<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549

                                    FORM 10-Q
(MARK  ONE)

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT  OF  1934  FOR  THE  QUARTERLY  PERIOD  ENDED  MARCH  28,  2004.
                                                   ----------------

     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   0-12919

                                 PIZZA INN, INC.
                    (EXACT NAME OF REGISTRANT IN ITS CHARTER)


                  MISSOURI                           47-0654575
     (STATE  OR  OTHER  JURISDICTION  OF         (I.R.S.  EMPLOYER
     INCORPORATION  OR  ORGANIZATION)             IDENTIFICATION  NO.)


                               3551 PLANO PARKWAY
                             THE COLONY, TEXAS 75056
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES,
                               INCLUDING ZIP CODE)

                                 (469) 384-5000
                         (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 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  12  B-2  OF  THE  EXCHANGE  ACT).  YES     NO [X]

     INDICATE  BY  CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS  REQUIRED  TO  BE  FILED  BY  SECTIONS 12, 13 OR 15(D) OF THE SECURITIES
EXCHANGE  ACT  OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED  BY  A  COURT.  YES [X}   NO

     AT  MAY  3,  2004,  AN  AGGREGATE  OF 10,083,674 SHARES OF THE REGISTRANT'S
COMMON  STOCK,  PAR  VALUE  OF  $.01  EACH (BEING THE REGISTRANT'S ONLY CLASS OF
COMMON  STOCK),  WERE  OUTSTANDING.


<PAGE>


                                 PIZZA INN, INC.

                                      Index
                                      -----


PART  I.    FINANCIAL  INFORMATION


Item  1.     Financial  Statements                                         Page
--------     ---------------------                                         ----

Condensed  Consolidated  Statements  of Operations for the three months and
 nine  months ended  March  28,  2004  and  March  30,  2003  (unaudited)     3


Condensed  Consolidated  Statements  of  Comprehensive Income for the three
 months and nine months ended March 28, 2004 and March 30, 2003 (unaudited)   3

Condensed  Consolidated  Balance  Sheets  at  March  28,  2004  (unaudited)
 and  June  29,  2003                                                         4

Condensed  Consolidated  Statements  of Cash Flows for the three months and
 nine  months ended  March  28,  2004  and  March  30,  2003  (unaudited)     5

Notes  to  Condensed  Consolidated  Financial  Statements (unaudited)         7

Item 2.
-------
Management's  Discussion  and  Analysis  of
-------------------------------------------
Financial Condition and Results of Operations                                13
---------------------------------------------

Item 3.
-------
Quantitative  and  Qualitative  Disclosures  about  Market  Risk             18

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

Item  4.     Controls  and  Procedures                                       18
--------     -------------------------




PART  II.   OTHER  INFORMATION

Item  1.     Legal  Proceedings                                              18
--------     ------------------
Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders     19

--------     -----------------------------------------------------------
Item  5.     Other  Information                                              19
--------     ------------------

Item  6.     Exhibits  and  Reports  on  Form  8-K                           21
--------     -------------------------------------
             Signatures                                                      22


                         PART 1.  FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS
-------------------------------

<TABLE>
<CAPTION>

                                                         PIZZA INN, INC.
                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                           (UNAUDITED)

                                                                           THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                                  -------------------      ------------------
                                                                    MARCH 28,           MARCH 30,        MARCH 28,    MARCH 30,
REVENUES:                                                             2004                 2003            2004         2003
                                                               -------------------  ------------------  -----------  -----------
<S>                                                            <C>                  <C>                 <C>          <C>
  Food and supply sales . . . . . . . . . . . . . . . . . . .  $            12,774  $           12,311  $   39,304   $   39,114
  Franchise revenue . . . . . . . . . . . . . . . . . . . . .                1,323               1,347       4,038        3,957
  Restaurant sales. . . . . . . . . . . . . . . . . . . . . .                  452                 446       1,234        1,366
  Other income. . . . . . . . . . . . . . . . . . . . . . . .                   94                  94         212          286
                                                               -------------------  ------------------  -----------  -----------
                                                                            14,643              14,198      44,788       44,723
                                                               -------------------  ------------------  -----------  -----------

COSTS AND EXPENSES:
  Cost of sales . . . . . . . . . . . . . . . . . . . . . . .               11,877              11,562      36,548       36,134
  Franchise expenses. . . . . . . . . . . . . . . . . . . . .                  851                 972       2,393        2,515
  General and administrative expenses . . . . . . . . . . . .                  829                 907       2,832        1,556
  Interest expense. . . . . . . . . . . . . . . . . . . . . .                  150                 188         470          622
                                                               -------------------  ------------------  -----------  -----------
                                                                            13,707              13,629      42,243       40,827
                                                               -------------------  ------------------  -----------  -----------

INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . .                  936                 569       2,545        3,896

  Provision for income taxes. . . . . . . . . . . . . . . . .                  319                 193         866        1,325
                                                               -------------------  ------------------  -----------  -----------

NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . .  $               617  $              376  $    1,679   $    2,571
                                                               ===================  ==================  ===========  ===========

BASIC EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . .  $              0.06  $             0.04  $     0.17   $     0.26
                                                               ===================  ==================  ===========  ===========

DILUTED EARNINGS PER COMMON SHARE . . . . . . . . . . . . . .  $              0.06  $             0.04  $     0.17   $     0.26
                                                               ===================  ==================  ===========  ===========

WEIGHTED AVERAGE COMMON SHARES. . . . . . . . . . . . . . . .               10,079              10,059      10,070       10,058
                                                               ===================  ==================  ===========  ===========

WEIGHTED AVERAGE COMMON AND
  POTENTIAL DILUTIVE COMMON SHARES. . . . . . . . . . . . . .               10,132              10,064      10,114       10,061
                                                               ===================  ==================  ===========  ===========

                                             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                              (IN THOUSANDS)

                                                                  THREE MONTHS ENDED. .  . . . . . . . .  NINE MONTHS ENDED
                                                              -----------------------------             ----------------------
                                                                    MARCH 28, . .  . . .  MARCH 30,       MARCH 28,    MARCH 30,
                                                                        2004                  2003            2004         2003
                                                               -------------------  ------------------  -----------  -----------

Net Income. . . . . . . . . . . . . . . . . . . . . . . . . .  $               617  $              376  $    1,679   $    2,571
Interest rate swap gain (loss) - (net of
   tax (expense) benefit of ($20) and ($15)
   and $75 and $130, respectively). . . . . . . . . . . . . .                   38                  29        (145)        (252)
                                                               -------------------  ------------------  -----------  -----------
Comprehensive Income. . . . . . . . . . . . . . . . . . . . .  $               655  $              405  $    1,534   $    2,319
                                                               ===================  ==================  ===========  ===========
<FN>
                                         See accompanying Notes to Consolidated Financial Statements.
</TABLE>




<TABLE>
<CAPTION>

                                     PIZZA INN, INC.
                               CONSOLIDATED BALANCE SHEETS
                           (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                                   MARCH 28,    JUNE 29,
ASSETS                                                               2004         2003
                                                                  -----------  ----------
<S>                                                               <C>          <C>
                                                                         (UNAUDITED)
CURRENT ASSETS
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . .  $      212   $     399
  Accounts receivable, less allowance for doubtful
    accounts of $308 and $722, respectively. . . . . . . . . . .       3,991       3,730
  Notes receivable, current portion, less allowance
    for doubtful accounts of $54 and $175, respectively. . . . .         244         260
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . .       1,811       1,511
  Deferred taxes, net. . . . . . . . . . . . . . . . . . . . . .         265         585
  Prepaid expenses and other . . . . . . . . . . . . . . . . . .         481         533
                                                                  -----------  ----------
      Total current assets . . . . . . . . . . . . . . . . . . .       7,004       7,018

