GARDEN FRESH RESTAURANT CORP /DE/, S-1/A, 1998-05-19

GARDEN FRESH RESTAURANT CORP /DE/
S-1/A, 1998-05-19
EATING PLACES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1998

REGISTRATION NO. 333-51267
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GARDEN FRESH RESTAURANT CORP.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5812 33-0028786
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

17180 BERNARDO CENTER DRIVE
SAN DIEGO, CA 92128
(619) 675-1600

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

MICHAEL P. MACK
CHIEF EXECUTIVE OFFICER
GARDEN FRESH RESTAURANT CORP.
17180 BERNARDO CENTER DRIVE
SAN DIEGO, CA 92128
(619) 675-1600

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

CAMERON JAY RAINS EDWARD S. ROSENTHAL
REBECCA K. SCHMITT FRIED, FRANK, HARRIS, SHRIVER &
NOEL C. HOWE JACOBSON
GRAY CARY WARE & FREIDENRICH LLP 350 Grand Avenue, 32nd Floor
4365 Executive Drive, Suite 1600 Los Angeles, CA 90071
San Diego, CA 92121 (213) 473-2000
(619) 677-1400

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ---------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ---------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ---------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.................... 1,840,000 shares $18.8125 $34,615,000 $10,490 (3)
</TABLE>

(1) Includes 240,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.

(2) Estimated solely for the purposes of computing the registration fee pursuant
to Rule 457(c) under the Securities Act, based upon the average of the high
and low sales prices of the Company's Common Stock as reported by the Nasdaq
National Market on April 27, 1998.

(3) Previously paid with original filing of registration statement.

------------------------------

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.

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- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED MAY 19, 1998

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.
<PAGE>
1,600,000 SHARES

[LOGO]

GARDEN FRESH RESTAURANT CORP.
COMMON STOCK

OF THE 1,600,000 SHARES OF COMMON STOCK OFFERED HEREBY, 1,300,000 SHARES ARE
BEING SOLD BY GARDEN FRESH RESTAURANT CORP. (THE "COMPANY") AND 300,000 SHARES
ARE BEING SOLD BY CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING
STOCKHOLDERS"). THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE
OF SHARES BY THE SELLING STOCKHOLDERS. THE COMMON STOCK IS TRADED ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "LTUS." ON MAY 19, 1998, THE LAST SALE PRICE AS
REPORTED BY NASDAQ WAS $ PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF MATERIAL RISKS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
PER SHARE.................. $ $ $ $
TOTAL(3)................... $ $ $ $
</TABLE>

(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF THE
UNDERWRITERS AND OTHER MATTERS.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $300,000.
(3) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
240,000 ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC LESS THE
UNDERWRITING DISCOUNT SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF THE
UNDERWRITERS EXERCISE THIS OPTION IN FULL, THE PRICE TO PUBLIC WILL TOTAL
$ , THE UNDERWRITING DISCOUNT WILL TOTAL $ AND THE
PROCEEDS TO THE COMPANY WILL TOTAL $ . SEE "UNDERWRITING."

THE SHARES OF COMMON STOCK ARE OFFERED BY THE UNDERWRITERS NAMED HEREIN
SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO REJECT
ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE CERTIFICATES
REPRESENTING THE SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT THE OFFICE OF
NATIONSBANC MONTGOMERY SECURITIES LLC ON OR ABOUT , 1998.
-------------------
NationsBanc Montgomery Securities LLC
BancAmerica Robertson Stephens
Morgan Keegan & Company, Inc.

, 1998
<PAGE>
GARDEN FRESH
RESTAURANT

[Picture of Salad Bar]

[Picture of Salad Buffet ingredients]

CHOICES. CHOICES. CHOICES.
YOU MAKE THE SALAD, AND WE MAKE IT FRESH!

[SOUPLANTATION LOGO]

[SWEET TOMATOES LOGO]

OUR FOCUS AND CORNERSTONE, A SPARKLING 55 FOOT SALAD BAR HOUSES FRESH TOSSED
SALADS, FRESH CUT PRODUCE AND SPECIALTY PREPARED SALADS.

[Picture of restaurant entry]

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Company's Common
Stock, including entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. For a description of these activities,
see "Underwriting."

2
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE SPECIFIED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES (I) NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND (II) THE EXERCISE BY CERTAIN SELLING STOCKHOLDERS OF
OUTSTANDING OPTIONS TO PURCHASE 83,500 SHARES WHICH WILL BE SOLD IN THIS
OFFERING. THE COMPANY'S FISCAL YEAR ENDS SEPTEMBER 30.

THE COMPANY

Garden Fresh Restaurant Corp. (the "Company") was founded in 1983 and
currently operates 52 salad buffet restaurants in California, Florida, Arizona,
New Mexico, Utah and Nevada under the names Souplantation and Sweet Tomatoes.
The Company's restaurants feature fresh, great tasting salads and other
complementary foods. Due to its salad focus, the Company's concept falls within
a segment of the restaurant industry that is distinct from other buffet concepts
in that many of the characteristics of the Company resemble the casual dining
segment rather than the buffet segment. The Company believes that it is a
leading salad buffet restaurant due, in part, to its total revenues and number
of restaurants. The Company also believes that it is well-positioned to maintain
its leadership position and that its opportunities for expansion are attractive
relative to expansion opportunities for many other restaurant concepts.

The restaurants have, as their centerpiece, two approximately 55-foot long
salad bars that feature fresh tossed specialty salads as well as a broad
selection of fresh cut greens, vegetables, toppings and dressings, and other
prepared salads. The restaurants also feature complementary menu offerings that
are presented in a scatter bar format. These offerings consist of a soup bar
with five to six soups made from scratch, an on-site bakery serving hot muffins,
breads and pizza focaccias, a hot pasta bar specializing in freshly made pastas,
a frozen yogurt bar and a fresh fruit bar. The Company seeks to provide its
guests with a level of service not typically associated with a buffet
restaurant.

The Company seeks to provide guests with an excellent value by offering
unlimited access to its entire menu of high quality fresh items at a fixed
price. Depending on the region and time of day, the price ranges from $5.79 to
$6.99 at lunch and from $6.99 to $7.69 at dinner. Discounts are provided to
children under 12 and senior citizens. The Company's restaurants are designed to
appeal to a broad range of guests of all ages, including the nutritionally
conscious. In fiscal 1997, net sales generated from lunch and dinner represented
approximately 45% and 55% of net sales, respectively.

The Company believes it has attractive unit level operating margins and
return on investment. For the twelve month period ended March 31, 1998, the 46
salad buffet restaurants that were open for the entire period had an average of
approximately 298,000 guest visits during the period, generated average net
sales of approximately $2,034,000, average restaurant operating income (net
sales less cost of sales, restaurant operating expenses, depreciation and
amortization) of approximately $328,000 or 16.1% of net sales, and average cash
flow (operating income plus depreciation and amortization) of approximately
$449,000 or 22.1% of net sales. The Company's average cash investment for the
six restaurants opened in the twelve month period ended March 31, 1998,
excluding land purchases and pre-opening costs, was approximately $1.9 million.
Pre-opening costs averaged approximately $205,000 for these restaurants. The
investment to open a new restaurant typically includes the purchase or
installation of furniture, fixtures, equipment and leasehold improvements, and
in the case of an owned site, the purchase of land and a building.

The Company intends to expand in fiscal 1998 and 1999 primarily in new
markets outside of California. In fiscal 1997, the Company opened one restaurant
in Arizona, four restaurants in Florida, one restaurant in New Mexico, and one
restaurant in Utah. In fiscal 1998, the Company has opened three new
restaurants, one each in Florida, Utah and Nevada, and anticipates opening
approximately eight additional salad buffet restaurants outside of California.
The Company has signed one lease, purchased five sites and signed contracts to
purchase two sites to be opened in fiscal 1998. In fiscal 1999, the Company
anticipates opening twelve new restaurants. The Company has signed contracts to
purchase four sites to be opened in fiscal 1999. Expansion will allow the
Company to continue generally utilizing a central kitchen to serve

3
<PAGE>
several restaurants located within a particular region. In addition, as a part
of its expansion strategy, the Company is evaluating the possibility of
developing its concept in alternative formats. The Company currently has no
plans to offer franchises.

The Company was incorporated in California in 1983 and reincorporated in
Delaware in 1987. The Company's executive offices are located at 17180 Bernardo
Center Drive, San Diego, California, 92128, and its telephone number is (619)
675-1600.

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company................................... 1,300,000 shares
Common Stock offered by the Selling Stockholders...................... 300,000 shares
Common Stock outstanding after the offering........................... 5,701,676 shares(1)
Use of proceeds....................................................... To repay indebtedness, to finance the
development of additional restaurants and
for general corporate purposes.
Nasdaq National Market symbol......................................... LTUS
</TABLE>

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(1) Based on the number of shares outstanding as of March 31, 1998. Includes
83,500 shares to be sold by certain selling stockholders after exercise of
outstanding options. Does not include the remaining approximately 722,000
shares of Common Stock issuable upon exercise of options outstanding as of
March 31, 1998 under the Company's Restaurant Management Stock Option Plan
(the "Restaurant Management Plan"), the Company's Key Employee Stock Option
Plan (the "Key Employee Plan"), the Company's 1995 Key Employee Stock Option
Plan (the "1995 Key Employee Plan"), the Company's 1995 Outside Directors
Option Plan (the "Directors Option Plan"), the Company's 1998 Stock Option
Plan (the "1998 Option Plan") and certain non-qualified stock options. Of
these options, options to purchase approximately 515,000 shares of Common
Stock are exercisable as of March 31, 1998. See "Management--Benefit Plans."

NOTE ON FORWARD LOOKING STATEMENTS

The statements contained in this prospectus that are not purely historical
are forward looking statements, including statements regarding the Company's
expectations, hopes, beliefs, intentions or strategies regarding the future.
Statements which use the words "expects," "will," "may," "anticipates,"
"believes," "intends," and "seeks" are forward looking statements. These forward
looking statements, including statements regarding the Company's expansion
efforts and plans to open new restaurants, are based on information available to
the Company on the date hereof, and the Company assumes no obligation to update
any such forward looking statement. It is important to note that the Company's
actual results could differ materially from those in such forward looking
statements. Among the factors that could cause actual results to differ
materially are the factors set forth under the heading "Risk Factors." In
particular, the Company's expansion efforts and plans to open new restaurants
could be affected by the Company's ability to locate suitable restaurant sites,
construct new restaurants in a timely manner and obtain additional funds.
Prospective investors should consider carefully the information discussed under
"Risk Factors."
------------------------

Garden Fresh Restaurant Corp., Souplantation and Sweet Tomatoes are
registered trademarks of the Company. This Prospectus also contains trademarks
of other companies.

4
<PAGE>
SUMMARY OF FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- -------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $ 51,380 $ 59,658 $ 61,320 $ 71,373 $ 90,252 $ 42,736 $ 51,739
Operating income........................ 1,781 1,548 3,999 5,544 7,970 3,019 4,139
Income (loss) before extraordinary
item.................................. 209 (335) 4,343(1) 3,004 3,887 1,392 1,904
Extraordinary item--early extinguishment
of debt(2)............................ -- -- (518) -- -- -- --
--------- -------- ----------- -------- -------- -------- --------
Net income (loss)....................... 209 (335) 3,825(1) 3,004 3,887 1,392 1,904
Stock dividend.......................... -- -- (8,298)(3) -- -- -- --
--------- -------- ----------- -------- -------- -------- --------
Net income (loss) available to common
stockholders.......................... $ 209 $ (335) $ (4,473) $ 3,004 $ 3,887 $ 1,392 $ 1,904
--------- -------- ----------- -------- -------- -------- --------
--------- -------- ----------- -------- -------- -------- --------
Net income (loss) per share available to
common stockholders
Basic................................. $ 0.61 $ (0.86) $ (2.47) $ 0.73 $ 0.93 $ 0.34 $ 0.44
--------- -------- ----------- -------- -------- -------- --------
--------- -------- ----------- -------- -------- -------- --------
Diluted............................... $ 0.13 $ (0.86) $ (2.47) $ 0.72 $ 0.88 $ 0.32 $ 0.41
--------- -------- ----------- -------- -------- -------- --------
--------- -------- ----------- -------- -------- -------- --------
Shares used in computing net income (loss) per
share
Basic................................. 342 391 1,810 4,103 4,192 4,150 4,298
Diluted............................... 1,624 391 1,810 4,176 4,402 4,345 4,633

SELECTED OPERATING DATA:
Percentage change in comparable
restaurant sales(4)................... (4.2)% 1.2% %2.0 2.5% 4.7% 1.9% 7.6%
Average price per guest(5).............. $ 6.64 $ 6.66 $ 6.56 $ 6.57 $ 6.75 $ 6.71 $ 6.93
Average net sales for salad buffet
restaurants open for full period (in
thousands)............................ $ 1,748 $ 1,779 $ 1,835 $ 1,902 $ 1,985 $ 953 $ 1,016
Number of salad buffet restaurants open
for full period....................... 27 31 32 35 42 42 49
Number of salad buffet restaurants open
at end of period...................... 33 33 35 42 49 46 52
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
ACTUAL AS ADJUSTED(6)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................................................ $ (7,649) $ (957)
Total assets............................................................................. 71,468 72,987
Long-term debt, including current portion................................................ 23,099 --
Shareholders' equity..................................................................... 36,538 61,156
</TABLE>

- ------------------------------

(1) Fiscal 1995 results include a benefit related to recognition of deferred tax
assets of $2,173.

(2) Represents a charge for previously unamortized issue costs, debt discount,
and prepayment penalty, net of $192 income tax benefit.

(3) Reflects preferential stock dividend of approximately 922 shares of Common
Stock to the holders of the Company's Series B, Series C and Series D
Preferred Stock, which occurred upon completion of the Company's initial
public offering.

(4) Comparable restaurant sales are computed on a monthly basis and then
aggregated to determine comparable restaurant sales on a quarterly or annual
basis. A restaurant is included in this computation after it has been open
for 15 full calendar months. As a result, a restaurant may be included in
this computation for only a portion of a given quarter or year.

(5) Average price per guest is derived from the Company's net sales, which
reflects discounts and coupons.

(6) As adjusted to reflect (i) the sale of 1,300 shares of Common Stock by the
Company at an assumed public offering price of $20.00 per share and (ii) the
exercise of outstanding options to purchase 83.5 shares held by certain
Selling Stockholders, and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY, ITS BUSINESS AND THE SHARES OF COMMON STOCK OFFERED HEREBY.

CERTAIN OPERATING RESULTS AND CONSIDERATIONS

In fiscal 1995, 1996, 1997 and the first six months of fiscal 1998, the
Company experienced an increase of 2.0%, 2.5%, 4.7% and 7.6% respectively, in
comparable restaurant sales. The Company's newer restaurants have not
historically experienced significant increases in guest volume following their
initial opening period. In addition, the Company does not believe it has
significant latitude to achieve comparable restaurant sales growth through price
increases. As a result, the Company does not believe that recent comparable
restaurant sales is indicative of future trends in comparable restaurant sales.
The Company believes that it may from time to time in the future experience
declines in comparable restaurant sales, and that any future increases in
comparable restaurant sales may be modest. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

EXPANSION RISKS

The Company opened seven salad buffet restaurants in each of fiscal 1996 and
fiscal 1997 and three restaurants in the first six months of fiscal 1998. The
Company currently intends to open eight additional restaurants in fiscal 1998
and approximately twelve restaurants in fiscal 1999. The Company's ability to
achieve its expansion plans will depend on a variety of factors, many of which
may be beyond the Company's control, including the Company's ability to locate
suitable restaurant sites, negotiate acceptable leases or purchase terms, obtain
required governmental approvals, construct new restaurants in a timely manner,
attract, train and retain qualified and experienced personnel and management,
operate its restaurants profitably and obtain additional capital, as well as
general economic conditions and the degree of competition in the particular
region of expansion. The Company has experienced, and expects to continue to
experience, delays in restaurant openings from time to time. In addition, since
its inception, the Company has closed three non-performing restaurants. Given
the number of restaurants in current operation and the Company's projected
expansion rate, there can be no assurances that the Company will not close
restaurants in the future. Any closure could result in a significant write-off
of assets which could adversely effect the Company's business, financial
condition and results of operations.

The Company incurs substantial costs in opening a new restaurant and, in the
Company's experience, new restaurants experience fluctuating operational levels
for some time after opening. Owned restaurants generally require significantly
more up-front capital than leased restaurants. As a result, an increase in the
percentage of owned restaurant openings as compared to historical practice would
increase the capital required to meet the Company's growth plans. There can be
no assurance that the Company will successfully expand into new regions or that
the Company's existing or new restaurants will be profitable. The Company has
encountered intense competition for restaurant sites, and in many cases has had
difficulty buying or leasing desirable sites on terms that are acceptable to the
Company. In many cases, the Company's competitors are willing and able to pay
more than the Company for sites. The Company expects these difficulties in
obtaining desirable sites to continue for the foreseeable future. See
"--Restaurant Industry and Competition," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Expansion Strategy" and "Business--Competition."

RESTAURANT INDUSTRY AND COMPETITION

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<PAGE>
restaurants and healthful and nutrition-oriented restaurants. The Company
competes with national and regional chains, as well as individually owned
restaurants. The number of buffet and casual restaurants with operations
generally similar to the Company's has grown substantially in the last several
years and the Company believes competition among buffet-style and casual
restaurants has increased and will continue to increase as the Company's
competitors expand operations in various geographic areas. Such increased
competition could increase the Company's operating costs or adversely affect its
revenues. The Company believes it competes favorably in the industry, although
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. In addition, the restaurant industry has few
non-economic barriers to entry. Therefore, there can be no assurance that third
parties will not be able to successfully imitate and implement the Company's
concept. The Company has encountered intense competition for restaurant sites,
and in many cases has had difficulty buying or leasing desirable sites on terms
that are acceptable to the Company. In many cases, the Company's competitors are
willing and able to pay more than the Company for sites. The Company expects
these difficulties in obtaining desirable sites to continue for the foreseeable
future.

COST SENSITIVITY

The Company's profitability is highly sensitive to increases in food, labor
and other operating costs. The Company's dependence on frequent deliveries of
fresh produce and groceries subjects it to the risk that shortages or
interruptions in supply caused by adverse weather or other conditions could
materially adversely affect the availability, quality and cost of ingredients.
In addition, unfavorable trends or developments concerning factors such as
inflation, food, labor and employee benefit costs (including increases in hourly
wage and minimum unemployment tax rates), rent increases resulting from the rent
escalation provisions in the Company's leases, and the availability of
experienced management and hourly employees may also adversely affect the
Company. The Company believes recent relatively favorable inflation rates and
part-time labor supplies in its principal market area have contributed to
relatively stable food and labor costs in recent years. However, there can be no
assurance that these conditions will continue or that the Company will have the
ability to control costs in the future. See "--Reliance on Key Suppliers and
Distributors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."

IMPORTANCE OF KEY EMPLOYEES

The Company is heavily dependent upon the services of its officers and key
management personnel involved in restaurant operations, purchasing, expansion
and administration. In particular, the Company is dependent upon the management
and leadership of its three executive officers, Michael Mack, David Qualls and
R. Gregory Keller. The loss of any of these three individuals could have a
material adverse effect on the Company's business, financial condition and
results of operations. The success of the Company and its individual restaurants
depends upon the Company's ability to attract and retain highly motivated,
well-qualified restaurant operations and other management personnel. The Company
faces significant competition in the recruitment of qualified employees. See
"Business--Restaurant Operations--Restaurant Management" and
"Business--Restaurant Operations--Customer Service."

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company's business experiences seasonal fluctuations as a
disproportionate amount of the Company's net income is generally realized in the
second, third and fourth fiscal quarters due to higher average sales and lower
average costs. Quarterly results have fluctuated and are expected to continue to
fluctuate as a result of a number of factors, including the timing of new
restaurant openings. As a result of these factors, net sales and net income on a
quarterly basis may fluctuate and are not necessarily indicative

7
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of the results that may be achieved for a full fiscal year. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results and Seasonality."

