Page 1
                   SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549

                                FORM 10-Q

(Mark One)

(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
  Exchange Act of 1934.

For the quarterly period ended May 9, 2004

                                   OR

( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

For the transition period from  ______________ to ____________________

Commission file number      0-23420


                          QUALITY DINING, INC.
         (Exact name of registrant as specified in its charter)

         Indiana                              35-1804902
(State or other jurisdiction of           (I.R.S. Employer
 incorporation or organization)           Identification No.)


           4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
                  (Address of principal executive offices and zip code)


                             (574) 271-4600
          (Registrant's telephone number, including area code)


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 Rule 12b-2 of the Act).
Yes    No x

The number of shares of the registrant's common stock outstanding as of
June 18, 2004 was 11,596,781.





                          QUALITY DINING, INC.
                      QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED MAY 9, 2004
                                  INDEX


                                                                Page


PART I  - Financial Information


Item 1.   Consolidated Financial Statements (Unaudited):

          Consolidated Statements of Operations                    3
          Consolidated Balance Sheets                              4
          Consolidated Statements of Cash Flows                    5
          Notes to Consolidated Financial Statements               6

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations           18

Item 3.   Quantitative and Qualitative Disclosures About Market
          Risk                                                    30

Item 4.   Controls and Procedures                                 30

Part II - Other Information

Item 1.   Legal Proceedings                                       31

Item 2.   Changes in Securities                                   31

Item 3.   Defaults upon Senior Securities                         31

Item 4.   Submission of Matters to Vote of Security Holders       31

Item 5.   Other Information                                       31

Item 6.   Exhibits and Reports on Form 8-K                        31

Signatures                                                        32


















Part I. FINANCIAL INFORMATION
Item 1. - CONSOLIDATED FINANCIAL STATEMENTS

                          QUALITY DINING, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Unaudited)
                (In thousands, except per share amounts)

                                 Twelve Weeks Ended    Twenty-Eight Weeks Ended
                                     May 9,    May 11,       May 9,     May 11,
                                      2004        2003          2004      2003
                                     -------   -------       -------    -------
Revenues:
  Burger King                       $ 26,578  $ 25,452      $ 58,885   $ 59,393
  Chili's Grill & Bar                 20,346    18,616        45,153     42,132
  Italian Dining Division              3,865     4,163         8,892      9,808
  Grady's American Grill               1,437     1,459         3,360      3,501
                                     -------   -------       -------    -------
Total revenues                        52,226    49,690       116,290    114,834
                                     -------   -------       -------    -------
Operating expenses:
  Restaurant operating expenses:
    Food and beverage                 14,270    13,450        31,856     30,850
    Payroll and benefits              15,114    14,293        33,894     33,630
    Depreciation and amortization      2,101     2,288         4,968      5,362
    Other operating expenses          13,605    12,685        30,421     30,077
                                     -------   -------       -------    -------
Total restaurant operating expenses   45,090    42,716       101,139     99,919
                                     -------   -------       -------    -------
Income from restaurant operations      7,136     6,974        15,151     14,915
  General and administrative           3,663     4,041         8,678      8,980
  Amortization of intangibles             37        87           119        203
                                     -------   -------       -------    -------
Operating income                       3,436     2,846         6,354      5,732
                                     -------   -------       -------    -------
Other income (expense):
  Recovery of note receivable              -     3,459             -      3,459
  Interest expense                    (1,464)   (1,690)       (3,523)    (3,994)
  Loss on sale of property
    and equipment                        (28)       (1)          (75)       (10)
  Minority interest in earnings         (573)     (587)       (1,054)    (1,370)
  Other income, net                       70       257           154        750
                                     -------   -------       -------    -------
Total other income (expense), net     (1,995)    1,438        (4,498)    (1,165)
                                     -------   -------       -------    -------
Income from continuing operations
    before income taxes                1,441     4,284         1,856      4,567
Income tax provision                     287       256           559        597
                                     -------   -------       -------    -------
Income from continuing operations      1,154     4,028         1,297      3,970
Loss from discontinued operations       (900)   (4,308)         (765)    (4,071)
                                     -------   -------       -------    -------
Net income (loss)                    $   254   $  (280)      $   532    $  (101)
                                     =======   =======       =======    =======
Basic net income (loss) per share:
    Continuing operations               0.10      0.36          0.11       0.35
    Discontinued operations            (0.08)    (0.38)         (.07)     (0.36)
                                     -------   -------       -------    -------
Basic net income (loss) per share   $   0.02   $ (0.02)        $0.04    $ (0.01)
                                     =======   =======       =======    =======
Diluted net income (loss) per share:
    Continuing operations               0.10      0.36          0.11       0.35
    Discontinued operations            (0.08)    (0.38)        (0.07)     (0.36)
                                     -------   -------       -------    -------
Diluted net income (loss) per share $   0.02   $ (0.02)        $0.04    $ (0.01)
                                     =======   =======       =======    =======
Weighted average shares outstanding:
Basic                                 11,311    11,311        11,311     11,311
                                     =======   =======       =======    =======
Diluted                               11,337    11,316        11,341     11,327
                                     =======   =======       =======    =======
See Notes to Consolidated Financial Statements.



                          QUALITY DINING, INC.
                       CONSOLIDATED BALANCE SHEETS
                               (Unaudited)
                         (Dollars in thousands)

                                             May 9,            October 26,
                                             2004                2003
ASSETS                                     ---------            ---------
Current assets:
  Cash and cash equivalents                $   1,265            $   1,724
  Accounts receivable                          1,706                1,723
  Inventories                                  1,823                1,670
  Deferred income taxes                        2,710                2,251
  Assets held for sale                            12                5,821
  Other current assets                         1,769                2,192
                                             -------              -------
Total current assets                           9,285               15,381
                                             -------              -------
Property and equipment, net                  109,593              112,826
                                             -------              -------
Other assets:
  Deferred income taxes                        6,207                6,749
  Trademarks, net                                495                1,285
  Franchise fees and development fees, net     8,440                8,801
  Goodwill                                     7,960                7,960
  Liquor licenses, net                         2,884                2,820
  Other                                        3,567                3,454
                                             -------              -------
Total other assets                            29,553               31,069
                                             -------              -------
Total assets                                $148,431             $159,276
                                             =======              =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt         $  9,151        $      10,055
  Accounts payable                             6,717                6,182
  Accrued liabilities                         21,761               19,520
                                             -------              -------
Total current liabilities                     37,629               35,757

Long-term debt                                72,638               85,335
                                             -------              -------
Total liabilities                            110,267              121,092
                                             -------              -------

Minority interest                             13,662               14,272

Stockholders' equity:
  Preferred stock, without par value:
    5,000,000 shares authorized; none issued       -                    -
  Common stock, without par value: 50,000,000
    shares authorized; 12,955,781 and
    12,955,781 shares issued, respectively        28                   28
  Additional paid-in capital                 237,402              237,402
  Accumulated deficit                       (205,982)            (206,514)
  Unearned compensation                         (517)                (575)
                                             -------              -------
                                              30,931               30,341
  Treasury stock, at cost, 2,508,587
    and 2,508,587 shares, respectively        (6,429)              (6,429)
                                             -------              -------
Total stockholders' equity                    24,502               23,912
                                             -------              -------
Total liabilities and stockholders' equity  $148,431             $159,276
                                             =======              =======
See Notes to Consolidated Financial Statements.



                          QUALITY DINING, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited)
                             (In thousands)
                                                   Twenty-Eight Weeks Ended
                                                       May 9,      May 11,
                                                        2004        2003
                                                     ---------    ---------
Cash flows from operating activities:
  Net income (loss)                                  $     532    $    (101)
  Loss from discontinued operations                        765        4,071
  Minority interest in earnings                          1,054        1,370
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization of
      property and equipment                             4,739        5,111
    Amortization of other assets                           775          865
    Loss on sale of property and equipment                  75           10
    Deferred income taxes                                   83            -
    Amortization of unearned compensation                   58           47
    Changes in current assets and current liabilities:
      Net decrease (increase) in current assets            287         (169)
      Net increase (decrease) in current liabilities     2,136       (3,539)
                                                     ---------    ---------
Net cash provided by operating activities               10,504        7,665
                                                     ---------    ---------
Cash flows from investing activities:
  Purchase of property and equipment                    (3,929)      (2,698)
  Proceeds from the sales of property and equipment      8,635          581
  Purchase of other assets                                (472)        (199)
  Other                                                      -          300
                                                     ---------    ---------
Net cash provided by (used) for investing activities     4,234       (2,016)
                                                     ---------    ---------
Cash flows from financing activities:
  Borrowings of long-term debt                          28,271       31,043
  Repayment of long-term debt                          (41,872)     (33,705)
  Cash distributions to minority interest
    in consolidated partnerships                        (1,664)      (3,683)
                                                     ---------    ---------
Net cash used by financing activities                  (15,265)      (6,345)
                                                     ---------    ---------
Cash provided by discontinued operations                    68          824
                                                     ---------    ---------

Net increase in cash and cash equivalents                 (459)         128
Cash and cash equivalents, beginning of period           1,724        1,174
                                                     ---------    ---------
Cash and cash equivalents, end of period             $   1,265    $   1,302
                                                     =========    =========


See Notes to Consolidated Financial Statements.





                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)
Note 1:  Description of Business.

Quality Dining, Inc. (the "Company") operates four distinct restaurant
concepts.  It owns the Grady's American Grill (R) and two Italian Dining
concepts and operates Burger King (R) restaurants and Chili's Grill & Bar(R)
("Chili's") as a franchisee of Burger King Corporation and Brinker
International, Inc. ("Brinker"), respectively.  The Company operates its
Italian Dining restaurants under the tradenames of Spageddies Italian
Kitchen (R) ("Spageddies"(R)) and Papa Vino's (TM) Italian Kitchen ("Papa
Vino's").  The Company operates one of its Grady's American Grill
restaurants under the tradename Porterhouse Steaks and Seafood (TM) and one
under the tradename Regas Grill (R).  As of May 9, 2004, the Company
operated 174 restaurants, including 118 Burger Kings, 38 Chili's Grill &
Bar restaurants, 7 Grady's American Grill restaurants, six Papa Vino's,
three Spageddies, one Regas Grill and one Porterhouse Steak and Seafood
restaurant.

