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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                          ---------------------------
                                   FORM 10-K
                          ---------------------------
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER
         29, 1996
                                       OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM
                      TO
         ------------    -----------

                          Commission File No. 0-27366

                             RAINFOREST CAFE, INC.
                             ---------------------
             (Exact name of registrant as specified in its charter)

            MINNESOTA                                            41-1779527
            ---------                                            ----------
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

         720 SOUTH FIFTH STREET
           HOPKINS, MINNESOTA                                       55343
           ------------------                                       -----
(Address of principal executive offices)                          (Zip Code)

                                 (612) 945-5400
                                 --------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:  COMMON STOCK, NO
PAR VALUE

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 for 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

As of March 24, 1997, 17,265,889 shares of the Registrant's Common Stock were
outstanding.  The aggregate market value of the Common Stock held by
non-affiliates of the Registrant on such date, based upon the last sale price
of the Common Stock as reported on the Nasdaq National Market on March 24,
1997, was $316,266,374.  For purposes of this computation, affiliates of the
Registrant are deemed only to be the Registrant's executive officers and
directors.

                      DOCUMENTS INCORPORATED BY REFERENCE

PART II and IV - Portions of the Registrant's Annual Report to Shareholders for
the year ended December 29, 1996, are incorporated by reference into Items 5
through 8, inclusive.

PART III - Portions of the Registrant's definitive proxy statement in
connection with the annual meeting of the shareholders to be held on May 22,
1997, are incorporated by reference into Items 10 through 13, inclusive.

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ITEM 1.  BUSINESS

         The Company owns and operates six large, high volume, themed
restaurant/retail facilities under the name "Rainforest Cafe -- A Wild Place to
Shop and Eat." The Company's Units are designed to provide a visually and
audibly stimulating and entertaining rainforest environment that appeals to a
broad range of customers of all ages. Each Rainforest Cafe consists of a
Restaurant and a Retail Village. The Restaurant provides an attractive value to
customers by offering a full menu of high quality food and beverage items,
generous portions and excellent service in a unique and exciting environment.
The Retail Village features apparel, toys and gifts with the Rainforest Cafe
logo and eight proprietary Animal Characters, and other items reflecting the
rainforest theme.

THE RAINFOREST CONCEPT AND STRATEGY

         The Company seeks to differentiate itself by providing high quality,
freshly prepared food and proprietary retail merchandise in a themed
environment. The key factors of the Company's market positioning and operating
strategy are as follows:

         Distinctive Concept. The Company's rainforest theme is promoted by a
simulated unique rainforest environment throughout the Unit. Each Rainforest
Cafe features a visually and audibly exciting environment that includes a
variety of live tropical birds, exotic saltwater fish in large custom-designed
aquariums, animated robotic animals and sculpted banyan trees that create a
canopy of foliage. The dynamic rainforest atmosphere is further enhanced by
simulated thunder and lightning storms, tropical rain showers, waterfalls,
mists that emanate from extensive rock formations, and specially-developed
aromatic scents.  This entertaining rainforest environment makes each
Rainforest Cafe "A Wild Place to Shop and Eat."

         Broad-Based Appeal. Management believes that the Company's Rainforest
Cafe concept has broader appeal than other theme-based restaurant concepts
because it attracts customers of all ages. The Company's distinctive concept,
combined with high quality food and retail merchandise, make the Rainforest
Cafe appealing to children, teenagers, adults, and senior citizens.

         High Profile Unit Locations. In order to take maximum advantage of the
Company's broad-based appeal, the Company believes that the placement of its
Units in high profile, heavy-traffic locations is critical to its success. By
being in such locations, the Company believes its Units appeal to both
destination customers as well as passers-by who are drawn to its visually and
audibly exciting environment. The Company believes that its format, as
developed at its existing Units, can be utilized in multiple high traffic
locations with favorable demographics such as shopping malls, entertainment
centers and Disney theme parks.

         High Quality Food. The Restaurant provides an attractive value to
customers by offering a moderately-priced, full menu of high quality food and
beverage items served in generous portions in a distinctive environment. The
Restaurant features a wide variety of appetizers, pastas, sandwiches, salads,
pizzas, burgers and full-platter entrees, presented in a visually appealing
manner. Menu items are prepared on-site using fresh, high quality ingredients.
Lunch and dinner entrees range in price from $7.95 to $15.95 and the average
guest check was approximately $13.00 at the end of the fiscal





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year ended December 29, 1996.  Management believes that its high quality food
contributes to a significant level of repeat business.

         Commitment to Retail and Building Brand Awareness. In order to enter
the Restaurant, all customers must pass through the Unit's Retail Village. The
Retail Village offers over 3,000 SKUs which includes apparel, toys and gifts
with the Rainforest Cafe logo and other items suggesting the rainforest theme.
The Company has also developed eight proprietary Animal Characters, each with a
distinct personality, as an additional method of merchandising its retail
products. The Company intends to utilize each Animal Character for clothing,
toys and gifts. By offering items featuring the Rainforest Cafe logo and Animal
Characters, the Company believes it is building "brand equity" in the
Rainforest Cafe name that will allow it to attract more customers and to
enhance its competitive retail position.  The Company plans to introduce future
products such as story books and games which are intended to further enhance
the value of the Company's proprietary animal characters.  The Retail Village
is also intended to be educational, with displays of live exotic tropical birds
and fish and an animated talking tree that gives environmental messages.