GEOGRAPHIC CONCENTRATION IN CALIFORNIA; RESTAURANT BASE

Twenty-eight of the Company's 52 existing salad buffet restaurants are
located in California. Accordingly, the Company is susceptible to fluctuations
in its business caused by adverse economic or other conditions in this region,
including natural disasters or other acts of God that could have a material
adverse effect on the Company's business. The Company's significant investment
in, and long-term commitment to, each of its restaurant sites limits its ability
to respond quickly or effectively to changes in local competitive conditions or
other changes that could affect the Company's operations. In addition, the
Company has a small number of restaurants relative to some of its competitors.
Consequently, a decline in the profitability of an existing restaurant or the
introduction of an unsuccessful new restaurant could have a more significant
effect on the Company's result of operations than would be the case in a company
with a larger number of restaurants. See "Business--Restaurant Facilities" and
"Business--Expansion Strategy."

RELIANCE ON KEY SUPPLIERS AND DISTRIBUTORS

The Company utilizes sole source suppliers for certain produce and grocery
items. In addition, in order to minimize price fluctuations, the Company enters
into fixed price supply contracts that typically have terms of two months to one
year and generally do not have minimum purchase requirements. However, in the
event that the Company's suppliers are unable to make the required deliveries
due to shortages or interruptions caused by adverse weather or other conditions
or are relieved of their contract obligations due to an invocation of an act of
God provision, the Company would need to renegotiate these contracts or purchase
such products and groceries elsewhere. There can be no assurance that the
Company's produce and grocery costs would not as a result be higher, and such
higher costs could have a material adverse effect on the Company's business and
results of operations. The Company has several local produce distributors that
are governed by one program and two main grocery distributors. All produce and
groceries purchased by the Company are channeled from the growers and other
suppliers to the Company's restaurants and restaurant commissaries through these
distributors. In the event that any of these distributors were to cease
distribution on behalf of the Company, the Company would be required to make
alternate arrangements for produce and grocery distribution. There can be no
assurance that the Company's distribution expense would not be greater under
such alternate arrangements. See "--Cost Sensitivity" and "Business--Restaurant
Operations."

COMPUTER SYSTEMS AND YEAR 2000

Many installed computer systems and software products are coded to accept
only two digit entries in the date code field. As the year 2000 approaches,
these code fields will need to accept four digit entries to distinguish years
beginning with "19" from those beginning with "20". As a result, in less than
two years, computer systems and/or software products used by many companies may
need to be upgraded to comply with such year 2000 requirements. The Company's
proprietary accounting and management information software is year 2000
compliant; however, certain standard software used by the Company pursuant to
third party software licenses is not. The Company believes that the cost of
modifying the standard, non-proprietary software will be borne by the licensors,
and accordingly does not believe that it will incur significant costs with
respect to year 2000 compliance. In addition, in the event that the licensors do
not achieve year 2000 compliance in a timely manner, the Company believes that
it can acquire alternative software that is compliant and that performs
substantially the same function as its current software. The Company does not
believe that the cost of acquiring and converting to such alternative software
would be significant or that it would have a material adverse effect on the
Company's business, financial condition or results of operations. However, if
the Company encounters any unanticipated delays in, or costs associated with,
the implementation of such changes, the Company's business, financial condition
and results of

8
<PAGE>
operations could be materially adversely affected. There also can be no
assurance that computer systems operated by third parties, such as vendors and
financial institutions, with which the Company does business will achieve year
2000 compliance in a timely fashion or that any delays or problems on their part
will not have a material adverse effect on the Company's business.

LEGAL MATTERS

The Company is from time to time the subject of complaints, threat letters
or litigation from guests alleging illness, injury or other food quality, health
or operational concerns. Adverse publicity resulting from such allegations may
materially adversely affect the Company and its restaurants, regardless of
whether such allegations are valid or whether the Company is liable. The Company
also is the subject of complaints or allegations from former or prospective
employees from time to time. Any adverse decision against the Company in a
current or future lawsuit or claim, particularly relating to food quality, could
materially and adversely affect the Company's business or results of operations.
See "Business--Legal Proceedings."

GOVERNMENT REGULATION

The Company's business is subject to and affected by various federal, state
and local laws. Each restaurant must comply with state, county and municipal
licensing and regulation requirements relating to health, safety, sanitation,
building construction and fire prevention. In addition, the Company is required
to comply with the alcohol licensing requirements of the federal government and
the states and municipalities where its restaurants are located. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
the daily operations of the Company's restaurants, including minimum age of
guests and employees, hours of operation, advertising, wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.
Failure to comply with federal, state or local regulations could cause the
Company's licenses to be revoked or force it to terminate the sale of alcoholic
beverages at one or more of its restaurants. Difficulties in obtaining or
failure to obtain required licenses or approvals could delay or prevent the
development of additional restaurants. The Company has not experienced
significant difficulties in obtaining licenses and approvals to date; however,
beer and wine licenses are not always available to the Company as a result of
the location of certain of its restaurants.

The Company is subject to state "dram-shop" laws and regulations, which
generally provide that a person injured by an intoxicated person may seek to
recover damages from an establishment that wrongfully served alcoholic beverages
to such person. While the Company carries liquor liability coverage as part of
its existing comprehensive general liability insurance, there can be no
assurance that it will not be subject to a judgment in excess of such insurance
coverage or that it will be able to obtain or continue to maintain such
insurance coverage at reasonable costs, or at all.

The Company's restaurants are subject to federal and state laws governing
wages, working conditions, citizenship requirements and overtime. Congress and
various states (including California) passed proposals that imposed increases in
state or federal minimum wages in 1996, 1997 and 1998. There is no assurance
that the Company will be able to continue to pass increased costs on to its
guests. The Company is subject to the Americans with Disabilities Act of 1990,
which requires certain accommodations to the Company's restaurant designs to
allow access for people with disabilities. In addition, the Company is subject
to the regulations of the Immigration and Naturalization Service ("INS"). Given
the location of many of the Company's restaurants, even if the Company's
operation of those restaurants is in strict compliance with INS requirements,
the Company's employees may not all meet federal citizenship or residency
requirements, which could lead to disruptions in its work force. Additionally,
legislative proposals are currently under consideration by Congress and state
legislators to require employers to pay for health insurance for all employees.

9
<PAGE>
ANTI-TAKEOVER MEASURES

Certain provisions of the Company's Restated Certificate of Incorporation
and Bylaws could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could limit the price that investors might be
willing to pay in the future for shares of the Company's Common Stock. Certain
of these provisions allow the Company to issue Preferred Stock with rights
senior to those of the Common Stock without any further vote or action by the
stockholders, eliminate the right of stockholders to act by written consent and
impose various procedural and other requirements that could make it more
difficult for stockholders to effect certain corporate actions. The issuance of
Preferred Stock could decrease the amount of earnings and assets available for
distribution to the holders of Common Stock and could adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock.
In certain circumstances, such issuance could have the effect of decreasing the
market price of the Common Stock. See "Description of Capital Stock."

VOLATILITY OF STOCK PRICE

The market price of the Company's Common Stock has fluctuated since the
initial public offering of the Common Stock in May 1995. Quarterly operating
results of the Company and other restaurant companies, 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 Common Stock to fluctuate substantially. In
addition, in recent years the stock market has experienced extreme price and
volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to the
operating performance of these companies. See "Price Range of Common Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Upon expiration of certain lock-up agreements 120 days after the effective
date of this offering, the Selling Stockholders may be eligible to sell an
aggregate of approximately 900,000 shares in the public market subject to
compliance with Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act of 1933"). Such sales could have an adverse effect on the price
of the Company's Common Stock.

10
<PAGE>
DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock
and intends to retain any future earnings for use in its business. Therefore,
the Company does not anticipate paying any cash dividends in the foreseeable
future. Furthermore, the Company may be prohibited from declaring or paying
cash, stock or other dividends or distributions on its capital stock under the
terms of its existing bank credit agreement.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "LTUS." The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1996
First Quarter.............................................................. $ 8.13 $ 6.38
Second Quarter............................................................. 8.38 6.38
Third Quarter.............................................................. 11.00 8.13
Fourth Quarter............................................................. 10.88 9.00

FISCAL 1997
First Quarter.............................................................. $ 10.88 $ 8.25
Second Quarter............................................................. 12.75 9.75
Third Quarter.............................................................. 12.00 9.25
Fourth Quarter............................................................. 15.50 11.13

FISCAL 1998
First Quarter.............................................................. $ 15.25 $ 12.25
Second Quarter............................................................. 18.69 14.50
Third Quarter (through April 28, 1998)..................................... 21.38 18.56
</TABLE>

On May 19, 1998, the last sale price of the Company's Common Stock as
reported on the Nasdaq National Market was $ per share.

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares offered by the
Company, at an assumed public offering price of $20.00 per share, are estimated
to be approximately $24.2 million ($28.8 million if the Underwriters'
over-allotment option is exercised in full). The Company intends to use $23.4
million of the net proceeds of this offering to retire all outstanding debt,
which was incurred primarily to fund the development of new restaurants. The
Company intends to use the balance of the net proceeds, along with additional
sources of debt financing, to finance the development of additional restaurants.
As of March 31, 1998, the Company estimates that the aggregate cost of opening
the remaining eight restaurants planned for fiscal 1998 will be approximately
$16.5 million of which $6.6 million has already been incurred. Pending the above
uses, the net proceeds will be invested in short-term, investment-grade,
interest-bearing securities. See "Risk Factors--Expansion Risks," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 3 of Notes to Financial
Statements.

CAPITALIZATION

The following table sets forth the Company's actual capitalization as of
March 31, 1998 and as adjusted capitalization to give effect to the sale of the
shares offered by the Company at an assumed public offering price of $20.00 per
share, the exercise of options to purchase 83,500 shares to be sold by certain
Selling Stockholders and the application of the estimated net proceeds
therefrom.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion............................. $ 23,099 $ --
Shareholders' equity:
Preferred Stock, $.01 par value, 2,500,000 shares authorized, none
outstanding.......................................................
Common Stock, $.01 par value, 12,000,000 shares authorized;
4,318,176 shares issued and outstanding; 5,701,676 shares
outstanding as adjusted(1)........................................ 43 57
Paid-in capital..................................................... 39,260 64,183
Accumulated deficit................................................. (2,765) (3,084)
--------- -----------
Total shareholders' equity........................................ 36,538 61,156
--------- -----------
Total capitalization............................................ $ 59,637 $ 61,156
--------- -----------
--------- -----------
</TABLE>

- ------------------------

(1) Actual outstanding Common Stock excludes 805,945 shares of Common Stock
issuable upon exercise of options outstanding as of March 31, 1998 under the
Restaurant Management Plan, the Key Employee Plan, the 1995 Key Employee
Plan, the Directors Option Plan, the 1998 Option Plan and certain other
nonqualified stock options. As adjusted outstanding Common Stock includes
83,500 shares of Common Stock issuable upon exercise of options to be
exercised immediately prior to the closing of this offering by certain
Selling Stockholders, but excludes the remaining 722,445 shares issuable
upon exercise of outstanding options. See "Management--Benefit Plans" and
"Description of Capital Stock."

12
<PAGE>
SELECTED FINANCIAL DATA

The following historical data for each of the years in the five-year period
ended September 30, 1997, has been derived from the Company's audited financial
statements. Balance sheets at September 30, 1996 and 1997 and the related
statements of operations and of cash flows for the three years ended September
30, 1997 and notes thereto appear elsewhere in this Prospectus. The data for the
six months ended March 31, 1997 and 1998 has been derived from unaudited
financial statements also appearing herein which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim periods.
The operating results for the six months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending September 30, 1998. The selected financial data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $ 51,380 $ 59,658 $ 61,320 $ 71,373 $ 90,252 $ 42,736 $ 51,739
Costs and expenses:
Cost of sales......................... 14,953 16,277 16,721 19,318 23,497 11,183 13,406
Restaurant operating expenses:
Labor............................... 14,592 17,229 17,425 19,870 26,130 12,523 15,245
Occupancy and other................. 13,335 15,710 15,473 16,981 20,836 10,146 12,003
General and administrative expenses... 4,008 4,446 4,098 5,142 5,672 2,804 3,483
Depreciation and amortization
expenses............................ 2,711 3,633 3,604 4,518 6,147 3,061 3,463
Restaurant closure costs.............. -- 815 -- -- -- -- --
--------- -------- -------- -------- -------- -------- --------
Total costs and expenses.......... 49,599 58,110 57,321 65,829 82,282 39,717 47,600
--------- -------- -------- -------- -------- -------- --------
Operating income........................ 1,781 1,548 3,999 5,544 7,970 3,019 4,139
Interest expense, net................... (1,495) (1,805) (1,092) (529) (1,473) (685) (962)
Other expenses, net..................... -- (60) (210) (66) (62) (23) (55)
--------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item.................... 286 (317) 2,697 4,949 6,435 2,311 3,122
Benefit (provision) for income
taxes(1).............................. (77) (18) 1,646 (1,945) (2,548) (919) (1,218)
--------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item.................................. 209 (335) 4,343 3,004 3,887 1,392 1,904
Extraordinary item--early extinguishment
of debt(2)............................ -- -- (518) -- -- -- --
--------- -------- -------- -------- -------- -------- --------
Net income (loss)....................... 209 (335) 3,825 3,004 3,887 1,392 1,904
--------- -------- -------- -------- -------- -------- --------
Stock dividend(3)....................... -- -- (8,298) -- -- -- --
--------- -------- -------- -------- -------- -------- --------
Net income (loss) available to common
stockholders.......................... $ 209 $ (335) $ (4,473) $ 3,004 $ 3,887 $ 1,392 $ 1,904
--------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- --------
Net income (loss) per share available to
common stockholders
Basic................................. $ 0.61 $ (0.86) $ (2.47) $ 0.73 $ 0.93 $ 0.34 $ 0.44
--------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- --------
Diluted............................... $ 0.13 $ (0.86) $ (2.47) $ 0.72 $ 0.88 $ 0.32 $ 0.41
--------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- --------
Shares used in computing net income
(loss) per share
Basic................................. 342 391 1,810 4,103 4,192 4,150 4,298
Diluted............................... 1,624 391 1,810 4,176 4,402 4,345 4,633

SELECTED OPERATING DATA:
Percentage change in comparable
restaurant sales(4)................... (4.2)% 1.2% 2.0% 2.5% 4.7% 1.9% 7.6%
Average price per guest(5).............. $ 6.64 $ 6.66 $ 6.56 $ 6.57 $ 6.75 $ 6.71 $ 6.93
Average sales for salad buffet
restaurants open for full period (in
thousands)............................ $ 1,748 $ 1,779 $ 1,835 $ 1,902 $ 1,985 $ 953 $ 1,016
Number of salad buffet restaurants open
for full period....................... 27 31 32 35 42 42 49
Number of salad buffet restaurants open
at end of period...................... 33 33 35 42 49 46 52
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
---------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- -------- ----------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>

BALANCE SHEET DATA:
Working capital (deficit)............... $ (2,229) $ (938) $ 292 $ (6,677) $ (7,776) $ (4,923) $ (7,649)
Total assets............................ 27,932 29,713 36,709 48,062 62,409 56,062 71,468
Long-term debt and capital lease
obligations,
including current portion............. 11,117 13,263 4,017 9,934 17,421 15,829 23,099
Shareholders' equity.................... 10,522 10,209 25,800 29,257 34,168 30,978 36,538
</TABLE>

- ------------------------------

(1) Fiscal 1995 results include a benefit related to recognition of deferred tax
assets of $2,173.

(2) Represents a charge for previously unamortized issue costs, debt discount,
and prepayment penalty, net of $192 income tax benefit.

(5) Average price per guest is derived from the Company's net sales, which
reflects discounts and coupons.

14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT PURELY HISTORICAL
ARE FORWARD LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, HOPES, BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE.
STATEMENTS WHICH USE THE WORDS "EXPECTS," "WILL," "MAY," "ANTICIPATES,"
"BELIEVES," "INTENDS," AND "SEEKS" ARE FORWARD LOOKING STATEMENTS. THESE FORWARD
LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING THE COMPANY'S EXPANSION
EFFORTS AND PLANS TO OPEN NEW RESTAURANTS, ARE BASED ON INFORMATION AVAILABLE TO
THE COMPANY ON THE DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE
ANY SUCH FORWARD LOOKING STATEMENT. IT IS IMPORTANT TO NOTE THAT THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD LOOKING
STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY ARE THE FACTORS SET FORTH UNDER THE HEADING "RISK FACTORS." IN
PARTICULAR, THE COMPANY'S EXPANSION EFFORTS AND PLANS TO OPEN NEW RESTAURANTS
COULD BE AFFECTED BY THE COMPANY'S ABILITY TO LOCATE SUITABLE RESTAURANT SITES,
CONSTRUCT NEW RESTAURANTS IN A TIMELY MANNER AND OBTAIN ADDITIONAL FUNDS.

The following should be read in conjunction with the "Selected Financial
Data" and the Company's financial statements and related notes thereto.

GENERAL

The Company has grown from 2 restaurants in 1984 to 52 salad buffet
restaurants as of March 31, 1998. Of the 52 restaurants, 23 are located in
Southern California using the name Souplantation and the balance are located in
Northern California (5), Florida (12), Arizona (7), New Mexico (2), Utah (2) and
Nevada (1), using the name Sweet Tomatoes. The Company's existing restaurants
average approximately 7,585 square feet, with newer restaurants based on the
Company's latest 7,200 sq ft prototype being smaller on average. The Company
currently leases the sites for most of its restaurants, mixed between in-line
locations and stand alone sites, although the Company purchases sites when
necessary to acquire desirable locations.

Net sales reflects discounts and coupons. Cost of sales consists primarily
of food and beverage costs. Food costs can vary significantly depending upon
pricing and availability of produce and grocery items. The Company attempts to
minimize cost fluctuations for some of its foods by entering into two month to
one year fixed price supply contracts with no minimum purchase requirements.
Restaurant operating expenses include all restaurant-level operating costs, the
significant components of which are direct and indirect labor expenses
(including benefits), advertising expenses, occupancy costs and maintenance and
utility expenses. Occupancy and other operating costs include rent, real estate
taxes and insurance. Certain elements of the Company's restaurant operating
expenses and, in particular, occupancy costs, are relatively fixed. However, a
significant majority of the Company's leases provide for periodic escalation of
minimum annual rentals based upon increases in the Consumer Price Index.
Occupancy costs, as well as depreciation and amortization expenses, will vary
between restaurants depending on whether a restaurant site is leased or owned.
See "Risk Factors--Cost Sensitivity" and "Risk Factors--Reliance on Key
Suppliers and Distributors."

Restaurant pre-opening costs incurred in connection with opening new
restaurant locations, including hiring, training and legal costs, are currently
amortized over one year commencing with the opening of the restaurant.
Pre-opening costs averaged approximately $205,000 for the six restaurants opened
in the twelve month period ended March 31, 1998. See "--New Accounting
Standard."

15
<PAGE>
OPERATING RESULTS

The following table sets forth the percentage of net sales of certain items
included in the Company's statements of operations for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales......................... 27.3 27.1 26.0 26.2 25.9
Restaurant operating expenses:
Labor............................... 28.4 27.8 29.0 29.3 29.5
Occupancy and other................. 25.2 23.8 23.1 23.7 23.2
General and administrative expenses... 6.7 7.2 6.3 6.6 6.7
Depreciation and amortization
expenses............................ 5.9 6.3 6.8 7.1 6.7
------- ------- ------- ------- -------
Total costs and expenses.......... 93.5 92.2 91.2 92.9 92.0
------- ------- ------- ------- -------
Operating income........................ 6.5 7.8 8.8 7.1 8.0
Interest expense, net................... (1.8) (0.8) (1.6) (1.6) (1.9)
Other expenses, net..................... (0.3) (0.1) (0.1) (0.1) (0.1)
------- ------- ------- ------- -------
Income before income taxes and
extraordinary item.................... 4.4 6.9 7.1 5.4 6.0
Benefit (provision) for income taxes.... 2.7 (2.7) (2.8) (2.1) (2.3)
------- ------- ------- ------- -------
Income before extraordinary item........ 7.1 4.2 4.3 3.3 3.7
Extraordinary item--early extinguishment
of debt............................... (0.9) -- -- -- --
------- ------- ------- ------- -------
Net income.............................. 6.2 4.2 4.3 3.3 3.7
Stock dividend.......................... (13.5) -- -- -- --
------- ------- ------- ------- -------
Net income (loss) available to common
shareholders.......................... (7.3)% 4.2% 4.3% 3.3% 3.7%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>

SIX MONTHS ENDED MARCH 31, 1998 VERSUS SIX MONTHS ENDED MARCH 31, 1997

NET SALES. Net sales for the six months ended March 31, 1998 increased
21.1% to $51.7 million from $42.7 million for the comparable 1997 period. This
was due to the opening of six restaurants since the comparable 1997 period and
the increase in comparable restaurant sales of 7.6%.

