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                                                                    EXHIBIT 10.3

                         FAMOUS DAVE'S OF AMERICA, INC.

                         1998 DIRECTOR STOCK OPTION PLAN
           (as adopted June 11, 1998, as amended through May 22, 2002)

      1. Purpose. The purpose of the Famous Dave's of America, Inc. 1998
Director Stock Option Plan (the "Plan") is to advance the interests of Famous
Dave's of America, Inc. (the "Company") and its shareholders by encouraging
share ownership by members of the Board of Directors of the Company (the
"Board") who are not employees of the Company or any of its subsidiaries, in
order to promote long-term shareholder value through continuing ownership of the
Company's Common Stock.

      2. Administration. The Plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of nonqualified stock options made under
the Plan ("Options"). The Board shall, subject to the provisions of the Plan,
grant Options under the Plan and shall have the power to construe the Plan, to
determine all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decisions of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number or any other officer of the Company to execute and deliver
documents on behalf of the Board. No member of the Board shall be liable for
anything done or omitted to be done by him or by any other member of the Board
in connection with the Plan, except for his own willful misconduct or as
expressly provided by statute.

      3. Participation. Each member of the Board who is not an employee of the
Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible
to receive an Option in accordance with Paragraph 5 below.

      4. Awards Under The Plan.

            (a) Awards under the Plan shall include only Options, which are
rights to purchase Common Stock of the Company, having $.01 par value (the
"Common Stock"). Such Options are subject to the terms, conditions and
restrictions specified in Paragraph 5 below.

            (b) There may be issued under the Plan pursuant to the exercise of
Options an aggregate of not more than 350,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 6 below. If any Option is canceled,
terminates or expires unexercised, in whole or in part, any shares of Common
Stock that would otherwise have been issuable pursuant thereto will be available
for issuance under new Options.

            (c) A Non-Employee Director to whom an Option is granted (and any
person succeeding to such a Non-Employee Director's rights pursuant to the Plan)
shall have no rights as
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a shareholder with respect to any Common Stock issuable pursuant to any such
Option until the date of the issuance of a stock certificate to him for such
shares. Except as provided in Paragraph 6 below, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.

      5. Nonqualified Stock Options. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:

            (a) The Option exercise price shall be the "Fair Market Value" (as
herein defined) of the Common Stock subject to such Option on the date the
Option is granted. Fair Market Value shall be the closing sales price of a share
of Common Stock on the date of grant as reported on the Nasdaq Market or, if the
Nasdaq Market is closed on that date, on the last preceding date on which the
Nasdaq Market was open for trading, but in no event will such Option exercise
price be less than the par value of the Common Stock.

            (b) The Board shall determine the number of shares of Common Stock
subject to each Option granted to Non-Employee Directors and, subject to Section
5(d) hereof, the vesting schedule of each such Option. Notwithstanding the
foregoing, once such Options become outstanding, a Non-Employee Director will
still be entitled to the anti-dilution adjustments provided for in Section 6
hereof.

            (c) The Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be exercisable
during his lifetime only by him.

            (d) Options shall not be exercisable:

                  (i) except pursuant to the vesting schedule established by the
Board of Directors and after the expiration of ten years from the date it is
granted. Notwithstanding anything to the contrary herein, an Option shall
automatically become immediately exercisable in full: (i) upon the removal of
the Non-Employee Director from the Board without cause; or (ii) in the event of
a "change in control" of the Company, as defined in any existing agreements
between the Company and its senior officers.

                  (ii) unless payment in full is made for the shares of Common
Stock being acquired thereunder at the time of exercise, such payment shall be
made in United States dollars by cash or check, or in lieu thereof, by tendering
to the Company Common Stock owned by the person exercising the Option and having
a Fair Market Value equal to the cash exercise price applicable to such Option,
or by a combination of United States dollars and Common Stock as aforesaid; and

                  (iii) unless the person exercising the Option has been at all
times during the period beginning with the date of grant of the Option and
ending on the date of such exercise, a Non-Employee Director of the Company,
except that


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                        (A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option that has not
expired and has not been fully exercised, such person may, at any time within
three years of the date he ceased to be a Non-Employee Director (but in no event
after the Option has expired under the provisions of subparagraph 5(d)(i)
above), exercise the Option with respect to any Common Stock as to which he
could have exercised on the date he ceased to be such a Non-Employee Director;
or

                        (B) if any person to whom an Option has been granted
shall die holding an Option that has not expired and has not been fully
exercised, his executors, administrators, heirs or distributees, as the case may
be, may, at any time within one year after the date of such death (but in no
event after the Option has expired under the provisions of subparagraph 5(d)(i)
above), exercise the Option with respect to any shares subject to the Option.

      6. Dilution and Other Adjustments. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of substantially all of its assets, any
distribution to shareholders other than a normal cash dividend, or other
extraordinary or unusual event, the number or kind of shares that may be issued
under the Plan pursuant to subparagraph 4(b) above, and the number or kind of
shares subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options and
with a corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.

      7. Miscellaneous Provisions.

            (a) Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an Option
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Non-Employee Director any right to be retained in the
service of the Company.

            (b) A participant's rights and interest under the Plan may not be
assigned or transferred, hypothecated or encumbered in whole or in part either
directly or by operation of law or otherwise (except in the event of a
participant's death, by will or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation or
liability of such participant.

            (c) Common Stock shall not be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities exchange and
other applicable laws and requirements.

            (d) It shall be a condition to the obligation of the Company to
issue Common Stock upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under


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subparagraph 5(d)(iii)(B) above) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state, local or foreign income or other taxes. If
the amount requested is not paid, the Company may refuse to issue such Common
Stock.

            (e) The expenses of the Plan shall be borne by the Company.

            (f) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company or the Board.

            (g) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Options hereunder or any
Common Stock issued pursuant hereto as may be required by Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, or any other applicable
statute, rule or regulation.

      8. Amendment or Discontinuance. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable; provided,
however, that no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or regulation, and in no
event shall the Plan be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act or the rules thereunder. No amendment of
the Plan shall materially and adversely affect any right of any participant with
respect to any Option theretofore granted without such participant's written
consent.

      9. Termination. This Plan shall terminate upon the earlier of the
following dates or events to occur upon the adoption of a resolution of the
Board terminating the Plan or ten years from the date the Plan is initially
approved and adopted by the shareholders of the Company. No termination of the
Plan shall materially and adversely affect any of the rights or obligations of
any person, without his consent, under any Option theretofore granted under the
Plan.

      10. Effective Date of Plan. The Plan will become effective on the date
that it is approved by the affirmative vote of the holders of the greater of (a)
a majority of the outstanding shares of Common Stock of the Company present and
entitled to vote or (b) a majority of the voting power of the minimum number of
shares entitled to vote that would constitute a quorum for transaction of
business at the Company's Annual Meeting of Shareholders.


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