<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT under SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT
--- OF 1934
For the quarter ended MARCH 19, 2000
---------------------
OR
/__/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________.
Commission file number 0-20792
FRESH CHOICE, INC.
------------------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0130849
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(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No.)
2901 TASMAN DRIVE - SUITE 109, SANTA CLARA, CALIFORNIA 95054
------------------------------------------------------------
(Address of principal executives offices) (Zip Code)
Registrant's telephone number, including area code: (408) 986-8661
--------------
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, $.001 par value, outstanding as of
April 17, 2000 was 5,762,906.
<PAGE>
FRESH CHOICE, INC.
INDEX
<TABLE>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets at March 19, 2000
and December 26, 1999..........................................................................................3
Condensed Consolidated Statements of Operations for the Twelve Weeks
ended March 19, 2000 and March 21, 1999........................................................................4
Condensed Consolidated Statements of Cash Flows for the Twelve Weeks
ended March 19, 2000 and March 21, 1999........................................................................5
Notes to Unaudited Condensed Consolidated Financial Statements.................................................6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................................8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk...............................................15
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings........................................................................................16
Item 2 - Changes in Securities....................................................................................16
Item 3 - Defaults Upon Senior Securities..........................................................................16
Item 4 - Submission of Matters to a Vote of Security Holders......................................................16
Item 5 - Other Information........................................................................................16
Item 6 - Exhibits and Reports on Form 8-K.........................................................................16
SIGNATURES ............................................................................................................17
INDEX TO FORM 10-Q
EXHIBITS...............................................................................................................18
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 19, December 26,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,859 $ 2,458
Receivables 128 186
Inventories 508 555
Prepaid expenses and other current assets 448 479
------------- ------------
Total current assets 3,943 3,678
PROPERTY AND EQUIPMENT, net 26,844 27,231
LEASE ACQUISITION COSTS, net 314 332
DEPOSITS AND OTHER ASSETS 529 616
------------- ------------
TOTAL ASSETS $ 31,630 $ 31,857
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,096 $ 2,317
Accrued salaries and wages 1,555 1,459
Sales tax payable 873 510
Other accrued expenses 1,451 1,844
Restructuring reserve 521 570
Current portion of long-term obligations 816 800
------------- ------------
Total current liabilities 7,312 7,500
CAPITAL LEASE OBLIGATIONS 999 1,126
LONG-TERM DEBT 1,266 1,316
OTHER LONG-TERM LIABILITIES 1,583 1,703
------------- ------------
Total liabilities 11,160 11,645
------------- ------------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value;
3.5 million shares authorized; shares
outstanding: 2000 and 1999 - 1,187,906 5,175 5,175
Common stock - $.001 par value;
15 million shares authorized; shares
outstanding: 2000 - 5,762,906; 1999 - 5,762,444 42,294 42,291
Accumulated deficit (26,999) (27,254)
------------- ------------
Total stockholders' equity 20,470 20,212
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,630 $ 31,857
============= ============
</TABLE>
The December 26, 1999 amounts are derived from the Company's audited
financial statements.
See accompanying notes to unaudited condensed consolidated financial
statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
---------------------------------------
March 19, 2000 March 21, 1999
----------------- -----------------
<S> <C> <C>
NET SALES $ 17,127 $ 16,791
----------------- -----------------
COSTS AND EXPENSES:
Cost of sales 4,135 4,078
Restaurant operating expenses:
Labor 5,547 5,584
Occupancy and other 4,924 5,313
Depreciation and amortization 832 805
General and administrative expenses 1,353 1,269
----------------- -----------------
Total costs and expenses 16,791 17,049
----------------- -----------------
OPERATING INCOME (LOSS) 336 (258)
Interest income 31 10
Interest expense (105) (105)
----------------- -----------------
Interest expense, net (74) (95)
----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 262 (353)
Provision for income taxes 7 -
----------------- -----------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 255 (353)
Cumulative effect of change in accounting principle - adoption
of SOP 98-5, "Reporting on the Costs of Start-Up Activities" - (70)
----------------- -----------------
NET INCOME (LOSS) $ 255 $ (423)
================= =================
Basic and diluted net income (loss) per common share before
cumulative effect of change in accounting principle $ 0.04 $ (0.06)
Cumulative effect of change in accounting principle - (0.01)
----------------- -----------------
Basic and diluted net income (loss) per common share $ 0.04 $ (0.07)
================= =================
Shares used in computing basic per share amounts 5,763 5,719
================= =================
Shares used in computing diluted per share amounts 7,101 5,719
================= =================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
4
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FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------------------------
March 19, March 21,
2000 1999
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 255 $ (423)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 897 862
Adoption of SOP 98-5, "Reporting on the Costs of Start-Up Activities" - 70
Issuance of stock options for consulting services 3 11
Loss on disposal of property 63 5
Deferred rent (120) (101)
Change in operating assets and liabilities:
Receivables 58 (1)
Inventories 20 26
Prepaid expenses and other current assets 31 23
Accounts payable (221) (842)
Accrued salaries and wages 96 290
Other accrued expenses (30) (356)
Restructuring reserve (49) (389)
------------- ------------
Net cash provided by (used in) operating activities 1,003 (825)
------------- ------------
INVESTING ACTIVITIES:
Capital expenditures (521) (232)
Deposits and other assets 80 (54)
------------- ------------
Net cash used in investing activities (441) (286)
------------- ------------
FINANCING ACTIVITIES:
Line of credit - borrowings (repayments), net - (1,155)
Long term debt - borrowings - 2,623
Long term debt - repayments (50) -
Capital lease obligations - borrowings - 25
Capital lease obligations - repayments (111) (89)
------------- ------------
Net cash provided by (used in) financing activities (161) 1,404
------------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS 401 293
CASH AND CASH EQUIVALENTS:
Beginning of period 2,458 1,830
------------- ------------
End of period $ 2,859 $ 2,123
============= ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 105 $ 77
============= ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements
5
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Twelve
Weeks ended March 19, 2000 and March 21, 1999
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements
have been prepared by the Company without audit and reflect all adjustments,
consisting of normal recurring adjustments and accruals, which are, in the
opinion of management, necessary for a fair statement of financial position
and the results of operations for the interim periods. The statements have
been prepared in accordance with the regulations of the Securities and
Exchange Commission, but omit certain information and footnote disclosures
necessary to present the statements in accordance with generally accepted
accounting principles. For further information, refer to the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 26, 1999.
