SAFE HARBOR STATEMENT under the PRIVATE SECURITIES LITIGATION REFORM ACT of 1995

Forward-looking statements are included in this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Such statements generally express management's expectations with respect to its plans, or its assumptions and beliefs concerning future developments and their potential effect on the Company. There can be no assurances that such expectations will be met or that future developments will not conflict with management's current beliefs and assumptions, which are subject to risks and uncertainties. Factors that could cause actual results and performance to differ materially from anticipated results that may be expressed or implied in forward-looking statements are included in, but are not limited to, the discussion in this Form 10-Q under Part II, Item 1A. "Risk Factors."

"Forward-looking statements" can generally be identified in sentences that contain words such as "should," "would," "could," "may," "plan(s)," "anticipate(s)," "project(s)," "believe(s)," "will," "expect(s)," "estimate(s)," "intend(s)," "continue," "assumption(s)," "goal(s)," "target" and similar words (or derivatives thereof) that are used to distinguish "forward-looking statements" from historical or present facts.

All forward-looking information in this MD&A is provided by the Company pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of all risk factors. Except as may be required by law, the Company disclaims any obligation to update any forward-looking statements that may be contained in this MD&A.

CORPORATE OVERVIEW

The operations of Frisch's Restaurants, Inc. and Subsidiaries (Company) consist of two reportable segments within the restaurant industry: full service family-style "Big Boy" restaurants and grill buffet style "Golden Corral" restaurants. As of December 16, 2008, 89 Big Boy restaurants and 35 Golden Corral restaurants were owned and operated by the Company, located in various regions of Ohio, Kentucky and Indiana, plus smaller areas in Pennsylvania and West Virginia.

The Company's Second Quarter of Fiscal 2009 consists of the twelve weeks ended December 16, 2008, and compares with the twelve weeks ended December 11, 2007, which constituted the Second Quarter of Fiscal 2008. The First Half of Fiscal 2009 consists of the 28 weeks ended December 16, 2008, and compares with the 28 weeks ended December 11, 2007, which constituted the First Half of Fiscal 2008. The first half of the Company's fiscal year normally accounts for a disproportionate share of annual revenue and earnings because it contains 28 weeks, whereas the second half of the year normally contains only 24 weeks. The upcoming twelve-week third quarter in particular is usually a disproportionately smaller share of annual revenue and earnings because it spans most of the winter season from mid December through early March. Winter storms can adversely affect results of operations, which are particularly vulnerable if severe winter weather should develop over a prolonged period. References to Fiscal 2009 refer to the 52 week year that will end on June 2, 2009. References to Fiscal 2008 refer to the 53 week year that ended June 3, 2008.

Sales amounted to $69,093,000 during the Second Quarter of Fiscal 2009, which was $120,000 lower than the Second Quarter of Fiscal 2008. Net earnings for the Second Quarter of Fiscal 2009 were $2,216,000, or diluted earnings per share (EPS) of $.43, which compares with $2,168,000, or diluted EPS of $.41 in the Second Quarter of Fiscal 2008. The improvement in net earnings is largely the result of a lower effective tax rate: 29 percent in the Second Quarter of Fiscal 2009 versus 32 percent in the Second Quarter of Fiscal 2008. Factors having a noteworthy effect on pretax earnings when comparing the Second Quarter of Fiscal 2009 with the Second Quarter of Fiscal 2008:

• Big Boy same store sales increased .6 percent.

• Golden Corral same store sales decreased 2.2 percent.

• As a percentage of sales, food costs increased to 35.4 percent from 35.2 percent.

• As a percentage of sales, payroll and related costs decreased to 32.6 percent from 32.8 percent.

• New store opening costs were $182,000 higher.

Sales reached a record $158,975,000 during the First Half of Fiscal 2009, which was $235,000 higher than the First Half of Fiscal 2008. Net earnings for the First Half of Fiscal 2009 were $4,391,000, or diluted EPS of $.85, which compares with $4,618,000, or diluted EPS of $.88 in the First Half of Fiscal 2008. The effective tax rate was 29 percent throughout the First Half of Fiscal 2009. It was 32 percent throughout the First half of Fiscal 2008. Factors having a noteworthy effect on pretax earnings when comparing the First Half of Fiscal 2009 with the First Half of Fiscal 2008:

• Big Boy same store sales increased .4 percent.

• Golden Corral same store sales decreased .2 percent.

• As a percentage of sales, food costs increased to 36.3 percent from 35.2 percent.

