amended and Restated Certificate of
Incorporation, until the financial restructuring was approved.

Prior to the Restructuring, the common stock was not
convertible, except that the Class B Common Stock would be
automatically converted, on a share-for-share basis, into shares
of Class A Common Stock on the sixth business day following the
expiration date of the Self Tender Offer without any action on
the part of the holders of shares of Class B Common Stock. The
Company did not have an obligation to purchase any Class B
Common Stock, pursuant to the Self Tender Offer.

The Restructuring approved by stockholders on January 2, 1996
resulted in converting each outstanding share of Class A Common
Stock into one share of Common Stock and 1.78 warrants and
converting each outstanding share of Class B Common Stock into
0.95 shares of Common Stock and 1.69 warrants, as described in
Note 2.

Common Stock Options and Warrants - In 1992, the holders of the
11% Notes received warrants to purchase an aggregate of
1,400,000 shares of Class B Common Stock at $.75 per share. The
fair value of these warrants at the date of grant was estimated
to approximate their exercise price. These warrants were
terminated in connection with the Restructuring effective
January 2, 1996.

On November 15, 1993, in connection with the amendment to the
master sublease agreement discussed in Note 9, Kmart received
warrants to purchase 1,700,000 shares of Class A Common Stock at
$.75 per share. These warrants were terminated in connection
with the Restructuring effective January 2, 1996. Kmart
received new warrants to purchase 8,108,159 shares of Common
Stock at $0.074 per share as described in Note 2, and following
the reverse stock split, Kmart retained warrants to purchase
540,544 shares at $1.11 per share.

In 1991, the Board of Directors adopted, and the stockholders
approved, the 1990 Option Plan for Key Employees for 1,220,000
shares of Common Stock (the "1990 Option Plan"). All options
that were granted were canceled either by the termination of the
employee or by agreement between the Company and the holders of
the options. As of January 2, 1996, there were no options
outstanding under the 1990 Option Plan.

The 1995 Stock Option Plan - The Board of Directors adopted, and
on January 2, 1996 the stockholders approved, the 1995 Stock
Option Plan authorizing an aggregate of 40,540,795 shares of
Common Stock (the "1995 Option Plan"). The number of shares
reserved under the 1995 Option Plan, subject to equitable
adjustment for the Reverse Stock Split approved by stockholders
on March 14, 1996 is 2,702,720. A Committee of the Board of
Directors administers the 1995 Option Plan, including
determining the employees to whom awards will be made, the size
of such awards and the specific terms and conditions applicable
to awards, such as vesting periods, circumstances of forfeiture
and the form and timing of payment. Grants including stock
options, stock appreciation rights and restricted stock may be
made to selected employees of the Company and its subsidiaries
and non-employee directors of the Company. There are no options
outstanding under the 1995 Option Plan.

Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") is effective for
fiscal years beginning after December 15, 1995 and requires
companies to adopt a method of accounting for valuing
compensation attributable to stock options. As allowed under
the provisions of SFAS 123, the Company has elected to continue
accounting for such compensation as provided by Accounting
Practice Bulletin Opinion No. 25, which will not have any
material effect on the Company's consolidated financial
statements.

7. INCOME TAXES

For the fiscal years ended January 2, 1996 and January 3, 1995,
the Company recorded losses from operations and in accordance
with SFAS 109, the income tax benefit to be recognized in the
statements of operations has been reduced to zero through the
increase in the valuation allowance since, in the opinion of
management, the benefit will not likely be realized.

Following is a summary of the income tax provision (benefit) for
the fiscal years ended January 2, 1996, January 3, 1995 and
December 28, 1993:

January 2, January 3, December 28,
1996 1995 1993

Federal:
Current $ - $ - $ -
Deferred (13,594) (8,671) (11,223)
Deferred -
valuation allowance 13,594 8,671 11,223

Total $ - $ - $ -

Following is a reconciliation of the expected tax (benefit) at
the statutory tax rate to the effective tax (benefit) for the
fiscal years ended January 2, 1996, January 3, 1995 and December
28, 1993:

January 2, January 3, December 28,
1996 1995 1993

Expected tax (benefit) at
the statutory tax rate $ 45,982 $ (7,470) $ (58,028)
Tax credit - (488) -
Pension expense - (748) -
Restructuring credit (59,584) - -
Other 8 35 -
Goodwill - - 48,698
Lawsuit settlement - - (1,893)
Increase in deferred tax
asset valuation allowance 13,594 8,671 11,223

Effective tax (benefit) $ - $ - $ -

Following is a summary of the types and amounts of existing
temporary differences and net operating loss carryforwards at
the statutory tax rate of 35% and tax credits:

January 2, 1996 January 3, 1995
Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities

Net operating loss
carryforward $ 37,415 $ - $ 25,627 $ -
Tax credits 1,355 1,781
Reserve for store
closing (current) for
financial statement
purposes and not for
tax purposes 2,191 1,366
Other reserves for
financial statement
purposes and not for
tax purposes 117 242
Excess of future lease
payments over fair
values, net of
amortization 1,247 1,617
Property, plant and
equipment, net 11,729 8,305
Other basis differences 437 539
Other temporary
differences 641 (29) 759 (58)

Deferred tax assets and
liabilities 55,132 $(29) $ 40,236 $(58)
Less: Deferred tax
liabilities 29 58
Valuation allowance (55,161) (a) (40,294)
Deferred tax asset, net $ - $ -

(a) The net change in the valuation allowance for the
fiscal year ended January 2, 1996, was an increase of
$14,867.

As of January 2, 1996, the Company has consolidated net
operating loss carryforwards of $106,900 for income tax
reporting purposes that expire from 2000 through 2009.
Approximately $3,700 and $11,800 of the operating loss
carryforwards for income tax reporting purposes relate to the
subsidiary operations of Cavalcade Holdings and its
subsidiary, Cavalcade Foods, respectively, for periods prior
to their inclusion in this Company-affiliated group. The
Company is limited in its use of these operating loss
carryforwards because of the change in ownership of the
related entities.

As of January 2, 1996, the Company has general business
credit carryforwards of approximately $1,355 which have
expiration dates through 2009. Approximately $74 of the
general business credit carryforwards relate to Cavalcade
Foods for periods prior to its inclusion in the Company-
affiliated group. These credits are subject to limited use.

Current tax laws and regulations relating to specified
changes in ownership limit the availability of the Company's
utilization of Cavalcade Holdings' and Cavalcade Foods' net
operating loss and tax credit carryforwards (collectively,
tax attributes). A change in ownership of greater than 50%
of a corporation within a three-year period causes such
annual limitations to be placed in effect. Such a change in
ownership is deemed to have occurred on June 24, 1993, when
KL Group acquired 1,119,151 Class B Common shares and an
option to purchase nearly all of the remaining Class B Common
shares of the Company. This ownership change limits the
utilization of the Company-affiliated group tax attributes
incurred through June 24, 1993. Additionally, a second
change of ownership is deemed to have occurred on March 28,
1996, when the holders of 95% of the limited partner interest
of the Partnership exchanged such interest for 95% of the
outstanding Common Stock of the Company. As of January 2,
1996, the Company-affiliated group tax attributes not subject
to limitation are approximately $61,600.

The Internal Revenue Service ("IRS") has examined the federal
income tax returns of certain of the Company's subsidiaries
and of their former majority stockholder, Michael J.
Levenson, for years prior to 1990. The IRS asserts
deficiencies of approximately $5,500 plus interest. Certain
of the Company's subsidiary corporations may have obligations
for federal, state, local or other taxes incurred or assessed
against persons or entities as a result of being, or being
treated by any taxing authority as, a direct or indirect
shareholder of the subsidiary corporations, under certain
circumstances. The disputed claims have been docketed in the
Tax Court in Chicago, Illinois and no trial date has been
set. The Company intends to vigorously contest the IRS
assessment and believes that the outcome of these audits will
not have a material adverse effect on its equity, results of
operations, and liquidity and capital resources after
consideration of the applicable amounts previously accrued.