         Focus on Customer Satisfaction. The Company is committed to staffing
each Unit with an experienced management team and providing its customers with
prompt, friendly and efficient service. A customer's experience is also
enhanced by the attitude and attention of Unit personnel, including "tour
guides" (greeters), "safari guides" (food servers), "navigators" (bartenders),
"pathfinders" (retail staff) and tropical bird curators. The Company recognizes
that, in order to maintain a high level of repeat customers and to attract new
business through word of mouth, it must provide superior customer service.

         Commitment to Attracting and Retaining Quality Employees. By providing
extensive training and attractive compensation, the Company fosters a strong
corporate culture and encourages a sense of personal commitment from its
employees. The Company believes its compensation structure and positive
corporate culture enable it to attract and maintain quality employees.  The
Company believes that Unit management is important for the profitability of
each Rainforest Cafe and accordingly, places particular emphasis on recruiting
Unit-level Directors of Operations that have significant restaurant and
management experience. The Company anticipates that, prior to opening a Unit, a
Director of Operations will have been trained at one or more Rainforest Cafes
for four to six months.

UNIT ECONOMICS

         To date, with the exception of the Company's Walt Disney World
Marketplace Unit, Units have ranged from between 15,000 to 23,000 square feet
and cost between $4.0 and $6.0 million, net of landlord contributions of
approximately $1.0 million, to develop.  Such existing Units have had
pre-opening costs ranging from $550,000 to $650,000.  The 30,000 square foot
Walt Disney World Marketplace Unit was developed at cost of approximately $11.2
million, net of landlord contributions.  In addition, the Company incurred
approximately $1.2 million in pre-opening costs and purchased approximately
$600,000 in inventory in connection with such Unit.

         The Company expects that most of its future Units will be between
16,000 and 23,000 square feet and cost between $4.0 and $6.0 million, net of
anticipated landlord contributions. Anticipated landlord contributions would
likely consist of allowances for leasehold improvements and/or rental





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abatement or similar concessions from the landlord.  The Company expects that
pre-opening and inventory costs at its future locations will be approximately
$650,000 and $400,000, respectively.  The Company also expects to open selected
Units, such as its planned Units in downtown Chicago, at the MGM Grand Hotel
and Casino and Disney's Animal Kingdom, which may cost significantly more.

UNIT LOCATIONS

         The following table sets forth certain information about the Company's
existing and planned Units and Units planned to be developed by licensees of
the Company:

<TABLE>
<CAPTION>
                                                                                           DATE OPENED OR
                                                                         RESTAURANT           PLANNED
           LOCATION                                   SQUARE FOOTAGE        SEATS           TO BE OPENED
           --------                                   --------------        -----           ------------
<S>                                                       <C>                <C>        <C>
Mall of America . . . . . . . . . . . . . . . . .         14,900             295            October 1994
  Bloomington, MN
                                                          23,000             425            October 1995
Woodfield Mall  . . . . . . . . . . . . . . . . .
  Schaumburg, IL
                                                          20,000             300             June 1996
Gurnee Mills  . . . . . . . . . . . . . . . . . .
  Gurnee, IL
                                                          30,000             550             July 1996
Walt Disney World Marketplace . . . . . . . . . .
  Orlando, FL
                                                          19,500             350            October 1996
Tysons Corner Center I  . . . . . . . . . . . . .
  McLean, VA
                                                          20,000             350           November 1996
Sawgrass Mills  . . . . . . . . . . . . . . . . .
  Ft. Lauderdale, FL

London(2) . . . . . . . . . . . . . . . . . . . . .       18,000             300        Second Quarter 1997
  London, England


Cancun (1)  . . . . . . . . . . . . . . . . . . . .       16,000             220         Third Quarter 1997
  Cancun, Mexico

South Coast Plaza . .  . . . . . . . . .  . . . . .       18,000             300         Third Quarter 1997
   Costa Mesa, CA

Palisades Center  . . . . . . . . . . . . . . . .         22,500             375         Third Quarter 1997
  West Nyack, NY

Chicago (Downtown)  . . . . . . . . . . . . . . .         21,000             375         Third Quarter 1997
  Chicago, IL


The Source  . . . . . . . . . . . . . . . . . . .         22,500             375         Third Quarter 1997
  Westbury, Long Island, NY

MGM Grand Hotel and Casino  . . . . . . . . . . .         23,000             350        Fourth Quarter 1997
  Las Vegas, NV

Grapevine Mills . . . . . . . . . . . . . . . . .         21,000             300        Fourth Quarter 1997
  Dallas, TX

Phoenix Mills . . . . . . . . . . . . . . . . . .         20,000             300        Fourth Quarter 1997
  Phoenix, AZ

Aventura Mall . . . . . . . . . . . . . . . . . . .       22,500             350        Fourth Quarter 1997
  Miami, FL
</TABLE>





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<TABLE>
<S>                                                       <C>                <C>        <C>
Disney's Animal Kingdom . . . . . . . . . . . . .         34,000             550        Second Quarter 1998
  Orlando, FL

Cherry Creek Mall . . . . . . . . . . . . . . . .         22,000             350         Third Quarter 1998
  Denver, CO
</TABLE>

-------------------------
(1)   Developed pursuant to License and Area Development Agreement with
Empresas de Comunicacion y Entretenimiento.  See "International License and
Joint Venture Agreements" below.

(2)   Developed pursuant to License and Area Development Agreement with
Glendola Leisure Ltd.  See "International License and Joint Venture
Agreements" below.

         The Company has executed leases for all planned Company-owned Units
indicated above.

