Exhibit 10.7

AMENDMENT NO. 5 TO  LOAN AGREEMENT

This AMENDMENT NO. 5 TO LOAN AGREEMENT (this "Amendment"), effective as of March 26, 2004 upon the
satisfaction of the conditions set forth herein, is hereby entered into among WELLS FARGO FOOTHILL, INC., a California corporation formerly known as FOOTHILL CAPITAL CORPORATION, a California
corporation ("Lender"), and American Restaurant Group, Inc., a Delaware corporation ("ARG"), ARG
Enterprises, Inc., a California corporation ("Enterprises"), ARG Property Management Corporation, a California corporation
("Property Management"), and ARG Terra, Inc., a Delaware corporation ("Terra"). ARG, Enterprises,
Property Management, and Terra are collectively referred to herein as "Borrowers" and individually as a
"Borrower".

RECITALS

WHEREAS, Borrowers and Lender have executed and delivered that certain Loan Agreement, dated as of
December 17, 2001 (as amended, modified or supplemented from time to time, the "Loan Agreement");

WHEREAS, Borrowers have requested Lender to (1) amend the calculation of Advance availability for a limited period of time,
(2) amend the definition of EBITDA, and (3) waive Borrowers' noncompliance with the covenants under Section 7.20 of the Loan Agreement as of December 31, 2003 (the
"Existing Default"). Lender has agreed to such amendments and waiver, subject to the terms and conditions of this Amendment.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrowers and Lender do
hereby agree as follows:



1.1Relation to Loan Agreement.This Amendment constitutes an
integral part of the Loan Agreement and shall be deemed to be a Loan Document for all purposes. Upon the effectiveness of this Amendment, on and after the date hereof each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to "the Loan Agreement," "thereunder,"
"thereof" or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby.

1.2Capitalized Terms.For all purposes of this Amendment,
capitalized terms used herein without definition shall have the meaning specified in the Loan Agreement.



2.1Amendment to Definition of "EBITDA".

The
definition of "EBITDA" contained in Section 1.1 of the Loan Agreement is hereby amended from and after the date hereof by deleting such definition in its entirety and
replacing it with the following:

"EBITDA"
means, with respect to any fiscal period being measured, Borrowers' and Subsidiary Guarantors' consolidated net earnings (or loss) from operations, minus (a) to the
extent included in computing net earnings (loss) from operations, extraordinary gains; plus (b) without duplication, to the extent deducted in computing net earnings (loss) from operations,
interest expense (net of interest income), income taxes, extraordinary losses, depreciation, amortization and non-cash charges for the following items incurred by Borrowers or Subsidiary
Guarantors in connection with changes to Borrowers' and Subsidiary Guarantors' financial statements because of GAAP requirements: vacation

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accrual,
asset impairment, store-closing reserves, gift-certificate accrual, and litigation accrual; provided, however, that such non-cash charges shall not exceed
(w) $62,500 for the first fiscal quarter of any fiscal year, (x) $62,500 for the second fiscal quarter of any fiscal year, (y) $187,500 for the third fiscal quarter of any fiscal
year, and (z) $187,500 for the fourth fiscal quarter of any fiscal year; plus (c) the loss on impairment and store closures not to exceed $3,889,000 for the fiscal quarter ending
September 29, 2003 and not to exceed $5,478,000 for the fiscal quarter ending December 29, 2003; plus (d) a reserve for the SRG bankruptcy not to exceed $10,010,000 for the fiscal
quarter ending September 29, 2003 and a credit to the SRG bankruptcy reserve not to exceed $1,596,000 for the fiscal quarter ending December 29, 2003; plus (e) a reserve for the
discontinued gift-certificate program not to exceed $400,000 for the fiscal quarter ending September 29, 2003 and a reserve for the discontinued gift-certificate program
not to exceed $2,400,000 for the fiscal quarter ending December 29, 2003. All of the foregoing shall, in each case and for each aspect of this calculation, be determined in accordance with GAAP
with respect only to the applicable fiscal period.

2.2Section 2.1(a).