8. EMPLOYEE BENEFIT PLANS

The Company has a noncontributory defined benefit pension
plan for which benefit accruals were frozen effective
June 30, 1989. The funding policy is to make the minimum
annual contribution required by applicable regulations. The
Partnership, the sponsor of the plan, agreed to provide for
funding by the 1998 plan year, of at least two-thirds of the
$4,569 of the unfunded current liability which existed at the
beginning of the 1993 plan year. If the agreed upon funding
is not satisfied by the minimum required annual
contributions, as adjusted for the deficit reduction
contribution, determined under Section 412 of the Internal
Revenue Code, the Company will make contributions in excess
of the minimum annual requirement. Pension expense was $592,
$785 and $1,013 for the years ended January 2, 1996, January
3, 1995 and December 28, 1993, respectively.

Beginning January 1, 1989, the Partnership was required to
recognize the additional minimum liability aspects of
Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87"). SFAS 87
requires the recognition of an additional pension liability
in the amount of the Partnership's unfunded accumulated
benefit obligation in excess of accrued pension cost with an
equal amount to be recognized as either an intangible asset
or a reduction of equity. Based upon plan actuarial and
asset information as of January 3, 1995 and January 2, 1996,
the Company recorded a decrease at January 3, 1995 and
increase at January 2, 1996 to the noncurrent pension
liability and a corresponding increase or decrease to
stockholders' equity of $4,365 and $1,992 because the
unfunded accumulated benefit obligation decreased or
increased, respectively.

The funded status of the plan amounts recognized in the
balance sheets and major assumptions used to determine these
amounts are as follows:

Years Ended
January 2, January 3, December 28,
1996 1995 1993

Components of pension
expense:
Interest cost $ 966 $ 972 $ 1,171
Actual return on plan
assets (1,475) (74) (306)
Net amortization and
deferral 1,101 (113) 148
Service cost

Net pension expense $ 592 $ 785 $ 1,013

January 2, January 3,
1996 1995
Actuarial present value
of projected benefit
obligations: Vested $ (14,211) $ (11,492)

Plan assets at fair value
(primarily money market
cash investments, corporate
equities, and corporate bonds) 10,349 9,117

Projected benefit obligation
in excess of plan assets (3,862) (2,375)

Net loss 5,283 3,291

Additional liability for unfunded
accumulated benefit obligation (5,283) (3,291)

Accrued pension cost $ (3,862) $ (2,375)

Major assumptions at beginning
of year:

Discount rate 7.00% 8.50%
Expected long-term rate of
return on plan assets 9.00% 9.00%

Effective January 2, 1996, for purposes of calculating
benefit obligations, the assumed discount rate decreased from
8.50% to 7.00% to reflect the current financial market for
high-quality debt instruments. There have been no other
changes in the plan's major actuarial assumptions for the two
years ended January 2, 1996.

The Company also has a voluntary savings plan (401(k) plan)
covering all eligible employees of the Company and its
subsidiaries through which it may contribute discretionary
amounts as approved by the Board of Directors.
Administrative expenses paid by the Company for the years
ended January 2, 1996, January 3, 1995 and December 28, 1993,
amounted to $2, $24 and $24, respectively.

9. COMMITMENTS AND CONTINGENCIES

The Partnership leases restaurant properties under various
noncancelable operating lease agreements which expire between
1996 and 2015 and require various minimum annual rentals.
Certain leases contain escalation clauses. Further, many
leases have renewal options ranging from one five-year period
to ten five-year periods.

Certain of the leases also require the payment of property
taxes, maintenance charges, advertising charges, insurance
and parking lot charges, and additional rentals based on
percentages of sales in excess of specified amounts.

On November 15, 1993, the Partnership entered into an
amendment of a master sublease agreement pursuant to which it
leased 43 properties from Kmart. Pursuant to the amendment
and subject to the terms and conditions thereof, two
properties were removed from the master sublease, and the
aggregate monthly rent for the period August 1, 1993 through
and including December 31, 1996 has been reduced by 25% and
the aggregate monthly rent for the period January 1, 1997
through and including December 31, 1999 has been reduced by
20%. The reductions in rent are subject to termination by
Kmart if Kevin E. Lewis ceases to be Chairman of the Board of
Directors of the Company. In consideration for these lease
term changes, the Company granted Kmart warrants to purchase
1.7 million shares of Class A Common Stock of the Company on
or before September 1, 2003, at $.75 per share. As a part of
the Restructuring, effective January 2, 1996, these warrants
were terminated and replaced with warrants to purchase
8,108,159 shares of Common Stock on or before January 2,
2001, at $0.074 per share, and following the reverse stock
split, Kmart retained warrants to purchase 540,544 shares at
$1.11 per share.

