Max & Erma's Restaurants, Inc. Reports Third Quarter Results

-- Revenues rise to a third quarter record $42.8 million;

-- Two company-owned and two franchised restaurants open during 3rd quarter 2005;

-- One company-owned and one franchised restaurant scheduled to open during 4th quarter 2005;

-- Three to four franchised and one to two company-owned restaurants planned for 2006.

-- Ten restaurant franchise agreements signed for Las Vegas.

Financial Summary (Unaudited)

(In thousands, except per share data)



                                  12 Weeks Ended     40 Weeks Ended

                                 ----------------- -------------------

                                  8/7/05   8/1/04    8/7/05    8/1/04

                                 -------- -------- --------- ---------

Revenues                         $42,813  $42,090  $143,108  $137,394

                                 ======== ======== ========= =========

Operating Income (Loss)            $(263)    $301       $21    $3,262

                                 ======== ======== ========= =========

Income (Loss) Before Taxes         $(846)   $(174)  $(1,826)   $1,658

                                 ======== ======== ========= =========

Net Income (Loss)                  $(946)    $(70)  $(1,236)   $1,318

                                 ======== ======== ========= =========

Net Income (Loss) per

 Diluted Common Share             $(0.37)  $(0.03)  $( 0.49)    $0.51

                                 ======== ======== ========= =========

Diluted Shares Outstanding         2,547    2,458     2,534     2,587

                                 ======== ======== ========= =========

Max & Erma's Restaurants, Inc. (Nasdaq/NMS:MAXE) today reported third quarter 2004 financial results.

Revenues for the third quarter of 2005 rose 2% to a third quarter record of $42.8 million from $42.1 million for the third quarter of 2004. Net loss and net loss per diluted share increased from $(70,000) or $(0.03) per diluted share for the third quarter of 2004 to a net loss of $(946,000) or $(0.38) per diluted share for the third quarter of 2005.

Year-to-date revenues increased 4% to $143.1 million for 2005 from $137.4 million for 2004. Year-to-date net income and net income per share declined from $1,318,000 or $0.51 per diluted share for 2004 to a net loss of $(1,236,000) or $(0.49) per diluted share for 2005.

Todd Barnum, Chairman and Chief Executive Officer of Max & Erma's said the revenue growth was a result of opening five restaurants last year and two restaurants this year, both during the third quarter. He said he is very pleased with the performance of these last seven restaurants, which are currently reporting sales 20% above chain average. However, same-store sales for restaurants open eighteen months or more were off 4% for the quarter and 2% year-to-date.

Mr. Barnum said the same-store sales declines have significantly impacted our restaurant profitability. He attributed the sales decline to a sluggish mid-western economy, the effect of high gas prices on our customer's discretionary income, and intense competition. He went on to say that restaurant profit margins continue to be negatively impacted by high ground beef prices, utility costs, and higher marketing expenses.

On a positive note, Mr. Barnum said the franchise side of the business is showing steady growth. Franchise fees and royalties are up over 12% this year. He added that two franchise Max & Erma's opened during the third quarter and one is expected to open during the fourth quarter of 2005. He also announced that the Company just signed a ten unit franchised development agreement for the Las Vegas, Nevada market. He is pleased to add the fastest growing city in the country to the list of Max & Erma's markets.

As of August 7, 2005, Max & Erma's owns and operates 78 casual dining full-service restaurants in Akron, Columbus, Cleveland, Cincinnati, Dayton, Niles, and Toledo, Ohio; Indianapolis, Indiana; Detroit, Ann Arbor, Grand Rapids, and Lansing, Michigan; Pittsburgh and Erie, Pennsylvania; Lexington, Louisville, and Crestview Hills, Kentucky; Chicago, Illinois; Charlotte, North Carolina; Atlanta, Georgia; Virginia Beach and Norfolk, Virginia. The Company also currently franchises 22 restaurants in Cleveland, Columbus, Cincinnati, Wilmington, Chillicothe, Dayton, Sandusky, and on the Ohio Turnpike; St. Louis, Missouri; Green Bay, Wisconsin; Philadelphia, Pennsylvania; Edinburgh, Evansville, Seymour, and Mishawaka, Indiana; and Richmond, Virginia. A Company-owned restaurant is under construction in Hamilton, Ohio. A franchised restaurant is under construction in Huntington, West Virginia. The Company's common shares are traded on the NASDAQ National Market System under the symbol MAXE.



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