Property, plant and equipment, net . . . . . . . . . . . . . . .      12,889      13,126
Property under capital leases, net . . . . . . . . . . . . . . .          60         120
Deferred taxes, net. . . . . . . . . . . . . . . . . . . . . . .         196         382
Long-term notes receivable, less allowance for
  doubtful accounts of $8 and $19, respectively. . . . . . . . .           -          41
Deposits and other . . . . . . . . . . . . . . . . . . . . . . .       1,023         109
                                                                  -----------  ----------
                                                                  $   21,172   $  20,796
                                                                  ===========  ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable - trade . . . . . . . . . . . . . . . . . . .  $    2,140   $   1,217
  Accrued expenses . . . . . . . . . . . . . . . . . . . . . . .       2,229       1,950
  Current portion of long-term debt. . . . . . . . . . . . . . .         510       1,448
  Current portion of capital lease obligations . . . . . . . . .          45         109
                                                                  -----------  ----------
    Total current liabilities. . . . . . . . . . . . . . . . . .       4,924       4,724

LONG-TERM LIABILITIES
  Long-term debt . . . . . . . . . . . . . . . . . . . . . . . .       8,165       9,643
  Long-term capital lease obligations. . . . . . . . . . . . . .          26          33
  Other long-term liabilities. . . . . . . . . . . . . . . . . .         767         989
                                                                  -----------  ----------
                                                                      13,882      15,389
                                                                  -----------  ----------
SHAREHOLDERS' EQUITY
  Common Stock, $.01 par value; authorized 26,000,000 shares;
    issued 14,981,319 and 14,956,319 shares, respectively;
    outstanding  10,083,674 and 10,058,674 shares, respectively.         150         150
  Additional paid-in capital . . . . . . . . . . . . . . . . . .       7,875       7,825
  Loans to officers. . . . . . . . . . . . . . . . . . . . . . .        (560)       (569)
  Retained earnings. . . . . . . . . . . . . . . . . . . . . . .      19,815      18,135
  Accumulated other comprehensive loss . . . . . . . . . . . . .        (506)       (650)
  Treasury stock at cost
    Shares in treasury: 4,897,645 and 4,897,645 respectively . .     (19,484)    (19,484)
                                                                  -----------  ----------
    Total shareholders' equity . . . . . . . . . . . . . . . . .       7,290       5,407
                                                                  -----------  ----------
                                                                  $   21,172   $  20,796
                                                                  ===========  ==========
<FN>

               See accompanying Notes to Consolidated Financial Statements.
</TABLE>



<TABLE>
<CAPTION>

                                             PIZZA INN, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (IN THOUSANDS)
                                               (UNAUDITED)


                                                                         NINE MONTHS ENDED
                                                                        -------------------
                                                                             MARCH 28,        MARCH 30,
                                                                               2004             2003
                                                                        -------------------  -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                     <C>                  <C>
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $            1,679   $    2,571
  Adjustments to reconcile net income to
    cash provided by operating activities:
    Depreciation and amortization. . . . . . . . . . . . . . . . . . .                 827        1,103
    Non-cash settlement of accounts receivable . . . . . . . . . . . .                (281)           -
    Recovery of bad debt, net. . . . . . . . . . . . . . . . . . . . .                (249)      (1,830)
    Utilization of deferred taxes. . . . . . . . . . . . . . . . . . .                 467          445
    Utilization of pre-reorganization net operating loss carryforwards                   -        1,131
  Changes in assets and liabilities:
    Notes and accounts receivable. . . . . . . . . . . . . . . . . . .                (236)        (115)
    Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . .                (300)        (182)
    Accounts payable - trade . . . . . . . . . . . . . . . . . . . . .                 923          173
    Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .                 279         (525)
    Prepaid expenses and other . . . . . . . . . . . . . . . . . . . .                 330          163
                                                                        -------------------  -----------
    CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . . . . . .               3,439        2,934
                                                                        -------------------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . .                  38            -
  Reacquisition of area development territory. . . . . . . . . . . . .                (682)           -
  Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . .                (554)        (261)
                                                                        -------------------  -----------
    CASH USED FOR INVESTING ACTIVITIES . . . . . . . . . . . . . . . .              (1,198)        (261)
                                                                        -------------------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Borrowings of long-term bank debt. . . . . . . . . . . . . . . . . .                 127          500
  Repayments of long-term bank debt and capital lease obligations. . .              (2,614)      (5,710)
  Officer loan payment . . . . . . . . . . . . . . . . . . . . . . . .                   9        1,951
  Proceeds from exercise of stock options. . . . . . . . . . . . . . .                  50            -
                                                                        -------------------  -----------
    CASH USED FOR FINANCING ACTIVITIES . . . . . . . . . . . . . . . .              (2,428)      (3,259)
                                                                        -------------------  -----------

Net decrease in cash and cash equivalents. . . . . . . . . . . . . . .                (187)        (586)
Cash and cash equivalents, beginning of period . . . . . . . . . . . .                 399          770
                                                                        -------------------  -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . .  $              212   $      184
                                                                        -------------------  -----------

<FN>

                      See accompanying Notes to Consolidated Financial Statements.
</TABLE>



<TABLE>
<CAPTION>

                                 PIZZA INN, INC.
                SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                                 (IN THOUSANDS)
                                   (UNAUDITED)


                                              NINE MONTHS ENDED
                                              ------------------
                                                  MARCH 28,       MARCH 30,
                                                     2004            2003
                                              ------------------  ----------

CASH PAYMENTS FOR:
<S>                                           <C>                 <C>
  Interest . . . . . . . . . . . . . . . . .  $              478  $      627
  Income taxes . . . . . . . . . . . . . . .                 309           -


NON-CASH FINANCING AND INVESTING ACTIVITIES:

  Non-cash settlement of accounts receivable  $              281  $        -


<FN>

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                 PIZZA INN, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)     The  accompanying  condensed  consolidated financial statements of Pizza
Inn, Inc. (the "Company") have been prepared without audit pursuant to the rules
and  regulations of the Securities and Exchange Commission.  Certain information
and footnote disclosures normally included in the financial statements have been
omitted  pursuant  to  such  rules  and regulations.  The condensed consolidated
financial  statements  should  be  read  in  conjunction  with  the notes to the
Company's  audited  condensed consolidated financial statements in its Form 10-K
for  the  fiscal  year  ended  June  29,  2003.

In  the opinion of management, the accompanying unaudited condensed consolidated
financial  statements  contain  all  adjustments necessary to fairly present the
Company's  financial position and results of operations for the interim periods.
All  adjustments  contained  herein  are  of  a  normal  recurring  nature.

     The  Company  elected  to follow APB No. 25, and related Interpretations in
accounting  for  employee  stock  options  because  the  alternative  fair value
accounting  provided  for  under  SFAS  No.  123,  "Accounting  for  Stock Based
Compensation,"  requires  use of option valuation models that were not developed
for  use  in  valuing  employee  stock  options.  Under  APB No. 25, because the
exercise price of our employee stock options equals or exceeds the fair value of
the  underlying  stock  on  the  date  of  grant,  no  compensation  expense  is
recognized.

Pro forma information regarding net income and earnings per share is required to
be  determined  as  if  the  Company had accounted for its stock options granted
subsequent to June 25, 1995 under the fair value method of SFAS No. 123.     For
purposes of pro forma disclosures, the estimated fair value of the stock options
is  amortized  over  the  option  vesting  periods.  The  Company's  pro  forma
information  follows  (in thousands, except for earnings per share information):

<TABLE>
<CAPTION>




                                                        NINE MONTHS ENDED
                                                    -------------------
                                                   MARCH 28,        MARCH 30,
<S>                                           <C>                  <C>
                                                            2004         2003
                                              -------------------  -----------

Net income, as reported. . . . . . . . . . .  $            1,679   $    2,571
Deduct:  Total stock-based employee
  compensation expense determined under fair
  value based method for all awards, net of
  related tax effects. . . . . . . . . . . .                  (1)         (15)
                                              -------------------  -----------

Pro forma net income . . . . . . . . . . . .  $            1,678   $    2,556

Earnings per share
  Basic-as reported. . . . . . . . . . . . .  $             0.17   $     0.26
  Basic-pro forma. . . . . . . . . . . . . .  $             0.17   $     0.25

  Diluted-as reported. . . . . . . . . . . .  $             0.17   $     0.26
  Diluted-pro forma. . . . . . . . . . . . .  $             0.17   $     0.25

</TABLE>






The  effects  of  applying  SFAS  No.  123  in this pro forma disclosure are not
indicative  of  future amounts as the pro forma amounts above do not include the
impact  of  additional  awards  anticipated  in  future  years.

