WHAT'S NEW
Chris Pappas, President and CEO:
This is an exciting time for our customers, investors and our organization to experience new growth for our brand with the opening of the next generation Luby's cafeteria. The opening of our new prototype restaurant in Cypress, TX, marked the Company's first new store opening in over seven years. We believe our new prototype capitalizes on Luby's core fundamentals of serving great food made from scratch and a convenient delivery system. Our growth strategy for the Company is to open new stores, upgrade and remodel older stores and expand our culinary services business to be the food provider for healthcare facilities.

In 2008, we plan to build four to six stores using the new prototype. Implementing a disciplined progressive expansion pace, we expect to build 45 to 50 new stores over the next five years. Initially we plan to build out markets in Texas, and there are markets outside the state that will support our concept and brand as well. Our goal for new stores is to outperform the company average unit volume and generate a store-level cash flow return on sales of 15 to 20 percent. We believe the expansion of new stores will generate favorable unit sales and strong returns on investment creating attractive long-term growth for Luby's.

In addition to our growth strategy to build new units, we will also continue to invest in existing stores through upgrading and remodeling our facilities. We are also expanding our culinary services business and recently announced that we entered into a multi-year agreement with Baylor College of Medicine to provide culinary services for its Texas Medical Center campus in Houston. Luby's worked closely with Baylor on the development and design of their new kitchen and dining facility that opened in August, 2007. Our culinary services initiative continues to gain traction, in addition to the Baylor College of Medicine contract, we operate six dining facilities in long-term acute facilities and soon we will be announcing additional partnerships with acute care hospitals. Providing culinary services at hospital facilities is a natural extension of our business and utilizes our unique restaurant skill set for cafeteria style dining as well as short order food service for customer care room delivery. This growth business presents several opportunities which include contracting our services for a negotiated time period and a management fee.