Management’s Discussion and Analysis (Continued)

Interest and Other. Interest expense of $15.4 million in the year ended December 31, 2001 is down $3.1 million from $18.5 million in the year ended December 31, 2000 due to lower interest rates. Included in the results for 2001 and 2000 is approximately $4.2 million and $15.2 million, respectively, of interest income earned on the note receivable from Sunburst. The Company recognized a $7.6 million loss associated with the monetization of $137.5 million of the Sunburst note during the year ended December 31, 2000.

Comparison of 2000 Operating Results and 1999 Operating Results

The Company recorded net income of $42.4 million for the year ended December 31, 2000, a decrease of $14.8 million, compared to net income of $57.2 million for the year ended December 31, 1999. Operating income of $92.4 million in Calendar 2000 was $1.8 million under 1999 operating income of $94.2 million due to a restructuring charge of $3.5 million (net of taxes) during the year ended December 31, 2000. A corporate wide reorganization was implemented in 2000 to improve service and support to the Company’s franchisees and to create a more competitive overhead structure. Net income was further adversely affected in 2000 by a $7.4 million equity loss (net of taxes) in Friendly and a $4.6 million loss (net of taxes) on the note from Sunburst. The Friendly equity loss was due to a comprehensive restructuring program at Friendly to strengthen its balance sheet and improve its operations. The Sunburst loss was attributed to two early payment transactions as Choice moved to monetize the note receivable.

Summarized financial results for the years ended December 31, 2000 and 1999 are as follows: