SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>


                                        For each of the fiscal years ended
                                       (In thousands except per share data)

                            August 1,  August 2,  July 28,   July 29,  July 30,
                              1997       1996       1995       1994      1993
________________________________________________________________________________
<S>                        <C>         <C>        <C>        <C>       <C>
OPERATING RESULTS
 Net sales                 $1,123,851  $943,287   $783,093   $640,899  $517,616
 Cost of goods sold           387,703   324,905    264,809    215,071   171,709
 Expenses:
   Store operations:
     Labor & other
     related expenses         378,117   314,157    256,253    207,227   167,909
     Other store
     operating expenses       162,675   138,701    114,564     92,694    74,673
     Store closing costs*          --    14,199         --         --        --
   General and
    administrative             57,798    50,627     44,746     36,807    30,096
     Total expenses           598,590   517,684    415,563    336,728   272,678
 Operating income             137,558   100,698    102,721     89,100    73,229
 Interest expense               2,089       369        723      2,136     2,885
 Interest income                1,988     2,051      3,335      3,604     2,600
 Income before income
  taxes and change in
  accounting principle        137,457   102,380    105,333     90,568    72,944
 Provision for income
  taxes                        50,859    38,865     39,290     33,609    27,292
 Income before change in
  accounting principle         86,598    63,515     66,043     56,959    45,652
 Cumulative effect of
  change in accounting
  principle**                      --        --         --        988        --
 Net income                $   86,598  $ 63,515   $ 66,043   $ 57,947   $45,652

SHARE DATA
 Earnings before change
  in accounting principle
  per share                     $1.41     $1.04      $1.09       $.94      $.78
 Cumulative effect of
  change in accounting
  principle per share**            --        --         --        .02        --
 Net earnings per share          1.41      1.04       1.09        .96       .78
 Dividends per share            $ .02     $ .02      $ .02       $.02      $.02
 Weighted average
  shares outstanding           61,446    60,813     60,557     60,607    58,789

FINANCIAL POSITION
 Working capital           $   60,654  $ 23,289   $ 43,600   $ 60,721  $ 76,115
 Total assets                 828,705   676,379    604,515    530,064   469,073
 Property and equipment
  -net                        678,167   568,573    479,518    385,960   305,596
 Long-term debt                62,000    15,500     19,500     23,500    36,576
 Capital lease
  obligations                   1,302     1,468      1,598      1,709     1,802
 Stockholders' equity         660,432   566,221    496,083    429,846   366,785
===============================================================================

</TABLE>

*Represents one-time charge to close certain stores and other write-offs.
(See Note 1 to the Company's Consolidated Financial Statements.)

**The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes", effective July 31, 1993.


                      MARKET PRICE AND DIVIDEND INFORMATION

      The  following  table  indicates the high and  low  sales  prices  of
the Company's common stock, as reported by The Nasdaq Stock Market (National
Market) and dividends paid.
<TABLE>
<CAPTION>
                            Fiscal Year 1997         Fiscal Year 1996
                           ____________________     ____________________
                           Prices     Dividends     Prices      Dividends
                        _____________            _____________
Quarter                 High      Low   Paid     High      Low     Paid
_________________________________________________________________________
<S>                    <C>      <C>     <C>     <C>      <C>       <C>
First                  $25.63   $19.63  $.005   $21.50   $17.38    $.005
Second                  28.38    19.88   .005    19.25    15.75     .005
Third                   29.25    24.88   .005    24.88    17.88     .005
Fourth                  29.88    23.75   .005    27.38    19.38     .005
=========================================================================
</TABLE>
<PAGE>
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
     The following table highlights operating results over the past three
fiscal years:
<TABLE>
<CAPTION>

                                                       Period to Period
                           Relationship to Net Sales   Increase(Decrease)
                           _________________________   _________________
                             1997     1996     1995  1997 vs 1996  1996 vs 1995
______________________________________________________________________________
<S>                           <C>      <C>      <C>        <C>           <C>
Net Sales
  Restaurant                  76.8%    77.8%    77.9%      18%           20%
  Retail                      23.2     22.2     22.1       25            21
_____________________________________________________
                             100.0%   100.0%   100.0%      19            20

Cost of goods sold            34.5     34.4     33.8       19            23
Expenses:
  Store operations:
    Labor & other
     related expenses         33.7     33.3     32.7       20            23
    Other store
     operating expenses       14.5     14.7     14.6       17            21
  Store closing costs*          --      1.5       --       --            --
  General & administrative     5.1      5.4      5.7       14            13
Operating income              12.2     10.7     13.1       37            (2)
Interest expense                .2       .1       .1      466           (49)
Interest income                 .2       .2       .4       (3)          (39)
Income before income taxes    12.2     10.8     13.5       34            (3)
Provision for income taxes     4.5      4.1      5.0       31            (1)
Net income                     7.7      6.7      8.4       36            (4)
===========================================================================
</TABLE>

*Represents one-time charge to close certain stores and other write-offs.
 (See Note 1 to the Company's Consolidated Financial Statements.)


                            SAME STORE SALES ANALYSIS

<TABLE>
<CAPTION>

                                                  Period to Period Increase
                                                  _________________________
                                                 1997 vs 1996   1996 vs 1995
                                                 (214 Stores)   (181 Stores)
___________________________________________________________________________
<S>                                                     <C>            <C>
Restaurant                                              3%             2%
Retail                                                  8              2
Restaurant & retail                                     4              2
===========================================================================