2. NET INCOME (LOSS) PER SHARE
Basic earnings per share ("EPS") excludes potentially
dilutive securities and is computed by dividing the Company's net income
(loss) by the weighted average of its common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock. The Company converts common stock options and
warrants into dilutive potential shares using the treasury stock method and
converts preferred stock into dilutive potential shares using the "if
converted" method.
Diluted EPS presented for the twelve weeks ended March 19,
2000 include potential dilutive securities. Diluted EPS presented for the
twelve weeks ended March 21, 1999 is the same as basic EPS since the Company
had net losses and, therefore, all potential dilutive securities are
antidilutive and are excluded from the computation. Shares used in computing
diluted per share amounts are as follows:
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------------------------
(In thousands) March 19, 2000 March 21, 1999
----------------- ---------------
<S> <C> <C>
Average common shares outstanding 5,763 5,719
Dilutive shares:
Stock options 150 -
Convertible preferred stock 1,188 -
----------------- ---------------
Total shares and dilutive shares 7,101 5,719
================= ===============
</TABLE>
The following table presents the total dilutive securities
which the Company excluded for the twelve weeks ended March 19, 2000 and
ended March 21, 1999 from its diluted EPS computation because either the
exercise price of the securities exceeded the average fair value of the
Company's common stock or the Company had net losses, and, therefore, these
securities were anti-dilutive:
<TABLE>
<CAPTION>
Twelve Weeks Ended
---------------------------
March 19, March 21,
(In thousands) 2000 1999
------------- -------------
<S> <C> <C>
POTENTIAL DILUTIVE SECURITIES
Stock options excluded 388 652
Stock warrants 138 732
Convertible preferred stock - 1,188
</TABLE>
6
<PAGE>
3. INCOME TAXES
The Company recorded an income tax provision for the twelve weeks
ended March 19, 2000 due to projected fiscal 2000 net income exceeding net
operating loss carryforwards available to offset taxable income. The Company
recorded no income tax benefit for its operating loss during the twelve weeks
ended March 21, 1999 due to the Company's net loss for the period and
valuation allowances against its net deferred tax assets. The Company's net
deferred tax assets consist primarily of the tax benefit related to operating
loss carryforwards and non-deductible asset write-downs in connection with
restructuring reserves. The Company will continue to provide a valuation
allowance for its deferred tax assets until it becomes more likely than not,
in management's assessment, that the Company's deferred tax assets will be
realized.
4. BORROWING ARRANGEMENTS
On March 19, 2000, the Company had $1,450,000 of long-term debt
borrowed under the terms of a $4,000,000 loan and security agreement (the
"Agreement"), of which $300,000 was included in the current portion of
long-term obligations. As of March 19, 2000, the Company had an additional
$1,450,000 available for borrowing under the Agreement.
Borrowings under the Agreement initially bear interest at the prime
rate (8.75% at March 19, 2000) plus 1.25% and, once repaid, can be
re-borrowed unless converted to a term loan. Outstanding borrowings on the
first and second anniversaries of the Agreement convert into term loans which
become payable at 1/60th of the converted balance each month plus interest at
1.75% above the prime rate. All borrowings, including any term loans, are
fully payable on December 29, 2001. Aggregate borrowings in excess of
$2,500,000 bear an additional 0.5% interest. The Agreement also provides for
a monthly collateral monitoring fee and a 0.5% unused line fee.
The Agreement requires the Company to maintain a minimum net worth
and debt service coverage ratio and to not exceed maximum interest and debt
to cash flow ratios and limits its aggregate indebtedness. The Agreement also
requires approval before paying dividends and limits the Company's fixed
asset acquisitions based on its operating cash flows. The Company was in
compliance with the loan agreement covenants at March 19, 2000.
5. RESTRUCTURING AND RESTAURANT CLOSURE RESERVE
At March 19, 2000, the Company's restructuring reserve of $521,000 consisted
of the remaining scheduled cash payments to be made on an agreement to settle
the lease obligation on one closed restaurant and the estimated cash costs to
close and settle the lease obligation at one other restaurant identified for
closure. One restaurant identified and reserved for closure in 1999, was
closed during the first quarter of 2000.
6. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Cost of Start-Up
Activities," which requires companies to expense the costs of start-up
activities and organization costs as incurred. The Company adopted SOP 98-5
effective for at the beginning of its fiscal year ending December 26, 1999
and expensed $70,000 of unamortized pre-opening costs at the time of adoption.