INTERNATIONAL LICENSE AND JOINT VENTURE AGREEMENTS

         The Company has entered into three separate license arrangements
relating to the development of Rainforest Cafes in the United Kingdom and
Ireland, Mexico and Canada.

         United Kingdom and Ireland.  In August 1996, the Company entered into
a License and Area Development Agreement with Glendola Leisure Ltd.
("Glendola"), an affiliate of the Foundation Group, a London-based hotel and
restaurant developer and operator, pursuant to which Glendola will develop five
Units over a ten year period in the United Kingdom and Ireland.  Pursuant to
this agreement, the Company will have the option to purchase up to 20% of the
equity interest in any Unit developed by Glendola, will receive per Unit
development fees and will receive royalties based upon a percentage of gross
sales.  Pursuant to this agreement, the Company has agreed to finance a 20%
interest in a Unit which will be opened at the Trucadero in London during the
second quarter of 1997.

         Mexico.  In November 1996, the Company entered into a License and Area
Development Agreement with Empresas de Comunicacion y Entretenimiento ("ECE"),
a Mexican-based restaurant owner and operator, pursuant to which ECE will
develop seven Units over a ten year period in Mexico.  Pursuant to this
agreement, the Company received a non-refundable development fee, and will
receive per Unit development fees and license fees based upon a percentage of
gross revenues.  Pursuant to this agreement, ECE is developing a Unit which
will be opened in Cancun during the second quarter of 1997.

         Canada.   In January 1997, the Company entered into a Joint Venture
and License Agreement with Elephant & Castle Group, Inc.("Elephant & Castle"),
a Vancouver-based operator of restaurants and pubs.  Pursuant to the joint
venture agreement, Elephant & Castle and the Company will each own 50% of a
joint venture that will open 5 Units over a 7 year period.   Pursuant to this
agreement, the Company will receive a non- refundable development fee and a
five year option to purchase up to 600,000 shares of Elephant & Castle Common
Stock at $8.00 per share.  The first Canadian Unit is scheduled to open during
the first quarter of 1998.  Martin J. O'Dowd, President and Chief Operating
Officer of the Company, is a director of Elephant & Castle.

DOMESTIC EXPANSION PLANS AND SITE SELECTION

         The Company's domestic site selection strategy is to locate its Units
in high profile, heavy traffic locations. A variety of factors are analyzed in
the site selection process, including local market





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demographics, site visibility, business seasonality and projected Unit
economics. By operating in high profile, heavy traffic locations, the Company
believes its Units appeal to both destination customers as well as passers-by
who are drawn to its visually and audibly exciting environment. The Company
believes that its format, as developed at its existing Units, can be utilized
in a number of high traffic venues with favorable demographics such as shopping
malls, entertainment centers and Disney theme parks.

         While most of the future Rainforest Cafes will be located in shopping
malls or entertainment centers, the Walt Disney World Marketplace Unit is a
stand-alone facility located near Orlando, Florida. Customers are able to enter
the Walt Disney World Marketplace Unit without having to enter Disney's
adjacent theme parks. The Rainforest Cafe at Disney's Animal Kingdom, will also
be a stand-alone facility and will be at the entrance to Disney's Animal
Kingdom so patrons will pass the Rainforest Cafe upon entering and leaving the
park. Disney's Animal Kingdom, scheduled to open in 1998, will be approximately
five times larger than Disney's Magic Kingdom, and will feature live and
simulated animal attractions. The 34,000 square foot, 550 seat Unit will be the
only sit-down restaurant at Disney's Animal Kingdom. The Company is continuing
discussions with Disney regarding opening Rainforest Cafes at other locations;
however, no assurance can be given that other Disney sites will be developed.
The Company's Disney leases provide, among other things, that the Company will
not own, operate, develop or manage a restaurant: (i) within a 75 mile radius
of Walt Disney World Marketplace or Disney's Animal Kingdom or (ii) in a theme
park located anywhere in the world that is not affiliated with Disney or its
affiliates. The Company also agreed that it would not open a Unit within 50
miles of current or future theme parks owned by Disney without giving Disney
the right of first refusal with regard to such proposed Unit. The Company
believes that it is currently in compliance with its contractual obligations to
Disney.

RAINFOREST FEATURES

         To create a simulated rainforest environment, each Rainforest Cafe
includes the following:

         Live Exotic Birds -- Rainforest Cafes display live exotic birds such
as macaws and cockatoos in the Retail Village. The Company has curators
specifically devoted to caring for the birds and fish and for answering guest
questions. When the exotic birds are not on display they are kept and
maintained in a specially designed "habitat room."

         Aquariums -- Rainforest Cafes have large aquarium systems, including
walk-through aquariums that contain many varieties of saltwater fish from
locales such as Africa and South America. Aquariums range in size from 750 to
10,000 gallons and are placed throughout each Unit to maximize visibility to
customers.

         Tropical Rainstorms and Waterfalls -- Simulated lightning and
thunderstorms "sweep" across each Rainforest Cafe every 20 to 30 minutes.
Rainforest Cafes also utilize a mist system emanating from rock formations
throughout the Unit and rain showers around the perimeter of the Restaurant and
Mushroom Bar area. Other Rainforest Cafe features include cascading waterfalls,
fountains and a ventilation system emitting a light floral aroma.