COST OF SALES. Cost of sales for the six months ended March 31, 1998
increased 19.6% to $13.4 million from $11.2 million for the comparable 1997
period. As a percentage of net sales, cost of sales decreased 0.3% from 26.2% to
25.9% in the comparable 1997 period due to a higher average meal price per
guest.

LABOR. Labor expense for the six months ended March 31, 1998 increased
21.6% to $15.2 million from $12.5 million for the comparable 1997 period. This
increase was due to the six restaurants opened since the comparable 1997 period.
As a percentage of net sales, the labor expense increased 0.2% from 29.3% in the
comparable 1997 period due to increases in the California minimum wage effective
March 1, 1997 and March 1, 1998, and the addition of six new restaurants which
utilized higher than historical labor hours.

OCCUPANCY AND OTHER. Occupancy and other operating costs for the six months
ended March 31, 1998 increased 18.8% to $12.0 million from $10.1 million for the
comparable 1997 period. This was due mainly to the addition of six new
restaurants, additional advertising to support the increase in same store sales
in

16
<PAGE>
existing markets, increases in professional services due to the change in
minimum wage, and maintenance and repair costs to maintain equipment and
facilities in older buildings. Occupancy and other operating costs as a
percentage of net sales decreased to 23.2% from 23.7% for the comparable 1997
period. This was due primarily to additional sales volume.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the six months ended March 31, 1998 increased 25.0% to $3.5 million from
$2.8 million for the comparable 1997 period. This was due primarily to the
increased personnel and relocation costs associated with opening stores in new
regions. As a percentage of net sales, general and administrative expenses
increased to 6.7% from 6.6% for the comparable 1997 period.

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses for the six months ended March 31, 1998 increased 12.9% to $3.5 million
from $3.1 million for the comparable 1997 period. This increase was due to
depreciation and amortization for the new restaurants opened since the
comparable 1997 period. Depreciation and amortization as a percentage of net
sales decreased to 6.7%, from 7.1% for the comparable 1997 period due to lower
amortization of preopening costs and high sales volume.

INTEREST EXPENSE, NET. Interest expense, net for the six months ended March
31, 1998 increased 42.9% to $1.0 million from $0.7 million for the comparable
1997 period. Interest expense increased due to the increase in debt incurred for
expansion.

FISCAL 1997 VERSUS FISCAL 1996

NET SALES. Net sales for the fiscal year ended September 30, 1997 increased
26.5% to $90.3 million from $71.4 million for the comparable 1996 period. The
increase was due to a 4.7% increase in comparable restaurant sales which
resulted from an increase in guest volume of 3.1%, and in average meal price of
1.6% and the addition of seven new stores that opened in fiscal 1997.

COST OF SALES. Cost of sales increased 21.8% to $23.5 million for the
fiscal year ended September 30, 1997 from $19.3 million for the comparable 1996
period. As a percentage of net sales, cost of sales decreased 1.1% from 27.1% in
fiscal 1996 to 26.0% for fiscal 1997. This decrease was primarily due to better
menu management and improved purchasing.

LABOR. Labor expense for the fiscal year ended September 30, 1997 increased
31.1% to $26.1 million from $19.9 million for the comparable 1996 period. This
increase was due primarily to an increase in the minimum wage and the associated
benefits based on wages. The remainder of the increase was due to increased
staffing requirements resulting from the increase in guest volume during the
period. As a percentage of net sales, labor expense for the fiscal year ended
September 30, 1997 increased to 29.0% from 27.8% in the comparable 1996 period.

OCCUPANCY AND OTHER. Occupancy and other operating costs for the fiscal
year ended September 30, 1997 increased 22.4% to $20.8 million from $17.0
million in the comparable 1996 period. As a percentage of net sales, occupancy
and other operating costs for the fiscal year ended September 30, 1997 decreased
to 23.1% from 23.8% in the comparable 1996 period. The decrease was due to
primarily lower occupancy costs in the newer regions.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the fiscal year ended September 30, 1997 increased 11.8% to $5.7 million
from $5.1 million for the comparable 1996 period. This increase was primarily
due to the increased personnel costs required to support the increased sales
volume. As a percentage of net sales, general and administrative expenses for
the fiscal year ended September 30, 1997 decreased to 6.3% from 7.2% in the
comparable 1996 period.

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses for the fiscal years ended September 30, 1997 and 1996 was
approximately $6.1 million and $4.5 million, respectively. As a

17
<PAGE>
percentage of net sales, depreciation and amortization expense for the fiscal
year ended September 30, 1997 increased to 6.8% from 6.3% in the comparable 1996
period. This increase was attributable to the increased amortization of start up
costs associated with the opening of seven new restaurants, four of which were
in new regions. The first store in a new region typically has higher startup
costs than later stores due to extra costs associated with establishing a new
region.

INTEREST EXPENSE, NET. Interest expense, net for the fiscal year ended
September 30, 1997 increased to $1.5 million from $0.5 million for the fiscal
year ended September 30, 1996. This increase was attributable to new debt
incurred for continued expansion.

BENEFIT (PROVISION) FOR INCOME TAXES. Provision for income taxes increased
to $2.5 million in 1997 from $1.9 million in 1996 principally due to higher
pretax income during the fiscal year.

NET OPERATING LOSS CARRYFORWARDS. At September 30, 1996, the Company had
available net operating loss carryforwards for federal income tax purposes of
approximately $1.4 million, which were utilized during fiscal 1997.

FISCAL 1996 VERSUS FISCAL 1995

NET SALES. Net sales for the fiscal year ended September 30, 1996 increased
16.5% to $71.4 million from $61.3 million for the comparable 1995 period. The
increase was due to a 2.5% increase in comparable restaurant sales which
resulted from an increase in guest volume and the addition of seven new salad
buffet restaurants opened in the second half of fiscal 1996.

COST OF SALES. Cost of sales increased 15.6% to $19.3 million in the year
ended September 30, 1996 from $16.7 million in the comparable 1996 period. As a
percentage of net sales, cost of sales decreased 0.2% to 27.1% for the fiscal
year ended September 30, 1996. This decrease was primarily due to better cost
management and improved purchasing.

LABOR. Labor expense for the fiscal year ended September 30, 1996 increased
14.4% to $19.9 million from $17.4 million for the comparable 1995 period. This
increase was due to increased staffing requirements resulting from the increase
in guest volume during the period. As a percentage of net sales, labor expense
for the fiscal year ended September 30, 1996 decreased to 27.8% from 28.4% in
the comparable 1995 period. This decrease was primarily due to a reduction in
workers' compensation insurance premiums.

OCCUPANCY AND OTHER. Occupancy and other operating costs for the fiscal
year ended September 30, 1996 increased 10.4% to $17.0 million from $15.4
million in the comparable 1995 period. As a percentage of net sales, occupancy
and other operating costs for the fiscal year ended September 30, 1996 decreased
to 23.8% from 25.2% in the comparable 1995 period. The decrease was primarily
due to lower occupancy costs in the newer regions, better managed supplies and
services, and lower marketing expense relative to sales.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the fiscal year ended September 30, 1996 increased 24.4% to $5.1 million
from $4.1 million for the comparable 1995 period. This increase was primarily
due to the increased cost associated with being a public company and personnel
costs required to support the increased sales volume. As a percentage of net
sales, general and administrative expenses for the fiscal year ended September
30, 1996 increased to 7.2% from 6.7% in the comparable 1995 period.

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses for the fiscal years ended September 30, 1996 and 1995 was
approximately $4.5 million and $3.6 million, respectively. As a percentage of
net sales, depreciation and amortization expense for the fiscal year ended
September 30,

18
<PAGE>
1996 increased to 6.3% from 5.9% in the comparable 1995 period. This increase
was attributable to the increased amortization of start up costs associated with
the opening of seven new salad buffet restaurants.

INTEREST EXPENSE, NET. Interest expense, net for the fiscal year ended
September 30, 1996 decreased 54.5% to $0.5 million from $1.1 million for the
fiscal year ended September 30, 1995. This was attributable to the reduction of
debt due to payoff thereof with the proceeds from the Company's initial public
offering in May 1995.

BENEFIT (PROVISION) FOR INCOME TAXES. Provision for income taxes increased
to $1.9 million in 1996 from a benefit of $1.6 million in 1995 principally due
to the recognition of $2,173,000 in deferred tax assets during the fourth
quarter of fiscal year 1995.

EXTRAORDINARY ITEM--EARLY EXTINGUISHMENT OF DEBT. During fiscal year 1995
the Company recognized an extraordinary loss of $518,000, net of an income tax
benefit of $192,000, representing a charge for previously unamortized debt issue
costs, unamortized debt discount, and a prepayment penalty associated with early
extinguishment of debt. There were no extraordinary items in fiscal year 1996.

NET OPERATING LOSS CARRYFORWARDS. At September 30, 1996, the Company had
available net operating loss carryforwards for federal income tax purposes of
approximately $1.4 million.

QUARTERLY RESULTS AND SEASONALITY

The following table sets forth certain unaudited quarterly results and the
percentage that certain items in the Company's statements of operations bear to
net sales for the four quarters of fiscal 1996 and 1997, and the first two
quarters of fiscal 1998. The Company believes that this unaudited quarterly
information includes all adjustments, consisting only of normal recurring
adjustments and accruals, necessary for a fair presentation of the information
shown. The operating results for any quarter are not necessarily indicative of
results for any future period.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997
--------------------------------------------- ---------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $14,935 $17,597 $18,712 $20,129 $19,277 $23,459 $23,502 $24,014
Operating income.............. 515 1,384 1,729 1,916 950 2,069 2,391 2,560
Net income.................... 245 771 962 1,026 375 1,017 1,192 1,303
AS A PERCENTAGE OF NET SALES:
Operating income.............. 3.4% 7.9% 9.2% 9.5% 4.9% 8.8% 10.2% 10.7%
Net income.................... 1.6 4.4 5.1 5.1 1.9 4.3 5.1 5.4
SELECTED OPERATING DATA:
Number of salad buffet
restaurants open at end of
period...................... 35 35 39 42 44 46 46 49
Percentage change in
comparable restaurant
sales(1).................... (0.2%) 6.7% 2.2% 0.9% 3.7% 1.6% 5.0% 9.4%

<CAPTION>
FISCAL 1998
---------------------
FIRST SECOND
QUARTER QUARTER
--------- ---------

<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $23,903 $27,836
Operating income.............. 1,387 2,752
Net income.................... 586 1,318
AS A PERCENTAGE OF NET SALES:
Operating income.............. 5.8% 9.9%
Net income.................... 2.5 4.7
SELECTED OPERATING DATA:
Number of salad buffet
restaurants open at end of
period...................... 51 52
Percentage change in
comparable restaurant
sales(1).................... 9.8% 5.8%
</TABLE>

- ------------------------------

(1) Comparable restaurant sales are computed on a monthly basis and then
aggregated to determine comparable restaurant sales on a quarterly or annual
basis. A restaurant is included in this computation after it has been open
for 15 full calendar months. As a result, a restaurant may be included in
this computation for only a portion of a given quarter or year.

The Company's restaurants experience seasonal influences, as a
disproportionate amount of the Company's net income is realized during the
second, third and fourth fiscal quarters due to higher average sales and lower
average costs. Quarterly results have fluctuated and are expected to continue to
fluctuate

19
<PAGE>
as a result of a number of factors, including the timing of new restaurant
openings, and are not necessarily indicative of the results that may be achieved
for a full fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its cash requirements principally from cash flow from
operating activities, bank debt and mortgage and capital lease financings. The
Company does not have significant receivables or inventory, and receives trade
credit based upon negotiated terms when purchasing food and supplies. From
October 1, 1996 through March 31, 1998, the Company generated $17.1 million in
cash flow from operating activities, received $13.2 million from bank debt and
mortgage and capital lease financings (net of repayments), and an additional
$1.5 million from the sale of the Company's Common Stock pursuant to stock
options and the Company's Employee Stock Purchase Plan.

As of March 31, 1998, the Company had drawn approximately $4.8 million of
its $5.0 million bank line of credit. Such credit line bears interest at the
bank's reference rate plus 0.75%, which totaled 9.25% per annum as of March 31,
1998. The credit agreement expires on November 1, 1999 and contains various
financial covenants and restrictions, including restrictions on the Company's
ability to pay dividends or to effect mergers or acquisitions without the bank's
approval. Borrowings under the line of credit are collateralized by equipment
and other assets. As of March 31, 1998 the Company was not in technical
compliance with one financial covenant. The breach has been waived by the bank
pending negotiation of an amendment to the covenant.

In connection with the development of new restaurants, the Company has over
time obtained mortgage and capital lease financing from approximately nine
lenders, each of which has financed multiple loans or leases. The outstanding
balance of each loan or lease generally is between $100,000 and $1.1 million.
The loans and leases have varying maturity rates extending through April 2003,
interest rates generally ranging from approximately 8.0% through 12.0% with an
average interest rate of approximately 10% per annum, and in certain cases,
pre-payment penalties of one to two percent. As of March 31, 1998, the
outstanding balances on such loans and leases aggregated approximately $18.3
million. The Company expects to retire such debt in full with the proceeds of
this offering.

The Company's principal capital requirement has been and will continue to be
funding the development of restaurants. From October 1, 1996 through March 31,
1998, capital expenditures totaled $27.5 million, $23.9 million of which funded
the development of new restaurants. The remaining capital expenditures primarily
funded maintenance at existing restaurants. In addition to budgeted capital
expenditures for the last six months of fiscal 1998 of $10.0 million for new
restaurant openings, the Company has budgeted $1.8 million in expenditures for
fiscal 1998 for capital improvements at existing sites. See "Business--Unit
Economics."

The Company intends to use the net proceeds of this offering to retire all
of its outstanding debt, which was incurred primarily to fund the development of
new restaurants. As a result, substantially all of the Company's assets will be
unencumbered shortly after the completion of this offering and the application
of the net proceeds therefrom. The Company believes that (i) internally
generated funds, (ii) available borrowings under the bank credit line and (iii)
funds that it will be able to borrow pursuant to secured credit facilities
consistent with its past practices, will be sufficient to meet the Company's
cash requirements through at least the end of fiscal 1999. After completion of
this offering and application of the net proceeds therefrom, the Company
believes that it will be able to arrange additional secured credit facilities on
terms at least as favorable to the Company as its current debt financing. If
these sources of financing are insufficient to satisfy the Company's liquidity
requirements, the Company may be required to sell additional equity or debt
securities or obtain additional credit facilities. There is no assurance that
financing will be available to the Company on favorable terms, or at all.

20
<PAGE>
IMPACT OF INFLATION

The primary inflationary factors affecting the Company's operations include
food and beverage and labor costs. The Company does not believe that inflation
has materially affected earnings during the past three years. Substantial
increases in costs and expenses, particularly food, supplies, labor and
operating expenses, could have a significant impact on the Company's operating
results to the extent that such increases cannot be passed along to guests.

NEW ACCOUNTING STANDARD

In April 1998, the Accounting Standards Executive Committee issued Statement
of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities." This
SOP requires that the costs of start-up activities, which is inclusive of
pre-opening costs, should be expensed as incurred. This new accounting standard
is effective for financial statements for fiscal years beginning after December
15, 1998. Earlier application is encouraged in fiscal years for which annual
financial statements have not been issued. Restatement of previously issued
financial statements is not permitted.

As is typical in the restaurant industry, the Company defers its restaurant
pre-opening costs and amortizes them over the twelve-month period following the
opening of each respective restaurant. At March 31, 1998, total deferred
pre-opening costs were $1.6 million. For fiscal 1997 and the six months ended
March 31, 1998, preopening expense amortization was approximately $1.2 million
and $0.6 million, respectively. The Company has not yet determined when it will
adopt SOP 98-5. Upon adoption, the Company will recognize the cumulative effect
of a change in accounting principle, net of any related income tax effect.

21
<PAGE>
BUSINESS

GENERAL

Garden Fresh Restaurant Corp. was founded in 1983 and currently operates 52
salad buffet restaurants in California, Florida, Arizona, New Mexico, Utah and
Nevada under the names Souplantation and Sweet Tomatoes. The Company's
restaurants feature fresh, great tasting salads and other complementary foods.
Due to its salad focus, the Company's concept falls within a segment of the
restaurant industry that is distinct from other buffet concepts and moderately
priced casual restaurants. The Company believes that it is well-positioned to
further penetrate this segment and that the opportunity for expansion within
this segment currently is attractive relative to expansion opportunities for
many other restaurant segments.

BUSINESS STRATEGY

The Company's fundamental strategy is to provide a casual restaurant dining
experience that incorporates the variety and choice inherent in a buffet
restaurant but the food quality and service expected in casual chains. The
Company believes that this strategy will create restaurant operating margins not
normally found in the buffet/family dining segment. The key elements of the
Company's strategy are as follows:

COMMITMENT TO HIGH QUALITY FOOD. The Company seeks to provide fresh
wholesome food with a strong emphasis on salads, which are featured on two 55
foot bars that include a wide range of salad offerings featuring three freshly
tossed salads as well as a large assortment of fresh cut produce, dressings and
toppings and several signature prepared salads. Various other offerings include
made from scratch soups, a hot pasta bar, a bakery which serves a variety of hot
muffins, focaccias and other breads and a dessert bar centered around a frozen
yogurt station with toppings complemented by fresh fruits and puddings.

COMMITMENT TO GUEST SERVICE. The Company seeks to provide its guests with a
level of service that exceeds the standards set by other buffet concepts while
not inhibiting the guest from enjoying the benefits of selecting from a virtual
cornucopia of choices offered at the various food bars within the restaurant. In
addition to high service standards the Company has implemented several programs
to maximize guest satisfaction. Included in these is a "zero defect" program
that focuses on the most popular offerings to ensure that each portion is
prepared exactly as specified by the recipes. The Company's high service
standards can only be maintained through intensive recruiting and training
programs designed to employ crew members and management that can sustain a
friendly, enjoyable environment thereby maximizing the guest's meal experience.

EXCELLENT PRICE/VALUE RELATIONSHIP. The Company believes that the pricing
and product mix at each restaurant is maintained at such a high level that the
resulting meal experience can only be duplicated in other casual chains at price
points that average two to three dollars higher than at the Souplantation and
Sweet Tomatoes restaurants.

COST MANAGEMENT. The ability of the Company to maintain the highest
possible quality products combined with what the Company believes to be one of
the lowest cost structures in the casual chain segment is directly attributable
to the Company's ability to manage costs rigorously. This is achievable only
through the use of the Company's fully integrated, proprietary computer
management information system. The precision with which the system operates
allows a manager to review his/her entire cost structure in increments of cents
per guest or minutes per employee if need be. At the same time, every level of
management can review virtually any data in any store as quickly as the store
itself. This allows for rapid problem detection and resolution thereby
minimizing potential cost problems. The Company believes that the system's
sophistication combined with the ability of management to effectively use it are
unequaled in the industry.

22
<PAGE>
EXPANSION STRATEGY

The Company's ability to implement an expansion strategy will depend on a
variety of factors, including the Company's ability to locate suitable
restaurant sites, construct new restaurants in a timely manner and obtain
additional funds. See "Risk Factors--Expansion Risks."

UNIT ECONOMICS

For the twelve month period ended March 31, 1998, the 46 salad buffet
restaurants that were open for the entire period had an average of approximately
298,000 guest visits during the period, generated average net sales of
approximately $2,034,000, average restaurant operating income (net sales less
cost of sales, restaurant operating expenses, depreciation and amortization) of
approximately $328,000 or 16.1% of net sales, and average cash flow (operating
income plus depreciation and amortization) of approximately $449,000 or 22.1% of
net sales. The Company's average cash investment for the six restaurants opened
in the twelve month period ended March 31, 1998, excluding land purchases and
pre-opening costs, was approximately $1.9 million. Pre-opening costs averaged
approximately $205,000 for these restaurants. The investment to open a new
restaurant typically includes the purchase or installation of furniture,
fixtures, equipment and leasehold improvements, and in the case of an owned
site, the purchase of land and a building. The Company currently leases the
sites for most of its restaurants, mixed between in-line locations and
stand-alone sites, although the Company purchases sites when necessary to
acquire desirable locations.