</TABLE>

      Same store restaurant sales (which compare sales of stores open
throughout the  fiscal  years  under  comparison) increased 3% in fiscal  1997
versus the comparable  52 weeks of fiscal 1996.  Same store restaurant sales
increased  2% for the comparable 52 weeks of fiscal 1996 versus fiscal 1995.
The increase  in same store restaurant sales growth from fiscal 1996 to fiscal 
1997 was primarily due  to  normal winter weather conditions in fiscal 1997 
compared to the extreme winter weather experienced in fiscal 1996.
      Same  store retail sales increased 8% in fiscal 1997 versus the
comparable 52  weeks  of  fiscal 1996 while same store retail sales increased
2%  for the comparable  52-week period in fiscal 1996 versus fiscal 1995.  The
increase  in same store retail sales growth from fiscal 1996 to fiscal 1997 was
primarily due to  the  introduction of three browsing books during the 
Christmas,  spring and summer  seasons  in fiscal 1997 as compared to only a 
summer  browsing book  in fiscal 1996 and the normal winter weather conditions 
in fiscal 1997 compared  to the extreme winter weather experienced in fiscal
1996.
<PAGE>
      In  fiscal 1997 total sales (restaurant and retail) in the 214 same
stores averaged $4.06 million.  Restaurant sales were 77.0% of total sales in
the same 214 stores in fiscal 1997 and 77.8% in fiscal 1996.
      Total  net  sales, which increased 19% and 20% in fiscal  1997  and
1996, respectively,  benefited from comparable store sales growth and the
opening  of 50, 43 and 36 new stores in fiscal 1997, 1996 and 1995, 
respectively.  The total net  sales increase in fiscal 1996 also benefited from
an extra week, while the total  net  sales increase in fiscal 1997 was 
negatively affected by  the extra week  in  fiscal  1996.   (See  Note 1 to the 
Company's  Consolidated Financial Statements.)
     Cost of goods sold as a percentage of net sales increased in fiscal
1997 to 34.5% from 34.4% in 1996.  This increase was primarily due to an 
increasing mix of retail sales which have a higher cost than restaurant sales.
Food cost as  a percentage of net sales in fiscal 1997 was unchanged from fiscal
1996 primarily due  to  menu increases of approximately .6% and 2.3% taken in 
October 1996 and May 1997, respectively, and operational efficiencies as a 
result of the normal winter  weather conditions in fiscal 1997 as compared to 
the extreme conditions in fiscal 1996, which together were offset by increases 
in coffee, dairy and hog complex  prices.  Cost of goods sold as a percentage of
net sales increased  in fiscal 1996 to 34.4% from 33.8% in 1995.  This increase
was primarily due to  a new menu, implemented in May 1995, that raised ideal 
food cost as the result  of a  change in menu mix.  Additionally, the increase 
in cost of goods sold was due to  operating  inefficiencies in the restaurants 
as a result of  extreme winter weather conditions as compared to fiscal 1995 and
substantial increases  in hog complex prices in the Company's fourth fiscal 
quarter of 1996.
     Labor and other related expenses include all direct and indirect labor
and related  costs incurred in store operations.  Labor expenses as a percentage
of net  sales  were  33.7%,  33.3%  and  32.7%  in  fiscal  1997,  1996  and
1995, respectively.  The year to year increase in fiscal 1997 versus fiscal  
1996 was primarily  due  to the introduction of a new store-level bonus  program
at the beginning  of  fiscal 1997 and store-level, hourly-employee  wage 
inflation  of approximately  2.7%.   These increases were partially  offset  by
the enhanced productivity achieved through operational changes implemented in 
the fourth  quarter  of fiscal 1996 and throughout fiscal 1997.  The  year  to 
year increase in fiscal 1996 versus fiscal 1995 was primarily due to continuing
labor cost  pressures as the costs to hire and retain employees continued to 
increase, unemployment rates remained low and competition remained high in the
industry.
      Other store operating expenses include all unit-level operating
costs, the major  components  of  which are operating supplies,  repairs  and
maintenance, advertising  expenses,  utilities, depreciation and amortization.
Other store operating expenses as a percentage of net sales were 14.5%, 14.7% 
and 14.6%  in fiscal  1997, 1996 and 1995, respectively.  The year to year 
decrease in fiscal 1997  versus  fiscal 1996 was primarily due to a decrease in
operating supplies expense  resulting from the return to paper napkins from 
linen  napkins  in the stores  during the fourth quarter of fiscal 1996.  The 
year to year increase  in fiscal  1996 versus fiscal 1995 was attributable to 
higher depreciation related to  opening  43  and  36 new stores in fiscal 1996 
and 1995, respectively.  The store  closing  costs in fiscal 1996 were due to
the one-time charge  for store closings and other write-offs in the fourth 
quarter of fiscal 1996. (See Note  1 to the Company's Consolidated Financial
Statements.)
     General and administrative expenses as a percentage of net sales were
5.1%, 5.4%  and 5.7% in fiscal 1997, 1996 and 1995, respectively.  The 
reductions from year  to  year  were accomplished largely through improved 
volume.   The largest areas  of increased spending in absolute dollars in fiscal
1997 were in manager trainee  costs to support the continued growth of the 
business and in corporate bonuses  as  a result of the improvement in pretax 
income in fiscal 1997 versus fiscal 1996.
<PAGE>
      Interest expense increased to $2.1 million in fiscal 1997 from $.4
million in  fiscal  1996.  The increase was primarily due to the Company's  
drawing on  a $50.0 million term loan on December 2, 1996.  Interest expense 
decreased to $.4 million  in  fiscal 1996 from $.7 million in fiscal 1995 
primarily  due  to the scheduled principal payments on the 9.53% Senior Notes.
      Interest income decreased in fiscal 1997 to $2.0 million from $2.1
million in  fiscal  1996  and $3.3 million in fiscal 1995.  The primary reason
for the decrease in interest income was lower average funds available for
investment.
      Provision  for income taxes as a percent of pretax income  was  37.0%
for fiscal  1997,  38.0%  for fiscal 1996 and 37.3% for fiscal  1995.   The
primary reasons  for the decrease in the tax rate in fiscal 1997 were decreases
in the effective state tax rates and the institution of the Work Opportunity Tax
Credit by  the federal government to replace the expired Targeted Jobs Tax 
Credit.  The primary  reason  for  the  increase in the tax  rate  in  fiscal  
1996  was the expiration of the Targeted Jobs Tax Credit program and increases 
in state rates.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
      The  Company will adopt SFAS No. 128, "Earnings per Share", in the
second quarter  of fiscal 1998.  The Company is still evaluating the effect of
adopting SFAS No. 128, but does not expect the adoption to have a material 
effect on the Company's   consolidated  financial  statements.   SFAS  No. 130,
"Reporting Comprehensive  Income",  and SFAS No. 131, "Disclosures  about  
Segments of  an Enterprise  and  Related Information", become effective for the 
Company  in the first  quarter of fiscal 1999.  The Company is still evaluating
the effects  of adopting  SFAS  No. 130 and SFAS No. 131, but does not expect  
the adoption  of either  pronouncement  to have a material effect on the  
Company's consolidated financial  statements.   (See  Note  1 to the Company's  
Consolidated Financial Statements.)