Section 2.1(a)
of the Loan Agreement is hereby amended by deleting clause (ii) thereof and inserting the following in lieu thereof:

(ii)
with respect to the period from January 1, 2004 to and including March 31, 2004, ninety percent (90%) of the trailing twelve-month EBITDA, and at all other times
seventy-five percent (75%) of the trailing twelve-month EBITDA, in each case as calculated monthly in accordance with 6.3(a)(ii)(A), less the Letter of Credit Usage.



3.1Acknowledgment of Existing Default; No Additional Defaults or Events of
Default.Borrowers acknowledge that the Existing Default exists and the occurrence of the Existing Default entitles Lender to exercise its
rights and remedies under the Loan Documents. Except for the Existing Default, Borrowers represent and warrant that as of the date hereof no event has occurred and no condition exists that
constitutes a Default or an Event of Default under the Loan Agreement or the other Loan Documents. Borrowers represent and warrant that upon the consummation of the transactions contemplated by this
Amendment, no Default or Event of Default will then exist or be created under the Loan Agreement or any other Loan Document.

3.2Waiver of Existing Default; Reservation of Other
Rights.Based on the foregoing, and in reliance thereon, Lender hereby waives the Existing Default. Except as expressly provided herein,
Lender reserves all of its rights and remedies under the Loan Documents.



4.1Corporate Organization and Authority.



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4.2Corporate Proceedings; Validity of Amendment.Each Borrower
has taken all corporate action necessary to be taken by it to authorize the execution and delivery of this Amendment. This Amendment has been duly executed and delivered by each Borrower and
constitutes the legal, valid, and binding obligation of each Borrower, enforceable against each Borrower in accordance with its terms.

4.3No Violations, Consents, or Approvals.The execution, delivery, and performance by
each Borrower of this Amendment, and the consummation of the transactions contemplated hereby, do not and will not (i) violate any provision of federal, state, or local law or regulation
applicable to such Borrower, the Governing Documents of such Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on such Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of such Borrower, including, without limitation, the Indenture
and Eligible Credit Facility, or (iii) require any approval of such Borrower's stockholders or any approval or consent of any Person under any material contractual obligation of such Borrower.

4.4Ratification and Confirmation of Loan Documents.The Loan
Agreement and all other Loan Documents and all representations, warranties, terms, and conditions therein remain in full force and effect, and each Borrower hereby confirms and ratifies each of the
provisions of the Loan Agreement and the other Loan Documents.



5.1Conditions to Effectiveness.    This Amendment shall not become effective until Lender
has received each of the following:



5.2Successors and Assigns.This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors and assigns.

5.3Counterparts.This Amendment may be executed simultaneously
in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. Delivery of an executed counterpart hereof by
facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart of this Amendment.

5.4GOVERNING LAW.    THE VALIDITY OF THIS AMENDMENT, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA.

5.5Expenses.Borrowers agree to
pay the
expenses of Lender in connection with the transactions contemplated by this Amendment (including, without limitation, the fees and expenses of counsel for the Lender).

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5.6Release.



5.7Ratification.Except as expressly amended hereby, any
conditions of the Loan Documents shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and
shall not (i) be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of
the Borrowers that would require the consent of Lender under the Loan Agreement or (ii) create a course of conduct or dealing among the parties hereto.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed and delivered by a duly authorized representative.

| |  | AMERICAN RESTAURANT GROUP, INC.,a Delaware corporation      
| |  | ------------------------------------------------------------
| |  | By:                                                         
| |  | Title:                                                      
| |  | ARG ENTERPRISES, INC.,a California corporation              
| |  | By:                                                         
| |  | Title:                                                      
| |  | ARG PROPERTY MANAGEMENT CORPORATION,a California corporation
| |  | By:                                                         
| |  | Title:                                                      
| |  | ARG TERRA, INC.,a Delaware corporation                      
| |  | By:                                                         
| |  | Title:                                                      
| |  | WELLS FARGO FOOTHILL, INC.,a California corporation         
| |  | By:                                                         
| |  | Title:                                                      

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