(2)
<PAGE>
The  Company entered into an agreement effective March 28, 2004 with its current
lender  to provide a $4.0 million revolving credit line that will expire October
1, 2005, replacing a $7.0 million line that was due to expire December 31, 2004.
Interest  on the revolving credit line is payable monthly.  Interest is provided
for  at a rate equal to prime less an interest rate margin from 1.0% to 0.5% or,
at  the  Company's  option, at the LIBOR rate plus 1.25% to 1.75%.  The interest
rate  margin is based on the Company's performance under certain financial ratio
tests.  A  0.375% to 0.5% annual commitment fee is payable on any unused portion
of  the  revolving  credit  line.  As  of March 28, 2004 and March 30, 2003, the
variable  interest  rates were 2.59% and 3.06%, respectively, using a LIBOR rate
basis.  Amounts outstanding under the revolving credit line as of March 28, 2004
and  March  30,  2003  were  $1.3  million  and  $2.7  million,  respectively.

The  Company  entered into a term note effective March 31, 2000 with its current
lender.  The  $5,000,000 term note had outstanding balances of $104,000 and $1.4
million  at  March  28,  2004  and  March 30, 2003, respectively.  The term note
requires  monthly  principal  payments  of $104,000 with the balance maturing on
March 31, 2004.  Interest on the term loan is also payable monthly.  Interest is
provided  for at a rate equal to prime less an interest rate margin of 0.75% or,
at  the Company's option, at the LIBOR rate plus 1.5%.  As of March 28, 2004 and
March  30, 2003, the variable interest rates were 2.63% and 2.81%, respectively.

The  Company  entered into an agreement effective December 28, 2000, as amended,
with  its  current  lender  to provide up to $8.125 million of financing for the
construction of the Company's new headquarters, training center and distribution
facility.  The  construction loan converted to a term loan effective January 31,
2002  with  the  unpaid  principal balance to mature on December 28, 2007.  This
term  loan will amortize over a term of twenty years, with principal payments of
$34,000  due  monthly.  Interest  on  this  term  loan  is also payable monthly.
Interest  is  provided for at a rate equal to prime less an interest rate margin
of  0.75%  or, at the Company's option, to the LIBOR rate plus 1.5%. As of March
28,  2004  and March 30, 2003, the variable interest rates were 2.59% and 2.78%,
respectively.  The  Company,  to  fulfill  bank  requirements,  has  caused  the
outstanding principal amount to be subject to a fixed interest rate by utilizing
an  interest  rate  swap  agreement as discussed below.  The $8.125 million term
loan  had  an  outstanding  balance  of  $7.2 million at March 28, 2004 and $7.6
million  at  March  30,  2003.

(3)     The  Company  entered  into an interest rate swap effective February 27,
2001,  as amended, designated as a cash flow hedge, to manage interest rate risk
relating  to the financing of the construction of the Company's new headquarters
and  to  fulfill bank requirements.  The swap agreement has a notional principal
amount  of $8.125 million with a fixed pay rate of 5.84% which began November 1,
2001  and will end November 19, 2007.  The swap's notional amount amortizes over
a  term  of  twenty  years to parallel the terms of the term loan. SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" requires that for
cash flow hedges, which hedge the exposure to variable cash flow of a forecasted
transaction, the effective portion of the derivative's gain or loss be initially
reported  as  a component of other comprehensive income in the equity section of
the  balance  sheet  and  subsequently  reclassified  into  earnings  when  the
forecasted  transaction  affects  earnings.  Any  ineffective  portion  of  the
derivative's  gain  or  loss  is reported in earnings immediately.  At March 28,
2004  there  was no hedge ineffectiveness. The Company's expectation is that the
hedging  relationship  will  continue  to  be  highly  effective  at  achieving
offsetting  changes  in  cash  flows.

(4)     On  April  30,  1998,  Mid-South  Pizza  Development, Inc. ("Mid-South")
entered  into  a promissory note whereby, among other things, Mid-South borrowed
$1,330,000  from  a  third party lender (the "Loan").  The proceeds of the Loan,
less transaction costs, were used by Mid-South to purchase area developer rights
from  the  Company  for  certain  counties in Kentucky and Tennessee.  Effective
December  28, 2003, the Company reacquired all such area development rights from
Mid-South.  The  Company  paid  approximately $963,000 for these rights of which
$682,000 was a cash payment, and a non-cash settlement of accounts receivable of
approximately  $281,000.  A  long-term  asset  was recorded for the same amount.
Restaurants  operating or developed in the reacquired territory will now pay all
royalties  and  franchise  fees  directly  to Pizza Inn, Inc.  The asset will be
amortized  against actual incremental cash flows received, which is estimated to
be  approximately  five  years.

(5)     On  January  18,  2002  the  Company  was served with a lawsuit filed by
Blakely-Witt  &  Associates, Inc. alleging Pizza Inn sent, or caused to be sent,
unsolicited facsimile advertisements. The plaintiff has requested this matter be
certified  as  a  class action. We are vigorously defending our position in this
litigation.  We  cannot  assure you that we will prevail in this lawsuit and our
defense could be costly and consume the time of our management. We are unable to
predict  the outcome of this case. However, an adverse resolution of this matter
could  materially  affect  our  financial  position  and  results of operations.

All of the parties to this matter have entered into a settlement agreement under
which  the  Company  would  pay  an  amount that would not materially affect our
financial  performance.  Final  approval of this settlement agreement is subject
to  court  approval  and  no  assurances can be given that such approval will be
obtained.  The  settlement terms currently agreed to and pending court approval,
have  been  provided  for  in  the  Company's  financial  statements.

(6)     On  April  21,  2004  the  Company's  board  of directors, following the
recommendation of the shareholders at its annual meeting held February 11, 2004,
approved  the  reimbursement  of  expenses  for  Newcastle  Partners'  proxy
solicitation  efforts  related  to matters presented for a vote at the Company's
annual  shareholder  meeting.  The  Company has established a reserve during its
fiscal  third  quarter  of approximately $176,000 to fund reimbursement of these
expenses.

(7)     In  January  2003,  the  Financial  Accounting  Standards Board ("FASB")
issued  Interpretation  No. 46, "Consolidation of Variable Interest Entities, an
interpretation  of  Accounting  Research  Bulletin  No.  51," ("FIN 46"). FIN 46
requires the consolidation of entities in which an enterprise absorbs a majority
of  the  entity's  expected losses, receives a majority of the entity's expected
residual  returns,  or  both,  as  a  result  of ownership, contractual or other
financial  interests  in  the  entity.

In  October  2003,  the  FASB issued Staff Position No. 46-6, "Effective Date of
FASB  Interpretation No. 46, Consolidation of Variable Interest Entities," ("FSP
FIN  46-6")  in  which  the  FASB  deferred,  for public companies, the required
effective  dates  to  implement FIN 46 for interests held in a variable interest
entity  ("VIE")  or  potential  VIE  that  was  created before February 1, 2003.

In December 2003, the FASB published a revision to FIN 46 to clarify some of the
provisions  and  to exempt certain entities from its requirements. Under the new
guidance, special effective date provisions apply to enterprises that have fully
or  partially  applied  FIN  46 prior to issuance of the revised interpretation.
Otherwise,  application  of  Interpretation  46R  ("FIN  46R")  is  required  in
financial  statements  of public entities that have interests in structures that
are commonly referred to as special-purpose entities ("SPEs") for periods ending
after  December  15,  2003.  Application  by  public  entities, other than small
business  issuers,  for  all  other types of VIEs other than SPEs is required in
financial  statements  for  periods  ending  after  March  15,  2004.