LIQUIDITY AND CAPITAL RESOURCES
      The  Company's cash generated from operating activities was $124.2
million in  fiscal  1997.   Most  of this cash was provided by net  income
adjusted  by depreciation  and amortization.  Increases in accrued employee 
compensation and deferred  income  taxes were partially offset by increases  in
inventories and prepaid expenses and decreases in accounts payable.
      Capital  expenditures were $148.6 million in fiscal 1997.  Land
purchases and cost of new stores accounted for substantially all of these
expenditures.
      The  Company's  internally  generated cash and  short-term  and  long-
term investments were sufficient to finance all of its growth in fiscal 1997,
but not to  meet  its seasonal cash needs.  As planned, the Company established
a $50.0 million term loan in the second quarter of fiscal 1997 to meet its 
seasonal cash needs in fiscal 1997 and its planned needs in fiscal 1998.
     The Company estimates that its capital expenditures for fiscal 1998
will be approximately  $190 million, substantially all of which will be  land
purchases and  construction of new stores.  On December 2, 1996 the Company  
received the proceeds from a $50.0 million 5-year term loan bearing interest at 
a three-month LIBOR-based rate ("London Interbank Offered Rate").  
Concurrently, the Company entered into a swap agreement with a bank to fix the 
interest rate at 6.36% for the  life  of the term loan.  This $50.0 million term
loan is part of a $125.0 million  bank  credit  facility that also includes  a  
$75.0  million revolver.  Management  believes that cash and short-term 
investments  at  August  1, 1997, along  with  cash  generated  from the 
Company's operating  activities  and its available  $75.0 million revolver, will
be sufficient to finance its continued expansion plans through fiscal 1999.
<PAGE>

<TABLE>
<CAPTION>

                           CONSOLIDATED BALANCE SHEET

                                      (In thousands except share data)
                                           August 1,      August 2,
ASSETS                                       1997           1996
____________________________________________________________________
<S>                                        <C>            <C>
Current Assets:
Cash and cash equivalents                  $ 64,933       $ 28,971
Short-term investments                        1,666          4,735
Receivables                                   4,836          2,803
Inventories                                  73,269         61,470
Prepaid expenses                              4,707          1,485
Deferred income taxes                            --          6,972
____________________________________________________________________
Total current assets                        149,411        106,436
____________________________________________________________________
Property and Equipment:
Land                                        192,258        165,376
Buildings and improvements                  423,260        346,479
Buildings under capital leases                3,289          3,289
Restaurant and other equipment              176,959        151,018
Leasehold improvements                       12,646         12,343
Construction in progress                     22,985         13,738
____________________________________________________________________
Total                                       831,397        692,243
Less:  Accumulated depreciation and
       amortization of capital leases       153,230        123,670
____________________________________________________________________
Property and equipment-net                  678,167        568,573
____________________________________________________________________
Long-term Investments                            --            565
____________________________________________________________________
Other Assets                                  1,127            805
____________________________________________________________________
Total                                      $828,705       $676,379
====================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________________________________________
Current Liabilities:
Accounts payable                           $ 27,422       $ 30,565
Current maturities of
  long-term debt                              3,500          4,000
Current portion of capital lease
  obligations                                   166            130
Taxes withheld and accrued                   13,969         12,475
Income taxes payable                          2,429          4,123
Deferred income taxes                         2,362             --
Accrued employee compensation                22,374         15,647
Accrued employee benefits                     9,961          9,692
Other accrued expenses                        6,574          6,515
____________________________________________________________________
Total current liabilities                    88,757         83,147
____________________________________________________________________
Long-term Debt                               62,000         15,500
____________________________________________________________________
Capital Lease Obligations                     1,302          1,468
____________________________________________________________________
Deferred Income Taxes                        16,214         10,043
____________________________________________________________________

Commitments and Contingencies (Note 9)

Stockholders' Equity:
Common stock - 150,000,000 shares of $.50
  par value authorized;  shares issued and
  outstanding: 1997, 61,065,306; 1996,
  60,594,353                                 30,533         30,297
Additional paid-in capital                  211,850        202,951
Retained earnings                           418,049        332,973
____________________________________________________________________
Total stockholders' equity                  660,432        566,221
____________________________________________________________________
Total                                      $828,705       $676,379
====================================================================
</TABLE>

         See notes to consolidated financial statements.
<PAGE>


                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>

                                    (In thousands except per share data)
                                            Fiscal years ended
                                August 1,        August 2,        July 28,
                                   1997             1996            1995
___________________________________________________________________________
<S>                            <C>                <C>            <C>
Net sales                      $1,123,851         $943,287       $783,093
Cost of goods sold                387,703          324,905        264,809
___________________________________________________________________________
Gross profit on sales             736,148          618,382        518,284
___________________________________________________________________________
Expenses:
  Store operations:
    Labor & other related
     expenses                     378,117          314,157        256,253
    Other store operating
     expenses                     162,675          138,701        114,564
    Store closing costs                --           14,199             --
  General and administrative       57,798           50,627         44,746
___________________________________________________________________________
  Total expenses                  598,590          517,684        415,563
___________________________________________________________________________
Operating income                  137,558          100,698        102,721
Interest expense                    2,089              369            723
Interest income                     1,988            2,051          3,335
___________________________________________________________________________
Income before income taxes        137,457          102,380        105,333
Provision for income taxes         50,859           38,865         39,290
___________________________________________________________________________
Net income                       $ 86,598         $ 63,515       $ 66,043
===========================================================================
Net earnings per share              $1.41            $1.04          $1.09
===========================================================================
</TABLE>


                   See notes to consolidated financial statements.

