SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 27, 1999      Commission File Number: 0-18668


                        MAIN STREET AND MAIN INCORPORATED
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                DELAWARE                                         11-2948370
    -------------------------------                          -------------------
    (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)


        5050 NORTH 40TH STREET
      SUITE 200, PHOENIX, ARIZONA                                   85018
----------------------------------------                          ----------
(Address of principal executive offices)                          (Zip Code)

                                 (602) 852-9000
               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, $.001 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 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. [ ]

At March 20, 2000, there were outstanding  10,029,426 shares of the registrant's
common stock,  $.001 par value.  The aggregate market value of common stock held
by nonaffiliates of the registrant  (7,035,302 shares) based on the closing sale
price of the common stock as reported on the Nasdaq National Market on March 20,
2000,  was  $21,985,318.   For  purposes  of  this  computation,  all  officers,
directors,  and  10%  beneficial  owners  of the  registrant  are  deemed  to be
affiliates.  Such  determination  should  not be deemed an  admission  that such
officers,  directors,  or 10% beneficial owners are, in fact,  affiliates of the
registrant.

Documents  incorporated  by  reference:   Portions  of  the  Registrant's  Proxy
Statement  for the 2000  Annual  Meeting of  Stockholders  are  incorporated  by
reference into Part III.
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED

                           ANNUAL REPORT ON FORM 10-K

                       FISCAL YEAR ENDED DECEMBER 27, 1999

                                TABLE OF CONTENTS

PART I                                                                      PAGE
  ITEM 1.  BUSINESS.........................................................   1
  ITEM 2.  PROPERTIES.......................................................  18
  ITEM 3.  LEGAL PROCEEDINGS................................................  18
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............  18

PART II
  ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS............................................  19
  ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.............................  20
  ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS......................................  21
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......  25
  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................  25
  ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE............................  25

PART III
  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............  25
  ITEM 11. EXECUTIVE COMPENSATION...........................................  25
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT.....................................................  25
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................  25

PART IV
  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
             ON FORM 8-K....................................................  26

SIGNATURES..................................................................  29

                                   ----------

                 STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

THE  STATEMENTS  CONTAINED  IN THIS  REPORT  ON FORM  10-K  THAT ARE NOT  PURELY
HISTORICAL  ARE  FORWARD-LOOKING  STATEMENTS  WITHIN THE  MEANING OF  APPLICABLE
SECURITIES LAWS.  FORWARD-LOOKING  STATEMENTS INCLUDE  STATEMENTS  REGARDING OUR
"EXPECTATIONS,"   "ANTICIPATION,"   "INTENTIONS,"   "BELIEFS,"  OR  "STRATEGIES"
REGARDING  THE  FUTURE.   FORWARD-LOOKING  STATEMENTS  ALSO  INCLUDE  STATEMENTS
REGARDING REVENUE, MARGINS,  EXPENSES, AND EARNINGS ANALYSIS FOR FISCAL 2000 AND
THEREAFTER;  FUTURE  RESTAURANT  OPERATIONS AND NEW RESTAURANT  ACQUISITIONS  OR
DEVELOPMENT;  THE RESTAURANT INDUSTRY IN GENERAL;  AND LIQUIDITY AND ANTICIPATED
CASH NEEDS AND AVAILABILITY.  ALL  FORWARD-LOOKING  STATEMENTS  INCLUDED IN THIS
REPORT ARE BASED ON  INFORMATION  AVAILABLE  TO US AS OF THE FILING DATE OF THIS
REPORT,  AND  WE  ASSUME  NO  OBLIGATION  TO  UPDATE  ANY  SUCH  FORWARD-LOOKING
STATEMENTS.  OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE FORWARD-LOOKING
STATEMENTS IN THIS REPORT.  A VARIETY OF FACTORS COULD CAUSE OUR ACTUAL  RESULTS
TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS,  INCLUDING THE FACTORS
DISCUSSED IN ITEM 1, "BUSINESS - SPECIAL CONSIDERATIONS."

                                        i
<PAGE>
                                     PART I

ITEM 1. BUSINESS

     We are the  world's  largest  franchisee  of T.G.I.  Friday's  restaurants,
currently owning 51 and managing six T.G.I.  Friday's  restaurants.  We also own
six Redfish Seafood Grill and Bar restaurants.  T.G.I.  Friday's restaurants are
full-service, casual dining establishments featuring a wide selection of freshly
prepared, popular foods and beverages served by well-trained, friendly employees
in relaxed settings. Redfish Seafood Grill and Bar restaurants are full-service,
casual dining  restaurants  that feature a broad  selection of New Orleans style
fresh seafood,  Creole and Cajun cuisine,  and traditional  southern dishes,  as
well as a "VooDoo" style lounge, all under one roof.

     We  own  the  exclusive  rights  to  develop  additional  T.G.I.   Friday's
restaurants in several  territories  in the western  United  States.  We plan to
develop  additional  T.G.I.  Friday's  restaurants  in our existing  development
territories,  in which we are  required  to open 37  additional  restaurants  by
December 31, 2003. Our strategy is to

     *    capitalize on the brand-name  recognition and goodwill associated with
          T.G.I. Friday's restaurants;

     *    expand our restaurant operations through

          -    the development of additional T.G.I.  Friday's restaurants in our
               existing development territories,

          -    the development of additional Redfish restaurants, and

          -    the  acquisition or development  of restaurants  operating  under
               other restaurant concepts; and

     *    increase  our  profitability  by  continuing  to  enhance  the  dining
          experience of our guests and improving operating efficiency.

     We were incorporated in December 1988. We maintain our principal  executive
offices at 5050 North 40th Street,  Suite 200,  Phoenix,  Arizona 85018, and our
telephone  number is (602) 852-9000.  Our Web site,  which is not a part of this
Report,  is located  at  www.mainandmain.com.  All  references  to our  business
operations  in this  Report  include  the  operations  of Main  Street  and Main
Incorporated and our subsidiaries and operating divisions.

                                  OUR BUSINESS

OUR T.G.I. FRIDAY'S RESTAURANTS

THE T.G.I. FRIDAY'S CONCEPT

     The T.G.I. Friday's concept is franchised by Carlson Restaurants Worldwide,
Inc.  (formerly  TGI  Friday's  Inc.),  a wholly  owned  subsidiary  of  Carlson
Companies Inc.,  which is a diversified  company with business  interests in the
restaurant and hospitality industries.  The first T.G.I. Friday's restaurant was
opened in 1965 in New York City.  Carlson  Restaurants  Worldwide,  Inc. and its
predecessors,  or Carlson Worldwide, has conducted a business since 1972 that is
substantially similar to the business currently conducted by its franchisees. As
of December 27, 1999,  Carlson  Worldwide  had 196  franchisor-operated  and 379
franchised T.G.I.  Friday's restaurants  operating worldwide.  Carlson Worldwide
currently owns approximately  2.6% of our outstanding  common stock.  Holders of
our common stock do not have any financial  interest in Carlson  Worldwide,  and
Carlson Worldwide has no responsibility for the contents of this Report.

     T.G.I. Friday's restaurants are full-service,  casual dining establishments
featuring a wide selection of  high-quality,  freshly prepared popular foods and
beverages,  including a number of innovative  and  distinctive  menu items.  The
restaurants  feature quick,  efficient,  and friendly table service  designed to
minimize customer waiting time and facilitate table turnover.  Service personnel
dress in traditional style  red-and-white  striped knit shirts and casual slacks
and are  encouraged  to  individualize  their outfits with  decorative  pins and
headwear,  which  enhance  the T.G.I.  Friday's  theme and  entertaining  dining
atmosphere.  Our  restaurants  generally  are open seven days a week between the
hours of  approximately  11:00 a.m. and 1:00 a.m. We believe that the design and
operational  consistency of all T.G.I. Friday's restaurants enable us to benefit
significantly  from the name  recognition  and goodwill  associated  with T.G.I.
Friday's restaurants.

                                       1
<PAGE>
MENU

     We attempt to capitalize on the innovative and distinctive  menu items that
have been an  important  attribute  of  T.G.I.  Friday's  restaurants.  The menu
consists of more than 100 food items, including

     *    appetizers,  such  as  mushrooms,  jalapeno  poppers,  buffalo  wings,
          stuffed  potato  skins,  quesadillas,   fried  onion  rings,  and  pot
          stickers;

     *    a  variety   of  soups,   salads,   sandwiches,   wrappers,   burgers,
          pizzadillas, and pasta;

     *    southwestern, oriental, and American specialty items;

     *    beef, seafood, and chicken entrees;

     *    a kids' menu; and

     *    desserts.

Beverages  include a full bar  featuring  wines,  beers,  classic and  specialty
cocktails,  after dinner drinks,  soft drinks,  milk,  milk shakes,  malts,  hot
chocolate, coffee, tea, frozen fruit drinks known as Friday's Smoothies(TM), and
sparkling fruit juice combinations known as Friday's Flings(R).

     Menu prices range from $6 to $17 for beef, chicken, and seafood entrees; $6
to $10 for pizzadillas, pasta, wrappers, and oriental and southwestern specialty
items;  $4 to $9  for  salads,  sandwiches,  and  burgers;  and  $3 to  $10  for
appetizers and soups.  Each  restaurant  offers a separate  children's menu with
food entrees ranging from $2 to $3. Alcoholic  beverage sales currently  account
for approximately 24.4% of total revenue.

RESTAURANT LAYOUT

     Each of our T.G.I. Friday's restaurants is similar in terms of exterior and
interior  design.  Each  restaurant  features a  distinctive  decor  accented by
red-and-white  striped  awnings,  brass  railings,  stained glass,  and eclectic
memorabilia. Each restaurant has interior dining areas and bar seating.

     Most of our  T.G.I.  Friday's  restaurants  are  located  in  free-standing
buildings.  These  restaurants  normally  contain between 5,500 and 9,000 square
feet of space and average  approximately 7,500 square feet. Most of our recently
developed restaurants, however, contain 5,800 to 6,500 square feet of space. Our
T.G.I.  Friday's restaurants contain an average of 60 dining tables,  seating an
average of 210 guests,  and a bar area  seating an average of  approximately  30
additional guests.

UNIT ECONOMICS

     We estimate that our total cost of opening a new T.G.I. Friday's restaurant
currently  ranges from $2,000,000 to $2,200,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include approximately (a) $1,250,000 to $1,450,000 for
building, improvements, and permits, including liquor licenses, (b) $550,000 for
furniture,  fixtures,  and  equipment,  (c)  $150,000 in  pre-opening  expenses,
including  hiring  expenses,  wages  for  managers  and  hourly  employees,  and
supplies,  and (d) $50,000 for the initial franchise fee. Actual costs, however,
may vary significantly  depending upon a variety of factors,  including the site
and  size  of the  restaurant  and  conditions  in the  local  real  estate  and
employment markets.  Our T.G.I.  Friday's  restaurants open during all of fiscal
1999 generated an average of approximately $3,119,000 in annual revenue.

OUR REDFISH SEAFOOD GRILL AND BAR RESTAURANTS

THE REDFISH CONCEPT

     Redfish Seafood Grill and Bar restaurants are  full-service,  casual dining
restaurants  that feature a broad  selection of New Orleans style fresh seafood,
Creole and Cajun cuisine, and traditional southern dishes, as well as a "VooDoo"
style lounge, all under one roof. The restaurants offer unique, freshly prepared
food  that is  served  quickly  and  efficiently  in a  fun-filled  New  Orleans
atmosphere. Each Redfish restaurant's VooDoo lounge features a unique atmosphere
decorated with an eclectic collection of authentic New Orleans artifacts, signs,
and antiques.

                                       2
<PAGE>
Local bands and,  occasionally,  national  touring  acts present live rhythm and
blues music on weekends. Redfish restaurants are open for lunch and dinner seven
days a week from 11 a.m. until 2 a.m.

MENU

     We have developed a menu of more than 75 items for our Redfish restaurants.
Signature  dishes  include   blackened   redfish,   Bourbon  Street   jambalaya,
hickory-smoked  prime rib,  asiago  encrusted  salmon,  southern  fried catfish,
crawfish  etoufee,  and marinated & grilled pork chops. The menu also features a
selection of  appetizers,  including  Looziana egg rolls,  dungeness  crabcakes,
"Alligator Bites," buffalo crawfish tails, and crab & artichoke dip. Our Redfish
menu also  features  a variety  of  delicious  pastas,  fresh  seasonal  salads,
sandwiches,  and tempting  desserts,  such as bananas  foster,  chocolate  bread
pudding,  and our  signature  key lime pie. The spacious  Voodoo lounge offers a
wide  selection of the finest  beers on tap, a full wine list,  and an extensive
specialty drink list.

RESTAURANT LAYOUT

     We developed the Redfish  restaurant  layout to provide a refined  southern
roadhouse  atmosphere.  Each  of  our  Redfish  restaurants  is  decorated  with
nostalgic  momentos of the South,  together  with  decorative  elements that are
derived from the individual  restaurant's locales. The decor generally creates a
tribute to the  legends of American  music who created the blues,  as well as to
the regions that  developed  the classic  Creole,  Cajun,  and American  cuisine
served in our Redfish restaurants.

     Most of our Redfish  restaurants are located in  high-traffic  urban office
environments.  These restaurants contain between 6,000 and 12,000 square feet of
space and average  approximately  8,500  square  feet.  Our Redfish  restaurants
contain an average of 60 dining tables,  seating an average of 250 guests, and a
bar area  seating an average of  approximately  25  additional  guests.  We have
developed a prototype for use in developing  Redfish  restaurants in the future.
We currently  are  constructing  our first  restaurant  using this  prototype in
Scottsdale,  Arizona.  This restaurant is scheduled to open during 2000. We plan
to use this prototype whenever possible in order to standardize the construction
process and to reduce costs.

UNIT ECONOMICS

     We  estimate  that our  total  cost of  opening  a new  Redfish  restaurant
currently  ranges from $1,800,000 to $2,200,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include  approximately  (a) $930,000 to $1,330,000 for
building, improvements, and permits, including liquor licenses, (b) $700,000 for
furniture,  fixtures,  and  equipment,  (c)  $170,000 in  pre-opening  expenses,
including  hiring  expenses,  wages  for  managers  and  hourly  employees,  and
supplies. Actual costs, however, may vary significantly depending upon a variety
of factors,  including the site and size of the restaurant and conditions in the
local real estate and employment  markets.  Our Redfish  restaurants open during
all of fiscal 1999  generated an average of  approximately  $2,000,000 in annual
revenue.

SITE SELECTION

     When  evaluating  whether  and where to seek  expansion  of our  restaurant
operations, we analyze a restaurant's profit potential. We consider the location
of a  restaurant  to be one of the most  critical  elements of the  restaurant's
long-term  success.  Accordingly,  we  expend  significant  time and  effort  in
investigating and evaluating  potential restaurant sites. In conducting the site
selection process, we obtain and examine detailed demographic  information (such
as population  characteristics,  density, and household income levels), evaluate
site characteristics  (such as visibility,  accessibility,  and traffic volume),
consider  the proposed  restaurant's  proximity  to demand  generators  (such as
shopping  malls,   lodging,   and  office  complexes),   and  analyze  potential
competition.  Our  senior  corporate  management  evaluates  and  approves  each
restaurant  site prior to  acquisition  after  extensive  consultation  with all
levels of our  operations  group.  Carlson  Worldwide  provides  site  selection
guidelines and criteria as well as site selection  counseling and assistance for
our T.G.I.  Friday's  restaurant sites. We also must obtain Carlson  Worldwide's
consent  before  we enter  into  definitive  agreements  for a  T.G.I.  Friday's
restaurant site.

                                       3
<PAGE>
CURRENT RESTAURANTS

     The following table sets forth  information  relating to each restaurant we
own or manage as of March 20, 2000.