The total minimum annual rental commitment and future minimum
sublease rental income under noncancelable operating leases
are as follows as of January 2, 1996:

Minimum Sublease
Years Rent Income

1996 $ 10,131 $ 461
1997 9,656 530
1998 8,930 510
1999 8,393 510
2000 8,972 420
For the remaining terms
of the leases 50,742 1,059

Total rental expense included in the statements of operations
is $11,929, $12,375 and $13,465, which includes $1,187,
$1,095 and $1,531 of additional rent based on net sales for
the years ended January 2, 1996, January 3, 1995 and December
28, 1993, respectively. The results of operations include
sublease rent income of $717, $312, and $178 for the years
ended January 2, 1996, January 3, 1995 and December 28, 1993,
respectively.

The Partnership had letters of credit outstanding at January
2, 1996 and January 3, 1995 amounting to approximately $1,000
each year, which are required under its insurance program. A
restricted cash deposit balance of $800 at January 2, 1996
and January 3, 1995 serves as collateral for these letters of
credit.

The Company, in the ordinary course of business, is a party
to various legal actions. In the opinion of management,
these actions ultimately will be disposed of in a manner
which will not have a material adverse effect upon the
Company's equity, results of operations, and liquidity and
capital resources after consideration of the applicable
amounts previously accrued.

On October 6, 1995, the Levensons filed a Notice of Non-Suit
as to certain of the defendants, including the Company, the
Partnership, Cafeteria Operators, Cavalcade & Co. and
specific individual members of the Board of Directors (other
than William E. Prather and Kevin E. Lewis) and amended their
complaint. As a result of such Notice of Non-Suit, the named
entities and individuals are no longer defendants in the
Levenson litigation.

The Company is required to indemnify certain of the
defendants originally named in the Levensons' complaint,
including the individual members of the Board of Directors
and certain of their affiliated entities pursuant to the
Company's Certificate of Incorporation and otherwise, for any
and all damages that may result from such complaint. As part
of the Restructuring, the Company also agreed to indemnify
certain parties named as defendants in the Levensons'
complaint, including, the holders of the 11% Notes, KL Group,
KL Park and Kmart, from and against all claims, actions suits
and other legal proceedings, damages, costs, interest,
charges, counsel fees and other expenses and penalties which
such entity may sustain or incur to any person whatsoever
(excluding judgments in the case of KL Group and KL Park) by
reason of or arising out of the Levenson litigation. Under
no circumstances will the Company be obligated to indemnify
any party for any liability resulting from such party's
willful misconduct or bad faith.

10. OTHER LIABILITY SUBJECT TO RESTRUCTURING

On October 4, 1993, an arbitration panel granted a $5,408
award against the Holding Partnership in favor of GEPT. The
arbitration award related to the March 1991 merger of the
Holding Partnership into the Company. GEPT had sought an
appraisal of the value of the subordinated partnership units
of the Holding Partnership pursuant to the merger agreement.
On February 6, 1994, the Delaware Court of Chancery confirmed
and entered judgment on the arbitrators' award in the
aggregate amount of $5,408 together with post-judgment
interest at the legal rate from the date of the Court's
Order. As a part of the Restructuring, effective January 2,
1996, the Partnership issued 12% Notes in the amount of
$1,700 in full satisfaction of the outstanding judgement,
including all accrued interest thereon.

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

Thirteen Weeks Ended
April 4 July 4 October 3 January 2

Year ended January 2, 1996:
<S> <C> <C> <C> <C>

Sales $ 52,754 $ 54,216 $ 53,944 $ 49,179
Gross profit (1) 35,711 36,282 36,528 33,100
Loss before
extraordinary item (6,117) (6,280) (6,944) (19,522)(2)
Loss per common share
before extraordinary
item (0.13) (0.13) (0.14) (0.40)
Net income (loss) (6,117) (6,280) (6,944) 150,717(2)(3)
Net income (loss)
per common share (3) (0.13) (0.13) (0.14) 3.10

Fourteen
Thirteen Weeks Ended Weeks Ended
March 29 June 28 September 27 January 3
Year ended
January 3, 1995:
Sales $ 54,209 $ 56,046 $ 56,526 $ 58,405
Gross profit(1) 37,192 38,344 39,119 39,752
Net loss (5,481) (4,320) (5,355)(2) (6,186)(2)
Net loss per
common share(3) (0.11) (0.09) (0.11) (0.13)
</TABLE>

(1) Gross profit is computed using cost of sales
including depreciation expense.
(2) See Note 14 Special Charges.
(3) See Note 2 Restructuring.
(4) Based on 48,648,955 shares of Common Stock
outstanding at January 2, 1996, after giving
effect to the reverse stock split.