<PAGE>



          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                    (In thousands except per share data)
                                          Additional               Total
                                Common     Paid-In    Retained Stockholders'
                                Stock      Capital    Earnings     Equity
___________________________________________________________________________
<S>                             <C>        <C>        <C>         <C>
Balances at July 29, 1994       $29,950    $194,074   $205,822    $429,846
 Cash dividends - $.02 per
  share                              --          --     (1,199)     (1,199)
 Exercise of stock options           46         969         --       1,015
 Tax benefit realized upon
  exercise of stock options          --         378         --         378
 Net income                          --          --     66,043      66,043
___________________________________________________________________________
Balances at July 28, 1995        29,996     195,421    270,666     496,083
 Cash dividends - $.02 per
  share                              --          --     (1,208)     (1,208)
 Exercise of stock options          301       4,865         --       5,166
 Tax benefit realized upon
  exercise of stock options          --       2,665         --       2,665
 Net income                          --          --     63,515      63,515
___________________________________________________________________________
Balances at August 2, 1996       30,297     202,951    332,973     566,221
 Cash dividends - $.02 per
  share                              --          --     (1,522)     (1,522)
 Exercise of stock options          236       7,288         --       7,524
 Tax benefit realized upon
  exercise of stock options          --       1,611         --       1,611
 Net income                          --          --      6,598      86,598
___________________________________________________________________________

Balances at August 1, 1997      $30,533    $211,850   $418,049    $660,432
===========================================================================
</TABLE>


               See notes to consolidated financial statements.

<PAGE>


                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>

                                                         (In thousands)
                                                     Fiscal years ended
                                              August 1,    August 2,  July 28,
                                                1997         1996       1995
___________________________________________________________________________
<S>                                           <C>          <C>         <C>
Cash flows from operating activities:
  Net income                                  $ 86,598     $ 63,515    $66,043
   Adjustments to reconcile net income to
    net cash provided by operating activities:
     Depreciation and amortization              35,735       31,433     26,488
     Loss (gain) on disposition of
       property and equipment                      135       14,689        (66)
   Changes in assets and liabilities:
     Receivables                                (2,033)         390       (199)
     Inventories                               (11,799)      (9,955)    (9,525)
     Prepaid expenses                           (3,222)        (573)       182
     Other assets                                 (436)        (212)       (60)
     Accounts payable                           (3,143)         814      3,985
     Taxes withheld and accrued                  1,494        1,651      3,416
     Income taxes payable                       (1,694)      (1,465)       548
     Accrued employee compensation               6,727        1,965        494
     Accrued employee benefits                     269        2,590       (780)
     Other accrued expenses                         59          806      1,428
     Deferred income taxes                      15,505       (1,978)       418
_______________________________________________________________________________
  Net cash provided by
    operating activities                        124,195     103,670     92,372
_______________________________________________________________________________
Cash flows from investing activities:
  Purchase of short-term investments               (603)     (4,011)    (7,169)
  Proceeds from maturities of
   short-term investments                         4,237      13,852     38,994
  Purchase of property and
    equipment                                  (148,649)   (137,633)  (121,052)
  Proceeds from sale of property and
    equipment                                     3,299       2,456      1,073
_______________________________________________________________________________
  Net cash used in investing
    activities                                 (141,716)   (125,336)   (88,154)
_______________________________________________________________________________
Cash flows from financing activities:
  Proceeds from issuance of
   long-term debt                                50,000          --         --
  Proceeds from exercise of
   stock options                                  7,524        5,166     1,015
  Tax benefit realized upon
   exercise of stock options                      1,611        2,665       378
  Principal payments under
   long-term debt and capital
   lease obligations                             (4,130)      (4,110)   (3,594)
  Dividends on common stock                      (1,522)      (1,208)   (1,199)
_______________________________________________________________________________
  Net cash provided by (used in)
   financing activities                           53,483        2,513   (3,400)
_______________________________________________________________________________
  Net increase (decrease) in cash
   and cash equivalents                           35,962      (19,153)     818
  Cash and cash equivalents,
   beginning of year                              28,971       48,124   47,306
______________________________________________________________________________
  Cash and cash equivalents,
   end of year                                  $ 64,933     $ 28,971  $48,124
===============================================================================
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                    $  3,349     $  2,084   $ 2,513
    Income taxes                                  35,664       39,642    37,945

</TABLE>


               See notes to consolidated financial statements.

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands except share and per share data)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      Fiscal  year -  The Company's fiscal year ends on the Friday nearest
July 31st  and  each quarter consists of thirteen weeks.  The Company's  fiscal
year ended August 2, 1996 consisted of 53 weeks and the fourth quarter of fiscal
1996 consisted of 14 weeks.
     Principles of consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are 
wholly owned.  All significant intercompany transactions and balances have been
eliminated.
      Cash and cash equivalents - The Company's policy is to consider all
highly liquid  investments purchased with an original maturity of three months 
or less to be cash equivalents.  Cash equivalents consist primarily of auction
preferred stocks   and   commercial  paper.   The  carrying  value  of  these
instruments approximates market value due to their very short maturities.
      Short-term  investments - Short-term investments, primarily
consisting  of federal  government  agency securities and commercial paper  
which  the Company intends  to  hold  to maturity, are stated at amortized cost
in accordance with Statement  of  Financial Accounting Standards (SFAS) No.  
115,  "Accounting for Certain Investments in Debt and Equity Securities".  
(See Note 3.)
      Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out (FIFO) method.
      Property  and equipment - Property and equipment are stated at cost.
For financial  reporting purposes depreciation and amortization on these assets
are computed  by use of the straight-line and double-declining balance methods
over the estimated useful lives of the respective assets, as follows:
<TABLE>
<CAPTION>

