The net decrease of 4.9% reflects a decline in same-store customer traffic of 9.6%, which was partially offset by a check average increase of 5.1%. The check average increase is primarily due to a price increase implemented during the last week of December 2000. We have experienced a generally consistent decline in same-store guest traffic trend since 1997. We believe that the declining trend is due to various factors including intense competition and market saturation within the restaurant industry.  We have not made significant advertising expenditures since the end of the second quarter of fiscal 2001. On November 1, 2001, we began a major two-month radio and direct mail advertising campaign designed to increase guest traffic. The core message of the campaign educates consumers about the return of our popular "Dilly" meal by using the tagline, "The Dilly is Back". Advertising expenditures for November and December of 2001 are expected to approximate $1.5 million.

            The following table illustrates cost of sales, other operating expenses, general and administrative expenses, and other expenses (income) as a percent of net sales for the comparative periods.

            Cafeteria-Level Income. During the first quarters of fiscal 2002 and 2001, cafeteria-level income (net sales less cost of sales and other operating expenses) as a percent of net sales was 6.3% and 3.7%, respectively.

            Cost of Sales. Cost of sales as a percentage of net sales decreased 2.9%. That decline is a combination of a 0.7% decrease in food costs as a percentage of net sales and a 2.2% decrease in labor costs as a percent of net sales.

            The decrease in food costs, as a percentage of net sales, is primarily due to the December 2000 cafeteria price increase. The improvement in labor costs, as a percentage of net sales, is due primarily to savings realized from reduced labor hours combined with the December 2000 price increase. On average, labor hours, primarily in the kitchen production area, have been reduced by 25 to 27 hours per day per cafeteria. This reduction in labor hours is due to staff reductions and scheduling efficiencies implemented initially as part of our outsourcing program. The outsourcing program involves outside vendors who provide and prepare selected components of several Piccadilly recipes, which have historically been made from scratch. Although the  number of outsourced items that are currently being used is not significant, our cafeteria general managers challenged existing staffing levels and cut production costs while preserving our high quality food and made-from-scratch cooking approach.

            Other Operating Expenses. Other operating expenses increased 0.3% as a percentage of net sales. Rent expense increased 0.7% as a percentage of net sales from the sale-leaseback transactions completed in March and July 2001. Health insurance costs increased 0.5% as a percentage of net sales due to inflation in claims costs. Additionally, the fixed portion of certain operating costs such as rent, repairs and maintenance, utilities, and depreciation, expressed as a percentage of net sales has increased as cafeteria sales decreased. These increases were largely offset by a 1.3% decline in advertising expense as a percentage of net sales. We will begin a new advertising campaign in the second quarter of this year designed to attract new guests and build frequency among existing guests. Advertising expenditures for the remainder of fiscal 2002 are expected to approximate $6.0 to $7.0 million.

            Provision for Cafeteria Impairments and Closings. During the quarter ended September 30, 2000, we recorded a non-cash charge of $0.5 million related to eight cafeterias closed in fiscal 2001. The charge included amounts for asset impairments and continuing lease obligations.

            General and Administrative Expenses. General and administrative expenses as a percentage of net sales decreased 0.6%. The decline is primarily attributable to a restructuring plan implemented in the fourth quarter of fiscal 2001, that resulted in the elimination of 25 middle management positions.

            Amortization and Write-off of Goodwill. During the quarter ended September 30, 2000, we recorded a charge of $0.3 million for the writeoff of goodwill associated with four Morrison cafeterias closed in fiscal 2001.

            Provision for Income Taxes. During the quarter ended March 31, 2001, we established a valuation allowance for the portion of deferred tax assets that was not supported by future reversals of existing temporary differences. During the quarter ended September 30, 2001, changes in the valuation allowance for deferred tax assets offset the provision for income taxes, reducing the net provision for income taxes to zero.

            All capital expenditures for fiscal 2002 are being funded by cash flow from operations. Cash and cash equivalents at September 30, 2001 were $6.0 million. Capital expenditures for the three months ended September 30, 2001 were $0.8 million. Capital expenditures for the fiscal year 2002 are expected to approximate $6.0 million. We believe that our cash from operations, together with the credit available under the Senior Credit Facility, will be sufficient to provide for our operational and capital expenditure needs through at least June 30, 2002.

            On July 31, 2001, we completed a sale-leaseback transaction of six properties. We received approximately $9.0 million in cash for the sale of the properties and simultaneously executed long-term leases that provide for our ability to continue to operate cafeterias at the sites for a primary term of 20 years and optional renewal periods for up to 20 additional years. We used substantially all of the net sale proceeds to purchase $9.4 million of our 12% Senior Secured Notes due fiscal 2007. As a result of this transaction, there will be an annual reduction of expense of $1.2 million. Net rent expense during the initial term for these six properties will be approximately $1.1 million annually. The assets sold and leased back previously had annual depreciation expense of approximately $0.9 million. The annualized interest expense relating to the repurchased notes, including amortization of the original issue discount and financing costs, was approximately $1.4 million.

            We recorded in the quarter ending September 30, 2001, extraordinary charges of approximately $1.1 million for the writeoff of unamortized deferred financing costs associated with the extinguished debt. The sale of the six properties resulted in a $1.3 million loss, which offsets the $1.3 million deferred gain from the related March 30, 2001 sale-leaseback transaction.

            The sale of the six properties resulted in a reduction of our borrowing capacity under our Senior Credit Facility from $19.2 million to approximately $14.4 million. At September 30, 2001, we had $10.8 million in letters of credit but no other borrowings under the Senior Credit Facility, leaving approximately $3.6 million available for borrowing.

            On June 29, 2001, we announced that we had reached an agreement to amend the Senior Credit Facility. This amendment waived the fiscal 2001 third quarter violation and lowered the required level of tangible net worth. On July 31, 2001, the Senior Credit Facility was again amended to further reduce the tangible net worth requirement.

            Since September 11, 2001, we have experienced further declines in our net same-store sales.  We are uncertain of the near or long-term impact of these events on our results of operations.  However, it is possible that additional declines in net same-store sales at individual cafeterias could result in the closing of such cafeterias and charges for impairment of property, plant and equipment and goodwill.

            The U.S. Congress is currently considering an increase in the federal minimum wage as part of an economic stimulus package. An increase in the federal minimum wage will adversely affect our operating costs. Historically, minimum wage increases are absorbed with price increases. We operate in a highly competitive industry and may be unable to transfer all or a portion of such higher operating costs to our guests.

(a)   Exhibits

        3.         (a)     Articles of Incorporation of the Company, as restated through March 12, 1999.⁽¹⁾

                    (b)     By-laws of the Company, as amended and restated through March 12, 1999. ⁽¹⁾

        10.1     Second Amendment to Amended and Restated Credit Agreement, dated, July 31, 2001, among the Company,
                    Hibernia National Bank and Branch Banking & Trust Company.

(b)   Reports on Form 8-K

        (1)        Current Report on Form 8-K dated July 2, 2001.

        (2)        Current Report on Form 8-K dated August 13, 2001.

        (3)        Current Report on Form 8-K dated September 28, 2001.

_________________________

(1)    Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the
        quarter ended March 31, 1999.

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.