7
<PAGE>
7. CONVERTIBLE PREFERRED STOCK
The Company's outstanding Series B non-voting convertible preferred
stock is currently held by one entity and is convertible, at the holders'
option, into Series A voting convertible preferred stock on a one-for-one
basis. Although no Series A preferred stock is currently outstanding, holders
of Series A preferred stock, if any, would be entitled to vote with common
stockholders on all matters submitted to a vote of stockholders. When and if
issued, the holders of a majority of the outstanding Series A preferred stock
will have a separate right to approve certain corporate actions.
In fiscal 1998, the Company failed to achieve a specified earnings
target (before interest, taxes, depreciation and amortization) of at least
$5,500,000 which constituted an event of default of the terms of the
preferred stock agreement and which triggered the right of the Series A
preferred stockholders to elect a majority of the Company's Board of
Directors. The holder of the Series B preferred stock has not initiated any
action to convert such shares into shares of Series A preferred stock nor has
it exercised its right to elect a majority of the Board of Directors. Such
holder has notified the Company that it has no present intention of
exercising such right; however, it has not waived any of its rights under the
agreement.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is intended to highlight significant
changes in the Company's financial position and results of operations for the
twelve weeks ended March 19, 2000. The interim Financial Statements and this
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Consolidated Financial
Statements and Notes thereto for the fiscal year ended December 26, 1999 and
the related Management's Discussion and Analysis of Financial Condition and
Results of Operations, both of which are contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1999.
Certain statements set forth in this discussion and analysis of
financial condition and results of operations including anticipated store
openings, planned capital expenditures and trends in or expectations
regarding the Company's operations constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are based on currently available operating, financial and
competitive information and are subject to various risks and uncertainties.
Actual future results and trends may differ materially depending on a variety
of factors as set forth herein. Among the risks and uncertainties are the
continuation of positive comparable store sales; future profitability; the
Company's successful efforts to close, sell or improve operating results of
underperforming stores which depend on many factors not within the Company's
control such as the negotiation of settlements of existing lease obligations
under acceptable terms; the ability to obtain additional financing on
favorable terms; and the Company's ability to locate suitable restaurant
sites and construct new restaurants in a timely manner.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements have been for the
expansion of its restaurant operations and remodeling of its restaurants. The
Company has traditionally financed these requirements with funds from equity
offerings, cash flow from operations, landlord allowances, capital equipment
leases and short-term bank debt. The Company does not have significant
receivables or inventory and receives trade credit based upon negotiated
terms in purchasing food and supplies.
8
<PAGE>
The Company has a $4,000,000 loan and security agreement (the
"Agreement") with a finance company. The Agreement expires on December 29,
2001 and provides for one-year renewals thereafter. During the quarter ended
March 19, 2000, the Company paid $50,000 of principal borrowed on a
$1,500,000 term loan converted under the Agreement on December 29, 1999. In
addition, the Company borrowed and repaid $500,000 during the first quarter
under the terms of the Agreeement. On March 19, 2000, the Company had
$1,450,000 of long term debt borrowed under the terms of the Agreement, of
which $300,000 was included in the current portion of long-term obligations.
As of March 19, 2000, the Company had an additional $1,450,000 available for
borrowing under the terms of the Agreement.
Borrowings under the Agreement initially bear interest at the
prime rate (8.75% at March 19, 2000) plus 1.25% and, once repaid, can be
re-borrowed unless converted to a term loan. Outstanding borrowings on the
first and second anniversaries of the Agreement convert into term loans which
become payable at 1/60th of the converted balance each month plus interest at
1.75% above the prime rate. All borrowings, including any term loans, are
fully payable on December 29, 2001. Aggregate borrowings in excess of
$2,500,000 bear an additional 0.5% interest. The Agreement also provides for
a monthly collateral monitoring fee and a 0.5% unused line fee.
The Agreement requires the Company to maintain a minimum net
worth and debt service coverage ratio and to not exceed maximum interest and
debt to cash flow ratios and limits its aggregate indebtedness. The Agreement
also requires approval before paying dividends and limits the Company's fixed
asset acquisitions based on its operating cash flows. The Company was in
compliance with the loan agreement covenants at March 19, 2000.
Long-term debt at March 19, 2000 also included $1,515,000 of
capital lease obligations, of which $516,000 was included in the current
portion of long term obligations, and a $116,000 note for site construction
costs.
Operating activities for the twelve weeks ended March 19, 2000
provided $1,003,000. During the same period, the Company invested $521,000 in
property and equipment, including the remodeling of five restaurants. The
Company plans to remodel 17 additional restaurants in fiscal 2000 to complete
its remodeling program. In addition, at the beginning of the second quarter
of fiscal 2000, the Company opened its second Fresh Choice Express test
location and is seeking a third test location in its core Northern California
market.
One restaurant closed during the 12 week period ended March 19,
2000 with closure costs approximating the amount of the reserve. At March 19,
2000, the Company's restructuring reserve of $521,000 consisted of the
remaining scheduled payments to settle the lease obligation on one closed
restaurant and the estimated cash costs to close and settle the lease
obligation at one other restaurant identified for closure.
The Company's outstanding Series B non-voting convertible
preferred stock is currently held by one entity and is convertible, at the
holders' option, into Series A voting convertible preferred stock on a
one-for-one basis. Although no Series A preferred stock is currently
outstanding, holders of Series A preferred stock, if any, would be entitled
to vote with common stockholders on all matters submitted to a vote of
stockholders. When and if issued, the holders of a majority of the
outstanding Series A preferred stock will have a separate right to approve
certain corporate actions.