Note 2:  Summary of Significant Accounting Policies.

Basis of Presentation

During   the   first   quarter  of  2004,  the  Company   adopted   FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities", as
revised  by  the FASB in December 2003 (FIN 46R).  As a  result  of  the
adoption  of  this Interpretation, the Company changed its consolidation
policy  whereby  the accompanying consolidated financial statements  now
include  the  accounts  of  Quality  Dining,  Inc.,  its  wholly   owned
subsidiaries,  and  certain related party affiliates that  are  variable
interest  entities.   Previously, the consolidated financial  statements
included only the accounts of Quality Dining, Inc., and its wholly owned
subsidiaries.  Prior periods have been restated to reflect this change.

The  Company determined that certain affiliated real estate partnerships
from which the Company leases 42 of its Burger King restaurants and that
are substantially owned by certain directors, officers, and stockholders
of  the  Company  meet the definition of variable interest  entities  as
defined  in  FIN 46R ("VIE's").  Furthermore, the Company has determined
that it is the primary beneficiary of these VIE's, based on the criteria
in FIN 46R.  The Company holds no direct ownership or voting interest in
the  VIE's.  Additionally, the creditors and beneficial interest holders
of the VIE's have no recourse to the general credit of the Company.

The  assets  of  the  VIE's,  which consist primarily  of  property  and
equipment,  totaled  $17,873,000 and $18,599,000  at  May  9,  2004  and
October  26,  2003, respectively.  The liabilities of the  VIE's,  which
consist primarily of bank debt, totaled $7,263,000 and $7,493,000 at May
9,  2004  and October 26, 2003, respectively.  Certain of the assets  of
the VIE's serve as collateral for the debt obligations.  Because certain
of  these  assets  were  previously recorded as capital  leases  by  the
Company,  with  a resulting lease obligation, the consolidation  of  the
VIE's  served  to increase total assets as reported by  the  Company  by
$13,291,000  and  $13,869,000 and total liabilities  by  $3,729,000  and
$3,697,000   at   May  9,  2004  and  October  26,  2003,  respectively.
Additionally, the consolidation of the VIE's increased treasury stock by
$2,806,000 at May 9, 2004 and October 26, 2003, as one of the VIE's owns
common  stock  of the Company. The change had no impact on reported  net
income  or  earnings per share for the twenty-eight weeks ended  May  9,
2004 and May 11, 2003.







                           QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

The  following  table  presents the effect of the consolidation  of  the
VIE's   on   depreciation  and  amortization  expense,  other  operating
expenses, general and administrative expense, interest expense and other
income  (expense) for the twelve weeks and twenty-eight weeks ended  May
9, 2004 and May 11, 2003:

(In thousands)                             12-Weeks Ended      28-Weeks Ended
                                            --------------     --------------
                                          May 9,     May 11,    May  11,  May 9,
                                          2004        2003       2004     2003
                                        -------    -------     -------  -------
Depreciation and amortization expense   $ 2,070    $ 2,255     $ 4,903  $ 5,285
Change in consolidation policy               31         33          65       77
                                         ------     ------      ------   ------
Consolidated depreciation and
  amortization                          $ 2,101    $ 2,288     $ 4,968  $ 5,362
                                         ======     ======      ======   ======

Other operating expenses                $14,172    $13,223     $31,706  $31,314
Change in consolidation policy             (567)      (538)     (1,285)  (1,237)
                                         ------     ------      ------   ------
Consolidated other operating expenses   $13,605    $12,685     $30,421  $30,077
                                         ======     ======      ======   ======

General and administrative expenses     $ 3,647    $ 4,031     $ 8,660  $ 8,937
Change in consolidation policy               16         10          18       43
                                         ------     ------      ------   ------
Consolidated general and administrative
  Expenses                              $ 3,663    $ 4,041     $ 8,678  $ 8,980
                                         ======     ======      ======   ======

Interest expense                        $ 1,517    $ 1,782     $ 3,646  $ 4,207
Change in consolidation policy              (53)       (92)       (123)    (213)
                                         ------     ------      ------   ------
Consolidated interest expense           $ 1,464    $ 1,690     $ 3,523  $ 3,994
                                         ======     ======      ======   ======

Other income (expense)                  $    70    $   257     $   425  $   710
Change in consolidation policy                -          -        (271)      40
                                         ------     ------      ------   ------
Consolidated other income (expense)     $    70    $   257     $   154  $   750
                                         ======     ======      ======   ======

All   significant  intercompany  balances  and  transactions  have  been
eliminated.

The  accompanying unaudited condensed consolidated financial  statements
have  been  prepared in accordance with accounting principles  generally
accepted   in  the  United  States  of  America  for  interim  financial
information  and with the instructions to Form 10-Q and  Article  10  of
Regulation  S-X  promulgated by the Securities and Exchange  Commission.
Accordingly,  they do not include all of the information  and  footnotes
required   by  generally  accepted  accounting  principles  for   annual
financial  statement reporting purposes.  In the opinion of  management,
all   adjustments,   consisting  only  of  normal  recurring   accruals,
considered  necessary  for  a  fair  presentation  have  been  included.
Operating  results  for the 28-week period ended May  9,  2004  are  not
necessarily indicative of the results that may be expected for  the  53-
week year ending October 31, 2004.

                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

These  financial  statements  should be read  in  conjunction  with  the
Company's audited financial statements for the fiscal year ended October
26, 2003 included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission.

As  a  result  of  the  adoption of Statement  of  Financial  Accounting
Standard ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived  Assets", the Company has classified the  revenues,  expenses
and  related  assets  and  liabilities of four  Grady's  American  Grill
restaurants  that  were  sold  in  2003,  one  Grady's  American   Grill
restaurant  that  was sold and one that was closed in fiscal  2004,  six
Grady's American Grill restaurants that the Company sold and leased back
in  fiscal 2004 and one Grady's American Grill restaurant that was  held
for  sale  at  the  end  of  the  second  quarter  of  fiscal  2004,  as
discontinued  operations  in  the  accompanying  consolidated  financial
statements.


Intangible Assets

Franchise  Fees  and Development Fees - The Company's  Burger  King  and
Chili's franchise agreements require the payment of a franchise fee  for
each  restaurant opened.  Franchise fees are deferred and  amortized  on
the  straight-line  method  over the lives of the  respective  franchise
agreements.  Development fees paid to Brinker were deferred and expensed
in  the  period the related restaurants were opened. Franchise fees  are
being amortized on a straight-line basis, generally over 20 years.

                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Trademarks  -  The Company owns the trademarks for its Grady's  American
Grill,  Spageddies Italian Kitchen, Papa Vino's Italian  Kitchen,  Regas
Grill  and Porterhouse Steaks and Seafood. During the second quarter  of
fiscal  2003  the Company recorded an impairment charge  of  $4,411,000,
consisting of a reduction in the net book value of the Grady's  American
Grill trademark of $2,882,000 and in the net book value of certain fixed
assets  of $1,529,000. The net book value of the Grady's American  Grill
trademark was $416,000 as of May 9, 2004.  During the second quarter  of
fiscal 2003 the Company reviewed the useful life of the Grady's American
Grill trademark and determined that the remaining useful life should  be
reduced  from 15 years to five years.  In determining the fair value  of
the impaired assets, the Company relied primarily on the discounted cash
flow analyses that incorporated an investment horizon of five years  and
utilized a risk adjusted discount factor.

Below are the gross carrying amount and accumulated amortization of  the
trademarks, franchise fees and development fees as of May 9, 2004.

Amortized Intangible Assets
- ---------------------------
(Dollars in thousands)                       As of May 9, 2004
                                    ------------------------------------
                                  Gross Carrying  Accumulated    Net
                                      Amount      Amortization   Book
                                                                 Value
Amortized intangible assets:           --------    --------    --------
  Trademarks                           $  2,050    $ (1,555)   $    495
  Franchise fees and development fees    14,824      (6,384)      8,440
                                        -------     -------      ------
Total                                  $ 16,874    $ (7,939)   $  8,935
                                        =======     =======     =======

                                            As of October 26, 2003
                                       ---------------------------------
                                  Gross Carrying  Accumulated    Net
                                      Amount      Amortization   Book
                                                                 Value
Amortized intangible assets:           --------    --------    --------
  Trademarks                           $  2,961    $ (1,676)   $  1,285
  Franchise fees and development fees    14,782      (5,981)      8,801
                                        -------     -------     -------
Total                                  $ 17,743    $ (7,657)   $ 10,086
                                        =======     =======     =======

The Company's intangible asset amortization expense for the twenty-eight
week period ending May 9, 2004 was $522,000 compared to $600,000 for the
comparable  period  in  fiscal  2003. The  estimated  annual  intangible
amortization expense for each of the next five years is as follows:

Year one    $  851,000
Year two    $  851,000
Year three  $  851,000
Year four   $  851,000
Year five   $  760,000



                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Goodwill - The Company operates four distinct restaurant concepts in the
food-service  industry.   It owns the Grady's  American  Grill  and  two
Italian Dining concepts and operates Burger King restaurants and Chili's
Grill  & Bar restaurants as a franchisee of Burger King Corporation  and
Brinker  International, Inc., respectively.   The Company has identified
each  restaurant  concept as an operating segment  based  on  management
structure  and  internal  reporting.   The  Company  has  two  operating
segments  with  goodwill - Chili's Grill & Bar  and  Burger  King.   The
Company  had  a total of $7,960,000 in goodwill as of May  9,  2004  and
October  26,  2003.   The  Chili's Grill and Bar operating  segment  had
$6,902,000  of  goodwill  and  the Burger  King  operating  segment  had
$1,058,000 of goodwill.

Stock Options

The  Company accounts for all of its stock-based compensation awards  in
accordance with APB Opinion No. 25 which requires compensation  cost  to
be  recognized  based on the excess, if any, between the  quoted  market
price of the stock at the date of grant and the amount an employee  must
pay  to acquire the stock.  Under this method, no compensation cost  has
been recognized for stock option awards.