The  Company  does  not have any interests in structures commonly referred to as
SPEs,  typically  has  no equity ownership interests in its franchisees, and has
not  consolidated  any  of these entities in the Company's financial statements.
The  Company  will continue to monitor developments regarding the Interpretation
as they occur.  Implementation of this pronouncement in the third fiscal quarter
of  2004  did  not  have  a  material  impact  on  the  financial  statements.

<PAGE>

(8)     The  proxy  contest  in connection with the Company's most recent annual
meeting  resulted  in  three  nominees of Newcastle Partners, L.P. ("Newcastle")
(i.e.  Ramon  D. Phillips, Robert B. Page, and Steven J. Pully) being elected as
Class  II  members  of  the  Board  of  Directors  at  the  meeting.

In  Part  II,  Item 5 of the Company's report on Form 10-Q for the quarter ended
September  28,  2003,  filed  with  the  Securities  and  Exchange Commission on
November  12,  2003,  the Company expressed concern that election of Newcastle's
nominees  might  result  in  a  "Change of Control" as defined in the employment
agreements  executed on December 16, 2002 between the Company and each of Ronald
W. Parker, B. Keith Clark, Ward T. Olgreen and Shawn M. Preator.  In the report,
the  Company  summarized  the  issue  as  follows:

Whether  or  not a Change of Control is deemed to have occurred is a function of
whether  or not two existing directors, Messrs. Schwarz and Pully, and a nominee
director, Mr. Phillips, currently an advisory director, are incumbent directors,
as  that  term  is defined in the employment agreements.  If a Change of Control
were to occur and any or all of these executive officers were to terminate their
employment  for any reason (including the voluntary termination of employment by
such  officer)  as  provided  in  the employment agreements within twelve months
after  such  Change of Control, the Company would be required to make a lump sum
payment  to  such  officer  which  would  have  a material adverse effect on the
Company's  financial  position  and  results  of  operations.

After filing its Form 10-Q for the quarter ended September 28, 2003, the Company
sought  a  legal opinion on the "Change of Control" issue from its outside legal
counsel,  which  delivered  its  opinion  on  November  26, 2003.  The Company's
definitive proxy statement, filed with the Securities and Exchange Commission on
January  7,  2004,  contained  the following commentary regarding the "Change of
Control"  issue:

Counsel  to  the  Company  has  delivered to the Board its written legal opinion
that,  subject  to  the  assumptions, limitations, qualifications and exceptions
contained  therein,  it  is  of  the  opinion  that  a Texas court in a properly
presented  and argued case should conclude that Messrs. Schwarz, Pully, Phillips
and  Page  would not constitute members of the Incumbent Board and therefore, if
the  Newcastle  nominees  are  elected  to  the Board in connection with a proxy
contest, a "Change of Control" as defined in the employment agreements discussed
above would be deemed to occur.    Counsel for Newcastle has informed counsel to
the Company that they disagree with this opinion.  Additionally, Messrs. Schwarz
and  Pully  have informed the Board that they believe themselves to be incumbent
directors.

Newcastle's  definitive  proxy statement, filed with the Securities and Exchange
Commission  on  January  2,  2004,  expressed a different view of the "Change of
Control"  issue:

We  believe  that  Messrs.  Schwarz  and Pully are "Incumbent Directors" under a
plain  reading  of  the  employment  agreements  as  they  were  appointed by an
agreement  of  a  majority  of  the Pizza Inn Board and not due to an "actual or
threatened  solicitation  of proxies."  We also believe that Mr. Phillips should
be deemed an "Incumbent Director" if elected by virtue of the fact that he was a
director  of  the Company at the time the new employment agreements were adopted
by  the  Pizza  Inn  Board.

After  the  shareholder  meeting,  the  newly constituted Audit Committee of the
Board  of Directors commenced an investigation to determine whether a "Change of
Control"  had  occurred  under  the  employment  agreements  as  a result of the
election  of  Newcastle's  nominees.  In connection with this investigation, the
Audit Committee engaged independent legal counsel to advise the Audit Committee.

On  May  4,  2004, the Audit Committee's independent legal counsel delivered its
legal  opinion  to the Audit Committee, opining that a Texas court in a properly
presented and argued case should conclude that no Change of Control has occurred
under the employment agreements of Messrs. Parker, Clark, Olgreen and Preator at
any  time  since  December  16,  2002.  In  addition  to  certain  assumptions,
limitations,  qualifications  and exceptions, the opinion was based on counsel's
conclusion that Mr. Phillips is among the individuals constituting the Incumbent
Board.

Based  on  the  opinion  of the Audit Committee's independent legal counsel, the
Audit  Committee,  on  May 10, 2004, concluded that there has been no "Change of
Control"  and recommended that the Board of Directors reach the same conclusion.
Based on such recommendation, the Board of Directors, on May 11, 2004, concluded
that  there  has  been  no  "Change  of  Control."

<PAGE>


(9)     The  following  table  shows  the  reconciliation  of  the numerator and
denominator of the basic EPS calculation to the numerator and denominator of the
diluted  EPS  calculation  (in  thousands,  except  per  share  amounts).

<TABLE>
<CAPTION>

                                        INCOME          SHARES          PER SHARE
                                     (NUMERATOR)    (DENOMINATOR)          AMOUNT
                               -----------          -------------          ------
<S>                                           <C>          <C>            <C>

THREE  MONTHS  ENDED  MARCH  28,  2004
BASIC  EPS
Income Available to Common Shareholders $ 617           10,079         $      0.06
Effect of Dilutive Securities - Stock Options              53
                                                           --
DILUTED  EPS
Income  Available  to  Common  Shareholders
 & Assumed Conversions                  $ 617           10,132         $      0.06

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

THREE  MONTHS  ENDED  MARCH  30,  2003
BASIC  EPS
Income Available to Common Shareholders $ 376           10,059         $      0.04
Effect of Dilutive Securities - Stock Options                5
DILUTED  EPS                                                --
Income  Available  to  Common  Shareholders
 & Assumed Conversions                  $ 376           10,064         $      0.04
                            ==================== =================      ==========


NINE  MONTHS  ENDED  MARCH  28,  2004
BASIC  EPS
Income Available to Common Shareholders $1,679          10,070         $      0.17
Effect of Dilutive Securities - Stock Options               44
                                                            --
DILUTED  EPS
Income  Available  to  Common  Shareholders
 & Assumed Conversions                  $1,679           10,114        $      0.17

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

NINE  MONTHS  ENDED  MARCH  30,  2003
BASIC  EPS
Income Available to Common Shareholders $2,571           10,059        $      0.26
Effect of Dilutive Securities - Stock Options                 2
                                                             --
DILUTED  EPS
Income  Available  to  Common  Shareholders
 & Assumed Conversions                  $2,571            10,061       $      0.26
                            ==================== =================      ==========
</TABLE>





(10)     Summarized  in  the  following  tables  are  net  sales  and  operating
revenues,  operating  profit,  and  geographic  information  (revenues)  for the
Company's  reportable  segments for the three month and nine month periods ended
March  28,  2004  and  March  30,  2003  (in  thousands).