In fiscal 1998, the Company failed to achieve a specified
earnings target (before interest, taxes, depreciation and amortization) of at
least $5,500,000 which constituted an event of default of the terms of the
preferred stock agreement and which triggered the right of the Series A
preferred stockholders to elect a majority of the Company's Board of
Directors. The holder of the Series B preferred stock has not initiated any
action to convert such shares into shares of Series A preferred stock nor has
it exercised its right to elect a majority of the
9
<PAGE>
Board of Directors. Such holder has notified the Company that it has no
present intention of exercising such right; however, it has not waived any of
its rights under the agreement.
The Company's continued growth depends to a significant degree
on its ability to open new restaurants and to operate such restaurants
profitably. The Company currently plans to open one new Fresh Choice
restaurant in fiscal 2000. In addition, the Company is seeking a third test
location for its Fresh Choice Express concept. The Company's ability to
implement an expansion strategy will depend upon a variety of factors,
including the continued success of efforts to restore profitability and the
Company's ability to obtain funds. See "Business Risks" included herein. The
Company believes its operating cash requirements and fiscal 2000 capital
requirements can be met through existing cash balances, cash provided by
operations and its borrowing arrangements. The Company may continue to seek
additional debt or equity financing to provide greater flexibility toward
improving its operating performance and resuming restaurant expansion.
IMPACT OF INFLATION
Many of the Company's employees are paid hourly rates related
to the federal and state minimum wage laws. Accordingly, increases in the
minimum wage could materially increase the Company's labor costs. In
addition, the cost of food commodities utilized by the Company are subject to
market supply and demand pressures. Shifts in these costs may have a
significant impact on the Company's food costs. The Company anticipates that
increases in these costs may be offset through pricing and other cost control
efforts; however, there is no assurance that the Company would be able to
pass such costs on to its guests or that even if it were able to do so, it
could do so in a short period of time.
BUSINESS RISKS
Certain characteristics and dynamics of the Company's business
and of financial markets in general create risks to the Company's long-term
success and to predictable financial results. These risks include:
OPERATING LOSSES AND HISTORICAL DECLINES IN COMPARABLE STORE
SALES. The Company's profitability began to decline in the second half of
1994. In the fourth quarter of 1994, the Company reported its first operating
loss, and reported operating losses in both 1995 and 1996. The Company
reported a modest profit in 1997 but again incurred an operating loss in
1998. The Company reported a profit for 1999 and for the twelve weeks ended
March 19, 2000.
Beginning late in the third quarter of fiscal 1994, the Company
began reporting comparable store sales declines. Comparable store sales
continued to decline in each quarter through the end of 1998. The Company
reported comparable store sales declines of 4.6%, 15.3%, 5.9%, 2.7% and 4.8%
for fiscal years 1994, 1995, 1996, 1997 and 1998, respectively. During 1999,
the Company reported positive comparable store sales in each quarter and
reported a comparable store sales increase of 3.5% for fiscal year 1999. The
Company also reported a comparable store sales increase of 5.2% in the first
quarter of 2000. There can be no assurance that comparable store sales will
continue to improve or that the Company will maintain profitability over the
long term.
EXPANSION. The Company experienced substantial growth prior to
mid-1995, having opened 14 restaurants in 1993, 15 restaurants in 1994, and
seven in 1995. In 1995, the Company suspended its expansion plans after
opening seven restaurants, reviewed the operating performance of all of its
restaurants, and identified certain restaurants which did not meet its
expectations for operating performance. As a result, in December 1995 the
Company announced a restructuring plan to close as many as ten restaurants.
The Company closed or sold eleven restaurants under this program, including
three at the end of 1995, and eight in 1996. The Company opened one Fresh
Choice restaurant in 1996. In 1997, the Company acquired the Zoopa trade name
and three Zoopa restaurants and also opened two new Zoopa restaurants. In
1998 two additional restaurants were opened. In September 1998, the Company
announced a plan to close four additional previously impaired
10
<PAGE>
underperforming restaurants and for the closure of two additional restaurants
where it decided not to renew the leases. To date four of these restaurants
have been closed, the Company reversed its decision to not renew the lease on
one restaurant after a significant improvement in operating performance and
is evaluating its options on the remaining restaurant. In addition the
Company closed a restaurant and sold another restaurant during the third
quarter of 1999. No new Fresh Choice or Zoopa restaurants opened in 1999. The
Company opened its first Fresh Choice Express, on a test basis, in Fort
Worth, Texas in the third quarter of 1999, opened its second test location in
Texas at the beginning of the second quarter of 2000, and is seeking a third
test location in its core Northern California market. The Company believes
its growth depends to a significant degree on its ability to open new
restaurants and to operate such restaurants profitably. While the Company
intends to resume its expansion, assuming its financial performance continues
to improve, there can be no assurance that the Company will be able to
continue expansion. The Company's ability to implement successfully an
expansion strategy will depend on a variety of factors, including the
selection and availability of affordable sites, the selection and
availability of capital to finance restaurant expansion and equipment costs,
the ability to hire and train qualified management and personnel, the ability
to control food and other operating costs, and other factors, many of which
are beyond the Company's control.