Years
______________________________________________________________________________
<S>                                                                       <C>
Buildings and improvements                                                20-45
Buildings under capital leases                                            20-25
Restaurant and other equipment                                             5-10
Leasehold improvements                                                     3-35
______________________________________________________________________________
</TABLE>

      Accelerated  depreciation  methods  are  generally  used  for  income
tax purposes.
      Interest is capitalized in accordance with SFAS No. 34, "Capitalization of
Interest Costs".  Capitalized interest was $2,093, $2,010 and $2,072 for fiscal
years 1997, 1996 and 1995, respectively.
     Gain or loss is recognized upon disposal of property and equipment,
and the asset  and related accumulated depreciation and amortization amounts are
removed from the accounts.
      Maintenance  and  repairs, including the replacement of minor  items,
are charged  to  expense,  and  major  additions  to  property  and  equipment
are capitalized.
      Advertising  - The Company generally expenses the costs of  producing
and communicating  advertising  the first time the  advertising  takes  place.
Net advertising expense was $25,178, $20,404 and $16,198 for the fiscal years
1997, 1996 and 1995, respectively.
      Income  taxes  - The Company accounts for income taxes in accordance
with SFAS  No.  109,  "Accounting for Income Taxes."  Targeted jobs tax  credits
and employer tax credits for FICA taxes paid on tip income are accounted for by
the flow-through  method.   Deferred income taxes reflect the  net  tax
effects  of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.  (See Note 7.)
      Earnings per share - The computation of earnings per share is based
on the weighted  average  number of outstanding common shares  and  equivalents
(stock options)  adjusted for stock splits.  The weighted average number of
outstanding common  shares  and  equivalents was 61,446,185, 60,813,172 and  
60,556,977 for 1997, 1996 and 1995, respectively.
      Long-term  investments  - Long-term investments, primarily
consisting  of federal  government  agency securities and commercial paper  
which  the Company intends  to  hold  to maturity, are stated at amortized cost
in accordance with SFAS No. 115.  (See Note 3.)
<PAGE>

      Stock-based  compensation  - SFAS No.  123, "Accounting for Stock-Based 
Compensation," encourages, but does  not  require, companies to adopt the fair 
value method of accounting for stock-based  employee  compensation.  The Company
has  chosen to continue  to account  for  stock-based  employee compensation in 
accordance with Accounting Principles Board Opinion No. 25, "Accounting for 
Stock Issued to Employees," and related Interpretations.
     Start-up costs - Start-up costs of a new store are expensed in the
month in which the store opens.
      Store  closing  costs  -  Upon the decision to close  a  store,
estimated unrecoverable  costs are charged to expenses.  Such costs include 
buildings and improvements, leasehold improvements and restaurant and other 
equipment, net  of salvage value, and a provision for  the  present  value of 
future lease obligations, less estimated  sub-rental income.  The Company 
recognized $14,199 in pretax costs for the closings of the Appleton, WI, the 
Fond du Lac, WI and the Eagan, MN stores, the closings of the three  Corner  
Market  stores in the middle Tennessee  area  and  replacing the Company's  
point-of-sale system in the fourth quarter  of  fiscal  1996.  These
costs represent a one-time charge of $8,806 net of taxes, or $.15 per share.
     Use of estimates - Management of the Company has made a number of
estimates and  assumptions  relating to the reporting of assets and  liabilities
and the disclosure  of  contingent liabilities to prepare these  consolidated
financial statements in conformity with generally accepted accounting 
principles.  Actual results could differ from those estimates.
     Recent  accounting pronouncements not yet adopted - In February 1997,
SFAS No.  128,  "Earnings  per  Share",  was issued.   SFAS  No.  128  specifies
the computation,  presentation and disclosure requirements for earnings  per
share.  This  statement  is effective for both interim and annual periods  
ending after December  15,  1997,  with  restatement of all  prior  periods  
shown.  Earlier application  is  not  permitted.  The effective date of SFAS 
No.  128  for the Company  is for the quarter and six-month period ending 
January 30,  1998.  The Company  estimates  that  SFAS  No. 128 will have  no  
material  effect  on the Company's  consolidated financial statements upon 
adoption.  In June 1997, SFAS No.  130,  "Reporting Comprehensive Income", was 
issued.  SFAS No. 130 specifies how  to  report  and  display comprehensive 
income  and  its  components.  This statement is effective for fiscal years 
beginning after December 15, 1997, with restatement of all prior periods shown.
The Company will adopt SFAS No. 130  in the  first  quarter  of  fiscal 1999.  
The Company is currently  evaluating the effect  that  SFAS  No.  130 will have 
on the Company's  consolidated financial statements  upon  adoption.   In June 
1997, SFAS  No.  131,  "Disclosures about Segments  of an Enterprise and Related
Information", was issued.  SFAS  No. 131 requires the disclosure of certain 
information about operating segments  in the financial  statements.  This 
statement is effective for fiscal  years beginning after  December  15, 1997, 
with restatement of all prior periods  shown  if not impracticable  to  do  so.
The Company will adopt SFAS No.  131  in  the first quarter  of  fiscal 1999.  
The Company is currently evaluating the  effect that SFAS  No. 131 will have on 
the Company's consolidated financial statements upon adoption.  The Company does
not expect the adoption of SFAS Nos. 128, 130 or 131 to have a material effect 
on the Company's consolidated financial statements.