Had  compensation cost for the Company's stock-based compensation  plans
been  determined  based on the fair value method as prescribed  by  SFAS
123, the Company's net earnings (loss) and net earnings (loss) per share
would have been the pro forma amounts indicated below:

                                              Twelve         Twenty-Eight
                                            Weeks Ended       Weeks Ended
                                          May 9,   May 11,  May 9,    May 11,
                                           2004     2003     2004      2003
                                         -------  -------   ------   -------

(In thousands, except per share amounts)
- ---------------------------------------
Net income (loss), as reported            $  254   $ (280)  $  532   $  (101)

Deduct: Total stock option based employee
compensation expense determined by using
the Black-Scholes option pricing model,
net of related tax effects                    (7)      (8)     (16)     (19)
                                           -----    -----    -----    -----
Net income (loss), pro forma              $  247   $ (288)  $  516   $ (120)
                                           =====    =====    =====    =====

Basic and diluted net income (loss)
  per common share, as reported           $ 0.02   $(0.02)  $ 0.04   $(0.01)
                                           =====    =====    =====    =====
Basic and diluted net income (loss)
  per common share, pro forma             $ 0.02   $ (0.03) $ 0.04   $(0.01)
                                           =====     =====    =====    =====




                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Note 3: Acquisitions and Dispositions.

During the first twenty-eight weeks of fiscal 2004, the Company received
net  proceeds of $7,571,000 from a sale of seven Grady's American  Grill
restaurants.  The Company recorded a loss in discontinued operations  of
$886,000  related to these sales in fiscal 2004.  Six of the restaurants
sold  were  sale-leaseback transactions.   In  each  of  the  six  sale-
leaseback transactions, the Company's lease obligations extend for  less
than one year.

The  Company  purchased  five existing Burger King  restaurants  from  a
Burger  King  franchisee  in  the  third  quarter  of  fiscal  2004  for
$1,150,000

During  fiscal  2003,  the  Company sold  four  Grady's  American  Grill
restaurants  for  net  proceeds of $4,779,000. The  Company  recorded  a
$1,160,000  gain in discontinued operations related to  these  sales  in
fiscal 2003.

As  discussed  in Note 2, discontinued operations includes the  revenues
and  expenses of the four Grady's American Grill restaurants  that  were
sold  in  fiscal  2003, the seven restaurants sold  and  one  restaurant
closed  in  the  first twenty-eight weeks of fiscal  2004  and  the  one
restaurant that was being held for sale as of May 9, 2004. The  decision
to  dispose  of the locations reflects the Company's ongoing process  of
evaluating the performance of the Grady's American Grill restaurants and
using  the proceeds from dispositions to reduce debt.  Assets  held  for
sale includes restaurant equipment totaling $12,000 as of May 9, 2004.


                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Net loss from discontinued operations for the periods ended May 9, 2004,
and May 11, 2003 were made up of the following components:


                                                Twelve         Twenty-Eight
                                              Weeks Ended       Weeks Ended
                                             May 9,   May 11,   May 9,   May 11,
                                              2004     2004      2004     2003
                                             -----    -----     -----    -----
(In thousands, except per share amounts)
- ----------------------------------------
Revenue discontinued operations            $ 2,140  $ 2,272   $ 5,779  $10,487
Income discontinued restaurant operations       13      273       140      529
Asset impairment and facility closing
  expense                                     (905)  (4,572)     (886)  (4,578)
                                             -----    -----     -----    -----
Loss before taxes                             (892)  (4,299)     (746)  (4,049)
Income tax provision                            (8)      (9)      (19)     (22)
                                             -----    -----     -----    -----
Loss from discontinued operations           $ (900) $(4,308)  $  (765) $(4,071)
                                             =====    =====     =====    =====
Basic and diluted net income per
  share from discontinued operations        $(0.08) $  (0.38) $ (0.07) $ (0.36)
                                             =====     =====    =====    =====

Note 4:  Commitments.

The Company is self-insured for a portion of its employee health care
costs.  The Company is liable for medical claims up to $125,000 per
eligible employee annually, and aggregate annual claims up to
approximately $3,160,000.  The aggregate annual deductible is determined
by the number of eligible covered employees during the year and the
coverage they elect.

The Company is self-insured with respect to any worker's compensation
claims not covered by insurance.  The Company maintains a $250,000 per
occurrence deductible and is liable for aggregate claims up to
$2,400,000 for the twelve-month period beginning September 1, 2003 and
ending August 31, 2004.

The Company is self-insured with respect to any general liability claims
below the Company's self-insured retention of $150,000 per occurrence
for the twelve-month period beginning September 1, 2003 and ending
August 31, 2004.

As  of May 9, 2004, the Company has accrued $4,065,000 for the estimated
expense  for  its  self-insured insurance plans. These accruals  require
management to make significant estimates and assumptions. Actual results
could differ from management's estimates.

At May 9, 2004, the Company had commitments aggregating $798,000 for the
construction of restaurants.

The  Company is involved in various legal proceedings incidental to  the
conduct  of  its  business, including employment discrimination  claims.
Based  upon currently available information, the Company does not expect
that  any  such proceedings will have a material adverse effect  on  the
Company's financial position or results of operations but there  can  be
no assurance thereof.






                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Note 5:  Debt Instruments.

As  of  May  9,  2004,  the  Company had a  financing  package  totaling
$109,066,000,  consisting  of a $60,000,000 revolving  credit  agreement
(the "Bank Facility") and a $49,066,000 mortgage facility (the "Mortgage
Facility"), as described below.

The  Mortgage  Facility currently includes 34 separate  mortgage  notes,
with  initial terms of either 15 or 20 years. The notes have fixed rates
of  interest of either 9.79% or 9.94%.  The notes require equal  monthly
interest  and  principal payments. The mortgage notes are collateralized
by  a  first mortgage/deed of trust and security agreement on  the  real
estate,  improvements  and  equipment on 19  of  the  Company's  Chili's
restaurants (nine of which the Company mortgaged its leasehold interest)
and  15  of  the Company's Burger King restaurants (three of  which  the
Company  mortgaged its leasehold interest). The mortgage notes  contain,
among other provisions, financial covenants that require the Company  to
maintain a consolidated fixed charge coverage ratio of at least 1.30 for
each of six subsets of the financed properties.

The  Company was not in compliance with the required consolidated  fixed
charge  coverage ratio for two of the subsets of the financed properties
as  of October 26, 2003.  Both of these subsets are comprised solely  of
Burger King restaurants and had fixed charge coverage ratios of 1.11 and
1.26 as of October 26, 2003. The Company sought and obtained waivers  of
these  covenant defaults from the mortgage lenders through November  28,
2004.  If  the Company is not in compliance with these covenants  as  of
November 28, 2004, the Company will most likely seek additional waivers.
The  Company believes it would be able to obtain such waivers but  there
can  be  no assurance thereof.  If the Company is unable to obtain  such
waivers it is contractually entitled to pre-pay the outstanding balances
under one or more of the separate mortgage notes such that the remaining
properties  in the subsets would meet the required ratio.  However,  any
such  prepayments  would be subject to prepayment premiums  and  to  the
Company's   ability  to  maintain  its  compliance  with  the  financial
covenants   in  its  Bank  Facility.   Alternatively,  the  Company   is
contractually  entitled  to  substitute one or  more  better  performing
restaurants for under-performing restaurants such that the reconstituted
subsets of properties would meet the required ratio.  However, any  such
substitutions  would  require the consent of the  lenders  in  the  Bank
Facility.   For these reasons, the Company believes that its  rights  to
prepay  mortgage  notes  or  substitute properties  may  be  impractical
depending on the circumstances existing at the time.

On  June  10,  2002,  the Company refinanced its Bank  Facility  with  a
$60,000,000  revolving credit agreement with JP Morgan  Chase  Bank,  as
agent, and four other banks.  The Bank Facility is collateralized by the
stock  of certain subsidiaries of the Company, certain interests in  the
Company's  franchise agreements with Brinker and Burger King Corporation
and substantially all of the Company's personal property not pledged  in
the Mortgage Facility.

The  Bank  Facility contains restrictive covenants including maintenance
of certain prescribed debt and fixed charge coverage ratios, limitations
on   the   incurrence   of  additional  indebtedness,   limitations   on
consolidated capital expenditures, cross-default provisions  with  other
material  agreements, restrictions on the payment  of  dividends  (other
than  stock dividends) and limitations on the purchase or redemption  of
shares of the Company's capital stock.











                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

The  Bank  Facility provides for borrowings at the adjusted  LIBOR  rate
plus a contractual spread which is as follows:

RATIO OF FUNDED DEBT
TO CASH FLOW                                              LIBOR MARGIN
- ------------------------------------------------          ------------
Greater than or equal to 3.50                                3.00%
Less than 3.5x but greater than or equal to 3.00             2.75%
Less than 3.0x but greater than or equal to 2.5x             2.25%
Less than 2.5x                                               1.75%

The  Bank  Facility  also  contains covenants requiring  maintenance  of
funded debt to cash flow and fixed charge coverage ratios as follows:

MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO              COVENANT
- --------------------           ----------
Fiscal 2003
Q1 through Q3                     4.00
Q4                                3.75

Fiscal 2004
Q1 through Q3                     3.75
Q4                                3.50

Fiscal 2005
Q1 through Q2                     3.50
Thereafter                        3.00

FIXED CHARGE COVERAGE RATIO       1.50



The Company's funded debt to consolidated cash flow ratio may not exceed
3.75  through the third quarter of fiscal 2004 and 3.50 by  the  end  of
fiscal  2004. The Company's funded debt to consolidated cash flow  ratio
on May 9, 2004 was 3.33.