While on a long-term basis, the Company intends to expand its
operations in markets outside of California, assuming its financial
performance continues to improve, there can be no assurance as to when or
whether the Company will resume its expansion. The Company's expansion plans
may include entering new geographic regions in which the Company has no
previous operating experience. There can be no assurance that the concept
will be successful in regions outside of California, where tastes and
restaurant preferences may be different. As of April 17, 2000, the Company
had opened or purchased eleven restaurants in Texas, including two test Fresh
Choice Express restaurants, six restaurants in the state of Washington and
three restaurants in the Washington, D.C. metropolitan area. Of the eighteen
restaurants closed or sold, three were in Texas, two were in the state of
Washington, ten were in California, and three were in the Washington, D.C.
metropolitan area (where the Company no longer operates).
GEOGRAPHIC CONCENTRATION. As of April 17, 2000 38 of the
Company's 50 restaurants were located in California, primarily in Northern
California. Accordingly, the Company is susceptible to fluctuations in its
business caused by adverse economic conditions in this region. In addition,
net sales at certain of the Company's restaurants have been adversely
affected when a new Company restaurant has been opened in relatively close
geographic proximity, and such pressure may continue to depress annual
comparable store sales. There can be no assurance that expansion within
existing or future geographic markets will not adversely affect the
individual financial performance of Company restaurants in such markets or
the Company's overall results of operations. In addition, given the Company's
present geographic concentration in Northern California, adverse weather
conditions in the region or negative publicity relating to an individual
Company restaurant could have a more pronounced adverse affect on net sales
than if the Company's restaurants were more broadly dispersed.
VOLATILITY OF STOCK PRICE. The market price of the Company's
Common Stock has fluctuated substantially since the initial public offering
of the Common Stock in December 1992. Changes in general conditions in the
economy, the financial markets or the restaurant industry, natural disasters
or other developments affecting the Company or its competitors could cause
the market price of the Company's Common Stock to fluctuate substantially. In
addition, in recent years the stock market has experienced extreme price and
volume fluctuations. This volatility has had significant effect on the market
prices of securities issued by many companies, including the Company, for
reasons sometimes unrelated to the operating performance of these companies.
Any shortfall in the Company's net sales or earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's Common Stock in any given period.
Additionally, such shortfalls may not become apparent until late in the
fiscal quarter, which could result in an even more immediate and significant
adverse effect on the trading price of the Company's Common Stock.
SEASONALITY AND QUARTERLY FLUCTUATIONS The Company's
restaurants have typically experienced seasonal fluctuations, as a
disproportionate amount of net sales and net income are generally realized in
the second and third fiscal quarters. In addition, the Company's quarterly
results of operations have been, and may continue to be, materially impacted
by the timing of new restaurant openings and restaurant closings. The fourth
quarter normally includes 16 weeks of operations as compared with 12 weeks
for each of the three prior quarters.
11
<PAGE>
The fourth quarter of 2000 will include 17 weeks. As a result of these
factors, net sales and net income in the fourth quarter are not comparable to
results in each of the first three fiscal quarters, and net sales and net
income can be expected to decline in the first quarter of each fiscal year in
comparison to the fourth quarter of the prior fiscal year. Comparable store
sales, which had been negative for four consecutive years through fiscal year
1998, may again turn negative.
DEPENDENCE ON KEY PERSONNEL. The success of the Company depends
on the efforts of key management personnel. The Company's success will depend
on its ability to motivate and retain its key crewmembers and to attract
qualified personnel, particularly general managers, for its restaurants. The
Company faces significant competition in the recruitment of qualified
crewmembers.
RESTAURANT INDUSTRY. The restaurant industry is affected by
changes in consumer tastes, as well as national, regional and local economic
conditions and demographic trends. The performance of individual restaurants,
including the Company's restaurants, may be affected by factors such as
traffic patterns, demographic considerations, and the type, number and
location of competing restaurants. In addition, factors such as inflation,
increased food, labor and crewmember benefit costs, and the availability of
experienced management and hourly crewmembers may also adversely affect the
restaurant industry in general and the Company's restaurants in particular.
Restaurant operating costs are affected by increases in the minimum hourly
wage, unemployment tax rates, and various federal, state and local
governmental regulations, including those relating to the sale of food and
alcoholic beverages. There can be no assurance that the restaurant industry
in general, and the Company in particular, will be successful.
COMPETITION. The Company's restaurants compete with the rapidly
growing mid-price, full-service casual dining segment; with traditional
limited-service buffet, soup, and salad restaurants; and, increasingly, with
quick-service outlets. The Company's competitors include national and
regional chains, as well as local owner-operated restaurants. Key competitive
factors in the industry are the quality and value of the food products
offered, quality and speed of service, price, dining experience, restaurant
location and the ambiance of facilities. Many of the Company's competitors
have been in existence longer than the Company, have a more established
market presence, and have substantially greater financial, marketing and
other resources than the Company, which may give them certain competitive
advantages. The Company believes that its ability to compete effectively will
continue to depend in large measure upon its ability to offer a diverse
selection of high-quality, fresh food products with an attractive price/value
relationship.
ABILITY TO OBTAIN ADDITIONAL FINANCING. The Company intends to
resume restaurant expansion, assuming its financial performance continues to
improve. The Company's ability to implement an expansion strategy will depend
upon a variety of factors, including the success of its restructuring plan in
restoring profitability and its ability to obtain funds. The Company believes
its near-term capital requirements can be met through its existing cash
balances, cash provided by operations and its available line of credit.
However, the Company may seek additional financing to provide greater
flexibility toward improving its operating performance. There can be no
assurance that the Company will be able to obtain additional financing when
needed on acceptable terms or at all.