<TABLE>
<CAPTION>




                                    THREE MONTHS ENDED                NINE MONTHS ENDED
                                   -------------------               ------------------

                                       MARCH 28,    MARCH 30,    MARCH 28,    MARCH 30,
<S>                                   <C>          <C>          <C>          <C>
                                            2004         2003         2004         2003
                                      -----------  -----------  -----------  -----------
 NET SALES AND OPERATING REVENUES:
 Food and Equipment Distribution . .  $   12,774   $   12,311   $   39,304   $   39,114
 Franchise and Other . . . . . . . .       1,775        1,793        5,272        5,323
 Intersegment revenues . . . . . . .         173          164          536          515
                                      -----------  -----------  -----------  -----------
   Combined. . . . . . . . . . . . .      14,722       14,268       45,112       44,952
 Other revenues. . . . . . . . . . .          94           94          212          286
 Less intersegment revenues. . . . .        (173)        (164)        (536)        (515)
                                      -----------  -----------  -----------  -----------
   Consolidated revenues . . . . . .  $   14,643   $   14,198   $   44,788   $   44,723
                                      ===========  ===========  ===========  ===========

 OPERATING PROFIT:
 Food and Equipment Distribution (1)  $      952   $      513   $    2,237   $    1,909
 Franchise and Other (1) . . . . . .         487          528        1,727        1,928
 Intersegment profit . . . . . . . .          51           47          142          143
                                      -----------  -----------  -----------  -----------
   Combined. . . . . . . . . . . . .       1,490        1,088        4,106        3,980
 Other profit or loss. . . . . . . .          94           94          212          286
 Less intersegment profit. . . . . .         (51)         (47)        (142)        (143)
 Corporate administration and other.        (597)        (566)      (1,631)        (227)
                                      -----------  -----------  -----------  -----------
   Income before taxes . . . . . . .  $      936   $      569   $    2,545   $    3,896
                                      ===========  ===========  ===========  ===========

 GEOGRAPHIC INFORMATION (REVENUES):
 United States . . . . . . . . . . .  $   14,295   $   13,863   $   43,723   $   43,892
 Foreign countries . . . . . . . . .         348          335        1,065          831
                                      -----------  -----------  -----------  -----------
   Consolidated total. . . . . . . .  $   14,643   $   14,198   $   44,788   $   44,723
                                      ===========  ===========  ===========  ===========
<FN>

 (1)             Does  not  include  full  allocation  of  corporate  administration.
</TABLE>


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

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          Management's  discussion  and  analysis  is  based  on  the Company's
condensed  consolidated  financial  statements  and  related footnotes contained
within  this  report.  The  Company's  critical  accounting policies used in the
preparation  of  those condensed consolidated financial statements are discussed
below.

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  amounts reported in the financial statements and
accompanying  notes.  Significant  estimates  made  by  management  include  the
allowance  for  doubtful  accounts,  inventory  valuation,  deferred  tax  asset
valuation  allowances,  and  legal  accruals.   Actual results could differ from
those  estimates.

     The  Company's  Norco  division  sells  food,  supplies  and  equipment  to
franchisees  on trade accounts under terms common in the industry.  Revenue from
such  sales  is  recognized  upon shipment.  Norco sales are reflected under the
caption "food and supply sales." Shipping and handling costs billed to customers
are  recognized  as  revenue.

     Franchise  revenue  consists  of  income  from license fees, royalties, and
Territory  sales.  License  fees  are  recognized  as income when there has been
substantial performance of the agreement by both the franchisee and the Company,
generally  at  the  time the unit is opened.  Royalties are recognized as income
when  earned.

     Territory  sales  are  the  fees  paid  by  selected experienced restaurant
operators  to  the  Company  for  the  right to develop Pizza Inn restaurants in
specific  geographical  territories.  When  the  Company  has  no  continuing
substantive  obligations of performance to the area developer or master licensee
regarding  the  fee,  the  Company  recognizes  the  fee  to  the extent of cash
received.  If  continuing  obligations exist, fees are recognized ratably during
the  performance  of  those  obligations.

     Inventories,  which consist primarily of food, paper products, supplies and
equipment  located at the Company's distribution center, are stated at the lower
of  FIFO  (first-in,  first-out) cost or market.  Provision is made for obsolete
inventories  and  is based upon management's assessment of the market conditions
for  its  products.

     Accounts  receivable  consist primarily of receivables from food and supply
sales  and  franchise  royalties.  The  Company records a provision for doubtful
receivables  to  allow  for  any amounts which may be unrecoverable and is based
upon  an  analysis  of  the  Company's  prior  collection  experience,  customer
creditworthiness,  and  current  economic  trends.

     Notes  receivable  primarily  consist  of  notes  from  franchisees for the
purchase  of  area development and master license territories, trade receivables
and  equipment  purchases.  These notes generally have terms ranging from one to
five  years  and interest rates of 6% to 9%. The Company records a provision for
doubtful  receivables to allow for any amounts which may be unrecoverable and is
based  upon  an  analysis of the Company's prior collection experience, customer
creditworthiness,  and  current  economic  trends.

     The  Company  has  recorded  a valuation allowance to reflect the estimated
amount  of deferred tax assets that may not be realized based upon the Company's
analysis  of  existing  tax  credits  by  jurisdiction  and  expectations of the
Company's  ability to utilize these tax attributes through a review of estimated
future  taxable  income  and  establishment  of tax strategies.  These estimates
could  be  impacted  by  changes in future taxable income and the results of tax
strategies.

     The  Company  assesses  its exposures to loss contingencies including legal
and  income  tax  matters  based  upon factors such as the current status of the
cases and consultations with external counsel and provides for an exposure if it
is  judged  to  be probable and estimable. If the actual loss from a contingency
differs  from  management's  estimate,  operating  results  could  be  impacted.

                              RESULTS OF OPERATIONS

QUARTER  AND  NINE  MONTHS ENDED MARCH 28, 2004 COMPARED TO THE QUARTER AND NINE
MONTHS  ENDED  MARCH  30,  2003.

     Earnings  per  share  for  the quarter were $0.06 versus $0.04 for the same
period  last  year.  Net  income  was  $617,000  versus $376,000, on revenues of
$14,643,000 versus $14,198,000 in the previous year.  For the nine month period,
earnings per share were $0.17 versus $0.26 last year.  Net income was $1,679,000
compared  to $2,571,000 on revenues of $44,788,000 versus $44,723,000 last year.
The  quarter  that ended March 28, 2004 included a pretax adjustment of $285,000
to  a  previously  recorded legal reserve.  The Company and all other parties in
the  previously  disclosed  class-action  fax  litigation  have  entered  into a
settlement  agreement,  which  is  awaiting  court  approval.  Excluding  the
above-described  adjustment  of approximately $188,000 (after-tax), or $0.02 per
share,  net  income of $617,000, or $0.06 per share, for the quarter ended March
28,  2004  was  $429,000  or  $0.04  per  share.

     Food  and  supply  sales  by  the Company's Norco division include food and
paper  products, equipment, marketing material, and other distribution revenues.
Food  and  supply  sales for the quarter increased 4% or $463,000 to $12,774,000
from  $12,311,000  compared  to  the  same period last year.  For the nine month
period, food and supply sales increased less than 1% or $190,000, to $39,304,000
from  $39,114,000.  These increases are primarily due to higher chainwide retail
sales  for  the  quarter  combined  with  higher  cheese  prices  year-to-date.

     Franchise  revenue,  which includes income from royalties, license fees and
area  development  and foreign master license (collectively, "Territory") sales,
decreased  2%  or  $24,000 for the quarter compared to the same period last year
and  increased  2%  or  $81,000  for the nine month period. The decrease for the
quarter is due to a reduction in foreign master license fees which was partially
offset by higher domestic and international royalties. The increase for the nine
month  period  is due primarily to higher international royalties, including the
collection  of  previously  unrecorded  past  due  royalties.

     Restaurant  sales,  which  consist  of  revenue  generated by Company-owned
training  stores  increased  1%  or $6,000 for the quarter, compared to the same
period  of  the  prior  year.   For  the  nine  month  period,  restaurant sales
decreased  10%  or  $132,000.  The Company opened a new Delco unit on January 9,
2004.  The  Company  also  sold an existing Buffet unit effective March 1, 2004.
The  year-to-date  decrease is the result of lower comparable sales and one less
month  of  operations  due  to  the  unit  sale  as  described  above.

     Other  income  consists  primarily  of  interest  income,  third  party
commissions,  and  non-recurring revenue items.  Other income remained unchanged
for  the  quarter,  compared to the same period of the prior year.  For the nine
month  period,  other  income decreased 26% or $74,000, due to lower commissions
and  lower  interest  income.