         Trees, Foliage and Animated Animals -- The ceiling level of the
Restaurant and Retail Village of a Rainforest Cafe are intertwined with a
"forest" of sculpted life-like banyan trees that





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creates a canopy of foliage over diners and shoppers. Each banyan tree is
hand-sculpted for a very realistic presentation of its overgrown rooting
system. The Restaurant and Retail Village contains several rock formations,
abundant foliage and jungle-like scenes. Interspersed throughout the facility
are robotic animals such as life-size crocodiles, elephants, gorillas,
dolphins, snakes, butterflies and frogs.

         Educational Commitment -- The Company makes each Rainforest Cafe an
environmentally educational experience. The Rainforest Cafe's talking banyan
tree "Tracy" gives environmental messages to help educate and entertain
children. Each Rainforest Cafe has an on-site curator who educates customers,
including school groups, on the tropical birds and the rainforest. The curator
also makes presentations at schools and community organizations.

RESTAURANT

         For the fiscal year ended December 29, 1996, approximately 76% of the
Company's total revenues were derived from Restaurant sales. The Company
believes that Rainforest Cafes enjoy a high level of repeat business and
customer diversity because of the Company's commitment to providing high
quality food and customer service in an exciting and entertaining environment.
Features of the Restaurant are as follows:

         Menu -- The Company considers its extensive menu selection to be an
important factor in the appeal of its Restaurant and, accordingly, continuous
attention is devoted to the development of new menu items. The Restaurant
features casual cuisine that caters to broad customer preferences. The menu
presently offers several types of appetizers such as "Jungle Chowder,"
"Rainforest Pita Quesadillas" and "Caribbean Chicken Tenders." The menu also
offers different types of pastas, sandwiches, salads, pizzas, burgers and
full-platter entrees, such as "Rasta Pasta" (bow tie pasta tossed in a garlic
cream sauce with grilled chicken, broccoli and pesto), "The Old Man and the
Sea" (swordfish sauteed in cajun spices topped with corn and shrimp salsa), and
"Rumble in the Jungle" (grilled pita bread stuffed with roasted turkey and
Caesar salad).  A children's menu and complete dessert selection are also
available. Lunch and dinner entrees range in price from $7.95 to $15.95. The
Restaurant's full-service bar, the "Mushroom Bar," features a number of
customized alcoholic and non-alcoholic drinks, such as the "Don't Panic It's
Organic" (carrot juice), the "Margarilla" (a margarita blended with orange
sherbet) and the "Spotted Chocolate Monkey" (fresh banana- chocolate syrup,
vanilla ice cream and banana liqueur). Alcoholic beverages are primarily served
to complement meals and account for approximately 10% of total restaurant
sales. The average check per person for the fiscal year ended December 29, 1996
was approximately $13.00.  Portions are generous and significant attention is
placed on presentation and the quality of preparation. Because the Unit's menu
is not tied to any particular type of food or beverage, the Company can
introduce and eliminate items based on local or current consumer trends without
altering its rainforest theme. The Company endeavors to hire experienced chefs
and invests substantial time training kitchen employees to maintain consistent
food preparation.

         Decor -- Restaurant decor is divided into distinctive dining
environments developed around the rainforest and other nature themes.  Current
themes include the rainforest atlas and waterfall, gorillas, elephants,
tropical fish and star gazing. Table decor complements the rainforest theme
through the use of brilliantly-colored tablecloths and upholstery with patterns
of animals, wildlife and plant life. In an effort to enhance the dining
experience, attempts are made to maximize restaurant





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seating near aquariums, waterfalls, sculpted rock formations or one of the
Restaurant's several banyan trees. An integral part of the Restaurant is the
"Mushroom Bar," the "stem" of which consists of the bar with a "cap" extending
over the customers. Seating at the bar is provided by customized stools
designed to resemble the legs of wild animals.

         Staffing -- An important part of the Company's mission is to ensure
that during each visit to a Rainforest Cafe, customers receive excellent
service. To extend the adventure theme, Restaurant customers are greeted at the
entrance by "tour guides", food servers are known as "safari guides" and the
bartenders are known as "navigators." The "tour guides" at the front desk are
trained to communicate, via headsets, with the floor management staff  who
greet Restaurant customers and seat them at their tables. The Company believes
that a customer's experience is enhanced by the attitude and attention of its
personnel. Customer service is based on a team approach so that each customer
is continually attended to, and employees go through extensive ongoing training
to ensure consistent service.

RETAIL VILLAGE

         For the fiscal year ended December 29, 1996, approximately 22% of the
Company's total revenues were derived from retail sales. In order to enter the
Restaurant, all customers must pass through the Unit's Retail Village. The
Retail Village offers over 3,000 SKUs and includes apparel and gifts with the
Rainforest Cafe logo and other items with a rainforest theme such as toys and
educational games. The Company has also developed eight proprietary Animal
Characters, each with a distinct personality including Ozzie, a rascally
orangutang; Rio, a colorful, tropical macaw; Tuki Makeeta, an imaginative baby
elephant; Cha! Cha!, an adventuresome tree frog; Nile, a proud crocodile; Maya,
a regal feline; Bamba, a gentle gorilla; and Iggy, a philosophical iguana.
These Animal Characters are designed to appeal to a broad range of customers,
thereby increasing retail sales and repeat business. The Company intends to
utilize each Animal Character for clothing and gifts.  Custom designed t-shirts
and sweatshirts with colorful animals spelling out the "Rainforest Cafe" logo
and Animal Characters are signature items. By offering items featuring the
Rainforest Cafe logo and Animal Characters, the Company believes it is building
"brand equity" in the Rainforest Cafe name that will allow it to attract more
customers and to enhance its competitive retail position. The Retail Village
also includes a large selection of colorful rocks, plush and animated toys and
puppets, and educational and entertaining games and puzzles. Gift items and
other artifacts suggesting the rainforest theme, including colorful animal
figurines and prints, kitchen magnets, serving plates and other tableware,
handmade wood products and other unique rainforest related home accessories,
are also available. The Company varies approximately 30% of its retail items
every 60 to 90 days, which management believes provides the Company with an
increased opportunity to generate repeat customer sales. The Company is also
increasing its commitment to private label products, which the Company expects
will improve the Company's retail margins due to the lower cost of private
label products.

