SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

     (MARK ONE)

For the Fiscal Year Ended April 25, 2004

OR

          For the transition period from __________  to _________

Commission File Number: 0-28930

ROADHOUSE GRILL, INC.

2703-A GATEWAY DRIVE, POMPANO BEACH, FL 33069

Registrant’s telephone number, including area code (954) 957-2600

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

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

COMMON STOCK, PAR VALUE $0.03 PER SHARE
(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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [  ] No [X]

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X ] No [  ]

     The number of shares of the registrant’s common stock outstanding as of August 6, 2004 was 29,220,663.

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

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ROADHOUSE GRILL, INC.

FORM 10-K
FISCAL YEAR ENDED APRIL 25, 2004

INDEX

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FORWARD LOOKING STATEMENTS

          This report contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Statements preceded by, followed by, or that include the words “believes,” “expects,” “anticipates,” or similar expressions are generally considered to be forward-looking statements. Specifically, this report contains forward-looking statements regarding, among other matters, our strategies, plans, objectives, expectations, future market position, operations, cash flow, margins, revenue, profitability, restaurant-level economics, liquidity and capital resources.

          Forward looking statements contained in this report are not guarantees of future performance and involve certain risks, uncertainties and assumptions, all of which are difficult to predict. We wish to caution readers that certain important factors have affected in the past and may affect in the future our actual results, and such factors could cause actual results to differ significantly from those expressed or implied in any forward looking statement contained in this report. Important factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements in this report include, but are not limited to, the following:

	•		Our having sufficient working capital to meet our future operating and capital requirements;
	•		Our ability to manage our debt and comply with the terms of our debt instruments, operating leases and capital leases;
	•		Our ability to increase our sales and manage our labor costs, food costs, other restaurant costs and corporate expenses, and our ability to operate our business on a cash flow positive and profitable basis;
	•		Our ability to acquire an adequate supply of food products at acceptable prices, and events that affect the availability and pricing of food products (such as instances of mad cow disease);
	•		Our ability to recruit, train and retain qualified management personnel and to obtain a sufficient number of qualified restaurant employees;
	•		Trends in consumer preferences, tastes and eating habits and competition for consumer dollars, both from restaurants similar to our restaurants and from restaurants generally;
	•		The level of competition from restaurants that operate in the markets in which we operate;
	•		U. S. domestic economic conditions and the impact of international conflicts on domestic economic conditions;
	•		The impact of seasonality on our business, resulting from having more than half of our restaurants in Florida;
	•		Our ability to maintain financial and accounting controls, management controls, and adequate reporting systems and procedures;

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	•		Increases in interest rates;
	•		The future relisting of our common stock on a recognized securities market and the development of a market for our common stock;
	•		Our ability to develop our restaurant concept and business beyond our existing configuration of restaurants, including the availability of financing to support future growth, our ability to find suitable locations for new restaurants and the costs associated with opening new restaurants; and
	•		To the extent that we decide to further franchise our restaurant concept, our ability to locate suitable franchisees in markets which we do not serve (both nationally and internationally) and the ability of those franchisees to develop, open and successfully operate restaurants in those markets.

          The forward looking statements contained in this report reflect our current view about future events and are subject to risks, uncertainties and assumptions. The important factors described above, as well as the factors described elsewhere in this report, could cause the assumptions underlying our forward looking statements to be incorrect and thereby cause our actual results to differ materially from those expressed in or implied by our forward looking statements. We undertake no obligation to revise any of the forward looking statements contained in this report, which speak only as of the date hereof. Readers of this report are therefore cautioned not to place undue reliance on these forward looking statements.

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PART I

ITEM 1. BUSINESS

GENERAL

          We operate high-quality, full-service casual dining restaurants under the name “Roadhouse Grill.” We currently operate 69 restaurants, 34 of which are located in Florida and the balance of which are located in Alabama, Arkansas, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio and South Carolina. There are also 11 Roadhouse Grill restaurants currently in operation that are operated by franchisees and licensees. Franchised and licensed restaurants are located in Malaysia (3), Brasilia, Brazil (1), Las Vegas, Nevada (1), Cincinnati, Ohio (1) and Italy (5).

          Our primary business is the operation of full-service, casual dining restaurants. Roadhouse Grill restaurants offer a diverse, moderately priced lunch and dinner menu highlighting exhibition cooking of steaks and other grilled entrees. In addition to steaks and other grilled items, our restaurants feature daily fresh baked yeast rolls, free peanuts and certain appetizers as signature items. Guest satisfaction comes from a pleasant restaurant atmosphere in which high-quality food and beverages are served at competitive prices. The key elements that define the Roadhouse Grill concept are:

	•		Premium Quality Grilled Entrees and a Diverse Menu. Roadhouse Grill restaurants offer a wide variety of steaks, chicken, seafood and other entrees, many of which are grilled in an exhibition style kitchen.
	•		High Price/Value to Guests. Roadhouse Grill restaurants strive to provide a high price/value dining experience for our guests by offering a broad, moderately priced menu and serving high quality generous portions.
	•		Attentive, Friendly Service. We believe that a distinctive, enjoyable dining experience is made possible through excellent service. Accordingly, we seek to hire restaurant managers and other restaurant personnel who possess strong initiative and the ability to provide quality and personalized service.
	•		Spacious, Open Layout. Roadhouse Grill restaurants are designed to have a fun and casual atmosphere. The interior of each restaurant is large, open and visually appealing, with exposed ceilings designed to create a casual ambiance.
	•		Broad Customer Appeal. The Roadhouse Grill concept is designed to appeal to a broad range of customers, including business people, couples, singles and, particularly, families. We believe that to be attractive to families, a concept must be appealing to both children and parents. Consequently, Roadhouse Grill restaurants furnish children with coloring menus, balloons and a free souvenir cup. In addition, each restaurant offers a special “Kids’ Menu” featuring an assortment of entrees. For adults, each Roadhouse Grill restaurant offers alcoholic beverages from its full-service bar, which is separated from the dining area.

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RECENT EVENTS

          On August 6, 2004, we closed a transaction with Sovereign Roadhouse LLC, a wholly-owned subsidiary of Sovereign Investment Company, (“Sovereign”) involving the sale and leaseback of eleven restaurant properties that we had previously owned. The sale price for the eleven properties was $21.8 million. The properties are being leased from Sovereign under lease agreements that extend for 20 years and include four five-year renewal options. We used approximately $18.1 million of the net proceeds from the sale to pay expenses related to the transaction and approximately $24.6 million of secured debt, which was repaid at a discount (resulting in a gain on extinguishment of debt of approximately $7.1 million). The net gain from the debt repayment will be reflected in our consolidated financial statements in the second quarter of fiscal 2005. We also realized a gain on the sale of the properties of approximately $1.7 million, which will be recorded as a reduction of occupancy and other expense over the life of the leases. The remaining net proceeds from the sale, of approximately $3.7 million, will be used for working capital, including new marketing initiatives to promote our existing restaurants. See Note 20 of Notes to Consolidated Financial Statements and Item 7. “Management’s Discussion of Financial Condition and Results of Operations.”