     Cost  of sales increased 3% or $315,000 for the quarter and increased 1% or
$414,000  for  the  nine month period.  These increases are due to higher cheese
prices  partially  offset  by  lower  depreciation and amortization expenses and
lower  transportation  costs.  Cost  of  sales, as a percentage of sales for the
quarter decreased to 90% from 91% for the same period last year.  Cost of sales,
as a percentage of sales for the nine month period increased to 90% from 89% for
the  same  period  last  year.

     Franchise  expenses  include  selling,  general and administrative expenses
directly  related  to  the  sale  and  continuing  service  of  franchises  and
Territories.  These  costs  decreased  12%  or  $121,000  for  the  quarter  and
decreased  5%  or $122,000 for the nine month period compared to the same period
last  year.  These  decreases are primarily the result of lower taxes on foreign
revenues  and  lower  payroll  and  related  expenses.

     General and administrative expenses decreased 9% or $78,000 for the quarter
and  increased 82% or $1,276,000 for the nine month period, compared to the same
periods  last  year.  The  quarterly  decrease  is  due  to  the reversal of the
previously  recorded legal reserve as discussed above which was partially offset
by  a $176,000 reserve for the reimbursement of expenses for Newcastle Partners'
proxy solicitation efforts.  The nine month period increase is the result of the
reversal of a previously recorded pre-tax charge of approximately $1,950,000 for
bad  debt  in  the  prior  year  partially  offset  by lower payroll and related
expenses.

     Interest  expense  decreased  20%  or  $38,000  for  the quarter and 24% or
$152,000  for  the  nine month period, compared to the same periods of the prior
year  due  to  lower  debt  balances  and  lower  interest  rates.

     Provision  for  income taxes increased 65% or $126,000 for the quarter, and
decreased 35% or $459,000 for the nine month period compared to the same periods
in  the  prior  year.  The  effective  tax rate was 34% for both the current and
prior  quarters  and  nine  month  periods.

                         LIQUIDITY AND CAPITAL RESOURCES

     Cash  flows  from  operating  activities  are  generally  the result of net
income,  deferred  taxes,  depreciation and amortization, and changes in working
capital.  In  the  first  nine months of fiscal 2004, the company generated cash
flows  of  $3,439,000  from  operating  activities  as compared to $2,934,000 in
fiscal  2003.  Cash  provided  by  operations was utilized primarily to pay down
debt.

     Cash  flows  from  investing  activities  primarily  reflect  the Company's
capital  expenditure  strategy. During the first nine months of fiscal 2004, the
Company used cash of $1,198,000 for investing activities as compared to $261,000
in  fiscal  2003.  The  cash  used during fiscal 2004 consisted primarily of the
reacquisition  of  area  development  rights  as  described  above,  and  costs
associated  with  a  Company-owned  store  which  opened  in  January  2004.

     Cash  flows  from  financing  activities  generally  reflect changes in the
Company's  borrowings  during  the  period,  treasury  stock  transactions,  and
exercise  of  stock  options.  Net  cash  used  for  financing  activities  was
$2,428,000  during the first nine months of fiscal 2004 as compared to cash used
for  financing  activities  of  $3,259,000  in  fiscal  2003.

     Management believes that future operations will generate sufficient taxable
income,  along  with the reversal of temporary differences, to fully realize the
deferred  tax  asset, net of a valuation allowance of $137,556 primarily related
to  the  potential  expiration  of  certain  foreign  tax  credit carryforwards.
Additionally,  management  believes  that  taxable income based on the Company's
existing  franchise base should be more than sufficient to enable the Company to
realize  its  net  deferred  tax asset without reliance on material, non-routine
income.  The  Company's  prior  net operating loss carryforwards and alternative
minimum  tax  carryforwards  have  now been fully utilized and the Company began
making  estimated  quarterly  tax  payments  in  January  2004.

              The  Company  entered  into  an agreement effective March 28, 2004
with  its  current  lender  to provide a $4.0 million revolving credit line that
will  expire  October  1,  2005,  replacing  a $7.0 million line that was due to
expire  December  31,  2004.  Interest  on  the revolving credit line is payable
monthly.  Interest  is  provided  for  at a rate equal to prime less an interest
rate  margin  from  1.0%  to 0.5% or, at the Company's option, at the LIBOR rate
plus  1.25%  to  1.75%.  The  interest  rate  margin  is  based on the Company's
performance  under  certain  financial  ratio  tests.  A  0.375%  to 0.5% annual
commitment  fee  is  payable on any unused portion of the revolving credit line.
As  of March 28, 2004 and March 30, 2003, the variable interest rates were 2.59%
and  3.06%,  respectively,  using a LIBOR rate basis.  Amounts outstanding under
the  revolving  credit  line  as  of March 28, 2004 and March 30, 2003 were $1.3
million  and  $2.7  million,  respectively.

          The Company entered into a term note effective March 31, 2000 with its
current  lender.  The  $5,000,000 term note had outstanding balances of $104,000
and  $1.4  million at March 28, 2004 and March 30, 2003, respectively.  The term
note  requires  monthly principal payments of $104,000 with the balance maturing
on March 31, 2004.  Interest on the term loan is also payable monthly.  Interest
is  provided  for at a rate equal to prime less an interest rate margin of 0.75%
or,  at the Company's option, at the LIBOR rate plus 1.5%.  As of March 28, 2004
and  March  30,  2003,  the  variable  interest  rates  were  2.63%  and  2.81%,
respectively.

          The  Company entered into an agreement effective December 28, 2000, as
amended,  with  its  current lender to provide up to $8.125 million of financing
for  the  construction  of  the  Company's new headquarters, training center and
distribution facility.  The construction loan converted to a term loan effective
January  31,  2002  with  the unpaid principal balance to mature on December 28,
2007.  This  term loan will amortize over a term of twenty years, with principal
payments  of  $34,000  due  monthly.  Interest on this term loan is also payable
monthly.  Interest  is  provided  for  at a rate equal to prime less an interest
rate  margin  of 0.75% or, at the Company's option, to the LIBOR rate plus 1.5%.
As  of March 28, 2004 and March 30, 2003, the variable interest rates were 2.59%
and  2.78%, respectively.  The Company, to fulfill bank requirements, has caused
the  outstanding  principal  amount  to  be  subject to a fixed interest rate by
utilizing  an  interest  rate  swap  agreement  as  discussed below.  The $8.125
million  term  loan had an outstanding balance of $7.2 million at March 28, 2004
and  $7.6  million  at  March  30,  2003.

          The  Company entered into an interest rate swap effective February 27,
2001,  as amended, designated as a cash flow hedge, to manage interest rate risk
relating  to the financing of the construction of the Company's new headquarters
and  to  fulfill bank requirements.  The swap agreement has a notional principal
amount  of $8.125 million with a fixed pay rate of 5.84% which began November 1,
2001  and will end November 19, 2007.  The swap's notional amount amortizes over
a  term  of  twenty  years to parallel the terms of the term loan. SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" requires that for
cash flow hedges, which hedge the exposure to variable cash flow of a forecasted
transaction, the effective portion of the derivative's gain or loss be initially
reported  as  a component of other comprehensive income in the equity section of
the  balance  sheet  and  subsequently  reclassified  into  earnings  when  the
forecasted  transaction  affects  earnings.  Any  ineffective  portion  of  the
derivative's  gain  or  loss  is reported in earnings immediately.  At March 28,
2004  there  was no hedge ineffectiveness. The Company's expectation is that the
hedging  relationship  will  continue  to  be  highly  effective  at  achieving
offsetting  changes  in  cash  flows.