CONTROL BY MAJOR SHAREHOLDER. Crescent Real Estate Equities
Limited Partnership holds 1,187,906 shares of Series B non-voting convertible
preferred stock, which is convertible into Series A voting convertible
preferred stock at any time at the option of the holder. Upon conversion,
holders of Series A preferred stock would be entitled to vote with common
stockholders and would have a separate right to approve certain corporate
actions, such as amending the Company's Certificate of Incorporation or
Bylaws, effecting a merger or sale of the Company, or making a fundamental
change in the Company's business activity. In addition because the Company
did not achieve an earnings target (before interest, taxes, depreciation and
amortization) of $5,500,000 in 1998, the holders of Series A preferred stock
would have the right to elect a majority of the Company's Board of Directors.
These factors could have the effect of delaying, deferring or preventing a
change in control of the Company and, as a result, could discourage
acquisition bids for the Company and limit the price that investors are
willing to pay for shares of common stock.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth items in the Company's
statements of operations as a percentage of sales and certain operating data
for the periods indicated:
<TABLE>
<CAPTION>
Twelve Weeks Ended
---------------------------------------------------
(Dollars in thousands) March 19, 2000 March 21, 1999
---------------------- -----------------------
<S> <C> <C> <C> <C>
NET SALES $ 17,127 100.0 % $ 16,791 100.0 %
COSTS AND EXPENSES:
Cost of sales 4,135 24.1 % 4,078 24.3 %
Restaurant operating expenses:
Labor 5,547 32.4 % 5,584 33.3 %
Occupancy and other 4,924 28.7 % 5,313 31.6 %
Depreciation and amortization 832 4.9 % 805 4.8 %
General and administrative expenses 1,353 7.9 % 1,269 7.5 %
---------------------- -----------------------
Total costs and expenses 16,791 98.0 % 17,049 101.5 %
---------------------- -----------------------
OPERATING INCOME (LOSS) 336 2.0 % (258) (1.5)%
Interest income 31 0.2 % 10 0.1 %
Interest expense (105) (0.7)% (105) (0.7)%
---------------------- -----------------------
Interest expense, net (74) (0.5)% (95) (0.6)%
---------------------- -----------------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 262 1.5 % (353) (2.1)%
Provision for income taxes 7 - % - - %
---------------------- -----------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 255 1.5 % (353) (2.1)%
Cumulative effect of change in accounting principle -
adoption of SOP 98-5, "Reporting on the Costs
of Start-Up Activities" - - % (70) (0.4)%
---------------------- -----------------------
NET INCOME (LOSS) $ 255 1.5 % $ (423) (2.5)%
====================== =======================
Number of restaurants:
Open at beginning of period 50 51
============ ============
Open at end of period 49 51
============ ============
</TABLE>
13
<PAGE>
The following table presents the components of average
operating income on a per restaurant basis, based on the average number of
Fresh Choice restaurants open during the period (the Company's one Fresh
Choice Express is excluded):
<TABLE>
<CAPTION>
Twelve Weeks Ended
------------------------------------------------------
(Dollars in thousands) March 19, 2000 March 21, 1999
-------------------------- -----------------------
<S> <C> <C> <C> <C>
NET SALES $ 353 100.0 % $ 329 100.0 %
COSTS AND EXPENSES:
Cost of sales 85 24.1 % 80 24.3 %
Restaurant operating expenses:
Labor 114 32.2 % 109 33.3 %
Occupancy and other 101 28.8 % 104 31.6 %
Depreciation and amortization 17 4.8 % 16 4.8 %
-------------------------- -----------------------
Total costs and expenses 317 89.9 % 309 94.0 %
-------------------------- -----------------------
RESTAURANT OPERATING INCOME $ 36 10.1 % $ 20 6.0 %
========================== =======================
Average Fresh Choice restaurants open 48.2 51.0
=============== =============
</TABLE>
RESULTS OF OPERATIONS: TWELVE WEEKS ENDED MARCH 19, 2000
COMPARED TO TWELVE WEEKS ENDED MARCH 21, 1999
NET SALES. Net sales for the quarter ended March 19, 2000 were
$17,127,000, an increase of $336,000, or 2.0%, from sales of $16,791,000 for
the quarter ended March 21, 1999. The primary components of the net increase
in sales were:
<TABLE>
<S> <C>
Increase in comparable store sales $ 819,000
Incremental sales from new restaurants 78,000
Absence of sales from closed restaurants (561,000)
----------------
$ 336,000
================
</TABLE>
The Company operated an average of 49.2 restaurants in the first
quarter of 2000, closing one restaurant during the quarter, compared to 51
restaurants in the first quarter of 1999. Sales at the Company's 47
comparable stores, which include restaurants open at least 18 months,
increased 5.2% in the first quarter of 2000 versus the first quarter of 1999.
Comparable store guest counts increased 6.2%, while the comparable store
average check decreased 1.0% to $7.18, reflecting increased coupon
redemptions.
Net sales per Fresh Choice restaurant averaged $353,000 in the first
quarter of 2000, an increase of 7.3% over net sales per restaurant of
$329,000 in the first quarter of 1999 due to comparable store sales increases
as noted above and closure of lower sales volume restaurants.
COSTS AND EXPENSES. Cost of sales (food and beverage costs) was 24.1%
of sales in the first quarter of 2000 compared to 24.3% in the first quarter
of 1999, a decrease of 0.2% of sales. Food costs continued to benefit from
the Company's food program which manages food costs through an efficient
product rotation while maintaining a quality menu offering to guests. In
addition, food costs benefited from cost efficiencies experienced with new
products and new production methods.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses (labor,
occupancy and other) were 61.1% of sales in the first quarter of 2000
compared to 64.9% of sales in the first quarter of 1999, a decrease of 3.8%
of sales.