CONCEPT AND MENU

The Company's menu is designed to focus on freshly made, great tasting food.
The focal point of the menu is the salad bar, but not to the point of neglecting
other interesting and exciting food offerings at the pasta, soup, bakery, frozen
yogurt and dessert bars. The Company seeks to provide guests with an excellent
value by offering unlimited access to its entire menu of high quality fresh
items at a fixed price. Depending on the region and time of day, the price
ranges from $5.79 to $6.99 at lunch and from $6.99 to $7.69 at dinner. Discounts
are provided to children under 12 and senior citizens.

23
<PAGE>
The following is a description of the Company's menu items in the order they
would appear to a guest walking along the various food bars in a typical
restaurant:

TOSSED SALADS. Upon entering the restaurant, guests are greeted at the door
and begin to walk along either of the salad bars. The initial featured
selections along the salad bars are two to three specialty salads that are
tossed fresh approximately every 20 minutes. The selections are changed weekly
for variety. The following is a partial listing of the Company's specialty salad
recipes:

Antipasto Salad
Barbecue Chicken Chopped Salad
California Cobb Salad
Caribbean Krab Salad
Caesar Salad
Chopped Salad with Smoked Turkey and Roasted Red Pepper
Country French Salad with Bacon
Greek Salad
Ranchero Taco Salad
Roasted Vegetable Salad with Feta & Olives
Roma Tomato, Mozzarella & Basil Salad
Shrimp & Krab Louie Salad
Sonoma Artichoke Salad
Spinach & Pasta Salad with Raspberry Vinaigrette
Spinach Salad with Mandarin Oranges and Caramelized Walnuts
Won Ton Chicken Salad

Following the specialty tossed salads on the salad bar, guests can make
their own salads by choosing from a broad assortment of fresh cut salad
ingredients. The salad bar offers three types of lettuce (romaine, iceberg and
one other rotational lettuce), an assortment of 11 seasonal fresh cut vegetables
(such as grated carrots, sliced mushrooms, chopped bell peppers and diced
jicama), 10 toppings (such as sunflower seeds, fresh bacon bits, grated cheddar
cheese and crumbled eggs), various condiments and 10 dressings. Employees
located between the two salad bars replenish the salad offerings frequently and
assist guests.

Next, the salad bar features prepared signature salads. The following is a
partial list of the Company's signature salad recipes:

Artichoke Rice Salad
Aunt Doris' Red Pepper Slaw
Baja Bean with Cilantro Salad with
Chipotle Vinaigrette
BBQ Potato Salad
Carrot Ginger Salad with Herb Vinaigrette
Carrot Raisin Salad
Chinese Krab Salad
Confetti Pasta Salad with Cheddar & Dill
Cowboy Beans Salad
Cucumber Tomato Salad with Chile Lime
Dijon Potato Salad with Garlic Dill Vinaigrette
Gemelli Pasta Salad with Chicken
German Potato Salad
Greek Couscous with Feta Cheese
Italian White Bean Salad
Jalapeno Potato Salad
Lemon Orzo Salad with Feta & Mint
Mandarin Krab Salad
Mandarin Noodles with Broccoli and Sesame Seeds
Mandarin Shells with Almonds and Snow Peas
Marinated Summer Vegetable Salad
Mazatlan Krab & Pasta Salad
Mediterranean Harvest Salad
Mediterranean Krab & Rotini Salad
Moroccan Marinated Vegetables
Old Fashioned Macaroni Salad
Oriental Ginger Slaw with Krab
Pesto Kashi
Picante Pasta Salad
Picnic Potato Salad
Pineapple Coconut Slaw
Poppyseed Coleslaw
Roasted Potato Salad with Chipotle Vinaigrette
Shrimp Tarragon Salad
Soba Noodles with Chicken
Southern Dill Potato Salad
Spicy Southwestern Pasta
Spinach Krab Salad
Summer Barley with Black Bean Salad
Thai Noodles with Peanut Sauce
Three Bean Marinade Salad
Tortellini Salad
Tortellini Salad with Basil
Tumbleweed Tortellini Salad
Tuna Tarragon Salad
Turkey Chutney Pasta Salad
Zesty Tortellini

24
<PAGE>
BEVERAGES. At the end of the salad bar, the Company offers an assortment of
beverages, including fresh juices, milk, soft drinks, sparkling waters,
lemonades, and in certain locations, beer and wine. Refills of soft drinks,
coffee and tea are provided at no extra cost.

SOUP BAR. The soup bar contains a selection of five to six soups made fresh
daily, featuring three regular offerings of chicken noodle soup, clam chowder
and chili. The Company seeks to offer only the highest quality soups. In making
one of its most popular dishes, chicken noodle soup, the Company cooks its own
chicken broilers, selecting only the white meat for use in the soup and using
some of the remaining portion to create a natural broth. The Company offers
additional soups that are selected from the Company's soup recipes, including
the following:

Albondigas Buenas Soup
Chesapeake Corn Chowder
Chicken Jambalaya
Chunky Potato Cheese Soup
Cream of Broccoli Soup
Cream of Mushroom Soup
Green Chile Stew
Irish Potato Leek Soup
Navy Bean Soup
New England Clam Chowder with Bacon
New Orleans Style Jambalaya
Posole
Santa Fe Black Bean Chile
Shrimp Bisque
Spicy 4-Bean Minestrone
Split Pea Soup with Ham
Sweet Tomato Onion Soup
Texas Red Chili
Turkey Cassoulet
Turkey Noodle Soup
Turkey Vegetable Soup
Vegetable Beef Stew
Vegetable Medley Soup
Vegetarian Harvest Soup
Yucatan Chili

PASTA BAR. At the pasta bar, guests can select from three hot pasta dishes
that are made fresh every 20-30 minutes. Pasta is prepared exhibition style to
order at the pasta station and served in individual servings to ensure that both
the pasta and the sauce remain hot. The Company's pasta sauce recipes include
the following:

Bruschetta
Chipotle Chicken with Cilantro
Creamy Bruschetta
Creamy Pesto with Sundried Tomatoes
Fettucine Alfredo
Garden Vegetable with Italian Sausage
Garden Vegetable with Meatballs
Italian Vegetable Beef
Jalapeno Salsa
Nutty Mushroom
Smoked Salmon & Dill
Vegetarian Marinara with Basil

BAKED GOODS. Each day, the bakery bar offers three different muffins, two
varieties of fresh dough pizza focaccias and a variety of freshly baked breads.
In addition, the Company offers baked potatoes and assorted toppings. All
muffins and other baked goods are baked on site and replenished frequently to
ensure warmth and freshness. The Company's recipes include the following:

Apple Cinnamon Bran Muffin
Apple Raisin Muffin
Apricot Nut Muffin
Banana Nut Muffin
Buttermilk Corn Bread
Carrot Pineapple Muffin with Oat Bran
Cherry Nut Muffin
Chile Corn Muffin
Chocolate Brownie Muffin
Chocolate Chip Mandarin Muffin
Chocolate Chip Muffin
Cranberry Orange Bran Muffin
Fruit Medley Bran Muffin
Garlic Parmesan Focaccia Muffin
Georgia Peach Poppyseed Muffin
Indian Grain Bread
Lemon Muffin
Mandarin Almond Muffin with Oat Bran
Nutty Peanut Butter Muffin
Peanut Butter Chocolate Chip Muffin
Pizza Focaccia
Pumpkin Raisin Muffin
Roasted Potato Focaccia
Strawberry Buttermilk Muffin
Sourdough Bread
Tomatillo Focaccia
Wild Maine Blueberry Muffin
Wild Maine Blueberry Muffin--Large
Zucchini Nut Muffin

25
<PAGE>
DESSERTS. Each restaurant offers several varieties of fresh fruit and other
dessert items. The most popular dessert offering is frozen yogurt. At the yogurt
bar, guests have the choice of two varieties of frozen yogurt, assorted toppings
(such as cookie crumbs, granola, sprinkles and peanuts) and chocolate sauce.

RESTAURANT OPERATIONS

COST MANAGEMENT FOCUS. The Company is committed to cost management without
degrading either quality of food or service. To accomplish this the Company has
developed a proprietary management information system which in conjunction with
several other cost related programs allows the Company to provide a cost
structure that the Company believes is superior to any casual or buffet style
restaurant.

COMPUTER INFORMATION SYSTEM. The core component of the Company's cost
management program is the Company's computer information system. The Company has
developed a proprietary computer accounting and management information system
that is fully integrated throughout the Company, including in each restaurant.
The Company believes that, as compared to off-the-shelf software applications,
this system provides significantly greater access to restaurant operating data
and a much shorter management reaction time. The system is used as a critical
planning tool by corporate and restaurant managers in four primary areas:
production, labor, food cost and financial and accounting controls. The system
generates forecasts of estimated guest volumes and other predictive data, which
assist restaurant managers in developing automated production reports that
detail the daily quantity and timing of batch production of various menu
offerings and food preparation requirements. The computerized system also acts
as a scheduling tool for the general managers, producing automated daily labor
reports outlining the restaurant's staffing needs based on changing trends and
guest volume forecasts. Corporate management, through daily information updates,
has complete access to restaurant data and can react quickly to changing trends.
The Company can quickly analyze the cost of its menu and make corporate-wide
menu adjustments to minimize the impact of shifting food prices and food waste.
Weekly computer-generated profit and loss statements and monthly accounting
department-generated profit and loss statements are reviewed at the corporate,
regional and restaurant management levels.

FOOD PURCHASING. Most food items are contracted on a centralized basis in
an effort to achieve uniform quality, adequate supplies and competitive prices.
The Company's food purchasing programs are designed to assist the Company in
minimizing food costs through vendor discounts based upon volume purchases. In
order to minimize price fluctuations, to the extent practical, the Company
purchases certain food items in two month to one year fixed price supply
contracts that are not subject to minimum quantity requirements. Although
contracted directly by the Company, all produce and groceries are delivered to
the Company's regional distributors, who in turn deliver the produce and
groceries to the individual restaurants and central kitchen restaurants
approximately three to five times a week. At each restaurant, the production
assistant manager is responsible for ensuring that all deliveries meet the
Company's guidelines regarding freshness and quality.

CENTRAL KITCHENS. In eleven geographic areas, the Company uses central
kitchens located in existing restaurants to prepare certain menu offerings on a
more efficient scale using the identical food preparation processes as the
restaurants. Each central kitchen generally services between two and seven
restaurants. Items prepared in the central kitchen are delivered daily to the
Company's local restaurants. The Company believes that, where economically
feasible, the use of central kitchens assists the Company in providing
consistently high quality, great tasting food, enhances the freshness of certain
menu offerings and allows the restaurant managers to devote more time and
attention to guests without any additional operating costs.

FOOD PREPARATION AND QUALITY CONTROL. The Company is committed to using
fresh produce and high quality groceries in its menu offerings. The kitchen and
central kitchen staffs prepare food items from scratch daily. Menu offerings are
closely monitored on the food bars and frequently replenished to assure

26
<PAGE>
constant food freshness. Items that are highly sensitive to freshness, such as
tossed salads, muffins, pizza focaccias, and prepared pastas are made on-site in
small batches throughout the day in order to maintain high levels of freshness
and great taste. The Company has developed a wide assortment of recipes that are
used in each restaurant and central kitchen in an effort to achieve consistently
high quality. The Company's food development effort focuses on the creation of
new recipes within existing food product categories. The Company's computer
system assists the restaurant managers in monitoring quality control without
raising costs by providing a detailed analysis of the raw materials used in the
creation of each finished product.

CUSTOMER SERVICE. One of the Company's fundamental strategies is to develop
a strong core of loyal, high frequency guests, in part by providing a level of
customer service not typically associated with a buffet. The Company seeks to
attract and retain friendly, customer-oriented employees. Employees are present
at the food bars and in the dining room to replenish food offerings, answer
questions and assist guests in serving themselves. The Company devotes
substantial attention and resources to maintaining cleanliness and fresh
presentation of the salad and other food bars in order to enhance the visual
appeal of the menu offerings.

The Company actively solicits guest input through the use of comment cards
and attempts to respond in writing to all guest suggestions and complaints.
Restaurant managers evaluate their respective restaurants approximately four
times per day for compliance with Company standards. In addition, the Company
conducts in-house market research through exit interviews and guest focus groups
on an ongoing basis in order to be responsive to changes in guest tastes and
expectations. Each restaurant receives independent evaluations of product
quality, cleanliness and service from secret shoppers approximately three times
per month, as well as a technical shop once a month to ensure strict adherence
to the Company's standards for food quality and service. The results of these
independent evaluations are taken into consideration in determining each
restaurant manager's monthly bonus.

RESTAURANT MANAGEMENT. The Company seeks to attract and retain friendly,
guest-oriented employees for its restaurant management positions. Upon joining
the Company and before assuming management responsibility, each restaurant
management employee completes a two month "hands-on" technical training course
in an existing restaurant that covers day to day restaurant operations. The
Company also selects restaurant management employees for participation in
ongoing management training programs that focus on motivation techniques,
performance reviews, team-building, interviewing and other management skills.

General managers are responsible for managing their respective restaurants
and reporting to District Operations Managers. Most district managers are
responsible for four to eight restaurants. The management staff of a typical
Souplantation/Sweet Tomatoes restaurant consists of one general manager, two or
three assistant managers and several other key employees. The Company recruits
most of its assistant managers from outside the Company, the majority of whom
have prior restaurant management experience. Most of the Company's general
managers have been promoted from assistant manager. The general manager of each
restaurant is principally responsible for the day-to-day operation and
profitability of the restaurant. The Company grants monthly bonuses to
restaurant managers based on actual restaurant performance as compared to
budget, and guest satisfaction. As an additional incentive, restaurant managers
are eligible for stock options.

MARKETING AND PROMOTION

The Company's marketing efforts seek to develop loyal guests for repeat
business, attract new guests and create awareness of existing and new
restaurants. The Company has instituted several programs in an effort to develop
loyal guests for repeat business. Under the Company's "first-time guest"
program, guests are greeted at the door and asked if they have previously eaten
at a Souplantation/Sweet Tomatoes restaurant. After being seated, first-time
guests are typically welcomed by a restaurant manager who

27
<PAGE>
provides them with further information about the restaurant. In addition, the
Company has implemented a "zero defect" program in its restaurants on certain
popular food offerings in an effort to provide consistently high quality
products. The "zero defect" program establishes highly detailed procedures
describing the precise methods under which these certain popular food offerings
are prepared, presented and replenished.

A significant portion of the Company's external marketing effort consists of
attracting new guests through the use of free standing inserts ("FSIs"). FSIs
contain descriptive information regarding the restaurants, as well in some
cases, discount coupons. FSIs are distributed by direct mail and through
newspapers. In addition, the Company has a "Business-to-Business" program under
which it mails discount cards to local businesses for distribution to their
employees. The discount cards entitle the employees to a certain price discount
on each repeat visit during a specified period.

In markets in which the Company has sufficient penetration, the Company uses
radio advertising to stimulate demand. Radio advertising is only used where the
return on investment of the radio campaign is sufficient to justify the cost. In
fiscal 1997, the Company used radio advertising in its San Diego, Tampa Bay and
Phoenix markets. The Company does not currently utilize television advertising
but is considering cable television advertising in markets where appropriate.

In addition, the restaurants periodically co-sponsor fund-raising events in
the restaurants for local charitable and other community organizations. For each
new restaurant, the Company conducts a pre-opening awareness program beginning
approximately two to three weeks prior to, and ending four to six weeks after,
the opening of a restaurant. The program typically includes special promotions,
site signs, sponsorship of a fund-raising event for a local charity to establish
ties to local community leaders and increase awareness of the new restaurant,
and pre-opening trial operations, to which the family and friends of new
employees are invited.

In fiscal 1997, marketing and promotion expenses constituted approximately
2.2% of total net sales.

RESTAURANT FACILITIES

DESIGN. Each Souplantation/Sweet Tomatoes restaurant generally has a
similar appearance. The Company currently uses a standardized design in
constructing restaurants, with modifications for each particular site. The
design and layout of the restaurants are intended to emphasize the fresh, great
tasting salads and other complementary menu offerings and promote a casual,
comfortable and inviting atmosphere. The centerpiece of the restaurants are the
two approximately 55-foot long salad bars located near the entrance of the
restaurants. An aisle between the two salad bars allows employees easy access
for replenishment of fresh food items, preparation of specialty tossed salads
and ongoing clean-up without disturbing guests. The remainder of the menu
offerings are presented in a scatter bar format designed to accommodate a high
volume of traffic while providing guests with unlimited and convenient access to
the food items. The dining area, which seats approximately 220 guests, provides
a warm, comfortable atmosphere that creates a relaxed dining environment similar
to many casual family restaurants. The Company's existing restaurants average
approximately 7,500 square feet (including the dining area, kitchen and food
preparation and storage areas), with new restaurants based on the Company's
latest prototype averaging approximately 7,200 square feet and 240 seats.
Certain of the Company's restaurants provide limited outdoor seating.

28
<PAGE>
LOCATION. The following is a list of the Company's salad buffet restaurants
and their locations by region:

<TABLE>
<CAPTION>
APPROXIMATE
MONTH OPENED SQUARE FOOTAGE(1)
------------------ -----------------
<S> <C> <C> <C>
REGION: SOUTHERN CALIFORNIA(2)
Del Mar (San Diego)............................................. September 1993 6,760
Laguna Niguel................................................... July 1993 6,800
Rancho Bernardo (San Diego)..................................... January 1993 6,760
San Bernardino.................................................. May 1992 6,500
Fountain Valley................................................. January 1990 7,500(3)
Brentwood (Los Angeles)......................................... January 1990 6,580
Beverly (Los Angeles)........................................... September 1989 8,100
Alhambra........................................................ September 1989 7,500
Marina del Rey.................................................. June 1989 8,490
Costa Mesa...................................................... May 1989 10,140
Rancho Cucamonga................................................ April 1989 7,630
Brea............................................................ October 1988 7,630
Arcadia......................................................... October 1988 7,500
Torrance........................................................ July 1988 8,080
Mira Mesa (San Diego)........................................... February 1988 8,210
Pasadena........................................................ November 1987 7,940
Carlsbad........................................................ July 1987 8,210
Lakewood........................................................ July 1987 8,210
Garden Grove.................................................... December 1986 8,210
Tustin.......................................................... August 1986 7,470
La Mesa......................................................... February 1986 8,420(3)
Point Loma (San Diego).......................................... January 1982 7,000
Mission Gorge (San Diego)....................................... March 1978 7,570

REGION: NORTHERN CALIFORNIA
N. Fresno Street (Fresno)....................................... October 1993 6,760
Fremont......................................................... February 1993 6,860
Shaw Avenue (Fresno)............................................ September 1990 6,760
Sunnyvale....................................................... May 1990 7,500
Pleasanton...................................................... March 1990 7,910

REGION: FLORIDA
Coral Springs................................................... December 1997 7,240
Fort Lauderdale................................................. September 1997 7,960
Hollywood....................................................... August 1997 8,000(3)
Altamonte Springs (Orlando)..................................... February 1997 8,740(3)
Fort Myers...................................................... January 1997 7,240
Sarasota........................................................ July 1996 8,500(3)
Plantation...................................................... April 1996 8,030
Brandon (Tampa)................................................. August 1995 8,110
Tampa........................................................... July 1995 8,500
Carrollwood (Tampa)............................................. June 1993 7,020
Largo (Tampa)................................................... September 1992 6,800
Palm Harbor (Tampa)............................................. January 1990 8,000(3)
</TABLE>

29
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
MONTH OPENED SQUARE FOOTAGE(1)
------------------ -----------------
<S> <C> <C> <C>
REGION: ARIZONA
Tucson II....................................................... November 1996 6,960
Ahwatukee (Phoenix)............................................. July 1996 6,960
Peoria (Phoenix)................................................ June 1996 6,460
Phoenix......................................................... May 1996 6,940
Tucson I........................................................ May 1996 7,420(3)
Tempe (Phoenix)................................................. February 1995 6,320
Scottsdale (Phoenix)............................................ February 1994 9,000(3)

REGION: NEW MEXICO
Cottonwood Mall (Albuquerque)................................... October 1996 6,300
San Mateo Avenue (Albuquerque).................................. September 1996 7,240(3)

REGION: UTAH
Centennial (Salt Lake City)..................................... November 1997 7,450
Overlook (Salt Lake City)....................................... September 1997 9,000(3)

REGION: NEVADA
Las Vegas....................................................... February 1998 7,240(3)
</TABLE>

The restaurants listed below are under development and have lease or
purchase contracts signed:

<TABLE>
<CAPTION>
ESTIMATED FISCAL APPROXIMATE SQUARE
QUARTER OPENING FOOTAGE(1)
---------------- -------------------
<S> <C> <C> <C>
REGION: FLORIDA
Jacksonville...................................................... Q4 1998 7,240(3)

REGION: GEORGIA
Perimeter (Atlanta)............................................... Q4 1998 8,900(3)
Towncenter (Atlanta).............................................. Q4 1998 7,240
Gwinnett (Atlanta)................................................ Q4 1998 7,240
Northpoint (Atlanta).............................................. Q2 1999 7,240

REGION: TEXAS
Hedwig Village (Houston).......................................... Q4 1998 8,900(3)
Willowbrook (Houston)............................................. Q4 1998 7,240

REGION: PACIFIC NORTHWEST
Beaverton, Oregon................................................. Q4 1998 7,240
Vancouver, Washington............................................. Q4 1998 8,000(3)

REGION: COLORADO
Aurora............................................................ Q1 1999 7,000
Westminster....................................................... Q1 1999 8,900(3)

REGION: NORTH CAROLINA
Raleigh........................................................... Q2 1999 7,240(3)
</TABLE>

- ------------------------

(1) Excludes outdoor patio space, but includes dining area, kitchen and food
preparation and storage areas.