<TABLE>
<CAPTION>
                                                                                      Owned or
                                                                             In       Managed by
                                                       Square   Seating   Operation  Our Company
Location                                               Footage  Capacity    Since       Since
--------                                               -------  --------    -----       -----
<S>                                                    <C>      <C>         <C>         <C>
ACQUIRED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
  Phoenix, Arizona..................................    9,396      298       1985        1990
  Mesa, Arizona.....................................    9,396      298       1985        1990
  Tucson, Arizona...................................    7,798      290       1982        1990
  Las Vegas, Nevada.................................    9,194      298       1982        1990
  Kansas City, Missouri.............................    8,500      270       1983        1993
  Overland Park, Kansas.............................    6,000      220       1992        1993
  San Diego, California.............................    8,002      234       1979        1993
  Costa Mesa, California............................    8,345      232       1980        1993
  Woodland Hills, California........................    8,358      283       1980        1993
  Valencia, California..............................    6,500      232       1993        1993
  Torrance, California..............................    8,923      237       1982        1993
  La Jolla, California..............................    9,396      225       1984        1993
  Palm Desert, California...........................    9,194      235       1983        1993
  West Covina, California...........................    9,396      232       1984        1993
  North Orange, California..........................    9,194      213       1983        1993
  Ontario, California...............................    5,700      190       1993        1993
  Laguna Niguel, California.........................    6,730      205       1990        1993
  San Bernardino, California........................    9,396      236       1986        1993
  Brea, California..................................    6,500      195       1991        1993
  Riverside, California.............................    6,500      172       1991        1993
  Pleasanton, California............................    8,000      255       1995        1998
  Salinas, California...............................    6,500      240       1994        1998
  Oakland, California...............................    5,966      230       1994        1998
  Sacramento, California............................    6,200      230       1979        1998
  Citrus Heights, California........................    8,500      270       1982        1998
  Fresno, California................................    5,950      230       1978        1998

DEVELOPED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
  Scottsdale, Arizona...............................    8,507      281       1991        1991
  Glendale, Arizona.................................    5,200      230       1993        1993
  Albuquerque, New Mexico...........................    5,975      270       1993        1993
  Reno, Nevada......................................    6,500      263       1994        1994
  Oxnard, California................................    6,500      252       1994        1994
  Carmel Mountain, California.......................    6,500      252       1995        1995
  Rancho Santa Margarita, California................    6,548      252       1995        1995
  Cerritos, California..............................    6,250      223       1996        1996
  Las Vegas, Nevada.................................    6,700      251       1997        1997
  E1 Paso, Texas #2.................................    5,491      206       1998        1998
  Superstition Springs (Mesa), Arizona..............    6,250      240       1998        1998
  Puente Hills, California..........................    5,800      272       1999        1999
  San Diego, California.............................    6,800      277       1999        1999
  Independence, Missouri............................    5,800      240       1999        1999
  Rancho San Diego, California......................    5,800      240       1999        1999
  Yorba Linda, California...........................    5,800      240       1999        1999
</TABLE>

                                                  (Table continued on next page)

                                        4
<PAGE>
<TABLE>
<CAPTION>
                                                                                      Owned or
                                                                             In       Managed by
                                                       Square   Seating   Operation  Our Company
Location                                               Footage  Capacity    Since       Since
--------                                               -------  --------    -----       -----
<S>                                                    <C>      <C>         <C>         <C>
  Simi Valley, California...........................    5,800      240       1999        1999
  Tucson, Arizona...................................    5,800      240       1999        1999
  Henderson, Nevada.................................    5,800      240       1999        1999
  Carlsbad, California..............................    8,146      302       1999        1999
  Temecula, California..............................    6,400      278       1999        1999
  Chandler, Arizona.................................    5,800      240       1999        1999
  Goodyear, Arizona.................................    5,800      240       2000        2000
  Shawnee, Kansas...................................    5,800      240       2000        2000
  Thousand Oaks, California.........................    5,800      240       2000        2000

MANAGED T.G.I. FRIDAY'S RESTAURANTS
  San Bruno, California.............................    8,345      200       1980        1993
  San Francisco, California.........................    4,748      161       1989        1993
  San Jose, California..............................    8,002      228       1977        1993
  San Mateo, California.............................    9,396      252       1984        1993
  San Ramon, California.............................    6,000      182       1990        1993
  El Paso, Texas #1.................................    4,800      198       1997        1997

REDFISH RESTAURANTS
  Chicago, Illinois.................................    6,200      214       1996        1997
  Wheaton, Illinois.................................    7,133      210       1997        1997
  Denver, Colorado..................................    7,925      321       1997        1997
  Cincinnati, Ohio..................................    7,133      239       1997        1997
  San Diego, California.............................   11,994      347       1999        1999
  Cleveland, Ohio...................................   10,964      328       1999        1999
</TABLE>

     The  average  size  of  our  acquired   T.G.I.   Friday's   restaurants  is
approximately  8,000 square feet,  and the average size of our developed  T.G.I.
Friday's restaurants is approximately 6,100 square feet.

RESTAURANT OPERATIONS

THE T.G.I. FRIDAY'S SYSTEM

     T.G.I.  Friday's  restaurants  are  developed  and  operated  pursuant to a
specified   system.    Carlson   Worldwide    maintains   detailed    standards,
specifications, procedures, and operating policies to facilitate the success and
consistency  of all T.G.I.  Friday's  restaurants.  To ensure  that the  highest
degree of  quality  and  service  is  maintained,  each  franchisee  of  Carlson
Worldwide,  including our company,  must operate each T.G.I. Friday's restaurant
in strict  conformity with these methods,  standards,  and  specifications.  The
T.G.I. Friday's system includes

     *    distinctive  exterior and interior design,  decor,  color scheme,  and
          furnishings;

     *    uniform specifications and procedures for operations;

     *    standardized menus featuring special recipes and menu items;

     *    procedures for inventory and management control;

     *    formal training and assistance programs;

     *    advertising and promotional programs;

     *    requirements  for quality and  uniformity  of  products  and  services
          offered;

     *    requirements   that  franchisees   purchase  or  lease  from  approved
          suppliers equipment, fixtures, furnishings, signs, inventory, recorded
          music, ingredients, and other products and materials that conform with
          the standards and specifications of Carlson Worldwide; and

                                       5
<PAGE>
     *    standards  for the  maintenance,  improvement,  and  modernization  of
          restaurants, equipment, furnishings, and decor.

     Carlson  Worldwide has committed to its  franchisees to continue to improve
and  further  develop  the  T.G.I.  Friday's  system  and to  provide  such  new
information and techniques to the franchisees by means of confidential franchise
operating manuals. The T.G.I.  Friday's system is identified by means of certain
trade names, service marks, trademarks,  logos, and emblems, including the marks
T.G.I.  Friday's(R)  and  Friday's(R).  We  believe  the  support as well as the
standards,  specifications,  and operating  procedures of Carlson  Worldwide are
important elements to our restaurant operations.  Our policy is to execute these
specifications,  procedures,  and policies to the highest level of the standards
of Carlson Worldwide.

     Once a restaurant is integrated into our  operations,  we provide a variety
of  corporate  services to assure the proper  execution  of the T.G.I.  Friday's
system and the operational success of the restaurant. Our executive management

     *    continually monitors restaurant operations;

     *    maintains management controls;

     *    inspects individual  restaurants to assure the quality of products and
          services and the maintenance of facilities;

     *    develops  employee  programs  for  efficient   staffing,   motivation,
          compensation, and career advancement;

     *    institutes procedures to enhance efficiency and reduce costs; and

     *    provides centralized support systems.

     We also maintain quality assurance procedures designed to assure compliance
with the high  quality of  products  and  services  mandated  by our company and
Carlson  Worldwide.  We respond to and  investigate  inquiries  and  complaints,
initiate on-site resolution of deficiencies,  and consult with each restaurant's
staff to assure  that  proper  action is taken to correct  any  deficiency.  Our
personnel  and  contracted  third-party  quality  assurance  professionals  make
unannounced  visits to restaurants  to evaluate the  facilities,  products,  and
services.  We believe that our quality  review  program and executive  oversight
enhance  restaurant   operations,   reduce  operating  costs,  improve  customer
satisfaction,  and  facilitate  the highest level of compliance  with the T.G.I.
Friday's system.

RESTAURANT MANAGEMENT

     Our  regional and  restaurant  management  personnel  are  responsible  for
complying with Carlson  Worldwide's  and our  operational  standards.  Our seven
regional  managers are  responsible  for between five and 11 of our  restaurants
within their  region.  These  regional  managers and one Director of  Operations
report to our Vice  President of Restaurant  Operations.  The Vice  President of
Restaurant  Operations  and one  other  Director  of  Operations  report  to our
Executive  Vice  President of Operations and Chief  Operating  Officer,  who has
responsibility  for our  operations.  Restaurant  managers are  responsible  for
day-to-day restaurant operations, including customer relations, food preparation
and service, cost control,  restaurant maintenance,  and personnel relations. We
typically staff our restaurants  with an on-site general  manager,  two or three
assistant managers, a kitchen manager, and approximately 90 hourly employees.

RECRUITMENT AND TRAINING

     We attempt to hire employees who are committed to the standards  maintained
by our company and Carlson  Worldwide.  We also believe that our high unit sales
volume,  the image and atmosphere of the T.G.I.  Friday's and Redfish restaurant
concepts,  and our career advancement and employee benefit programs enable us to
attract high quality management and restaurant personnel.

     Our T.G.I. Friday's restaurant personnel participate in continuing training
programs  maintained  by Carlson  Worldwide  and our company.  In  addition,  we
supplement  those  programs  by hiring  personnel  devoted  solely  to  employee
training.  Each  restaurant  general and  assistant  manager  completes a formal
training program  conducted by our company and Carlson  Worldwide.  This program
provides  our T.G.I.  Friday's  restaurant  managers  between

                                       6
<PAGE>
10 and 15 weeks of training,  depending on the trainee's  prior  experience  and
ability.  The training  covers all aspects of management  philosophy and overall
restaurant operations,  including supervisory skills,  operating and performance
standards,  accounting procedures, and employee selection and training necessary
for restaurant operations.

     Our Redfish  restaurant  managers and  personnel  participate  in extensive
training programs consistent with our operating  standards.  Many of our Redfish
restaurant  managers are experienced T.G.I.  Friday's managers who have accepted
positions in our Redfish operations.

     We believe that our incentive,  motivation,  and training  programs enhance
employee performance, result in better customer service, and increase restaurant
efficiency.  We have  implemented  incentive  programs  that  reward  restaurant
managers when the restaurant's  operating results surpass designated goals and a
reward and recognition program for outstanding achievements by employees.

MAINTENANCE AND IMPROVEMENT OF RESTAURANTS

     We maintain our restaurants and all associated fixtures,  furnishings,  and
equipment in  conformity  with the T.G.I.  Friday's  System or standards we have
developed  for our  Redfish  restaurants.  We  also  make  necessary  additions,
alterations, repairs, and replacements to our restaurants as required by Carlson
Worldwide,  including  periodic  repainting or  replacement  of obsolete  signs,
furnishings,  equipment,  and  decor.  We may be  required,  subject  to certain
limitations,  to modernize our  restaurants  to the  then-current  standards and
specifications of Carlson Worldwide.

MANAGEMENT INFORMATION SYSTEMS

     We have devoted considerable  resources to develop and implement management
information systems that improve the quality and flow of information  throughout
our company.  These systems include systems that complement  proprietary systems
developed  and  maintained  by  Carlson  Worldwide  as well as  systems  we have
developed  for  our  Redfish  restaurants.  Inventory  control  and  transaction
processing  are  effected  by means of a  computerized  sales  system,  which is
integrated into data processing  systems we utilize for financial and management
control, centralized accounting, and management information systems.

     We use five to seven touch-screen  computer registers located  conveniently
throughout each of our  restaurants.  Servers enter guest orders by touching the
appropriate  sections of the register's  computer  screen,  which  transfers the
information  electronically  to the  kitchen  and  bar  for  preparation.  These
registers also are connected to a personal computer in the restaurant office and
to our corporate  information  system via modem.  Management  receives  detailed
comparative  reports on each restaurant's  sales and expense  performance daily,
weekly, and monthly.

     We believe that our  management  information  systems enable us to increase
the speed and  accuracy of order  taking and  pricing,  to better  assess  guest
preferences,  to efficiently  schedule labor to better serve guests,  to quickly
and accurately  monitor food and labor costs, to promptly  access  financial and
operating  data,  and to improve the  accuracy  and  efficiency  of  store-level
information and reporting.

EQUIPMENT, FOOD PRODUCTS, AND OTHER SUPPLIES

     We lease or purchase all fixtures, furnishings,  equipment, signs, recorded
music,  food  products,  supplies,  inventory,  and other products and materials
required for the  development and operation of our T.G.I.  Friday's  restaurants
from  suppliers  approved  by Carlson  Worldwide.  In order to be  approved as a
supplier, a prospective supplier must demonstrate to the reasonable satisfaction
of  Carlson  Worldwide  its  ability  to meet  the  then-current  standards  and
specifications  of Carlson  Worldwide for such items,  possess  adequate quality
controls,  and have the capacity to provide supplies  promptly and reliably.  We
are not required to purchase  supplies  from any  specified  suppliers,  but the
purchase or lease of any items from an  unapproved  supplier  requires the prior
approval of Carlson Worldwide.

     Carlson Worldwide  maintains a list of approved  suppliers and a set of the
T.G.I. Friday's system standards and specifications.  Carlson Worldwide receives
no commissions on direct sales to its  franchisees,  but may receive

                                       7
<PAGE>
rebates and  promotional  discounts from  manufacturers  and suppliers,  some of
which are passed on  proportionately  to our  company.  Carlson  Worldwide is an
approved  supplier of various kitchen  equipment and store fixtures,  decorative
memorabilia,  and various  paper goods,  such as menus and in-store  advertising
materials  and items.  However,  we are not required to purchase such items from
Carlson  Worldwide.  If we elect to purchase such items from Carlson  Worldwide,
Carlson Worldwide derives revenue as a result of such purchases.

     Each of our restaurants purchases perishable produce,  dairy products,  and
breads  from  approved  local  suppliers.  In prior  years and until the  fourth
quarter of fiscal 1999, we purchased most of our key food  products,  as well as
many of our other restaurant supplies,  from a single national food distributor.
Carlson  Worldwide and all of its other  franchisees  also  purchased  from this
distributor,  which is not affiliated with our company or Carlson Worldwide.  In
November  1999,  this  distributor   announced  that  it  was  phasing  out  its
distribution  services  to the casual  dining  industry.  This  decision  had an
immediate and substantial negative impact on the distributor's deliveries to our
restaurants.  As the  level of  service  began to  deteriorate,  we  immediately
entered  into  temporary  back-up   distribution   arrangements  with  alternate
suppliers,  generally at higher prices than we had previously  obtained from our
primary  supplier.  In January 2000,  the supplier  filed for  protection  under
Chapter 11 of the U. S. Bankruptcy Code.

     In January 2000, we entered into an agreement  with a different  company to
provide  primary  distribution  services  to  most of our  restaurants.  We were
already purchasing food and other supplies for our Redfish restaurants from this
distributor.  We anticipate that we will complete the transition to this company
as our primary  distributor by March 31, 2000. A second distributor will service
seven of our  restaurants  in the midwest and southwest.  We anticipate  that we
will complete the transition to this distributor by April 15, 2000.

     Our  restaurants  utilize a simple bar code  system for daily  ordering  of
their primary food and merchandise items.  Orders are sent electronically to the
supplier.  Our  suppliers  have  comprehensive  warehouse  and delivery  outlets
servicing each of our markets.

     We believe that our purchases from our primary suppliers will enable us to

     *    maintain a high level of quality  consistent with our T.G.I.  Friday's
          and Redfish restaurants;

     *    to  realize  convenience  and  dependability  in  the  receipt  of our
          supplies;

     *    to avoid the costs of maintaining a large purchasing department, large
          inventories, and product warehouses; and

     *    to attain cost advantages as the result of volume purchases.

We believe,  however,  that all  essential  products  are  available  from other
national  suppliers  as well as from local  suppliers in the cities in which our
restaurants  are located in the event we determine to purchase our supplies from
other suppliers.

ADVERTISING AND MARKETING

T.G.I. FRIDAY'S RESTAURANTS

     We participate in the national marketing and advertising programs conducted
by Carlson Worldwide. The programs use network and cable television and national
publications and feature new menu innovations and various promotion programs. In
addition,  from  time to time,  we  supplement  the  marketing  and  advertising
programs  conducted by Carlson  Worldwide  through local radio,  newspaper,  and
magazine  advertising  media and sponsorship of community events. In conjunction
with Carlson  Worldwide,  we maintain a "frequent  diner"  program that includes
awards of food,  merchandise,  and travel to frequent  diners  based upon points
accumulated through purchases.

     As a  franchisee  of Carlson  Worldwide,  we are able to utilize  the trade
names,  service  marks,  trademarks,  emblems,  and indicia of origin of Carlson
Worldwide,  including the marks T.G.I. Friday's(R) and Friday's(R). We advertise
in  various  media  utilizing  these  marks  to  attract  new  customers  to our
restaurants.

                                       8
<PAGE>
REDFISH RESTAURANTS

     Our  in-house  marketing  department  develops  advertising  and  marketing
programs for our Redfish restaurants. We develop these programs with an emphasis
on building  awareness of the  "Redfish"  brand in the  communities  in which we
operate  Redfish   restaurants  and  generating  sales  for  those  restaurants.
Advertising and marketing  campaigns have included radio and print  advertising,
as well as  point-of-sale  marketing  promotions.  We  conduct  a  comprehensive
advertising and public relations  campaign in advance of each Redfish restaurant
grand opening.

EXPANSION OF OPERATIONS

     Since 1990, we have acquired 36 existing  T.G.I.  Friday's  restaurants  as
well as the exclusive  rights to develop  restaurants in specified  territories.
The acquisitions include 26 restaurants in California, three in Arizona, and one
in each of Colorado, Kansas, Missouri, Nebraska, Nevada, Oregon, and Washington.
We also have developed 31 new T.G.I. Friday's  restaurants.  These include 13 in
California,  six in Arizona,  three in each of  Washington  and  Nevada,  two in
Texas,  and one in each of  Colorado,  New  Mexico,  Kansas,  and  Missouri.  We
subsequently  sold five of the  restaurants we acquired in California,  which we
continue to manage,  and sold eight restaurants in Colorado,  Nebraska,  Oregon,
and Washington. In addition, we developed one Friday's Front Row Sports Grill in
Portland,  Oregon,  which we closed in June 1998.  In May 1998,  we acquired six
T.G.I. Friday's restaurants in northern California along with the related T.G.I.
Friday's  development  agreement.  In 1997, we acquired a 52% ownership interest
and in 1999 we acquired the remaining minority interest in Redfish America, LLC,
which  currently  operates our Redfish  Seafood  Grill and Bar  restaurants.  We
opened 11 T.G.I. Friday's and two Redfish restaurants during 1999.

     We plan to expand our  restaurant  operations  through the  development  of
additional restaurants in our existing development territories.  We opened three
T.G.I.  Friday's restaurants during the first quarter of fiscal 2000. We plan to
open an additional nine T.G.I.  Friday's  restaurants and one Redfish restaurant
during the remainder of 2000 and to meet or exceed our development  requirements
thereafter.  We have signed  leases or purchase  agreements  for six  additional
restaurants  scheduled  to be  developed  during  2000.  We have  identified  10
additional  sites for  development  in 2001 and currently are  negotiating  site
acquisitions for these restaurants. We currently are considering other sites for
additional restaurants,  but have not entered into leases or purchase agreements
for such sites.

     The opening of new restaurants will depend on our ability to

     *    locate    suitable   sites   in   terms   of   favorable    population
          characteristics,  density and  household  income  levels,  visibility,
          accessibility,   traffic  volume,   proximity  to  demand   generators
          (including  shopping  malls,  lodging,  and  office  complexes),   and
          proximity to potential competition;

     *    obtain financing for  construction,  tenant  improvements,  furniture,
          fixtures, equipment, and other expenditures;

     *    negotiate acceptable leases or terms of purchase;

     *    secure zoning, environmental,  health and similar regulatory approvals
          and liquor licenses;

     *    recruit and train qualified personnel; and

     *    manage successfully the rate of expansion and expanded operations.

     The  opening  of  new  restaurants   also  may  be  affected  by  increased
construction costs and delays resulting from governmental  regulatory approvals,
strikes or work stoppages,  adverse weather conditions, and various acts of God.
Newly  opened  restaurants  may operate at a loss for a period  following  their
opening.  The  length of this  period  will  depend  upon a number  of  factors,
including the time of year the restaurant is opened, sales volume, and operating
costs.

     The  acquisition  of existing  restaurants  will depend upon our ability to
identify and purchase  restaurants that meet our criteria on satisfactory  terms
and  conditions.  There  can be no  assurance  that  we will  be  successful  in
achieving  our  expansion  goals  through  the  development  or  acquisition  of
additional  restaurants or that any additional

                                       9
<PAGE>
restaurants that are developed or acquired will be profitable.  In addition, the
opening of additional  restaurants in an existing  market may have the effect of
drawing customers from and reducing the sales volume of existing restaurants.

DEVELOPMENT AGREEMENTS

     We are a party to four development agreements with Carlson Worldwide.  Each
development agreement grants us the exclusive right to develop additional T.G.I.
Friday's  restaurants  in a  specified  territory  and  obligates  us to develop
additional  T.G.I.  Friday's  restaurants in that territory in accordance with a
specified development schedule.

     We  own  the  exclusive  rights  to  develop  additional  T.G.I.   Friday's
restaurants in territories  encompassing most of the states of Arizona,  Nevada,
and New Mexico,  Northern California,  and the Kansas City, Kansas, Kansas City,
Missouri,  and E1 Paso,  Texas  metropolitan  areas.  We also have the exclusive
right,  together with Carlson Worldwide,  to develop additional T.G.I.  Friday's
restaurants in the Southern California territory.

     The  following   table  sets  forth   information   regarding  our  minimum
requirements  to  open  new  T.G.I.   Friday's  restaurants  under  our  current
development  agreements as well as the number of existing restaurants in each of
our development territories.

<TABLE>
<CAPTION>
                           Southern     Northern
                          California   California   Southwest      Midwest
Year                     Territory(1)   Territory  Territory(2)  Territory(3)  Total
----                     ------------   ---------  ------------  ------------  -----
<S>                          <C>          <C>         <C>          <C>         <C>
2000....................        4            4            2            1          11
2001....................        4            6            1            1          12
2002....................        4            4            1            1          10
2003....................        3            3         (TBD)        (TBD)          6
                             ----         ----        -----        -----        ----
     Total..............       15           17            4            3          39
                             ====         ====        =====        =====        ====
Existing Restaurants....       26            6(4)        15(5)         4          51
</TABLE>

----------
(1)   Carlson Worldwide also may develop restaurants in this region.
(2)   Includes the states of  Arizona,  Nevada,  and New Mexico and the E1 Paso,
      Texas metropolitan area.
(3)   Includes metropolitan Kansas City, Kansas and Kansas City, Missouri.
(4)   Does not include  five  restaurants  managed  in the  Northern  California
      Territory.
(5)   Does not include one restaurant managed in the Southwest Territory.
(TBD) To be determined  by  negotiation  between  Carlson Worldwide and the
      Company during 2002.

     Each development  agreement gives Carlson Worldwide certain remedies in the
event that we fail to comply in a timely manner with our schedule for restaurant
development,  if we otherwise  default  under the  development  agreement or any
franchise  agreement relating to a restaurant within that development  territory
as described below, or if our officers or directors  breach the  confidentiality
or noncompete provisions of the development agreement. The remedies available to
Carlson  Worldwide include (a) the termination of our exclusive right to develop
restaurants  in  the  related  territory;  (b) a  reduction  in  the  number  of
restaurants we may develop in the related territory;  (c) the termination of the
development  agreement;  and (d) an acceleration of the schedule for development
of restaurants in the related territory pursuant to the development agreement.

FRANCHISE AGREEMENTS

     We enter into or assume a separate franchise agreement with respect to each
T.G.I.  Friday's restaurant that we acquire or develop pursuant to a development
agreement.  Each franchise agreement grants us an exclusive license to operate a
T.G.I.  Friday's restaurant within a designated geographic area, which generally
is a three-mile  limit from each  restaurant,  and  obligates us to operate such
restaurant in accordance with the requirements and specifications established by
Carlson Worldwide relating to food preparation and quality of service as well as
general operating procedures,  advertising,  records maintenance, and protection
of  trademarks.  The franchise  agreements  restrict our ability to transfer our
interest  in our T.G.I.  Friday's  restaurants  without  the  consent of Carlson
Worldwide.

                                       10
<PAGE>
     Each franchise  agreement  requires us to pay Carlson  Worldwide an initial
franchise fee, generally in the amount of $50,000. In addition, we are obligated
to pay Carlson  Worldwide a royalty in the amount of 4% of the gross  revenue as
defined in the franchise  agreement for each restaurant.  Royalty payments under
these  agreements  totaled  $4,120,000,  during fiscal 1997,  $3,929,000  during
fiscal 1998, and $4,830,000  during fiscal 1999.  Each franchise  agreement also
requires  us to  spend at least  2% of  gross  sales on local  marketing  and to
contribute  up to  4% of  gross  sales  to a  national  marketing  pool  Carlson
Worldwide  administers.  All funds contributed in excess of 2% of gross sales to
the  national  advertising  fund may be credited  against the local  advertising
requirement.  Carlson Worldwide  required us as well as all other franchisees to
contribute  1.9% of gross sales in fiscal 1998 and 2.1% of gross sales in fiscal
1999 to the national  marketing  pool.  Marketing  expenses  totaled  $1,919,000
during fiscal 1997,  $1,805,000 during fiscal 1998, and $2,733,000 during fiscal
1999.

     A default  under one of our  franchise  agreements  will not  constitute  a
default  under  any of our  other  franchise  agreements.  A  default  under the
franchise  agreement for a restaurant in a development  territory may,  however,
constitute  a  default  under the  development  agreement  for that  development
territory.

GOVERNMENT REGULATION

     Each of our restaurants is subject to licensing and regulation by state and
local departments and bureaus of alcohol control, health,  sanitation,  and fire
and to periodic review by the state and municipal authorities for areas in which
the  restaurants  are located.  In  addition,  we are subject to local land use,
zoning,  building,  planning,  and traffic  ordinances  and  regulations  in the
selection and acquisition of suitable sites for  constructing  new  restaurants.
Delays in obtaining,  or denials of, or revocation or temporary  suspension  of,
necessary  licenses or approvals  could have a material  adverse impact upon our
development of restaurants.

     We also are subject to regulation under the Fair Labor Standards Act, which
governs such matters as working conditions and minimum wages. An increase in the
minimum wage rate or changes in tip-credit  provisions,  employee  benefit costs
(including costs  associated with mandated health  insurance  coverage) or other
costs associated with employees could adversely affect our company.

     In addition, we are subject to the Americans with Disabilities Act of 1990.
That act may require us to make  certain  installations  in new  restaurants  or
renovations to existing restaurants to meet federally mandated requirements.  To
our knowledge, we are in compliance in all material respects with all applicable
federal, state, and local laws affecting our business.

COMPETITION

     The  restaurant  business  is highly  competitive  with  respect  to price,
service,  food type,  and  quality.  In  addition,  restaurants  compete for the
availability of restaurant personnel and managers.  Our restaurants compete with
a large number of other restaurants,  including national and regional restaurant
chains and franchised  restaurant systems,  many of which have greater financial
resources,  more experience,  and longer operating histories than we do. We also
compete with locally owned, independent restaurants.

     Our  casual  dining  business  also  competes  with  various  types of food
businesses,  as well as other businesses,  for restaurant locations.  We believe
that site selection is one of the most crucial decisions  required in connection
with the development of restaurants.  As the result of the presence of competing
restaurants  in  our  development  territories,  our  management  devotes  great
attention to  obtaining  what they  believe  will be premium  locations  for new
restaurants, although we cannot assure you that they will be successful in these
efforts.

EMPLOYEES

     We employ  approximately 2,450 persons on a full-time basis, of whom 60 are
corporate management and staff personnel and 2,390 are restaurant personnel.  We
also employ  approximately 4,400 part-time  employees.  Except for corporate and
management  personnel,  we generally pay our  employees on an hourly  basis.  We
employ an average of  approximately  90 full-time and part-time hourly employees
at each of our  restaurants.  None of our  employees are covered by a collective
bargaining  agreement with us. We have never  experienced a major work stoppage,
strike,  or labor  dispute.  We consider our relations  with our employees to be
good.

                                       11
<PAGE>
EXECUTIVE OFFICERS

     The following table sets forth certain information  regarding our executive
officers:

          Name            Age                     Position
          ----            ---                     --------
Bart A. Brown, Jr......   68    President, Chief Executive Officer, and Director
William G. Shrader.....   52    Executive Vice President, Chief Operating
                                  Officer, and Director
James Yeager...........   49    Vice President - Finance, Secretary, and
                                  Treasurer

     BART A. BROWN, JR. has served as our President and Chief Executive  Officer
and as a director since December 1996. Mr. Brown was affiliated  with Investcorp
International,  N.A., an international  investment banking firm, from April 1996
until  December  1996.  Mr. Brown  served as the  Chairman  and Chief  Executive
officer of Color Tile,  Inc. at the request of Investcorp  International,  Inc.,
which owned all of that company's  common stock,  from September 1995, which was
shortly  after Color Tile,  Inc.  filed  under  Chapter 11 of the United  States
Bankruptcy  Code, until March 1996. Mr. Brown served as Chairman of the Board of
The Circle K  Corporation  from June 1990,  shortly after that company filed for
reorganization  under Chapter 11 of the United  States  Bankruptcy  Code,  until
September  1995.  From September 1994 until  September 1996, Mr. Brown served as
the Chairman and Chief Executive Officer of Spreckels Industries, Inc. Mr. Brown
engaged in the private  practice of law from 1963 through 1990 after seven years
of employment with the Internal Revenue Service.

     WILLIAM G. (BILL) SHRADER has served as our Executive Vice  President,  and
Chief Operating Officer and as a director since March 1999. Prior to joining our
company,  Mr. Shrader was Senior Vice President of Marketing for Tosco Marketing
Company from February 1997 to March 1999. From August 1992 to February 1997, Mr.
Shrader  served  in  several  capacities  at Circle K  Stores,  Inc.,  including
President of the Arizona  Region,  President of the Petroleum  Products/Services
Division, Vice President of Gasoline Operations,  and Vice President of Gasoline
Marketing. Mr. Shrader began his career in 1976 at The Southland Corporation and
departed in 1992 as National Director of Gasoline Marketing.

     JAMES YEAGER has served as our Vice  President-Finance  since  January 1999
and as our Secretary and  Treasurer  since April 1998.  Mr. Yeager served as our
Corporate  Controller  from June 1997 to  January  1999.  Prior to  joining  our
company, Mr. Yeager was Chief Financial Officer of Restaurants of America, Inc.,
a multiple  concept  restaurant  company.  Prior to that, he was Chief Financial
Officer of an engineering and high-tech  manufacturing  company,  a multi-office
law firm, a 160 unit chain of retail drug stores, a 60 unit chain of retail drug
stores,  and a full-service real estate investment and management  company.  Mr.
Yeager began his career as a manager and a partner in a local public  accounting
firm in Dallas, Texas where he worked from 1972 to 1983.

                             SPECIAL CONSIDERATIONS

     YOU SHOULD  CAREFULLY  CONSIDER THE FOLLOWING  FACTORS,  IN ADDITION TO THE
OTHER INFORMATION IN THIS REPORT, IN EVALUATING OUR COMPANY AND OUR BUSINESS.

WE DEPEND ON CARLSON WORLDWIDE.

     We currently operate 51 T.G.I.  Friday's  restaurants as a T.G.I.  Friday's
franchisee.  We also manage an additional six T.G.I.  Friday's  restaurants  for
those restaurants' franchisees. As a result of the nature of franchising and our
franchise agreements with Carlson Worldwide, our long-term success depends, to a
significant extent, on

     *    the continued vitality of the T.G.I.  Friday's  restaurant concept and
          the overall success of the T.G.I. Friday's system;

     *    the ability of Carlson  Worldwide  to identify and react to new trends
          in the restaurant industry,  including the development of popular menu
          items;

     *    the ability of Carlson  Worldwide  to develop  and pursue  appropriate
          marketing  strategies  in  order  to  maintain  and  enhance  the name
          recognition,  reputation,  and market  perception  of T.G.I.  Friday's
          restaurants;

     *    the goodwill associated with the T.G.I. Friday's trademark;

                                       12
<PAGE>
     *    the  quality,  consistency,  and  management  of  the  overall  T.G.I.
          Friday's system; and

     *    the  successful  operation  of T.G.I.  Friday's  restaurants  owned by
          Carlson Worldwide and other T.G.I. Friday's franchisees.

     We  believe  that  the  experience,  reputation,  financial  strength,  and
franchisee  support of Carlson  Worldwide  represent  positive  factors  for our
business.  We have no control,  however,  over the  management  or  operation of
Carlson  Worldwide or other T.G.I.  Friday's  franchisees.  A variety of factors
affecting Carlson Worldwide or the T.G.I. Friday's concept could have a material
adverse effect on our business. These factors include the following:

     *    any business reversals that Carlson Worldwide may encounter;

     *    a failure by Carlson Worldwide to promote the T.G.I.  Friday's name or
          restaurant concept;

     *    the  inability  or  failure  of  Carlson   Worldwide  to  support  its
          franchisees, including our company;

     *    the failure to operate  successfully the T.G.I.  Friday's  restaurants
          that Carlson Worldwide itself owns; or

     *    negative  publicity  with  respect to Carlson  Worldwide or the T.G.I.
          Friday's name.

The future results of the  operations of our  restaurants  will not  necessarily
reflect the results achieved by Carlson Worldwide or its other franchisees,  but
will depend upon such factors as the  effectiveness  of our management team, the
locations of our restaurants, and the operating results of those restaurants.

FRANCHISE AGREEMENTS IMPOSE RESTRICTIONS AND OBLIGATIONS ON OUR BUSINESS.

     Our franchise  agreement  with Carlson  Worldwide for each T.G.I.  Friday's
restaurant that we own generally requires us to

     *    pay an initial franchise fee of $50,000;

     *    pay royalties of 4% of the restaurant's gross sales; and

     *    spend up to 4% of the restaurant's  gross sales on advertising,  which
          may include contributions to a national marketing pool administered by
          Carlson Worldwide.

During fiscal 1999,  Carlson Worldwide  required us and its other franchisees to
contribute  2.1% of gross sales to the national  marketing  pool. We must pay or
accrue  these  amounts   regardless  of  whether  or  not  our  restaurants  are
profitable.  In addition,  the  franchise  agreements  require us to operate our
T.G.I.   Friday's   restaurants  in  accordance   with  the   requirements   and
specifications   established  by  Carlson  Worldwide.   These  requirements  and
specifications relate to a variety of factors, including the following:

     *    the  exterior  and  interior   design,   decor,   and  furnishings  of
          restaurants;

     *    menu selection;

     *    the preparation of food products;

     *    quality of service;

     *    general operating procedures;

     *    advertising;

     *    maintenance of records; and

     *    protection of trademarks.

     If we fail to satisfy  these  requirements  or otherwise  default under the
franchise  agreements,  we could be subject to  potential  damages for breach of
contract  and could  lose our  franchise  rights  for some or all of our  T.G.I.
Friday's restaurants. We also could lose our rights to develop additional T.G.I.
Friday's restaurants.

                                       13
<PAGE>
WE MAY NOT BE ABLE TO COMPLY  WITH ALL OF THE  REQUIREMENTS  OF OUR  DEVELOPMENT
AGREEMENTS.

     Our  development  agreements with Carlson  Worldwide  require us to open at
least 39 additional T.G.I.  Friday's restaurants by December 31, 2003. We opened
three new T.G.I.  Friday's  restaurants during the first quarter of fiscal 2000.
One of these  restaurants  fulfilled  our  development  requirements  for  1999.
Accordingly,  we must  develop 37  additional  T.G.I.  Friday's  restaurants  by
December 31, 2003.  The  acquisition  of  restaurants  does not  constitute  the
opening of new restaurants under the development agreements.  We may not be able
to secure sufficient restaurant sites that we believe are suitable or we may not
be able to develop restaurants on sites on terms and conditions that we consider
favorable in order to satisfy the  requirements of the  development  agreements.
The development  agreements give Carlson Worldwide certain remedies in the event
that we fail to comply with the development schedule in a timely manner or if we
breach  the   confidentiality  or  noncompete   provisions  of  the  development
agreements.  These remedies include, under certain  circumstances,  the right to
reduce the number of  restaurants  we may  develop  in the  related  development
territory or to terminate  our  exclusive  right to develop  restaurants  in the
related development territory.

     At our request, Carlson Worldwide from time to time has agreed to amend the
development  schedules  to extend the time by which we were  required to develop
new  restaurants  in  certain  development   territories.   We  requested  those
amendments  because  we were  unable  to secure  sites  that we  believed  to be
attractive on favorable terms and conditions.  Carlson  Worldwide may decline to
extend the development schedule in the future if we experience any difficulty in
satisfying the schedule for any reason, including a shortage of capital.