12. OTHER RELATED PARTY TRANSACTIONS

In June, 1993, Michael J. Levenson resigned from his position
of Chairman of the Board and was terminated without cause as
an employee of the Company. The Company and certain of its
affiliates entered into an agreement with Mr. Levenson which
provided for quarterly payments of his severance and
provision of certain benefits to Mr. Levenson for a period of
twenty-six months versus the forty-five months he would have
otherwise received under his existing employment agreement.
In September, 1993, this agreement was amended to
substantially reduce the severance compensation claims of Mr.
Levenson to a period of twelve months. During 1993, the
Company paid $496 to Mr. Levenson pursuant to the severance
agreement. Mr. Levenson released the Company from any future
compensation obligations on the consulting agreement with his
affiliate and the funding obligations on the Split-Dollar
Life Insurance policy beyond December 2, 1993. Mr. Levenson
retained the right to acquire the Company's receivable with
respect to such policy from the Company at its discounted
present value. The option to purchase the policy receivable
expires on December 15, 1997. As a result of these
activities, the receivable was fully reserved by the Company
in the fourth quarter of 1993.

On September 28, 1994, the Partnership and M & B Restaurants,
L. C. ("M&B") entered into a Lease and Sublease Agreement
(the "Lease") and a Trademark License and Development
Agreement (the "License"). Under the terms of the Lease, the
Partnership leases two El Paso Bar-B-Que facilities to M&B, a
company controlled by William Prather, former CEO of the
Company, for an initial term ending December 31, 2003.
Pursuant to the License, M&B agreed to pay opening fees and
royalties on 31 units required to be opened by December 31,
2003 and to acquire the trademarks and other intangibles used
by The El Paso Bar-B-Que Company by December 31, 2003, but
not earlier than December 31, 1997, for a cash payment of
seven times the prior four quarterly payments under the
License. The Company received $16 relating to the lease
during 1995. On November 10, 1995, Amendment One to
Trademark License and Development Agreement (the "Agreement")
was executed to modify to 25 the number of new units required
to be opened by December 31, 2003 and on which M&B agreed to
pay opening fees and royalties. The Amendment also modified
the earliest buyout date to December 31, 1999.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of
financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial
Instruments" ("SFAS 107"). The estimated fair value amounts
have been determined by the Company using available market
information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

At January 2, 1996, the carrying amount and the fair value of
the Company's financial instruments, as determined under
SFAS 107, were as follows:
Carrying Estimated
Amount Fair Value
Long-term debt, including
current portion and interest
accrued through maturity $ 80,951 $ 47,538

The Company's long-term debt is not publicly traded, and as a
result, market quotes are not readily available. The fair
value of the long-term debt at January 2, 1996 is based upon
the face amount of the debt resulting from the Restructuring
described in Note 2 as management believes that this is most
indicative of the fair value. The carrying amount of the
debt at January 3, 1995 was $202,661. The debt instruments
were held by a limited number of holders, were not publicly
traded and due to the pending Restructuring, an estimated
fair value was not practicable to determine.

14. SPECIAL CHARGES

The loss from operations for the thirteen week period ended
January 2, 1996 includes special charges of $12,273, which
includes $4,501 related to the reserve for store closings.
Also included in the special charges is $7,772 to recognize
the write-down of certain assets in property, plant and
equipment to estimated fair values in accordance with the
adoption of SFAS 121.