(2) Does not include mini-restaurant located in Los Angeles, California which
opened in fiscal 1996.

(3) Includes central kitchen.

30
<PAGE>
SITE SELECTION AND CONSTRUCTION

The Company's site selection strategy is to open economically viable
restaurants that achieve an appropriate balance between lunch and dinner guest
volumes in each of its target markets. The Company considers the location of
each restaurant to be critical to its long-term success and management devotes
significant effort to the investigation and evaluation of potential sites. The
site selection process focuses on regional and trade area demographics,
population density, household income and education levels, day-time traffic
patterns, as well as specific site characteristics such as visibility,
accessibility, traffic volume and the availability of adequate parking.

The Company also reviews potential competition and customer activity at
other restaurants operating in the area. To date, the Company has located a
majority of its restaurants in strip shopping centers and neighborhood shopping
centers located near business districts.

The Company generally engages outside general contractors for the required
construction or build-out of restaurant sites and expects to continue this
practice for the foreseeable future. The Company's experience to date has been
that obtaining construction permits has taken from two to nine months. The
interior build-out of in-line restaurants and the construction of free-standing
restaurants generally takes approximately four months and five months,
respectively.

The Company may experience delays in opening new restaurants or may not be
able to open new restaurants as a result of a variety of factors including the
Company's ability to locate suitable restaurant sites, construct new restaurants
in a timely manner and obtain additional funds. See "Risks Factors-- Expansion
Risks."

COMPETITION

The restaurant industry is highly competitive. Key competitive factors in
the industry include the quality and value of the food products offered, quality
of service, price, dining experience, restaurant location and the ambiance of
the facilities. The Company's primary competitors include mid-price, full-
service casual dining restaurants, as well as traditional self-service buffet
and other soup and salad restaurants and healthful and nutrition-oriented
restaurants. The Company competes with national and regional chains, as well as
individually owned restaurants. The number of buffet and casual restaurants with
operations generally similar to the Company's has grown substantially in the
last several years and the Company believes competition among buffet-style and
casual restaurants has increased and will continue to increase as the Company's
competitors expand operations in various geographic areas. Such increased
competition could increase the Company's operating costs or adversely affect its
revenues. The Company believes it competes favorably in the industry, although
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. In addition, the restaurant industry has few
non-economic barriers to entry. Therefore, there can be no assurance that third
parties will not be able to successfully imitate and implement the Company's
concept. The Company has encountered intense competition for restaurant sites,
and in many cases has had difficulty buying or leasing desirable sites on terms
that are acceptable to the Company. In many cases, the Company's competitors are
willing and able to pay more than the Company for sites. The Company expects
these difficulties in obtaining desirable sites to continue for the foreseeable
future.

GOVERNMENT REGULATION

31
<PAGE>
to comply with the alcohol licensing requirements of the federal government and
the states and municipalities where its restaurants are located. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
the daily operations of the Company's restaurants, including minimum age of
guests and employees, hours of operation, advertising, wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.
Failure to comply with federal, state or local regulations could cause the
Company's licenses to be revoked or force it to terminate the sale of alcoholic
beverages at one or more of its restaurants. Difficulties in obtaining or
failure to obtain required licenses or approvals could delay or prevent the
development of additional restaurants. The Company has not experienced
significant difficulties in obtaining licenses and approvals to date, however,
beer and wine licenses are not always available to the Company as a result of
the location of certain of its restaurants.

The Company's restaurants are subject to federal and state laws governing
wages, working conditions, citizenship requirements and overtime. Congress and
various states (including California) passed proposals that imposed increases in
state or federal minimum wages in 1996, 1997 and 1998. There is no assurance
that the Company will be able to continue to pass such increased costs on to its
guests. The Company is subject to the Americans with Disabilities Act of 1990,
which requires certain accommodations to the Company's restaurant designs to
allow access for people with disabilities. In addition, the Company is subject
to the regulations of the INS. Given the location of many of the Company's
restaurants, even if the Company's operation of those restaurants is in strict
compliance with INS requirements, the Company's employees may not all meet
federal citizenship or residency requirements, which could lead to disruptions
in its work force. Additionally, legislative proposals are currently under
consideration by Congress and state legislators to require employers to pay for
health insurance for all employees. See "Risks Factors-- Cost Sensitivity."

INSURANCE

The Company carries property, liability, business interruption, crime,
employee benefits, earthquake, directors and officers liability and workers'
compensation insurance policies. However, there can be no assurance that the
Company's insurance coverage will be adequate or that insurance will continue to
be available to the Company at reasonable rates, if at all. In the event
coverage is inadequate or becomes unavailable, the Company could be materially
adversely affected.

TRADE NAMES AND SERVICE MARKS

The Company and its predecessor have used the trademarks and service marks
Souplantation since 1978 and Sweet Tomatoes since 1990. The Souplantation
trademark is used in the Southern California market, while the Sweet Tomatoes
trademark is used in the Northern California, Florida, Arizona, New Mexico, Utah
and Nevada markets. The Company registered both Souplantation and Sweet Tomatoes
trademarks, as well as the Garden Fresh Restaurant Corp. trademark, with the
United States Patent and Trademark Office.

PROPERTY

The Company currently leases 42 and owns 11 open restaurant sites, including
one mini-restaurant site. The majority of the Company's leases provide for
minimum annual rentals and contain percentage-of-

32
<PAGE>
sales rent provisions against which the minimum rent is applied. A significant
majority of the leases also provide for periodic escalation of minimum annual
rent based upon increases in the Consumer Price Index. T y pically, the
Company's leases are 20 years in length with two 10-year extension options.
Restaurants leased by the Company are generally leased under "triple net" leases
that require the Company to pay real estate taxes, insurance and maintenance
expenses. The Company's executive offices, a test kitchen and a training
facility are located in an approximately 11,000 square foot leased facility near
one of the Company's restaurants in San Diego, California under a lease expiring
in July 2002.

In January 1995, the Company opened an experimental "Souplantation To Go!"
mini-restaurant next to one of its restaurants located in San Diego. The
mini-restaurant was a limited menu, quick-service concept which closed in June
1995. The Company has also opened a mini-restaurant in a hospital business
complex located in Los Angeles. The Company is still evaluating the
mini-restaurant concept and there can be no assurance that further expansion of
this concept will occur or that the mini-restaurant will be successful.

LEGAL PROCEEDINGS

The Company is from time to time the subject of complaints, threat letters
or litigation from guests alleging illness, injuries or other food quality,
health or operational concerns. Adverse publicity resulting from such
allegations may materially adversely affect the Company and its restaurants,
regardless of whether such allegations are valid or whether the Company is
liable. The Company also is the subject of complaints or allegations from former
or prospective employees from time to time. The Company believes that the
lawsuits, claims and other legal matters to which it has become subject in the
course of its business are not material to the Company's financial position or
results of operations. Nevertheless, an existing or future lawsuit or claim,
particularly relating to food quality, could result in an adverse decision
against the Company that could materially and adversely affect the Company or
its business.

EMPLOYEES

As of March 31, 1998, the Company had approximately 3,560 employees
including 3,280 hourly restaurant employees (of whom 2,600 were part-time
employees), 230 full-time restaurant management employees and 48 full-time
corporate management and staff employees and 3 part-time corporate employees.
None of the Company's employees is represented by a labor union. The Company
believes that its relationship with its employees is good.

33
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Michael P. Mack...................................... 46 Chairman of the Board, President and Chief Executive
Officer
David W. Qualls...................................... 52 Executive Vice President-Finance and Real Estate,
Chief Financial Officer and Secretary
R. Gregory Keller.................................... 50 Vice President of Operations
Edgar F. Berner(1)................................... 66 Director
Robert A. Gunst(1)(2)................................ 50 Director
Michael M. Minchin, Jr.(2)........................... 71 Director
John M. Robbins, Jr.(2).............................. 50 Director
</TABLE>

- ------------------------

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

Michael P. Mack co-founded the Company in 1983 and was the President and
Chief Operating Officer from the Company's inception until April 1991 and the
Chief Executive Officer from September 1990 to April 1991. Mr. Mack assumed the
role of Chairman of the Board of Directors in December 1997. Mr. Mack has also
been a director of the Company since its inception. Since February 1994, Mr.
Mack has been the Company's President and Chief Executive Officer. From April
1991 to February 1994, Mr. Mack served as the President of MPM Management, Inc.,
a consulting firm. Prior to joining the Company, from 1977 to 1983, Mr. Mack
worked for Bain & Company, a management consulting firm, where he specialized in
the development and implementation of business strategies. Mr. Mack received a
B.A. from Brown University and an M.B.A. from Harvard University.

David W. Qualls joined the Company in November 1985 as Chief Financial
Officer and Secretary. Since 1990, Mr. Qualls has also served as the Company's
Executive Vice President in charge of Finance and Real Estate. From 1982 to
1985, Mr. Qualls served as Vice President of Finance and Administration and
Chief Financial Officer of Diatek, Inc., a medical electronics company. Mr.
Qualls received a B.A. from California State University at Fresno and an M.B.A.
from the University of Virginia.

R. Gregory Keller joined the Company in June 1991 as Vice President of
Operations. From January 1991 to June 1991 prior to joining the Company, Mr.
Keller served as a consultant to the Company. From June 1990 to January 1991,
Mr. Keller served as an independent consultant. From June 1971 to June 1990, Mr.
Keller served as a divisional Vice President of Operations of Paragon, Inc., a
restaurant company, where he managed operations for 33 restaurants. Mr. Keller
received a B.S. from Northern Illinois University.

Edgar F. Berner joined the Company's Board of Directors in 1996. Mr. Berner
currently serves as Chairman and was formerly the CEO of Sweet Factory, Inc., a
national candy specialty chain. From 1969 to 1980, Mr. Berner was founder and
President of Fashion Conspiracy, a 280 store junior apparel chain which was sold
to Edison Brothers Stores, Inc. (Nasdaq). He previously served on the Board of
The Clothestime, Inc., and Edison Brothers Stores, Inc. In addition to serving
on the Board of the Company, Mr. Berner is a Director of Hot Topic, Inc.
(Nasdaq), a youth oriented specialty retail chain.

Robert A. Gunst joined the Company's Board of Directors in 1996. Mr. Gunst
has more than 25 years of experience of food and retailing. Mr. Gunst has been
President and Chief Executive Officer of The Good Guys, Inc. (Nasdaq) since
1993. In 1990, he became President and Chief Operating Officer of The Good Guys,
Inc. while remaining a member of its board. Prior to The Good Guys, Inc., Gunst
served as

34
<PAGE>
Senior Vice President, Chief Financial Officer and a board member of San
Francisco-based Shaklee Corporation. Previously, he served in several senior
positions with PepsiCo, Inc. (NYSE) including Senior Vice President of
Marketing/Manufacturing and Franchising for La Petite Boulangerie, Inc., and as
Chief Financial Officer and Vice President of Finance and Administration for
PepsiCo Foods International. Prior to PepsiCo, Mr. Gunst was a Senior Vice
President and Chief Financial Officer for Victoria Station Incorporated, a chain
of restaurants. Mr. Gunst holds a Master's Degree in Business Administration
from the University of Chicago's Graduate School of Business and a Bachelor of
Arts Degree from Dartmouth College.

Michael M. Minchin, Jr. joined the Company's Board of Directors in November
1993 and assumed the role of Chairman of the Board from February 1994 to
December 1997. From May 1992 to November 1993, Mr. Minchin served as an
independent consultant to Sizzler International, Inc. (NYSE) a restaurant
company, and several other publicly held restaurant chains. Prior to that, Mr.
Minchin served as the Executive Vice President of Sizzler International from May
1980 to May 1992. Mr. Minchin received a B.A. from Stanford University and an
M.B.A. from Harvard University. Currently, Mr. Minchin serves as Managing
Director of the John Douglas French Alzheimer's Foundation as well as an
independent consultant to several publicly held restaurant chains.

John M. Robbins, Jr. joined the Company's Board of Directors in 1996. Mr.
Robbins currently serves as Chairman of the Board of Directors and CEO of
American Residential Investment Trust, Inc. (NYSE) ("ARIT") and Home Asset
Management Corp. Prior to joining ARIT, Mr. Robbins was Chairman of the Board of
American Residential Mortgage Corporation ("AMRES Mortgage") from 1990 until
1994 and President of AMRES Mortgage from the time he co-founded it in 1983
until 1994. He currently serves as a Director of Pacific Research & Engineering
Corporation (AMEX), National Bankcard and the University of San Diego.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has two standing committees: a Compensation Committee
and an Audit Committee. The Audit Committee's function is to review, with the
Company's independent accountants and management, the results of the examination
of the Company's financial statements by the independent accountants and the
independent accounts' opinion. The Compensation Committee's function is to
review and recommend executive compensation, including executive officer salary
levels, incentive compensation programs and stock option grants.

BOARD COMPENSATION

The outside directors of the Company each received $6,000 per year as a cash
compensation for attendance at meetings of the Board of Directors during fiscal
1997. In fiscal 1998, each outside director will receive $10,000 per year.
Additionally, the directors of the Company are reimbursed for expenses incurred
in connection with attendance at Board of Directors or committee meetings. Each
outside director has received automatic option grants pursuant to the Directors
Option Plan. Option grants to outside directors will be made in the future
pursuant to the 1998 Option Plan. See "--Benefit Plans."

BOARD COMPOSITION

The Board of Directors is divided into three classes. Directors serve
staggered three year terms. The Class A Director, who will serve until the
Company's annual meeting of stockholders in 2000, is Michael P. Mack; the Class
B Directors, who will serve until the annual meeting in 1999, are Edgar F.
Berner and John M. Robbins, Jr.; and the Class C Directors, who will serve until
the annual meeting in 2001, are Michael M. Minchin, Jr., and Robert A Gunst. At
each annual meeting of stockholders, directors are elected for a term of three
years.

35
<PAGE>
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law, the Company's Restated
Certificate of Incorporation includes a provision to eliminate the personal
liability of its directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In addition,
the Bylaws of the Company provide that the Company is required to indemnify its
officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified, and to provide
liability insurance, if available on reasonable terms. The Company has entered
into indemnification agreements with its officers and directors containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the Delaware General Corporation Law. The
indemnification agreements require the Company, among other things, to indemnify
such officers and directors against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities for
which Delaware law prohibits indemnification), to advance their expenses
incurred as a result of any proceedings against them as to which they could be
indemnified, and to provide liability insurance to the extent that the Company's
policies cover directors, officers, employees or agents. The Company has
obtained directors' and officers' liability insurance. At present, the Company
is not aware of any pending or threatened litigation or proceeding involving a
director, officer, employee or agent of the Company in which indemnification
would be required or permitted. The Company believes that its charter provisions
and indemnification agreements are necessary to attract and retain qualified
persons as directors and officers.

The Company is entering into an indemnification agreement with certain of
the Selling Stockholders pursuant to which the Company will indemnify the
Selling Stockholders for certain liabilities that could result from this
offering.

EXECUTIVE COMPENSATION

The following table sets forth information for three fiscal years ended
September 30, 1997, 1996 and 1995 concerning the compensation of the Chief
Executive Officer of the Company and the other executive officers of the Company
as of September 30, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
--------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- --------------------------------------------------------------- --------- ---------- --------- -------------------
<S> <C> <C> <C> <C>
Michael P. Mack(1)............................................. 1997 $ 256,823 $ 93,000 18,000
Chief Executive Officer, President 1996 208,843 90,000 40,000
1995 179,250 50,000 90,000

David W. Qualls(2)............................................. 1997 176,151 57,000 12,000
Chief Financial Officer, Executive Vice President- 1996 153,175 60,000 30,000
Finance and Real Estate, Secretary 1995 139,826 50,000 75,000

R. Gregory Keller(3)........................................... 1997 153,836 50,000 10,000
Vice President of Operations 1996 131,875 60,000 30,000
1995 115,767 50,000 75,000
</TABLE>

- ------------------------

(1) Mr. Mack was granted an increase in annual salary to $287,500 for fiscal
year 1998.

(2) Mr. Qualls was granted an increase in annual salary to $195,500 for fiscal
year 1998.

(3) Mr. Keller was granted an increase in annual salary to $172,500 for fiscal
year 1998.

36
<PAGE>
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the year ended
September 30, 1997 to the persons named in the Summary Compensation Table.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN FISCAL 1997(1) POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED(2) FISCAL YEAR PRICE(2) DATE 5% 10%
- ----------------------------------------- ----------- --------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Mack.......................... 18,000 14.0% $ 8.50 10/15/06 $ 96,221 $ 243,843
David W. Qualls.......................... 12,000 9.4 8.50 10/15/06 64,147 162,562
R. Gregory Keller........................ 10,000 7.8 8.50 10/15/06 53,456 135,468
</TABLE>

- ------------------------

(1) Grants were based on performance for fiscal year 1996.

(2) All options were granted at market value on the date of grant. All options
vest equally at 1/36 per month over 36 months.

(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, overall market conditions and the optionholders' continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved. One share of stock purchased in 1997 at
$8.50 would yield profits of $5.35 per share at 5% appreciation over ten
years, or $13.55 per share at 10% appreciation over the same period.

The following table provides information concerning exercises of options to
purchase the Company's Common Stock in the fiscal year ended September 30, 1997,
and unexercised options held at fiscal year end by the persons named in the
Summary Compensation Table.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Mack.................. 34,500 $ 123,510 101,831 46,169 $ 646,856 $ 313,144
David W. Qualls.................. 29,175 146,818 81,896 35,104 516,633 237,118
R. Gregory Keller................ 0 0 99,224 33,776 698,733 228,818
</TABLE>

- ------------------------

(1) Amounts shown represent the value realized upon the exercise of stock
options during fiscal 1997, which equals the difference between the exercise
price of the options and the closing market price of the underlying Common
Stock on the date preceding the exercise date.

(2) Values are net of exercise price. Based on the 1997 year-end market price
per share of $14.75 on September 30, 1997, the last trading date prior to
the end of the Company's fiscal year. The values shown equal the difference
between the exercise price of unexercised in-the-money options and the
closing market price of the underlying Common Stock at September 30, 1997.
Options are in-the-money if the fair market value of the Common Stock
exceeds the exercise price of the option.