2.  INVENTORIES
     Inventories were composed of the following at:
<TABLE>
<CAPTION>

                                          August 1,           August 2,
                                            1997                1996
_______________________________________________________________________
<S>                                        <C>                 <C>
Retail                                     $58,199             $50,474
Restaurant                                  11,214               9,472
Supplies                                     3,856               1,524
_______________________________________________________________________
Total                                      $73,269             $61,470
=======================================================================
</TABLE>
<PAGE>

3.  SHORT-TERM AND LONG-TERM INVESTMENTS

The amortized costs and fair values of held-to-maturity securities at
August 1, 1997 were as follows:
<TABLE>
<CAPTION>

                            Amortized  Unrealized  Unrealized    Fair
                              Cost        Gains      Losses      Value
______________________________________________________________________
<S>                          <C>         <C>          <C>       <C>
U.S. Treasury and U.S.
 Government Agencies         $  501        --         --        $  501
Corporate debt
 securities                     603      $  5         --           608
Other securities                562       128         --           690
______________________________________________________________________
Short-term investments       $1,666      $133         --        $1,799
======================================================================
</TABLE>

The amortized costs and fair values of held-to-maturity securities at
August  2, 1996 were as follows:
<TABLE>
<CAPTION>

                            Amortized  Unrealized  Unrealized    Fair
                              Cost        Gains      Losses      Value
______________________________________________________________________
<S>                          <C>           <C>       <C>        <C>
U.S. Treasury and U.S.
 Government Agencies         $2,544        --        $ 9        $2,535
Corporate debt
 securities                     499        --          3           496
Other securities              2,257        $1         --         2,258
______________________________________________________________________
Short-term and long-term
 investments                 $5,300        $1        $12        $5,289
======================================================================
</TABLE>

The  following table shows the maturity distribution of the Company's
investment securities at August 1, 1997:
<TABLE>
<CAPTION>

                                               Amortized           Fair
Maturity (Fiscal Year)                            Cost            Value
_______________________________________________________________________
<S>                                             <C>              <C>
1998                                            $1,666           $1,799
_______________________________________________________________________
Short-term investments                          $1,666           $1,799
=======================================================================
</TABLE>

4.  DEBT
     Long-term debt consisted of the following at:
<TABLE>
<CAPTION>

                                                 August 1,      August 2,
                                                    1997           1996
___________________________________________________________________________
<S>                                               <C>            <C>
6.36% Term Loan payable on or before
 December 1, 2001                                 $50,000             --
9.53% Senior Notes Payable in annual
 installments of varying amounts from
 January 15, 1994 to January 15, 2002,
 with a final installment of $2,000
 due January 15, 2003                              15,500        $19,500
Less current maturities                             3,500          4,000
___________________________________________________________________________
Long-term debt                                    $62,000        $15,500
===========================================================================
</TABLE>

      The  financial covenants related to the 6.36% Term Loan require  that
the Company  maintain an interest coverage ratio of 3.0 to 1.0 and a lease
adjusted funded debt to total capitalization ratio not to exceed 0.4 to 1.0.
      The  note agreements relating to the 9.53% Senior Notes placed in
January, 1991  in  the  original  amount  of  $30,000 include,  among  other
provisions, requirements  that the Company maintain minimum tangible net worth
of $70,000.  The agreements also contain certain other restrictions related to 
the payment of cash  dividends  and  the  purchase of treasury stock.   Retained
earnings not restricted under the provisions of the agreements were 
approximately $382,175 at August 1, 1997.
<PAGE>

      Based  on discounted cash flows of future payment streams, assuming
rates equivalent  to the Company's incremental borrowing rate on similar
liabilities, the  fair  value of the 6.36% Term Loan and the 9.53% Senior Notes
approximates carrying value as of August 1, 1997.
     The Company has a revolving credit facility with a maximum principal
amount of $75,000.  No amounts were outstanding under the  revolving credit
facility at August 1, 1997.
      At  August 1, 1997 and August 2, 1996, the Company was in compliance
with all covenants.
     The aggregate maturities of long-term debt subsequent to August 1,
1997 are as follows:
<TABLE>
<CAPTION>

Fiscal year
___________________________________________________________________________
<S>                                                                 <C>
1998                                                                $ 3,500
1999                                                                  2,500
2000                                                                  2,500
2001                                                                  3,000
2002                                                                 52,000
Later years                                                           2,000
___________________________________________________________________________
Total                                                               $65,500
===========================================================================
</TABLE>

5.  COMMON STOCK
       The Board of Directors granted certain executive officers hired in
fiscal 1996  a  total  of  37,000 restricted shares which vest over  five  
years.  The Company's compensation expense for these restricted shares was $150
and $144  in fiscal  1997  and 1996, respectively.  The weighted average fair  
value  of the restricted shares granted during fiscal 1996 was $20.27 per share.

6.  STOCK OPTION PLANS

      During fiscal 1997, the Company amended and restated the 1987 Option
Plan and  retitled it as the Amended and Restated Stock Option Plan ("the New
Plan"), to  allow  flexibility to extend the duration of certain options under
the New Plan,  to  modify the option terms of certain retired, terminated,
disabled  or deceased optionees, to make only non-qualified options available 
for grant under the   New  Plan  and  to  allow  for  the  possibility  of  
transferability and assignability  of  options  under  the New Plan.   With  the
exception  of the aforementioned items, the New Plan is substantially the same 
as the 1987 Plan.
      The New Plan, like the 1987 Plan and the 1982 Plan, is administered
by the Stock  Option  Committee  (the  "Committee").   Members  of  the  
Committee are appointed  by  the Board and consist of members of the Board.  The
Committee  is authorized  to determine, at time periods within its discretion 
and subject  to the  direction of the Board, which key employees shall be 
granted  options, the number  of  shares covered by the options granted to each,
and within applicable limits, the terms and provisions relating to the exercise
of such options.
      The  Committee  is currently authorized to grant options  to purchase  an
aggregate of 14,025,702 shares of the Company's common stock under all employee
stock  option plans.  The option price per share under the New Plan must be  at
least  100%  of the fair market value of a share of the Company's  common stock
based  on  the  closing price on the day next preceding the day  the option  is
granted.  Options are generally exercisable each year on a cumulative basis
at a rate  of  33% of the total number of shares covered by the option beginning
one year  from the date of grant, expire ten years from the date of grant and 
are non-transferrable.   At  August  1, 1997, there were 3,382,389  shares  of
unissued common stock reserved for issuance under the New Plan.
<PAGE>

