Overview

The following discussion should be read in conjunction with the financial statements included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2008.

Our revenues and income are subject to potentially material changes as a result of the market prices of diesel fuel and gasoline, as well as the availability of these products. These factors are subject to the worldwide petroleum products supply chain, which historically has incurred shocks as a result of, among other things, severe weather, terrorism, political crises, wars and other military actions and variations in demand, which are often the result of changes in the macroeconomic environment. Over the past few years there has been significant volatility in the cost of diesel fuel and gasoline: first, as crude oil demand increased during the previous economic expansion in the United States and events such as Hurricane Katrina affected the supply system; then as economic growth in certain developing economies, such as China and India, increased demand for petroleum products; then, as the world value of the U.S. dollar declined and as speculation in the price of petroleum commodities increased; and, more recently, as the price of diesel fuel and gasoline declined dramatically as the current worldwide recession reduced demand for petroleum products. During the third quarter of 2009, as the comparative value of the U.S. dollar began to decline, diesel fuel and gasoline prices have again begun to rise dramatically. We expect that these significant changes in our costs for these products can largely be passed on to our customers, but increased volatility in the crude oil and refined products markets can result in negative effects on our sales and profitability and increases in our working capital requirements. Nonetheless, for the foreseeable future, we expect that the crude oil and refined product markets will continue to be volatile.

In addition to the factors cited above, our financial results during the three and nine month periods ended September 30, 2009, were, and our financial results in future periods may be, affected by the condition of the U.S. economy, generally, and the financial condition and activity of the trucking industry in the U.S, specifically. The trucking industry is the primary customer for our goods and services. Freight and trucking demand in the U.S. generally reflects the amount of commercial activity in the U.S. economy. Because the U.S. economy has been in a recession, demand for our products and services has declined during the past year. The decline in new home starts and the decline in import activity in the U.S. during that time have contributed to reduced trucking industry activity in the U.S. generally and to declines in our fuel sales volume. Although recently the U.S. economy has shown signs of stabilizing, it is unclear as to whether these trends will continue or be sustainable. If the U.S. economy continues to operate as it has over the past 12 to 18 months or if it worsens, our financial results may not improve and may decline, resulting in our experiencing increased losses from our operations. The current economic conditions in the U.S. generally, and in the trucking industry in particular, have retarded our efforts to produce profitable results from our operations in 2008 and 2009.

Summary of Travel Center Site Counts



The following table summarizes the changes in the composition of our business
(company operated, franchisee leased and operated or franchisee owned and
operated) from December 31, 2007 through September 30, 2009:



                                                       Franchisee    Franchisee
                                           Company     Leased and    Owned and
                                           Operated     Operated      Operated      Total
Number of travel centers at
December 31, 2007                               189            10            37         236

January - September 2008 Activity:
No activity                                       -             -             -           -
Number of travel centers at
September 30, 2008                              189            10            37         236

October - December 2008 Activity:
Terminated franchised travel centers              -             -            (2 )        (2 )
Closed travel centers                            (1 )           -             -          (1 )
Number of travel centers at
December 31, 2008                               188            10            35         233

January - September 2009 Activity:
No activity                                       -             -             -           -
Number of travel centers at
September 30, 2009                              188            10            35         233

Relevance of Fuel Revenues

Due to volatile pricing of fuel products and our pricing arrangements with fuel customers, we believe that fuel revenue is not a reliable metric for analyzing our results of operations from period to period. As a result solely of changes in fuel prices, our fuel revenue may increase or decrease significantly as compared to our historical results, in both absolute amounts and on a percentage basis, without a comparable change in fuel sales volumes or in gross margin per gallon. We consider fuel volumes and gross margin to be better measures of comparative performance than fuel revenues.

Results of Operations

Three months ended September 30, 2009 compared to September 30, 2008

The following table summarizes our results for the three month periods ended September 30, 2009 and 2008.