RISK FACTORS

WE HAVE EXPERIENCED SIGNIFICANT LOSSES FROM OPERATIONS AND CASH FLOW PROBLEMS IN THE PAST.

          We emerged from a Chapter 11 reorganization proceeding on September 20, 2002. See Note 2 of Notes to Consolidated Financial Statements for information about our Chapter 11 proceeding. During the last three fiscal years, our net losses were $6.0 million, $11.2 million and $21.4 million. Further, we have experienced substantial cash flow problems in the past, and may do so again in the future. There can be no assurance that we will be able to achieve and sustain profitable and cash flow positive operations.

OUR PROFITABILITY IS DEPENDENT IN LARGE MEASURE ON FOOD AND SUPPLY COSTS WHICH ARE NOT WITHIN OUR CONTROL.

          Our ability to operate our business on a profitable and cash flow positive basis is dependent in part on our ability to deal with changes in food costs and matters that effect the supply of necessary food products to our restaurants. Various factors, many of which are beyond our control, affect food costs and the availability of certain food products, including climatic changes, disease or illness in beef cattle (such as mad cow disease) that could impact supply in the marketplace, and government regulations. Specifically, we are dependent in the operation of our business on frequent, timely deliveries of beef, poultry, seafood and produce, which subjects our business to the risks of possible shortages or interruptions in supply caused by adverse weather or other conditions which could adversely affect the availability and costs of these items. These factors have in the past and could in the future materially affect our business and results of operations.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER DUE TO VARIOUS FACTORS BEYOND OUR CONTROL, INCLUDING SEASONALITY.

          Our operating results have in the past and are likely in the future to fluctuate seasonally because of the geographic concentration of our operations in Florida, where 34 of our restaurants are located. Restaurant sales in our Florida restaurants generally increase from November through April, the peaks of the Florida tourism season, and generally decrease from May through October. Further, the results of

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operations of our Florida restaurants and thereby our overall results of operations have in the past and may continue in the future to be materially adversely affected by declines in tourism in Florida, downturns in the Florida economy or by hurricanes or other adverse weather conditions in Florida. To offset these seasonal trends and to attempt to reduce the decline in sales during the off-season, we generally run special promotions for our customers during off-peak periods and incentive contests for our employees. Also, adverse publicity in Florida relating to Roadhouse Grill restaurants could have a more pronounced effect on our results of operations than might be the case if our restaurants were broadly dispersed geographically. Although we currently have more restaurants outside Florida than inside Florida, our non-Florida restaurants are more broadly disbursed among a wide geographic area, and therefore have not materially affected the historical seasonality of our business.

          In addition to seasonality, our quarterly and annual operating results and our comparable restaurant sales may fluctuate significantly from period to period as a result of a variety of factors, including:

	•		The efforts we make from time to time (including advertising and promotional programs) to increase our sales, and the success or failure of those programs;
	•		The results of our continual efforts to manage our labor costs, food costs, other restaurant costs and corporate expenses;
	•		Our ability to acquire an adequate supply of food products at acceptable prices, and events that affect the availability and pricing of food products (such as instances of mad cow disease);
	•		Our ability to recruit, train and retain qualified management personnel and to obtain sufficient numbers of qualified restaurant employees;
	•		The level of competition from existing or new competitors in the markets in which our restaurants are located;
	•		Trends in consumer preferences, tastes and eating habits and competition for consumer dollars, both from restaurants similar to our restaurants and from restaurants generally; and
	•		U. S. domestic economic conditions, particularly in the markets in which we operate, and the impact of international conflicts on domestic economic conditions.

          In addition, our quarterly or annual results may be affected by costs associated with the opening of new restaurants during any period. We typically incur the most significant portion of preopening expenses associated with a newly opened restaurant within the two months immediately preceding and the month of the opening of the new restaurant. Further, we believe that the labor and operating costs associated with a newly opened restaurant for the first several months of operation are materially greater than those expected after that time, both in aggregate dollars and as a percentage of revenues. Accordingly, the volume and timing of new restaurant openings has had in the past and may have in the future a meaningful impact on preopening expenses and labor and operating costs from period to period.

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OUR BUSINESS IS IMPACTED BY THE INTENSE COMPETITION IN THE FULL SERVICE CASUAL DINING SECTOR AND IN THE RESTAURANT INDUSTRY GENERALLY.

          The restaurant industry, particularly the full-service casual dining segment, is highly competitive. We compete with a broad range of restaurants, including national and regional casual dining chains as well as locally-owned restaurants, some of which operate with concepts similar to ours. We believe that the competitive factors that are used by consumers to differentiate among restaurants include price, service, location, concept and food quality, including taste, freshness, and nutritional value. We believe that we compete effectively in our markets. However, many of our competitors possess substantially greater financial, marketing, personnel and other resources than we do and have greater brand name recognition than we do. We also compete with other restaurants and restaurant chains for sites for new restaurants and for employees.

          We believe that the full-service casual dining segment is likely to continue to attract a significant number of new entrants. In addition, the full-service restaurant industry is characterized by the frequent introduction of new food products, which are accompanied by substantial promotional campaigns. In recent years, numerous companies in the full-service casual restaurant industry have introduced products intended to capitalize on growing consumer preference for food products which are, or are perceived to be, healthful, nutritious, low in calories, low in carbohydrates and/or low in fat content. We believe that we will be subject to increasing competition from companies whose products or marketing strategies address these consumer preferences, and we may need to modify or refine elements of our business in order to effectively compete with popular new restaurant formats or concepts that develop from time to time. There can be no assurance that we will be successful in implementing any such modifications.

WE ARE DEPENDENT UPON SUPPLY AND QUALITY OF FOOD PRODUCTS.

          Our operations depend upon frequent deliveries of quality food products. We are routinely exposed to the risks that shortages or interruptions in supply can occur and adversely affect the availability, quality and cost of these critical food products. Regional weather conditions may also adversely affect product supply and quality. We have in the past experienced difficulty in obtaining adequate supplies of food products, or at a cost that allowed such products to be sold on a profitable basis. There can be no assurance that future food supply shortages or interruptions, especially with respect to steak products, might not have a material adverse effect on our sales, operations and profitability.

OUR BUSINESS IS AFFECTED BY LITIGATION AND PUBLICITY CONCERNING FOOD QUALITY, HEALTH AND OTHER ISSUES WHICH CAN CAUSE GUESTS TO AVOID OUR RESTAURANTS AND WHICH CAN RESULT IN LIABILITIES.