If   the  Company  does  not  maintain  the  required  funded  debt   to
consolidated cash flow ratio, that would constitute an event of  default
under  the  Bank Facility.  The Company would then need to seek  waivers
from  its  lenders or amendments to the covenants.  If the  Company  was
unable to obtain waivers from its lenders or amendments to the covenants
the  Company  would  be  in  default under the  Bank  Facility.   During
continuance  of an event of default, the Company would be subject  to  a
post-default  interest rate under the Bank Facility that  increases  the
otherwise effective interest rate by 1.50%.  In addition to the right to
declare  all obligations immediately due and payable, the Bank  Facility
also  has additional rights including, among other things, the right  to
sell any of the collateral securing the Company's obligations under  the
Bank  Facility.  In the event the Company's obligations under  the  Bank
Facility  become immediately due and payable the Company does  not  have
sufficient liquidity to satisfy these obligations and it is likely  that
the Company would be forced to seek protection from its creditors.  Such
events  would  also  constitute a default under the Company's  franchise
agreements with Brinker and Burger King Corporation.








                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Note 6: Net Income Per Share

Basic  net  income (loss) per share is computed by dividing  net  income
(loss)  by  the  weighted average number of common  shares  outstanding.
Diluted  earnings per share is based on the weighted average  number  of
common  shares  outstanding plus all potential  dilutive  common  shares
outstanding.  For all years presented, the difference between basic  and
dilutive shares represents options on common stock.  For the twelve  and
twenty-eight  week  periods  ended May 9,  2004,  544,143  options  were
excluded  from  the diluted earnings per share calculations  because  to
include  them would have been anti-dilutive. For the twelve and  twenty-
eight  week  periods  ended May 11, 2003, 597,733 and  582,7333  options
respectively  were  excluded  from  the  diluted  earnings   per   share
calculations because to include them would have been anti-dilutive.



                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

Note 7: Segment Reporting.

The  Company  operates four distinct restaurant concepts  in  the  food-
service  industry.  It owns the Grady's American Grill and  two  Italian
Dining concepts and operates Burger King restaurants and Chili's Grill &
Bar   as   a   franchisee  of  Burger  King  Corporation   and   Brinker
International,  Inc., respectively.   The Company  has  identified  each
restaurant concept as an operating segment based on management structure
and  internal reporting.  For purposes of applying SFAS 131, the Company
considers  the  Grady's  American Grill, the two  Italian  concepts  and
Chili's Grill & Bar to be similar and has aggregated them into a  single
reportable operating segment (Full Service).  The Company considers  the
Burger   King  restaurants  as  a  separate  reportable  segment  (Quick
Service).  Summarized  financial information  concerning  the  Company's
reportable  segments is shown in the following table.  The  "all  other"
column  is  the VIE activity, see Note 2. The "other reconciling  items"
column  includes corporate related items, intercompany eliminations  and
income and expense not allocated to reportable segments.
                                                           Other
                            Full      Quick       All    Reconciling
(Dollars in thousands)     Service   Service     Other     Items      Total
- ---------------------------------------------------------------------------
- -------
Second quarter fiscal 2004
- ---------------------------
Revenues                   $25,648   $26,578    $  840    $ (840)   $ 52,226
Income from restaurant
  operations                 3,442    3,133        688      (127)      7,136

Operating income (loss)      2,112      909        672      (257)      3,436
Interest expense                                                      (1,464)
Other expense                                                           (531)
Income from continuing
  operations before income                                            ------
  taxes                                                            $   1,441
                                                                      ======
Total Assets                71,947    46,849     17,873    11,762  $ 148,431
Depreciation and
  amortization               1,052       983        115        56  $   2,206

Second quarter fiscal 2003
- ---------------------------
Revenues                   $24,238   $25,452     $  800    $ (800) $  49,690
Income from restaurant
  operations                 3,561     2,888        658      (133)     6,974

Operating income (loss)      2,128       466        648      (396) $   2,846
Interest expense                                                      (1,690)
Other income                                                           3,128
Income from continuing
  operations before income                                            ------
  taxes                                                            $   4,284
                                                                      ======

Total Assets               82,904     48,932     15,972    11,465  $ 159,273
Depreciation and
  amortization              1,109      1,162        117       275  $   2,663





                          QUALITY DINING, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               May 9, 2004
                               (Unaudited)

                                                           Other
                            Full      Quick       All    Reconciling
(Dollars in thousands)     Service   Service     Other     Items        Total
- -------------------------------------------------------------------------------
First twenty-eight weeks of fiscal 2004
- ---------------------------------------
Revenues                   $57,405   $58,885     $1,939   $(1,939)   $ 116,290
Income from restaurant
  operations                 7,565     6,309      1,576      (299)      15,151

Operating income (loss)      4,493     1,028      1,558      (725)       6,354
Interest expense                                                        (3,523)
Other income                                                              (975)
Income from continuing
  operations before income                                             -------
  taxes                                                              $   1,856
                                                                       =======

Total Assets                71,947    46,849     17,873    11,762    $ 148,431
Depreciation and
  amortization               2,513     2,343        261       397    $   5,514

First twenty-eight weeks of fiscal 2003
- ---------------------------------------
Revenues                   $55,441   $59,393     $1,854    (1,854)   $ 114,834
Income from restaurant
  operations                 7,852     5,856      1,516      (309)      14,915

Operating income (loss)      4,644       536      1,473      (921)       5,732
Interest expense                                                        (3,994)
Other income                                                             2,829
Income from continuing                                                 -------
  operations before income
  taxes                                                              $   4,567
                                                                       =======

Total Assets               82,904     48,932     15,972    11,465    $ 159,273
Depreciation and
  amortization              2,603      2,712        273       718    $   6,306

















Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS

GENERAL

The  Company has a 52/53-week fiscal year ending on the last  Sunday  in
October  of each year. The current fiscal year consists of 53 weeks  and
ends  October 31, 2004. The first quarter of the Company's  fiscal  year
consists  of 16 weeks. The second and third quarter of fiscal 2004  each
consist  of  12  weeks.  The fiscal 2004 fourth quarter consists  of  13
weeks.

RESULTS OF OPERATIONS

The   following  table  sets  forth,  for  the  periods  indicated,  the
percentages  which certain items of revenue and expense  bear  to  total
revenues.

                                  Twelve Weeks Ended   Twenty-Eight Weeks Ended
                                     May 9,  May 11,       May 9,    May 11,
                                      2004     2003         2004      2003
                                     -----    -----        -----      -----
Total revenues                       100.0%   100.0%       100.0%     100.0%

Operating expenses:
  Restaurant operating expenses
    Food and beverage                 27.3     27.1         27.4       26.9
    Payroll and benefits              28.9     28.8         29.1       29.3
    Depreciation and amortization      4.0      4.6          4.3        4.7
    Other operating expenses          26.1     25.5         26.2       26.2
                                     -----    -----        -----      -----
Total restaurant operating expenses   86.3     86.0         87.0       87.1
                                     -----    -----        -----      -----
Income from operations                13.7     14.0         13.0       12.9
                                     -----    -----        -----      -----
  General and administrative           7.0      8.1          7.4        7.8
  Amortization of intangibles          0.1      0.2          0.1        0.2
                                     -----    -----        -----      -----
Operating income (loss)                6.6      5.7          5.5        4.9
                                     -----    -----        -----      -----
Other income (expense):
  Recovery of note receivable            -      7.0            -        3.0
  Interest expense                    (2.8)    (3.4)        (3.0)      (3.5)
  Minority interest in earnings       (1.1)    (1.2)        (0.9)      (1.2)
  Other income (expense), net            -      0.5            -        0.7
                                     -----    -----        -----      -----
Total other income (expense), net     (3.9)     2.9         (3.9)      (1.0)
                                     -----    -----        -----      -----
Income from continuing operations
 before income taxes                   2.7      8.6          1.6        3.9
Income tax provision                   0.5      0.5          0.5        0.5
                                     -----    -----        -----      -----
Income  (loss)  from  continuing
  operations                           2.2      8.1          1.1        3.4
Income (loss) from discontinued
  operations, net  of  tax            (1.7)    (8.7)        (0.7)      (3.5)
                                     -----    -----        -----      -----
Net Income (loss)                      0.5%    (0.6)%        0.4%      (0.1)%
                                     =====    =====        =====      =====





Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AN RESULTS OF OPERATIONS (continued)

Restaurant sales for the Company were $52,226,000 for the second quarter
of  fiscal  2004 versus $49,690,000 for the comparable period in  fiscal
2003,  an increase of $2,536,000. Restaurant sales for the first twenty-
eight weeks of fiscal 2004 were $116,290,000 versus $114,834,000 for the
comparable period in fiscal 2003, an increase of $1,456,000.

The  Company's  Burger  King restaurant sales were  $26,578,000  in  the
second  quarter of fiscal 2004 compared to sales of $25,452,000  in  the
same  period of fiscal 2003, an increase of $1,126,000. The Company  had
increased revenue of $532,000 due to additional sales weeks from two new
restaurants opened in fiscal 2003. The Company's Burger King restaurants
had average weekly sales of $18,770 in the second quarter of fiscal 2004
versus  $18,285 in the same period in fiscal 2003. Sales at  restaurants
open  for  more  than one year increased 2.4% in the second  quarter  of
fiscal  2004  when  compared to the same period in  fiscal  2003.  Sales
decreased  $507,000 to $58,886,000 for the first twenty-eight  weeks  of
fiscal  2004 compared to $59,393,000 for the comparable period in fiscal
2003.  The Company had increased revenue of $1,211,000 due to additional
sales weeks from three restaurants opened in fiscal 2003. Average weekly
sales were $17,822 in the first twenty-eight weeks of fiscal 2004 versus
$18,357 in the same period in fiscal 2003. Sales at restaurants open for
more  than  one year decreased 3.2% in the first twenty-eight  weeks  of
fiscal 2004 when compared to the same period in fiscal 2003. During  the
second quarter of fiscal 2004 Burger King introduced some appealing  new
products  and had improved promotional campaigns.  The Company  believes
these  changes  were  responsible for  the  positive  same  store  sales
results.