14
<PAGE>
Labor costs were 32.4% of sales for the first quarter of 2000
compared to 33.3% of sales in the first quarter of 1999. Labor costs as a
percentage of sales benefited from the Company's increased sales as well as
labor savings from improved food production and scheduling methods.
Occupancy and other expenses of 28.7% of sales in the first
quarter of 2000 compared to 31.6% of sales in the first quarter of 1999, a
decrease of 2.9% of sales. The decline is primarily the result of a reduction
in marketing and promotional expenditures, and higher average sales on these
mostly fixed costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
expenses were 4.9% of sales in the first quarter of 2000 compared to 4.8% of
sales in the first quarter of 1999. This increase is primarily a result of
the Company's investment in its remodeling program and point of sale systems.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were 7.9% of sales in the first quarter of 2000 compared to 7.5% of
sales in the first quarter of 1999. The increase is due primarily to the
timing of the Company's general manager conference, which occurred in the
first quarter of 2000 versus the second quarter of 1999, and increased
accruals for potential incentive payments.
INTEREST INCOME (EXPENSE), NET. Interest expense of $105,000 in
both the first quarter of 2000 and 1999, consists of fees related to securing
the Company's borrowing arrangements and interest expense on outstanding
borrowings and capital lease obligations. Interest income increased in the
first quarter of 2000 due to higher interest earned on its average cash
balances.
INCOME TAXES. The Company recorded an income tax provision for
the twelve weeks ended March 19, 2000 due to projected fiscal 2000 net income
exceeding net operating loss carryforwards available to offset taxable
income. The Company recorded no income tax benefit for its operating loss
during the twelve weeks ended March 21, 1999 due to the Company's net loss
for the period and valuation allowances against its net deferred tax assets.
The Company's net deferred tax assets consist primarily of the tax benefit
related to operating loss carryforwards and non-deductible asset write-downs
in connection with restructuring reserves. The Company will continue to
provide a valuation allowance for its deferred tax assets until it becomes
more likely than not, in management's assessment, that the Company's deferred
tax assets will be realized.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. In April
1998, the American Institute of Certified Public Accountants issued Statement
of Position 98-5 ("SOP 98-5"), "Reporting on the Cost of Start-Up
Activities," which requires companies to expense the costs of start-up
activities and organization costs as incurred. The Company adopted SOP 98-5
effective for at the beginning of its fiscal year ending December 26, 1999
and expensed $70,000 of unamortized pre-opening costs at the time of adoption.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through
its borrowing activities. The Company has not used derivative financial
instruments to hedge such risks. There is inherent roll-over risk for
borrowings as they mature and are renewed at current market rates. The extent
of this risk is not quantifiable or predictable because of the variability of
future interest rates and business financing requirements. If market rates
were to increase immediately by 10 percent from levels at March 19, 2000, the
fair value of the Company's borrowings would not be materially affected as
borrowings are primarily subject to variable interest rates.
15
<PAGE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 1 - LEGAL PROCEEDINGS Not Applicable.
ITEM 2 - CHANGES IN SECURITIES Not Applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable.
ITEM 5 - OTHER INFORMATION Not Applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
(a) Exhibits. The exhibits listed in the accompanying index to Form 10-Q
Exhibits are filed or incorporated by reference as part of this report.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended March 19, 2000.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRESH CHOICE, INC.
(Registrant)
/S/ Everett F. Jefferson
----------------------------------------
Everett F. Jefferson
President and Chief Executive Officer
(Principal Executive Officer)
/S/ David E. Pertl
----------------------------------------
David E. Pertl
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: May 1, 2000
17
<PAGE>
INDEX TO FORM 10-Q EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 (1) Restated Certificate of Incorporation of Fresh Choice, Inc.
3.2 (8) Amended By-Laws of Fresh Choice, Inc. dated April 11, 1996
3.3 (10) Certificate of Amendment of Restated Certificate of Incorporation of Fresh Choice,
Inc.
3.4 (10) Certificate of Designation of Series A Voting Participating Convertible Preferred
Stock of Fresh Choice, Inc.
3.5 (10) Certificate of Designation of Series B Non-Voting Participating Convertible Preferred Stock
of Fresh Choice, Inc.
3.6 (10) Certificate of Designation of Series C Non-Voting Participating Convertible Preferred Stock
of Fresh Choice, Inc.
4.1 (10) Registration Rights Agreement dated September 13, 1996 between Fresh Choice, Inc. and
Crescent Real Estate Equities Limited Partnership
10.1 (1) Form of Indemnity Agreement for directors and officers
10.2 (2) (3) Second Amended and Restated 1988 Stock Option Plan
10.3 (2) (3) 1992 Employee Stock Purchase Plan
10.4 (1) Series A Preferred Stock Purchase Agreement dated August 10, 1988
10.5 (1) Series B Preferred Stock Purchase Agreement dated July 21, 1989
10.6 (1) Series C Preferred Stock Purchase Agreement dated January 15, 1990
10.7 (1) Master Lease and Warrant Agreement with Equitec Leasing Company and Warrant dated
January 18, 1990
10.8 (8) Preferred Stock Purchase Agreement with Crescent Real Estate Equities Limited Partnership
dated April 26, 1996
10.9 (1) Series D Preferred Stock Purchase Agreement dated April 17, 1991
10.10 (5) Amendment No. 1 dated September 3, 1993 to the Business Loan Agreement dated
September 3, 1993.