      In  fiscal 1989, the Board of Directors adopted the 1989 Non-employee
Plan ("Directors  Plan") for non-employee directors.  The stock options were
granted with  an  exercise price equal to the fair market value of the Company's
common stock  as  of the date of grant and expire one year from the retirement
of the director  from  the board.  An aggregate of 1,518,750 shares  of  the
Company's common  stock  is authorized to be issued under this plan.  Due to  
the overall plan limit, no shares have been granted under this plan since fiscal
1994.

     Stock Options:  A summary of the status of the Company's stock option
plans for  fiscal  1997,  1996 and 1995, and changes during those years  is
presented below:
<TABLE>
<CAPTION>

(Shares in thousands)        1997               1996                1995
___________________________________________________________________________
                              Weighted-          Weighted-       Weighted-
                               Average            Average         Average
Fixed Options          Shares   Price     Shares   Price   Shares  Price
____________________________________________________________________________
<S>                    <C>     <C>        <C>     <C>       <C>     <C>
Outstanding,
 beginning of year     5,342   $21.34     4,831   $20.63    4,041   $19.48
Granted                1,297    22.80     1,449    19.35    1,133    25.21
Exercised               (464)   16.14      (602)    8.49      (91)   11.43
Forfeited or canceled   (528)   23.51      (336)   25.61     (252)   25.98
                       _____              _____             _____
Outstanding,
 end of year           5,647    21.90     5,342    21.34    4,831    20.63
                       =====              =====             =====
Options exercisable
 at year-end           3,751    22.13     3,749    21.81    4,067    19.75
Weighted-average fair
 value per share of
 options granted
 during the year               $13.52             $11.18
</TABLE>

      The  following  table  summarizes information about  fixed  stock
options outstanding at August 1, 1997:
<TABLE>
<CAPTION>

(Shares in thousands)    Options Outstanding        Options Exercisable
_________________________________________________________________________
                      Weighted-Average   Weighted-             Weighted-
  Range of    Number     Remaining       Average    Number      Average 
  Exercise  Outstanding Contractual     Exercise  Exercisable  Exercise
   Prices   at 8/1/97      Life           Price    at 8/1/97    Price
_________________________________________________________________________
<S>           <C>          <C>            <C>       <C>        <C>
$ 3.33-10.00    374        2.54           $ 6.20      374      $ 6.20
 10.01-20.00  1,488        6.92            18.19      848       17.53
 20.01-29.50  3,785        7.18            24.91    2,529       26.03
              _____                                 _____
$ 3.33-29.50  5,647        6.81            21.90    3,751       22.13
              =====                                 =====
</TABLE>

Had the fair value of options granted under these plans beginning in fiscal
1996 been  recognized  as  compensation expense on a  straight-line  basis  over
the vesting  period of the grant, the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                             1997      1996
_____________________________________________________________
<S>                                        <C>       <C>
Net income:
    As reported                            $86,598   $63,515
    Pro forma                               76,767    61,001
Net earnings per share:
    As reported                               1.41      1.04
    Pro forma                                 1.25      1.00
</TABLE>
<PAGE>

      The pro forma effect on net income for 1997 and 1996 is not
representative of  the pro forma effect on net income in future years because it
does not take into  consideration pro forma compensation expense related to 
grants made prior to 1995.
     The fair value of each option grant is estimated on the date of grant
using the  Black-Scholes  option-pricing  model with  the  following  weighted-
average assumptions used for grants in fiscal 1997 and 1996:  dividend yield of
 .1% for all years;  expected  volatility of 35 and 36 percent, respectively;  
risk-free interest  rate  ranges  of  6.3% to 6.7% and 5.3%  to  6.3%,  
respectively; and expected lives of six years.
     The Company recognizes a tax deduction upon exercise of non-qualified
stock options  in an amount equal to the difference between the option price  
and the fair  market  value  of the common stock.  These tax benefits  are
credited  to Additional Paid-In Capital.

7.  INCOME TAXES
      Deferred income taxes reflect the net tax effects of temporary
differences between  the carrying amounts of assets and liabilities for 
financial reporting purposes and the amounts used for income tax purposes.
       Significant  components  of  the Company's net  deferred  tax
liability consisted of the following at:

<TABLE>
<CAPTION>
                                                     August 1,    August 2,
                                                       1997         1996
___________________________________________________________________________
<S>                                                   <C>          <C>
Deferred tax assets:
    Financial accruals without
     economic performance                             $ 6,328      $ 6,304
    Other                                               2,727        2,364
___________________________________________________________________________
    Deferred tax assets                                 9,055        8,668
___________________________________________________________________________


Deferred tax liabilities:
    Excess tax depreciation over book                  17,068       10,756
    Other                                              10,563          983
___________________________________________________________________________

    Deferred tax liabilities                           27,631       11,739
___________________________________________________________________________

Net deferred tax liability                            $18,576      $ 3,071
===========================================================================

</TABLE>

      The  Company provided no valuation allowance against deferred tax
assets recorded as of August 1, 1997 and August 2, 1996, as the "more-likely-
than-not" valuation  method  determined all deferred assets to  be  fully  
realizable in future taxable periods.
       The  components of the provision for income taxes for each of the
three fiscal years were as follows:
<TABLE>
<CAPTION>