          Health concerns, including adverse publicity concerning food-related illness, whether or not specifically related to our restaurants, could cause guests to avoid certain restaurant groups including our restaurants, thereby having a negative impact on our sales. We may also be the subject of complaints or litigation from guests alleging food-related illness, injuries suffered on our premises or other food quality, health or operational concerns. A lawsuit or claim could result in an adverse decision against us that could have a material adverse effect on our business and results of operations. We may also be subject to litigation which, regardless of the outcome, could result in adverse publicity. Adverse publicity resulting from such allegations may materially adversely affect our business, regardless of whether such allegations are true or whether we are ultimately held liable. Such litigation, adverse publicity or damages could have a material adverse effect on our business, competitive position and results of operations.

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WE COULD FACE LABOR SHORTAGES, INCREASED LABOR COSTS, AND OTHER ADVERSE EFFECTS OF VARYING LABOR CONDITIONS.

          The success of our restaurants depends, in large part, on the efforts, abilities, experience and reputations of the general managers and chefs at each of our restaurants. Our inability to recruit and retain qualified individuals may delay the opening of new restaurants or result in higher employee turnover in existing restaurants, which could materially and adversely affect our results of operations or business. Our success also depends, in part, upon our ability to attract, motivate and retain a sufficient number of qualified employees, including restaurant managers, kitchen staff and wait staff. Qualified individuals needed to fill these positions are in short supply. A significant delay in finding qualified employees or high turnover among existing employees could cause our business and results of operations to suffer. Also, competition for qualified employees could require us to pay higher wages to attract sufficient qualified employees. Further, a number of our employees are subject to various minimum wage requirements. The federal minimum wage has remained at $5.15 per hour since September 1, 1997. Any minimum wage increase may have a material adverse effect on our business, financial condition, results of operations or cash flows.

WE MAY NOT BE ABLE TO SUCCESSFULLY EXPAND IN THE FUTURE.

          We opened only one company-owned restaurant in fiscal 2004 and no additional company-owned restaurants are currently expected to be opened in fiscal 2005. Our ability to expand our restaurant operations will depend, in large measure on our ability to generate sufficient income from operations, as well as having sufficient debt and/or equity financing available on acceptable terms, to fund the costs of developing additional company-owned restaurants. Further, even if we have the funding required to open new company-owned restaurants in the future, our ability to successfully open new restaurants will be affected by various factors, including the need to locate suitable restaurant sites, the negotiation of favorable lease arrangements for such sites, the management of the costs of development of the new restaurants, our ability to secure the approvals and permits necessary to open new restaurants and our ability to successfully retain quality restaurant management and restaurant personnel to staff the new restaurant. Finally, even if new restaurants are opened, there may be delays in the opening of such restaurants that could affect our expectations regarding the impact of such restaurants on our consolidated sales and operating results and there can be no assurance that any restaurants we open will operate profitably and be cash flow positive.

WE ARE DEPENDENT UPON OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES.

          We are and will continue to be dependent on the services of our executive officers and key employees, including Ayman Sabi, our Chief Executive Officer. The loss of Mr. Sabi’s services, or the loss of the services of our other executive officers or our key employees, could have a material adverse effect on our business, and there can be no assurance that an adequate replacement could be found if the services of Mr. Sabi, our other executive officers or our key employees were unavailable.

OUR FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS COULD HARM OUR BUSINESS AND REPUTATION AND ADVERSELY AFFECT OUR OPERATIONS.

          Our business is subject to federal, state and local regulations with respect to, among other matters, building, fire, health, sanitation and safety. Further, our development of future restaurants will be subject to laws, rules and regulations concerning land use, building, zoning and environmental matters.

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          Various federal and state labor laws govern our operations and our relationship with our employees, including minimum wage, overtime, safety and working conditions, fringe benefit and citizenship requirements. In particular, we are subject to the regulations of the Immigration and Naturalization Service (INS). Given the location of many of our restaurants, even if we operate those restaurants in strict compliance with INS requirements, our employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in our work force. Further, material increases in unemployment tax rates, minimum wage requirements, sales taxes or the cost of compliance with any applicable law or regulation could materially and adversely affect our business.

          Sales of alcoholic beverages account for approximately 10% of our revenues. Since we sell alcoholic beverages, we are required to comply with the alcohol licensing requirements of the various government agencies, including states and municipalities where our restaurants are located. Alcoholic beverage control regulations require each Roadhouse Grill restaurant to apply to a state authority and, in certain locations, county and/or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to provide service for extended hours. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. If a liquor license for any restaurant were lost, revenues for that restaurant would be adversely affected. Alcoholic beverage control regulations relate to numerous aspects of our restaurants, including minimum age of patrons consuming and employees serving alcoholic beverages, hours of operation, advertising, wholesale purchasing, inventory control, and handling, storage and dispensing of alcoholic beverages. Our restaurant operations are also subject to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Any liability under such statutes could have a material adverse effect on our results of operations and financial condition. While we carry liquor liability coverage as part of our existing comprehensive general liability insurance, there can be no assurance that our insurance coverages will be adequate.

          The federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. We are required to comply with the Americans with Disabilities Act and regulations relating to accommodating the needs of the disabled in connection with the construction of new facilities and with significant renovations of existing facilities, which will over time require an incremental capital investment by us.

          Finally, in connection with our franchise operations, we are required to comply with Federal Trade Commission and state laws and regulations that govern the offer, sale and termination of franchises and the refusal to renew franchises.

          We believe that we operate our business within the requirements of applicable federal, state and local laws and regulations. However, our failure to operate in accordance with any or all of such regulations, or an allegation that we are operating in violation of such regulations, even if it turns out not to be true, could have a material adverse impact on our business, financial position or results of operations.

WE ARE SELF-INSURED IN CERTAIN OF OUR INSURANCE COVERAGES AND HAVE EXPERIENCED INCREASED INSURANCE COSTS.

          We maintain insurance to cover the potential liabilities associated with a number of the risks that we may encounter in our business operations. These include property and flood coverage, auto, workers’ compensation, general liability and umbrella, directors and officers liability, employers practice liability and crime insurance. Many of the policies, such as property, flood and directors and officers liability, include

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deductibles ranging from $100,000 to $250,000 per claim. For many policy years, under workers’ compensation, employers practice liability and general liability coverage, we are effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $300,000 per claim and on an aggregate basis. We are also self-insured in regard to the medical insurance benefits that we provide to our managers and certain other employees. These employees who elect to receive medical insurance benefits are required to contribute a portion of the cost of providing the insurance benefits.

          Due to the trends currently being experienced in the insurance industry, we believe that insurance costs will continue to represent a significant expense to us and may increase in the future. We continually evaluate our options relating to controlling these costs, including changes in insurance carriers and brokers, modifications to certain of the provisions of our policies (including deductibles and self-insured retention limits) and changes in the portion of costs incurred in providing coverage for our employees that are paid by the employees who participate in the particular insurance plan.

OUR COMMON STOCK IS QUOTED ON THE PINK SHEETS, AND INVESTORS MAY FIND IT DIFFICULT TO SELL OUR COMMON STOCK.

