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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended September 30, 2003

OR

For the transition period from                     to                    

0-25886

(Commission file number)

GARDEN FRESH RESTAURANT CORP.

(Exact name of registrant as specified in its charter)

(858) 675-1600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as described in Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of March 31, 2003 was $33,672,000.*

*Excludes the Common Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding as of March 31, 2003. The calculation does not reflect a determination that such persons are affiliates for any other purposes.

Number of shares of Common Stock, $0.01 par value, outstanding as of November 14, 2003 was 5,833,792.

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GARDEN FRESH RESTAURANT CORP.

ANNUAL REPORT ON FORM 10-K

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PART I

Item 1.    Business

The statements contained in this Form 10-K 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 words such as “expects,” “will,” “may,” “could,” “anticipates,” “believes,” “intends,” “attempts,” and “seeks” are forward looking statements. These forward looking statements, including statements regarding (i) plans to operate and expand within its applicable segment of the restaurant industry, (ii) beliefs regarding operating margins and price structures, (iii) standards of customer service, (iv) strategies to increase guest frequency rates, (v) the benefits of utilizing distribution centers and central kitchens, (vi) the Company’s expansion and construction plans, (vii) the expenses and performance of the restaurants, (viii) the expenses associated with increased insurance premiums, (ix) the expected increase of occupancy and other costs, (x) the anticipation of an increase to the provisional income tax rate, (xi) the need to obtain additional financing, (xii) future restaurant sales, (xiii) the Company’s expectations regarding increased competition and its ability to compete against other companies, (xiv) strategic marketing programs and effects of such programs, (xv) the sufficiency of the Company’s sources of cash to meet its requirements and its ability to comply with financial covenants, (xvi) the result of litigation and its impact on the Company, (xvii) the impact of new accounting standards, and (xviii) the ability to complete the pending merger transaction referred to in this report and the additional costs to be incurred related to this transaction, are all based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements. 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Risks.” 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, while the Company’s plans to increase operational efficiency could be affected by escalating costs of goods and services.

General

Garden Fresh Restaurant Corp. was founded in 1983 and currently operates 97 salad buffet style restaurants in California, Florida, Arizona, Colorado, Georgia, Illinois, Kansas, Missouri, Nevada, New Mexico, North Carolina, Oregon, Texas, Utah, and Washington under the names Souplantation and Sweet Tomatoes. The Company’s restaurants feature soups, salads, freshly baked goods and desserts. Due to its focus on fresh food, 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 has developed strategies that will further its penetration into this segment and it believes that the opportunity for expansion within this segment continues to be attractive relative to expansion opportunities into other restaurant segments.

The Company’s menu is designed to focus on high quality, freshly made, great tasting food. The dining experience begins with the salad bar and is completed with other interesting and exciting food offerings at the hot 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 $6.49 to $7.99 at lunch and from $7.89 to $9.29 at dinner. The restaurants provide discounts to children under 12 and to senior citizens. Throughout the year the Company utilizes various other discount and coupon programs.

On September 30, 2003, the Company announced that it had entered into a definitive agreement to merge with an affiliate of Fairmont Capital, Inc. The merger agreement provides that the stockholders of Garden Fresh will receive $16.35 per share in cash for their shares of common stock. The merger agreement was amended on November 21, 2003. Any references to “the merger” or a “pending merger” in this report refer to the transaction contemplated by that agreement as so amended. The merger is pending as of the date of this report.

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Business Strategy

The Company’s fundamental strategy is to provide a casual restaurant dining experience that combines the variety and choice characteristic to buffet style restaurants with the food quality and attention to guests typical of 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 Fresh Food. The Company seeks to provide fresh wholesome food beginning with salads, which are featured on two approximately 55 foot-long 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, 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, other breads, warm desserts, and a traditional 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 and encourages its guests to enjoy the benefits of selecting from an abundance of choices offered at the various food bars within the restaurant. In addition to high service standards, the Company has implemented several programs to both measure and 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 varied product mix at each restaurant are maintained at such a level that the resulting meal experience can only be duplicated in other existing 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 high quality products is combined with the Company’s ability to manage costs rigorously. This is achievable only through the use of the Company’s fully integrated, computer management information system (See “Restaurant Operations—Information Management System”). The system allows a restaurant 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, 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 valuable strengths.

Unit Economics

The following table contains selected restaurant operating statistics for the 95 restaurants that were open for the entire 12 month period ended September 30, 2003.

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The following table illustrates the approximate average capital investment for a salad buffet restaurant based on the 95 stores that were open for the entire period ended September 30, 2003.

The Company’s restaurants experience seasonal influences, as a disproportionate amount of the Company’s net income is generally 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 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.

Restaurant Operations

Restaurant Level Operation.

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. Each restaurant receives independent evaluations of product quality, cleanliness and service from secret shoppers approximately twice a month. The results of these independent evaluations are taken into consideration in determining each restaurant manager’s monthly bonus.

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Information Management System (IMS). The Company is committed to controlling costs without sacrificing either food quality or guest service. To accomplish this, the Company has developed an integrated management information system. The specific components of the IMS are:

Food Management System (FMS). The Company utilizes a system for managing all aspects of food production which encompasses purchasing, preparation, and distribution in order to emphasize food quality and costs as well as to focus on safety and sanitation. This system removes responsibility for the food distribution process away from restaurant operations management so that restaurant managers can provide more attention to total guest experience within the restaurant. The following components comprise the Food Management System (FMS):

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Potential increases in costs for utilities and fuel along with increased hourly wage rates and increased insurance costs for property and employees could adversely affect the distribution center’s ability to provide or deliver food or supplies at favorable costs in the future.

There can be no assurance that the Company, through its restaurant operating strategies, management information system or food management system, will experience higher net sales, cost reduction savings, or increases in net income in the future.

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 believes that a strong execution of the Company’s concept at the restaurant level is the platform for external media and promotional efforts.

A significant portion of the Company’s external marketing effort consists of attracting new guests through the use of freestanding inserts (“FSIs”). FSIs contain descriptive information regarding the restaurants, as well as in most 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.

During fiscal 2003 the Company increased its use of radio advertising to stimulate demand to the majority of its markets during different periods throughout the year.

In addition, the restaurants often co-sponsor fundraising 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

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the restaurant. The program typically includes special promotions, site signs and sponsorship of a fundraising 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 2003, marketing and promotion expenses of $6,662,000 constituted approximately 3.0% of net sales.

There can be no assurance that the marketing and promotion strategies discussed herein will result in higher net sales in the future.

Expansion Strategy

In fiscal 2003, the Company opened two new restaurants and a stand alone central kitchen facility in California. The Company does not have any plans for expansion in fiscal 2004. The Company expects unit growth to accelerate after 2004 within its existing regions. Expansion within the Company’s existing regions will allow the Company to continue generally utilizing a central kitchen to serve several restaurants located within a particular region.