                                          1997          1996         1995
___________________________________________________________________________
<S>                                      <C>           <C>          <C>
Current:
   Federal                               $30,398       $34,965      $31,284
   State                                   4,956         5,878        7,588
Deferred                                  15,505        (1,978)         418
___________________________________________________________________________
Total income tax provision               $50,859       $38,865      $39,290
===========================================================================
</TABLE>
<PAGE>

     A  reconciliation of the provision for income taxes as  reported  and
the amount computed by multiplying the income before the provision for income
taxes by the U.S. federal statutory rate of 35% was as follows:
<TABLE>
<CAPTION>

                                          1997          1996         1995
___________________________________________________________________________
<S>                                      <C>           <C>          <C>
Provision computed at federal
 statutory income tax rate               $48,110       $35,833      $36,867
State and local income taxes,
 net of federal benefit                    3,753         4,126        4,199
Jobs credit                                 (195)          (33)        (787)
Employer tax credits for FICA taxes
 paid on tip income                       (1,403)       (1,328)      (1,194)
Other-net                                    594           267          205
___________________________________________________________________________
Total income tax provision               $50,859       $38,865      $39,290
===========================================================================
</TABLE>

 8.  SEGMENT INFORMATION
      The Company operates stores which provide a combination of restaurant
and retail  services  to  the  motoring public.  The Company  considers this
combination  of services  to be one industry segment.

9.   COMMITMENTS AND CONTINGENCIES
      The  Company has been involved in various legal matters during fiscal
1997 which  are being defended and handled in the ordinary course of business.
While the  ultimate  results  of  such  matters cannot  be  determined  or
predicted, management does not believe that they will have a material adverse 
effect on the Company's results of operations or financial position.
      The  Company  operates seventeen stores from leased  facilities  and
also leases  certain  land  and  advertising  billboards.   These  leases  have
been classified as either capital or operating leases in accordance with the
criteria contained  in  SFAS  No. 13, "Accounting for Leases".  The  interest  
rates for capital leases vary from 10% to 17%.  Amortization of capital leases 
is included with depreciation expense.  A majority of the Company's lease 
agreements provide for  renewal  options  and  some of these options  contain  
escalation clauses.  Certain  store  leases provide for contingent lease 
payments  based  upon sales volume in excess of specified minimum levels.
     The following is a schedule by years of future minimum lease payments
under capital leases together with the present value of the minimum lease
payments  as of August 1, 1997:
<TABLE>
<CAPTION>

Fiscal year
_________________________________________________________________________
<S>                                                               <C>
1998                                                              $  368
1999                                                                 371
2000                                                                 371
2001                                                                 321
2002                                                                 214
Later years                                                          693
_________________________________________________________________________
Total minimum lease payments                                       2,338
Less amount representing interest                                    870
_________________________________________________________________________
Present value of minimum lease payments                            1,468
Less current portion                                                 166
_________________________________________________________________________
Long-term portion of capital lease obligations                    $1,302
=========================================================================
</TABLE>
<PAGE>

      The following is a schedule by years of the future minimum rental
payments required under noncancelable operating leases as of August 1, 1997:
<TABLE>
<CAPTION>

Fiscal year
_________________________________________________________________________
<S>                                                              <C>
1998                                                             $12,890
1999                                                               7,489
2000                                                               2,988
2001                                                                 971
2002                                                               1,307
Later years                                                        5,184
_________________________________________________________________________
Total                                                            $30,829
=========================================================================
</TABLE>

Rent expense under operating leases for each of the three fiscal years was:
<TABLE>
<CAPTION>

                                      Minimum       Contingent     Total
_________________________________________________________________________
<S>                                   <C>              <C>        <C>
1997                                  $14,163          $787       $14,950
1996                                   12,134           764        12,898
1995                                    9,717           685        10,402
</TABLE>

10.  EMPLOYEE SAVINGS PLAN
      The  Company  has an employee savings plan, which provides for
retirement benefits  for  eligible  employees.  The plan is  funded  by  
elective employee contributions  up to 16% of their compensation and the Company
matches 25%  of employee  contributions  for  each  participant  up  to  6%  of
the employee's compensation.   The Company contributed $1,188, $864 and $714 for
fiscal 1997, 1996 and 1995, respectively.

11. QUARTERLY FINANCIAL DATA (UNAUDITED)
      Quarterly financial data for fiscal 1997 and 1996 are summarized  as 
follows:
<TABLE>
<CAPTION>


                              1st          2nd          3rd          4th
                            Quarter      Quarter      Quarter      Quarter
___________________________________________________________________________
<S>                        <C>          <C>          <C>          <C>
1997
Net sales                  $258,902     $267,854     $275,062     $322,033
Gross profit on
 sales                      169,587      170,282      182,615      213,664
Income before income
 taxes                       30,403       25,459       32,672       48,923
Net income                   18,850       15,988       20,518       31,242
Net earnings per share          .31          .26          .33          .51
___________________________________________________________________________
1996
Net sales                  $221,011     $219,484     $220,579     $282,213
Gross profit on
 sales                      147,404      138,855      146,566      185,557
Income before income
 taxes*                      27,086       20,217       26,212       28,865
Net income*                  16,794       12,535       16,251       17,935
Net earnings per share*         .28          .21          .27          .29
</TABLE>

*Fiscal  1996 included $14,199 in pre-tax costs ($8,806 after tax  or  $.15
per share)  related  to  a one-time charge for store closings and other  write-
offs.  (See Note 1).
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Stockholders of
Cracker Barrel Old Country Store, Inc.:

We have audited the accompanying consolidated balance sheet of Cracker Barrel
Old Country Store, Inc. and subsidiaries (the "Company") as of August 1, 1997
and August 2, 1996, and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the three fiscal years in
the period ended August 1, 1997.  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the companies at 
August 1, 1997 and August 2, 1996, and the results of their operations and their
cash flows for each of the three fiscal years in the period ended August 1, 1997
in conformity with generally accepted accounting principles.


Deloitte & Touche LLP
Nashville, Tennessee
September 10, 1997
<PAGE>