• As a percentage of sales, payroll and related costs decreased to 32.8 percent from 33.1 percent.

• Gains on sales of real estate were $1,116,000 in the First Half of Fiscal 2009, up from $524,000 in the First Half of Fiscal 2008.

Another significant factor affecting the Company's operations has been the annual increase in the minimum wage as mandated by Ohio voters in November 2006:

• The minimum wage for non-tipped employees increased 33 percent from $5.15 per hour to $6.85 per hour beginning January 1, 2007. It was increased to $7.00 per hour effective January 1, 2008 and to $7.30 per hour on January 1, 2009 in accordance with the mandate's annual provision to adjust automatically for the rate for inflation.

• The minimum wage for tipped employees increased 61 percent from $2.13 per hour to $3.43 per hour beginning January 1, 2007. It was increased to $3.50 per hour on January 1, 2008 and to $3.65 per hour on January 1, 2009 in accordance with the inflation provision in the mandate.

More than two-thirds of the Company's payroll costs are incurred in Ohio. The effects of paying the required higher hourly rates of pay have effectively been countered with reductions in the number of hours worked along with higher menu prices. Further reductions in the number of hours that employees are permitted to work will likely be implemented to offset the effect of what would otherwise be a $500,000 increase in annual payroll costs attributable to the January 1, 2009 increase.

The federal minimum wage for non-tipped employees increased from $5.15 per hour to $5.85 per hour in July 2007 and to $6.55 per hour in July 2008. It is currently scheduled to increase to $7.25 per hour in July 2009. Through December 2008, the effect of these increases on labor costs has not been significant because 1) Ohio's (where more than two-thirds of the Company's payroll costs are incurred) minimum wage already exceeds the federal requirement, 2) conditions in most other markets already dictate higher wage rates and 3) the minimum rate for tipped employees remains at $2.13 per hour except in Ohio.

RESULTS of OPERATIONS

Sales

The Company's sales are primarily generated through the operation of Big Boy restaurants and Golden Corral restaurants. Big Boy sales also include wholesale sales from the Company's commissary to restaurants licensed to other operators and the sale of Big Boy's signature brand tartar sauce to grocery stores. Same store sales comparisons are a key metric that management uses in the operation of the business. Same store sales are affected by changes in customer counts and menu price increases. Changes in sales also occur as new restaurants are opened and older restaurants are closed. Below is the detail of consolidated restaurant sales:

                                          Second Quarter            First Half
                                       Dec. 16,    Dec. 11,    Dec. 16,    Dec. 11,
                                         2008        2007        2008        2007
                                                      (in thousands)
       Big Boy restaurant sales        $  44,290   $  43,713   $  98,709   $  98,404
       Wholesale sales to licensees        2,170       2,142       5,019       4,998
       Other wholesale sales                 197         203         491         424

       Total Big Boy Sales                46,657      46,058     104,219     103,826

       Golden Corral sales                22,436      23,155      54,756      54,914

       Consolidated restaurant sales   $  69,093   $  69,213   $ 158,975   $ 158,740

Higher Big Boy sales shown in the above table include a same store sales increase of .6 percent in the Second Quarter of Fiscal 2009 (on a customer count decrease of 2.7 percent) and an increase of .4 percent in the First Half of Fiscal 2009 (on a 3.0 percent decrease in customer counts). The Big Boy same store sales comparisons include average menu price increases of 2.4 percent and 1.2 percent implemented respectively in September 2008 and September 2007. In addition, a 1.6 percent increase was put in place in February 2008 to which a .5 percent increase was added in April 2008. Another increase is currently planned for February 2009.

The Company operated 89 Big Boy restaurants as of December 16, 2008, including two new ones that opened respectively in August and October 2008. Also, a high volume suburban Cincinnati unit was temporarily out of service for three months (June 8, 2008 to September 8, 2008) in order to replace it with a new facility. Two low volume Big Boy restaurants ceased operating at the end of Fiscal 2008. No new Big Boy restaurants are currently under construction, although several promising sites are currently under contract to be acquired in the near term.

Lower Golden Corral sales shown in the above table include a same store sales decrease of 2.2 percent in the Second Quarter of Fiscal 2009 (on a customer count decrease of 6.0 percent) and a decrease of .2 percent in the First Half of Fiscal 2009 (on a 3.7 percent decrease in customer counts). The Golden Corral same store sales comparisons include average menu price increases of 2.5 percent and 3.2 percent implemented respectively in September 2008 and October 2007. In addition, a .8 percent increase went into effect in March 2008 to which a .5 percent increase was added in June 2008. The Golden Corral segment of the Company has now suffered a same store sales decrease in eighteen of the last 21 quarters.