37
<PAGE>
BENEFIT PLANS

1998 STOCK OPTION PLAN. A total of 1,080,318 shares of the Company's Common
Stock have been reserved for issuance under the Company's 1998 Stock Option
Plan. However, the number of shares available for issuance under the 1998 Option
Plan, at any time, is reduced by the number of shares which (i) remain subject
to outstanding options granted under certain prior plans, (ii) are issued upon
exercise of such options, or (iii) are issued pursuant to options granted under
such prior plans after December 11, 1997. As of March 31, 1998, no shares of
Common Stock have been issued upon exercise of options and 80,250 shares were
subject to outstanding options (none of which are exercisable). The 1998 Option
Plan provides for discretionary grants of incentive stock options and
nonqualified stock options to the Company's employees (including officers),
directors, consultants, advisors, and/or other independent contractors. The
option price per share for an incentive stock option may not be less than 100%
of the fair market value of a share of Common Stock on the grant date. The
option price per share for a nonstatutory stock option may not be less than 85%
of the fair market value of a share of Common Stock on the grant date. The
option price per share for an incentive stock option granted to a person owning
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company (or a parent or subsidiary) may not be less than 110% of
the fair market value of a share of Common Stock on the grant date. The
Company's Compensation Committee has the authority to determine the vesting
schedule for each option granted. Generally, options must be exercised within 10
years. The 1998 Option Plan includes an automatic grant program for outside
directors. Pursuant to this program, each outside director will be granted an
option to purchase 10,000 shares of Common Stock at the time he or she is first
elected or appointed a director of the Company. In addition, each outside
director remaining in office will be granted an option to purchase 6,640 shares
on the day following each annual meeting of stockholders.

EMPLOYEE STOCK PURCHASE PLAN. The Company has an Employee Stock Purchase
Plan which is intended to qualify under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"). Employees with at least one year of service
and who are employed more than 20 hours per week are eligible subject to certain
limitations; each eligible participant at the beginning of an offering period
(which generally last for one year) has a purchase right equal to the lesser of
a number of whole shares determined by dividing $25,000 by the fair market value
of a share of Common Stock on the first day of the offering period or 5,000
shares, subject to adjustment depending on the length of the offering period.
The purchase price per share will be 85% of the lower of the fair market value
of a share of Common Stock on the first day of the offering period or the fair
market value of a share of Common Stock on the purchase date. A maximum of
250,000 of the Company's authorized, but unissued or re-acquired shares of
Common Stock may be issued under the Purchase Plan.

EMPLOYEE 401(K) SAVINGS PLAN. The Company has an employee savings plan (the
"Savings Plan") as which is intended to qualify under Sections 401(a) and 401(k)
of the Code. Employees who are at least 21 years of age with at least 12 months
of service are entitled to defer a portion of their annual compensation for
deposit in the Savings Plan. The Company may make contributions to the Savings
Plan at the discretion of the Board of Directors on a basis that matches, fully
or partially, employee deferrals. Participants' deferrals are limited to $10,000
per calendar year. Contributions to the Savings Plan are not subject to income
tax until withdrawn from the Saving Plan. The Company has made contributions to
the Savings Plan. Company contributions to the Savings Plan vest at the rate of
25% per year of service.

DEFERRED COMPENSATION PLAN. The Company maintains the Variable Deferred
Compensation Plan for Executives, which is a nonqualified deferred compensation
plan for a select group of management employees. There are currently 12
participants in the plan. Under the plan, a participant may elect to defer up to
100% of compensation into the plan. For executive officers, the Company makes
matching contributions of up to $20,000. Matching contributions vest over a four
year period (25% per year of service). Deferrals and matching contributions
accrue earnings based upon the investment return of a portfolio selected by each
participant from among portfolio options specified in the plan. The plan also

38
<PAGE>
provides a death benefit to participants who die while employed by the Company.
The death benefit is generally $100,000 but for executive officers is $500,000.
Benefits under the plan are generally payable at retirement or attainment of a
specified age. All contributions and earnings held under the plan remain assets
of the Company and are subject to the claims of general creditors of the
Company. The plan is not intended to be a qualified plan under Section 401(a) of
the Code.

RESTAURANT MANAGEMENT STOCK OPTION PLAN. A total of 267,500 shares of
Common Stock have been reserved for issuance under the Company's Restaurant
Management Stock Option Plan, as amended. As of March 31, 1998, 79,936 shares of
Common Stock had been issued upon exercise of options, and 180,028 shares were
subject to outstanding options (of which options for 109,268 shares of Common
Stock are exercisable). The Restaurant Management Plan provides for grants of
incentive stock options and nonqualified stock options to employees who hold the
position of general manager or assistant manager or a position of similar
importance to the Company. The option price per share for an incentive stock
option or a nonqualified stock option may not be less than 100% of the fair
market value of a share of Common Stock on the grant date. The option price per
share for an incentive stock option granted to a person owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company (or a parent or subsidiary) may not be less than 110% of the fair market
value of a share of Common Stock on the grant date. Generally, options must be
exercised within 10 years. The Company will not issue any additional options
under the Restaurant Management Plan.

KEY EMPLOYEE STOCK OPTION PLAN. The Company's Key Employee Stock Option
Plan was adopted in 1984 and expired on February 1, 1994. As of March 31, 1998,
292,542 shares of Common Stock had been issued upon exercise of options, and
18,167 shares were subject to outstanding options (all of which shares are
exercisable) under the Key Employee Plan.

1995 OUTSIDE DIRECTORS STOCK OPTION PLAN. A total of 130,000 shares of the
Company's Common Stock have been reserved for issuance under the Company's 1995
Outside Directors Stock Option Plan. As of March 31, 1998, no shares of Common
Stock have been issued upon exercise of options, and 55,000 shares were subject
to outstanding options (all of which are exercisable). The Directors Options
Plan provides for the automatic granting of nonqualified stock options to
directors of the Company who are not (a) at the time of grant employees of (i)
the Company or (ii) any parent or subsidiary of the same; and (b) directors of
the Company as of the effectiveness of the Company's initial public offering
("Eligible Outside Directors"). Each Eligible Outside Director was granted an
option to purchase 10,000 shares of Common Stock on the day immediately
following his election or appointment. Thereafter, through fiscal 1997, each
Eligible Outside Director was granted an option to purchase 5,000 shares of
Common Stock on each Anniversary Date. The "Anniversary Date" is the day
following each annual meeting at which such Eligible Outside Director is
re-elected. The exercise price of the options in all cases will be equal to the
fair market value of Common Stock on the grant date. Except in certain defined
circumstances, the options vest and become exercisable at the end of the year
provided that the Eligible Outside Director has continuously served as a
director of the Company since the date of grant. Except in certain defined
circumstances, options must be exercised within ten years of the grant date. The
Company does not intend to issue any additional options under the Directors
Option Plan.

1995 KEY EMPLOYEE STOCK OPTION PLAN. A total of 435,000 shares of the
Company's Common Stock have been reserved for issuance under the Company's 1995
Key Employee Stock Option Plan as amended. As of March 31, 1998, no shares of
Common Stock have been issued upon exercise of options and 435,000 shares were
subject to outstanding options (of which options for 378,386 shares of Common
Stock are exercisable). The 1995 Key Employee Plan provides for grants of
incentive stock options and nonqualified stock options to the Company's
employees (including officers), directors, consultants, advisors, and/or other
independent contractors. The option price per share for an incentive stock
option may not be less than 100% of the fair market value of a share of Common
Stock on the grant date. The option price per share for nonqualified stock
option may not be less than 85% of the fair market value of a share of

39
<PAGE>
Common Stock on the grant date. The option price per share for an incentive
stock option granted to a person owning stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or a parent
or subsidiary) may not be less than 110% of the fair market value of a share of
Common Stock on the grant date. The Company's Compensation Committee has the
authority to determine the vesting schedule for each option granted. Generally,
options must be exercised within ten years. The Company does not intend to issue
any additional options under the 1995 Key Employee Plan.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

In July 1997, the Company entered into employment agreements with Michael
Mack, Chief Executive Officer and President, David Qualls, Executive Vice
President and Chief Financial Officer-Finance and Real Estate, and Gregory
Keller, Vice President of Operations, which provides them, upon termination
without cause, with a severance equal to one half of their then current annual
salary and certain other benefits. Additionally, in the event of a termination
without cause following a change of control, their employment agreements provide
for a severance equal to two years of base salary plus two years of bonus. Under
the respective employment agreements, the minimum base annual salary for Mr.
Mack is $250,000, for Mr. Qualls is $170,000, and for Mr. Keller is $150,000.

In the event of a change in control as defined under the Company's 1998
Option Plan, any unexercisable or unvested portion of the outstanding options
will become immediately exercisable and vested in full prior to the change in
control. The Company's other stock option plans also contain provisions that
could lead to the vesting and exercisability of all outstanding options prior to
a change in control of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1997, the Company's Board of Directors established the levels
of compensation for certain of the Company's executive officers without the
involvement of the Compensation Committee, as the Compensation Committee was not
active during that period. Mr. Michael Mack, the Company's Chairman of the
Board, President and Chief Executive Officer, participated in the deliberations
regarding executive compensation that occurred during fiscal 1997, but did not
take part in the deliberations regarding his own compensation. The current
members of the Company's Compensation Committee, who were also members of the
Compensation Committee in fiscal 1997, are Messrs. Minchin, Robbins and Gunst.
None of these individuals were at any time an officer or employee of the
Company.

CERTAIN TRANSACTIONS

ARRANGEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS

The Company has entered into employment agreements with the Company's
executive officers. See "Employment Contracts and Termination of Employment and
Change of Control Arrangements."

The Company has entered into indemnification agreements with its executive
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporate Law.

The Company's policy has been and continues to be that all transactions
between the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Company's Board of Directors and by
a majority of the disinterested members of the Company's Board of Directors and
(ii) be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. In addition, this policy requires that any loans by
the Company to its officers, directors or other affiliates be for bona fide
business purposes only.

40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998, (i) by each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) by each Selling Stockholder, (iii) by each of the Company's
executive officers and directors, and (iv) by all directors and executive
officers as a group. Except pursuant to applicable community property laws or as
indicated in the footnotes to this table, to the Company's knowledge, each
stockholder identified in the table possesses sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by such
stockholder.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(2) AFTER THE OFFERING(4)
------------------------ SHARES ----------------------
NAMES AND ADDRESSES(1) NUMBER PERCENT(3) OFFERED NUMBER PERCENT
- ------------------------------------------------------ --------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Entities and individuals affiliated with
The D3 Family Fund, L.P.(5)......................... 338,325 7.8% -- 338,325 5.9%
19605 NE 8th Street
Camas, WA 98607
Entities affiliated with
St. Paul Venture Capital, Inc.(6)................... 595,346 13.8 160,000 435,346 7.6
8500 Normandale Lake Blvd., Ste. 1940
Bloomington, MN 55437

Michael P. Mack(7).................................... 276,181 6.2 56,500 219,681 3.7

David W. Qualls(8) ................................... 106,477 2.4 50,000 56,477 *

R. Gregory Keller(9) ................................. 120,447 2.7 21,000 99,447 1.7

Michael M. Minchin, Jr.(10) .......................... 99,564 2.3 12,500 87,064 1.5

Edgar F. Berner(11) .................................. 19,300 * -- 19,300 *

Robert A. Gunst(11) .................................. 20,000 * -- 20,000 *

John M. Robbins, Jr.(11) ............................. 18,500 * -- 18,500 *

All directors and executive officers as a group (7
persons)(12) ....................................... 660,469 13.7 140,000 520,469 8.5
</TABLE>

- ------------------------

* Less than one percent.

(1) Except as otherwise indicated, the address of each beneficial owner is c/o
the Company, 17180 Bernardo Center Drive, San Diego, CA 92128.

(2) In accordance with Securities and Exchange Commission rules, a person is
deemed to have beneficial ownership of any securities as to which such
person, directly or indirectly, has or shares voting power or investment
power and of any securities with respect to which such person has the right
to acquire such voting or investment power within 60 days. Except as
otherwise noted in the accompanying footnotes, the named persons have sole
voting and investment power.

(3) Percent of the outstanding shares of Common Stock, treating as outstanding
with respect to a beneficial owner all shares of Common Stock issuable on
exercise of stock options within 60 days of March 31, 1998, held by the
particular beneficial owner.

(4) Assumes no exercise of the underwriters over-allotment option.

(5) Includes shares held by following: The Nierenberg Family 1993 Trust
(33,975); Lawrence K. Orr, Trustee for the David and Patricia Nierenberg
1993 Irrevocable Trust (3,200); Florence Cies (1,550); Florence Cies, IRA
(300); Haredale Limited (10,100); Sharptown Limited (1,500); Toxford
Corporation (1,500); and James Henry Hildebrandt (3,000). The Company has
been informed that The D3 Family Fund, L.P. or affiliated entities may
purchase shares in this offering.

(6) St. Paul Venture Capital, Inc. is an affiliate of St. Paul Fire and Marine
Insurance Company which is the record owner of 445,346 shares and St. Paul
Venture Capital IV, LLC which is the record owner of 150,000 shares. The
160,000 shares offered are offered by St. Paul Fire and Marine Insurance
Company.

41
<PAGE>

(7) Includes 132,219 shares issuable upon exercise of stock options, 375 shares
held by his wife, Ruth Mack and 143,582 shares held by The Mack Family
Trust dated December 12, 1996.

(8) Includes 105,817 shares issuable upon exercise of stock options, 50,000 of
which are being sold in this offering.

(9) Includes 118,697 shares issuable upon exercise of stock options, 21,000 of
which are being sold in this offering, 1,141 shares held by The Robert and
Patricia Keller Trust and 1,000 shares held by Robert Keller's IRA.

(10) Includes 99,564 shares issuable upon exercise of stock options, 12,500 of
which are being sold in this offering.

(11) Includes 15,000 shares issuable upon exercise of stock options.

(12) Includes 501,297 shares issuable upon exercise of stock options, 83,500 of
which are being sold in this offering.

DESCRIPTION OF CAPITAL STOCK

The following summary of certain provisions of the Common Stock and the
Preferred Stock of the Company does not purport to be complete and is subject
to, and qualified in its entirety by, the Restated Certificate of Incorporation,
as amended, and Bylaws, as amended, of the Company.

The Company's authorized capital stock consists of 12,000,000 shares of
Common Stock, $.01 par value, and 2,500,000 shares of Preferred Stock, $.01 par
value.

COMMON STOCK

As of March 31, 1998, there were approximately 4.3 million shares of Common
Stock outstanding held of record by approximately 258 stockholders. The holders
of Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the holders of Common Stock. The Restated
Certificate of Incorporation provides for cumulative voting in the election of
directors. Subject to preferences applicable to any outstanding Preferred Stock,
the holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor, although the Company has not paid dividends on its Common Stock. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any Preferred Stock. The holders of Common Stock have no preemptive or
subscription rights and there are no redemption or conversion rights with
respect to such shares. All outstanding shares of Common Stock are fully paid
and non-assessable and the shares of Common Stock to be issued upon completion
of this offering will be fully paid and non-assessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.

PREFERRED STOCK

The Board of Directors is authorized, without further stockholder approval,
to issue up to 2,500,000 shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted or imposed upon
any unissued shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series. The issuance of
Preferred Stock may have the effect of delaying or preventing a change in
control of the Company. The issuance of Preferred Stock could decrease the
amount of earnings and assets available for distribution to the holders of
Common Stock or could adversely affect the rights and powers, including voting
rights, of the holders of the Common Stock. In certain circumstances, such
issuance could have the effect of decreasing the market price of the Common
Stock. As of the closing of the offering, no shares of Preferred Stock will be
outstanding and the Company currently has no plans to issue any shares of
Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, Section 203 of the Delaware Law prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a

42
<PAGE>
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder, subject to certain
exceptions such as the approval of the board of directors and of the holders of
at least two-thirds of the outstanding shares of voting stock not owned by the
interested stockholder. The existence of this provision would be expected to
have an anti-takeover effect, including attempts that might result in a premium
over the market price for the shares of Common Stock held by stockholders.

The Company's Restated Certificate of Incorporation provides for a Board of
Directors which is divided into three classes of directors, with each class
serving a staggered three-year term. The classification system of electing
directors may tend to discourage a third party from making a tender offer or
otherwise attempting to obtain control of the Company and may maintain the
incumbency of the Board of Directors, as it generally makes it more difficult
for stockholders to replace a majority of the Directors. The Restated
Certificate of Incorporation also eliminates the right of stockholders to act
without a meeting and requires a super majority approval of stockholders in
connection with certain related party transactions. These and other provisions
may have the effect of deferring hostile takeovers or delaying changes in
control or management of the Company and therefore may discourage another person
or entity from making a tender offer for the Company's Common Stock, including
offers at a premium over the market price of the Common Stock, and might result
in a delay in changes in control of management. In addition, these provisions
could have the effect of making it more difficult for proposals favored by the
stockholders to be presented for stockholder consideration. The amendment of any
of these provisions would require approval by holders of 66 2/3% or more of the
outstanding Common Stock.

The Company has also included in its Restated Certificate of Incorporation
provisions to eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware General Corporation Law, and the Company has included in its
Bylaws provisions to indemnify its directors and officers generally to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law.
See "Risk Factors--Anti-takeover Measures."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
BankBoston, N.A.

43
<PAGE>
UNDERWRITING

The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions contained in the underwriting agreement (the
"Underwriting Agreement") by and among the Company, the Selling Stockholders and
the Underwriters, to purchase from the Company and the Selling Stockholders the
number of shares of Common Stock indicated below opposite their respective names
at the initial public offering price less the underwriting discount set forth on
the cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of the shares if they
purchase any.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
NationsBanc Montgomery Securities LLC............................................
BancAmerica Robertson Stephens...................................................
Morgan Keegan & Company, Inc.....................................................
----------
Total.......................................................................... 1,600,000
----------
----------
</TABLE>

The Underwriters have advised the Company and the Selling Stockholders that
the Underwriters propose initially to offer the Common Stock to the public on
the terms set forth on the cover page of this Prospectus. The Underwriters may
allow, and such dealers may reallow, to selected dealers a concession of not
more than $ per share, and the Underwriters may allow a concession of not
more than $ per share to certain other dealers. After the offering, the
public offering price and other selling terms may be changed by the
Underwriters. The Common Stock is offered subject to receipt and acceptance by
the Underwriters and to certain other conditions, including the right to reject
orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
aggregate maximum of 240,000 additional shares of Common Stock, to cover
over-allotments, if any, at the same price per share as the initial shares to be
purchased by the Underwriters. To the extent the Underwriters exercise this
option, the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with this offering.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including civil liabilities under the Securities
Act of 1933 or will contribute to payments the Underwriters may be required to
make in respect hereof.

All of the Company's directors (except the Selling Stockholders) and the
Selling Stockholders have agreed that, for a period of 90 days and 120 days,
respectively, after the date of this Prospectus, they will not, without the
prior written consent of NationsBanc Montgomery Securities LLC, directly or
indirectly sell, offer, contract or grant any option to sell, pledge, transfer,
or otherwise dispose of any shares of Common Stock, options or warrants to
acquired shares of Common Stock, or securities exchangeable or exercisable for
or convertible into shares of Common Stock. In addition, the Company has agreed
that, for a period of 120 days after the date of this Prospectus, it will not,
without the prior written consent of NationsBanc Montgomery Securities LLC,
directly or indirectly issue, sell, offer, contract or grant any option to sell,
pledge, transfer, or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock, other than (i) the
shares of Common Stock offered by the Company hereby or (ii) shares of Common
Stock issued pursuant to the Company's equity compensation plans described in
this prospectus.

44
<PAGE>
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market. Such transactions may include stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting any purchase for the purpose of pegging, fixing
or maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. The Underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment options described above. A penalty
bid means an arrangement that permits the Underwriters to reclaim a selling
concession from a syndicate member in connection with the offering when shares
of Common Stock sold by the syndicate member are purchased in syndicate covering
transactions. Such transactions may be effected on the Nasdaq National Market,
in the over-the-counter market, or otherwise.