          Our common stock is currently quoted on the “pink sheets.” The fact that our common stock is not listed on the NASDAQ stock market or on a stock exchange is likely making trading our shares difficult for broker-dealers, shareholders and investors. It may also make it more difficult for us to raise additional equity capital in the future. While we hope to relist our common stock on a nationally recognized market in the future, there can be no assurance that our common stock will qualify for trading or quotation on a nationally recognized market in the future.

          Because our shares are traded on the pink sheets and trade below $1 per share, we are also subject to SEC rules concerning the trading of so-called “penny stocks.” Under these rules, broker-dealers who sell securities governed by the rule to persons who are not established customers or accredited investors must make a special suitability determination and must receive the purchaser’s written consent to the transaction prior to the sale. These rules may deter broker-dealers from recommending or trading our stock.

APPROXIMATELY 66.5% OF OUR OUTSTANDING COMMON STOCK IS HELD BY ONE SHAREHOLDER, WHICH WILL LIMIT OTHER SHAREHOLDERS’ ABILITY TO INFLUENCE CORPORATE MATTERS.

          At April 25, 2004, Berjaya Group (Cayman) Limited, the ultimate parent of which is Berjaya Group Berhad, a diversified holding company headquartered in Malaysia, beneficially owned, directly or indirectly, approximately 66.5% of our outstanding common stock. See Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” As a result, Berjaya is able to control major decisions of corporate policy, elect our entire board of directors and determine the outcome of any major transaction or other matters submitted to our shareholders, including potential mergers or acquisitions, and amendments to our articles of incorporation. Shareholders other than Berjaya are therefore likely to have little or no influence on decisions regarding such matters. Third parties may be discouraged from making a tender offer or bid to acquire us because of this concentration of ownership.

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COMPANY-OWNED RESTAURANT OPERATIONS

MENU

          The Roadhouse Grill menu, which was revised and expanded in June 2003, features aged USDA Choice steaks and prime rib, beef ribs, chicken and seafood, all of which are grilled to order. Our steaks are aged both before and after being cut and trimmed. The menu features over sixty items, including 11 cuts of steak ranging from 6 oz. to 18 oz. We are known for our “Roadie,” a bourbon marinated sirloin, our prime rib and award-winning baby-back ribs. In addition to grilled selections, our menu offers a variety of specialty drinks, a pasta dish, several seafood dishes, a wide variety of appetizers, sandwiches, and salads, including signature items such as our Roadhouse cheese wraps, and a variety of desserts, most notably the “messy sundae.” Each entree is served with a choice of a house salad or Caesar salad, a choice of baked sweet potato, baked potato, home fries, french fries or rice pilaf, homemade yeast rolls and peanuts.

          Roadhouse Grill restaurants are open seven days a week for lunch and dinner and offer full bar service. Entrée prices range from $6.99 to $19.49. From 11:00 a.m. to 3:00 p.m. Monday through Friday, in addition to our full menu, each Roadhouse Grill offers a selection of 15 lunch menu items ranging from charbroiled steak salad to southern fried chicken tenders and french fries, as well as daily specials, all prepared to order quickly and priced at $7.99 or less.

UNIT ECONOMICS

          The 68 company-owned Roadhouse Grill restaurants that were open for the entire 52 weeks in the fiscal year ended April 25, 2004 (fiscal 2004) generated average net sales of approximately $2.0 million, average restaurant-level cash flow (restaurant net sales less cost of restaurant sales, excluding pre-opening expenses) of $159,000 and average operating income (restaurant-level cash flow less depreciation and amortization) of $60,000.

          Our average cash investment for these 68 restaurants was approximately $1.6 million, including building structures (where applicable), building or leasehold improvements and equipment and fixtures, but excluding land and pre-opening costs. Restaurant-level economics are affected to the extent that we construct free-standing units on company-owned or leased land, rather than leasing existing buildings. In such cases, initial development costs are substantially greater and occupancy costs (other than depreciation) are substantially less than when we lease existing buildings. We cannot predict if average unit-level economics would be altered significantly if in the future the mix of restaurants placed in leased buildings compared to free-standing buildings on company-owned or leased land were to change materially from our current mix.

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RESTAURANT LOCATIONS

          The following table sets forth the location of each of our company-owned restaurants open as of April 25, 2004:

RESTAURANT OPERATIONS AND MANAGEMENT

          Restaurant Personnel. We believe that excellent service contributes significantly to a distinctive, enjoyable dining experience. Accordingly, we seek to hire individuals who possess strong initiative and the ability to provide quality and personalized service. Roadhouse Grill attempts to foster the individuality of its employees, encouraging them to interact with customers on a friendly, casual basis. We recruit both experienced restaurant managers from outside the company and promote qualified employees from within the company. We seek to retain high-quality restaurant managers and personnel by providing them with opportunities for promotion and financial incentives based on individual restaurant performance. These financial incentives include a bonus plan that enables each restaurant manager to earn a portion of a bonus pool by achieving certain predetermined performance goals. To further enhance the “team” concept, restaurant managers also have an opportunity for financial incentives based on our consolidated company-wide financial results.

          Roadhouse Grill restaurants generally operate with a general manager, a dining room manager, a kitchen manager and one or two assistant managers, depending upon volume. The general manager of each restaurant has primary responsibility for managing the day-to-day operations of the restaurant in accordance with our company-wide standards. The general manager and kitchen manager of each restaurant generally are responsible for interviewing, hiring and training restaurant staff. Each restaurant has a staff of approximately 60 to 70 employees.

          We devote a significant amount of time and resources to restaurant management and staff training. Each new manager participates in an eight-week training program, which is conducted both at designated training restaurants and our corporate office, before assuming an assistant manager position (or, in some instances, a kitchen manager position) at a Roadhouse Grill restaurant. This program is designed to provide training in all areas of restaurant operations, including food preparation and service, alcoholic beverage

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service, company philosophy, operating standards, policies and procedures, and business management and administration techniques. These new managers are also trained and evaluated in regards to behavioral skills and other topics to ensure they possess the ability to succeed in managing one of our restaurants. The managers of the training restaurant conduct weekly evaluations of each manager trainee.

          In connection with the opening of a new restaurant, we send an experienced training team to train and assist the new restaurant employees. The training team generally arrives at each restaurant two weeks prior to opening and remains for four weeks after opening. Typically, the general manager, the dining room manager and the kitchen manager of each new restaurant are individuals who have been managers at an existing Roadhouse Grill restaurant.

          The development and success of our restaurants depends, in part, on the efforts, abilities, experience and reputations of the general managers and chefs at our restaurants. Our inability to recruit and retain high-quality personnel may delay the opening of new restaurants or result in higher employee turnover in existing restaurants, which could materially and adversely affect our results of operations or business. Competition for qualified employees could require us to pay higher wages to attract sufficient qualified employees.

          Additionally, our restaurant operations are overseen by our Vice President of Operations and by our nine directors of operations, each of whom is responsible for supervising the operations of six to ten restaurants.