The Company operated 35 Golden Corral restaurants as of December 16, 2008. No further development is currently planned.

Gross Profit

Gross profit for the Big Boy segment includes wholesale sales and cost of
wholesale sales. Gross profit differs from restaurant level profit discussed in
Note G (Segment Information) to the consolidated financial statements, as
advertising expense is charged against restaurant level profit. Gross profit for
both operating segments is shown below:



                                         Second Quarter            First Half
                                     Dec. 16,     Dec. 11,    Dec. 16,    Dec. 11,
                                       2008         2007        2008        2007
                                                     (in thousands)
        Big Boy gross profit         $   6,099   $    6,714   $  12,057   $  13,883
        Golden Corral gross profit         538          236       1,154         856

        Total gross profit           $   6,637   $    6,950   $  13,211   $  14,739

The operating percentages shown in the following table are percentages of total sales, including Big Boy wholesale sales. The table supplements the discussion that follows which addresses cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.

                                           Second Quarter                                    First Half
                              12 weeks 12/16/08       12 weeks 12/11/07       28 weeks 12/16/08       28 weeks 12/11/07
                                     Big                     Big                     Big                     Big
                            Total    Boy     GC     Total    Boy     GC     Total    Boy     GC     Total    Boy     GC
Sales                       100.0   100.0   100.0   100.0   100.0   100.0   100.0   100.0   100.0   100.0   100.0   100.0

Food and Paper               35.4    34.1    38.3    35.2    33.1    39.4    36.3    34.6    39.6    35.2    33.3    39.0

Payroll and Related          32.6    34.0    29.8    32.8    34.4    29.7    32.8    34.5    29.6    33.1    34.7    30.0

Other Operating Costs
(including opening costs)    22.3    18.9    29.6    22.0    17.9    29.9    22.6    19.3    28.7    22.4    18.7    29.5

Gross Profit                  9.7    13.0     2.3    10.0    14.6     1.0     8.3    11.6     2.1     9.3    13.3     1.5

Volatile commodity markets continue to pose a difficult environment in which to contain food costs. Sharply rising commodity prices are evident by the much higher food and paper cost percentages for the Big Boy segment shown in the above table, despite higher menu prices being charged to customers. Costs have increased significantly for poultry, pork, beef and fish products. The market for hamburger in particular has experienced very steep cost increases. The food and paper cost percentages for the Golden Corral segment retreated significantly in the Second Quarter of Fiscal 2009, chiefly reflecting much lower prices for top butt sirloin steaks.

The effect of commodity price increases is actively managed with changes to the Big Boy menu mix and effective selection and rotation of items served on the Golden Corral buffet, together with periodic increases in menu prices. Food and paper cost percentages in the Golden Corral segment are much higher than Big Boy because of the all-you-can-eat nature of the Golden Corral concept, as well as its use of steak as a featured item on the buffet line.

The favorable trends in payroll and related cost percentages in both Big Boy and Golden Corral continue to be a clear indicator that the mandated increases in the minimum wage have been effectively mitigated by management's resolve to reduce the number of hours worked by hourly paid employees and higher menu prices.

Management performs a comprehensive review each quarter of its self-insurance program for Ohio workers' compensation and adjusts its reserves as deemed appropriate based on claims experience. The reserves were lowered by $42,000 in the First Half of Fiscal 2009, effected through a credit to earnings during the Second Quarter of Fiscal 2009. The reserves were increased by $59,000 during the First Half of Fiscal 2008, including a $41,000 charge against earnings in the Second Quarter of Fiscal 2008.

Net periodic pension cost (computed under Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions) was $364,000 and $285,000 respectively, in the Second Quarter of Fiscal 2009 and the Second Quarter of Fiscal 2008. Net periodic pension cost was $849,000 and $666,000 respectively, in the First Half of Fiscal 2009 and the First Half of Fiscal 2008. Although no contributions are needed to meet minimum funding requirements for Fiscal 2009, discretionary contributions are anticipated that are currently estimated at $1,000,000, including $500,000 that was contributed during the First Half of Fiscal 2009. Future funding of the pension plans largely depends upon the performance of investments held in trusts that have been established for the plans. Equity securities comprise 70 percent of the target allocation of the plans' assets. As a result of recent market volatility, the market values of these securities have declined significantly, which could materially affect future funding requirements and result in the recognition of much higher net periodic pension costs in future years.

