Bob Evans Farms

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International Guild of Hospitality & Restaurant Managers

Bob Evans Farms, Inc., incorporated in November 1985, is engaged in two principal industry segments: the ownership and operation of a chain of full-service, family restaurants located in 22 states, and the manufacture, distribution and sale of fresh and fully cooked pork products and other complementary food products in 30 states. The Company wholly owns BEF Holding Co., Inc. The subsidiaries owned by BEF Holding Co., Inc. include Bob Evans Farms, Inc. (BEF Ohio), Owens Country Sausage, Inc. and BEF Aviation Co., Inc. BEF Ohio wholly owns Bob Evans Transportation Company, LLC and BEF IN Holding Co., Inc. (BEF IN Holding). BEF Ohio is the limited partner and BEF IN Holding is the general partner of Bob Evans Restaurants of Indiana, L.P. (BEF Indiana). BEF Indiana wholly owns Bob Evans Restaurants of Michigan, Inc. (Michigan Restaurants), and Michigan Restaurants wholly owns Bob Evans Restaurants, Inc. (Restaurants), which wholly owns BEF RE Holding Co., Inc. (RE Holding). RE Holding majority owns BEF REIT, Inc.

Restaurant Operations

The Company operates a total of 495 full-service, family restaurants under the Bob Evans Restaurant, Bob Evans Restaurant & General Store and Owens Restaurant names. Bob Evans Farms experienced a same-store sales increase of 3.2% in fiscal 2002, as compared to a 2.6% increase during fiscal 2001 in its restaurant segment.

All of Bob Evans Farms' family restaurants feature a wide variety of homestyle menu offerings designed to appeal to its diverse customer base, primarily families. Breakfast entrees, including traditional items and specialty offerings, are served all day. The restaurants are typically open from 6 a.m. until 10 p.m., Sunday through Thursday, with extended closing hours on Friday and Saturday for most locations. Average guest checks for breakfast, lunch and dinner are $6.02, $6.73 and $7.16, respectively. Approximately 65% of total revenues from restaurant operations are generated from 6 a.m. to 4 p.m., with the balance generated from 4 p.m. to closing. Sales on Saturday and Sunday account for approximately 39% of a typical week's revenues.

The Company's restaurants are supplied with food and other inventory items (other than sausage products and related meat items) by five independent food and non-food distributors twice a week. Sausage products and other Bob Evans meat items are supplied by Bob Evans Farms to each restaurant by its driver-salesmen, with the exception of the restaurants located in Florida, Massachusetts, Mississippi, New York, North Carolina and South Carolina, and parts of Missouri, which are supplied by other food distributors.

During fiscal 2002, carryout business in Bob Evans Farms' restaurants accounted for approximately 5.4% of the total revenues generated by the restaurant segment. To increase carryout business and customer satisfaction, the Company continues to include Carry Home Kitchen, an enhanced carryout area, in all new locations. Through dedicated staffing and facilities, Carry Home Kitchens not only better serve carryout customers, but also increase eat-in dessert sales as a result of the awareness generated by the added dessert case. Bob Evans Farms' restaurants do not have a drive-through service for carryout business. Plans for fiscal 2003 are to continue to expand carryout business by increasing marketing programs and consumer awareness.

The Company offers retail items for sale on a limited basis in its traditional restaurants' Corner Cupboard area, and on a much larger scale in its seven Bob Evans Restaurants & General Stores. The Corner Cupboard retail areas provide select offerings of the gifts, retail food items and other novelties available in Bob Evans Restaurants & General Stores. Given the success of this program, Bob Evans Farms plans to include Corner Cupboard retail areas in all new and rebuilt restaurants. The Company also introduced retail Corner Cupboard areas in 47 existing units during fiscal 2002, and plans to add an additional 13 in existing units during fiscal 2003, which will bring the total to approximately 265.

During fiscal 2002, Bob Evans Farms opened 27 new restaurants. The majority of these new restaurants are located in the Company's core markets, however, it also expanded its restaurant operations by opening restaurants in newer marketing areas, such as Kansas City, Missouri, and Raleigh-Durham, North Carolina. From time to time, restaurants are evaluated and closed due to a changing market, poor performance or a change in access or building safety. During the 2002 fiscal year, one traditional Bob Evans Restaurant was closed in Gainesville, Florida, due to its inability to perform to Company expectations.

Food Products Operations

The Company's traditional business in its food products segment is the production, distribution and sale of approximately 40 varieties of fresh, smoked and fully cooked pork sausage and ham products under the brand names of Bob Evans, Owens Country Sausage and Country Creek Farm. Bob Evans Farms continues to devote time and effort on both new product development and sales of its pork sausage and ham products to institutional and foodservice purchasers. In addition to its meat offerings, the Company also sells a number of other complementary food items in the frozen and refrigerated areas of grocery stores. During fiscal 2002, Bob Evans Farms expanded Bob Evans food products offerings by introducing Pizza Burrito; Sausage, Egg and Cheese Large SnackWiches; Wildfire Chicken with Rice entree, and Chicken and Noodles, Chicken Pot Pie and Lasagna with Meat Sauce family-sized entrees. Several items in the Bob Evans and Owens product lines, including SnackWiches, are microwaveable convenience items for meals and snacks.

Specialty items for Bob Evans Farms' institutional and foodservice customers are made to their specifications and include sausage links and patties, sausage gravy and biscuit sandwiches. Although foodservice sales do not generate margins as high as sales of branded items, they provide the Company with incremental volume in its production plants. During fiscal 2002 and fiscal 2001, foodservice sales accounted for approximately 8% of Bob Evans Farms' food products sales. Foodservice sales are expected to remain relatively constant in fiscal 2003.

Previously, the Company produced and sold liquid-smoke flavorings through its Hickory Specialties, Inc. subsidiary. In October 2001, Bob Evans Farms sold Hickory Specialties to sharpen the focus on its core strengths in the food and restaurant businesses.

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