WE FACE RISKS ASSOCIATED WITH THE EXPANSION OF OUR OPERATIONS.

     The success of our business  depends on our ability to expand the number of
our restaurants,  either by developing or acquiring additional restaurants.  Our
success  also  depends on our  ability to operate  and manage  successfully  our
growing operations. Our ability to expand successfully will depend upon a number
of factors, including the following:

     *    the  availability  and  cost  of  suitable  restaurant  locations  for
          development;

     *    the availability of restaurant acquisition opportunities;

     *    the hiring,  training,  and  retaining of  additional  management  and
          restaurant personnel;

     *    the availability of adequate financing;

     *    the continued development and implementation of management information
          systems;

     *    competitive factors; and

     *    general economic and business conditions.

     The rate at which we will be able to increase the number of  restaurants we
operate will vary  depending  upon whether we acquire  existing  restaurants  or
develop new restaurants.  The acquisition of existing  restaurants  depends upon
our  ability to identify  and  acquire  restaurants  on  satisfactory  terms and
conditions. The opening of new restaurants depends upon our ability to

     *    locate suitable sites in terms of

          -    favorable population characteristics,
          -    density and household income levels,
          -    visibility, accessibility, and traffic volume,
          -    proximity  to  demand   generators,   including  shopping  malls,
               lodging, and office complexes, and
          -    potential competition;

     *    obtain financing for  construction,  tenant  improvements,  furniture,
          fixtures, and equipment;

     *    negotiate acceptable leases or terms of purchase;

     *    secure liquor licenses and zoning, environmental,  health, and similar
          regulatory approvals;

     *    recruit and train qualified personnel; and

                                       14
<PAGE>
     *    manage successfully the rate of expansion and expanded operations.

     The  opening  of  new  restaurants   also  may  be  affected  by  increased
construction costs and delays resulting from governmental  regulatory approvals,
strikes or work stoppages,  adverse weather conditions, and various acts of God.
Newly  opened  restaurants  may operate at a loss for a period  following  their
initial opening. The length of this period will depend upon a number of factors,
including

     *    the time of year the restaurant is opened,

     *    sales volume, and

     *    our ability to control costs.

     We may not successfully achieve our expansion goals. Additional restaurants
that we develop or acquire may not be  profitable.  In addition,  the opening of
additional  restaurants  in an  existing  market  may have the effect of drawing
customers  from and reducing the sales  volume of our  existing  restaurants  in
those markets.

WE MAY NEED ADDITIONAL CAPITAL.

     The development of new restaurants requires funds for construction,  tenant
improvements,  furniture,  fixtures,  equipment, training of employees, permits,
initial  franchise fees, and additional  expenditures.  We expect that cash flow
from  operations,  together with  financing  commitments,  will be sufficient to
develop the nine T.G.I.  Friday's  restaurants  that our development  agreements
require us to open by the end of 2000 and the one new Redfish restaurant that we
plan to develop  during 2000.  We will require  funds to develop the  additional
restaurants that our development agreements require us to open after 2000 and to
pursue  any  additional   restaurant   development  or  restaurant   acquisition
opportunities. In the future, we may seek additional equity or debt financing to
provide  funds so that we can develop or acquire  additional  restaurants.  Such
financing may not be available or may not be available on satisfactory terms. If
financing is not available on  satisfactory  terms,  we may be unable to satisfy
our  obligations  under our  development  agreements  with Carlson  Worldwide or
otherwise to expand our restaurant  operations.  See Item 1, "Business - Special
Considerations  - We may not be able to comply with all of the  requirements  of
our  development  agreements."  While debt  financing will enable us to add more
restaurants  than we  otherwise  would be able to do, debt  financing  increases
expenses and we must repay the debt regardless of our operating results.  Future
equity financings could result in dilution to our stockholders.

WE HAVE SIGNIFICANT BORROWINGS.

     We have incurred  significant  indebtedness  in connection  with our growth
strategy.  Our growth  strategy  has  focused  on  restaurant  acquisitions  and
internal restaurant development.  As of December 27, 1999, we had long-term debt
of  approximately  $33.3 million and a working capital deficit of $16.6 million.
Our borrowings will result in interest expense of approximately  $4.1 million in
2000 and $5.1 million in 2001, based on currently  prevailing interest rates and
assuming the  outstanding  indebtedness  is paid in accordance with the existing
payment schedules without any prepayments or additional borrowings. We must make
these interest payments  regardless of our operating results.  Currently,  49 of
our  restaurants  are pledged to secure our debt  obligations.  We also may seek
additional equity or debt financing in the future to provide funds to develop or
acquire  additional  restaurants.  See "Risk  Factors  - We may need  additional
capital."

WE FACE RISKS THAT AFFECT THE RESTAURANT INDUSTRY IN GENERAL.

     The ownership and operation of restaurants  may be affected by a variety of
factors over which we have no control. These factors include the following:

     *    adverse  changes in national,  regional,  or local  economic or market
          conditions;

     *    increased costs of labor or food products;

     *    fuel shortages and price increases;

     *    competitive factors;

     *    changing consumer tastes, habits, and spending priorities;

     *    the cost and availability of insurance coverage;

     *    management problems;

     *    uninsured losses;

                                       15
<PAGE>
     *    the number, density, and location of competitors;

     *    changing demographics;

     *    changing traffic patterns;

     *    limited alternative uses for properties and equipment;

     *    changes in government regulation; and

     *    weather conditions.

     Third  parties  may file  lawsuits  against  us  based  on  discrimination,
personal  injury,  claims for  injuries or damages  caused by serving  alcoholic
beverages  to an  intoxicated  person  or to a  minor,  or  other  claims.  As a
multi-unit  restaurant operator, we can be adversely affected by publicity about
food quality,  illness, injury, or other health and safety concerns or operating
issues at one restaurant or a limited  number of restaurants  operated under the
same name, whether or not we actually own or manage the restaurants in question.
We cannot predict any of these factors with any degree of certainty.  Any one or
more of these factors could have a material adverse effect on our business.

WE FACE INTENSE COMPETITION.

     The  restaurant  business  is highly  competitive  with  respect  to price,
service,  and food type and  quality.  Restaurant  operators  also  compete  for
attractive restaurant sites and qualified restaurant personnel and managers. Our
restaurants compete with a large number of other restaurants, including national
and regional  restaurant chains and franchised  restaurant  systems,  as well as
with  locally  owned,  independent  restaurants.  Many of our  competitors  have
greater financial  resources,  more experience,  and longer operating  histories
than we have.

WE DEPEND UPON OUR SENIOR MANAGEMENT.

     Our  success  depends,  in large  part,  upon the  services  of our  senior
management.  The loss of the  services of any  members of our senior  management
team could have a material and adverse effect on our business.

WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION.

     Various federal, state, and local laws affect our business. The development
and operation of restaurants depend to a significant extent on the selection and
acquisition  of suitable  sites.  These  sites are subject to zoning,  land use,
environmental,  traffic,  and other regulations of state and local  governmental
agencies.  City  ordinances or other  regulations,  or the  application  of such
ordinances  or  regulations,  could  impair our ability to  construct or acquire
restaurants in desired locations and could result in costly delays. In addition,
restaurant operations are subject to

     *    licensing and  regulation by state and local  departments  relating to
          health, sanitation, safety standards, and fire codes;

     *    federal  and state  labor  laws,  including  applicable  minimum  wage
          requirements,  tip credit provisions,  overtime regulations,  workers'
          compensation  insurance rates,  unemployment and other taxes,  working
          and safety conditions, and citizenship requirements; and

     *    state and local licensing of the sale of alcoholic beverages.

     The  delay or  failure  to obtain  or  maintain  any  licenses  or  permits
necessary for operations  could have a material  adverse effect on our business.
In addition,  an increase in the minimum wage rate,  employee  benefit costs, or
other costs  associated with employees could adversely  affect our business.  We
also are subject to the  Americans  with  Disabilities  Act of 1990 that,  among
other things,  may require us to install certain fixtures or  accommodations  in
new restaurants or to renovate existing  restaurants to meet federally  mandated
requirements.

     Sales of alcoholic  beverages  represent an important source of revenue for
each of our  restaurants.  The  temporary  suspension  or permanent  loss or the
inability to maintain a liquor license for any restaurant  would have an adverse
effect on the operations of that restaurant. We do not plan to open a restaurant
in any  location  for which we  believe  we cannot  obtain or  maintain a liquor
license.

                                       16
<PAGE>
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

     Historically,  the market price of our common stock has been  volatile.  In
the  future,  the  market  price of our  common  stock  will be  subject to wide
fluctuations as a result of a variety of factors, including the following:

     *    quarterly  variations  in our  operating  results  or  those  of other
          restaurant companies;

     *    changes in analysts' estimates of our financial performance;

     *    changes in national and regional  economic  conditions,  the financial
          markets, or the restaurant industry;

     *    natural disasters; or

     *    other   developments   affecting  our  business  or  other  restaurant
          companies.

     The trading volume of our common stock has been limited, which may increase
the volatility of the market price for our stock. In addition,  the stock market
has  experienced  extreme price and volume  fluctuation  in recent  years.  This
volatility  has had a  significant  effect on the  market  prices of  securities
issued by many  companies for reasons not  necessarily  related to the operating
performances of these companies.

THE EXISTENCE OF STOCK  OPTIONS AND WARRANTS MAY  ADVERSELY  AFFECT THE TERMS OF
FUTURE FINANCINGS.

     Stock  options to acquire an aggregate of 2,439,000  shares of common stock
currently are outstanding. An additional 673,466 have been reserved for issuance
upon  exercise of options that may be granted  under our  existing  stock option
plans. In addition, warrants to acquire 231,277 shares of common stock currently
are outstanding.  During the terms of those options and warrants, the holders of
those  securities  will have the  opportunity  to profit from an increase in the
market  price of our common  stock.  The  existence  of options and warrants may
adversely  affect the terms on which we can obtain  additional  financing in the
future,  and the  holders of options  and  warrants  can be expected to exercise
those options and warrants at a time when, in all  likelihood,  we would be able
to obtain  additional  capital by offering  shares of common stock on terms more
favorable  to it  than  those  provided  by the  exercise  of such  options  and
warrants.

SALES OF LARGE NUMBERS OF SHARES COULD ADVERSELY  AFFECT THE PRICE OF OUR COMMON
STOCK.

     Sales of substantial  amounts of common stock in the public market, or even
the potential for such sales,  could adversely affect  prevailing  market prices
for our common stock and could adversely affect our ability to raise capital. As
of March 20, 2000, there were outstanding 10,029,426 shares of our common stock.
Of these shares,  8,044,143 shares are freely  transferable  without restriction
under the securities  laws,  unless they are held by our  "affiliates,"  as that
term is defined in the securities laws. The remaining  1,985,283 of common stock
currently  outstanding are  "restricted  securities," as that term is defined in
Rule 144 under the securities laws, and may be sold only in compliance with Rule
144,  pursuant to  registration  under the  securities  laws,  or pursuant to an
exemption  from  registration.  Affiliates  also are  subject  to certain of the
resale  limitations  of Rule 144.  Generally,  under Rule 144,  each  person who
beneficially owns restricted  securities with respect to which at least one year
has elapsed  since the later of the date the shares were acquired from us or one
of  our  affiliates  may,  every  three  months,   sell  in  ordinary  brokerage
transactions  or to market makers an amount of shares equal to the greater of 1%
of our  then-outstanding  common stock or the average  weekly trading volume for
the four weeks prior to the proposed sale of such shares. Currently, most of the
restricted  shares are  eligible  for sale under Rule 144 or under  registration
statements that we have filed to permit resales of the restricted shares.

WE DO NOT ANTICIPATE THAT WE WILL PAY DIVIDENDS.

     We have  never  paid  any  dividends  on our  common  stock,  and we do not
anticipate  that we will pay dividends in the foreseeable  future.  We intend to
apply  any  earnings  to the  expansion  and  development  of our  business.  In
addition,  the terms of our credit facilities limit our ability to pay dividends
on our common stock.

                                       17
<PAGE>
ITEM 2. PROPERTIES

     In December  1998, we entered into a five-year  lease for space to serve as
our  corporate  offices.  We believe  that the leased  space is adequate for our
current  and  reasonably  anticipated  needs  and that we will be able to secure
adequate space upon the expiration of the lease.

     We also lease space for all of our  restaurants.  The  initial  lease terms
range from 10 to 20 years and contain  renewal  options for up to 20 years.  The
leases typically provide for a fixed rental plus percentage rental.

ITEM 3. LEGAL PROCEEDINGS

     From  time  to  time,  we are  subject  to  routine  contract,  negligence,
employment related, and other litigation in the ordinary course of business.  We
do not believe  that we are subject to any pending  litigation  that will have a
material  adverse  effect on our  business or  financial  condition  that is not
otherwise reserved for in our consolidated financial statements.

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

     Not applicable.

                                       18
<PAGE>
                                     PART II

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

     Our common  stock has been quoted on the Nasdaq  National  Market under the
symbol  "MAIN"  since  October  30,  1992.  The  following  table sets forth the
quarterly  high  and low  sales  prices  of our  common  stock  for the  periods
indicated as reported by the Nasdaq Stock Market.

                                                             High        Low
                                                             -----      -----
1998
    First Quarter........................................    $4.00      $2.56
    Second Quarter.......................................     3.94       3.13
    Third Quarter........................................     4.31       3.31
    Fourth Quarter.......................................     3.88       2.94
1999
    First Quarter........................................    $3.63      $2.97
    Second Quarter.......................................     3.88       3.00
    Third Quarter........................................     4.00       3.13
    Fourth Quarter.......................................     3.56       3.03
2000
    First Quarter (through March 20, 2000)...............    $3.47      $3.00

     On March 20, 2000, there were 893 holders of record of our common stock. On
March 20,  2000,  the  closing  sale  price of our  common  stock on the  Nasdaq
National Market was $3.13 per share.

     We have never declared or paid any cash dividends.  We intend to retain any
earnings to fund the growth of our  business  and do not  anticipate  paying any
cash  dividends  in the  foreseeable  future.  In addition,  our  existing  debt
obligations prohibit us from paying cash dividends.

                                       19
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following table sets forth selected consolidated financial data for our
company for the periods indicated.  The selected consolidated financial data for
each of the five fiscal  years in the period  ending  December 27, 1999 has been
derived from our consolidated  financial statements,  which have been audited by
Arthur  Andersen  LLP,  independent  accountants.  These data  should be read in
conjunction with, and are qualified by reference to, our consolidated  financial
statements  and the  notes  thereto  and Item 7,  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Report.

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
                                                -------------------------------------------------------------
                                                              (In thousands, except per share amounts)
                                                 Dec. 25,     Dec. 30,     Dec. 29,     Dec. 28,     Dec. 27,
                                                  1995         1996         1997         1998         1999
                                                ---------    ---------    ---------    ---------    ---------
<S>                                             <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenue .....................................   $ 119,508    $ 122,563    $ 107,018    $ 114,242    $ 140,294
Restaurant operating expenses:
   Cost of sales ............................      34,005       35,089       30,995       33,242       39,960
   Payroll and benefits .....................      36,769       38,858       31,907       33,701       42,405
   Depreciation and amortization ............       4,353        4,586        3,265        3,730        4,664
   Other operating expenses .................      35,250       36,944       30,589       31,004       38,923
                                                ---------    ---------    ---------    ---------    ---------
     Total restaurant operating expenses ....     110,377      115,477       96,756      101,677      125,952
                                                ---------    ---------    ---------    ---------    ---------
Income from restaurant operations ...........       9,131        7,086       10,262       12,565       14,342
   Amortization of intangibles ..............       1,331        1,450          953          983          990
   General and administrative expenses ......       4,410        4,388        4,559        4,906        5,955
   Preopening expenses(1) ...................          --           --          287          661        2,228
   New manager training expenses ............          --           --          562          731        1,748
   Non-recurring items ......................          --       20,208       (2,390)         (17)         494
   Management fee income ....................          --           --         (979)      (1,082)        (865)
                                                ---------    ---------    ---------    ---------    ---------
Operating income (loss) .....................       3,390      (18,960)       7,270        6,383        3,792
   Interest expense and other, net...........       4,424        3,206        2,466        2,218        2,604
                                                ---------    ---------    ---------    ---------    ---------
Income (loss)  before income taxes,
  cumulative effect of change in accounting
   principle, and extraordinary item ........      (1,034)     (22,166)       4,804        4,165        1,188
Provision for income taxes ..................          --           --           --           --           50
                                                ---------    ---------    ---------    ---------    ---------
Net income (loss) before cumulative effect
  of change in accounting principle and
  extraordinary item ........................   $  (1,034)   $ (22,166)   $   4,804    $   4,165    $   1,138
                                                =========    =========    =========    =========    =========
Net income (loss)(1)(2) .....................   $  (1,034)   $ (22,166)   $   3,166    $   4,165    $     970
                                                =========    =========    =========    =========    =========
DILUTED EARNINGS PER SHARE:
   Net income (loss) before cumulative effect
     of change in accounting principle and
     extraordinary item .....................   $   (0.22)   $   (2.73)   $    0.47    $    0.39    $    0.11
   Net income (loss)(1)(2) ..................   $   (0.22)   $   (2.73)   $    0.31    $    0.39    $    0.09
Weighted average shares outstanding - diluted       4,621        8,110       10,098       10,608       10,407

BALANCE SHEET DATA:
   Working capital ..........................   $  (7,848)   $  (1,343)   $  (1,330)   $  (2,807)   $ (16,652)
   Total assets .............................      88,605       70,848       61,168       70,255       86,525
   Long-term debt, net of current portion ...      31,204       33,809       24,308       28,264       31,513
   Stockholders' equity .....................      37,261       16,585       22,203       26,372       27,383
</TABLE>

----------
(1)  Fiscal 1999 includes a charge of $168,000,  or $0.02 per share,  due to the
     cumulative effect of change in accounting principle related to the adoption
     of SOP 98-5. See Note 3 to our consolidated financial statements.
(2)  Fiscal 1997  includes an  extraordinary  loss from debt  extinguishment  of
     $1,638,000, or $0.16 per share.