     On  April 30, 1998, Mid-South Pizza Development, Inc. ("Mid-South") entered
into  a  promissory  note  whereby,  among  other  things,  Mid-South  borrowed
$1,330,000  from  a  third party lender (the "Loan").  The proceeds of the Loan,
less transaction costs, were used by Mid-South to purchase area developer rights
from  the  Company  for  certain  counties in Kentucky and Tennessee.  Effective
December  28, 2003, the Company reacquired all such area development rights from
Mid-South.  The  Company  paid  approximately $963,000 for these rights of which
$682,000 was a cash payment, and a non-cash settlement of accounts receivable of
approximately  $281,000.  A  long-term  asset  was recorded for the same amount.
Restaurants  operating or developed in the reacquired territory will now pay all
royalties  and  franchise  fees  directly  to Pizza Inn, Inc.  The asset will be
amortized  against actual incremental cash flows received, which is estimated to
be  approximately  five  years.

On January 18, 2002, the Company was served with a lawsuit filed by Blakely-Witt
&  Associates,  Inc.  alleging Pizza Inn sent or, caused to be sent, unsolicited
facsimile  advertisements.  The plaintiff has requested this matter be certified
as  a class action. We are vigorously defending our position in this litigation.
We  cannot assure you that we will prevail in this lawsuit and our defense could
be  costly  and consume the time of our management. We are unable to predict the
outcome  of  this  case.  However,  an  adverse  resolution of this matter could
materially  affect  our  financial  position  and  results  of  operations.

All of the parties to this matter have entered into a settlement agreement under
which  the  Company  would  pay  an  amount that would not materially affect our
financial  performance.  Final  approval of this settlement agreement is subject
to  court  approval  and  no  assurances can be given that such approval will be
obtained.  The  settlement terms currently agreed to and pending court approval,
have  been  provided  for  in  the  Company's  financial  statements.

On April 21, 2004 the Company's board of directors, following the recommendation
of  the  shareholders at its annual meeting held February 11, 2004, approved the
reimbursement  of  expenses  for  Newcastle Partners' proxy solicitation efforts
related  to  matters  presented  for  a vote at the Company's annual shareholder
meeting.  The  Company has established a reserve during its fiscal third quarter
of  approximately  $176,000  to  fund  reimbursement  of  these  expenses.



                     CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     The  following  chart  summarizes all of the Company's material obligations
and  commitments  to make future payments under contracts such as debt and lease
agreements  as  of  March  28,  2004  (in  thousands):

<TABLE>
<CAPTION>



                                        Less Than 1   1-3    4-5    After 5
<S>                                  <C>      <C>     <C>       <C>     <C>
                                    Total.  Year     Years   Years     Years
-----------------------------------  -------  ------  --------  ------
Bank debt . . . . . . . . . . . . .  $ 8,675  $  510  $  2,545  $5,620  $ -
Operating lease obligations . . . .    3,132   1,111     1,582     348   91
Capital lease obligations (1) . . .       71      45        22       4    -
                                     -------  ------  --------  ------  ---
Total contractual cash obligations.  $11,878  $1,666  $  4,149  $5,972  $91
                                     =======  ======  ========  ======  ===
</TABLE>


(1)  Does  not  include  amount  representing  interest.

                            FORWARD-LOOKING STATEMENT

          This  report contains certain forward-looking statements (as such term
is  defined in the Private Securities Litigation Reform Act of 1995) relating to
the  Company  that are based on the beliefs of the management of the Company, as
well as assumptions and estimates made by and information currently available to
the  Company's  management.  When  used  in this report, the words "anticipate,"
"believe,"  "estimate,"  "expect,"  "intend"  and  similar  expressions, as they
relate  to  the  Company  or  the Company's management, identify forward-looking
statements.  Such  statements  reflect  the  current  views  of the Company with
respect  to  future  events  and are subject to certain risks, uncertainties and
assumptions  relating to the operations and results of operations of the Company
as  well  as  its  customers and suppliers, including as a result of competitive
factors  and  pricing  pressures,  shifts  in  market  demand,  general economic
conditions and other factors including but not limited to, changes in demand for
Pizza Inn products or franchises, the impact of competitors' actions, changes in
prices  or supplies of food ingredients, and restrictions on international trade
and  business.  Should  one or more of these risks or uncertainties materialize,
or  should  underlying  assumptions or estimates prove incorrect, actual results
may  vary  materially  from  those  described  herein  as anticipated, believed,
estimated,  expected  or  intended.

<PAGE>

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK
--------------------------------------------------------------------------

     The  Company  has  market  risk  exposure  arising from changes in interest
rates.  The  Company's  earnings  are affected by changes in short-term interest
rates  as a result of borrowings under its credit facilities which bear interest
based  on  floating  rates.

     At  March  28,  2004 the Company has approximately $8.7 million of variable
rate  debt  obligations  outstanding  with  a  weighted average interest rate of
2.63%.  A  hypothetical  10%  change  in  the  effective interest rate for these
borrowings,  assuming  debt  levels  at  March  28,  2004, would change interest
expense  by  approximately $19,000 for the nine months ended March 28, 2004.  As
discussed  previously,  the  Company  has  entered  into  an  interest rate swap
designed  to  manage  the  interest  rate  risk  relating to $7.2 million of the
variable  rate  debt.

ITEM  4.   CONTROLS  AND  PROCEDURES
------------------------------------

a)     Evaluation  of  disclosure  controls  and  procedures.  Based  on  their
evaluation  as  of  a  date  within 90 days of the filing date of this Quarterly
Report  on  Form  10-Q,  the Company's principal executive officer and principal
financial  officer  have  concluded  that  the Company's disclosure controls and
procedures  (as  defined  in  Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange  Act  of  1934  (the  "Exchange  Act"))  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.  Our  Chief  Executive  Officer and our Chief Financial Officer have
evaluated  the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this Quarterly Report, and they have concluded that
as  of  that  date  our  disclosure  controls  and  procedures were effective at
ensuring  that  required  information will be disclosed on a timely basis in our
reports  filed  under  the  Exchange  Act.

b)     Changes  in  internal controls.  There were no significant changes to our
internal  controls  or  in  other  factors  that  could significantly affect our
internal  controls  subsequent  to  the  date  of  their evaluation by our Chief
Executive  Officer  and  our Chief Financial Officer.  There were no significant
deficiencies  or  material  weaknesses,  and  therefore there were no corrective
actions  taken.

PART  II.  OTHER  INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS
----------------------------

     On  January  18,  2002,  the  Company  was  served  with a lawsuit filed by
Blakely-Witt  &  Associates,  Inc.  in  the  District  Court,  L-193rd  Judicial
District, Dallas County, Texas (Cause No. 01-11043).  The suit alleges Pizza Inn
sent,  or  caused  to be sent, unsolicited facsimile advertisements to plaintiff
and  others  in  violation of (i) 47 U.S.C. Section 227(b)(1)(C) and (b)(3), the
Telephone  Consumer  Protection  Act,  and (ii) Texas Business and Commerce Code
Section  35.47.  The plaintiff has requested this matter be certified as a class
action.  We  are vigorously defending our position in this litigation. We cannot
assure  you that we will prevail in this lawsuit and our defense could be costly
and  consume the time of our management. We are unable to predict the outcome of
this case. However, an adverse resolution of this matter could materially affect
our  financial  position  and  results  of  operations.

     All  of the parties to this matter have entered into a settlement agreement
under which the Company would pay an amount that would not materially affect our
financial  performance.  Final  approval of this settlement agreement is subject
to  court  approval  and  no  assurances can be given that such approval will be
obtained.  The  settlement terms currently agreed to and pending court approval,
have  been  provided  for  in  the  Company's  financial  statements.

<PAGE>
------
ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
---------------------------------------------------------------------

     At  the  Annual  Meeting  of Shareholders on February 11, 2004 five matters
were  submitted  to a vote of shareholders. Those matters and the results of the
vote  for  each  are  as  follows:

Item  1.     Election  of  Class  II  Directors

           Nominee                For               Votes Withheld
           -------                ---               --------------
        Robert B. Page          5,506,809               14,025
        Ramon D. Phillips       5,512,895               14,025
        Steven J. Pully         6,198,964               112,207


Item  2.     Approval to adopt a resolution to repeal the following amendment of
the  Amended  and  Restated  Bylaws of the Company adopted on December 18, 2002:
Amendment  to Article III, Section 7 that eliminates the ability of shareholders
to  call  a  special  meeting  of  shareholders.