          Purchasing. To better insure uniform quality and obtain competitive prices, we contract centrally for most restaurant food products and other supplies. Individual restaurants decide the amount of each item they require and place orders directly with our distributors several times a week. Managers also arrange for produce items to be provided by local vendors that meet our quality standards. Corporate management closely monitors prices and other supply contract terms for locally and centrally contracted items. Because of the volume of our aggregate orders and the volume of supplies delivered to each individual restaurant, we believe that we are able to obtain favorable prices for our supplies.

          Our profitability is dependent in part on our ability to anticipate and react to changes in food and supply costs. Various factors beyond our control, including climatic changes, disease or illness in beef cattle that could impact supply in the marketplace and government regulations, may affect food costs. Specifically, our dependence on frequent, timely deliveries of beef, poultry, seafood and produce subjects us to the risks of possible shortages or interruptions in supply caused by adverse weather or other conditions which could adversely affect the availability and cost of any such items. Our failure or inability to deal with these increases or shortages could materially and adversely affect our business and result of operations.

          In addition, during fiscal 2004, we purchased approximately 81% of our food and other restaurant supplies from two distributors. Our dependence on a small number of suppliers subjects us to the risk of possible shortages or interruptions in supply if one of these distributors is not able to provide food and supplies to our restaurants in a timely manner. However, we believe that the benefits of working with a small number of high-quality, financially stable vendors and realizing the benefits of primarily centralized distribution offsets the risks associated with this supplier dependence.

          Hours of Operation. Roadhouse Grill restaurants are open seven days a week, typically from 11:00 a.m. to 10:00 p.m. Sunday through Thursday and from 11:00 a.m. to 11:00 p.m. on Friday and Saturday.

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          Reporting and Financial Controls. We maintain reporting, financial and accounting controls for each of our restaurants through the use of centralized accounting and management information systems. We have also developed and continue to enhance corporate policies and procedures designed to maintain consistency in our operations and to strengthen internal accounting controls. Through the review of periodic financial information, on-site visits to our restaurants and other means, we continually evaluate compliance with our policies and procedures. In addition, each of our restaurants is equipped with a computerized accounting system that allows restaurant management to efficiently manage labor, food cost and other direct operating expenses, that provide corporate management rapid access to financial data and that reduces time devoted by our restaurant managers to administrative responsibilities. Guest counts, sales, cash deposits and labor cost information are collected daily from each restaurant. Physical inventories of all food and beverage items are performed weekly. Each restaurant manager prepares a restaurant level weekly profit and loss statement, and at the end of each accounting period, operating statements are prepared for each location. The weekly and accounting period operating statements are reviewed at both the corporate level and restaurant level for variances from expected results to allow for any corrective actions to be taken as quickly as possible.

ADVERTISING AND MARKETING

          Our motto is: “Roadhouse Grill...Eat, Drink and be Yourself.” We attempt to build brand-awareness by providing a distinctive dining experience that results in a significant number of new customers being attracted through word of mouth, as well as by traditional marketing efforts and promotional activities. We believe that clustering multiple restaurants in target markets helps build brand-awareness and increases the efficiencies in our marketing efforts. We also utilize radio, billboard and print advertising to promote our restaurants and build brand-awareness. In addition, beginning in fiscal 2004, we used a program with a rewards and loyalty company to market our restaurants. Further, we market at the restaurant level through sponsorship of community charity activities, sporting events, festivals and Chamber of Commerce events. For fiscal years 2004, 2003 and 2002, advertising and marketing expense relating to Roadhouse Grill restaurants amounted to approximately 2.4%, 2.4% and 1.7% of total revenues, respectively. Excluding the expense related to our program with the rewards and loyalty company, advertising and marketing expense amounted to 1.5% of total revenues in fiscal 2004.

          Over the last few years, because of our financial condition, we have not been able to invest in marketing initiatives at the same level as many of our competitors. However, during fiscal 2005, we expect to use some of the working capital available to us from the sale/leaseback transaction described above under “Recent Events” to invest in additional marketing initiatives.

RESTAURANT INDUSTRY AND COMPETITION

          The restaurant industry is highly competitive. We compete with a broad range of restaurants, including national and regional casual dining chains as well as locally-owned restaurants, some of which operate with concepts similar to ours. A number of our competitors have been in existence longer than us and have substantially greater financial, marketing and other resources and wider geographical diversity than we do. The entrance of new competitors into our market areas or the expansion of operations by existing competitors could have a material adverse effect on our future results of operations and financial condition. There is no assurance that we will be able to compete successfully in the markets in which we operate. In addition, we compete with other restaurant companies and retailers for sites, labor and, in many cases, customers. We believe that the key competitive factors in the restaurant industry are price, quality of food and service, location and concept. To the extent that one or more of our competitors becomes more

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successful with respect to any of the key competitive factors, then our business could be materially adversely affected.

          The restaurant industry has few non-economic barriers to entry and is affected by changes in consumer tastes as well as national, regional and local economic conditions, demographic trends, traffic patterns, and the type, number and location of competing restaurants. There are various other factors which generally affect competitors in the restaurant industry. Dependence on fresh meats and produce also subjects restaurant companies to the risk that shortages or interruptions of supply could adversely affect the availability, quality or cost of ingredients. In addition, factors such as inflation, increased food, labor and employee benefit costs and the availability of qualified management and hourly employees also may adversely affect us and our restaurant competitors. The significant investment in and long-term commitment that we make to each of our restaurant sites limits our ability to respond quickly or effectively to changes in local competitive conditions or other changes that could affect our operations. The success of our restaurant concept will also be dependent on the performance of franchisee-owned restaurants over which we have limited control.

SEASONALITY

          Our operating results fluctuate seasonally because of our geographic concentration in Florida, where we have 34 of our 69 company-owned restaurants. Our restaurant sales generally increase from November through April, the peak period of the Florida tourism season, and generally decrease from May through October. In addition, because of our present geographic concentration, our results of operations have been and may continue to be materially adversely affected by a decline in tourism in Florida, downturns in Florida’s economy or by hurricanes or other adverse weather conditions in Florida. To offset this seasonal trend and to attempt to reduce the decline in sales during the off-season, we run special promotions for our customers, incentive contests for our employees and otherwise focus marketing initiatives on increasing sales during these off-season periods.

GOVERNMENT REGULATION

          Our business is subject to federal, state and local regulations with respect to, among other matters, building, fire, health, sanitation and safety. Further, our development of future restaurants will be subject to laws, rules and regulations concerning land use, building, zoning and environmental matters.

          Various federal and state labor laws govern our operations and our relationship with our employees, including minimum wage, overtime, safety and working conditions, fringe benefit and citizenship requirements. In particular, we are subject to the regulations of the Immigration and Naturalization Service (INS). Given the location of many of our restaurants, even if we operate those restaurants in strict compliance with INS requirements, our employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in our work force. Further, material increases in unemployment tax rates, minimum wage requirements, sales taxes or the cost of compliance with any applicable law or regulation could materially and adversely affect our business.