Other operating costs include occupancy costs such as maintenance, rent, depreciation, property tax, insurance and utilities, plus costs relating to field supervision, accounting and payroll preparation, franchise fees for Golden Corral restaurants, new restaurant opening costs and many other operating costs. As most of these expenses tend to be fixed costs, the percentages shown in the above table are greatly affected by changes in same store sales levels. Opening costs were $202,000 (all for Big Boy) and $20,000 respectively during the Second Quarter of Fiscal 2009 and the Second Quarter of Fiscal 2008. For the First Half of Fiscal 2009, opening costs were $531,000 (all of which was for Big Boy). Opening costs were $605,000 ($380,000 for Big Boy and $225,000 for Golden Corral) in the First Half of Fiscal 2008.

Other operating costs are a much higher percentage of sales for the Golden Corral segment as sales volumes remain well below original expectations. The reductions in the Golden Corral percentages are largely from lower depreciation charges, the result of an impairment of assets charge taken at the end of Fiscal 2008 to lower the carrying costs of three restaurants.

Operating Profit

To arrive at the measure of operating profit, administrative and advertising expense is subtracted from gross profit while franchise fees and other revenue are added to it. Gains and losses from the sale of real property, if any, are then respectively added or subtracted.

Administrative and advertising expense decreased $175,000 and $83,000 respectively, in the Second Quarter of Fiscal 2009 and the First Half of Fiscal 2009 when compared with comparable periods a year ago. The decreases are attributable primarily to lower accruals for incentive compensation and stock based compensation costs.

Revenue from franchise fees is based on sales generated by Big Boy restaurants that are licensed to other operators. The fees are based principally on percentages of sales and are recorded on the accrual method as earned. As of December 16, 2008, 26 Big Boy restaurants were licensed to other operators and paying fees to the Company, a reduction of one restaurant from a year ago. Other revenue also includes certain other fees earned from licensed restaurants along with miscellaneous rent and investment income.

Gains from the sale of real property amounted to $1,116,000 during the First Half of Fiscal 2009. The gains resulted primarily from the disposition in the first quarter of fiscal 2009 of a Big Boy restaurant that had ceased operations June 2008. Aggregate proceeds amounted to $1,581,000. Gains from the sale of real property amounted to $524,000 during the First Half of Fiscal 2008. The gains resulted from the disposition in the first quarter of fiscal 2008 of three low volume Big Boy restaurants that ceased operations respectively in January, April and June 2007. Aggregate proceeds amounted to $1,685,000.

No impairment of assets was recorded during any of the periods presented in this MD&A.

Interest Expense

Interest expense decreased $79,000 and $233,000 respectively, in the Second Quarter of Fiscal 2009 and the First Half of Fiscal 2009 when compared with comparable periods a year ago. The decreases are the result of lower debt levels and lower variable interest rates combined with much lower interest charges associated with capitalized leases. There are no longer any restaurant facilities leased by the Company that are classified as capital leases under the provisions of Statement of Financial Accounting Standards No. 13 (SFAS 13), "Accounting for Leases" as amended.

Income Tax Expense

Income tax expense as a percentage of pretax earnings was estimated at 29 percent throughout the First Half of Fiscal 2009 and was 32 percent throughout the First Half of Fiscal 2008. The effective tax rate for Fiscal 2008 was ultimately lowered to 30.8 percent. These rates have been kept consistently low through the Company's use of tax credits, especially the federal credit allowed for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. In addition, the 29 percent rate used throughout the First Half of Fiscal 2009 reflects the statutory elimination of corporate income tax in the state of Ohio.

LIQUIDITY and CAPITAL RESOURCES

Sources of Funds

Food sales to restaurant customers provide the Company's principal source of cash. The funds from sales are immediately available for the Company's use, as substantially all sales to restaurant customers are received in cash or are settled by debit or credit cards. The primary source of cash provided by operating activities is net earnings plus depreciation. Other sources of cash may include borrowing against credit lines, proceeds received when stock options are exercised and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for discretionary objectives, including capital projects (principally restaurant expansion) and dividends.