Since its inception the Company has closed three non-performing salad buffet restaurants, one small quick service restaurant, two Ladles restaurants and its one Slurp! restaurant. 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 affect 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 expenses for some time after opening. In the Company’s experience, operational expenses tend to stabilize over a period of three to fifteen months after a store opens. Owned restaurants generally require significantly more up-front capital than leased restaurants, as a result of which an increase in the percentage of owned restaurant openings as compared to historical practice would increase the overall capital required to meet the Company’s growth plans. There can be no assurance that the Company will successfully expand 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.

The Company currently has no plans to offer franchises.

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 seats approximately 220 guests. The Company’s existing restaurants average approximately 7,400 square feet (including the dining area, kitchen and food preparation and storage areas).

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Location. The following is a list of the Company’s current salad buffet restaurants, central kitchens, and distribution centers and their location by state as of September 30, 2003:

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Property

The Company currently leases 75 and owns 22 open restaurant sites of which 77 are freestanding and 20 are located inline within large buildings. The majority of the Company’s leases provide for minimum annual rentals and contain percentage-of-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. Typically, 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 30,000 square foot leased facility in San Diego, California under a lease expiring in July 2012. The West Coast distribution center is located in an approximately 30,000 square foot leased facility in San Diego, California under a lease expiring in March 2005, while the East Coast distribution center occupies an approximately 32,000 square foot facility under a lease expiring in June 2008.

Restaurant Industry and 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 at dinner and fast casual restaurants at lunch. Additionally, the Company competes with traditional self-service buffet and other soup and salad restaurants and healthful and nutrition-oriented restaurants at both meal periods. The Company competes with national and regional chains, as well as individually owned restaurants. The number of casual restaurants with operations generally similar to the Company’s has grown substantially in the last several years and the Company believes competition among 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. Many of the Company’s competitors have been in existence longer than the Company and have both a more established market presence and 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.

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 recently completed the development of, and has commenced utilizing a demographic based site selection model to measure the accuracy of sales forecasting for projected units.

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.

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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 freestanding 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Risks—Expansion Risks.”

There can be no assurance that the Company will continue to be successful in selecting or acquiring suitable restaurant sites or that it will be successful in developing a site selection model that will favorably assist the site selection process.

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. 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 and the other fourteen states in which the Company operates) passed proposals that imposed increases in state or federal minimum wages in 1996, 1997, 1998, 2000, 2001, 2002, and 2003. 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 Immigration and Naturalization Service (“INS”). Given that many of the Company’s restaurants are located in California and Arizona, 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 and similar legislation has been passed in California that may go into effect in 2006. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Risks—Cost Sensitivity.”

Insurance

The Company carries property, liability, product tampering, business interruption, automobile, umbrella, fiduciary liability, crime, earthquake, flood, directors and officer’s liability, employee health, 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, Colorado, North Carolina, Nevada, Georgia, Texas, Washington, Oregon, Kansas, Missouri and Illinois 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. The Company has also used the trademark and service marks “Ladles, A Soup and Salad Takery” and “Slurp! The Soup Experience” in the California market.

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Employees

As of September 30, 2003, the Company had 5,420 employees including 4,955 hourly restaurant employees (of whom 4,009 were part-time employees), 320 full-time restaurant management employees, 30 full-time distribution employees, 111 full-time corporate management and staff employees and 4 part-time corporate employees. None of the Company’s employees are represented by a labor union. The Company believes that its relationship with its employees is good.

Other

The Company provides a link to this and previous Company filings on forms 10-K, 10-Q, 8-K, S-8 and other SEC filings through its website, accessible at www.gardenfreshcorp.com, www.souplantation.com or www.sweettomatoes.com.

Item 2.    Properties

The Company currently leases 75 and owns 22 open restaurant sites of which 77 are freestanding and 20 are located inline within large buildings. In addition, the Company also owns land for two potential restaurant sites. The majority of the Company’s leases provide for minimum annual rentals and contain percentage-of-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. Typically, 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 30,000 square foot leased facility in San Diego, California under a lease expiring in July 2012. The West Coast distribution center is located in an approximately 30,000 square foot leased facility in San Diego, California under a lease expiring in March 2005, while the East Coast distribution center occupies an approximately 32,000 square foot facility under a lease expiring in June 2008. For additional information regarding the Company’s properties, please see the information set forth in Item 1 of this Report under the caption “Restaurant Facilities”.

Item 3.    Legal Proceedings

On September 29, 2003, the Company entered into an Agreement and Plan of Merger with GF Holdings, Inc. (“GF Holdings”), a Delaware corporation, and GFR Acquisition Company, a Delaware corporation and wholly-owned subsidiary of GF Holdings (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company, with the Company being the surviving corporation and becoming a wholly-owned subsidiary of GF Holdings. On October 2, 2003, a purported stockholder class action lawsuit was filed in the San Diego Superior Court against the Company, its directors and 25 unnamed “Doe” defendants entitled Allan Aites v. Garden Fresh Restaurant Corp., et al., Case No. GIC818850. The suit alleges that the individual defendants breached their fiduciary duty to the Company’s stockholders in connection with the merger by advancing their individual interests at the expense of the Company’s stockholders. The complaint also alleges that the individual defendants failed to properly value the Company, ignored conflicts of interest in connection with the merger and failed to engage in arm’s length negotiations in the merger. The complaint seeks: (i) a declaration that the merger agreement was entered into in breach of the defendants’ fiduciary duties; (ii) an injunction against the defendants preventing them from consummating the merger unless a procedure or process is adopted to obtain the highest possible price for the stockholders; (iii) disclosure of fourth quarter financial information; (iv) rescission of the merger agreement; (v) such other equitable relief as the court deems appropriate; and (vi) an award of attorneys’ fees, among other relief. The Company believes that this lawsuit is without merit and intends to defend against it vigorously. A hearing on the defendants’ demurrer and application to have the complaint dismissed has been scheduled by the Court for February 6, 2004. The claims have not progressed sufficiently for the Company to estimate a range of possible exposure, if any.

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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 could result in an adverse decision against the Company that could adversely affect the Company or its business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Risks—Legal Matters”.

Item 4.    Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003.

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PART II

Item 5.    Market for Company’s Common Equity and Related Stockholder Matters

Garden Fresh Restaurant Corp. Common Stock (Symbol: LTUS) is traded over the counter via NASDAQ National Market. As of September 30, 2003, 5,824,023 shares were owned by 350 shareholders of record. The following is a summary of market activity for the fiscal years 2002 and 2003.

Garden Fresh Restaurant Corp. completed its initial public offering (IPO) on May 16, 1995 at a price of $9.00 per share.

To date, the Company has not paid any cash dividends. The Company intends to retain future earnings for use in its business and does not anticipate paying cash dividends in the foreseeable future.

For the year ended September 30, 2003, the Company had the following compensation plans under which it has authorized the issuance of equity securities:

The Company has five stock option plans under which 2,282,500 options are authorized to be granted to employees, consultants and directors of the Company. Of this balance, 451,979 options are still available to be granted as of September 30, 2003. 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 2001, 2002 and 2003, 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 one to five years and may be exercised in annual installments ranging from one 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 7,500 shares annually thereafter.