          Sales of alcoholic beverages account for approximately 10% of our revenues. Since we sell alcoholic beverages, we are required to comply with the alcohol licensing requirements of the various government agencies, including states and municipalities where our restaurants are located. Alcoholic beverage control regulations require each Roadhouse Grill restaurant to apply to a state authority and, in certain locations, county and/or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to

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provide service for extended hours. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. If a liquor license for any restaurant were lost, revenues for that restaurant would be adversely affected. Alcoholic beverage control regulations relate to numerous aspects of our restaurants, including minimum age of patrons consuming and employees serving alcoholic beverages, hours of operation, advertising, wholesale purchasing, inventory control, and handling, storage and dispensing of alcoholic beverages. Our restaurant operations are also subject to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Any liability under such statutes could have a material adverse effect on our results of operations and financial condition. While we carry liquor liability coverage as part of our existing comprehensive general liability insurance, there can be no assurance that our insurance coverages will be adequate.

          The federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. We are required to comply with the Americans with Disabilities Act and regulations relating to accommodating the needs of the disabled in connection with the construction of new facilities and with significant renovations of existing facilities, which will over time require an additional incremental capital investment by us.

          Our operations are subject to various local, state and federal laws regulating the discharge of pollutants into the environment. We believe that our operations are in material compliance with applicable environmental laws and regulations, and we conduct environmental audits of all proposed restaurant sites in order to determine whether there is any evidence of contamination prior to purchasing or entering into a lease with respect to such sites. However, there can be no assurance that we will not incur material environmental liability in connection with any of our owned or leased properties.

          Finally, in connection with our franchise operations, we are required to comply with Federal Trade Commission and state laws and regulations that govern the offer, sale and termination of franchises and the refusal to renew franchises.

          We believe that we operate our business within the requirements of applicable federal, state and local laws and regulations. However, our failure to operate in accordance with any or all of such regulations, or an allegation that we are operating in violation of such regulations, even if it turns out not to be true, could have a material adverse impact on our business, financial position or results of operations.

INSURANCE

          We maintain insurance to cover the potential liabilities associated with a number of the risks that we encounter in our business operations. These include property and flood coverage, auto, workers’ compensation, general liability and umbrella, directors and officers liability, employers practice liability and crime insurance. Many of the policies, such as property, flood and directors and officers liability include deductibles ranging from $100,000 to $250,000 per claim. For many policy years, under workers’ compensation, employers practice liability and general liability coverage, we are effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $300,000 per claim and on an aggregate basis. We are also essentially self-insured in regards to the medical insurance benefits that we provide to our managers and certain other employees. These employees who elect to receive medical insurance benefits are required to contribute a portion of the cost of providing the insurance benefits. Total insurance costs incurred by us for fiscal 2004, 2003 and 2002 were $5.0 million, $6.3 million and $3.5 million, respectively.

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          Due to the trends currently being experienced in the insurance industry, we believe that insurance costs will continue to represent a significant expense to us and may increase in the future. Management is continuing to evaluate options relating to controlling these costs including changes in our insurance carriers and brokers, modifications to certain of the provisions of our policies including deductibles and self-insured retention limits and changes in the portion of costs incurred in providing coverage for our employees that are allocated to the employees who participate in the plan.

EMPLOYEES

          At April 25, 2004, we employed 4,545 persons, of whom 4,240 were restaurant employees, 263 were restaurant management and supervisory personnel, and 42 were corporate personnel. Restaurant employees include both full-time and part-time workers and substantially all are paid on an hourly basis. None of our employees are covered by collective bargaining agreements, and we have never experienced an organized work stoppage, strike or labor dispute. We believe that our relationship with our employees is satisfactory.

TRADEMARKS AND SERVICE MARKS

          Roadhouse Grill has registered the “Roadhouse Grill” service mark and other designs and slogans with the U.S. Patent and Trademark Office and with the respective trademark offices in other countries. Roadhouse Grill has certain other foreign trademarks in various stages of the registration process; however, due to our financial condition, until recently we had temporarily ceased the registration process in several countries. However, we expect to resume such process on a case-by-case basis in certain countries in the future.

          We believe that our trademarks and service marks have significant value and are essential to our ability to create demand for and awareness of our restaurants. There can be no assurance, however, that our marks would be upheld if challenged or that we would not be prevented from using our marks. We also rely on trade secrets and proprietary know-how, and we employ various methods to protect our concepts and recipes. However, these methods may not completely protect us.

EXPANSION PLANS FOR COMPANY OWNED RESTAURANTS

          Expansion Strategy. Due to capital constraints, we have determined that it is not feasible at this time for us to significantly expand the Roadhouse Grill concept through the opening of a significant number of additional company-owned restaurants. We opened one company-owned restaurant in fiscal 2004 (in June 2003). However, no other new company-owned restaurant openings are currently planned for fiscal 2005. Subject to the operating results of our existing restaurants, the availability of adequate financing and the identification of suitable locations, we will make a determination as to the number of restaurants to open in future years. Our focus during fiscal 2005 will be on managing our existing restaurants in the United States, expanding the number of franchised locations and returning our business to profitability. Management believes that opportunities exist that would enable us to expand our franchised operations in that regard. Management also believes that this type of growth opportunity will require significantly lower capital resources than building the Roadhouse Grill concept through opening significant numbers of additional company-owned stores.

          Factors affecting development of company-owned restaurants. If and when we decide to open additional company-owned restaurants, our ability to successfully open such new restaurants will depend on

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a number of factors, many of which may be beyond our control, including our having financing available to open such restaurants and our ability to locate suitable restaurant sites; negotiate acceptable lease or purchase terms; obtain required governmental approvals and construct the new restaurants in a timely manner; attract, train and retain qualified and experienced personnel and management. Due to these factors and others discussed in this report, there can be no assurance that we will be able to develop or operate additional restaurants.

          We believe that the site selection process is critical to the long-term success of any restaurant, and, accordingly, when we open a company-owned restaurant we devote significant time and effort to the investigation and evaluation of potential locations. Among the factors considered in the site selection process are market demographics (including population, age and median household income); traffic patterns and activity; site visibility, accessibility and parking; and proximity to residential developments, office complexes, hotels, retail establishments and entertainment areas. Another important factor is the convenience of the potential location to both lunch and dinner guests and the occupancy cost of the proposed site. Our development strategy has been to cluster restaurants in markets that can support them with cost-effective media advertising. In addition, we believe that clustering multiple units allows more efficient supervision of the restaurants. In connection with the site selection process, potential restaurant sites are identified by our personnel and by consultants and independent real estate brokers.

          When we have developed new restaurants in existing buildings, construction has taken approximately 90 to 120 days after required construction permits have been obtained. Construction of restaurants on vacant land is a longer process and has generally ranged from 120 to 180 days. Our experience to date has been that obtaining construction permits has generally taken from 30 to 180 days. We engage outside general contractors for construction of our restaurants and expect to continue this practice for the foreseeable future if and when we develop additional company-owned restaurants.