                                       20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

     We commenced our restaurant  operations in May 1990 with the acquisition of
four T.G.I.  Friday's  restaurants  in Arizona and Nevada.  During the past nine
years, we have grown through acquisitions and development of new restaurants. We
currently own 57 restaurants and manage an additional six restaurants.

     During 1996,  we had a change in  management  and  implemented  a long-term
business strategy to enhance our financial  position,  to place more emphasis on
our casual  dining  business  in  certain  designated  areas,  and to dispose of
underperforming assets.

     The  first  step  was  to  strengthen  our  financial  position.  This  was
accomplished by (i) the sale of 1,250,000  shares of common stock for $2,500,000
through a private  placement  transaction in January 1997; (ii) the sale of five
restaurants  in northern  California in January 1997 for  $10,800,000,  of which
$8,000,000  in  proceeds  were used to repay debt (see Notes 2 and 5 to Notes to
Consolidated Financial Statements); and (iii) new borrowings of $21,300,000 with
a  repayment  period of 15 years.  Proceeds  from the new  borrowings  were used
primarily to pay off debt with shorter repayment periods (see Note 5 to Notes to
Consolidated Financial Statements).

     We also  renegotiated our development  agreements with Carlson Worldwide to
reduce the number of T.G.I.  Friday's  restaurants we are required to build with
the intent to focus on those development  territories that are most economically
favorable  (see  Note 7 to  Notes  to  Consolidated  Financial  Statements).  In
addition,  we recorded net restructuring and reorganization  gains of $17,000 in
1998 and  $2,390,000  in 1997  related to the  disposition  of various  non-core
assets and the write-down of certain core assets to realizable  values (see Note
2 to Notes to Consolidated Financial Statements).

     Our  strategy  is to reduce  operating  costs  and  expand  our  restaurant
operations.  This will entail  continuing  to build T.G.I.  Friday's and Redfish
restaurants and evaluating other concepts in the casual dining segment.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated,  the percentages
that certain items of income and expense bear to total revenue:

                                                   Fiscal Year Ended
                                        ----------------------------------------
                                        December 29,  December 28,  December 27,
                                           1997          1998          1999
                                        ------------  ------------  ------------
Revenue ...............................    100.0%        100.0%        100.0%
Restaurant operating expenses:
   Cost of sales ......................     29.0          29.1          28.5
   Payroll and benefits ...............     29.8          29.5          30.2
   Depreciation and amortization ......      3.1           3.3           3.3
   Other operating expenses ...........     28.5          27.1          27.8
                                           -----         -----         -----
   Total restaurant operating expenses      90.4          89.0          89.8
                                           -----         -----         -----
Income from restaurant operations .....      9.6          11.0          10.2

   Amortization of intangibles ........      0.9           0.9           0.7
   General and administrative expenses       4.3           4.3           4.2
   Preopening expenses ................      0.3           0.6           1.6
   New manager training expenses ......      0.5           0.6           1.2
   Non-recurring items ................     (2.2)           --           0.4
   Management fee income ..............     (0.9)         (0.9)         (0.6)
                                           -----         -----         -----
Operating income ......................      6.7           5.5           2.7
Interest expense and other, net .......      2.3           1.9           1.9
                                           -----         -----         -----
Income before income taxes,
   cumulative effect of change in
   accounting principle, and
   extraordinary item .................      4.4%          3.6%          0.8%
                                           =====         =====         =====

                                       21
<PAGE>
FISCAL 1999 COMPARED WITH FISCAL 1998

     Revenue for the fiscal year ended  December  27,  1999  increased  22.8% to
$140,294,000  compared with  $114,242,000  in the year ended  December 28, 1998.
This  increase  was  due  primarily  as a  result  of  the  acquisition  of  six
restaurants in May 1998 and the development of three new restaurants in 1998 and
13 new  restaurants in 1999.  Additionally,  same-store  sales increased 4.9% in
fiscal 1999 as compared  with an  increase in  same-store  sales of 4.7% for the
prior year. Revenue from alcoholic  beverages accounted for 24.4% of revenue for
the fiscal year ended  December  27,  1999 as  compared  with 23.3% for the year
ended December 28, 1998.

     Cost of sales as a  percentage  of revenue  decreased to 28.5% in 1999 from
29.1% in 1998. This decrease was due to management's  on-going efforts to reduce
food costs by implementing more efficient and  cost-effective  practices in food
preparation, as well as reducing costs through more efficient purchasing of food
items.

     Labor  costs  increased  as a  percentage  of revenue to 30.2% in 1999 from
29.5% in 1998.  This  increase was  primarily  due to increased  staffing  needs
during the initial  months of  operation  for newly opened  restaurants.  Once a
restaurant  has  reached  operating  maturity,  labor costs as a  percentage  of
revenue will be normalized.  Additionally,  during 1999 we implemented a program
to increase our restaurant management staff in many of our restaurants from four
to five  managers.  This  increase  in  management  staff is  intended to reduce
turnover by improving the quality of life of our managers, which we believe will
ultimately lead to lower labor costs.

     Other  operating  expenses  include rent,  real estate  taxes,  common area
maintenance charges,  advertising,  insurance,  maintenance,  and utilities.  In
addition,  the franchise  agreements  between Carlson  Worldwide and our company
require a 4% royalty and a contribution to a national marketing pool of up to 4%
of gross  sales,  although we were only  required to  contribute  2.1% for 1999.
Other operating  expenses  increased as a percentage of revenue to 27.8% in 1999
from 27.1% in 1998. The increases were due primarily to additional marketing and
promotional costs.

     In total,  depreciation  and  amortization  decreased  as a  percentage  of
revenue to 4.0% in 1999 from 4.2% in 1998. The decrease was due primarily to the
relatively  fixed  nature  of these  expenses  as  compared  with our  increased
revenue.

     General and administrative expenses as a percentage of revenue decreased to
4.2% in 1999 from 4.3% in 1998.  This decrease was in spite of costs incurred in
training our restaurant  management staff on new software and hardware installed
to ensure that our restaurant computer systems were Year 2000 compliant, as well
as additional  recruiting  costs  associated with the hiring of managers for the
restaurants we opened in 1999.

     On December 29, 1998,  we adopted  Statement of Position  98-5 ("SOP 98-5")
"REPORTING ON THE COSTS OF START-UP  ACTIVITIES," as promulgated by the American
Institute  of  Certified  Public  Accountants,  which  requires  us  to  expense
preopening  expenses as they are incurred.  Prior to 1999, we  capitalized  such
expenses  and  amortized  them over a period of one year.  Pursuant to SOP 98-5,
pre-opening  expenses  of  $2,228,000,  or  1.6% of  revenue,  were  charged  to
operations during the year ended December 27, 1999 as compared with amortization
of pre-opening expenses of $661,000, or 0.6% of revenue, for fiscal 1998.

     New manager  training  expenses are those costs  incurred in training newly
hired or promoted  managers,  as well as those costs  incurred to relocate those
managers to permanent management positions.  Due to our aggressive growth, these
expenses  increased  to  $1,748,000,  or 1.2% of  revenue,  for the  year  ended
December  27, 1999 as compared  with  $731,000,  or 0.6% of revenue,  for fiscal
1998.

     In 1999, we increased the provision for non-recurring items and the reserve
for projected losses by approximately  $494,000.  This represents (a) a decrease
in the reserve of  approximately  $341,000 related to an adjustment of legal and
settlement  costs, and (b) an increase in the reserve of approximately  $835,000
in connection with the settlement of a lawsuit in February 2000.

     Interest  expense  was  approximately  $2,604,000  in  1999  compared  with
$2,218,000 in 1998. This increase was due to debt incurred in the development of
new restaurants and to the acquisition of six new restaurants in May 1998.

                                       22
<PAGE>
     No income tax provision was recorded in 1998 due to the availability of net
operating loss carryforwards.  In 1999, we recorded a $50,000 expense related to
state  income  taxes due in certain  states  where net  operating  losses are no
longer available to us. At December 27, 1999, we had  approximately  $10,400,000
of net  operating  and capital loss  carryforwards  to be used to offset  future
income  for  income  tax  purposes.  We have  determined  that a 100%  valuation
allowance is  appropriate  on the net operating  loss as a result of our current
restaurant  expansion  plans.  We will  re-evaluate  the  need  for a  valuation
allowance at each quarter.

FISCAL 1998 COMPARED WITH FISCAL 1997

     Revenue  for the fiscal year ended  December  28,  1998  increased  6.8% to
$114,242,000  as compared with  $107,018,000  for the fiscal year ended December
29, 1997.  This increase was due primarily to the acquisition of six restaurants
in May 1998, the  development of three new  restaurants  during the year, and an
increase in same store sales of 4.7% for the year. Sales of alcoholic  beverages
accounted  for 23.3% of revenue for the year as compared with 23.6% for the year
ended December 29, 1997.

     Cost of sales  increased  as a  percentage  of  revenue to 29.1% in 1998 as
compared with 29.0% in 1997. This increase was the result of the introduction of
Jack Daniels Grill menu items in mid-1997, which have higher food costs, as well
as higher food costs associated with the Redfish restaurants that we acquired in
April 1997. Additionally,  certain dairy and potato products had higher costs in
1998 as compared with 1997.

     Labor  costs  decreased  as a  percentage  of  revenue  to 29.5% in 1998 as
compared  with 29.8% in 1997. A $0.40 per hour increase in the minimum wage rate
in September 1997 and an additional  $0.60 per hour increase in the minimum wage
rate in  California  in March 1998 was more than offset by menu price  increases
and better management of labor costs in 1998.

     Other  operating  expenses  include rent,  real estate taxes,  advertising,
insurance,  maintenance,   supplies,  and  utilities.  Also  included  in  other
operating expenses is a 4% royalty fee paid to Carlson Worldwide pursuant to the
franchise  agreements,  as well as payments to a national marketing fund managed
by  the  franchisor.  The  franchise  agreements  require  us to pay up to 4% of
revenue  to  this  marketing  fund,  although  we  were  required  to  only  pay
approximately  1.9% in  1998.  The  decrease  in  other  operating  expenses  is
attributable to lower insurance costs and to our on-going cost reduction efforts
in supply, maintenance, and advertising costs.

     Depreciation and amortization  increased as a percentage of revenue to 4.2%
in  1998 as  compared  with  4.0%  in 1997  due  primarily  to  amortization  of
pre-opening  costs of  three  new  restaurants  developed  in  1998,  as well as
additional  depreciation associated with these three new restaurants and the six
northern California restaurants purchased in May 1998.

     General and  administrative  expenses  as a  percentage  of revenue  remain
unchanged at 4.3% for both 1997 and 1998.

     Interest  expense  decreased as a percentage of revenue to  $2,218,000,  or
1.9% of revenue,  in 1998 as compared with  $2,466,000,  or 2.3% of revenue,  in
1997. This decrease was primarily due to the  capitalization  of financing costs
associated with restaurants developed during 1998. Additionally,  the percentage
decrease is attributable to the relatively fixed nature of these financing costs
as compared with increasing revenues from 1997 to 1998.

     No  income  tax  provision  was  recorded  in  1998  or  1997  due  to  the
availability of net operating loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

     Our  primary  use of  funds  over  the  past  five  years  has been for the
acquisition of existing T.G.I.  Friday's  restaurants and exclusive  development
rights.  These  acquisitions were financed  principally  through the issuance of
long-term debt and common stock. We have also expended funds for the development
of new  restaurants.  During 1999, we also  purchased  the minority  interest in
Redfish  America,  LLC for $500,000 in cash. The principal source of these funds
has been operating cash flow, supplemented by bank and lease financing.

                                       23
<PAGE>
     Net  cash  flows  from  operating   activities  were  $1,050,000  in  1997,
$9,062,000 in 1998, and $16,219,000 in 1999. These were supplemented by net cash
flows from financing of $3,755,000 in 1999 and $4,092,000 in 1998, which we used
to fund our acquisitions  and development of new  restaurants.  In 1997, we used
$8,287,000 of net cash flows from  financing  activities,  which came  primarily
from the sale of assets.

     Our  current  liabilities  exceed  our  current  assets due in part to cash
expended on our  development  requirements  and because the restaurant  business
receives  substantially  immediate payment for sales,  while payables related to
inventories and other current  liabilities  normally carry longer payment terms,
usually 15 to 30 days. At December 27, 1999, we had a deficit in working capital
of  approximately  $16,652,000 due primarily to an increase in accounts  payable
related to  restaurant  development  costs for projects in progress,  as well as
recently  completed  restaurants.  Subsequent to December 27, 1999, we reduced a
significant portion of our working capital deficit through long-term  borrowings
under the financing commitments described below.

     At December  27, 1999 we had a cash  balance of  $3,055,000.  Monthly  cash
receipts have been sufficient to pay all obligations as they become due.

     At December 27, 1999,  we had  long-term  debt of  $31,513,000  and current
portion of long-term debt of $1,830,000.

     Approximately  $19,329,000  of this debt is a term loan  comprised  of five
notes  payable to one  lender.  Three of the notes bear  interest  at 9.457% per
annum and two of the notes bear  interest  at the one month  LIBOR rate plus 320
basis points.  The notes are payable in equal monthly  installments of principal
and interest that total  approximately  $223,000 per month.  The notes mature on
May 1, 2012.

     During April 1999, we obtained a $5.0 million revolving line of credit with
another  lender.  The line of credit is  available to finance  construction  and
other costs  associated with developing new  restaurants.  Borrowings  under the
line of credit  bear  interest  at prime plus 112.5  basis  points.  The line of
credit includes covenants related to our net worth, fixed charge coverage ratio,
profitability, and access to capital. We were in compliance with these covenants
at December 27, 1999.  The line of credit  matures on July 17, 2000. At December
27, 1999, we had no borrowings outstanding under this line of credit.

     During November 1999, we entered into two working capital reducing revolver
loan  agreements with another  lender.  One agreement  provides for a maximum of
$8,050,000  to  finance  80% of the  costs  to  develop  seven  T.G.I.  Friday's
restaurants.  Borrowings  under this  agreement  will mature in 10 years.  These
borrowings  are  secured  by the assets  financed  with the  borrowings  and are
guaranteed by certain of our  subsidiaries.  The other agreement  provides for a
maximum of  $3,150,000  to finance  80% of the costs to furnish  and equip seven
T.G.I. Friday's restaurants.  Borrowings under this agreement are secured by the
assets  financed with the borrowings and will mature in seven years.  Borrowings
under both agreements bear interest at 2.65% over the "30-Day Dealer  Commercial
Paper  Rate,"  as  defined  in the  agreements,  or a  combined  rate of 9.1% at
December  27,  1999.  At December 27, 1999,  we had  outstanding  borrowings  of
$1,600,000 under these agreements. These agreements include covenants related to
our fixed charge coverage ratio and debt to adjusted cash flow ratio. We were in
compliance with these covenants at December 27, 1999.

     The  remainder of our  long-term  debt consists of notes payable to various
lending  institutions.  These notes bear interest at rates ranging from 7.75% to
11.0% and mature at various times over the next 15 years.

     We plan to develop at least 10 additional  restaurants  over the next year.
Subsequent  to December 27, 1999, we borrowed a total of  $10,781,000  under the
credit  arrangements  described above or new credit arrangements that we entered
into after  December 27, 1999. We used the proceeds of these  borrowings to fund
unpaid  development  costs recorded as accounts payable at December 27, 1999. As
of  March  20,  2000,  we  have  permanent  debt  and  sale/leaseback  financing
agreements or commitments totaling approximately $28,700,000 that we will use to
fund restaurant  development  activity and working capital  requirements through
the remainder of 2000.

     We lease all of our  restaurants  with terms  ranging  from 10 to 20 years.
Minimum  payments on our  existing  lease  obligations  are  approximately  $8.0
million per year through 2002.

     We believe that our current  resources,  our lines of credit,  and expected
cash flows from  operations  will be sufficient to fund our capital needs during
the next 12 months at our current level of operations,  apart from capital needs
resulting  from  additional  developed  restaurants or  acquisitions.  We may be
required to obtain additional capital to fund our planned growth during the next
12 to 18 months and beyond.  Potential  sources of any such  capital may include
bank financing,  strategic alliances,  and additional offerings of our equity or
debt securities. We cannot provide assurance that such capital will be available
from these or other  potential  sources,  and the lack of  capital  could have a
material adverse effect on our business.

                                       24
<PAGE>
YEAR 2000 COMPLIANCE

     In 1998, we began  identifying  those most critical areas that might not be
Year 2000  compliant  and  established  a time line to  complete  the  necessary
analysis and  remediation  plans.  We have completed the  remediation  plans and
believe we have corrected any deficiencies  identified in all affected areas. As
of the  filing  date of  this  Report,  we have  not  experienced  any  material
disruption to our operations as a result of any failure of any of our systems to
function  properly as of January 1, 2000. We also have not  experienced any Year
2000 failures related to any of our significant vendors or suppliers.

     Year 2000 compliance has many elements and potential consequences,  some of
which may not be foreseeable or may be realized in future periods.  In addition,
unforeseen  circumstances  may  arise,  and we may  not in the  future  identify
equipment or systems that are not Year 2000 compliant.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     At December 27, 1999, we did not  participate in any  derivative  financial
instruments or other  financial and commodity  instruments  for which fair value
disclosure would be required under Statement of Financial  Accounting  Standards
No. 107. We do not hold investment  securities that would require  disclosure of
market risk.