OPERATIONS, MANAGEMENT AND EMPLOYEES

         The Company's ability to manage complex operations including high
volume Restaurants and Retail Villages has been, and will continue to be,
central to its overall success. The Company believes that its management must
include skilled personnel at all levels, including senior corporate management,
Unit Directors of Operations, and other Unit employees. The Company's senior





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corporate management, including the Company's Chairman and Chief Executive
Officer, Lyle Berman, and the Company's President and Chief Operating Officer,
Martin O'Dowd, has significant restaurant and retail experience. The Company
believes that Unit management is important for the profitability of each
Rainforest Cafe and accordingly, places particular emphasis on recruiting
Directors of Operations that have significant restaurant and management
experience. The Company anticipates that, prior to opening a Unit, a Director
of Operations will have been trained at one or more Rainforest Cafes for four
to six months.

         The Company strives to maintain quality and consistency in each of its
Units through the careful training and supervision of personnel and the
establishment of, and adherence to, high standards relating to personnel
performance, food and beverage preparation, and maintenance of facilities. All
managers must complete an eight-week training program during which they are
instructed in areas such as food quality and preparation, customer service, and
employee relations. New staff members participate in approximately three weeks
of training under the close supervision of Company management. The Company has
also prepared operations manuals relating to food and beverage quality and
service standards. Management strives to instill enthusiasm and dedication in
its employees, regularly solicits employee suggestions concerning Company
operations and endeavors to be responsive to employees' concerns. In addition,
the Company has extensive and varied programs designed to recognize and reward
employees for superior performance. The Company believes that it has been able
to attract high quality, experienced restaurant and retail management and
personnel with its competitive compensation and bonus programs.

         In general, each Unit has between 250 and 500 employees, although
staffing levels vary according to the size of the Unit. As of March 1, 1997 the
Company had approximately 1900 employees, including 60 employees at its
corporate headquarters. The Company believes that its relationship with its
employees is good.

PURCHASING

         The Company strives to obtain consistent quality items at competitive
prices from reliable sources. In order to maximize operating efficiencies and
to provide the freshest ingredients for its food products while obtaining the
lowest possible prices for the required quality, each Restaurant's management
team includes a purchasing manager who determines the daily quantities of food
items needed and orders such quantities from major suppliers at prices often
negotiated directly with the Company's corporate office. Food and supplies are
shipped directly to the Units. The Company purchases perishable food products
locally. The Company does not maintain a central food product warehouse or
commissary. With respect to retail products, the Company maintains over 3,000
SKUs, which it purchases from several suppliers. The Company maintains a
centralized warehouse for retail product distribution. The Company is committed
to private label manufacturing which it believes will improve the Company's
retail margins due to the lower cost of private label products. The Company has
not experienced any significant delays in receiving restaurant or retail
supplies and equipment. The Company is not dependent on any one supplier for
its restaurant or retail goods.

MANAGEMENT INFORMATION SYSTEMS/ACCOUNTING

         The Company uses integrated management information systems that are
designed to be utilized in future Units. These systems include a computerized
point-of-sale system which facilitates





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the movement of customer food and beverage orders between the customer areas
and kitchen operations, controls cash, handles credit card authorizations,
keeps track of revenues on a per employee basis and provides management with
revenue and inventory data. The Company's retail/bar coding system allows
management to track inventory daily. The point-of-sale system is accessed by
service personnel who are assigned individual identification keys and
appropriate information is printed in the kitchen and bar areas which
eliminates the need to read handwritten tickets. The point-of-sale system
electronically transfers data nightly to Company headquarters. The Company also
uses a computerized time management system which determines the time worked by
each employee, allows management to gather data and schedule work hours, and
produces payroll reports. Each Unit also uses computerized systems to control
and gather data with respect to food, beverage, retail and supplies
inventories.

         The Company's automated Unit-level point-of-sale, time management and
inventory management systems provide data for posting directly to the Company's
general ledger and to other accounting subsystems. The automated general ledger
system provides various management reports comparing current and prior
operating results as well as measuring performance against predetermined
operating budgets. The results are reported to and reviewed with Company
management by accounting personnel. Such reporting includes (i) weekly reports
of revenues, cost of revenues and selected controllable Unit expenses, (ii)
detailed monthly Unit performance reports of revenues and expenses and (iii)
monthly reports of Unit-by-Unit and administrative expense performance.

MARKETING AND PROMOTION

         To date, the Company has primarily relied upon "word of mouth"
advertising to attract customers to its Rainforest Cafes. The Company also
utilizes outdoor billboards, distinctive exterior signage and limited print
advertising. The unique and dynamic environment of the Rainforest Cafe and its
tropical bird habitat have resulted in a significant amount of unsolicited
positive media publicity. Additionally, the Company has attempted to create
equity in its "Rainforest Cafe" name by offering items featuring the Rainforest
Cafe logo and Animal Characters. At certain Units, the Company employs a Group
Sales Manager who is responsible for promoting and arranging corporate and
other group catering events at the Unit.