          Our prototypical restaurant format is approximately 6,800 square feet with seating for approximately 260 guests. Our restaurants currently range in size from 5,000 to 12,000 square feet, with seating for between 190 to 398 guests. We use a standardized design in constructing restaurants, with modifications made for each particular site and are assisted by outside architects in the design of individual restaurants. We also make our standardized design available to our franchisees and have final right of approval on the design of each franchised restaurant.

          We believe that our restaurants have a comfortable atmosphere and are visually appealing with exposed ceilings and brick and lapboard cedar walls decorated with colorful murals and neon signs. The typical interior also includes multi-level seating, a full-service bar, an exhibition grill and display kitchen. The exterior of each restaurant features rough-sawed siding, a wrap-around wood plank porch, a tin roof trimmed in neon and an oversized “Roadhouse Grill” sign. In addition to the public areas, each restaurant has a food preparation and storage area including a fully-equipped kitchen.

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FRANCHISED AND LICENSED RESTAURANTS

          The following table sets forth the location of franchised and licensed restaurants open as of April 25, 2004:

          We currently have six franchisees and licensees: Roadhouse Grill Italia S.R.L, Roadhouse Grill Asia Pacific (H.K.) Limited (“Roadhouse Grill Hong Kong”), Roadhouse Grill Asia Pacific (Cayman) Limited (“Roadhouse Grill Asia”), Brent Empreendimentos e Alimentacao Ltda. (“Roadhouse Grill Brazil”), NAHI, Inc. and Roadhouse Operating Company, LLC (“Roadhouse Operating”). Berjaya, our majority shareholder, beneficially owns Roadhouse Grill Hong Kong and Roadhouse Grill Asia.

          We are currently seeking to develop additional franchising opportunities on an international basis with primary focus on development in Europe, South America, and the Caribbean. We are also actively seeking multi-unit franchising in the United States. There can be no assurance that we will be successful in our franchising efforts.

          Roadhouse Grill Italia S.R.L. On July 6, 2000, we entered into a joint venture agreement with the Cremonini Group, a publicly-traded Italian conglomerate and parent company of Roadhouse Grill Italia S.R.L., specializing in the food service industry in Europe. Under the original joint venture agreement, Cremonini Group was required to open and operate at least 60 Roadhouse Grill restaurants in Italy, France, Spain, Great Britain and other principal European countries. In March 2004, the joint venture and related agreements with the Cremonini Group was terminated and replaced with a trademark license agreement with Roadhouse Grill Italia S.R.L. (“RGI”) (the “License Agreement”). Under the License Agreement, we have granted RGI the exclusive right to develop a minimum of 36 restaurants in Italy during the next ten years, including the four restaurants opened prior to 2004. RGI has the right to discontinue the development of new restaurants on January 1, 2009 based on the operating restaurants existing at that time not meeting certain performance criteria. RGI also was granted a right of first refusal in regards to developing Roadhouse Grill restaurants in other selected European countries. We are not required to make any capital outlay in connection with the development of these restaurants.

          In accordance with the terms of the License Agreement, RGI is required to pay us a fixed development fee for each restaurant to be opened in accordance with the development schedule at the earliest to occur of the restaurant opening or the end of the applicable calendar year. In addition, we are entitled to fixed royalty fees at the beginning of each calendar year based on the number of restaurants currently open or scheduled to open by the end of the following calendar year in accordance with the development schedule. The payment obligations of RGI under the License Agreement are guaranteed by

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the Cremonini Group. As of April 25, 2004, there are five franchised restaurants operating in Italy and RGI has paid us all fees required to be paid under the License Agreement, including the development fees relating to the two restaurants to be opened in 2004.

          Roadhouse Grill Hong Kong. During January 1996, we entered into a Master Development Agreement with Roadhouse Grill Asia Pacific (HK) Limited (“Roadhouse Grill Hong Kong”), which is for an indefinite period and provides for the development and franchising of Roadhouse Grill restaurants in Hong Kong. The Master Development Agreement was amended by an addendum to Master Development Agreement, dated August 2003 (as amended, the “Hong Kong Master Development Agreement”). Under the terms of the Hong Kong Master Development Agreement, we will be entitled to receive 50% of all revenues received by Roadhouse Grill Hong Kong from third party franchisees, including, but not limited to, franchise fees, reservation fees and royalty fees. The Hong Kong Master Development Agreement provides for minimum initial franchise and ongoing royalty fees. In addition, Roadhouse Grill Hong Kong has agreed to establish an office for the purpose of selling Roadhouse Grill franchises in Hong Kong. Subject to the selling of franchises by Roadhouse Grill Hong Kong in accordance with an agreed upon development schedule, we will pay 50% of the pre-approved budgeted expenses of the office. Roadhouse Grill Hong Kong has agreed to pay 50% of the out-of-pocket expenses incurred by us in connection with our duties and obligations under the Hong Kong Master Development Agreement. Roadhouse Grill Hong Kong and us will each be 50% responsible for any liabilities that arise from the attraction, selection, granting, administration and supervision of franchisees (except for any liabilities caused solely or primarily by either of them, which such causing party shall be fully responsible for), and Roadhouse Grill Hong Kong has agreed to maintain an insurance policy for coverage against such liabilities. Roadhouse Grill Hong Kong is not required to develop any specific number of restaurants in Hong Kong, but must use its best efforts to sell franchises in accordance with an agreed upon development schedule. Under certain circumstances, Roadhouse Grill Hong Kong may also establish its own Roadhouse Grill restaurants in Hong Kong. In that event, Roadhouse Grill Hong Kong is not required to pay any franchise or reservation fee for its restaurants, but is required to pay us royalty fees based on gross sales in connection with the operation of each of its restaurants. Roadhouse Grill Hong Kong is also responsible for paying or reimbursing approved expenses incurred by us in connection with the opening of each restaurant. As of April 25, 2004, Roadhouse Grill Hong Kong had not developed or opened any Roadhouse Grill restaurants pursuant to the Master Development Agreement.

          Roadhouse Grill Asia. During January 1996, we entered into a Master Development Agreement with Roadhouse Grill Asia Pacific (Cayman) Limited (“Roadhouse Grill Hong Kong”), which is for an indefinite period and provides for the development and franchising of Roadhouse Grill restaurants in countries in Asia and the Pacific Rim (other than Hong Kong), including, but not limited to, Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, the Philippines and Thailand. The Master Development Agreement was amended by an addendum to Master Development Agreement, dated August 2003 (as amended, the “Asia Master Development Agreement”). The material terms of the Asia Master Development Agreement, including the terms relating to the establishment of an office and the sharing of franchising revenues, office expenses and certain expenses, are substantially the same as those under the Hong Kong Master Development Agreement summarized above. Under the Asia Master Development Agreement, Roadhouse Grill Asia is not required to develop any specific number of restaurants in Asia, but must use its best efforts to sell franchises in accordance with an agreed upon development schedule.