Working Capital Practices

The Company has historically maintained a strategic negative working capital position, a common practice in the restaurant industry. The working capital deficit was $20,632,000 as of December 16, 2008 and was $20,142,000 as of June 3, 2008. As significant cash flows are consistently provided by operations, and existing credit lines are readily available, negative working capital should not hinder the Company's ability to satisfactorily retire any of its obligations when due, including the aggregated contractual obligations and commercial commitments shown in the following table.

Aggregated Information about Contractual Obligations and Commercial Commitments

December 16, 2008



                                                                      Payments due by period (in thousands)
                                                                                                                 more
                                                                                                                than 5
                                                Total      year 1     year 2     year 3    year 4    year 5     years
    Long-Term Debt                             $ 33,264   $  8,259   $ 11,285   $  5,144   $ 4,012   $ 2,231   $  2,333
    Rent due under Capital Lease Obligations        852        296        262        221        73        -          -
1   Rent due under Operating Leases              21,812      1,873      1,573      1,568     1,546     1,533     13,719
2   Unconditional Purchase Obligations           18,522      8,058      3,129      3,129     3,012     1,194         -
3   Other Long-Term Obligations                   1,452        227        230        234       237       240        284
    Total Contractual Cash Obligations         $ 75,902   $ 18,713   $ 16,479   $ 10,296   $ 8,880   $ 5,198   $ 16,336

1 Not included in the table is a secondary liability for the performance of a ground lease that has been assigned to a third party. The annual obligation of the lease approximates $48 through 2020. Should the third party default, the Company has the right to re-assign the lease. Operating leases include option periods considered to be part of the lease term under the provisions of Statement of Financial Accounting Statement No. 13, "Accounting for Leases," as amended.

2 Primarily consists of commitments for certain food and beverage items, plus capital projects including commitments to purchase real property pursuant to purchase option provisions in leases.

3 Deferred compensation liability.

If needed to fund temporary working capital needs, a $5,000,000 revolving credit facility (currently unused) is available to the Company through September 1, 2010. A construction draw credit facility is also in place through September 1, 2010 with $5,500,000 in current availability.

Operating Activities

Operating cash flows were $10,296,000 in the First Half of Fiscal 2009, which compares with $9,787,000 in the First Half of Fiscal 2008. The increase in operating cash flows is primarily attributable to normal changes in assets and liabilities such as prepaid expenses, inventories and accounts payable, all of which can and do fluctuate widely from quarter to quarter. Management measures cash flows from the operation of the business by using the simple method of net earnings plus non-cash expenses such as depreciation, losses (net of any gains) on dispositions of assets, charges for impairment of assets (if any) and stock based compensation expense. Under this method, which is shown in the consolidated statement of cash flows as a sub-total, cash flows from the operation of the business in the First Half of Fiscal 2009 amounted to $10,805,000, which was $1,163,000 lower than the First Half of Fiscal 2008.

Investing Activities

Capital spending is the principal component of the Company's investing activities. Capital spending was $11,479,000 during the First Half of Fiscal 2009, an increase of $4,296,000 from the First Half of Fiscal 2008. This year's capital spending includes $10,310,000 for Big Boy restaurants and $1,169,000 for Golden Corral restaurants. These capital expenditures consisted of new restaurant construction, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.

Proceeds from the disposition of property during the First Half of Fiscal 2009 amounted to $1,584,000, primarily reflecting the sale of an older Big Boy restaurant that had ceased operations in June 2008. Its sale resulted in a gain of $1,072,000. Proceeds from property dispositions in the First Half of Fiscal 2008 amounted to $1,713,000, primarily reflecting the sale of three low-volume Big Boy restaurants that ceased operations respectively in January, April and June 2007, yielding an aggregate gain of $524,000.

Financing Activities

Borrowing against credit lines amounted to $5,000,000 during the First Half of Fiscal 2009, none of which was borrowed during the Second Quarter of Fiscal 2009. Scheduled and other payments of long-term debt and capital lease obligations amounted to $4,877,000 during the First Half of Fiscal 2009. Regular quarterly cash dividends to shareholders were paid at a rate of $.12 per share, amounting to $1,226,000 during the First Half of Fiscal 2009. In addition, a dividend had been declared but not paid as of December 16, 2008. Its payment of $612,000 on January 9, 2009 was the 192nd consecutive quarterly dividend paid by the Company. The Company expects to continue its 48 year practice of paying regular quarterly cash dividends.

During the First Half of Fiscal 2009, 1,000 shares of the Company's common stock were issued pursuant to the exercise of stock options, yielding proceeds to the . . .