The loss from operations for the fourteen week period ended
January 3, 1995 includes special charges to reserves of
$1,435 resulting primarily from the decision to close one
buffet restaurant and adjustments to the units previously
reserved to be closed. Also included is a credit of $442
related to the settlement of a lawsuit by the Internal
Revenue Service as described below. The loss from operations
for the thirteen week period ended September 27, 1994
includes special charges to reserves of $1,221 resulting
primarily from the closing of a specialty restaurant. Of the
total special charges of $2,214 during the period ended
January 3, 1995, approximately $1,164 relates to the write-
down of assets.

The loss from operations for the twelve and one-half week
period ended December 28, 1993 includes special charges of
$8,770 related to the reserve for store closings, including
the write-down of certain assets in property, plant and
equipment to estimated fair value. These charges reflected
management's intention to close thirteen restaurants and to
adjust the units previously reserved for closing. Also
included are special charges of $1,539 for the Company's
operating and financial restructuring, $1,502 for writing
down the values of certain non-operating assets, $761 for
writing down the values of certain operating assets, and $741
of estimated costs related to certain lawsuits, including an
action filed in U.S. District Court for the Northern District
of Lubbock by the Internal Revenue Service against Cafeteria
Operators, et al as alleged successors by merger to Bishop
Buffets, Inc., alleging the Internal Revenue Service issued
an erroneous refund to Bishop Buffets, Inc. on December 6, 1988.

The loss from operations for the thirteen week period ended
October 2, 1993 includes a special credit of $2,570 which
consisted of a $1,937 reversal of liabilities accrued
relative to two cafeterias which were previously closed and
for which the lease agreements were terminated, and the
reduction of severance amounts payable of $633 to the former
Chairman of the Board per the terms of an agreement, as
amended September 30, 1993. (See Note 12)

The loss from operations for the thirteen week period ended
July 3, 1993 includes special charges to reserves of $1,209
for the estimated costs of closing one specialty unit and two
non-restaurant units (closed in January and February 1994),
including the write-down of certain assets in property, plant
and equipment to estimated fair value. Also included is
$1,148 for severance amounts payable to the former Chairman
of the Board per the terms of an agreement dated June 24,
1993. (See Note 12)

15. CONDENSED PRO FORMA INFORMATION (UNAUDITED)

The financial restructuring transactions have been accounted
for in accordance with SFAS 15 and accordingly, the
indebtedness was recorded at the sum of all future principal
and interest payments and there will be no recognition of
interest expense in future periods. Following is condensed
pro forma information for the fiscal year ended January 2,
1996, reflecting the elimination of $27,340 interest expense
related to such indebtedness:

Sales $ 210,093
Cost of sales 67,763
Selling, general and administrative 127,329
Depreciation and amortization 14,002
Special charges 12,273
Operating loss (11,274)
Interest expense 249
Net loss (11,523)

Loss per common share:
Primary (0.24)
Fully diluted (0.22)

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses,
other than underwriting discounts and commissions, to be paid in
connection with the sale of the Shares being registered, all of
which will be paid by the registrant. All amounts are estimates
except the registration fee.

Registration Fee . . . . . . . . . . . . . . . . . $ 26,757
Accounting Fees and Expenses . . . . . . . . . . . $ 15,000
Legal Fees and Expenses . . . . . . . . . . . . . $ 75,000
Trustee Fees . . . . . . . . . . . . . . . . . . . $ 5,000
Printing and Engraving Fees and Expenses . . . . . $ 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . $ 10,000
Total . . . . . . . . . . . . . . . . . . . . . . $136,757

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the General Corporation Law of Delaware
enables a Delaware corporation to provide in its certificate of
incorporation, and the Company has so provided in its Amended and
Restated Certificate of Incorporation, for the elimination or
limitation of the personal liability of a director to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director; provided, however, that a
director's liability is not eliminated or limited: (1) for any
breach of the director's duty of loyalty to the corporation or
its stockholders; (2) for acts or omissions not in good faith or
which involve an intentional misconduct or a knowing violation of
law; (3) under Section 174 of the General Corporation Law of
Delaware (which imposes liability on directors for unlawful
payment of dividends or unlawful stock purchases or redemptions);
or (4) for any transaction from which the director derived an
improper personal benefit. The Certificate of Incorporation
further provides that if the Delaware General Corporation Law is
amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as amended.

Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a
party or witness or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that he or she is or was a director, officer,
employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. Depending on the
character of the proceeding, a corporation may indemnify against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. If the person indemnified is not wholly successful
in such action, suit or proceeding, but is successful, on the
merits or otherwise, in one or more but less than all claims,
issues or matters in such proceeding, he or she may be
indemnified against expenses actually and reasonably incurred in
connection with each successfully resolved claim, issue or
matter. In the case of an action or suit by or in the right of
the corporation, no indemnification may be made in respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such
action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper. Section 145 provides that to the extent a director,
officer, employee or agent of a corporation has been successful
in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or manner therein, he
or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her
in connection therewith.

The By-laws of the Company provide that, to the fullest
extent permitted by the General Corporation Law of the State of
Delaware, the Company shall indemnify any person who was or is a
party or is threatened to be made a party to any action, suit or
proceeding of the type described above by reason of the fact that
he or she is or was a director or officer of the Company or is or
was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. No expenses will be paid in
advance except, as authorized by the Board of Directors, to a
director or officer for expenses incurred while acting in his or
her capacity as a director or officer, who has delivered an
undertaking to the corporation to repay all amounts advanced if
it should be later determined that such director or officer was
not entitled to indemnification. The By-laws further provide
that the above rights of indemnification are not exclusive of any
other rights of indemnification that a director or officer may be
entitled to from any other source.

Each current director has entered into an Indemnification
Agreement dated as of January 2, 1996 by and between the Company
and such director pursuant to which the Company will indemnify
such director and hold such director harmless from any and all
losses, expenses and fines to the fullest extent authorized,
permitted or not prohibited (i) by the Delaware General
Corporation Law or any other applicable law (including judicial,
regulatory or administrative interpretations or readings
thereof), the Company's Certificate of Incorporation or By-laws
as in effect on the date of execution of the agreement or other
statutory provision authorizing such indemnification that is
adopted after January 2, 1996. In the event that after the date
of the agreements the Company provides any greater right of
indemnification, in any respect, to any other person serving as
an officer or director of the Company, then such greater right of
indemnification shall inure to the benefit of the respective
director and shall be deemed to be incorporated in the relevant
agreement as a basis for indemnity, at each director's election,
together with the indemnity expressly set forth therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On March 28, 1996, as part of the Restructuring, the Company
issued to the Selling Security Holders, 47,432,731 shares of
Common Stock in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of 1933.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

EXHIBITS DESCRIPTION
*3.1 Amended and Restated Certificate of Incorporation of
Furr's/Bishop's, Incorporated.

*3.2 By-laws of Furr's/Bishop's, Incorporated.

**3.3 Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of Furr's/Bishop's,
Incorporated.
***3.4 Second Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of
Furr's/Bishop's, Incorporated.

5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom.

**10.2 Warrant Agreement dated as of July 10, 1995 by and
between Furr's/Bishop's, Incorporated and Chemical
Bank.

10.3 Consulting and Indemnity Agreement and General Release,
dated as of June 7, 1996 by and between Kevin E. Lewis,
Furr's/Bishop's, Incorporated and Cafeteria Operators,
L.P.

***21.0 Subsidiaries of the Registrant.

****23.1 Consent of Deloitte & Touche LLP, as independent public
accountants.

23.2 Consent of Skadden, Arps, Slate, Meagher & Flom
(included in their opinion filed as Exhibit 5.1).

****24.1 Power of Attorney (included in the Signature Page to
this Registration Statement).

27.1 Financial Data Schedule.

(b) Financial Statement Schedules

Schedule Description Page

II Consolidated Valuation and S-1
Qualifying Accounts

____________________
* Incorporated by reference from the Registrant's Registration
Statement or Form S-4, File No. 33-38978.
** Incorporated by reference from the Registrant's Registration
Statement or Form S-4, File No. 33-92236.
*** Incorporated by reference from the Registrant's Form 10-K for
the fiscal year ended January 2, 1996.
**** Filed herewith.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement;

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.

(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold as of the termination of the offering.

The undersigned Registrant hereby undertakes that:

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant undertakes that:

(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on August
7, 1996.