     Our market risk exposure is limited to interest rate risk  associated  with
our credit instruments. We incur interest on loans made under revolving lines of
credit at variable  interest  rates of 1.125% over prime and 2.65% over  "30-Day
Dealer  Commercial  Paper  Rates." At  December  27,  1999,  we had  outstanding
borrowings on these lines of credit of approximately $1,600,000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to the  financial  statements,  the report  thereon,  the
notes thereto and the supplementary  data commencing at page F-1 of this report,
which  financial  statements,  report,  notes,  and  data  are  incorporated  by
reference.

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

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required  by  this  Item  relating  to our  directors  is
incorporated by reference to our Proxy Statement to be filed for our 2000 Annual
Meeting of Stockholders.  The information  required by this Item relating to our
executive officers is included in Item 1, "Business - Executive  Officers."

ITEM 11. EXECUTIVE COMPENSATION

     The  information  required by this Item is incorporated by reference to our
Proxy Statement to be filed for our 2000 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  required by this Item is incorporated by reference to our
Proxy Statement to be filed for our 2000 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this Item is incorporated by reference to our
Proxy Statement to be filed for our 2000 Annual Meeting of Stockholders.

                                       25
<PAGE>
                                     PART IV

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

(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

     (1)  Financial Statements are listed in the Index to Consolidated Financial
          Statements on page F-1 of this Report.

     (2)  No Financial  Statement  Schedules  are included  because they are not
          applicable or are not required or the  information  required to be set
          forth therein is included in the consolidated  financial statements or
          notes thereto.

(b)  REPORTS ON FORM 8-K.

     Not applicable.

(c)  EXHIBITS

Exhibit
Number         Exhibit
------         -------
3.1            Certificate of Incorporation of the Registrant(1)
3.2            Certificate    of   Amendment   of   Restated    Certificate   of
               Incorporation(l)
3.3            Amended and Restated Bylaws of the Registrant(1)
10.1           Registrant's 1990 Stock Option Plan(2)
10.5           Form  of  Franchise  Agreement  between  the  Registrant  and TGI
               Friday's, Inc.(3)
10.9           Form of Management Agreement between Main St. California II, Inc.
               and Main St.  California,  Inc.,  a wholly  owned  subsidiary  of
               Registrant.(4)
10.10          Master Incentive  Agreements between Main St. California II, Inc.
               and Main St.  California,  Inc.,  a wholly  owned  subsidiary  of
               Registrant.(4)
10.11          Employment Agreement with Bart A. Brown, Jr.(5)
10.11A         Employment  Agreement  dated  January 1, 1999 between Main Street
               and Main Incorporated and Bart A. Brown, Jr. (6)
10.13          Promissory Note between Registrant and CNL Financial I, Inc.(5)
10.14          Promissory Note between Registrant and CNL Financial I, Inc.(5)
10.15          Promissory Note between Registrant and CNL Financial I, Inc.(5)
10.16          Registrant's 1995 Stock Option Plan(7)
10.17          Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Cornerstone Productions, Inc., a wholly owned subsidiary
               of the Registrant.(8)
10.18          Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Main St. California,  Inc., a wholly owned subsidiary of
               the Registrant.(8)
10.18A         First Amendment to Development Agreement dated February 10, 1999,
               between TGI Friday's, Inc. and Main St. California, Inc.(6)
10.19          Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Main St. Midwest, Inc., a wholly owned subsidiary of the
               Registrant.(8)
10.20          Amended and Restated  Purchase  Agreement  between RJR  Holdings,
               Inc. and Main St. California,  Inc., a wholly owned Subsidiary of
               the Registrant.(8)
10.21          Development  Agreement  dated  April 22,  1998  between  Main St.
               California,  Inc. and TGI Fridays,  Inc., and First  Amendment to
               Development   Agreement  dated  February  10,  1999  between  TGI
               Friday's,  Inc.  and Main St.  California,  Inc.,  a wholly owned
               subsidiary of the Registrant.(6)
10.22          Stock  Option  Agreement  dated  August  5,  1996,   between  the
               Registrant  and John F.  Antioco  for  800,000  shares  of Common
               Stock.(9)
10.22A         Stock  Option   Agreement  dated  June  15,  1998,   between  the
               Registrant  and  John  F.  Antioco   amending  the  Stock  Option
               Agreement dated August 5, 1996.(9)
10.23          Stock Option  Agreement  dated  December  16,  1996,  between the
               Registrant  and Bart A. Brown,

                                       26
<PAGE>
Exhibit
Number         Exhibit
------         -------
               Jr. for 250,000 shares of  Common Stock. (The  Registrant  issued
               three additional Stock Option  Agreements which are substantially
               identical  in all  material  respects,  except  as to  number  of
               shares.  The four Stock Option Agreements give rights to purchase
               a total of 625,000 shares of Common Stock.)(9)
10.23A         Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.23.(9)
10.24          Stock  Option   Agreement  dated  July  14,  1997,   between  the
               Registrant  and Bart A.  Brown,  Jr. for 75,000  shares of Common
               Stock.   (The  Registrant  issued  one  additional  Stock  Option
               Agreement  which  is  substantially  identical  in  all  material
               respects,  except as to number of  shares.  The two Stock  Option
               Agreements  give rights to purchase a total of 175,000  shares of
               Common Stock.)(9)
10.24A         Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.24.(9)
10.25          Stock  Option   Agreement  dated  June  15,  1998,   between  the
               Registrant  and James Yeager for 15,000  shares of Common  Stock.
               (The  Registrant  issued two additional  Stock Option  Agreements
               which  are  substantially  identical  in all  material  respects,
               except as to option holder and number of shares.  The three Stock
               Option  Agreements  give  rights  to  purchase  a total of 50,000
               shares of Common Stock.)(9)
10.25A         Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.25.(9)
10.26          Stock Option  Agreement  dated  December  31,  1998,  between the
               Registrant  and Tim Rose for 10,000 shares of Common Stock.  (The
               Registrant  issued one additional Stock Option Agreement which is
               substantially  identical in all material  respects,  except as to
               option  holder  and  number  of  shares.  The  two  Stock  Option
               Agreements  give rights to purchase a total of 160,000  shares of
               Common Stock.)(9)
10.26A         Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.26.(9)
10.27          Registration  Rights Agreement dated August 5, 1996,  between the
               Registrant and John F. Antioco.(10)
10.28          1999 Incentive Stock Plan.(11)
10.29          Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement  dated  November 2, 1999,  between Main Street and Main
               Incorporated and Merrill Lynch Business Financial Services, Inc.
10.30          Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement  dated November 22, 1999,  between Main Street and Main
               Incorporated and Merrill Lynch Business Financial Services, Inc.
10.31          Form of Unconditional  Guaranty  executed in connection with WCMA
               Reducing  Revolver Loan  Agreement  dated November 22, 1999 (Such
               guarantees   were   executed  by  Main  St.   California,   Inc.,
               Cornerstone Productions, Inc., and Redfish America, LLC)
10.32          Form of  Security  Agreement  executed  in  connection  with WCMA
               Reducing  Revolver Loan  Agreement  dated November 22, 1999 (Such
               security  agreements were executed by Main St.  California,  Inc.
               and Cornerstone Productions, Inc.)
21             List of Subsidiaries
23             Consent of Arthur Andersen LLP
27             Financial Data Schedule

----------
(1)  Incorporated by reference to the Registrant's  Form 10-K for the year ended
     December 30, 1991, filed with the Securities and Exchange  Commission on or
     about March 31, 1992.
(2)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form S-1  (Registration  No.  33-40993) which became effective in September
     1991.
(3)  Incorporated  by  reference  to the  Registrant's  Form 8-K filed  with the
     Securities and Exchange Commission on or about April 15, 1994.
(4)  Incorporated  by reference to the  Registrant's  Form 8-K Report filed with
     the Commission in January 1997.
(5)  Incorporated by reference to the Registrant's  Form 10-K for the year ended
     December 30, 1996, filed with the Securities and Exchange  Commission on or
     about April 14, 1997.
(6)  Incorporated by reference to the Registrant's  Form 10-K for the year ended
     December 28, 1998,  filed with the  Securities  and Exchange  Commission on
     March 29, 1999.

                                       27
<PAGE>
(7)  Incorporated  by reference to  Registrant's  Proxy  Statement  for its 1995
     Annual Meeting of Stockholders.
(8)  Incorporated by reference to the Registrant's  Form 10-K for the year ended
     December 29, 1997,  filed with the  Securities  and Exchange  Commission on
     March 27, 1998.
(9)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form S-8  (Registration  No.  333-78155),  filed  with the  Securities  and
     Exchange Commission on May 10, 1999.
(10) Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form S-3  (Registration  No.  333-78161)  as declared  effective on May 14,
     1999.
(11) Incorporated  by reference to Registrant's  Registration  Statement on Form
     S-8  (Registration No.  333-89931),  filed with the Securities and Exchange
     Commission on October 29, 1999.

                                       28
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       MAIN STREET AND MAIN INCORPORATED


                                       By: /s/ Bart A. Brown, Jr.
                                           -------------------------------------
                                           Bart A. Brown, Jr.
Date: March 24, 2000                       President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


/s/ John F. Antioco        Chairman of the Board                  March 24, 2000
-----------------------
John F. Antioco


/s/ Bart A. Brown, Jr.     President, Chief Executive             March 24, 2000
-----------------------    Officer, and Director
Bart A. Brown, Jr.         (Principal Executive Officer)


/s/ William G. Shrader     Executive Vice President, Chief        March 24, 2000
-----------------------    Operating Officer and Director
William G. Shrader


/s/ James Yeager           Vice President-Finance (Principal      March 24, 2000
-----------------------    Financial and Accounting Officer),
James Yeager               Secretary and Treasurer


/s/ Jane Evans             Director                               March 24, 2000
-----------------------
Jane Evans


/s/ John C. Metz           Director                               March 24, 2000
-----------------------
John C. Metz

                                       29
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
Report of Independent Public Accountants...................................  F-2

Consolidated Balance Sheets at December 27, 1999 and December 28, 1998.....  F-3

Consolidated Statements of Operations for the fiscal years ended
  December 27, 1999, December 28, 1998, and December 29, 1997..............  F-4

Consolidated Statements of Changes in Stockholders' Equity for
  the fiscal years ended December 27, 1999, December 28, 1998,
  and December 29, 1997....................................................  F-5

Consolidated Statements of Cash Flows for the fiscal years ended
  December 27, 1999, December 28, 1998, and December 29, 1997..............  F-6

Notes to Consolidated Financial Statements.................................  F-7

                                       F-1
<PAGE>
                               ARTHUR ANDERSEN LLP
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Main Street and Main Incorporated:

     We have audited the accompanying consolidated balance sheets of MAIN STREET
AND MAIN INCORPORATED (a Delaware  corporation) AND SUBSIDIARIES,  (the Company)
as of December  27, 1999 and December  28,  1998,  and the related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years ended December 27, 1999,  December 28, 1998, and December 29, 1997.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audits 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,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of the Company as of December
27, 1999 and December 28, 1998,  and the results of its  operations and its cash
flows for the years ended December 27, 1999, December 28, 1998, and December 29,
1997, in conformity with accounting  principles generally accepted in the United
States.

     As explained in Note 3 to the financial statements,  effective December 29,
1998, the Company changed its method of accounting for start-up costs.


                                        /s/ ARTHUR ANDERSEN LLP

Phoenix, Arizona,
  February 23, 2000.

                                       F-2
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (In Thousands, Except Par Value and Share Data)

                                                      December 27,  December 28,
                                                          1999         1998
                                                        --------     --------
ASSETS
Current assets
  Cash and cash equivalents ..........................  $  3,055     $  7,294
  Accounts receivable, net ...........................     3,434        2,096
  Inventories ........................................     1,453          840
  Prepaid expenses ...................................       621          593
                                                        --------     --------
      Total current assets ...........................     8,563       10,823
Property and equipment, net ..........................    58,006       39,195
Other assets, net ....................................     2,072        2,337
Franchise costs, net .................................    17,884       17,900
                                                        --------     --------
                                                        $ 86,525     $ 70,255
                                                        ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current portion of long-term debt ..................  $  1,830     $  1,365
  Accounts payable ...................................    14,033        4,183
  Other accrued liabilities ..........................     9,352        8,082
                                                        --------     --------
      Total current liabilities ......................    25,215       13,630
                                                        --------     --------
Long-term debt, net of current portion ...............    31,513       28,264
                                                        --------     --------
Other liabilities and deferred credits ...............     2,414        1,989
                                                        --------     --------
Commitments and contingencies

Stockholders' equity
Preferred stock, $.001 par value, 2,000,000 shares
  authorized; no shares issued and outstanding in
  1999 and 1998 ......................................        --           --
Common stock, $.001 par value, 25,000,000 shares
  authorized; 10,025,776 and 9,976,416 shares issued
  and outstanding in 1999 and 1998, respectively .....        10           10
Additional paid-in capital ...........................    44,190       44,149
Accumulated deficit ..................................   (16,817)     (17,787)
                                                        --------     --------
                                                          27,383       26,372
                                                        --------     --------
                                                        $ 86,525     $ 70,255
                                                        ========     ========

              The accompanying notes are an integral part of these
                          consolidated balance sheets.

                                       F-3
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                             Year Ended
                                                                -------------------------------------
                                                               December 27,  December 28,  December 29,
                                                                  1999          1998          1997
                                                                ---------     ---------     ---------
<S>                                                             <C>           <C>           <C>
Revenue .....................................................   $ 140,294     $ 114,242     $ 107,018
                                                                ---------     ---------     ---------
Restaurant operating expenses
  Cost of sales .............................................      39,960        33,242        30,995
  Payroll and benefits ......................................      42,405        33,701        31,907
  Depreciation and amortization .............................       4,664         3,730         3,265
  Other operating expenses ..................................      38,923        31,004        30,589
                                                                ---------     ---------     ---------
       Total restaurant operating expenses ..................     125,952       101,677        96,756
                                                                ---------     ---------     ---------
Income from restaurant operations ...........................      14,342        12,565        10,262

  Amortization of intangible assets .........................         990           983           953
  General and administrative expenses .......................       5,955         4,906         4,559
  Preopening expenses .......................................       2,228           661           287
  New manager training expenses .............................       1,748           731           562
  Non-recurring items .......................................         494           (17)       (2,390)
  Management fee income .....................................        (865)       (1,082)         (979)
                                                                ---------     ---------     ---------
Operating income ............................................       3,792         6,383         7,270

  Interest expense and other, net ...........................       2,604         2,218         2,466
                                                                ---------     ---------     ---------
Income before income taxes, cumulative effect of change in
    accounting principle, and extraordinary item ............       1,188         4,165         4,804
  Provision for income taxes ................................          50            --            --
                                                                ---------     ---------     ---------
Net income before cumulative effect of change in accounting
    principle and extraordinary item ........................       1,138         4,165         4,804
  Extraordinary loss from debt extinguishment ...............          --            --        (1,638)
  Cumulative effect of change in accounting principle .......        (168)           --            --
                                                                ---------     ---------     ---------
Net income ..................................................   $     970     $   4,165     $   3,166
                                                                =========     =========     =========
Basic earnings per share
  Net income before cumulative effect of change in accounting
    principle and extraordinary item ........................   $    0.11     $    0.42     $    0.48
  Extraordinary loss from debt extinguishment ...............          --            --         (0.16)
  Cumulative effect of change in accounting principle .......       (0.02)           --            --
                                                                ---------     ---------     ---------
       Net income ...........................................   $    0.09     $    0.42     $    0.32
                                                                =========     =========     =========
Diluted earnings per share
  Net income before cumulative effect of change in accounting
    principle and extraordinary item ........................   $    0.11     $    0.39     $    0.47
  Extraordinary loss from debt  extinguishment ..............          --            --         (0.16)
  Cumulative effect of change in accounting principle .......       (0.02)           --            --
                                                                ---------     ---------     ---------
       Net income ...........................................   $    0.09     $    0.39     $    0.31
                                                                =========     =========     =========
  Weighted average number of shares outstanding
    -- Basic ................................................      10,008         9,976         9,918
                                                                =========     =========     =========
  Weighted average number of shares outstanding
    -- Diluted ..............................................      10,407        10,608        10,098
                                                                =========     =========     =========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-4
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In Thousands)