In general, the purchase of a security for the purpose of stabilizing or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchase. Neither the Company nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

In addition, certain of the Underwriters that currently act as market makers
for the Common Stock may engage in "passive market making" in the Common Stock
on Nasdaq in accordance with Regulation M under the Securities Exchange Act of
1934, as amended. Regulation M permits, upon the satisfaction of certain
conditions, underwriters participating in a distribution that are also Nasdaq
market makers in the security being distributed to engage in limited market
making transactions during the period that such activities would otherwise be
prohibited by Regulation M. However, Regulation M does not permit passive market
making at any time when a stabilizing bid is in effect. Also, Regulation M
prohibits underwriters engaged in passive market making generally from entering
a bid or effecting a purchase at a price that exceeds the highest bid for those
securities displayed on Nasdaq by a market maker that is not participating in
the distribution. Under Regulation M, each underwriter engaged in passive market
making is subject to a daily net purchase limitation generally equal to 30% of
such entity's average daily trading volume during the two full consecutive
calendar months immediately preceding, or any 60 consecutive calendar days
ending within the 10 calendar days preceding, the date of the filing of the
registration statement under the Securities Act of 1933 pertaining to the
securities to be distributed.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Gray Cary Ware & Freidenrich LLP, San Diego, California.
Certain legal matters will be passed upon for the Underwriters by Fried, Frank,
Harris, Shriver & Jacobson, a partnership including professional corporations,
Los Angeles, California.

EXPERTS

The financial statements as of September 30, 1996 and 1997 and for each of
the three years in the period ended September 30, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

45
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of 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 and the
Registration Statement and exhibits and schedules thereto can be inspected and
copied at the public reference section of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at certain regional offices located at
7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1025, Washington, D.C. 20549, at prescribed rates. The
Commission maintains a World Wide Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, such
material can be inspected at the offices of the Nasdaq Stock Market, Inc., 1735
K Street, N.W., Washington, D.C. 20006.

46
<PAGE>
INDEX TO FINANCIAL STATEMENTS
GARDEN FRESH RESTAURANT CORP.

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2

Balance Sheet as of September 30, 1996 and 1997 and March 31, 1998 (Unaudited)............................. F-3

Statement of Operations for the Years Ended September 30, 1995, 1996 and 1997 and
the Six Months Ended March 31, 1997 and 1998 (Unaudited).................................................. F-4

Statement of Cash Flows for the Years Ended September 30, 1995, 1996 and 1997 and
the Six Months Ended March 31, 1997 and 1998 (Unaudited).................................................. F-5

Statement of Changes in Shareholders' Equity for the Years Ended September 30, 1995,
1996 and 1997 and the Six Months Ended March 31, 1998 (Unaudited)......................................... F-6

Notes to Financial Statements.............................................................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Garden Fresh Restaurant Corp.

In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in shareholders' equity present fairly,
in all material respects, the financial position of Garden Fresh Restaurant
Corp. at September 30, 1996 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1997,
in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP

San Diego, California
November 7, 1997,
except as to net income (loss)
per share information as reflected
in the Statement of Operations
and Notes 1 and 5 which is as of April 27, 1998

F-2
<PAGE>
GARDEN FRESH RESTAURANT CORP.

BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1997 MARCH 31, 1998
------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents....................... $ 615,000 $ 2,345,000 $ 2,588,000
Inventories..................................... 2,297,000 2,886,000 3,245,000
Other current assets............................ 530,000 550,000 1,886,000
Deferred income taxes........................... 734,000 322,000 88,000
------------ ------------ --------------
Total current assets.......................... 4,176,000 6,103,000 7,807,000
Property and equipment.......................... 41,552,000 54,257,000 61,381,000
Intangible and other assets..................... 1,572,000 1,472,000 1,811,000
Deferred income taxes........................... 762,000 577,000 469,000
------------ ------------ --------------
$ 48,062,000 $ 62,409,000 $71,468,000
------------ ------------ --------------
------------ ------------ --------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable................................ $ 3,028,000 $ 5,012,000 $ 3,723,000
Current portion of long-term debt............... 3,490,000 4,456,000 4,972,000
Accrued liabilities............................. 4,335,000 4,411,000 6,761,000
------------ ------------ --------------
Total current liabilities..................... 10,853,000 13,879,000 15,456,000
------------ ------------ --------------
Accrued rent...................................... 1,508,000 1,397,000 1,347,000
Long-term debt, net of current portion............ 6,444,000 12,965,000 18,127,000

Shareholders' equity:
Preferred stock, $.01 par value; 2,500,000
shares authorized at September 30, 1996 and
1997 and March 31, 1998 (unaudited),
respectively; no shares issued or outstanding
at September 30, 1996 and 1997 or March 31,
1998 (unaudited), respectively
Common stock, $.01 par value; 12,000,000 shares
authorized at September 30, 1996 and 1997 and
March 31, 1998 (unaudited), respectively;
4,117,227, 4,264,579 and 4,318,176 issued and
outstanding at September 30, 1996 and 1997 and
March 31, 1998 (unaudited), respectively...... 41,000 43,000 43,000
Paid-in capital................................. 37,772,000 38,794,000 39,260,000
Accumulated deficit............................. (8,556,000) (4,669,000) (2,765,000)
------------ ------------ --------------
Total shareholders' equity.................... 29,257,000 34,168,000 36,538,000
------------ ------------ --------------
Commitments and contingencies (Note 7)..........
------------ ------------ --------------
$ 48,062,000 $ 62,409,000 71,468,000
------------ ------------ --------------
------------ ------------ --------------
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>
GARDEN FRESH RESTAURANT CORP.

STATEMENT OF OPERATIONS

Net income (loss) per share available to common
shareholders:
Basic.......................................... $ (2.47) $ 0.73 $ 0.93 $ 0.34 $ 0.44
Diluted........................................ $ (2.47) $ 0.72 $ 0.88 $ 0.32 $ 0.41

Shares used in computing net income (loss) per
share available to common shareholders:
Basic.......................................... 1,810,000 4,103,000 4,192,000 4,150,000 4,298,000
Diluted........................................ 1,810,000 4,176,000 4,402,000 4,345,000 4,633,000
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>
GARDEN FRESH RESTAURANT CORP.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
------------------------------------------- ----------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 3,825,000 $ 3,004,000 $ 3,887,000 $ 1,392,000 $ 1,904,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expenses............. 3,604,000 4,518,000 6,147,000 3,061,000 3,463,000
Loss on property disposal.......................... 220,000 66,000 70,000 31,000 55,000
Deferred income taxes.............................. (2,173,000) 677,000 597,000 189,000 342,000
Tax benefits from exercise of stock options........ 25,000
Changes in assets and liabilities:
Increase in inventories.......................... (149,000) (295,000) (589,000) (295,000) (359,000)
(Increase) decrease in other assets.............. 1,306,000 (100,000) (20,000) (1,109,000) (1,336,000)
Increase (decrease) in accounts payable.......... 720,000 276,000 1,984,000 (260,000) (1,289,000)
Increase (decrease) in accrued liabilities....... (112,000) 1,698,000 76,000 683,000 2,350,000
Increase (decrease) in accrued rent.............. 43,000 5,000 (111,000) (39,000) (50,000)
------------- ------------- ------------- ------------- -------------
Net cash provided by operating activities...... 7,284,000 9,849,000 12,066,000 3,653,000 5,080,000
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of property and equipment:
New restaurant development......................... (5,678,000) (16,272,000) (14,516,000) (6,597,000) (9,361,000)
Existing restaurant additions...................... (2,546,000) (1,962,000) (3,036,000) (1,050,000) (600,000)
Increase in intangible and other assets............ (161,000) (1,257,000) (1,270,000) (651,000) (1,020,000)
------------- ------------- ------------- ------------- -------------
Net cash used in investing activities.......... (8,385,000) (19,491,000) (18,822,000) (8,298,000) (10,981,000)
------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt......................... 3,145,000 8,207,000 13,008,000 8,203,000 8,339,000
Change in certificates of deposit restricted to
secure debt........................................ 303,000 125,000
Repayment of long-term debt.......................... (12,390,000) (2,290,000) (5,521,000) (2,308,000) (2,661,000)
Net proceeds from issuance of common stock........... 11,679,000 129,000 999,000 329,000 466,000
Repayment of shareholder notes receivable............ 87,000 324,000
------------- ------------- ------------- ------------- -------------
Net cash provided by financing activities...... 2,824,000 6,495,000 8,486,000 6,224,000 6,144,000
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents... 1,723,000 (3,147,000) 1,730,000 1,579,000 243,000
Cash and cash equivalents at beginning of period....... 2,039,000 3,762,000 615,000 615,000 2,345,000
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents at end of period............. $ 3,762,000 $ 615,000 $ 2,345,000 $ 2,194,000 $ 2,588,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Non-cash financing transactions:
Issuance of common stock upon exercise of warrants... $ 284,000
-------------
-------------
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>
GARDEN FRESH RESTAURANT CORP.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
----------------------- --------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994........... 3,676,479 $ 37,000 433,925 $ 4,000 $ 17,666,000
Issuance of common stock.............. 1,500,000 15,000 11,649,000
Conversion of preferred stock......... (3,676,479) (37,000) 1,102,944 11,000 26,000
Stock dividend........................ 921,935 9,000 8,289,000
Exercise of warrants.................. 138,495 2,000 (2,000)
Exercise of common stock options...... 2,048 15,000
Repayment of shareholder notes
receivable..........................
Net income............................
----------- --------- ---------- -------- ------------
Balance at September 30, 1995........... 4,099,347 41,000 37,643,000
Exercise of common stock options...... 17,880 129,000
Repayment of shareholder notes
receivable..........................
Net income............................
----------- --------- ---------- -------- ------------
Balance at September 30, 1996........... 4,117,227 41,000 37,772,000
Exercise of common stock options...... 135,155 2,000 910,000
Issuance of common stock under
employee stock purchase plan........ 12,197 87,000
Tax benefits from exercise of stock
options............................. 25,000
Net income............................
----------- --------- ---------- -------- ------------
Balance at September 30, 1997........... 4,264,579 43,000 38,794,000
----------- --------- ---------- -------- ------------
Exercise of common stock options
(unaudited)......................... 48,156 395,000
Issuance of common stock under
employee stock purchase plan
(unaudited)......................... 5,441 71,000
Net income (unaudited)................
----------- --------- ---------- -------- ------------
Balance at March 31, 1998 (unaudited)... 4,318,176 $43,000 $ 39,260,000
----------- --------- ---------- -------- ------------
----------- --------- ---------- -------- ------------

ACCUMULATED COMMON STOCK
DEFICIT NOTES RECEIVABLE TOTAL
------------- ----------------- ------------
<S> <C> <C> <C>
Balance at September 30, 1994........... $ (7,087,000) $ (411,000) $ 10,209,000
Issuance of common stock.............. 11,664,000
Conversion of preferred stock.........
Stock dividend........................ (8,298,000)
Exercise of warrants..................
Exercise of common stock options...... 15,000
Repayment of shareholder notes
receivable.......................... 87,000 87,000
Net income............................ 3,825,000 3,825,000
------------- ----------------- ------------
Balance at September 30, 1995........... (11,560,000) (324,000) 25,800,000
Exercise of common stock options...... 129,000
Repayment of shareholder notes
receivable.......................... 324,000 324,000
Net income............................ 3,004,000 3,004,000
------------- ----------------- ------------
Balance at September 30, 1996........... (8,556,000) 29,257,000
Exercise of common stock options...... 912,000
Issuance of common stock under
employee stock purchase plan........ 87,000
Tax benefits from exercise of stock
options............................. 25,000
Net income............................ 3,887,000 3,887,000
------------- ----------------- ------------
Balance at September 30, 1997........... (4,669,000) 34,168,000
------------- ----------------- ------------
Exercise of common stock options
(unaudited)......................... 395,000
Issuance of common stock under
employee stock purchase plan
(unaudited)......................... 71,000
Net income (unaudited)................ 1,904,000 1,904,000
------------- ----------------- ------------
Balance at March 31, 1998 (unaudited)... $ (2,765,000) $ 36,538,000
------------- ----------------- ------------
------------- ----------------- ------------
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS

NOTE 1-- THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

Garden Fresh Restaurant Corp. (the "Company") is a Delaware corporation
which owns and operates restaurants in Arizona, California, Florida, New Mexico
and Utah doing business as Souplantation or Sweet Tomatoes.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

INVENTORIES

Inventories, consisting principally of food, beverages and restaurant
supplies, are valued at the lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization
are provided using the straight-line method over estimated useful lives of 3 to
30 years or the remaining lease term, whichever is shorter.

Maintenance and repairs are charged to operations as incurred. When assets
are sold or otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is included in the results of
operations.

Impairment of restaurant property and equipment is measured on the basis of
anticipated undiscounted cash flows for each restaurant. Based upon the
Company's analysis, no impairment of such assets was indicated during fiscal
1995, 1996, or 1997.

INTANGIBLE AND OTHER ASSETS

Intangible assets resulting from the 1983 acquisition of the two original
Souplantation restaurants, comprised of leasehold interests and goodwill, are
amortized using the straight-line method over 15 years. Preopening costs
incurred in connection with opening new restaurant locations, including training
and legal costs, are deferred and amortized over a one-year period commencing
with the opening of each respective restaurant. Debt issuance costs are
capitalized and amortized using the straight-line method over the term of the
debt.

INCOME TAXES

Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred income tax asset or liability is
established for the expected future consequences resulting from the differences
in the financial reporting and tax bases of assets and liabilities. Deferred
income tax expense (benefit) is the net change during the year in the deferred
income tax asset or liability. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.

F-7
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1-- THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ADVERTISING

Advertising costs are expensed as incurred. Advertising expenses were
$1,440,000, $1,467,000 and $1,963,000 in fiscal 1995, 1996 and 1997,
respectively, and are included in restaurant operating expenses.

FAIR VALUE OF FINANCIAL INSTRUMENTS

It is management's belief that the carrying amounts shown for the Company's
financial instruments are reasonable estimates of their related fair value.

CASH EQUIVALENTS

Cash equivalents are highly liquid investments purchased with maturities of
three months or less. Cash equivalents consist of investments in money market
accounts backed by Federal government securities. The carrying amount is
reflected at cost, which approximates the fair value due to the short maturity
of these instruments. The Company's policy is to place its cash and cash
equivalents with high credit quality financial institutions and to limit the
amount of credit exposure.

NET INCOME (LOSS) PER SHARE AVAILABLE TO COMMON SHAREHOLDERS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
specifies the computation, presentation and disclosure requirements for earnings
per share. In accordance with SFAS No. 128, the Company has presented basic
earnings per share and diluted earnings per share and restated all prior periods
in conformity with SFAS No. 128. Basic earnings per share is computed based on
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed based on the weighted average number of
common shares outstanding during the period increased by the effect of dilutive
stock options using the treasury stock method and common shares expected to be
issued under the Company's employee stock purchase plan.

Common stock equivalents of approximately 73,000 and 210,000 shares for
fiscal 1996 and 1997, respectively, were used to calculate diluted earnings per
share. For fiscal 1995, common stock equivalents were not used to calculate
diluted loss per share because of their antidilutive effect. There are no
reconciling items in calculating the numerator for basic and diluted earnings
(loss) per share for the periods presented.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

The accompanying balance sheet at March 31, 1998 and the statements of
operations and cash flows for the six month periods ended March 31, 1998 and
1997, and the statement of shareholders' equity for the six month period ended
March 31, 1998 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair statement of the financial position and the results of
operations for the interim periods.

F-8
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1-- THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STOCK-BASED COMPENSATION

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net income and net income per share as if the fair value-based
method had been applied in measuring compensation expense (Note 5).

EXTRAORDINARY ITEM

During fiscal 1995, the Company recognized an extraordinary loss of
$518,000, net of an income tax benefit of $192,000, representing a charge for
previously unamortized debt issue costs, unamortized debt discount, and a
prepayment penalty associated with early extinguishment of debt repaid with
proceeds from the Company's May 1995 initial public offering.

NOTE 2--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
OTHER CURRENT ASSETS
Prepaid taxes..................................................................... $ 298,000 $ 364,000
Prepaid insurance................................................................. 66,000 59,000
Other............................................................................. 166,000 127,000
-------------- --------------
$ 530,000 $ 550,000
-------------- --------------
-------------- --------------

PROPERTY AND EQUIPMENT
Leasehold improvements............................................................ $ 16,821,000 $ 18,796,000
Furniture and fixtures............................................................ 15,151,000 18,915,000
Equipment......................................................................... 12,234,000 14,675,000
Land and buildings................................................................ 13,624,000 21,301,000
Construction in process on new restaurants........................................ 4,103,000 5,605,000
-------------- --------------
61,933,000 79,292,000
Less accumulated depreciation and amortization.................................... (20,381,000) (25,035,000)
-------------- --------------
$ 41,552,000 $ 54,257,000
-------------- --------------
-------------- --------------

INTANGIBLE AND OTHER ASSETS
Intangible assets acquired, net of accumulated amortization of $609,000 and
$659,000, respectively.......................................................... $ 207,000 $ 157,000
Preopening costs, net of accumulated amortization of $334,000 and $472,000,
respectively.................................................................... 913,000 864,000
Deposits and other assets......................................................... 452,000 451,000
-------------- --------------
$ 1,572,000 $ 1,472,000
-------------- --------------
-------------- --------------
</TABLE>

F-9
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
ACCRUED LIABILITIES
Accrued payroll and related expenses.............................................. $ 1,507,000 $ 1,870,000
Accrued interest.................................................................. 74,000 138,000
Sales taxes payable............................................................... 477,000 576,000
Accrued insurance................................................................. 799,000 871,000
Accrued construction in progress cost............................................. 621,000
Other............................................................................. 857,000 956,000
-------------- --------------
$ 4,335,000 $ 4,411,000
-------------- --------------
-------------- --------------
</TABLE>

NOTE 3--LONG-TERM DEBT

Obligations under long-term debt arrangements are comprised of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Notes payable to lending institutions, interest at 9.29%-11.38%, due in various
monthly installments aggregating $371,000 (including interest) through 2002.
Secured by property and equipment................................................. $ 9,475,000 $ 10,927,000
Notes payable to lending institutions, interest at 9.54%-11.63%, due in various
monthly installments aggregating $152,000 (including interest) through 2001.
Secured by land, building and property............................................ 459,000 6,494,000
------------- -------------
9,934,000 17,421,000
Less current portion................................................................ (3,490,000) (4,456,000)
------------- -------------
$ 6,444,000 $ 12,965,000
------------- -------------
------------- -------------
</TABLE>

The Company paid an aggregate of $1,811,000, $770,000 and $1,669,000 of
interest on all outstanding debt during fiscal 1995, 1996 and 1997,
respectively. The Company capitalized $92,000, $167,000 and $154,000 in interest
expense during fiscal 1995, 1996 and 1997, respectively, related to construction
of new stores. Interest expense includes $126,000 in fiscal 1995 relating to
amortization of debenture and related warrant costs.

Principal payments due on long-term debt during the five years subsequent to
September 30, 1997 are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 4,456,000
1999........................................................ 4,345,000
2000........................................................ 5,156,000
2001........................................................ 3,150,000
2002........................................................ 314,000
Thereafter..................................................
--------------
$ 17,421,000
--------------
--------------
</TABLE>

F-10
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--INCOME TAXES

The provision (benefit) for income taxes is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
Current tax expense:
Federal.......................................... $ 396,000 $ 968,000 $ 1,395,000
State............................................ 131,000 300,000 556,000
------------- ------------ ------------
Total current.................................. 527,000 1,268,000 1,951,000
Deferred tax expense (benefit)..................... (2,173,000) 677,000 597,000
------------- ------------ ------------
Total tax expense (benefit).................... $ (1,646,000) $ 1,945,000 $ 2,548,000
------------- ------------ ------------
------------- ------------ ------------
</TABLE>

A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate to income before income taxes is
as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
Amounts computed at statutory federal rate......... $ 917,000 $ 1,683,000 $ 2,188,000
State taxes and other.............................. 281,000 262,000 360,000
Alternative minimum taxes.......................... (253,000)
Changes in deferred tax liabilities (assets)
recorded to valuation allowance.................. (418,000)
Release of valuation allowance..................... (2,173,000)
------------- ------------ ------------
Provision (benefit) for income taxes............... $ (1,646,000) $ 1,945,000 $ 2,548,000
------------- ------------ ------------
------------- ------------ ------------
</TABLE>

The Company paid an aggregate of $59,000, $1,137,000 and $1,985,000 of
income taxes in fiscal 1995, 1996 and 1997, respectively.