The  Company's Chili's Grill & Bar restaurant sales increased $1,730,000
to  $20,346,000  in  the  second quarter  of  fiscal  2004  compared  to
$18,616,000 in the same period in fiscal 2003. The Company had increased
revenue  of $1,821,000 due to additional sales weeks from one restaurant
opened  during fiscal 2004 and three restaurants opened in fiscal  2003.
Average  weekly  sales  decreased to $45,314 in the  second  quarter  of
fiscal  2004 versus $45,627 in the same period of fiscal 2003. Sales  at
restaurants  open  for more than one year decreased .5%  in  the  second
quarter of fiscal 2004 when compared to the same period in fiscal  2003.
Sales  for  the  first  twenty-eight  weeks  of  fiscal  2004  increased
$3,021,000 to $45,153,000 compared to $42,132,000 for the same period in
fiscal  2003.  The  Company had increased revenue of $3,683,000  due  to
additional sales weeks from one new restaurant opened during fiscal 2004
and  three  new  restaurants opened in fiscal 2003. The  average  weekly
sales were $43,374 in the first twenty-eight weeks of fiscal 2004 versus
$44,257 in the same period in fiscal 2003. Sales at restaurants open for
more  than  one year decreased 1.7% in the first twenty-eight  weeks  of
fiscal 2004 when compared to the same period in fiscal 2003.

Sales  in the Company's Grady's American Grill restaurant division  were
$1,437,000  in the second quarter of fiscal 2004 compared  to  sales  of
$1,459,000 in the same period in fiscal 2003, a decrease of $22,000. The
Company sold four units in fiscal 2003, closed one unit in fiscal  2004,
sold  and  leased  back  six restaurants in  fiscal  2004  and  had  one
restaurant classified as held for sale as of May 9, 2004. As required by
SFAS  144,  the  results of operations for these restaurants  have  been
classified  as  discontinued operations for all periods  reported.   The
remaining  three Grady's American Grill restaurants had  average  weekly
sales of $39,921 in the second quarter of fiscal 2004 versus $40,528  in
the  first  quarter of fiscal 2003, a decrease of 1.5%.   Sales  in  the
Company's Grady's American Grill restaurant division were $3,360,000  in
the  first  twenty-eight  weeks of fiscal  2004  compared  to  sales  of
$3,501,000  in the same period in fiscal 2003, a decrease  of  $141,000.
The  remaining  three  Grady's American Grill  restaurants  had  average
weekly  sales of $39,995 in the first twenty-eight weeks of fiscal  2004
versus  $41,679 in the same period of fiscal 2003, a decrease  of  4.0%.
The  Company  believes  sales  declines in its  Grady's  American  Grill
division resulted from competitive intrusion and the Company's inability
to efficiently market this concept.








Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)

The   Company's  Italian  Dining  Division  restaurant  sales  decreased
$298,000 to $3,865,000 in the second quarter of fiscal 2004 compared  to
$4,163,000  in the same period in fiscal 2003. The average weekly  sales
were $35,785 in the second quarter of fiscal 2004 versus $38,549 in  the
same period of fiscal 2003. Sales at restaurants open for more than  one
year  decreased 7.2% in the second quarter of fiscal 2004 when  compared
to  the  same  period  in fiscal 2003. Sales for the first  twenty-eight
weeks  of  fiscal  2004  decreased $916,000 to  $8,892,000  compared  to
$9,808,000 for the same period in fiscal 2003. The average weekly  sales
were  $35,287  in  the first twenty-eight weeks of  fiscal  2004  versus
$38,920 in the same period in fiscal 2003. Sales at restaurants open for
more  than  one year decreased 9.6% in the first twenty-eight  weeks  of
fiscal  2004  when  compared to the same period  in  fiscal  2003.   The
Company has experienced significant competitive intrusion in the markets
where it has Italian Dining restaurants.

Total  restaurant  operating  expenses, as a  percentage  of  restaurant
sales,  increased to 86.3% for the second quarter of fiscal 2004  versus
86.0%  in  the second quarter of fiscal 2003, and decreased to 87.0%  in
the  first  twenty-eight weeks of fiscal 2004 versus 87.1% in  the  same
period  of  fiscal 2003. The following factors influenced the  operating
margins.

Food  and  beverage costs increased to 27.3% of total  revenues  in  the
second quarter of fiscal 2004 compared to 27.1% of total revenues in the
same period in fiscal 2003, and 27.4% in the first twenty-eight weeks of
fiscal  2004 compared to 26.9% in the same period of fiscal  2003.  Food
and  beverage  costs have increased in both the full service  and  quick
service segment.  The increases are mainly due to higher dairy and  beef
costs.   The Company expects the cost pressures to persist for the  rest
of fiscal 2004.

Payroll  and benefits were 28.9% of total revenues in the second quarter
of  fiscal  2004  compared to 28.8% in the same period of  fiscal  2003.
Payroll  and benefits were 29.1% of total revenues in the first  twenty-
eight  weeks  of  fiscal 2004 compared to 29.3% in the  same  period  of
fiscal  2003. The Company had lower payroll and benefits expense,  as  a
percentage  of sales, in the quick service segment for both the  quarter
and  twenty-eight weeks ended May 9, 2004.  The improvement  was  mainly
due  to  the  Company's increased focus on payroll  costs  in  light  of
declining  sales. The Company does not believe that it can  continue  to
decrease   payroll  expense  in  the  quick  service   segment   without
diminishing  customer  satisfaction; therefore, if  the  negative  sales
trends  do not abate, payroll costs as a percentage of sales are  likely
to  increase in the remaining quarters of fiscal 2004.  The Company  had
higher  payroll and benefits expense, as a percentage of sales,  in  the
full  service segment for both the quarter and twenty-eight weeks  ended
May  9, 2004.  The increase was mainly due to lower average weekly sales
in each of the full service concepts.

Depreciation  and  amortization,  as a  percentage  of  total  revenues,
decreased to 4.0% for the second quarter of fiscal 2004 compared to 4.6%
in  the  same period in fiscal 2003. The decrease was mainly  due  to  a
$179,000  decrease in depreciation expense in the quick service segment.
The   decrease   was  mainly  due  to  certain  assets  becoming   fully
depreciated.  Depreciation and amortization, as a  percentage  of  total
revenues,  decreased to 4.3% in the first twenty-eight weeks  of  fiscal
2004  compared to 4.7% in the same period in fiscal 2003.  The  decrease
was  mainly  due to a $369,000 decrease in depreciation expense  in  the
quick  service  segment.  The decrease was mainly due to certain  assets
becoming fully depreciated.

Other   restaurant  operating  expenses  include  rent  and   utilities,
royalties, promotional expense, repairs and maintenance, property  taxes
and  insurance. Other restaurant operating expenses as a  percentage  of
total  revenues increased in the second quarter of fiscal 2004 to  26.1%
compared  to  25.5%  in  the  same period of  fiscal  2003.   They  were
consistent at 26.2% in the first twenty-eight weeks of fiscal  2004  and
fiscal 2003. The Company's other operating expenses, as a percentage  of
sales,  increased in the second quarter of fiscal 2004,  mainly  due  to
lower  average  weekly sales at the Company's full service  restaurants.
The  Company participated in the Burger King 2000 and 2001 Early Renewal
programs that included a royalty reduction as an incentive to franchisees
to   renew   franchise  agreements  early.   The  Company  included   39
restaurants  in  the  Early Renewal programs.  In the first  twenty-eight
weeks of fiscal 2004 and fiscal 2003 the Company's participation in  the
Early  Renewal program reduced the Company's royalty expense by $196,000
and $132,000, respectively.

Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)

Income  from restaurant operations increased $162,000 to $7,136,000,  or
13.7%  of  revenues, in the second quarter of fiscal  2004  compared  to
$6,974,000,  or  14.0% of revenues, in the comparable period  of  fiscal
2003.  Income from restaurant operations in the Company's Quick  Service
segment  decreased  $119,000 while the Company's  Full  Service  segment
increased   $236,000  from  the  prior  year.  Income  from   restaurant
operations  increased $236,000 to $15,151,000, or 13.0% of revenues,  in
the first twenty-eight weeks of fiscal 2004 compared to $14,915,000,  or
12.9% of revenues, in the comparable period of fiscal 2003. Income  from
restaurant  operations in the Company's Quick Service segment  decreased
$287,000  while  the  Company's Full Service segment increased  $453,000
when compared to the first twenty-eight weeks of the prior year.

General  and  administrative  expenses were  $3,663,000  in  the  second
quarter  of fiscal 2004 compared to $4,041,000 in the second quarter  of
fiscal  2003  and $8,678,000 in the first twenty-eight weeks  of  fiscal
2004  compared  to $8,980,000 in the same period of fiscal  2003.  As  a
percentage   of  total  restaurant  sales,  general  and  administrative
expenses were 7.0% in the second quarter of fiscal 2004 versus  8.1%  in
the  second  quarter of fiscal 2003, and 7.4% in the first  twenty-eight
weeks of fiscal 2004 compared to 7.8% in the same period of fiscal 2003.
In  the second quarter of fiscal 2003 the Company recorded approximately
$118,000 in expenses related to the Company's litigation with BFBC,  LTD
and  in the first twenty-eight weeks of fiscal 2003 the Company recorded
approximately $284,000 for the BFBC, LTD litigation. The Company did not
have similar expense in fiscal 2004.

Total  interest  expense  for  the second quarter  of  fiscal  2004  was
$1,464,000 compared to $1,690,000 during the same period in fiscal 2003.
Total interest expense was $3,523,000 in the first twenty-eight weeks of
fiscal  2004  compared  to interest expense of $3,994,000  in  the  same
period  of  fiscal 2003. The decreases were due to lower interest  rates
and lower debt levels.

During  the  second  quarter  of fiscal  2003  the  Company  recorded  a
$3,459,000  gain  on  the  collection of  a  note  receivable  that  had
previously  been  written off.  The Company did  not  have  any  similar
activity in fiscal 2004.

Minority   interest  in  earnings  relates  to  certain  related   party
affiliates  that are variable interest entities.  The Company  holds  no
direct  ownership or voting interest in the VIE's. Minority interest  in
earnings  was  $573,000  for the second quarter of  fiscal  2004  versus
$587,000  in the comparable period in fiscal 2003. Minority interest  in
earnings was $1,054,000 for the first twenty-eight weeks of fiscal  2004
versus $1,370,000 in the comparable period in fiscal 2003. See Note 2 in
the  Company's consolidated financial statements for the impact  of  the
variable interest entities on specific income statement categories.