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Item 6.    Selected Financial Data

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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.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

In response to the SEC’s Release Numbers 33-8050 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and 33-8056, “Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company has identified the following critical accounting policies that reflect the more significant judgments and estimates used in the preparation of our financial statements. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to impairment of long-lived assets, accruals for workers compensation claims, and contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

We believe that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements:

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possible exposure, if any, and accordingly, the Company has not recorded a liability for its estimated losses under this dispute. The Company is not aware of any additional pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations. Should the Company become aware of such claims, should the amounts it is currently disputing change, or should the Company be able to estimate the range of possible exposure for the stockholder class action lawsuit, it will re-evaluate its estimated losses and provide new or additional accruals for such contingencies as necessary.

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 97 restaurants as of September 30, 2003. Of the 97 restaurants, 33 are located in Southern California using the name Souplantation and the remaining are located in Northern California (7), Florida (18), Arizona (8), New Mexico (2), Utah (2), Nevada (2), Washington (1), Georgia (4), Texas (4), North Carolina (2), Oregon (3), Colorado (4), Missouri (3) Kansas (1) and Illinois (3) using the name Sweet Tomatoes. The Company’s existing restaurants average approximately 7,400 square feet, however, newer restaurants are based on the Company’s latest 7,240 sq. ft prototype. 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.

On September 30, 2003, the Company announced that it had entered into a definitive agreement to merge with an affiliate of Fairmont Capital, Inc. The merger agreement provides that the stockholders of Garden Fresh will receive $16.35 per share in cash for their shares of common stock. The merger is pending as of the date of this report.

Net sales reflect discounts and coupons. Costs 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, the majority of which have 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 expenses 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 “Business Risks—Cost Sensitivity” and “Business Risks—Reliance on Key Suppliers and Distributors.”

Restaurant opening costs incurred in connection with opening new restaurant locations, including hiring, training and legal costs, are currently expensed as incurred. Restaurant opening costs totaled $227,000 for the opening of two new salad buffet restaurants opened and one distribution center in the twelve month period ended September 30, 2003.

Fiscal 2003 Versus Fiscal 2002

Net Sales. Net sales for the fiscal year ended September 30, 2003 increased 2.9% to $220.5 million from $214.3 million for the comparable 2002 period. This increase was due primarily to twelve months of sales revenue contributed by the two new restaurants added during fiscal 2002 that were not open for the entire fiscal 2002 period, to the opening of two new restaurants in fiscal 2003 and to the increase in comparable restaurant sales of 1.6% for fiscal 2003. The same store sales increase was driven by an increase in same store average meal price of 2.7%, offset by a decrease in guest counts of 1.1% since the comparable 2002 period. See “Business Risks—Certain Operating Results and Considerations”.

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Costs of Sales. Costs of sales for the fiscal year ended September 30, 2003 increased 3.1% to $53.9 million from $52.3 million for the comparable 2002 period. This increase was due primarily to the two new restaurants added during fiscal 2002 that were not open for the entire fiscal 2002 period and to the addition of two new restaurants in fiscal 2003. As a percentage of net sales, costs of sales have remained consistent at 24.4% for fiscal 2003 and 2002. Should the Company continue to make expenditures towards menu improvement or to support specific programs, costs of sales can be expected to continue to increase. See “Business Risks—Certain Operating Results and Considerations”.

Labor. Labor expense for the fiscal year ended September 30, 2003 increased 2.5% to $69.8 million from $68.1 million for the comparable 2002 period. This increase was due primarily to (i) an increase in the minimum wage rate in California, (ii) two new restaurants added during fiscal 2002 that were not open for the entire fiscal 2002 period, and (iii) the addition of two new restaurants and one stand alone central kitchen opened in fiscal 2003. As a percentage of net sales, labor expense decreased 0.1 percentage points to 31.7% from 31.8% since the comparable 2002 period. The decrease as a percentage of net sales is due to programs put in place to better utilize crew labor hours and reduce the number of managers in each store from four to three, partially offset by higher wage rates across markets, increased health and workers’ compensation insurance premiums for restaurant employees due to escalating rate pressures from the insurance industry, and increased costs for employee benefits. The Company expects health and workers’ compensation insurance premiums to continue to increase, especially in California, its largest employment base, resulting in increased labor expense.

Occupancy and Other Expenses. Occupancy and other expenses for the fiscal year ended September 30, 2003 increased 9.0% to $56.8 million from $52.1 million for the comparable 2002 period. Occupancy and other expenses as a percentage of net sales increased 1.5 percentage points to 25.8% from 24.3% for the comparable 2002 period. This increase was due primarily to an increase in marketing expense, increases in base rent from Consumer Price Index (CPI) escalations for leased sites as well as increased rent from the sale-leaseback of one site during fiscal 2003. In addition, part of the increase can be attributed to higher utility costs and increased liability and property insurance costs as a result of increased rate pressure throughout the insurance industry. The Company anticipates occupancy and other expenses to increase as it continues to experience rising insurance premiums, increasing rent expense resulting from CPI escalation clauses under operating leases and higher repair and maintenance expenses relating to its aging restaurant base. Such expenses will be partially offset by decreased depreciation expense related to the older assets reaching the end of their useful lives. Should the Company undertake additional sale-leasebacks of existing sites it would incur increased base rent related to new leases at those sites but experience a decrease in depreciation expense related to the sale of those assets. See “Business Risks—Other Operating Expenditures”.

General and Administrative Expenses. General and administrative expenses for the fiscal year ended September 30, 2003 increased 5.9% to $14.3 million from $13.5 million for the comparable 2002 period. As a percentage of net sales, general and administrative expenses increased 0.2 percentage points to 6.5% from 6.3% for the comparable 2002 period. The increase as a percentage of net sales is the result of increased staffing in the real estate and marketing departments and increased fees for audit, tax, and legal services, which were only partially offset by higher sales.

Restaurant Opening Costs. Restaurant opening costs for the fiscal year ended September 30, 2003 decreased 33.3% to $0.2 million from $0.3 million from the comparable 2002 period due to the timing of restaurant openings. Two salad buffet restaurants and one central kitchen facility were opened during fiscal 2003 compared to two salad buffet restaurants and one distribution center opened in fiscal 2002. Restaurant opening costs as a percentage of net sales remained consistent at 0.1% for both the 2003 and 2002 period.

Depreciation and Amortization Expense. Depreciation and amortization expense for the fiscal year ended September 30, 2003 increased 5.8% to $14.5 million from $13.7 million for the comparable 2002 period. Depreciation and amortization expense as a percentage of net sales increased 0.2 percentage points to 6.6% from 6.4% for the comparable 2002 period. These increases are the result of additional expense related to the opening

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of two new restaurants and the stand-alone kitchen facility, and to a full year of depreciation expense related to the addition of a new corporate office and the amortization of a new accounting software package compared to the 2002 period, where only a partial amount of these charges were included in the balance. These increases were partially offset by decreased depreciation expense associated with the sale-leaseback of one restaurant site since the comparable 2002 period.

Facility Exit Costs. The Company did not incur any costs related to facility exit activities for the fiscal year ended September 30, 2003 compared to a gain of $0.1 million for the comparable 2002 period.

Merger Costs. The Company incurred costs of $997,000 related to the merger acquisition activities that occurred during the fourth quarter 2003. These costs include fees paid to obtain a fairness opinion, legal and accounting services, and other transaction related costs. These expenses are expected to continue until the transaction is completed.

Interest Income. Interest income for the fiscal year ended September 30, 2003 was $55,000 compared to $85,000 for the comparable 2002 period as a result of lower interest rates combined with decreased investing activity of available cash.

Interest Expense. Interest expense for the fiscal year ended September 30, 2003 decreased 17.8% to $3.7 million from $4.5 million for the comparable 2002 period as a result of lower interest rates and the reduction in debt balances since the same period in the prior fiscal year.

Other Income (Expense), net. Other expense, net for the fiscal year ended September 30, 2003 increased to $639,000 from $394,000 for the comparable 2002 period. The additional expense for the 2003 period is due to increased asset disposals during fiscal 2003 compared to the same period in fiscal 2002.

Provision for Income Taxes. For the fiscal year ended September 30, 2003, the provisional income tax rate as a percentage of income before taxes increased 6.0 percentage points to 47.0% from 41.0% for the comparable period in fiscal 2002 as a result of higher apportionment of taxable earnings to states such as California and Illinois that have greater marginal income tax rates, and a larger amount of permanent differences associated with the merger costs, which are non-deductible for tax purposes. The Company anticipates that it will continue to experience the effects of apportionment on its taxable earnings should it continue to expand into or continue to concentrate within states with greater marginal income tax rates.

Fiscal 2002 Versus Fiscal 2001

Net Sales. Net sales for the fiscal year ended September 30, 2002 increased 8.0% to $214.3 million from $198.5 million for the comparable 2001 period. This increase was due primarily to twelve months of sales revenue contributed by the nine new restaurants added and one existing restaurant re-opened during fiscal 2001 that were not open for the entire fiscal 2001 period, the opening of two new restaurants since the comparable 2001 period and the increase in comparable restaurant sales of 2.1%. The same store sales increase was driven by an increase in same store average meal price of 2.1% since the comparable 2001 period. Net sales for 2002 includes $0.3 million from the Ladles and Slurp! restaurants compared to $0.6 million for 2001. See “Business Risks—Certain Operating Results and Considerations”.

Costs of Sales. Costs of sales for the fiscal year ended September 30, 2002 increased 5.9% to $52.3 million from $49.4 million for the comparable 2001 period. This increase was due primarily the nine new restaurants added and one existing restaurant re-opened during fiscal 2001 that were not open for the entire fiscal 2001 period and the addition of two new restaurants in fiscal 2002. As a percentage of net sales, costs of sales decreased 0.5 percentage points to 24.4% from 24.9% since the comparable 2001 period. The decrease as a percentage of net sales is due to increases in average meal price during fiscal 2002 and to efficiencies achieved through the utilization of the East Coast distribution center resulting in lower food costs. See “Business Risks—Certain Operating Results and Considerations”.

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Labor. Labor expense for the fiscal year ended September 30, 2002 increased 5.7% to $68.1million from $64.4 million for the comparable 2001 period. This increase was due primarily to an increase in the minimum wage rate in California and to the nine new restaurants added and one existing restaurant re-opened during fiscal 2001 that were not open for the entire fiscal 2001 period and the addition of two new restaurants opened in fiscal 2002. As a percentage of net sales, labor expense decreased 0.7 percentage points to 31.8% from 32.5% since the comparable 2001 period. This decrease is due to increases in average meal price during fiscal 2002 and programs put in place to better utilize crew labor hours and reduce the number of managers in each store from four to three.

Occupancy and Other Expenses. Occupancy and other expenses for the fiscal year ended September 30, 2002 increased 10.4% to $52.1 million from $47.2 million for the comparable 2001 period. Occupancy and other expenses as a percentage of net sales increased 0.6 percentage points to 24.3% from 23.7% for the comparable 2001 period. This increase was due primarily to higher property insurance costs as a result of increased rate pressure throughout the insurance industry, increases in base rent associated with sale-leasebacks, and repair and maintenance costs for aging restaurants. During the fiscal year ended September 30, 2002, the Company completed four sale-leaseback transactions whereby the Company sold and leased back the land and building for four separate restaurant sites.

General and Administrative Expenses. General and administrative expenses for the fiscal years ended September 30, 2002 and 2001 remained consistent at $13.5 million. As a percentage of net sales, general and administrative expenses decreased 0.5 percentage points to 6.3% from 6.8% for the comparable 2001 period. The decrease as a percentage of net sales is the result of higher net sales and to reduced spending due to a reduction in staff and programs put in place to better manage general and administrative expenditures.

Restaurant Opening Costs. Restaurant opening costs for the fiscal year ended September 30, 2002 decreased 85.0% to $0.3 million from $2.0 million from the comparable 2001 period. Restaurant opening costs as a percentage of net sales decreased 0.9 percentage points to 0.1% from 1.0% for the comparable 2001 period. The decrease is consistent with the Company’s reduction in restaurant opening activity during fiscal 2002 compared to fiscal 2001. Two salad buffet restaurants were opened during fiscal 2002 compared to nine salad buffet restaurants and one Slurp! restaurant opened and one existing restaurant re-opened during fiscal 2001.

Depreciation and Amortization Expense. Depreciation and amortization expense for the fiscal year ended September 30, 2002 increased 9.6% to $13.7 million from $12.5 million for the comparable 2001 period. Depreciation and amortization expense as a percentage of net sales increased 0.1 percentage points to 6.4% from 6.3% for the comparable 2001 period. These increases were due to additional depreciation for the two new restaurants opened since the comparable 2001 period and to depreciation expense related to the new accounting software package and new corporate office, partially offset by decreased depreciation expense associated with the sale-leaseback of four restaurant locations since the comparable 2001 period.

Facility Exit Costs. The Company recorded a gain of $0.1 million related to facility exit costs for the fiscal year ended September 30, 2002 compared to an expense of $1.6 million for the comparable 2001 period. In September 2001, the Company decided to abandon the Ladles and Slurp! concepts due to poor operating performance. The Company closed these restaurants during the first half of fiscal 2002. Facility exit costs for fiscal 2001 consist of impairment charges of $1,368,000 as well as an accrual of $204,000, representing the present value of the estimated net future lease payments associated with these restaurants. During fiscal 2002, the Company made cash payments to reduce the liabilities for future rent payments of $121,000. The Company reversed the accrual for the remaining balance of $83,000 during the fourth quarter of fiscal year 2002 due to the termination of the lease of the Ladles location and a long-term sublease for the Slurp! location.