Deferred tax assets (liabilities) are summarized as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Operating loss carryforwards.................................... $ 501,000 $
Depreciation.................................................... (1,195,000) (1,299,000)
Accrued rent.................................................... 633,000 588,000
Alternative minimum tax credit carryforward..................... 1,394,000 1,340,000
Other........................................................... 163,000 270,000
------------- -------------
Deferred taxes................................................ $ 1,496,000 $ 899,000
------------- -------------
------------- -------------
</TABLE>

At September 30, 1997, the Company had available alternative minimum tax
credit carryforwards of $1,340,000. The Internal Revenue Code imposes certain
conditions and possible limitations on the future availability of tax credit
carryforwards, including limitations arising from changes in the Company's
ownership.

F-11
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--SHAREHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

All preferred stock issued was convertible, at the option of the holder,
into an equal number of shares of common stock; the preferred shares were
automatically converted to common shares upon the closing of the Company's May
1995 initial public offering. The rights of the preferred shareholders included
rights to receive certain dividends when declared by the Board of Directors,
certain preferential distributions in the event of voluntary dissolution of the
Company, and certain voting rights.

Subsequent to the closing of the Company's initial public offering,
2,500,000 shares of preferred stock are authorized; no shares have been issued.
The Board of Directors is authorized to issue the preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions
associated with the preferred stock.

COMMON STOCK

In May 1995, the Company completed an initial public offering of 1,500,000
shares of common stock. In connection with the offering, the Company paid a
preferential dividend to the holders of Series B, C and D preferred stock
consisting of 921,935 shares of common stock, as a condition to the automatic
conversion of the preferred stock to common stock in conjunction with the public
offering. Additionally, in connection with the offering, the Company changed the
exercise price of warrants which had been issued in connection with subordinated
notes to $1.67 from $3.33 per share and the warrants were exchanged for 138,495
shares of common stock.

STOCK OPTION PLANS

The Company has four stock option plans under which 1,227,450 options may be
granted to employees, consultants and directors of the Company. The plans
provide for the grant of both incentive stock options and non-qualified stock
options. Under the plans, options to purchase common stock may be granted for
periods up to ten years at a price per share ranging from 85% to 110% of the
fair market value of the Company's common stock at the date of grant. During
fiscal 1995, 1996 and 1997, employee stock options were granted at the fair
market value of the stock at the date of grant. The options generally vest over
periods of up to five years and may be exercised in annual installments ranging
from three to ten years. Under the plans, directors will receive options to
purchase 10,000 shares of common stock upon their election to the Board of
Directors, and options to purchase 5,000 shares annually thereafter.

F-12
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
Activity for fiscal 1995, 1996 and 1997 with respect to these plans is as
follows:

<TABLE>
<CAPTION>
SHARES WEIGHTED-AVERAGE
UNDERLYING OPTIONS EXERCISE PRICE
------------------ -----------------
<S> <C> <C>
OUTSTANDING AT SEPTEMBER 30, 1994....................... 221,741 $ 7.16
Granted................................................. 386,087 $ 9.20
Exercised............................................... (2,160) $ 7.00
Canceled................................................ (11,850) $ 8.44
--------
OUTSTANDING AT SEPTEMBER 30, 1995....................... 593,818 $ 8.35
Granted................................................. 201,950 $ 7.74
Exercised............................................... (17,880) $ 7.24
Canceled................................................ (5,689) $ 8.91
--------
OUTSTANDING AT SEPTEMBER 30, 1996....................... 772,199 $ 7.98
Granted................................................. 148,250 $ 9.04
Exercised............................................... (135,155) $ 6.75
Canceled................................................ (10,375) $ 8.02
--------
OUTSTANDING AT SEPTEMBER 30, 1997....................... 774,919 $ 8.40
--------
--------
</TABLE>

Options to purchase an aggregate of 489,392 shares and 517,769 shares were
exercisable under the plans as of September 30, 1996 and 1997, respectively. The
weighted-average fair value of options granted under the plans during fiscal
1996 and 1997 was $2.82 per share and $4.90 per share, respectively.

The following is a summary of stock options outstanding at September 30,
1997:

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING --------------------------------
--------------------------------------------------- NUMBER
NUMBER EXERCISABLE
OUTSTANDING AT WEIGHTED-AVERAGE AT
SEPTEMBER 30, REMAINING WEIGHTED-AVERAGE SEPTEMBER 30, WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES 1997 CONTRACTUAL LIFE EXERCISE PRICE 1997 EXERCISE PRICE
- ---------------------------- -------------- ---------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 4.40-$ 6.50............... 177,185 7.7 years $ 6.25 92,825 $ 6.02
$ 7.50-$ 9.13............... 511,609 7.8 years $ 8.78 359,094 $ 8.82
$10.00-$12.50............... 86,125 7.2 years $ 10.58 65,850 $ 10.00
------- -------------
$ 4.40-$12.50............... 774,919 7.7 years $ 8.40 517,769 $ 8.47
------- -------------
------- -------------
</TABLE>

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock-based
compensation. No compensation expense has been recognized for employee stock
option grants, which are fixed in nature, as the options have been granted at
fair market value. No compensation expense has been recognized for the employee
stock purchase plan. Had compensation expense for the Company's stock-based
compensation awards issued during fiscal 1996 and 1997 been determined based on
the fair value at the grant dates consistent with the methodology of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the

F-13
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
NET INCOME:
As reported..................................................... $ 3,004,000 $ 3,887,000
------------ ------------
------------ ------------
Pro forma....................................................... $ 2,776,000 $ 3,386,000
------------ ------------
------------ ------------
</TABLE>

Net income per share available to common shareholders:

<TABLE>
<S> <C> <C>
BASIC:
As reported........................................ $ 0.73 $ 0.93
----- -----
----- -----
Pro forma.......................................... $ 0.68 $ 0.81
----- -----
----- -----

DILUTED:
As reported........................................ $ 0.72 $ 0.88
----- -----
----- -----
Pro forma.......................................... $ 0.66 $ 0.77
----- -----
----- -----
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for grants in fiscal 1996 and 1997, respectively: dividend yield of
0.0% for both years, expected volatility of 39% and 52%, risk-free interest
rates of 5.50% and 6.28%, and expected lives of 4.6 years and 5.3 years. The
fair value of the employees' purchase rights pursuant to the employee stock
purchase plan is estimated using the Black-Scholes model with the following
assumptions for fiscal 1996 and 1997: dividend yield of 0.0% for both years,
expected volatility of 39% and 52%, risk-free interest rates of 5.16% and 5.46%,
and expected lives of 6 months for both years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in subjective input
assumptions can materially affect the fair value estimates, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock-based compensation plans.

EMPLOYEE STOCK PURCHASE PLAN

During 1996, the Company implemented an employee stock purchase plan for all
eligible employees to purchase shares of common stock at 85% of the lower of the
fair market value of a share of common stock on the first day of the offering
period or the fair market value of a share of common stock on the purchase date.
Employees may authorize the Company to withhold up to 10% of their compensation
during any offering period, subject to certain limitations. During fiscal 1997,
12,197 shares were issued

F-14
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
under the plan. The weighted-average fair value of those purchase rights granted
in fiscal 1996 and 1997 was $2.11 and $3.20, respectively. At September 30,
1997, 237,803 shares were reserved for future issuance.

NOTE 6--401(k) SAVINGS PLAN

The Company has a 401(k) Savings Plan (the "Plan") which allows eligible
employees to contribute from one percent to the maximum percentage as determined
by the Plan administrator (seventeen percent for the plan years ended December
31, 1995, 1996 and 1997) of pre-tax compensation, with the Company making
discretionary matching contributions as determined each year by the Board of
Directors. Employees vest immediately in their contributions and vest in Company
contributions over a four year period of service. Included in general and
administrative expense for fiscal 1995, 1996 and 1997 are Company contributions
of $24,000, $0 and $0, respectively.

NOTE 7--COMMITMENTS AND CONTINGENCIES

The Company leases certain of its restaurant facilities under noncancelable
operating lease agreements. The leases expire at various dates through 2017 and
contain five to twenty-year renewal options. The leases provide that the Company
pay the taxes, insurance and maintenance expenses related to the leased
facilities, and the monthly rental payments are subject to periodic adjustments.
Certain leases contain fixed escalation clauses and rent under these leases is
charged ratably over the lease term. The majority of the leases also provide for
percentage rentals on sales above a specified minimum.

The aggregate future minimum lease commitments due are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
1998........................................................................... $ 6,166,000
1999........................................................................... 6,036,000
2000........................................................................... 5,700,000
2001........................................................................... 5,668,000
2002........................................................................... 5,657,000
Thereafter..................................................................... 42,758,000
-------------
Total minimum lease payments................................................. $ 71,985,000
-------------
-------------
</TABLE>

The Company incurred rental expenses under all operating leases of
$5,127,000, $5,037,000 and $5,584,000 in fiscal 1995, 1996 and 1997,
respectively. Rental expense includes percentage rentals of $134,000, $171,000
and $227,000 for fiscal 1995, 1996 and 1997, respectively.

The Company is party to litigation involving a lessor who management
believes breached certain exclusivity clauses in the lease of one of its stores.
Management filed a lawsuit alleging breach of such clauses, and the lessor has
countersued the Company alleging that the Company breached the same lease in
connection with the Company's closing of the store in 1994. While there can be
no assurances, in the opinion of management, after reviewing the information
which is currently available with respect to these matters and consulting with
the Company's counsel, the ultimate resolution of these matters will not
materially affect the financial position or results of operations of the
Company.

The Company is also a party to various legal actions relating to former
employees. In the opinion of management, after reviewing the information which
is currently available with respect to these matters,

F-15
<PAGE>
GARDEN FRESH RESTAURANT CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--COMMITMENTS AND CONTINGENCIES (CONTINUED)
and consulting with the Company's counsel, any liability which may ultimately be
incurred will not materially affect the financial position or results of
operations of the Company.

NOTE 8--SUBSEQUENT EVENTS

In November 1997, the Company obtained a $5,000,000 revolving line of
credit. The outstanding principal balance on this line of credit bears interest
at a rate of .75% above the prime rate with interest payable at the beginning of
each month. All outstanding principal and interest amounts are due on November
1, 1999.

F-16
<PAGE>
[Picture of soup and bakery bar]

AT THE HEART OF THE RESTAURANT IS OUR NEW EXHIBITION-STYLE PASTA STATION, ALONG
WITH THE SOUP, BAKERY AND DESSERT BARS.

ONE OF THE NEWEST SWEET TOMATOES OPENED IN UTAH IN NOVEMBER 1997.

[Picture of outside of Sweet Tomatoes Restaurant]

Serving Up
Freshness
For 20 Years
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS 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, ANY SELLING STOCKHOLDERS
OR ANY UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION, OR IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.

--------------------------------

TABLE OF CONTENTS
------------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 3
RISK FACTORS.............................................................. 6
DIVIDEND POLICY........................................................... 11
PRICE RANGE OF COMMON STOCK............................................... 11
USE OF PROCEEDS........................................................... 12
CAPITALIZATION............................................................ 12
SELECTED FINANCIAL DATA................................................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................. 15
BUSINESS.................................................................. 22
MANAGEMENT................................................................ 34
CERTAIN TRANSACTIONS...................................................... 40
PRINCIPAL AND SELLING STOCKHOLDERS........................................ 41
DESCRIPTION OF CAPITAL STOCK.............................................. 42
UNDERWRITING.............................................................. 44
LEGAL MATTERS............................................................. 45
EXPERTS................................................................... 45
AVAILABLE INFORMATION..................................................... 46
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>

1,600,000 SHARES

[LOGO]

GARDEN FRESH
RESTAURANT CORP.

COMMON STOCK

--------------------

PROSPECTUS
---------------

NationsBanc Montgomery
Securities LLC

BancAmerica Robertson Stephens

Morgan Keegan & Company, Inc.

, 1998

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Other expenses in connection with the registration of the securities
hereunder, which will be paid by the Registrant, are estimated to be as follows:

<TABLE>
<CAPTION>
ITEM AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Securities and Exchange Commission registration fee............................... $ 10,381
NASD filing fee................................................................... 3,926
Nasdaq National Market fee........................................................ 17,500
Accounting fees and expenses...................................................... 60,000
Legal fees and expenses........................................................... 135,000
Printing and engraving expenses................................................... 50,000
Transfer agent and registrar fees................................................. 5,000
Miscellaneous expenses............................................................ 18,193
----------
Total........................................................................... $ 300,000
----------
----------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("Delaware Law") permits
indemnification of officers, directors and other corporate agents under certain
circumstances and subject to certain limitations. The Company's Restated
Certificate of Incorporation includes a provision to eliminate the personal
liability of its directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In addition,
the Bylaws of the Company provide that the Company is required to indemnify its
officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified, and to provide
liability insurance if available on reasonable terms. The Company has entered
into indemnification agreements with its officers and directors containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the Delaware General Corporation Law. The
indemnification agreements require the Company, among other things, to indemnify
such officers and directors against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities for
which Delaware law prohibits indemnification), to advance their expenses
incurred as a result of any proceedings against them as to which they could be
indemnified, and to provide liability insurance to the extent that the Company's
policies cover directors, officers, employees or agents. The Company has also
obtained directors' and officers' liability insurance with $3.0 million in
coverage per claim or related claims and $3.0 million in the aggregate. At
present, the Company is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of the Company in
which indemnification would be required or permitted. The Company believes that
its charter provisions and indemnification agreements are necessary to attract
and retain qualified persons as directors and officers.

These indemnification provisions may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
(including reimbursement of expenses incurred) arising under the Securities Act
of 1933.

The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant and its officers and directors for certain liabilities arising
under the Securities Act of 1933, or otherwise.

II-1
<PAGE>
The Company is entering into an indemnification agreement with the Company's
executive officers and directors who are Selling Stockholders pursuant to which
the Company will indemnify the Selling Stockholders for certain liabilities
which could result from this offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In March 1995, the Board of Directors and the stockholders of the Company
approved an amendment to the Company's Restated Certificate of Incorporation
which provided for the payment of a preferential stock dividend of approximately
922,000 shares of Common Stock payable to the holders of the Company's Series B,
C and D Preferred Stock immediately prior to the closing of the Company's
initial public offering. The shares of Common Stock were issued on May 24, 1995.
The issuance of the securities in this transaction was deemed to be exempt from
registration under the Securities Act pursuant to Section 4(2) as a transaction
by an issuer not involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 (1) Form of Underwriting Agreement.

3.1 (2) Restated Certificate of Incorporation of Garden Fresh Restaurant Corp., as amended.

3.2 (3) Bylaws of Garden Fresh Restaurant Corp., as amended.

5.1 (1) Opinion of Gray Cary Ware & Freidenrich LLP.

10.1 (3) Form of Indemnity Agreement for executive officers and directors.

10.2 (3) The Company's Restaurant Management Stock Option Plan, as amended.

10.3 (3) The Company's Key Employee Stock Option Plan, as amended.

10.4 (3) The Company's 1995 Outside Director Stock Option Plan.

10.5 (3) The Company's 1995 Key Employee Stock Option Plan, as amended.

10.6 (4) Form of Executive Employment Agreement.

10.7 (4) Wells Fargo Bank Revolving Line of Credit Note.

10.8 (5) The Company's 1998 Stock Option Plan.

10.9 (5) The Company's Variable Deferred Compensation Plan for Executives.

10.13(3) Park Terrace Office Park Lease between the Company and Park Terrace Partners dated November 1, 1991.

10.14(1) Indemnification Agreement between the Company and the Selling Stockholders dated April 28, 1998.

23.1 Consent of Price Waterhouse LLP, Independent Accountants.

23.2 (1) Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1).

24.1 (1) Power of Attorney (included on Page II-4).
</TABLE>

- ------------------------

(1) Previously filed as an exhibit to this Registration Statement.

(2) Incorporated by reference from Exhibit 4.1 filed with the Company's
Registration Statement on Form S-8 (No. 33-93568) filed June 16, 1995.

II-2
<PAGE>

(3) Incorporated by reference from the Exhibits with corresponding numbers filed
with the Company's Registration Statement on Form S-1 (No. 33-90404), as
amended by Amendment No. 1 to Form S-1 filed on April 19, 1995, Amendment
No. 2 to Form S-1 filed May 8, 1995 and Amendment No. 3 to Form S-1 filed
May 15, 1995, except that Exhibit 10.2 is incorporated by reference from
Exhibits 10.2 and 10.2A, Exhibit 10.3 is incorporated by reference from
Exhibits 10.3 and 10.3A and Exhibit 10.5 is incorporated by reference from
Exhibit 10.5 and 10.5A.

(4) Incorporated by reference from the Exhibits with corresponding numbers filed
with the Company's Form 10Q filed with the SEC on February 13, 1998.

(5) Incorporated by reference from the Exhibit with the corresponding number
filed with the Company's Form 10Q filed with the SEC on April 28, 1998.

(B) FINANCIAL STATEMENT SCHEDULES

All such schedules have been omitted because they are not applicable or not
required under the instructions contained in Regulation S-X or because the
information is included elsewhere in the Financial Statements or the notes
thereto.

ITEM 17. UNDERTAKINGS

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 Securities Act
of 1933 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, office 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 Securities
Act of 1933 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 4340A 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 of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective; and

(2) For the purpose of determining any liability under the Securities
Act, 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.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Diego, State of California, on the 15th day of May, 1998.

<TABLE>
<S> <C> <C>
GARDEN FRESH RESTAURANT CORP.

By: /s/ DAVID W. QUALLS
-----------------------------------------
David W. Qualls
EXECUTIVE VICE PRESIDENT - FINANCE AND
REAL ESTATE, CHIEF FINANCIAL OFFICER AND
SECRETARY
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------

Chairman of the Board,
* Chief Executive Officer,
- ------------------------------ President and Director May 15, 1998
Michael P. Mack (PRINCIPAL EXECUTIVE
OFFICER)

Executive Vice
President-Finance and
/s/ DAVID W. QUALLS Real Estate, Chief
- ------------------------------ Financial Officer and May 15, 1998
David W. Qualls Secretary (PRINCIPAL
FINANCIAL AND ACCOUNTING
OFFICER)

*
- ------------------------------ Director May 15, 1998
Edgar F. Berner

*
- ------------------------------ Director May 15, 1998
Robert A. Gunst

*
- ------------------------------ Director May 15, 1998
Michael M. Minchin, Jr.

*By: /s/ DAVID W. QUALLS
-------------------------
David W. Qualls,
ATTORNEY-IN-FACT

II-4
<PAGE>
EXHIBIT INDEX

3.1 (2) Restated Certificate of Incorporation of Garden Fresh Restaurant Corp., as amended.

3.2 (3) Bylaws of Garden Fresh Restaurant Corp., as amended.

5.1 (1) Opinion of Gray Cary Ware & Freidenrich LLP.

10.1 (3) Form of Indemnity Agreement for executive officers and directors.

10.2 (3) The Company's Restaurant Management Stock Option Plan, as amended.

10.3 (3) The Company's Key Employee Stock Option Plan, as amended.

10.4 (3) The Company's 1995 Outside Director Stock Option Plan.

10.5 (3) The Company's 1995 Key Employee Stock Option Plan, as amended.

10.6 (4) Form of Executive Employment Agreement.

10.7 (4) Wells Fargo Bank Revolving Line of Credit Note.

10.8 (5) The Company's 1998 Stock Option Plan.

10.9 (5) The Company's Variable Deferred Compensation Plan for Executives.

10.13(3) Park Terrace Office Park Lease between the Company and Park Terrace Partners dated November 1, 1991.

10.14(1) Indemnification Agreement between the Company and the Selling Stockholders dated April 28, 1998.

23.1 Consent of Price Waterhouse LLP, Independent Accountants.

23.2 (1) Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1).

24.1 (1) Power of Attorney (included on Page II-4).
</TABLE>

- ------------------------

(1) Previously filed as an exhibit to this Registration Statement.

(2) Incorporated by reference from Exhibit 4.1 filed with the Company's
Registration Statement on Form S-8 (No. 33-93568) filed June 16, 1995.

(4) Incorporated by reference from the Exhibits with corresponding numbers filed
with the Company's Form 10Q filed with the SEC on February 13, 1998.

(5) Incorporated by reference from the Exhibit with the corresponding number
filed with the Company's Form 10Q filed with the SEC on April 28, 1998.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 7, 1997, except
as to net income (loss) per share information as reflected in the Statement of
Operations and Notes 1 and 5 which is as of April 27, 1998, relating to the
financial statements of Garden Fresh Restaurant Corp., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.

PRICE WATERHOUSE LLP

San Diego, California
May 15, 1998