<TABLE>
<CAPTION>
                                              Common Stock
                                           ---------------------      Additional
                                                          Par          Paid-in       Accumulated
                                            Shares       Value         Capital         Deficit        Total
                                           --------     --------       --------        --------      --------
<S>                                        <C>          <C>            <C>             <C>           <C>
BALANCE, December 30, 1996 ..............     8,718     $      9       $ 41,694        $(25,118)     $ 16,585
  Shares issued in connection with
    private placement (net) .............     1,250            1          2,447              --         2,448
  Shares issued in connection with
    options exercised ...................         3           --              4              --             4
  Net income ............................        --           --             --           3,166         3,166
                                           --------     --------       --------        --------      --------
BALANCE, December 29, 1997 ..............     9,971           10         44,145         (21,952)       22,203
  Shares issued in connection with
    options exercised ...................         5           --              4              --             4
  Net income ............................        --           --             --           4,165         4,165
                                           --------     --------       --------        --------      --------
BALANCE, December 28,1998 ...............     9,976           10         44,149         (17,787)       26,372
  Shares issued in connection with
    options exercised ...................        50           --             41              --            41
  Net income ............................        --           --             --             970           970
                                           --------     --------       --------        --------      --------
BALANCE, December 27, 1999 ..............    10,026     $     10       $ 44,190        $(16,817)     $ 27,383
                                           ========     ========       ========        ========      ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-5
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                         Year Ended
                                                         -----------------------------------------
                                                        December 27,   December 28,    December 29,
                                                           1999           1998            1997
                                                        -----------    -----------     -----------
<S>                                                      <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .......................................    $    970        $  4,165        $  3,166
  Adjustments to reconcile net income to net
    cash provided by operating activities:
  Depreciation and amortization ....................       5,654           5,374           4,505
  Non-recurring items ..............................         494             (17)         (2,391)
  Extraordinary loss from debt extinguishment ......          --              --           1,638
  Changes in assets and liabilities
    Accounts receivable, net .......................      (1,338)           (865)            122
    Inventories ....................................        (613)            203             124
    Prepaid expenses ...............................         (28)           (304)           (116)
    Other assets, net ..............................          29            (341)         (1,288)
    Accounts payable ...............................       9,850             293              57
    Other accrued liabilities ......................       1,201             554          (4,767)
                                                        --------        --------        --------
        Net Cash Flows -- Operating Activities......      16,219           9,062           1,050
                                                        --------        --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid to acquire assets through business
    combination ....................................          --              --            (880)
  Cash received from note receivable ...............          --             757              --
  Cash paid to acquire additional interest in
   subsidiary ......................................        (500)             --              --
  Net additions to property and equipment ..........     (31,401)        (19,002)         (6,613)
  Cash paid to acquire franchise rights ............        (238)         (3,318)             --
  Sale of assets ...................................          --           2,062          17,326
  Cash received from sale-leaseback transactions....       7,926           6,791           1,641
                                                        --------        --------        --------
        Net Cash Flows -- Investing Activities......     (24,213)        (12,710)         11,474
                                                        --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of common stock ...............          41               4           2,504
  Financing and offering costs paid ................          --              --             (52)
  Long-term debt borrowings ........................       5,296           5,620          21,554
  Principal payments on long-term debt .............      (1,582)         (1,532)        (32,293)
                                                        --------        --------        --------
        Net Cash Flows -- Financing Activities......       3,755           4,092          (8,287)
                                                        --------        --------        --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............      (4,239)            444           4,237
CASH AND CASH EQUIVALENTS, BEGINNING ...............       7,294           6,850           2,613
                                                        --------        --------        --------
CASH AND CASH EQUIVALENTS, ENDING ..................    $  3,055        $  7,294        $  6,850
                                                        ========        ========        ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
  Cash paid during the year for interest ...........    $  3,218        $  2,557        $  3,404
                                                        ========        ========        ========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-6
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION AND BASIS OF PRESENTATION

     Main Street and Main Incorporated (the "Company") is a Delaware corporation
engaged in the business of acquiring,  developing and operating restaurants.  At
December 27, 1999, the Company owned 48 T.G.I. Friday's restaurants and operated
nine T.G.I. Friday's restaurants under management  agreements.  The Company also
owned and operated six Redfish restaurants.

PRINCIPLES OF CONSOLIDATION

     The consolidated  financial statements include the accounts of the Company,
and its wholly owned subsidiaries.  All material intercompany  transactions have
been eliminated in consolidation.  All references to the Company herein refer to
the Company and its subsidiaries.

FISCAL YEAR

     The Company  operates on a fiscal year, which ends on the Monday closest to
December 31.

USE OF ESTIMATES

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements,  and the  reported  amounts  of  revenues  and  expenses  during the
reporting period. Actual results could differ from those estimates.

2. RESTRUCTURING, REORGANIZATION AND NON-RECURRING ITEMS

     The Financial Accounting Standards Board has issued Statements of Financial
Accounting  Standards  ("SFAS")  No.121,   "ACCOUNTING  FOR  THE  IMPAIRMENT  OF
LONG-LIVED  ASSETS  AND FOR  LONG-LIVED  ASSETS TO BE  DISPOSED  OF",  which the
Company  adopted  in 1996.  SFAS No.  121  requires  that  long-lived  assets be
reviewed for  impairment  whenever  events or  circumstances  indicate  that the
carrying amount of the asset may not be recoverable.  If the sum of the expected
future cash flows  (undiscounted  and without interest charges) from an asset to
be held and used in operations is less than the carrying value of the asset,  an
impairment  loss must be recognized in the amount of the difference  between the
carrying  value and fair  value.  Assets to be disposed of must be valued at the
lower of carrying value or fair value less costs to sell.

     During 1996, the Company implemented a long-term business strategy to place
more emphasis on the core business and to dispose of underperforming core assets
and non-core assets.  As a result of implementing  this strategy,  combined with
certain  events  occurring  during fiscal years ended 1997,  1998, and 1999, the
Company recognized a gain on sale of assets,  certain non-recurring charges, and
impairment of certain assets as follows (in thousands):

                                       F-7
<PAGE>
                MAIN STREET AND MAIN INCORPORATED AND SUBSIDIAIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


                                        December 27,  December 28,  December 29,
                                           1999          1998          1997
                                          -------       -------       -------
Gain on sale of assets ...............    $    --       $    --       $(5,231)
Impairment of non-core assets ........         --            --         1,660
Impairment of core assets held for
   disposal ..........................         --          (648)           --
Impairment of core assets used in
   operations ........................         --            --           842
Other non-recurring items ............        494           631           339
                                          -------       -------       -------
                                          $   494       $   (17)      $(2,390)
                                          =======       =======       =======

GAIN ON SALE OF ASSETS

     In January 1997, the Company sold five  restaurants in northern  California
(the  "Northern  California  Sale") for  $10,800,000  in cash and entered into a
management agreement with the buyer to manage the restaurants.  This transaction
resulted  in a gain  before  taxes of  approximately  $1,595,000.  Of the  total
proceeds,  $8,000,000 was used to reduce the Company's  existing debt,  with the
balance used for working capital purposes.  Also in 1997, the Company sold eight
T.G.I. Friday's restaurants in Washington,  Oregon,  Colorado and Nebraska.  The
sale price of these restaurants totaled $8,877,000 and resulted in a gain before
taxes of approximately $3,636,000.

IMPAIRMENT OF NON-CORE ASSETS

     In December 1993, the Company sold its dairy and food distribution business
for  $7,500,000,  including a promissory note in the amount of $6,000,000 due on
December  31,  1996.  During  the  second  quarter  of 1996,  the  debtor on the
$6,000,000  promissory note sold assets related to its dairy  operations,  which
represented  a  significant  portion of the  collateral  securing the note.  The
debtor  used  cash  from the sale to pay down  its  senior  debt and to  provide
working  capital  for  its  ice  cream  novelty  production  facility.   Due  to
uncertainty of the business,  the Company's promissory note, net of the deferred
gain booked at the time of the initial  sale,  was  written  down by  $4,136,000
during 1996.  During 1997,  the Company wrote off the  remaining  carry value of
$1,000,000  due  to  further  adverse  developments  with  the  dairy  and  food
distribution  business.  As of December 27, 1999 none of the promissory note has
been paid.

     In May 1991,  the Company  entered into a five-year  management  assistance
agreement with AsianStar Co., Ltd.  ("AsianStar"),  a Korean company  affiliated
with a former  director  of the  Company,  to provide  management  services  and
expertise  relative  to  the  development  and  operation  of  T.G.I.   Friday's
restaurants  in the  Republic  of Korea.  The  management  assistance  agreement
provided  for the Company to receive a fee of 3% of the net revenue of the first
two restaurants  developed in Seoul,  Korea.  In 1996, the Company  finalized an
agreement with  AsianStar to exchange its receivable for a $1,660,000  ownership
interest in  AsianStar.  Due to the  uncertainty  of the Korean  venture and the
estimated  length of time  before the  Company  will  receive  any return on its
investment,  a $1,000,000  impairment  loss was taken during 1996. The Company's
investment in the Korean venture was  approximately  $660,000 as of December 30,
1996.  During 1997,  the Company wrote off the remaining  carrying value of this
investment due to further  uncertainty  of the Korean  venture  resulting from a
down turn in the Korean  economy.  As of December 27, 1999,  the Company has not
realized cash from this venture.

                                       F-8
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


IMPAIRMENT OF CORE ASSETS HELD FOR DISPOSAL

     During 1996, the Company recorded a $5,541,000 charge to write off property
and  equipment  and  pre-opening  costs  associated  with  two of the  Company's
recently  developed  restaurants.  One of the restaurants was a Front Row Sports
Grill in  Portland,  Oregon and the other was a T.G.I.  Friday's  restaurant  in
Denver,  Colorado.  During 1998, a favorable lease payoff was negotiated related
to the Front Row Sports Grill. A $648,000 gain was recognized in connection with
the lease settlement, resulting in a reversal of the remaining reserve.

IMPAIRMENT OF CORE ASSETS USED IN OPERATIONS

     During 1997, the Company recorded a charge of $874,000 related primarily to
two  Redfish  restaurants  where  undiscounted  cash flows did not  support  the
carrying value of assets.

NON-RECURRING ITEMS

     Non-recurring items include severance,  contract termination,  professional
services costs, and other non-recurring charges.

     In 1997, the Company recorded a gain on the sale of assets of approximately
$5,231,000 and  restructuring  and  reorganizing  charges of $2,841,000.  Of the
$2,841,000 in charges,  $2,269,000 was recorded as a reduction  against  certain
impaired  assets and  $572,000  was  recorded  as an increase in the reserve for
projected  losses.  The balance in the reserve for projected  losses at December
29, 1997 was approximately $2,115,000.

     In 1998,  the  Company  increased  the  reserve  for  projected  losses  by
approximately  $631,000.  The reserve was  decreased by  approximately  $648,000
related to a favorable  lease  settlement  and  approximately  $731,000 in other
costs and legal fees associated with  terminating the lease. The reserve balance
in other accrued  liabilities at December 28, 1998 was approximately  $1,367,000
for the remaining severance, legal, and condemnation costs.

     In 1999, the Company  increased the provision for  non-recurring  items and
the reserve for projected losses by approximately  $494,000. This represents (a)
a decrease in the reserve of approximately  $341,000 related to an adjustment of
legal and settlement  costs and (b) an increase in the reserve of  approximately
$835,000 in connection  with the  settlement of a lawsuit in February  2000. The
reserve  balance  in  other  accrued   liabilities  at  December  27,  1999  was
approximately $1,153,000 for the remaining estimated legal and settlement costs.

                                       F-9
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


     Valuation and qualifying accounts and reserves for the years ended December
27,1999, December 28,1998, and December 29, 1997 consist of the following:

<TABLE>
<CAPTION>
                                  Balance At                                  Balance At
                                  Beginning      Expense                         End
                                  of Period      Recorded       Other         of Period
                                 -----------   -----------   -----------     -----------
<S>                              <C>           <C>           <C>             <C>
RESERVE FOR PROJECTED LOSSES:

  Year ended December 27, 1999   $ 1,367,000   $   494,000   $  (708,000)(1)  $ 1,153,000
  Year ended December 28, 1998     2,115,000       631,000    (1,379,000)(2)    1,367,000
  Year ended December 29, 1997     1,572,000       572,000       (29,000)(1)    2,115,000

INSURANCE AND CLAIMS RESERVES:

  Year ended December 27, 1999     1,282,400     3,909,000    (3,597,600)(3)    1,593,800
  Year ended December 28, 1998     1,536,500     3,234,000    (3,488,100)(3)    1,282,400
  Year ended December 29, 1997       613,400     3,181,000    (2,257,900)(3)    1,536,500
</TABLE>
----------
(1)  Cash paid for projected losses.
(2)  Represents cash paid in the amount of  approximately  $731,000 and recovery
     of a prior period charge in the amount of approximately $648,000.
(3)  Claims paid

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The  consolidated  financial  statements  reflect  the  application  of the
following accounting policies:

CASH EQUIVALENTS

     Cash  equivalents   include   short-term   money  market   investments  and
certificate of deposit accounts with original maturities of 90 days or less from
purchase.

REVENUE RECOGNITION

     Revenue from  restaurant  sales is recognized  when food and beverage items
are sold.

INVENTORIES

     Inventories  consist  primarily  of food,  beverages  and  supplies and are
stated at the  lower of cost  (first-in,  first-out  (FIFO))  or net  realizable
value.

FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

     The  carrying  value of cash  equivalents,  accounts  receivable,  accounts
payable,  accrued liabilities,  and other liabilities approximate fair value due
to the short-term maturities of these instruments. The revolving lines of credit
approximate  fair value as they bear interest at indexed rates.  In management's
opinion,  fixed rate long-term debt is currently at rates that could be obtained
if the Company were to acquire similar debt.

                                      F-10
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


PROPERTY AND EQUIPMENT

      Property and equipment are stated at cost,  depreciated on a straight-line
basis  over the  estimated  useful  lives,  and  consist  of the  following  (in
thousands):

                                                      December 27,  December 28,
                                       Useful Lives      1999           1998
                                       ------------      ----           ----
Land .................................       --        $    534      $    897
Building and leasehold improvements...     5-20          44,937        24,324
Kitchen equipment ....................     5-7           15,431        10,354
Restaurant equipment .................     5-10           6,472         4,870
Smallwares and decor .................     5-10           5,849         4,678
Office equipment and furniture .......     5-7            3,009         1,687
                                                       --------      --------
                                                         76,232        46,810
Less: Accumulated depreciation and
      amortization ...................                  (19,457)      (14,914)
                                                       --------      --------
                                                         56,775        31,896
Construction in progress .............                    1,231         7,299
                                                       --------      --------
      Total ..........................                 $ 58,006      $ 39,195
                                                       ========      ========

     Depreciation  expense was  $4,734,000  for 1999,  $3,786,000  for 1998, and
$3,920,000 for 1997.

FRANCHISE COSTS

       The Company has paid certain  franchise  costs for the exclusive right to
operate  restaurants  in  its  franchise  territories.  These  costs  are  being
amortized on a straight-line basis and consist of the following (in thousands):

                                     Amortization   December 27,    December 28,
                                        Period         1999            1998
                                        ------         ----            ----
Franchise fees and license costs......  20-30        $21,930         $21,093
Prepaid franchise fees ...............     --             --             100
                                                     -------         -------
                                                      21,930          21,193
Less: Accumulated amortization........                (4,046)         (3,293)
                                                     -------         -------
      Total ..........................               $17,884         $17,900
                                                     =======         =======

Franchise  fees and license costs  represent the value assigned to the franchise
agreements  in  the  regions  acquired  and  to  the  licenses  to  operate  the
restaurants. These agreements provide for an initial term of 20 to 30 years with
two  renewal  terms of 10 years  each.  Prepaid  franchise  fees  relate  to the
restaurants  the  Company  is  committed  to  develop  under  the  terms  of the
development agreements (Note 7).

                                      F-11
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


PREOPENING COSTS

     On December 29, 1998, the Company adopted  Statement of Position 98-5 ("SOP
98-5")  "REPORTING ON THE COSTS OF START-UP  ACTIVITIES",  as promulgated by the
American  Institute of Certified  Public  Accountants,  which  requires that the
Company expense  preopening  expenses as they are incurred.  Prior to January 1,
1999,  such expenses were  capitalized  and amortized over a period of one year.
The  cumulative  effect of this  change in  accounting  principle  resulted in a
charge of $168,000 on January 1, 1999.

OTHER ACCRUED LIABILITIES

     Other accrued liabilities consist of the following (in thousands):

                                                   December 27,    December 28,
                                                       1999           1998
                                                      ------         ------
     Accrued payroll ........................         $2,888         $2,079
     Reserve for projected losses ...........          1,153          1,367
     Accrued sales tax ......................          1,174            899
     Other accrued liabilities ..............          4,137          3,737
                                                      ------         ------
             Total ..........................         $9,352         $8,082
                                                      ======         ======

INCOME TAXES

       The Company  utilizes the liability method of accounting for income taxes
as set forth in SFAS No.109,  "ACCOUNTING FOR INCOME TAXES". Under the liability
method,  deferred taxes are provided based on the temporary  differences between
the  financial  reporting  basis and the tax basis of the  Company's  assets and
liabilities,  using enacted tax rates in the years in which the  differences are
expected to reverse.

EARNINGS PER SHARE

     In February  1997,  the Financial  Accounting  Standards  Board issued SFAS
No.128,  "EARNINGS PER SHARE",  which  supersedes  Accounting  Principles  Board
("APB")  Opinion  No. 15,  "EARNINGS  PER  SHARE",  the  existing  authoritative
guidance.  The statement  modifies the  calculation of primary and fully diluted
earnings per share  ("EPS") and  replaces  them both with basic and diluted EPS.
The following table sets forth basic and diluted EPS  computations for the years
ended December 27, 1999, December 28, 1998, and December 29, 1997 (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                    1999                         1998                         1997
                        ---------------------------  ---------------------------  ---------------------------
                                   Per Share                  Per Share                     Per Share
                        Net Income  Shares   Amount  Net Income  Shares   Amount  Net Income  Shares   Amount
                        ----------  ------   ------  ----------  ------   ------  ----------  ------   ------
<S>                        <C>      <C>      <C>      <C>         <C>     <C>       <C>        <C>      <C>
Basic EPS ...............  $970     10,008   $0.09    $4,165      9,976   $0.42     $3,166     9,918    $0.32
Effect of stock options
 and warrants ...........    --        399      --        --        632      --         --       180       --
                           ----     ------   -----    ------     ------   -----     ------    ------    -----
Diluted EPS .............  $970     10,407   $0.09    $4,165     10,608   $0.39     $3,166    10,098    $0.31
                           ====     ======   =====    ======     ======   =====     ======    ======    =====
</TABLE>

                                      F-12
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

     Effective December 30, 1997, the Company adopted SFAS No. 131, "DISCLOSURES
ABOUT  SEGMENTS OF AN ENTERPRISE  AND RELATED  INFORMATION",  which  established
revised  standards for the reporting of financial  and  descriptive  information
about operating segments in financial statements.