        Votes for              5,648,318
        Votes against            655,894
        Abstain                   20,884

Item  3.     Approval to adopt a resolution to repeal the following amendment of
the Amended and Restated Bylaws of the Company adopted on December 18, 2002: New
Article  III,  Section  13  that  requires  shareholders  to comply with certain
procedures  in  order  to  bring  business  before  a  shareholders  meeting.

        Votes for               5,693,889
        Votes against             606,963
        Abstain                    23,884

Item  4.     Approval to adopt a resolution to repeal the following amendment of
the Amended and Restated Bylaws of the Company adopted on December 18, 2002: New
Article  IV,  Section  6  that  requires  shareholders  to  comply  with certain
procedures  in  order  to  nominate  directors.

        Votes for                5,700,154
        Votes against              600,706
        Abstain                     23,836

Item  5.     Approval  to  adopt  a  resolution  recommending  to  the  Board of
Directors of the Company that the Company reimburse Newcastle Partners, L.P. for
all  expenses  it  incurs in connection with its solicitation of proxies for the
Annual  Meeting.

       Votes for                 5,871,073
       Votes against               809,953
       Abstain                      83,670

ITEM  5.  OTHER  INFORMATION
----------------------------

     The  proxy  contest  in  connection  with  the Company's most recent annual
meeting  resulted  in  three  nominees of Newcastle Partners, L.P. ("Newcastle")
(i.e.  Ramon  D. Phillips, Robert B. Page, and Steven J. Pully) being elected as
Class  II  members  of  the  Board  of  Directors  at  the  meeting.

     In  Part  II,  Item  5 of the Company's report on Form 10-Q for the quarter
ended  September  28, 2003, filed with the Securities and Exchange Commission on
November  12,  2003,  the Company expressed concern that election of Newcastle's
nominees  might  result  in  a  "Change of Control" as defined in the employment
agreements  executed on December 16, 2002 between the Company and each of Ronald
W. Parker, B. Keith Clark, Ward T. Olgreen and Shawn M. Preator.  In the report,
the  Company  summarized  the  issue  as  follows:

Whether  or  not a Change of Control is deemed to have occurred is a function of
whether  or not two existing directors, Messrs. Schwarz and Pully, and a nominee
director, Mr. Phillips, currently an advisory director, are incumbent directors,
as  that  term  is defined in the employment agreements.  If a Change of Control
were to occur and any or all of these executive officers were to terminate their
employment  for any reason (including the voluntary termination of employment by
such  officer)  as  provided  in  the employment agreements within twelve months
after  such  Change of Control, the Company would be required to make a lump sum
payment  to  such  officer  which  would  have  a material adverse effect on the
Company's  financial  position  and  results  of  operations.

     After  filing  its  Form 10-Q for the quarter ended September 28, 2003, the
Company sought a legal opinion on the "Change of Control" issue from its outside
legal  counsel, which delivered its opinion on November 26, 2003.  The Company's
definitive proxy statement, filed with the Securities and Exchange Commission on
January  7,  2004,  contained  the following commentary regarding the "Change of
Control"  issue:

Counsel  to  the  Company  has  delivered to the Board its written legal opinion
that,  subject  to  the  assumptions, limitations, qualifications and exceptions
contained  therein,  it  is  of  the  opinion  that  a Texas court in a properly
presented  and argued case should conclude that Messrs. Schwarz, Pully, Phillips
and  Page  would not constitute members of the Incumbent Board and therefore, if
the  Newcastle  nominees  are  elected  to  the Board in connection with a proxy
contest, a "Change of Control" as defined in the employment agreements discussed
above would be deemed to occur.    Counsel for Newcastle has informed counsel to
the Company that they disagree with this opinion.  Additionally, Messrs. Schwarz
and  Pully  have informed the Board that they believe themselves to be incumbent
directors.

     Newcastle's  definitive  proxy  statement,  filed  with  the Securities and
Exchange  Commission  on  January  2,  2004,  expressed  a different view of the
"Change  of  Control"  issue:

We  believe  that  Messrs.  Schwarz  and Pully are "Incumbent Directors" under a
plain  reading  of  the  employment  agreements  as  they  were  appointed by an
agreement  of  a  majority  of  the Pizza Inn Board and not due to an "actual or
threatened  solicitation  of proxies."  We also believe that Mr. Phillips should
be deemed an "Incumbent Director" if elected by virtue of the fact that he was a
director  of  the Company at the time the new employment agreements were adopted
by  the  Pizza  Inn  Board.

     After the shareholder meeting, the newly constituted Audit Committee of the
Board  of Directors commenced an investigation to determine whether a "Change of
Control"  had  occurred  under  the  employment  agreements  as  a result of the
election  of  Newcastle's  nominees.  In connection with this investigation, the
Audit Committee engaged independent legal counsel to advise the Audit Committee.

     On  May  4, 2004, the Audit Committee's independent legal counsel delivered
its  legal  opinion  to  the  Audit  Committee,  opining that a Texas court in a
properly presented and argued case should conclude that no Change of Control has
occurred  under  the employment agreements of Messrs. Parker, Clark, Olgreen and
Preator  at  any  time  since  December  16,  2002.  In  addition  to  certain
assumptions,  limitations,  qualifications and exceptions, the opinion was based
on  counsel's conclusion that Mr. Phillips is among the individuals constituting
the  Incumbent  Board.

     Based  on  the  opinion of the Audit Committee's independent legal counsel,
the  Audit  Committee, on May 10, 2004, concluded that there has been no "Change
of  Control"  and  recommended  that  the  Board  of  Directors  reach  the same
conclusion.  Based  on  such  recommendation, the Board of Directors, on May 11,
2004,  concluded  that  there  has  been  no  "Change  of  Control."



<PAGE>
------
ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K
-----------------------------------------------

(a)     Exhibits:

10.1     First  amendment  to  third amended and restated loan agreement between
the  Company  and  Wells  Fargo  Bank  (Texas),  N.A.  dated  April 22, 2004 but
effective  March  28,  2004.


10.2     Seventh  amended  and  restated revolving credit note agreement between
the  Company  and  Wells  Fargo  Bank  (Texas),  N.A.  dated  April 22, 2004 but
effective  March  28,  2004.



31.1     Certification of Chief Executive Officer as Adopted Pursuant to Section
302  of  the  Sarbanes-Oxley  Act  of  2002.

31.2     Certification of Chief Financial Officer as Adopted Pursuant to Section
302  of  the  Sarbanes-Oxley  Act  of  2002.

32.1     Certification of Chief Executive Officer as Adopted Pursuant to Section
906  of  the  Sarbanes-Oxley  Act  of  2002.

32.2     Certification of Chief Financial Officer as Adopted Pursuant to Section
906  of  the  Sarbanes-Oxley  Act  of  2002.

(b)     Form  8-K

On  January  23,  2004 the Company filed a report on Form 8-K, reporting a press
release with respect to earnings for the second quarter ended December 28, 2003.

On February 8, 2004 the Company filed a report on Form 8-K, reporting management
performance  from  August  2002  to  December  2003.

On  February  11,  2004  the  Company filed a report on Form 8-K, announcing the
results  of  its  annual  shareholder  meeting.

On  April  23,  2004  the  Company filed a report on Form 8-K, reporting a press
release  with  respect  to  earnings for the third quarter ended March 28, 2004.




<PAGE>
                                     ------
                                   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.


                                   PIZZA  INN,  INC.
                                   Registrant




                                   By:     /s/Ronald  W.  Parker
                                           ---------------------
                                        Ronald  W.  Parker
                                        President  and  Chief  Executive Officer






                                   By:     /s/Shawn  M.  Preator
                                           ---------------------
                                        Shawn  M.  Preator
                                        Chief  Financial  Officer








Dated:  May  12,  2004













<PAGE>
<PAGE>




</TEXT>
</DOCUMENT>