                                       Three Months Ended
                                          September 30,              $             %
(dollars in millions)                  2009           2008         Change       Change

Revenues:
Fuel                                $     984.9    $  1,832.4    $   (847.5 )      -46.3 %
Nonfuel                                   293.5         321.5         (28.0 )       -8.7 %
Rent and royalties                          3.5           3.8          (0.3 )       -7.7 %
Total revenues                          1,281.9       2,157.7        (875.8 )      -40.6 %

Cost of goods sold (excluding
depreciation):
Fuel                                      924.4       1,747.1        (822.7 )      -47.1 %
Nonfuel                                   124.9         135.0         (10.1 )       -7.5 %
Total cost of goods sold
(excluding depreciation)                1,049.3       1,882.1        (832.8 )      -44.2 %

Operating expenses:
Site level operating expenses             153.4         166.5         (13.1 )       -7.9 %
Selling, general &
administrative expense                     19.7          21.3          (1.6 )       -7.6 %
Real estate rent                           58.4          58.7          (0.3 )       -0.4 %
Depreciation and amortization
expense                                    10.3          10.4          (0.1 )       -1.5 %
Total operating expenses                  241.8         256.9         (15.1 )       -5.9 %

Income (loss) from operations              (9.2 )        18.7         (27.9 )     -149.3 %
Equity in earnings of affiliates            0.3           0.4          (0.1 )      -32.9 %
Interest income                             0.5           0.9          (0.4 )      -48.3 %
Interest expense                           (3.6 )        (3.2 )        (0.4 )       13.1 %
Income (loss) before income
taxes                                     (12.0 )        16.8         (28.8 )     -171.4 %
Provision for income taxes                  0.2           0.2           0.0         56.7 %
Net income (loss)                   $     (12.2 )  $     16.6    $    (28.8 )     -173.5 %

Same Site Comparisons. A travel center is included in the following same site comparisons if it was continuously operated by us from July 1, 2008 through September 30, 2009 or, in the case of rent revenues and royalty revenues, by a franchisee of ours for that same period. Travel centers are not excluded from the same site comparisons as a result of changes in their size or in the services offered.

                                       Three Months Ended September 30,            $             %
(gallons and dollars in
millions)                                 2009                  2008             Change       Change

Number of company operated
travel centers                                    187                   187             -            -

Fuel sales volume (gallons) (1)                 476.1                 494.1         (18.0 )       -3.6 %
Fuel margin(1)                      $            60.2     $            85.7    $    (25.5 )      -29.7 %
Total nonfuel revenues (1)          $           293.5     $           321.5    $    (28.0 )       -8.7 %
Operating expenses (1) (2)          $           153.3     $           165.9    $    (12.6 )       -7.6 %

Number of franchisee operated
travel centers                                     43                    43             -            -
Rent and royalty revenues           $             3.6     $             3.7    $     (0.1 )       -2.7 %

(2) Excludes real estate rent expense.

Revenues. Revenues for the three month period ended September 30, 2009, were $1,281.9 million, which represented a decrease from the quarter ended September 30, 2008, of $875.8 million, or 40.6%, primarily related to a decrease in fuel revenue.

Fuel revenues were 76.8% of total revenues for the quarter ended September 30, 2009, as compared to 84.9% for the same period in 2008. Fuel revenues for the quarter ended September 30, 2009, were $984.9 million, a decrease of $847.5 million, or 46.3%, as compared to the same period in 2008. This decrease was principally the result of decreases in fuel prices and also resulted from reduced fuel sales volume. The table below shows the changes in fuel revenues between periods that resulted from price and volume changes:

                                                          Gallons         Fuel
(gallons and dollars in millions)                           Sold        Revenues

Results for three months ended September 30, 2008             507.9    $   1,832.4

Decrease due to petroleum products price changes                  -         (822.8 )
Decrease due to same site volume changes                      (18.0 )        (35.1 )
Decrease due to the company operated site closed
since January 1, 2008                                          (1.4 )         (2.8 )
Other change, net                                               6.6           13.2
Net decrease from prior year period                           (12.8 )       (847.5 )

Results for three months ended September 30, 2009             495.2    $     984.9