COMPETITION

         The restaurant and specialty retail businesses are highly competitive.
In the restaurant industry, competition is based primarily upon price, service,
food quality and location. There are numerous well-established competitors,
including national, regional and local restaurant chains, possessing
substantially greater financial, marketing, personnel and other resources than
the Company. The Company also competes on a general basis with a large variety
of national and regional restaurant operations, as well as with locally owned
restaurants, diners, and other establishments that offer moderately priced
food. The Company competes with other theme restaurants in the highly
competitive and developing theme restaurant market. Other restaurants and
companies utilize the rainforest or related themes. Additionally, the Company
competes with a number of well-established specialty retailers possessing
substantially greater financial, marketing, personnel and other resources than
the Company. In the retail industry, competition is based primarily





                                       10
<PAGE>   11

upon merchandise selection, price and customer service. There can be no
assurance that the Company will be able to respond to various competitive
factors affecting the restaurant and retail industries.

         The performance of individual Units may also be affected by factors
such as traffic patterns, demographic considerations, and the type, number and
location of competing restaurants. In addition, factors such as inflation,
increased food, labor and employee benefit costs, and the availability of
experienced management and hourly employees may also adversely affect the
restaurant and retail industries in general and the Company's Units in
particular. Restaurant and retail operating costs may be further affected by
increases in the minimum hourly wage, unemployment tax rates, real estate taxes
and similar matters over which the Company has no control.

REGULATION

         Restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire, and other authorities and are also subject to
state and local licensing and regulation of the sale of alcoholic beverages and
food. Additionally, businesses that maintain or sell animals are subject to
additional levels of state and local health and sanitation regulations. Having
tropical birds as part of the Rainforest Cafe concept requires the Company to
adhere to stringent health codes that prohibit crossover between kitchen
workers and animal handlers, and any exchange of air from the bird areas to the
rest of the Unit. The Company overcame this problem at its existing Units by
installing specially designed air exhaust hoods for the birds' perch area.
Additionally, a separate waste disposal system is provided for the birds.
Although, to date, the Company has satisfied animal-related licensing for its
existing Units, no assurance can be given that the Company will be able to
maintain such approvals or obtain such approvals at other locations.
Difficulties or failure in obtaining required licenses and approvals will
result in delays in, or cancellation of, the opening of Units.

TRADEMARKS

         The Company's ability to implement successfully its Rainforest Cafe
concept will depend in part on its ability to further establish "brand equity"
through the use of its trademarks, service marks, trade dress and other
proprietary intellectual property, including its name and logos, the Animal
Characters and unique features of its rainforest theme decor. It is the
Company's policy to seek to protect and to defend vigorously its rights to this
intellectual property; any failure to do so could have a material adverse
effect on the Company's operations.

         The Company's mark "A WILD PLACE TO SHOP AND EAT" is now a federally
registered service mark for its restaurant and retail store services.
Additionally, in June 1996 the Company filed federal trademark applications for
"RAINFOREST CAFE A WILD PLACE TO SHOP AND EAT" and the related design, which
includes the Company's new logo, illustrating six of the Company's eight
proprietary Animal Characters. These applications cover the Company's use of
this mark on restaurant and associated retail services and a wide range of
retail products. The Company intends also to protect its proprietary Animal
Characters by the filing of copyright applications and, in certain instances,
trademark registration applications.





                                       11
<PAGE>   12

There is no assurance, however, that any such registrations, including the
registration of the name and logo, will be obtained. The denial of one of the
Company's trademark applications could lower the barriers for entry for
potential competitors of the Company.

         There is also no assurance that any of the Company's rights in any of
its intellectual property will be enforceable, even if registered, against any
prior users of similar intellectual property or competitors of the Company who
seek to utilize similar intellectual property in areas where the Company
operates or intends to conduct operations. The failure to enforce any of the
Company's intellectual property rights could have the effect of reducing the
Company's ability to capitalize on its efforts to establish brand equity. The
Company is aware of trademark applications, registrations and uses that may
accord to third parties certain rights in the word "rainforest" or in certain
elements of some of the proprietary Animal Character names and illustrations
with respect to utilization of these marks on certain clothing and retail
products. The existence of any such third party rights could result in claims
of infringement against the Company with respect to its uses of "Rainforest
Cafe" or its Animal Characters in connection with its sales of clothing and
other retail products. It is also possible that the Company will encounter
claims from prior users of similar intellectual property in areas where the
Company operates or intends to conduct operations, thereby limiting the
Company's operations, and possibly causing the Company to pay damages to a
prior user or registrant of similar intellectual property. In this regard, the
Company has communicated with other businesses with respect to their use of a
rainforest theme decor that may constitute infringement of, or that may be
infringed upon by, the Company's trade dress.

ITEM 2.  PROPERTIES

         The Company intends to lease the facilities for each of its Units. It
has entered into long-term ten year leases with respect to its existing Mall of
America, Woodfield Mall, Gurnee Mills and Walt Disney World Marketplace Units,
Tysons Corner Center I and Sawgrass Mills, and its planned Units at Palisades
Center, The Source, Grapevine Mills, Disney's Animal Kingdom, Cherry Creek
Mall, Chicago Downtown, MGM Grand, Arizona Mills, and Aventura Mall and an
eleven year lease for South Coast Plaza. The Company's leases with Disney are
cancelable by the landlord at any time upon 60 days notice and payment by
Disney of the Company's unamortized value of leasehold improvements at the Walt
Disney World Unit or Disney's Animal Kingdom Units, respectively, and an amount
equal to the net operating income generated by such Unit for the previous lease
year. With regard to the Tysons Corner Center I and Cherry Creek Mall leases,
in the event the Company fails to achieve specified gross sales by a certain
date, the lease may be terminated by the landlords.  The Company's leases
typically have annual base rent and percentage rents that range from 5 to 15
percent depending upon location and volume of sales.