Interest Income. Interest income for the fiscal year ended September 30, 2002 decreased 50.0% to $0.1 million from $0.2 million for the comparable 2001 period as a result of lower interest rates combined with decreased investing activity of available cash.

Interest Expense. Interest expense for the fiscal year ended September 30, 2002 decreased 8.2% to $4.5 million from $4.9 million for the comparable 2001 period as a result of lower interest rates and to the reduction in debt balances since the same period in the prior fiscal year.

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Other Income (Expense), net. Other income and expense, net for the fiscal year ended September 30, 2002 decreased to ($394,000) from $804,000 for the comparable 2001 period. This decrease was primarily due to the receipt of an insurance settlement of $1.3 million in fiscal 2001 related to the loss of assets in a fire at a restaurant in San Diego, California which offset asset disposals in the same period. Expenses incurred during fiscal 2002 relate to asset disposals.

Provision for Income Taxes. For the fiscal year ended September 30, 2002, the provisional income tax rate as a percentage of income before taxes increased 1.4 percentage points to 41.0% from 39.6% for the comparable period in fiscal 2001 as a result of higher apportionment of taxable earnings to states such as California and Illinois that have greater marginal income tax rates.

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 2002 and 2003. 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.

The Company’s restaurants experience seasonal influences, as a disproportionate amount of the Company’s net income is generally realized during the second, third and fourth fiscal quarters due to higher average sales and lower average costs. However, during the fourth quarter of fiscal year 2003, the Company incurred costs of $997,000 related to the merger transaction, which ultimately resulted in the Company incurring a net loss for the period. Had these charges not been incurred, fourth quarter results would have resulted in net income for the quarter. 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, and are not necessarily indicative of the results that may be achieved for a full fiscal year.

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Liquidity and Capital Resources

The Company’s principal capital requirement has been both for funding the development of new restaurants and improving existing restaurants. The Company finances its cash requirements principally from cash flows from operating activities, bank debt, mortgage financing, equipment lease financing, sale-lease back of owned properties and the sale of Company stock. Cash and cash equivalents increased $5.8 million to $11.1 million at September 30, 2003 from $5.3 million at the beginning of the fiscal year. The higher cash balance at September 30, 2003 resulted from cash generated from operations and the receipt of proceeds related to financing activities during the year ended September 30, 2003. These proceeds were used to fund capital expenditures and to repay borrowings that existed previously.

Capital expenditures totaled $11.2 million during fiscal 2003 and $12.8 million for the comparable period in fiscal 2002. During fiscal 2003, the Company made capital expenditures of $6.0 million (including the decrease in construction costs included in accounts payable) for construction of two new restaurants and a stand-alone kitchen facility, which opened during the second quarter of fiscal 2003, and $5.2 million for capital improvements at existing sites. For fiscal 2002, the Company paid $4.7 million (including the decrease in construction costs included in accounts payable) for the opening of two new restaurants, and construction of future restaurants, and paid $8.0 million for capital improvements at existing restaurants. The cash investment to open a new restaurant excludes restaurant opening costs and 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’s original capital budget for fiscal 2003 totaled $12.7 million, which included $6.7 million for the completion of the construction of three new restaurants, one stand-alone kitchen facility and $6.0 million for capital improvements for existing facilities. In January 2003, the Company completed its development of the two new restaurants and the stand-alone kitchen facility. The Company currently does not have plans to open any additional restaurants in fiscal 2004. See “Business Risks—Expansion Risks.”

During fiscal 2003, the Company generated $18.0 million in cash flows from operating activities, obtained $8.7 million from long-term equipment financing and $1.5 million from the draw on the line of credit, received proceeds from a sale-lease back transaction of $3.1 million, and received $0.7 million from the sale of the Company’s Common Stock pursuant to stock option plans and the Company’s Employee Stock Purchase Plan. In addition, the Company made repayments of $13.5 million towards its long-term debt obligations and $1.5 million of repayments on the line of credit during the year ended September 30, 2003.

The Company’s current assets increased $6.0 million to $24.3 million at September 30, 2003 from September 30, 2002 primarily due to the increases in cash and cash equivalents, inventories and other assets. The Company’s current liabilities increased $7.0 million to $34.9 million at September 30, 2003 from September 30, 2002 primarily due to an increase in accrued liabilities and the current portion of long term debt. The Company and the restaurant industry in general maintain insignificant receivables and vendors grant trade credit for purchasing food and supplies. Inventories have increased $547,000 from September 30, 2002 in order to support the addition of two new restaurants and a stand-alone central kitchen during the year ended September 30, 2003. The Company also continues to invest in the business through the addition of new restaurants and refurbishment of existing restaurants, which are reflected as long-term assets and not as part of working capital. As of September 30, 2003 the current ratio increased to 0.70 to 1.0 compared with 0.66 to 1.0 at the beginning of the fiscal year, primarily due to the increase in cash and cash equivalents and inventories and the decrease in accounts payable, offset by an increase in current portion of long-term debt. There can be no assurance that the Company will continue to reduce its working capital deficit in the future.

As of September 30, 2003, the Company operated 97 restaurants. The Company currently owns the land or land and buildings for 24 restaurants, including the land for two sites related to future openings. The Company opened two new restaurants and one new stand alone kitchen facility in January 2003, and as a result incurred restaurant opening costs of $227,000 during the year ended September 30, 2003. See “Business Risks—Expansion Risks.”

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The Company requires capital principally to grow the business through new restaurant construction, as well as to maintain, improve and refurbish existing restaurants, and for general operating purposes. In addition to funds generated from operations, the Company may need to obtain external financing in the form of a sale-lease back of owned properties and long-term debt financing to complete its long-term plans for expansion of new restaurants and improvements to existing restaurants and meet principal payments on its existing loans. There can be no assurance that such funds will be available when needed and should the Company not be able to obtain such financing it may be forced to delay the development of new restaurants in the future and cease improvements to existing restaurants. Additionally, should the Company’s results of operations decrease it may not have the ability to pay its debt of $38.8 million outstanding at September 30, 2003. Based upon current levels of operations and anticipated growth, the Company expects that cash flows from operations, combined with other financing alternatives available, will be sufficient to meet debt service, capital expenditures and working capital requirements for the next twelve months. See “Business Risks—Capital Requirements.”

The Company is subject to a number of covenants under various debt instruments, including limitations on additional borrowings, acquisitions, capital expenditures, lease commitments and dividend payments, as well as requirements to maintain certain financial ratios, cash flows and net worth. As of September 30, 2003, the Company was not in compliance with a fourth quarter net income covenant. Management believes that this violation was the product of the merger costs that were incurred during fourth quarter of fiscal year 2003, and expects to be in compliance with the quarterly covenant in the future. The financial institution has issued a waiver of the violation through September 30, 2003. The Company’s original line of credit agreement expires on January 31, 2004 and the letter of credit issued will expire on April 1, 2004. In November 2003, the Company signed an amendment to this agreement extending the expiration until April 30, 2004.