     The Company has determined  that it has one reportable  operating  segment.
Although the Company has two  operating  segments  that are managed based on its
restaurant concepts,  T.G.I. Friday's and Redfish, the Redfish operating segment
is  immaterial  to the  Company  as a whole  and does  not  meet the  reportable
thresholds of SFAS No. 131.

     As a  result  of the  foregoing,  the  Company  has  determined  that it is
appropriate to present one reportable  segment  consistent  with the guidance in
SFAS No. 131.  Accordingly,  the Company has not  presented  separate  financial
information  for each of its operating  segments as the  Company's  consolidated
financial statements present its one reportable segment.

RECLASSIFICATIONS

     Certain amounts in 1997 and 1998 have been reclassified to conform with the
1999 presentation.

4. INCOME TAXES

     Deferred  income taxes arise due to  differences in the treatment of income
and expense  items for financial  reporting  and income tax  purposes.  In prior
years,  the Company  generated net operating  losses and in 1999, 1998, and 1997
the Company utilized net operating losses.  The effect of temporary  differences
and  carryforwards  that gave rise to deferred tax balances at December 27, 1999
and December 28, 1998 were as follows (in thousands):

                                 Temporary Differences
                                 ---------------------   Tax Carry  Net Deferred
December 27, 1999                Deductible    Taxable    Forwards   Tax Assets
-----------------                ----------    -------    --------   ----------

Excess tax over book depreciation
 and amortization ...............  $   --     $(3,185)    $    --     $(3,185)
Provision for estimated expenses    1,353          --          --       1,353
Non-recurring items and other ...   2,386         300          --       2,086
FICA and other credits ..........      --          --       4,335       4,335
Net operating loss carryforward .      --          --       4,223       4,223
Valuation reserve ...............      --          --      (8,390)     (8,390)
                                   ------     -------     -------     -------
      Total .....................  $3,739     $(3,485)    $   168     $   422
                                   ======     =======     =======     =======

                                      F-13
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

                                 Temporary Differences
                                 ---------------------   Tax Carry  Net Deferred
December 28, 1998                Deductible    Taxable    Forwards   Tax Assets
-----------------                ----------    -------    --------   ----------

Excess tax over book depreciation
 and amortization ...............  $   --     $(3,296)     $    --      $(3,296)
Provision for estimated expenses    1,290          --           --        1,290
Non-recurring items and other ...   2,481         438           --        2,043
FICA and other credits ..........      --          --        3,403        3,403
Net operating loss carryforward .      --          --        4,849        4,849
Valuation reserve ...............      --          --       (7,921)      (7,921)
                                   ------     -------      -------      -------
              Total .............  $3,771     $(3,734)     $   331      $   368
                                   ======     =======      =======      =======

     The amounts  recorded as net  deferred  tax assets at December 27, 1999 and
December  28,  1998  are  included  as  a  component  of  other  assets  in  the
consolidated balance sheets. The remaining net deferred tax asset as of December
27, 1999  consists  primarily of the benefits to be obtained from the use of net
operating loss  carryforwards and credits expected to be realized in the future.
The Company has determined that a 100% valuation allowance is appropriate on the
net operating  loss as a result of the Company's  current  restaurant  expansion
plans. The Company will  re-evaluate the need for a valuation  allowance at each
quarter.

     At December 27, 1999, the Company had approximately  $10,400,000 of federal
net operating and capital loss  carryforwards to be used to offset future income
for income tax purposes. These carryforwards expire in the years 2002 to 2012.

     Reconciliations  of the federal income tax rate to the Company's  effective
tax rate were as follows:

                                      December 27,   December 28,   December 29,
                                          1999          1998           1997
                                          ----          ----           ----

Statutory federal rate ...............    34.0%        34.0%           34.0%
State taxes, net of federal benefit...     6.0          6.0             6.0
Nondeductible expenses ...............     1.4          6.3             7.5
Benefit of FICA credit ...............   (58.7)       (15.2)          (18.0)
Change in valuation allowance ........    21.5        (31.1)          (29.5)
                                         -----        -----           -----
                                           4.2%         0.0%            0.0%
                                         =====        =====           =====

5. LONG-TERM DEBT

     Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                   Maturity                           December 27,   December 28,
                                    Dates        Interest Rates          1999           1998
                                    -----        --------------          ----           ----
<S>                                <C>       <C>                     <C>            <C>
Term Loan II....................     2012      9.457% and the one      $19,329        $20,116
                                                month LIBOR rate
                                              plus 320 basis points
Other notes payable and
  line of credit ...............  1999-2015       7.75 - 11%            14,014          9,513
                                                                       -------        -------
                                                                        33,343         29,629
Less current portion............                                        (1,830)        (1,365)
                                                                       -------        -------
Total...........................                                       $31,513        $28,264
                                                                       =======        =======
</TABLE>

                                      F-14
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In March 1997, the Company repaid existing debt with $8,000,000 of proceeds
from  the  Northern  California  sale  (Note  2)  and  with  proceeds  from  new
borrowings.  The new borrowings  ("Term Loan II") consist of five notes from one
lender.  Three of the notes  bear  interest  at 9.457% and two of the notes bear
interest at the one month LIBOR rate plus 320 basis points. All of the notes are
payable in equal monthly installments of principal and interest of approximately
$223,000  (combined)  until the notes are paid in full on May 1, 2012.  Proceeds
from  the  Term  Loan II were  also  used to  repay a note  payable  to  Carlson
Restaurants Worldwide including accrued interest of $301,000, with the remaining
proceeds used for general corporate  purposes.  The early  extinguishment of the
existing debt  resulted in an  extraordinary  loss of  $1,638,000  before income
taxes.

     The Term Loan II is secured by the assets of 16 T.G.I. Friday's restaurants
and contains one financial  covenant  relative to a fixed charge coverage ratio,
which the Company currently is in compliance with. Assets at 33 T.G.I.  Friday's
restaurants  and  assets  at three  Redfish  restaurants  have been  pledged  as
collateral for other notes payable.

     During April 1999,  the Company  obtained a $5.0 million  revolving line of
credit  with  another  lender.  The  line of  credit  is  available  to  finance
construction  and  other  costs  associated  with  developing  new  restaurants.
Borrowings  under the line of credit  bear  interest  at prime plus 112.5  basis
points.  The line of credit  includes  covenants  related to the  Company's  net
worth, fixed charge coverage ratio,  profitability,  and access to capital.  The
Company was in compliance with these covenants at December 27, 1999. The line of
credit  matures on July 17,  2000.  At  December  27,  1999,  the Company had no
borrowings outstanding under this line of credit.

     During November 1999, the Company entered into two working capital reducing
revolver loan  agreements  with another  lender.  One  agreement  provides for a
maximum of  $8,050,000  to  finance  80% of the costs to  develop  seven  T.G.I.
Friday's  restaurants.  Borrowings under this agreement will mature in 10 years.
These  borrowings are secured by the assets financed with the borrowings and are
guaranteed  by  certain  of the  Company's  subsidiaries.  The  other  agreement
provides for a maximum of  $3,150,000 to finance 80% of the costs to furnish and
equip seven T.G.I.  Friday's  restaurants.  Borrowings  under this agreement are
secured by the assets  financed  with the  borrowings  and will  mature in seven
years.  Borrowings under both agreements bear interest at 2.65% over the "30-Day
Dealer Commercial Paper Rate," as defined in the agreements,  or a combined rate
of 9.1% at December 27, 1999. At December 27, 1999, the Company had  outstanding
borrowings  of  $1,600,000  under these  agreements.  These  agreements  include
covenants  related to the  Company's  fixed  charge  coverage  ratio and debt to
adjusted cash flow ratio.  The Company was in compliance with these covenants at
December 27, 1999.

     Maturities of long-term debt, giving effect to the new borrowings discussed
above, are as follows at December 27, 1999 (in thousands):

            2000............................... $ 1,830
            2001...............................   2,012
            2002...............................   2,356
            2003...............................   1,965
            2004...............................   2,135
            Thereafter.........................  23,045
                                                -------
                    Total...................... $33,343
                                                =======

6. STOCKHOLDERS' EQUITY

     In January 1997, the Company sold  1,250,000  shares of its Common Stock to
various  investors,  including  500,000 shares  purchased by two officers of the
Company, for total proceeds of $2,500,000.

STOCK OPTIONS

     In July 1990, the Company's Board of Directors approved a stock option plan
("the 1990  Plan").  The 1990 Plan  provides  for the  issuance of up to 250,000
options to  acquire  shares of the  Company's  Common  Stock.  The  options  are
intended to qualify as  incentive  stock  options  within the meaning of Section
422A of the Internal  Revenue Code of 1986 or as options  which are not intended
to meet the requirements of such section ("non-statutory stock options"). Awards
granted  under  the  1990  Plan  also may  include  stock  appreciation  rights,
restricted  stock awards,  phantom  stock,  performance  shares or  non-employee
director options.

                                      F-15
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The exercise  price of all incentive  stock options  granted under the 1990
Plan must be at least  equal to the fair  market  value of such shares as of the
date of grant or, in the case of incentive  stock options  granted to the holder
of 10% or more of the Company's  Common Stock,  at least 110% of the fair market
value  of  such  shares  on  the  date  of  grant.  The  exercise  price  of all
non-statutory  stock options  granted under the 1990 Plan shall be determined by
the Board of Directors of the Company at the time of grant. The maximum exercise
period for which the  options  may be granted is 10 years from the date of grant
(five years in the case of  incentive  stock  options  granted to an  individual
owning more than 10% of the Company's Common Stock).


     In 1996, the Company  adopted the 1995 Stock Option Plan ("the 1995 Plan"),
with terms comparable to the 1990 Plan, covering 325,000 shares of Common Stock.
In 1999, the Company  adopted the 1999  Incentive  Stock Plan ("the 1999 Plan"),
with terms  comparable  to the 1990 Plan,  covering  1,000,000  shares of Common
Stock.

     During 1997, the Company canceled certain  outstanding  options and granted
new options under the 1990 and 1995 Plans.

     In addition to the 1990,  1995, and 1999 Stock Option Plans,  the Company's
Board of Directors approved the issuance of 425,000  non-statutory stock options
to  two  of  the  Company's  officers  during  1997,  the  issuance  of  210,000
non-statutory  stock options to two of the Company's  officers  during 1998, and
460,000 non-statutory stock options to two of the Company's officers in 1999.

     Stock options as of December 27, 1999,  December 28, 1998, and December 29,
1997 is as follows:

<TABLE>
<CAPTION>
                                                    1999                    1998                   1997
                                              ------------------     ------------------     ------------------
                                               Weighted Average       Weighted Average       Weighted Average
                                                         Exercise               Exercise               Exercise
                                              Options      Price     Options      Price     Options      Price
                                              -------      -----     -------      -----     -------      -----
<S>                                           <C>          <C>      <C>           <C>      <C>           <C>
Options outstanding at beginning of
   period ................................    2,381,000    $2.98    2,077,500     $2.90    1,596,500     $3.40
Granted ..................................      737,000     3.30      416,000      3.27      781,950      2.46
Exercised ................................     (234,459)    2.42       (2,500)     2.50       (2,200)     2.50
Canceled .................................     (444,541)    3.77     (110,000)     2.54     (298,750)     3.51
                                             ----------             ----------            ----------
Options outstanding at end of period......    2,439,000     3.22    2,381,000      2.98    2,077,500      2.90
                                             ==========             ==========            ==========

Exercisable at end of period .............    1,642,544     2.79    1,590,577      2.56    1,224,291      3.40
                                             ==========             ==========            ==========
Weighted average fair value of options
   granted ...............................   $     1.82            $     1.87             $     1.44
                                             ==========            ==========             ==========
</TABLE>

     Entities  electing to retain the  accounting  under APB Opinion No. 25 must
make pro forma  disclosures of net income and earnings per share, as if the fair
value based method of accounting defined in SFAS No. 123 had been applied.

                                      F-16
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The Company has elected to account for its stock-based  compensation  plans
under APB Opinion No. 25;  therefore,  no compensation cost is recognized in the
accompanying  financial  statements for stock based employee awards. The Company
has  computed,  for pro forma  disclosure  purposes,  the  value of all  options
granted since January 1, 1995, using the Black-Scholes option pricing model with
the following weighted average assumptions:

                                                 1999        1998        1997
                                                Options     Options    Options
                                                -------     -------    -------

      Risk free interest rate..................   5.95%       5.42%      6.2%
      Expected dividend yield..................   0.0%        0.0%       0.0%
      Expected lives in years..................   4.0         4.0        4.0
      Expected volatility......................  65.8%       70.6%      71.3%

     If the Company had accounted for its stock-based compensation plans using a
fair value based method of accounting, the Company's net income and earnings per
share  would have been  reported  as  follows  (in  thousands,  except per share
amounts):

                                     December 27,   December 28,    December 29,
                                        1999           1998             1997
                                        ----           ----             ----
      Net income:
        Pro Forma .................    $ 169          $3,351           $2,442
      Earnings per share:
        Pro Forma-Basic............     0.02            0.34             0.25
        Pro Forma-Diluted..........     0.02            0.32             0.24

     The effects of applying SFAS No. 123 for  providing  pro forma  disclosures
are not likely to be  representative  of the effects on reported  net income and
earnings per share (basic and diluted) for future  years,  because  options vest
over several years and additional awards are made each year.

COMMON STOCK WARRANTS

     As of December 27, 1999 and December 28, 1998, the Company had  outstanding
warrants to acquire its securities as follows:

                                                             1999         1998
                                                             ----         ----
Common Stock to be acquired by warrants issued to
 lenders in connection with the issuance of
 debt; exercisable at $9.08 through March 2004............  231,277      231,277
                                                            =======      =======

7. COMMITMENTS AND CONTINGENCIES

DEVELOPMENT AGREEMENTS

     The Company is obligated under four separate development agreements to open
39 new T.G.I. Friday's restaurants through 2003. The development agreements give
Carlson  Restaurants  Worldwide  Inc.  (formerly  TGI  Friday's,  Inc.)  certain
remedies in the event the Company  fails to timely  comply with the  development
agreements,  including  the right,  under certain  circumstances,  to reduce the
number of restaurants the Company may develop in related franchised territory or
to  terminate  the  Company's  exclusive  rights to develop  restaurants  in the
related franchised  territory.  The Company's  development  territories  include
Arizona,  Nevada,  New  Mexico,  California  and  the  Kansas  City  and El Paso
metropolitan areas.

                                      F-17
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


FRANCHISE, LICENSE AND MARKETING AGREEMENTS

     In accordance with the terms of the T.G.I.  Friday's  restaurant  franchise
agreements,  the Company is required to pay  franchise  fees of $50,000 for each
restaurant  opened. The Company also is required to pay a royalty of up to 4% of
gross sales.  Royalty  expense was  approximately  $4,830,000,  $3,929,000,  and
$4,120,000 under these agreements during 1999, 1998, and 1997, respectively.  In
addition,  the  Company  could be  required  to spend up to 4% of gross sales on
marketing.   Marketing   expense  under  these   agreements  was   approximately
$2,733,000,   $1,805,000,   and   $1,919,000   during  1999,   1998,  and  1997,
respectively.

OPERATING LEASES

     The Company leases land and restaurant  facilities  under operating  leases
having terms  expiring at various dates through  January  2021.  The  restaurant
leases have from two to three  renewal  clauses of five years each at the option
of the Company and have provisions for contingent  rentals based upon percentage
of gross sales as defined.  The Company's  minimum  future lease  payments as of
December 27, 1999 were as follows (in thousands):

        2000..................................................     $  7,512
        2001..................................................        8,199
        2002..................................................        8,251
        2003..................................................        8,130
        2004..................................................        7,829
        Thereafter............................................       90,211
                                                                   --------
                Total.........................................     $130,132
                                                                   ========

     Rental expense during 1999,  1998, and 1997 was  approximately  $6,948,000,
$5,604,000,  and  $5,081,000,   respectively.  In  addition,  the  Company  paid
contingent  rentals of $678,000,  $523,000,  and $499,000 during 1999, 1998, and
1997,  respectively.  The  difference  between  rent  expense  and rent  paid is
included  in  other   liabilities  and  deferred  credits  in  the  accompanying
consolidated balance sheets.

CONTINGENCIES

     In the normal  course of  business,  the Company is named as a defendant in
various litigation matters. In management's  opinion, the ultimate resolution of
these  matters  will not  have a  material  impact  on the  Company's  financial
position or results of operations.

     The Company is also subject,  from time to time, to audit by various taxing
authorities  reviewing the Company's  income,  property,  sales, use and payroll
taxes.  Management  believes  that any finding  from such audits will not have a
material impact on its financial position or results of operations.

8. BENEFIT PLANS

     The Company  maintains a 401(k) Savings Plan for all of its employees.  The
Company currently  matches 50% of the participants'  contributions for the first
4%  of  the  participants'  compensation.  Contributions  by  the  Company  were
approximately  $122,000,  $100,000,  and $78,000  during 1999,  1998,  and 1997,
respectively.

                                      F-18
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


9. RELATED PARTY TRANSACTIONS

     In October  1997,  the Company sold three T.G.I.  Friday's  restaurants  in
Colorado  and  Nebraska to Sherman  Restaurants,  LLC for  $2,768,000  (Note 2).
Sherman Restaurants, LLC is controlled by Samuel Sherman, the brother of Steven
Sherman, who served as a director of the Company until February 2000.

     In December 1993, the Company  entered into a five-year lease agreement for
corporate office space with an entity controlled by Steven Sherman.  During 1998
the lease was amended to extend the  original  term  through  January 31,  2004.
Approximately $244,000,  $177,000, and $172,000 was paid in rent for this leased
space during 1999, 1998, and 1997, respectively.

                                      F-19