The  provision for income taxes was $287,000 for the second  quarter  of
fiscal 2004 versus $256,000 in the comparable period in fiscal 2003. The
provision for income taxes was $559,000 for the first twenty-eight weeks
of  fiscal 2004 versus $597,000 in the comparable period in fiscal 2003.
The  Company's provision for income taxes includes a significant  amount
of state tax expense that is based on criteria other than income.

At  the  end  of  the second quarter of fiscal 2004 the  Company  had  a
valuation  reserve  against its deferred tax asset resulting  in  a  net
deferred tax asset of $8.9 million.  Absent a significant and unforeseen
change   in   facts   or  circumstances,  management  re-evaluates   the
realizability of its tax assets in connection with its annual  budgeting
cycle. Management does not believe there were any significant changes in
facts  or circumstances through the end of the second quarter of  fiscal
2004.






2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS (continued)

Discontinued  operations includes all disposed of  restaurants  and  the
six  current Grady's American Grill restaurants, which at the  end  of
the  second quarter the Company expected to sell or close before the end
of fiscal 2004.  The decision to dispose of these locations reflects the
Company's  ongoing process of evaluating the performance and cash  flows
of its various restaurant locations and using the proceeds from the sale
of  closed  restaurants to reduce outstanding debt.  The net  loss  from
discontinued  operations  for the second  quarter  of  fiscal  2004  was
$900,000 versus a loss of $4,308,000 in the same period of fiscal  2003.
The  net  loss  from discontinued operations for the first  twenty-eight
weeks  of  fiscal 2004 was $765,000 versus a loss of $4,071,000  in  the
same  period in fiscal 2003. The fiscal 2004 results include  impairment
and  facility closing expenses of $886,000 versus $4,578,000  in  fiscal
2003.

The  total restaurant sales from discontinued operations for the  second
quarter of fiscal 2004 were $2,140,000 versus $4,214,000 in fiscal 2003.
The  total  restaurant sales from discontinued operations for the  first
twenty-eight weeks of fiscal 2004 were $5,779,000 versus $10,487,000  in
the same period in fiscal 2003.

For  the second quarter of fiscal 2004, the Company reported net  income
of $254,000 compared to a net loss of $280,000 for the second quarter of
fiscal  2003.  For  the first twenty-eight weeks  of  fiscal  2004,  the
Company  reported  net income of $532,000 compared  to  a  net  loss  of
$101,000 for the same period in fiscal 2003.

Management Outlook

The  following  section contains forward-looking statements  within  the
meaning  of  the  Private  Securities Litigation  Reform  Act  of  1995,
including  statements  about  trends  in  and  the  impact  of   certain
initiatives  upon  the  Company's  operations  and  financial   results.
Forward-looking statements can be identified by the use of words such as
"anticipates,"  "believes," "plans," "estimates," "expects,"  "intends,"
"may,"  and  other similar expressions.  Forward-looking statements  are
made based upon management's current expectations and beliefs concerning
future  developments and their potential effects on the Company.   There
can  be  no assurance that the Company will actually achieve the  plans,
intentions   and   expectations  discussed  in   these   forward-looking
statements.  Actual results may differ materially.

Quick Service

The  quick  service segment of the restaurant industry is a very  mature
and  competitive segment, which is dominated by several national chains.
Market  share  is  gained  through national  media  campaigns  promoting
specific sandwiches, usually at a discounted price. The national  chains
extend  marketing efforts to include nationwide premiums and movie  tie-
ins.   To  date  in  fiscal  2004, other  chains  in  the  quick-service
restaurant  industry,  including  McDonald's  and  Wendy's,  promotional
campaigns  and new products have been successful in taking  away  market
share  from Burger King. During the second quarter of fiscal 2004 Burger
King introduced some appealing new products and had improved promotional
campaigns.  The Company believes these changes were responsible for  the
positive same store sales results.

Full Service

The  full service segment of the restaurant industry is also mature  and
competitive.   This  segment has a few national companies  that  utilize
national media efficiently.  This segment also has numerous regional and
local  chains  that  provide  service and  products  comparable  to  the
national   chains   but  which  cannot  support  significant   marketing
campaigns.  The Company operates three restaurant concepts that  compete
in the full service segment.






 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS (continued)

During  fiscal  2004,  the  Company  has  continued  to  emphasize   the
operational and marketing initiatives that contributed to the success of
its  Chili's  division  in fiscal 2003. While the average  weekly  sales
trends were not as good as the Company had expected, the Company expects
steady financial results for the remainder of fiscal 2004.

During  the  first  twenty-eight  weeks  of  fiscal  2004,  the  Company
continues to experience a deterioration in its Italian Dining division's
profitability.  The  Company  has  experienced  significant  competitive
intrusion  in the markets where it has Italian Dining restaurants.   The
Company  expects the competitive pressures to continue for the remainder
of fiscal 2004.

During the first twenty-eight weeks of fiscal 2004, the Grady's American
Grill  concept was negatively affected by competitive intrusion  in  the
Company's   markets  and  limitations  in  the  Company's   ability   to
efficiently  market  its  restaurants.  The  Company  will  continue  to
consider  opportunities  to  divest  under-performing  or  non-strategic
restaurants  during  fiscal  2004.   The  Company  expects  the  Grady's
American  Grill division's operating performance to continue to  decline
during fiscal 2004.


Income taxes

The  Company  has recorded a valuation allowance to reduce its  deferred
tax  assets  since it is more likely than not that some portion  of  the
deferred  assets  will not be realized. Management  has  considered  all
available  evidence both positive and negative, including the  Company's
historical  operating results, estimates of future  taxable  income  and
ongoing  feasible tax strategies in assessing the need for the valuation
allowance.   The  Company believes the positive  evidence  includes  the
historically consistent profitability of its Chili's, Italian Dining and
Burger  King divisions, and the resolution of substantially all  of  its
bagel-related contingent liabilities.  The Company believes the negative
evidence includes the persistent negative trends in its Grady's American
Grill  division  and  the  recent sales  declines  in  its  Burger  King
division.   During  the first twenty-eight weeks  of  fiscal  2004,  the
Company  continued to experience unusual uncertainty concerning whether,
when  and  to  what extent the recent sales declines in its Burger  King
division  will  be  reversed.   In estimating its  deferred  tax  asset,
management  used its 2004 operating plan as the basis for a forecast  of
future   taxable  earnings.   Management  did  not  incorporate   growth
assumptions  and  limited the forecast to five years,  the  period  that
management believes it can project results that are more likely than not
achievable.   Absent  a significant and unforeseen change  in  facts  or
circumstances,  management re-evaluates the  realizability  of  its  tax
assets in connection with its annual budgeting cycle.

Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)


LIQUIDITY AND CAPITAL RESOURCES

The  Company requires capital principally for building or acquiring  new
restaurants,  replacing equipment and remodeling  existing  restaurants.
The  Company's restaurants generate cash immediately through sales.   As
is  customary  in  the restaurant industry, the Company  does  not  have
significant  assets in the form of trade receivables or  inventory,  and
customary  payment  terms generally result in  several  weeks  of  trade
credit  from  its vendors.  Therefore, the Company's current liabilities
have historically exceeded its current assets.

During  the  first  twenty-eight weeks of 2004,  net  cash  provided  by
operating  activities was $11,144,000 compared to $7,665,000  in  fiscal
2003.  The  increase was mainly due to changes in working  capital  that
provided cash in fiscal 2004 versus changes in working capital that used
cash in fiscal 2003.

During  the  first twenty-eight weeks of fiscal 2004,  the  Company  had
$3,929,000  in capital expenditures in connection with the  building  of
one  new  full service restaurant that opened in the second  quarter  of
fiscal 2004 and the refurbishing of existing restaurants.

During  the  first twenty-eight weeks of fiscal 2004,  the  Company  had
$8,635,000 in proceeds from the sales of property and equipment.

The  Company  had  a  net repayment of $12,450,000 under  its  revolving
credit agreement during the first twenty-eight weeks of fiscal 2004.  As
of  May  9,  2004,  the  Company's revolving  credit  agreement  had  an
additional  $26,504,000 of capacity though not all of that  capacity  is
available   for  future  borrowings  due  to  the  applicable  financial
covenants.  The  Company's average borrowing rate on May  9,  2004,  was
4.22%.

The  Company's primary cash requirements in fiscal 2004 will be  capital
expenditures  in  connection  with the  building  or  acquiring  of  new
restaurants,    remodeling   of   existing   restaurants,    maintenance
expenditures,  and  the  reduction of  debt  under  the  Company's  debt
agreements.    During  the  remainder  of  fiscal  2004,   the   Company
anticipates opening two full service restaurants.  The Company does  not
plan  to  build  any new quick service restaurants in fiscal  2004.  The
Company  did  purchase  five existing Burger  King  restaurants  from  a
franchisee  during the third quarter of fiscal 2004 for $1,150,000.  The
actual   amount   of  the  Company's  cash  requirements   for   capital
expenditures  depends in part on the number of new  restaurants  opened,
whether  the  Company owns or leases new units, and the  actual  expense
related  to  remodeling  and maintenance of existing  units.  While  the
Company's  capital  expenditures for fiscal 2004 are expected  to  range
from $10,000,000 to $12,000,000, if the Company has alternative uses  or
needs  for  its cash, the Company believes it could reduce such  planned
expenditures without affecting its current operations.  The Company  has
debt  service  requirements of approximately $1,474,000 in fiscal  2004,
consisting  primarily  of  the  principal payments  required  under  its
mortgage  facility.  The Company expects to reduce its borrowings  under
its  revolving credit agreement by $2,000,000 within the next  year  and
therefore has classified $2,000,000 of revolving credit debt as current.
The  Company had $4,813,000 of current debt related to the consolidation
of its variable interest entities, see Note 2.