         The Company's executive offices, including retail warehouse space, are
located in Hopkins, Minnesota, under a lease which terminates in June 2000.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any material litigation and is not aware
of any threatened litigation that would have a material adverse effect on its
business.





                                       12
<PAGE>   13

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 29, 1996.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

         Lyle Berman, age 55, has been Chairman of the Board and Chief
Executive Officer of the Company since its inception in February 1994.  Mr.
Berman has been Chief Executive Officer and Chairman of the Board of Grand
Casinos, Inc. and its predecessor since October 1990. Mr. Berman is also Chief
Executive Officer and a director of Stratosphere Corporation, and a director of
G-III Apparel Group Ltd., Innovative Gaming Corporation of America and New
Horizon Kids Quest, Inc. Stratosphere Corporation filed for Chapter 11
bankruptcy protection in January 1997.

         Martin J. O'Dowd, age 47, has been President and Chief Operating
Officer since May 1995 and has served as a director and Secretary since June
1995. From July 1987 to May 1995, Mr. O'Dowd was Corporate Director, Food &
Beverage Services for Holiday Inn Worldwide. From August 1985 to July 1987, Mr.
O'Dowd was Vice President and General Operations Manager for the Hard Rock Cafe
in New York. Mr. O'Dowd is also a director of Elephant & Castle Group, Inc. and
Famous Daves of America, Inc.

         Steven W. Schussler, age 41, has been Executive Vice
President-Development of the Company since its inception and a director of the
Company since January 1995. From 1983 to February 1992, Mr. Schussler was an
officer of Juke Box Saturday Night of Minneapolis, Inc. ("JBSN"), a 1950's and
1960's theme restaurant and nightclub. JBSN filed for bankruptcy in January
1992.

         Ercu Ucan, age 41, has been Executive Vice President-Retail of the
Company since its inception and a director of the Company since January 1995.
From September 1992 until December 1993, Mr. Ucan served as President of the
Orjin Textile Group in Istanbul, Turkey, a garment factory employing
approximately 150 persons. From January 1989 until August 1992, Mr. Ucan served
as Director of Trend Merchandising and Director of Product Development for
Wilsons.

         Mark S. Robinow, age 40, has been Chief Financial Officer since
November 1995. From August 1993 to June 1995, Mr. Robinow served as Senior Vice
President and Chief Financial Officer of Edina Realty, Inc., the country's
fourth largest residential real estate brokerage company. From December 1986 to
August 1993, Mr. Robinow served as Chief Financial Officer, Secretary and
Treasurer of Ringer Corporation, a publicly held manufacturer of natural lawn
and garden products for the consumer market. Mr. Robinow is a certified public
accountant.

         Mark L. Bartholomay, age 37, has been Senior Vice President -
International Development and Operations of the Company since February 1997.
From May 1995 to February 1997 Mr. Bartholomay served as a Vice President and
research analyst of Dain Bosworth, Incorporated, an investment banking firm.
From April 1993 to May 1995, Mr. Bartholomay was Senior Vice President and
Regional Director of Corporate Finance for Principal Financial Securities, Inc.
Prior to that, Mr. Bartholomay was Vice President and Chief Financial Officer
for Universal International, Inc. from





                                       13
<PAGE>   14

February 1992 to April 1993.  Before that, Mr. Bartholomay worked in investment
banking from December 1985 to February 1992.

         Gregory C. Carey, age 44,  has been Vice President-Operations since
August 1996. From May 1996 to August 1996, Mr. Carey served as Director of
Operations at the Company's Walt Disney World Marketplace Unit. From June 1994
to May 1996, Mr. Carey served as Director of Operations at the Company's Mall
of America Unit. From July 1989 to June 1994, Mr. Carey served as Senior
General Manager at Restaurants Unlimited, Inc., an upscale restaurant operating
company. From November 1987 to July 1989, Mr. Carey served as Regional Manager
at General Mills Restaurants, Inc.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Page 24 of the Company's Annual Report to Shareholders for the fiscal
year ended December 29, 1996, are incorporated herein by reference.

         The Company has never paid any cash dividends with respect to its
Common Stock and the current policy of the Board of Directors is to retain any
earnings to provide for the growth of the Company.

ITEM 6.  SELECTED FINANCIAL DATA

         The inside front cover of the Company's Annual Report to Shareholders
for the fiscal year ended December 29, 1996, is incorporated herein by
reference.





                                       14
<PAGE>   15

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

         Pages 10 through 14 of the Company's Annual Report to Shareholders for
the fiscal year ended December 29, 1996, are incorporated herein by reference.

ITEM 8.  FINANCIAL STATEMENTS

         Pages 15 through Page 23 of the Company's Annual Report to
Shareholders for the fiscal year ended December 29, 1996, are incorporated
herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

          None.