If the merger agreement with GF Holdings is terminated under specific circumstances as set forth in the agreement, the Company will be liable to pay GF Holdings a fee of $4.1 million

Total debt outstanding decreased $4.8 million to $38.8 million, at September 30, 2003 from $43.6 million at the beginning of the fiscal year. The Company is also subject to payments under specific contractual obligations and commitments. A summary of those contractual obligations and commercial commitments as of September 30, 2003 is as follows:

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The Company is not aware of any other factors, which are reasonably likely to affect the liquidity, other than those discussed above and disclosed as business risks and risk factors disclosed below. While the Company has noted that certain operating expenses, including insurance and occupancy costs, are rising and the economy has slowed down, the Company believes that there are sufficient funds available from operations, the existing credit facility and the sale-lease back of restaurant properties to accommodate the Company’s future operations.

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 four years with the exception of labor, which was affected by California and Federal minimum wage increases. 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 Standards

In September 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 146 (SFAS No. 146), “Accounting for Costs Associated with Exit or Disposal Activities”, which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the company’s commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing any future restructuring costs as well as the amounts recognized. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted the provisions of SFAS No. 146 on January 1, 2003 and the adoption of SFAS No. 146 did not have a material effect on its financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS No. 148), “Accounting for Stock Based Compensation—Transition and Disclosure”, which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of Statement No. 123 (SFAS No. 123) to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of SFAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a “ramp-up” effect on stock-based compensation expense in the first few years following adoption. SFAS No. 148 provides two additional methods of transition that reflect an entity’s full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. SFAS No. 148 also improves the clarity and prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for all companies—regardless of the accounting method used—by requiring that the data be presented more prominently and in a more user-friendly format in the

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footnotes to the financial statements. In addition, the Statement improves the timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. The Company did not adopt the fair value based method of accounting for stock-based employee compensation. The Company adopted the interim and annual disclosure provisions of SFAS No. 148 in the quarter ended March 31, 2003 and year ended September 30, 2003, respectively,which did not have a material effect on its financial statements.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (SFAS No. 149), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. In particular, this Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. This Statement is generally effective for contracts entered into or modified after September 30, 2003, and is not expected to have a material impact on the Company’s financial statements.

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for the Company for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after September 15, 2003, and is not expected to have a material impact on the Company’s financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN No. 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of certain guarantees. The initial recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN No. 45 are effective for interim or annual periods ending after December 15, 2002. The Company adopted the disclosure provisions of FIN No. 45 as of January 1, 2003, which did not have a material effect on the financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risk will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. FIN No. 46 also requires enhanced disclosure requirements related to variable interest entities. FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period ending after December 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company does not believe that the adoption of this accounting pronouncement will have a material impact on our financial statements.

In November 2002, the FASB’s Emerging Issues Task Force (EITF) discussed Issue 02-16 (EITF 02-16), “Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor”. Issue 02-16 provides guidance on how a customer should account for cash consideration received from a vendor. This Issue is effective for new arrangements entered into after December 15, 2002. The Company adopted the provisions of Issue 02-16 in the second quarter of fiscal year 2003 for all prospective agreements with effective dates after January 1, 2003 and the adoption did not have a material impact on the results of operations or financial position as these type of agreements were previously accounted for in a similar manner.

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BUSINESS RISKS

In addition to other information in this Form 10-K, shareholders and prospective investors should consider carefully the following factors in evaluating the Company and its business.

Certain Operating Results and Considerations

In fiscal 2001, 2002, and 2003, the Company experienced an increase of 3.3%, 2.1%, and 1.6% respectively, in comparable restaurant sales. The Company does not believe it has significant latitude to achieve comparable restaurant sales growth through price increases, and, as a result, the Company does not believe that recent comparable restaurant sales are indicative of future trends in such 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. Further, the Company’s newer restaurants have not historically experienced significant increases in guest volume following their initial opening period. See “Selected Financial Data.”

Expansion Risks

The Company opened ten salad buffet restaurants in fiscal 1999, seventeen in fiscal 2000, ten in fiscal 2001 (opening nine new restaurants and re-opening one existing restaurant), two restaurants in fiscal 2002 and two restaurants in fiscal 2003. The Company currently does not have any specific plans to open any restaurants in fiscal 2004. The Company’s ability to achieve its expansion plans during fiscal 2005 and beyond 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, qualified managers, 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.

Since its inception, the Company has closed three non-performing buffet restaurants, one mini restaurant, two Ladles restaurants and one SLURP! restaurant due to poor operating performance. Given the number of restaurants in current operation, 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 affect 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. In the Company’s experience, operational expenses tend to stabilize over a period of three to fifteen months after a store opens. 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 “Business—Restaurant Industry and Competition,” and “Business—Expansion Strategy”.

Restaurant Industry and 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

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ambiance of the facilities. The Company’s primary competitors include mid-price, full-service casual dining restaurants at dinner and fast casual restaurants at lunch. Additionally, the Company competes with traditional self-service buffet and other soup and salad restaurants and healthful and nutrition-oriented restaurants at both meal periods. The Company competes with national and regional chains, as well as individually owned restaurants. The number of casual restaurants with operations generally similar to the Company’s has grown substantially in the last several years and the Company believes competition among 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, and have both a more established market presence and 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.

Multi-unit food service businesses such as the Company’s can also be materially and adversely affected by publicity resulting from poor food quality, illness, injury or other health concerns with respect to the nutritional value of certain food. To minimize the risk of food-borne illness, the Company has implemented sanitation audits through its Food Management System for managing food safety and quality. Nevertheless, the risk of food-borne illness cannot be completely eliminated. Any outbreak of such illness attributed to Company restaurants in particular, or within the food service industry in general, could have a material adverse effect on our financial condition and results of operations

Capital Requirements

In addition to funds generated from operations, the Company will need to obtain external financing in the form of sale-lease backs of owned properties and long-term debt financing to complete its plans for expansion through new restaurants and improvements to existing restaurants for fiscal year 2005 and beyond and meet principal payments on its existing loans. There can be no assurance that such funds will be available when needed and should the Company not be able to obtain such financing, it may be forced to severely curtail the development of new restaurants at its desired pace, or at all, and to make improvements to existing restaurants. Additionally, should the Company’s results of operations decrease it may not have the ability to pay its debt of $38.8 million outstanding at September 30, 2003.

Cost Sensitivity

The Company’s profitability is highly sensitive to increases in food, labor, utilities, insurance costs, 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, increasing food, labor and employee benefit costs (including increases in minimum hourly wage and 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, both insurance and energy costs have increased at much higher than historical rates in the Company’s core market, California, and other regions. Should these costs continue to increase, the food and labor costs will unfavorably impact the results of operations. 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,” and “Business.”