The  Company  anticipates that its cash flow from  operations,  together
with  the available capacity under its revolving credit agreement as  of
May  9,  2004, will provide sufficient funds for its operating,  capital
expenditure,  debt  service and other requirements through  the  end  of
fiscal 2004.

As  of  May  9,  2004,  the  Company had a  financing  package  totaling
$109,066,000,  consisting  of a $60,000,000 revolving  credit  agreement
(the "Bank Facility") and a $49,066,000 mortgage facility (the "Mortgage
Facility"), as described below.

Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)

The  Mortgage  Facility currently includes 34 separate  mortgage  notes,
with  initial terms of either 15 or 20 years. The notes have fixed rates
of  interest of either 9.79% or 9.94%.  The notes require equal  monthly
interest  and  principal payments. The mortgage notes are collateralized
by  a  first mortgage/deed of trust and security agreement on  the  real
estate,  improvements  and  equipment on 19  of  the  Company's  Chili's
restaurants (nine of which the Company mortgaged its leasehold interest)
and  15  of  the Company's Burger King restaurants (three of  which  the
Company  mortgaged its leasehold interest). The mortgage notes  contain,
among other provisions, financial covenants that require the Company  to
maintain a consolidated fixed charge coverage ratio of at least 1.30 for
each of six subsets of the financed properties.

The  Company was not in compliance with the required consolidated  fixed
charge  coverage ratio for two of the subsets of the financed properties
as  of October 26, 2003.  Both of these subsets are comprised solely  of
Burger King restaurants and had fixed charge coverage ratios of 1.11 and
1.26. The Company sought and obtained waivers of these covenant defaults
from the mortgage lenders through November 28, 2004.  If the Company  is
not  in  compliance with these covenants as of November  28,  2004,  the
Company  will most likely seek additional waivers.  The Company believes
it  would  be able to obtain such waivers but there can be no  assurance
thereof.   If  the  Company  is unable to  obtain  such  waivers  it  is
contractually entitled to pre-pay the outstanding balances under one  or
more  of  the separate mortgage notes such that the remaining properties
in  the  subsets  would  meet the required  ratio.   However,  any  such
prepayments would be subject to prepayment premiums and to the Company's
ability to maintain its compliance with the financial covenants  in  its
Bank Facility.  Alternatively, the Company is contractually entitled  to
substitute  one  or  more  better  performing  restaurants  for   under-
performing restaurants such that the reconstituted subsets of properties
would  meet  the required ratio.  However, any such substitutions  would
require  the  consent  of the lenders in the Bank Facility.   For  these
reasons,  the Company believes that its rights to prepay mortgage  notes
or   substitute   properties  may  be  impractical  depending   on   the
circumstances existing at the time.

On  June  10,  2002,  the Company refinanced its Bank  Facility  with  a
$60,000,000  revolving credit agreement with JP Morgan  Chase  Bank,  as
agent, and four other banks.  The Bank Facility is collateralized by the
stock  of certain subsidiaries of the Company, certain interests in  the
Company's  franchise agreements with Brinker and Burger King Corporation
and substantially all of the Company's personal property not pledged  in
the Mortgage Facility.

The  Bank  Facility contains restrictive covenants including maintenance
of certain prescribed debt and fixed charge coverage ratios, limitations
on   the   incurrence   of  additional  indebtedness,   limitations   on
consolidated capital expenditures, cross-default provisions  with  other
material  agreements, restrictions on the payment  of  dividends  (other
than  stock dividends) and limitations on the purchase or redemption  of
shares of the Company's capital stock.

The  Bank  Facility provides for borrowings at the adjusted  LIBOR  rate
plus a contractual spread which is as follows:

RATIO OF FUNDED DEBT
TO CASH FLOW                                            LIBOR MARGIN
- ------------------------------------------------        -------------
Greater than or equal to 3.50                              3.00%
Less than 3.5x but greater than or equal to 3.00           2.75%
Less than 3.0x but greater than or equal to 2.5x           2.25%
Less than 2.5x                                             1.75%






Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)


The  Bank  Facility  also  contains covenants requiring  maintenance  of
funded  debt  to cash flow and fixed charge coverage ratios  for  fiscal
2004 and 2005 as follows:

MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO               COVENANT
- --------------------             -------
Fiscal 2003
Q1 through Q3                     4.00
Q4                                3.75

Fiscal 2004
Q1 through Q3                     3.75
Q4                                3.50

Fiscal 2005
Q1 through Q2                     3.50
Thereafter                        3.00

FIXED CHARGE COVERAGE RATIO       1.50


The Company's funded debt to consolidated cash flow ratio may not exceed
3.75  through the third quarter of fiscal 2004 and 3.50 by  the  end  of
fiscal  2004. The Company's funded debt to consolidated cash flow  ratio
on May 9, 2004 was 3.33.

If   the  Company  does  not  maintain  the  required  funded  debt   to
consolidated cash flow ratio that would constitute an event  of  default
under  the  Bank Facility.  The Company would then need to seek  waivers
from  its  lenders or amendments to the covenants.  If the  Company  was
unable to obtain waivers from its lenders or amendments to the covenants
the  Company  would  be  in  default under the  Bank  Facility.   During
continuance  of an event of default, the Company would be subject  to  a
post-default  interest rate under the Bank Facility that  increases  the
otherwise effective interest rate by 1.50%.  In addition to the right to
declare  all obligations immediately due and payable, the Bank  Facility
also  has additional rights including, among other things, the right  to
sell any of the collateral securing the Company's obligations under  the
Bank  Facility.  In the event the Company's obligations under  the  Bank
Facility  become immediately due and payable the Company does  not  have
sufficient liquidity to satisfy these obligations and it is likely  that
the Company would be forced to seek protection from its creditors.  Such
events  would  also  constitute a default under the Company's  franchise
agreements with Brinker and Burger King Corporation.

Critical Accounting Policies
- ----------------------------
Management's Discussion and Analysis of Financial Condition and  Results
of  Operations  are  based  upon  the Company's  consolidated  financial
statements, which were prepared in accordance with accounting principles
generally  accepted  in the United States of America.  These  principles
require  management to make estimates and assumptions  that  affect  the
reported  amounts  in  the consolidated financial statements  and  notes
thereto.  Actual  results  may differ from  these  estimates,  and  such
differences  may  be material to the consolidated financial  statements.
Management  believes that the following significant accounting  policies
involve a higher degree of judgment or complexity.












Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)


Property and Equipment
- -----------------------
Property and equipment are depreciated on a straight-line basis over the
estimated useful lives of the assets. The useful lives of the assets are
based  upon  management's expectations for the period of time  that  the
asset   will   be  used  for  the  generation  of  revenue.   Management
periodically  reviews the assets for changes in circumstances  that  may
impact their useful lives.

Impairment of Long-Lived Assets
- --------------------------------
Management  periodically reviews property and equipment  for  impairment
using historical cash flows as well as current estimates of future  cash
flows.  This  assessment  process requires  the  use  of  estimates  and
assumptions that are subject to a high degree of judgment. In  addition,
at  least annually, or as circumstances dictate, management assesses the
recoverability  of goodwill and other intangible assets  which  requires
assumptions  regarding  the  future cash  flows  and  other  factors  to
determine the fair value of the assets.   In determining fair value, the
Company   relies  primarily  on  discounted  cash  flow  analyses   that
incorporates  an  investment horizon of five years and utilizes  a  risk
adjusted  discount factor.  If these assumptions change in  the  future,
management  may  be  required  to record impairment  charges  for  these
assets.

Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)

Income taxes
- ------------
The  Company  has recorded a valuation allowance to reduce its  deferred
tax  assets  since it is more likely than not that some portion  of  the
deferred  assets  will not be realized. Management  has  considered  all
available  evidence both positive and negative, including the  Company's
historical  operating results, estimates of future  taxable  income  and
ongoing  feasible tax strategies in assessing the need for the valuation
allowance.   In estimating its deferred tax asset, management  used  its
2004  operating  plan  as  the basis for a forecast  of  future  taxable
earnings.  Management did not incorporate growth assumptions and limited
the  forecast to five years, the period that management believes it  can
project  results  that  are more likely than not achievable.   Absent  a
significant and unforeseen change in facts or circumstances,  management
re-evaluates the realizability of its tax assets in connection with  its
annual budgeting cycle.

The  Company  operates  in  a  very competitive  industry  that  can  be
significantly  affected  by  changes  in  local,  regional  or  national
economic conditions, changes in consumer tastes, weather conditions  and
various  other  consumer  concerns.   Accordingly,  the  amount  of  the
deferred  tax  asset  considered by management to  be  realizable,  more
likely  than not, could change in the near term if estimates  of  future
taxable  income change.  This could result in a charge to,  or  increase
in, income in the period such determination is made.

Other estimates
- ---------------
Management  is  required  to make judgments  and  or  estimates  in  the
determination  of  several of the accruals that  are  reflected  in  the
consolidated   financial  statements.  Management  believes   that   the
following accruals are subject to a higher degree of judgment.

Management uses estimates in the determination of the required  accruals
for general liability, workers' compensation and health insurance. These
estimates  are  based  upon  a detailed examination  of  historical  and
industry  claims  experience. The claims experience may  change  in  the
future and may require management to revise these accruals.

The Company is periodically involved in various legal actions arising in
the  normal  course of business. Management is required  to  assess  the
probability of any adverse judgments as well as the potential ranges  of
any  losses. Management determines the required accruals after a careful
review  of  the facts of each legal action and assistance  from  outside
legal  counsel.  The  accruals may change  in  the  future  due  to  new
developments in these matters.

Management  continually  reassesses its assumptions  and  judgments  and
makes  adjustments  when  significant facts and  circumstances  dictate.
Historically, actual results have not been materially different than the
estimates that are described above.