          As of April 25, 2004, there were three Roadhouse Grill restaurants operating in Malaysia under the Master Development Agreement with Roadhouse Grill Asia. We recorded less than $0.1 million in royalty

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income from those restaurants during fiscal 2004. Royalty income is currently being offset against interest that we owe to Berjaya. This offset of royalty income will continue until the royalty receivable exceeds the amount due Berjaya, which approximates $0.1 million as of April 25, 2004. Once the royalty receivable exceeds the payable to Berjaya, we expect to begin collecting the earned royalty fees.

          Roadhouse Grill Brazil. In May 1999, we entered into a Master Development Agreement with Roadhouse Grill Brazil, which provides for the development and franchising of Roadhouse Grill restaurants in Brazil. Under the agreement, Roadhouse Grill Brazil is required to open and maintain at least eight Roadhouse Grill restaurants during the first ten years of the term of the agreement. Roadhouse Grill Brazil pays us a one-time franchise fee for each new restaurant opened and an ongoing service fee based on gross sales. Roadhouse Grill Brazil currently operates one Roadhouse Grill restaurant in Brasilia, Brazil. As of April 25, 2004, the receivable from Roadhouse Grill Brazil was less than $0.1 million.

          Ohio franchisee. In March 2002, we entered into a Master Development Agreement with NAHI, Inc., granting the exclusive right to build five restaurants in five years in the Cincinnati/Tri State area of Ohio and Kentucky. In order to maintain these exclusive rights, the franchisee must comply with the terms of the agreement including, but not limited to, opening one restaurant per year. As of April 25, 2004, the franchisee has not complied with the development schedule. However, we have not taken any action in regards to terminating the agreement to date, although we reserve the right to do so. Currently, there is one restaurant open pursuant to this Master Development Agreement.

          Roadhouse Operating. Roadhouse Operating entered into an initial franchise agreement and Master Development Agreement with us (the “Roadhouse Operating Master Development Agreement”) in August 1995 for the exclusive development of up to five restaurants, over a period which ended October 31, 1999, in Clark County, Nevada (which includes the Las Vegas, Nevada metropolitan area). Roadhouse Operating initially opened three Roadhouse Grill restaurants. Two of these have been closed, and one is currently being operated.

          Roadhouse Operating is obligated to pay us a percentage royalty fee based on gross sales. As of April 25, 2004, the receivable from Roadhouse Operating was approximately $0.2 million. Due to lack of payment, this amount has been fully reserved. We are also the guarantor of equipment leases for the three restaurants, owned by Roadhouse West G.P., an affiliate of Roadhouse Operating. In addition, management understands that other parties have also guaranteed these obligations. Roadhouse West G.P. is currently in default of the payment terms of the operating leases and management believes that the balance of the remaining lease payments due is approximately $1.0 million. The leases are collateralized by the leased equipment and certain leasehold improvements. Roadhouse West G.P. has recently filed for Chapter 11 bankruptcy, and such proceeding has now been converted to a Chapter 7 proceeding. We cannot predict the outcome of these proceedings but believe that any potential liability will be mitigated by the factors described above and, accordingly, we have provided no reserve for any possible obligations that may arise relating to these proceedings.

ITEM 2. PROPERTIES

          As of April 25, 2004, all but 11 of our company-owned open restaurants were located in leased space. Initial lease expirations range from five to 20 years, with the majority of the leases providing us with renewal options extending the lease term. All of our leases provide for a minimum annual rent, and several

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leases call for annual or other escalations at various points in the lease term or for additional rent based on sales volume at the particular location over specified minimum levels. Generally, the leases are triple net leases, which require us to pay the costs of insurance, taxes and a portion of the lessors’ operating costs. We believe that our facilities are in satisfactory condition, are suitable for their intended use and are, in the aggregate, sufficient for our present business needs.

          On August 6, 2004, we closed a transaction with Sovereign Roadhouse LLC, a wholly-owned subsidiary of Sovereign Investment Company, (“Sovereign”) involving the sale and leaseback of eleven restaurant properties that we had previously owned. The sale price for the eleven properties was $21.8 million. The properties are being leased from Sovereign under lease agreements that extend for 20 years and include four five-year renewal options. See Note 20 of Notes to Consolidated Financial Statements.

          In December 2003, we completed a sale and leaseback transaction relating to our corporate headquarters building. Gross proceeds from the sale were $3.0 million. The net proceeds of $2.6 million, after payment of expenses and security deposits, were used, in part, to pay debt related to the facility of $1.5 million. The remaining net proceeds of $1.1 million were retained by us for working capital and general corporate purposes. The leaseback agreement provides for rent to be paid on a triple net basis and extends for a period of 15 years with two five-year renewal options. We occupy approximately 19,000 square feet of the facility and have leased the remaining 11,500 square feet through May 2007.

          We also own the land and building related to a closed store that is currently held for sale. We are currently marketing this facility and hope to complete the sale of this facility during fiscal 2005.

ITEM 3. LEGAL PROCEEDINGS

BANKRUPTCY

          Please refer to Note 2 of Notes to Consolidated Financial Statements for information regarding our Chapter 11 reorganization proceedings that were completed in September 2002.

CLASS ACTION SUIT AND SEC INFORMAL INVESTIGATION

          See Note 14 of Notes to Consolidated Financial Statements for information regarding the putative class action that was filed against us and two of our directors and was recently dismissed and the informal SEC investigation that arose as a result of the restatement of our audited financial statements for the fiscal years ended 2000 and 1999 and the first three fiscal quarters of fiscal 2001.

OTHER

          We are a party to certain legal proceedings arising in the ordinary course of business. While it is not possible to predict or determine the outcome of any of these proceedings, we do not believe that any liability resulting from these proceedings will have a material adverse effect on our financial position, results of operations or business.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No actions were submitted to a vote of our shareholders during the fourth quarter of fiscal 2004.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

          As of April 25, 2004, we had outstanding 29,220,663 shares of common stock, par value $0.03 per share. Our common stock is currently quoted on the Pink Sheets under the symbol “GRLL.PK.” Our common stock traded on the Nasdaq National Market until it was delisted in May 2002. The following table sets forth, for the periods indicated, the highest and lowest closing sale prices for the common stock, as reported by the Nasdaq National Market through May 2002 and on the Pink Sheets thereafter:

DIVIDEND POLICY

          We have not declared or paid any cash dividends or distributions on our capital stock. We do not intend to pay any cash dividends on our common stock in the foreseeable future. Future earnings, if any, will be used to support operations and finance expansion. Future declaration and payment of dividends, if any, will be determined in light of then current conditions, including our earnings, operations, capital requirements, financial condition, and other factors deemed relevant by our Board of Directors, at their discretion.

SHAREHOLDERS

          As of August 6, 2004, there were approximately 80 shareholders of record of our common stock. A portion of our outstanding common stock is held of record in broker “street name” for the benefit of individual investors, and we believe that as of the date of this report there are approximately 900 beneficial holders of our common stock.

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EQUITY COMPENSATION PLAN INFORMATION

     See Item 12.

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ITEM 6. SELECTED FI