FURR'S/BISHOP'S INCORPORATED

By: /s/ Kevin E. Lewis
-------------------------------
Kevin E. Lewis
Chairman, President and Chief
Executive Officer

POWER OF ATTORNEYS

KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin E. Lewis,
E.W. Williams, Jr. and Alton R. Smith, and each of them, his true
and lawful attorneys-in-fact and agents, with full power of
substitution and restitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration
Statement and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF
1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:

Signature Title Date

/s/ Kevin E. Lewis Chairman, President and August 7, 1996
-------------------- and Chieff Executive Officer
Kevin E. Lewis

/s/ * Director August 7, 1996
--------------------
E.W. Williams, Jr.

/s/ * Director August 7, 1996
--------------------
Russell A. Belinsky

/s/ * Director August 7, 1996
--------------------
Suzanne Hopgood

/s/ * Director August 7, 1996
--------------------
Gilbert C. Osnos

/s/ * Director August 7, 1996
--------------------
Kenneth R. Reimer

/s/ * Director August 7, 1996
--------------------
Sanjay Varma

/s/ Alton R. Smith Principal Accounting and August 7, 1996
-------------------- Principal Financial Officer
Alton R. Smith

/s/ Kevin E. Lewis
--------------------
Kevin E. Lewis
Attorney-in-fact

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Furr's/Bishop's, Incorporated
Lubbock, Texas

We have audited the consolidated balance sheets of
Furr's/Bishop's, Incorporated and subsidiaries (the Company) as
of January 2, 1996 and January 3, 1995 and the related
consolidated statements of operations, shareholders' equity
(deficit) and cash flows for the 52-week year ended January 2,
1996, the 53-week year ended January 3, 1995, and the 51-1/2-week
year ended December 28, 1993, and have issued our report thereon
dated March 28, 1996 (included elsewhere in this Registration
Statement). Our audits also included the financial statement
schedules listed in Part II, Item 16(b) of this Registration
Statement. These financial statement schedules are the
responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.

/s/ Deloitte & Touche LLP
-------------------------
March 28, 1996
Dallas, Texas

Schedule II

FURR'S/BISHOP'S INCORPORATED AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)

Additions
Charged to
Balance at Charged to Other Balance
Beginning Costs and Accounts- Deductions at End
Description of Period Expenses Describe Describe of Period

QUARTER ENDED
APRIL 2, 1996:
<S> <C> <C> <C> <C> <C>
Reserve for store
closing $ 5,839 $ 92 $ - $ 342(1) $ 5,589

Allowance for
doubtful accounts
receivable $ 27 $ 4 $ - $ 2(3) $ 29

Other valuation
accounts $ - $ - $ - $ - $ -

YEAR ENDED
JANUARY 2, 1996:
Reserve for store
closing $ 3,479 $4,155 $ - $ 1,795(1) $ 5,839

Allowance for
doubtful
accounts receivable $ 64 $ 16(2) $ - $ 21(3) $ 27

Other valuation
accounts $ - $ - $ - $ - $ -

YEAR ENDED
JANUARY 3, 1995:
Reserve for
store closing $ 4,749 $1,083 $ - $ 2,353(1) $3,479

Allowance for
doubtful accounts
receivable $ 35 $ 29 $ - $ - $ 64

Other valuation
accounts $ - $ - $ - $ - $ -

YEAR ENDED
DECEMBER 28, 1993:
Reserve for
store closing $ 3,450 $3,402 $ - $ 2,103(1) $4,749

Allowance for
doubtful accounts
receivable $ 129 $ (83)(2) $ - $ (11)(3) $ 35

Other valuation
accounts $ - $ - $ - $ - $ -

</TABLE>

(1) Includes costs and expenses incurred during the year on closed
units and severance payments.
(2) Net adjustment reflects $23 expense for additional reserves and
$106 reduction for related asset account being written off.
(3) Net adjustment to the reserves to reflect revision of existing
reserves and for establishing reserves for closing additional
stores.
(4) Includes costs and expenses incurred during the year on closed
units of $3,131 and write-off of property, plant and equipment
of $103.
(5) Related asset account was written off.

See notes to the Company's consolidated financial statements.

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Furr's/Bishop's,
Incorporated on Form S-1 of our report dated March 28, 1996, relating to
Furr's/Bishop's, Incorporated (the Company) appearing in the Prospectus,
which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in
such Prospectus.

/s/Deloitte & Touche LLP
Dallas, Texas
June 27, 1996