Item  2.  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS (continued)

This  report contains and incorporates forward-looking statements within
the  meaning  of the Private Securities Litigation Reform Act  of  1995,
including statements about the Company's development plans and trends in
the   Company's   operations  and  financial  results.   Forward-looking
statements  can be identified by the use of words such as "anticipates,"
"believes," "plans," "estimates," "expects," "intends," "may," and other
similar  expressions.  Forward-looking statements are  made  based  upon
management's   current  expectations  and  beliefs   concerning   future
developments and their potential effects on the Company.  There  can  be
no   assurance  that  the  Company  will  actually  achieve  the  plans,
intentions   and   expectations  discussed  in   these   forward-looking
statements.  Actual results may differ materially.  Among the risks  and
uncertainties  that could cause actual results to differ materially  are
the  following:  the availability and cost of suitable locations for new
restaurants;  the availability and cost of capital to the  Company;  the
ability  of  the  Company to develop and operate  its  restaurants;  the
hiring,  training  and  retention of skilled  corporate  and  restaurant
management   and   other  restaurant  personnel;  the  integration   and
assimilation of acquired concepts; the overall success of the  Company's
franchisors;  the  ability to obtain the necessary government  approvals
and third-party consents; changes in governmental regulations, including
increases  in  the minimum wage; the results of pending litigation;  and
weather and other acts of God.  The Company undertakes no obligation  to
update or revise any forward-looking information, whether as a result of
new information, future developments or otherwise.


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The  Company  is  exposed to interest rate risk in connection  with  its
$60.0  million  revolving  credit facility that  provides  for  interest
payable  at  the  LIBOR rate plus a contractual spread.   The  Company's
variable  rate  borrowings under this revolving credit facility  totaled
$31.1  million  at  May  9, 2004.  The impact on  the  Company's  annual
results  of  operations of a one-point interest  rate  change  would  be
approximately $311,000.

Item 4. CONTROLS AND PROCEDURES.

As  of  the  end  of  the  period covered by this  report,  the  Company
conducted   an   evaluation,  under  the  supervision   and   with   the
participation of the principal executive officer and principal financial
officer, of its disclosure controls and procedures (as defined in  Rules
13a-14(c)  and 15d-15(e) under the Securities Exchange Act of 1934  (the
"Exchange  Act")).   Based on this evaluation, the  principal  executive
officer  and  principal financial officer concluded that  the  Company's
disclosure  controls  and  procedures  are  effective  to  ensure   that
information required to be disclosed by the Company in reports  that  it
files  or  submits  under  the  Exchange  Act  is  recorded,  processed,
summarized  and reported within the time periods specified in Securities
and  Exchange  Commission rules and forms. There was no  change  in  the
Company's internal control over financial reporting during the Company's
most recently completed fiscal quarter that has materially affected,  or
is reasonably likely to materially affect the Company's internal control
over financial reporting.


                       PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Note 4 to the unaudited consolidated financial statements of the Company
included in Part I of this report is incorporated herein by reference.


Item 2. Changes in Securities

None

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to Vote of Security Holders

None

Item 5. Other Information

On June 15, 2004 a group of seven shareholders led by Company CEO Daniel
B.  Fitzpatrick  presented  the Board with a proposal  to  purchase  all
outstanding  shares  of common stock owned by the  public  shareholders.
Under  the terms of the proposed transaction, the public holders of  the
outstanding shares of  the Company would each receive $2.75 per share in
cash in exchange for their shares.  The purchase would take the form  of
a  merger  in  which  the  Company would survive  as  a  privately  held
corporation.   The group advised the Board that it is not interested  in
selling its shares to a third party, whether in connection with  a  sale
of the company or otherwise.

In  response to the proposal, the Board appointed a special committee of
independent   directors  to  evaluate  the  transaction   and   make   a
recommendation to shareholders.  It is expected that the committee  will
retain independent advisors.

The proposed transaction is subject to certain conditions, including the
negotiation  of  definitive agreements, the obtaining of  the  necessary
financing   for  the  merger  and  the  refinancing  of   the  Company's
outstanding bank debt, the approval of the Company's franchisors and the
approval of the Board of Directors and the shareholders of the Company.


Item 6. Exhibits and Reports on Form 8-K

  (a)Exhibits

    A  list  of exhibits required to be filed as part of this report  is
    set  forth in the Index to Exhibits, which immediately precedes such
    exhibits, and is incorporated herein by reference.

  (b)Reports on Form 8-K

     On  March 31, 2004, the Company filed a current report on Form  8-K
     furnishing  under  Item  12 a copy of the Company's  press  release
     dated March 31, 2004.











                               Signatures

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

                                           Quality Dining, Inc.
                                           (Registrant)


Date:  June 18, 2004                        By: /s/John C. Firth
                                            ----------------------------
                                            Executive Vice President
                                            General Counsel and Secretary
                                           (Principal Financial Officer)
INDEX TO EXHIBITS

Exhibit Number           Description
- --------------           ---------------------------------
31.1                 Rule 13a-14(a)/15d-14(a) Certification of Principal
                     Executive Officer

31.2                 Rule 13a-14(a)/15d-14(a) Certification of Principal
                     Executive Officer

32.1                  Section  1350  Certification  of  Chief  Executive
                      Officer

32.2                  Section  1350  Certification  of  Executive   Vice
                      President and General Counsel (Principal Financial
                      Officer)





                                                            EXHIBIT 31.1

                 RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Daniel B. Fitzpatrick, certify that:

  1.I have reviewed this quarterly report on Form 10-Q of Quality Dining,
     Inc.;

  2.Based  on  my  knowledge, this report does not  contain  any  untrue
     statement of a material fact or omit to state a material fact necessary
     to make the statements made, in light of the circumstances under which
     such statements were made, not misleading with respect to the period
     covered by this report;

  3.Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows
     of the registrant as of, and for, the periods presented in this report;

  4.The  registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined  in  Exchange Act Rules l3a-15(e) and  15d-15(e))  for  the
     registrant and have:

       a.Designed such disclosure controls and procedures or caused such
          disclosure controls and procedures to be designed under our
          supervision,
          to ensure that material information relating to the registrant,
          including its consolidated subsidiaries, is made known to us by others
          within those entities, particularly during the period in which this
          report is being prepared;

       b.Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as  of the
          end of the period covered by this report based on such evaluation; and

       c.Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control of financial reporting; and;

  5.The registrant's other certifying officer and I have disclosed, based
     on  our  most recent evaluation of internal control over  financial
     reporting, to the registrant's auditors and the audit committee  of
     registrant's board of directors (or persons performing the equivalent
     functions):

       a.All significant deficiencies or material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

       b.Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control or financial reporting; and

Date:June 18, 2004
                                   /s/ Daniel B. Fitzpatrick
                                   ----------------------------
                                   Daniel B. Fitzpatrick
                                   President and Chief Executive
                                   Officer


                                                            EXHIBIT 31.2
                 RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, John C. Firth, certify that:

  1.I have reviewed this quarterly report on Form 10-Q of Quality Dining,
     Inc.;

  2.Based  on  my  knowledge, this report does not  contain  any  untrue
     statement of a material fact or omit to state a material fact necessary
     to make the statements made, in light of the circumstances under which
     such statements were made, not misleading with respect to the period
     covered by this report;

  3.Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows
     of the registrant as of, and for, the periods presented in this report;

  4.The  registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined  in  Exchange Act Rules l3a-15(e) and  15d-15(e))  for  the
     registrant and have:

       a.Designed such disclosure controls and procedures or caused such
          disclosure controls and procedures to be designed under our
          supervision,
          to ensure that material information relating to the registrant,
          including its consolidated subsidiaries, is made known to us by others
          within those entities, particularly during the period in which this
          report is being prepared;

       b.Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as  of the
          end of the period covered by this report based on such evaluation; and

       c.Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control of financial reporting; and;

  5.The registrant's other certifying officer and I have disclosed, based
     on  our  most recent evaluation of internal control over  financial
     reporting, to the registrant's auditors and the audit committee  of
     registrant's board of directors (or persons performing the equivalent
     functions):

       a.All significant deficiencies or material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

       b.Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control or financial reporting; and

      Date: June 18, 2004
                                   /s/ John C. Firth
                                  -----------------------------------
                                  John C. Firth
                                  Executive Vice President and General
                                  Counsel (Principal Financial Officer)



                                                               EXHIBIT 32.1

                          QUALITY DINING, INC.

                        CERTIFICATION PURSUANT TO
                         18 U.S.C. SECTION 1350,
                         AS ADOPTED PURSUANT TO
              SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the Quarterly Report of Quality Dining,  Inc.  (the
"Company") on Form 10-Q for the period ending May 9, 2004 as filed  with
the   Securities  and  Exchange  Commission  on  the  date  hereof  (the
"Report"),  I,  Daniel B. Fitzpatrick, Chairman of the Board,  President
and  Chief  Executive Officer of the Company, certify,  pursuant  to  18
U.S.C.   1350, as adopted pursuant to  906 of the Sarbanes-Oxley Act  of
2002, that:

     (1)The Report fully complies with the requirements of section 13(a) or
       15(d) of the Securities Exchange Act of 1934; and

     (2)The information contained in the Report fairly presents, in  all
       material respects, the financial condition and results of operations of
       the Company.



/s/ Daniel B. Fitzpatrick
- --------------------------
Daniel B. Fitzpatrick
Chairman of the Board, President and
Chief Executive Officer
June 18, 2004


                                                            EXHIBIT 32.2

                          QUALITY DINING, INC.

                        CERTIFICATION PURSUANT TO
                         18 U.S.C. SECTION 1350,
                         AS ADOPTED PURSUANT TO
              SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the Quarterly Report of Quality Dining,  Inc.  (the
"Company") on Form 10-Q for the period ending May 9, 2004 as filed  with
the   Securities  and  Exchange  Commission  on  the  date  hereof  (the
"Report"),  I,  John  C.  Firth, Executive Vice  President  and  General
Counsel  (Principal Financial Officer) of the Company, certify, pursuant
to  18  U.S.C.   1350, as adopted pursuant to  906 of the Sarbanes-Oxley
Act of 2002, that:

     (1)The Report fully complies with the requirements of section 13(a) or
       15(d) of the Securities Exchange Act of 1934; and

     (2)The information contained in the Report fairly presents, in  all
       material respects, the financial condition and results of operations of
       the Company.



/s/ John C. Firth
- ----------------------
John C. Firth,
Executive Vice President and
General Counsel (Principal Financial Officer)
June 18, 2004