On a same site basis for our company operated sites, fuel sales volume decreased by 18.0 million gallons, or 3.6%, during the three months ended September 30, 2009 compared to the same period in 2008. We believe the same site fuel sales volume decrease resulted primarily from a decline in trucking activity attributable to the significant decline in economic activity in the U.S. throughout 2008 and continuing into 2009, particularly the declines in the shipments of durable goods, including new home building supplies, as well as a decline in imports into the U.S. that are transported by truck combined with increased fuel conservation efforts by truck operators throughout 2008 and continuing into 2009 as a result of the historically high cost of fuel in 2008. The same site fuel sales volume decline for the quarter was somewhat lessened by an increase in fuel sales volumes to motorist customers that we believe resulted from both the decline in fuel prices in 2009 as compared to 2008 and our retail pricing strategy.

Nonfuel revenues were 22.9% of total revenues for the quarter ended September 30, 2009, as compared to 15.0% for the same period in 2008. Nonfuel revenues for the three months ended September 30, 2009, were $293.5 million, a decrease of $28.0 million, or 8.7%, as compared to the same period in 2008. The change between years is primarily related to the decline in unit sales at those sites we operated continuously during both periods, partially offset by price increases. On a same site basis for our company

operated sites, nonfuel revenues decreased by $28.0 million, or 8.7% during the three months ended September 30, 2009, compared to the same period in 2008. We believe the same site nonfuel revenue decrease reflects decreased customer traffic in our travel centers as a result of many of the factors affecting our fuel sales volumes, and also resulted because our customers have reduced discretionary spending as a result of the recent U.S. economic recession. We believe this decrease was partially offset by the impact of our sales and marketing initiatives and the attractiveness of our nonfuel product and service offerings to customers regardless of where they choose to purchase fuel or the effects of their fuel conservation efforts.

Rent and royalty revenues for the three months ended September 30, 2009, were $3.5 million, a decrease of $0.3 million, or 7.7%, as compared to the same period in 2008. Lower royalties resulting from reduced nonfuel revenues at our franchisee locations and the termination of two franchise sites in the fourth quarter of 2008 were largely offset by scheduled increases in rent revenues at the ten franchisee operated locations we sublease to our franchisees.

Cost of goods sold (excluding depreciation). Cost of goods sold for the three months ended September 30, 2009, was $1,049.3 million, a decrease of $832.8 million, or 44.2%, as compared to the same period in 2008, which was primarily attributable to decreased fuel costs. Fuel cost of goods sold for the quarter ended September 30, 2009 of $924.4 million decreased by $822.7 million, or 47.1% as compared to the same period in 2008. This decrease in fuel cost of goods sold primarily resulted from the decrease in petroleum commodity prices and also resulted from the fuel sales volumes decrease as described above.

Nonfuel cost of goods sold for the three months ended September 30, 2009, was $124.9 million, a decrease of $10.1 million, or 7.5%, as compared to the same period in 2008. Nonfuel cost of goods sold decreased due to the nonfuel sales decreases noted above, partially offset by increases in product unit costs. Nonfuel cost of goods sold as a percentage of nonfuel revenue was 42.6% for the quarter ended September 30, 2009, compared to 42.0% for the same period in 2008.

Site level operating expenses. Site level operating expenses for the three months ended September 30, 2009, were $153.4 million, a decrease of $13.1 million, or 7.9%, as compared to the same period in 2008. This decrease was primarily due to the lower levels of business activity, our efforts to adjust our labor costs to offset lower sales volumes and our other expense control initiatives.

On a same site basis for our company operated sites, site level operating expenses decreased by $12.6 million, or 7.6% in the three months ended September 30, 2009, as compared to the same period in 2008. The decrease in site level operating expenses on a same site basis was primarily the result of decreases in labor and related benefits and payroll tax expense as a result of our efforts to adjust our labor costs to offset lower sales volumes and our other expense control initiatives. This decrease was partially offset by increases over the prior year in expenses that are not as directly related to our volume of business such as real estate taxes and other taxes not based on income, increases in the unit cost of labor and related benefits, and certain costs of maintaining our operating locations. On a same site basis, site level operating expenses as a percentage of nonfuel revenues for the quarter ended September 30, 2009, were 52.2%, compared to 51.6% for the same period in 2008. The increase in operating expenses as a percentage of nonfuel revenues results from the fact that certain of our expenses are fixed in nature so decreases in our sales levels do not result in a corresponding decrease in site level operating expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended September 30, 2009, were $19.7 million, a decrease of $1.6 million, or 7.6%, as compared to the same period in 2008. This decrease primarily resulted from the elimination of expense related to severance and retention payments to certain employees and our cost saving strategies, including our labor cost reductions.

Real estate rent expense. Rent expense for the three months ended September 30, 2009, was $58.4 million, a decrease of $0.3 million as compared to the same period in 2008. Under our real estate leases, we paid rent of $45.5 million during the three months ended September 30, 2009 of which $2.3 million was recognized as interest expense and $0.6 million was recognized as a reduction of our capital lease obligation. During the three months ended September 30, 2009, we accrued $2.5 million of noncash rent expense to recognize rent expense on a straight line basis over the terms of those leases that include rent escalation provisions and amortized $1.7 million of our deferred leasehold improvement allowance as a reduction of rent expense. In addition, during the three months ended September 30, 2009, we accrued $15 million of rent expense that was not paid in cash pursuant to our rent deferral agreement with Hospitality Trust.

Depreciation and amortization expense. Depreciation and amortization expense for the three months ended September 30, 2009 was $10.3 million, a decrease of $0.1 million, or 1.5%, as compared to the same period in 2008.

Loss from operations. Our loss from operations for the three months ended September 30, 2009, was $9.2 million, as compared to income from operations of $18.7 million for the same period in 2008. This decline was the result of the changes in revenues and expenses described above.

Interest income and expense. Interest income and expense consisted of the following:

                                              Three Months Ended September
                                                          30,                          $
(dollars in millions)                          2009                 2008             Change

Accretion of leasehold improvement
receivable                                $           0.3      $           0.4    $       (0.1 )
Other interest income                                 0.2                  0.5            (0.3 )
Total interest income                     $           0.5      $           0.9    $       (0.4 )

Rent expense classified as interest       $           2.3                  2.3    $          -
Amortization of deferred financing
costs                                                 1.0                  0.2             0.8
Other interest expense                                0.3                  0.7            (0.4 )
Total interest expense                    $           3.6      $           3.2    $        0.4

Income tax provision. Our provisions for income taxes of $0.2 million and $0.2 million for the three months ended September 30, 2009 and 2008, respectively, differed from the amounts calculated at the statutory rate primarily due to recognition of a valuation allowance against our net deferred tax assets and to certain state income taxes that are due without regard to our net operating losses.

Nine months ended September 30, 2009 compared to September 30, 2008

The following table summarizes our results for the nine month periods ended September 30, 2009 and 2008.

                                      Nine Months Ended
                                        September 30,              $             %
(dollars in millions)                 2009          2008         Change       Change

Revenues:
Fuel                               $  2,529.4    $  5,415.5    $ (2,886.1 )      -53.3 %
Nonfuel                                 837.0         916.9         (79.9 )       -8.7 %
Rent and royalties                       10.4          11.0          (0.6 )       -4.8 %
Total revenues                        3,376.8       6,343.4      (2,966.6 )      -46.8 %

Cost of goods sold (excluding
depreciation):
Fuel                                  2,349.2       5,227.9      (2,878.7 )      -55.1 %
Nonfuel                                 352.4         384.5         (32.1 )       -8.3 %
Total cost of goods sold
(excluding depreciation)              2,701.6       5,612.4      (2,910.8 )      -51.9 %

Operating expenses:
Site level operating expenses           447.9         484.5         (36.6 )       -7.6 %
Selling, general &
administrative expense                   58.3          77.3         (19.0 )      -24.7 %
Real estate rent                        175.7         174.8           0.9          0.6 %
Depreciation and amortization
expense                                  29.5          32.5          (3.0 )       -9.4 %
Total operating expenses                711.4         769.1         (57.7 )       -7.5 %