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Minimum Wage

The Company has experienced increases in its labor expenses due to increases in the federal minimum wage rate and in the California minimum wage rate. These increases have resulted in a decrease in the Company’s profitability. The Company could be impacted by increasing wage costs in any of its markets where the minimum wage rate is increased. The Company is exploring strategic ideas on how to better manage labor utilization in order to minimize any potential impact from increasing wage costs. There can be no assurance that the Company will be able to manage and absorb these increases in wage costs in the future.

Planned Marketing Expenditures

The Company has incurred increased marketing expenditures during the year ended 2003 as an attempt to increase guest counts. A significant portion of the Company’s external marketing effort consists of attracting guests through the use of freestanding inserts (“FSIs”), print media, and radio advertising as a means to increase market awareness. In addition, the restaurants often co-sponsor fund-raising events in the restaurants for local charitable and other community organizations. There can be no assurance that the marketing and promotion strategies discussed herein will be successful or benefit the Company by increasing guest counts or achieving higher net sales in the future.

Other Operating Expenditures

As the facilities for the Company’s existing restaurant base continue to age, the Company expects to experience increased repair and maintenance expenditures related to those existing stores. Such increases may affect store profitability. Further, the Company has experienced and expects to continue to experience higher property insurance costs as a result of increased rate pressure throughout the insurance industry. There can be no assurance that the increases in repair and maintenance expense and increased property insurance expense will not continue to impact the Company’s profitability or its ability to control costs in the future.

For the fiscal year ended September 30, 2003, the Company converted one location to leased from owned as part of a plan to reduce debt. Such conversions result in an increase in store rent expense (partially offset by a decrease in building depreciation expense) for the converted location. Should the Company continue to convert owned locations to leased locations, store rent expense will continue to increase as a result.

Importance of Key Employees

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.

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 of the results that may be achieved for a full fiscal year. See “Quarterly Results and Seasonality.”

Geographic Concentration in California and Florida; Restaurant Base

Forty of the Company’s 97 existing salad buffet restaurants are located in California and eighteen are located in Florida. Accordingly, the Company is susceptible to fluctuations in its business caused by adverse

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economic or other conditions in these regions, including natural disasters, such as hurricanes which have occurred annually in recent years in Florida, 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, financial conditions and results of operations. The Company has several local produce distributors and also distributes other grocery items through its own distribution system out of one warehouse on the West Coast and one on the East Coast. All produce and groceries purchased by the Company are channeled from the growers and other suppliers to the Company’s warehouses, restaurants, and central kitchens 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. 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.”

Legal Matters

On September 29, 2003, the Company entered into a merger agreement pursuant to which Merger Subsidiary will merge with and into the Company, with the Company being the surviving corporation and becoming a wholly-owned subsidiary of GF Holdings. On October 2, 2003, a purported stockholder class action lawsuit was filed in the San Diego Superior Court against the Company, its directors and 25 unnamed “Doe” defendants entitled Allan Aites v. Garden Fresh Restaurant Corp., et at., Case No. GIC818850. The suit alleges that the individual defendants breached their fiduciary duty to the Company’s stockholders in connection with the merger by advancing their individual interests at the expense of the Company’s stockholders. The complaint also alleges that the individual defendants failed to properly value the Company, ignored conflicts of interest in connection with the merger and failed to engage in arm’s length negotiations in the merger. The complaint seeks: (i) a declaration that the merger agreement was entered into in breach of the defendants’ fiduciary duties; (ii) an injunction against the defendants preventing them from consummating the merger unless a procedure or process is adopted to obtain the highest possible price for the stockholders; (iii) disclosure of fourth quarter financial information; (iv) rescission of the merger agreement; (v) such other equitable relief as the court deems appropriate; and (vi) an award of attorneys’ fees, among other relief. A hearing on the defendants’ demurrer and application to have the complaint dismissed has been scheduled by the Court for February 6, 2004. The Company believes that this lawsuit is without merit and intends to defend against it vigorously.

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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 is 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, 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.

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. 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 and the other fourteen states in which the Company operates) passed proposals that imposed increases in state or federal minimum wages in 1996, 1997, 1998, 2000, 2001, 2002, and 2003. 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 and similar legislation has been passed in California that may go into effect in 2006.

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.

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 “Market for Company’s Common Equity and Related Stockholder Matters.”

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Certain Risks Associated with the Merger

On September 29, 2003, the Company entered into a merger agreement, pursuant to which Merger Subsidiary will merge with and into Garden Fresh, with Garden Fresh being the surviving corporation and becoming a wholly-owned subsidiary of GF Holdings. In the merger, each issued and outstanding share of the Company’s common stock, par value $0.01 per share, will be canceled and converted automatically into the right to receive $16.35 per share in cash. The merger remains subject to a condition that the aggregate proceeds of the financings contemplated by certain debt financing commitments be available to GF Holdings at the closing, as well as other customary closing conditions, including the approval of the merger by the Company’s shareholders. The Company expects to hold a special meeting of stockholders to vote on the merger agreement in the second fiscal quarter of 2004. There can be no assurance, however, that the merger will be completed.

Since the announcement of the pending merger, the trading in the Company’s stock has been influenced by the market expectations about the closing of the merger. If the merger fails to close or is delayed, that may have a material adverse impact on the business of the Company and market price for the Company’s stock.

If the merger agreement is terminated under specific circumstances as set forth in the agreement, the Company will be liable to pay GF Holdings a fee of $4.1 million.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

At September 30, 2003 the Company did not have an outstanding balance under its line of credit agreement and no amounts have been drawn against the letter of credit. On November 1, 2002 the Company entered into a line of credit agreement (Credit Agreement) with a bank. This credit agreement provides for borrowings up to $6 million under a revolving credit agreement that will carry interest at either the prime rate or LIBOR plus 2% with interest payable at the beginning of each month. Accordingly, changes in short-term interest rates could affect the Company’s line of credit interest rate, increasing net interest expense and likewise decreasing earnings and cash flow. The Company cannot predict market fluctuations in interest rates and their impact on debt, nor can there be any assurance that long-term fixed rate debt will be available at favorable rates, if at all. Consequently, future results may differ materially from the estimated results due to adverse changes in interest rates or debt availability.

The majority of the Company’s outstanding long-term debt balance at September 30, 2003 of $38.8 million is financed through loans from lending institutions with fixed interest rates. As such, the Company does not believe that changes in short-term interest rates would have a material impact on interest expense related to these loans or significantly decrease results of operations or cash flow. However, if the Company chose to refinance any amounts due in fiscal year 2004, the Company may be subject to changes in short-term interest rate fluctuations, which may decrease or increase results of operations and cash flow.

The Company did not have any foreign currency or other market risk or any derivative financial instruments at September 30, 2003.

Item 8.    Financial Statements and Supplementary Data

The Company’s financial statements as of September 30, 2003 and 2002, and for each of the three fiscal years in the period ended September 30, 2003, and the report of our independent auditors, are included in this report as listed in the index on page 44 of this report—Item 15(a).