10.11 (5) Amendment No. 2 dated November 15, 1993 to the Business Loan Agreement dated
September 3, 1993.
10.12 (1) Amendment dated December 1, 1992 to Preferred Stock Purchase Agreements
10.13 (4) Business Loan Agreement dated September 3, 1993 with Bank of America National Trust
and Savings Association
10.14 (5) Amendment No. 4 dated March 31, 1995 to the Business Loan Agreement dated
September 3, 1993
18
<PAGE>
INDEX TO FORM 10-Q EXHIBITS continued
EXHIBIT
NO. DESCRIPTION
----------------------------------------------------------------------------------------------------------------------
10.15 (5) Amendment No. 3 dated April 27, 1994 to the Business Loan Agreement dated September
3, 1993
10.16 (6) Loan and Security Agreement dated December 20, 1995 with Silicon Valley Bank
10.17 (6) Third Party Security agreement dated December 20, 1995 between Silicon Valley Bank and
Moffett Design Corporation
10.18 (6) Warrant to Purchase up to 75,000 Shares of the Company's Common Stock issued to Silicon
Valley Bank on December 20, 1995
10.19 (6) Common Stock Purchase Warrant to Purchase 100,000 Shares of the
Company's Common Stock issued to Bain & Company, dated December 15, 1995
10.20 (6) (3) Employment Offer Letter to Robert Ferngren dated November 9, 1995
10.21 (9) (3) Amendment dated July 29, 1996 to Employment Offer Letter to Robert Ferngren
10.22 (10) (3) Severance Agreement with Charles A. Lynch dated July 18, 1996
10.23 (10) (3) Severance Agreement with David Anderson dated July 18, 1996
10.24 (10) (3) Severance Agreement with Tim G. O'Shea dated July 18, 1996
10.25 (10) (3) Severance Agreement with Joan M. Miller dated July 18, 1996
10.26 (11) (3) Employment Offer Letter to David E. Pertl dated January 24, 1997
10.27 (11) (3) Employment Offer Letter to Everett F. Jefferson dated January 30, 1997
10.28 (11) (3) Amendment to Employment Offer Letter to Everett F. Jefferson dated February 10, 1997
10.29 (11) Loan Modification Agreement dated November 27, 1996 with Silicon Valley Bank
10.30 (11) (3) Severance Agreement with Tina Freedman dated March 13, 1997
10.31 (12) Agreement of Sale and Purchase dated April 2, 1997 with RUI One Corp.
10.32 (12) Amendment to Loan and Security Agreement dated July 9, 1997 with Silicon Valley Bank
10.33 (13) Amendment to Loan and Security Agreement dated May 27, 1998 with Silicon Valley Bank
10.34 (13) (3) Consulting Agreement with Charles A. Lynch dated April 17, 1998
10.35 (14) Amendment to Loan and Security Agreement dated October 28, 1998 with Silicon Valley Bank
10.36 (14) Loan and Security Agreement dated December 29, 1998 with FINOVA Capital Corporation
10.37 (14) (3) Form of Severance Agreement with Senior Vice Presidents
10.38 (14) (3) Officer Incentive Plan for fiscal year 1999
10.39 (15) (3) Officer Incentive Plan for fiscal year 2000
10.40 (15) (3) Senior Vice President of Operations Incentive Plan for fiscal year 2000
27 (7) Financial Data Schedule
-------------------------
</TABLE>
19
<PAGE>
(1) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Registration Statement on Form
S-1 (No. 33-53904) filed October 29, 1992, as amended by
Amendment No. 1 to Form S-1 (No. 33-53904) filed December 7,
1992, except that Exhibit 3.1 is incorporated by reference from
Exhibit 3.1C and Exhibit 3.2 is incorporated by reference from
Exhibit 3.2B.
(2) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 4, 1994.
(3) Agreements or compensatory plans covering executive officers and
directors of Fresh Choice, Inc.
(4) Incorporated by reference
from the Company's Annual Report on Form 10-K for the period
ended December 26, 1993.
(5) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended March 19, 1995.
(6) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(7) Included in EDGAR filing only.
(8) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended March 24, 1996.
(9) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 16, 1996.
(10) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 8, 1996.
(11) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K for
the year ended December 29, 1996.
(12) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 15, 1997.
(13) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 14, 1998.
(14) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K/A for
the year ended December 27, 1998.
(15) Incorporated by reference from the Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K for
the year ended December 26, 1999.
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FRESH
CHOICE, INC.'S REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 19, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-19-2000
<CASH> 2,859
<SECURITIES> 0
<RECEIVABLES> 128
<ALLOWANCES> 0
<INVENTORY> 508
<CURRENT-ASSETS> 3,943
<PP&E> 46,168
<DEPRECIATION> (19,324)
<TOTAL-ASSETS> 31,630
<CURRENT-LIABILITIES> 7,312
<BONDS> 0
0
5,175
<COMMON> 42,294
<OTHER-SE> (26,999)
<TOTAL-LIABILITY-AND-EQUITY> 31,630
<SALES> 17,127
<TOTAL-REVENUES> 17,127
<CGS> 4,135
<TOTAL-COSTS> 16,791
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 262
<INCOME-TAX> 7
<INCOME-CONTINUING> 255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