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information beginning immediately following the caption "Election
of Directors" to, but not including, the caption "Executive Compensation" in
the Company's Proxy Statement, to be filed with the Securities and Exchange
Commission within 120 days after the close of the Company's fiscal year ended
December 29, 1996 and forwarded to stockholders prior to the Company's 1997
Annual Meeting of Shareholders (the "1997 Proxy Statement"), is incorporated
herein by reference.





                                       15
<PAGE>   16

ITEM 11.  EXECUTIVE COMPENSATION

         The information in the 1997 Proxy Statement beginning immediately
following the caption "Executive Compensation" to, but not including, the
caption "Compensation Committee Interlocks and Insider Participation," is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND    MANAGEMENT

         The information in the 1997 Proxy Statement beginning immediately
following the caption "Voting Securities and Principal Holders Thereof" to, but
not including, the caption "Election of Directors," is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information in the 1997 Proxy Statement under the caption "Certain
Transactions" is incorporated herein by reference.





                                       16
<PAGE>   17

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

<TABLE>
<CAPTION>
(a)(1)  Financial Statements:
                                                                                                      Page
                                                                                                      ----
         <S>                                                                                          <C>
         Balance Sheets as of December 29, 1996 and December 31, 1995
                                                                                                      15

         Statements of Operations for the fiscal years ended December 29, 1996 and December           16
         31, 1995 and for the period from February 3, 1994 through January 1, 1995

         Statements of Shareholders' Equity for the fiscal years ended December 29, 1996 and          17
         December 31, 1995 and for the period from  February 3, 1994 through January 1, 1995

         Statements of Cash Flows for the fiscal years ended December 29, 1996 and December           18
         31, 1995 and for the period from February 3, 1994 through January 1, 1995

         Notes to Financial Statements                                                                19

         Independent Auditors' Reports                                                                23

         -------------------------------
</TABLE>








                                       17
<PAGE>   18

(a)(3)   Exhibits

<TABLE>
<S>              <C>
3.1              Articles of Incorporation, as amended. (1)
3.2              By-laws. (1)
10.1             Lease Agreement by and between Mall of America, Inc. and the Company dated March 31, 1994. (1)
10.2             Lease Agreement by and between the Company and Woodfield Mall dated April 1995. (2)
10.3             Lease Agreement by and between the Company and Walt Disney World dated September 6, 1995. (3)
10.4             Company's 1995 Stock Option and Compensation Plan. (1)
10.5             Employment Agreement dated February 1, 1995 by and between the Company and Steven W. Schussler. (1)
10.6             Employment Agreement dated April 6, 1995 by and between the Company and Martin J. O'Dowd. (1)
10.7             Indemnification Agreement dated April 6, 1995 by and between the Company and Steven Schussler. (1)
10.8             Form of Director Stock Option Agreement dated April 7, 1995. (1)
10.9             Form of Escrow Agreement dated April 7, 1995 by and among the Company, the Commissioner of Commerce of the State
                 of Minnesota, Lyle Berman, Steve Schussler, Ercu Ucan, David Rogers and Joel Waller. (1)
10.10            Lease Agreement by and between the Company and Trump Taj Mahal Associates dated December 6, 1995.(3)
10.11            Form of Lease Agreement by and between the Company and Strato-Retail LLC.(4)
10.12            Company's 1996 Employee Stock Purchase Plan.
13.              Annual Report to Shareholders for the fiscal year ended December 29, 1996.
21.              Subsidiaries of Company.
23.1             Consent of Lund Koehler Cox & Company, PLLP.
23.2             Consent of Arthur Andersen LLP.
27.              Financial Data Schedule.
</TABLE>

-----------------
(1) Incorporated herein by reference to the Company's Registration Statement on
    Form SB-2, File No. 33-89256C.
(2) Incorporated herein by reference to the Company's Form 10-QSB for the
    quarter ended April 2, 1995.
(3) Incorporated herein by reference to the Company's Registration Statement on
    Form S-1, File No. 33-99836.

(4) Incorporated herein by reference to the Company's Form 10-K for the fiscal
    year ended December 31, 1995.

(b)  Reports on Form 8-K.

No Current Reports on Form 8-K were filed during the fourth quarter ended
December 29, 1996.





                                       18
<PAGE>   19

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        RAINFOREST CAFE, INC.
                                        Registrant

Date:   March 26, 1997                  By:/s/ Lyle Berman
                                           --------------------------------
                                        Name:
                                        Title: Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
indicated on March 26, 1996.

<TABLE>
<CAPTION>
                        Name                               Title
                        ----                               -----
<S>                                                        <C>
/s/ Lyle Berman                                            Chairman of the Board, Chief Executive Officer, and
----------------------------------------------------       Secretary (principal executive officer)
                    Lyle Berman

/s/ Steven W. Schussler                                    Executive Vice President and Director
----------------------------------------------------
                Steven W. Schussler

                                                           President, Chief Operating Officer and Director
----------------------------------------------------
                 Martin  J. O'Dowd

                                                           Executive Vice President and Director
----------------------------------------------------
                     Ercu Ucan

/s/ David W. Anderson                                      Director
----------------------------------------------------
                 David W. Anderson

                                                           Director
----------------------------------------------------
                  David L. Rogers

/s/ Joel N. Waller                                         Director
----------------------------------------------------
                   Joel N. Waller

/s/ Kenneth W. Brimmer                                     Director
----------------------------------------------------
                 Kenneth W. Brimmer

/s/ Mark S. Robinow                                        Chief Financial Officer (principal financial
----------------------------------------------------       officer and principal accounting officer)
                  Mark S. Robinow
</TABLE>





                                       19