Loss from operations                    (36.2 )       (38.1 )         1.9         -5.1 %
Equity in earnings of
affiliates                                0.5           0.8          (0.3 )      -36.8 %
Interest income                           1.8           6.2          (4.4 )      -70.5 %
Interest expense                        (10.8 )        (9.9 )        (0.9 )        8.9 %
Loss before income taxes                (44.7 )       (41.0 )        (3.7 )        8.7 %
Provision for income taxes                0.6           0.5           0.1         33.4 %
Net loss                           $    (45.3 )  $    (41.5 )  $     (3.8 )        9.0 %

Same Site Comparisons. A travel center is included in the following same site comparisons if it was continuously operated by us from January 1, 2008 through September 30, 2009 or, in the case of rent revenues and royalty revenues, by a franchisee of ours for that same period. Travel centers are not excluded from the same site comparisons as a result of changes in their size or in the services offered.

                                         Nine Months Ended September 30,           $           %
(gallons and dollars in millions)           2009                 2008           Change       Change

Number of company operated travel
centers                                            187                  187            -           -

Fuel sales volume (gallons) (1)                1,378.7              1,538.2       (159.5 )     -10.4 %
Fuel margin(1)                        $          179.0     $          187.8    $    (8.8 )      -4.7 %
Total nonfuel revenues (1)            $          837.7     $          916.7    $   (79.0 )      -8.6 %
Operating expenses (1) (2)            $          447.8     $          483.2    $   (35.4 )      -7.3 %

Number of franchisee operated
travel centers                                      43                   43            -           -
Rent and royalty revenues             $           10.4     $           10.6    $    (0.2 )      -2.0 %

(2) Excludes real estate rent expense.

Revenues. Revenues for the nine month period ended September 30, 2009, were $3,376.8 million, which represented a decrease from the nine months ended September 30, 2008, of $2,966.6 million, or 46.8%, primarily related to a decrease in fuel revenue.

Fuel revenues were 74.9% of total revenues for the nine months ended September 30, 2009, as compared to 85.4% for the same period in 2008. Fuel revenues for the nine months ended September 30, 2009, were $2,529.4 million, a decrease of $2,886.1 million, or 53.3%, as compared to the same period in 2008. This decrease was principally the result of decreases in fuel prices and also resulted from reduced fuel sales volume. The table below shows the changes in fuel revenues between periods that resulted from price and volume changes:

                                                          Gallons         Fuel
(gallons and dollars in millions)                           Sold        Revenues

Results for nine months ended September 30, 2008            1,594.9    $   5,415.5

Decrease due to petroleum products price changes                  -       (2,603.8 )
Decrease due to same site volume changes                     (159.5 )       (280.0 )
Decrease due to the company operated site closed
since January 1, 2008                                          (4.5 )         (8.0 )
Other changes, net                                              3.2            5.7
Net decrease from prior year period                          (160.8 )     (2,886.1 )

Results for nine months ended September 30, 2009            1,434.1    $   2,529.4

On a same site basis for our company operated sites, fuel sales volume decreased by 159.5 million gallons, or 10.4%, during the nine months ended September 30, 2009, compared to the same period in 2008. We believe the same site fuel sales volume decrease resulted primarily from a decline in trucking activity attributable to the significant decline in economic activity in the U.S. throughout 2008 and continuing into 2009, particularly the declines in the shipments of durable goods, including new home building supplies, as well as a decline in imports into the U.S. that are transported by truck, combined with increased fuel conservation efforts by truck operators throughout 2008 and continuing into 2009 as a result of the historically high cost of fuel in 2008. We believe the same site fuel sales volume decrease also resulted from decreased demand from motorists during the first half of 2009 as a result of the continued high cost of fuel to consumers as well as the recessionary condition of the U.S. economy.

Nonfuel revenues were 24.8% of total revenues for the nine months ended September 30, 2009, as compared to 14.5% for the same period in 2008. Nonfuel revenues for the nine months ended September 30, 2009, were $837.0 million, a decrease of $79.9

million, or 8.7%, as compared to the same period in 2008. The change between years is primarily related to the decline in unit sales at those sites we operated during both periods, partially offset by our price increases. On a same site basis for our company operated sites, nonfuel revenues decreased by . . .