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Item 9.    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A.    Controls and Procedures

Under the supervision and with the participation of management, including the principal executive and principal financial officers, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report. There were no changes in internal control over financial reporting that would require additional disclosure under Regulation S-K 308(c).

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PART III

Item 10.    Directors and Executive Officers of the Company

The Company has a classified Board of Directors consisting of two Class A directors (Michael P. Mack and David Nierenberg), two Class B directors (Edgar F. Berner and John M. Robbins, Jr.), and three Class C directors (Edward A. Blechschmidt, Robert A. Gunst and Michael M. Minchin, Jr.,) who will serve until the Annual Meetings of Stockholders to be held in 2006, 2005 and 2004, respectively, and until their respective successors are duly elected and qualified. At each Annual Meeting of Stockholders, directors are elected for a full term of three years to succeed those directors whose terms expire at such annual meeting. The names, ages and positions of the Registrant’s directors and executive officers are listed below, along with a brief account of their business experience. There are no family relationships among these directors or officers, nor any arrangement or understanding between any such directors or officers and any other person pursuant to which any of such officers were selected as executive officers.

Directors of the Company:

*Executive Officer of the Company

Class A Directors (term expires 2006):

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 from December 1997 until January 2003. Mr. Mack has been a director of the Company since 1984. 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 Bachelor of Arts Degree from Brown University and a Master’s Degree in Business Administration from Harvard University.

David Nierenberg joined the Company’s Board of Directors in 2001. Mr. Nierenberg currently serves as President of Nierenberg Investment Management Company. Since 1996 his firm has managed The D3 Family Fund, LP, a private investment partnership based in Camas, Washington, that seeks long term capital gain through investments in undervalued micro-cap domestic public companies. Mr. Nierenberg also manages the following funds: D3 Family Fund, D3 Family Retirement Fund, LP; D3 Children’s Fund, LP, and D3 Offshore Fund. Prior to forming Nierenberg Investment Management, he was a general partner at Trinity Ventures, Ltd., in

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Menlo Park, California, from 1986 to 1995 where he specialized in turnarounds and financial service and healthcare companies. Previously, he was a senior vice president at General Electric Venture Capital Corp., also based in Menlo Park. He began his career at Bain & Company, an international management consulting firm, from 1978 to 1985, where he was a partner managing strategy, acquisition and cost reduction projects. Mr. Nierenberg is a member of the Massachusetts State Bar. He serves on the Board of Directors of several public and private corporations and civic and charitable organizations, including Southwest Washington Medical Center, Mexican Restaurants, Inc. (CASA) and Natus Medical Inc. (BABY). Mr. Nierenberg received his Juris Doctorate from Yale Law School and his Bachelor of Arts degree from Yale College where he was elected to Phi Beta Kappa.

Class B Directors (term expires 2005):

Edgar F. Berner joined the Company’s Board of Directors in 1996. Mr. Berner is a private investor and is the former Chairman (from 1991 to 1996) and CEO (from 1991 to 1998) 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. He previously served on the Board of Directors of The Clothestime, Inc. and Edison Brothers Stores, Inc. In addition to serving on the Board of Directors of the Company, Mr. Berner is a Director of Hot Topic (Nasdaq), a teen specialty retail chain, and a Director of Barbeques Galore (Nasdaq) the nation’s largest barbeque chain store.

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. (AMEX) (“ARIT”). Prior to joining ARIT, Mr. Robbins was Chairman of the Board of Directors 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. Mr. Robbins is also a Director of Accredited Home Lenders, the University of San Diego, and the Mortgage Bankers Association of America.

Class C Directors (term expires 2004):

Edward A. Blechschmidt joined the Company’s Board of Directors in April 2003. Mr. Blechschmidt is a private investor and management consultant and formerly Chairman and CEO (from 2000 to 2002) of Gentiva Health Services, Inc. Prior to joining Gentiva, Mr. Blechschmidt was CEO of Olsten Corporation from 1998 to 2000. From 1996 to 1998 he was President and CEO of Siemens Nixdorf Americas and Siemens’ Pyramid Technologies. Prior to Siemens, he spent more than 20 years with Unisys Corporation in various lines and staff positions including Chief Financial Officer. Mr. Blechschmidt is also a Director of Gentiva Health Services, Inc., Lionbridge Technologies, Inc., and Bayshore Healthcare, Ltd.

Robert A. Gunst joined the Company’s Board of Directors in 1996 and assumed the role of Chairman of the Board in January 2003. Mr. Gunst has more than 30 years of experience in food and retailing. Mr. Gunst currently is a private investor. Mr. Gunst had previously served as President and Chief Executive Officer of The Good Guys, Inc. (Nasdaq) from 1993 to 1999. In 1990, he became President and Chief Operating Officer of The Good Guys, Inc. while remaining a member of its Board of Directors of which he had joined in 1986. 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 Bachelor of Arts Degree from Stanford University and a Master’s Degree in Business Administration from Harvard University. Currently,

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Mr. Minchin serves as President and Managing Director of the John Douglas French Alzheimer’s Research Foundation as well as an independent consultant to several publicly held restaurant chains and bio medical start-ups.

Committees of the Board of Directors

The Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Governance 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 accountants’ opinion. The Audit Committee also approves all professional services performed by the independent accountants, recommends the retention of the independent accountants to the Board, subject to ratification by the stockholders, recommends a code of corporate conduct, and periodically reviews the Company’s accounting policies and internal accounting and financial controls. For fiscal 2003, the members of the Audit Committee were Messrs. Berner, Gunst, and Nierenberg. In addition, in April 2003, Edward Blechschmidt joined the Board, and was elected to serve as the audit committee chair, and replaced Mr. Nierenberg in his role as audit committee member.

The Compensation Committee’s function is to review and recommend executive compensation, including officer salary levels, incentive compensation programs and stock option grants. During fiscal 2003, the members of the Compensation Committee were Messrs. Gunst, Minchin and Nierenberg.

The Nominating and Governance Committee’s function is to identify and select potential candidates for the Company’s Board of Directors. In addition, the Nominating and Governance Committee recommends corporate governance principles and code of corporate conduct. This Committee was formed in November of 2002, and the members are Messrs. Berner, Minchin and Robbins.

The Board of Directors has determined that the Company has an audit committee financial expert, Edward A. Blechschmidt, serving on its audit committee, who is considered to be independent under the NASDAQ listing requirements in effect during fiscal 2003.

During the fiscal year ended September 30, 2003, the Board held five meetings. All directors attended at least seventy-five percent of these meetings of the Board and the committees on which they served (during the periods that they served).

Executive Officers of the Company:

The executive officers of the Company as of September 30, 2003 are as follows (in alphabetical order with CEO/President listed first):

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 from December 1997 until January 2003. Mr. Mack has also been a director of the Company since its inception. Since February 1994, Mr. Mack has been

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