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 25, 2000      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 incorporation                (I.R.S. Employer
               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, 2001, there were outstanding  14,045,601 shares of the registrant's
common stock,  $.001 par value.  The aggregate market value of common stock held
by nonaffiliates of the registrant  (8,479,601 shares) based on the closing sale
price of the common stock as reported on the Nasdaq National Market on March 20,
2001,  was  $25,438,803.   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 2001  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 25, 2000

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
PART I
     ITEM 1.  BUSINESS......................................................  1
     ITEM 2.  PROPERTIES.................................................... 22
     ITEM 3.  LEGAL PROCEEDINGS............................................. 22
     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 22


PART II
     ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDER MATTERS.......................................... 23
     ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.......................... 24
     ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS.......................... 25
     ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 30
     ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 30
     ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE......................... 30

PART III
     ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 31
     ITEM 11. EXECUTIVE COMPENSATION........................................ 31
     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT................................................... 31
     ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 31

PART IV
     ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
               ON FORM 8-K.................................................. 32


SIGNATURES ................................................................. 35

                                  ------------

                 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 2001 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 56 and managing six T.G.I.  Friday's  restaurants.  We also own
six Redfish Seafood Grill and Bar  restaurants and two Bamboo Club  restaurants.
On July 21, 2000, we acquired the concept, name, business, and substantially all
of the assets of the Bamboo Club.

     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.  Bamboo Club  restaurants  are  full-service,  fine  dining,
upscale restaurants that feature an extensive and diverse menu of innovative and
tantalizing Pacific Rim cuisine.

     We  own  the  exclusive  rights  to  develop  additional  T.G.I.   Friday's
restaurants  in  several  territories  in the  western  United  States.  We have
co-development   privileges  with  Carlson  Restaurants   Worldwide  to  develop
additional  T.G.I.  Friday's  restaurants  in  California.  We plan  to  develop
additional T.G.I. Friday's restaurants in our existing development  territories.
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   and  Bamboo  Club
               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 may explore  opportunities  to franchise the Redfish and Bamboo Club concepts
to third parties in the future.

     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.  As used in this Report,  the terms
"we," "our," "us," or "Main Street" refers to Main Street and Main  Incorporated
and its 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,  has conducted a business since 1972 that is substantially similar
to the business currently conducted by its franchisees. As of December 25, 2000,
Carlson  Restaurants  Worldwide had 222  franchisor-operated  and 425 franchised
T.G.I. Friday's restaurants  operating worldwide.  Carlson Restaurants Worldwide
currently owns approximately  1.9% of our outstanding  common stock.  Holders of
our common  stock do not have any  financial  interest  in  Carlson  Restaurants
Worldwide,  and Carlson  Restaurants  Worldwide  has no  responsibility  for the
contents of this Report.

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<PAGE>
     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, such as
menu items  featuring  "Jack Daniel's"  sauces.  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,  also known as
"flair",  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.

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, burgers, and pasta;

     *    southwestern, oriental, and American specialty items;

     *    beef, seafood,  and chicken entrees,  including Jack Daniels(TM) grill
          items;

     *    a children's 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 pasta 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  freestanding
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 $2,450,000 to $2,800,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include approximately (a) $1,650,000 to $2,000,000 for
building, improvements, and permits, including liquor licenses, (b) $600,000 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
2000 generated an average of approximately $3,304,000 in annual revenue.

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<PAGE>
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. 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 11:00 a.m. until 2:00 a.m.

MENU

     We have developed a menu of more than 50 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 and 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.

     Menu  prices  range  from $7.00 to $25.00 for an entree and $5.00 to $11.00
for salads and appetizers. Alcohol sales currently account for approximately 20%
of total revenue.

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  locale. 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 constructed our first restaurant using this prototype in Scottsdale, Arizona.
This  restaurant  opened on  February  8,  2001.  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 $2,400,000 to $2,600,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include approximately (a) $1,650,000 to $1,850,000 for
building, improvements, and permits, including liquor licenses, (b) $600,000 for
furniture,  fixtures,  and  equipment,  (c)  $150,000 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 2000  generated an average of  approximately  $2,300,000 in annual
revenue.

OUR BAMBOO CLUB RESTAURANTS

THE BAMBOO CLUB CONCEPT

     Bamboo Club  restaurants are  full-service,  fine dining  restaurants  that
feature an extensive and diverse menu of innovative and tantalizing  Pacific Rim
cuisine.  Bamboo Club  restaurants  use fresh  ingredients and premium herbs and

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<PAGE>
spices in creative  combinations to serve  high-quality  food and beverages that
deliver a unique combination of delicious taste, eye-appealing color, appetizing
aroma, and delightful texture.  The entire Bamboo Club concept has been designed
to deliver a consistent  and  enjoyable  dining  experience  to each guest in an
elegant,  upscale  atmosphere.  The  restaurants  feature  a modern  decor  that
provides a dramatic yet comfortable impression, with food and beverages prepared
and served by a highly trained and skilled staff.

     Bamboo Club restaurants are open for lunch and dinner,  with hours of 11:30
a.m. to midnight  Sunday through  Thursday and 11:30 a.m. to 1:00 a.m. on Friday
and Saturday.  The kitchen remains open until 11:00 p.m. Sunday through Thursday
and until  midnight on Friday and Saturday to  accommodate  guests who prefer to
dine late. Bamboo Club restaurants take reservations and can serve large parties
or groups.

MENU

     Bamboo Club  restaurants  feature a menu of more than 80 items  inspired by
the diverse and exotic  cuisines  found in  locations  such as Bangkok,  Canton,
Singapore, Seoul, Hong Kong, Indonesia, Hawaii, and other Pacific Rim cities and
provinces.  Each Bamboo Club  restaurant  also features a full-service  bar that
serves a variety of popular  drinks and  liquors,  such as martinis and tropical
drinks, as well as traditional mixed beverages,  fine wines, a wide selection of
popular Asian and domestic beers, and fine cigars.

     Menu prices range from $6 to $10 for salads; $5 to $10 for appetizers;  and
$10 to $29 for entrees. The average guest check is approximately $25 per person.
Alcoholic  beverage  sales  account  for  approximately  20% of  total  revenue.
Take-out orders represent approximately 5% of total revenue. In addition,  sales
through a  third-party  delivery  service  represent  approximately  3% of total
revenue.

RESTAURANT LAYOUT AND STAFFING

     Bamboo Club restaurants have been designed to create a dramatic  impression
in an  atmosphere  that is both spacious and intimate.  The  restaurants'  decor
features artful lighting,  dramatic murals, an eclectic mix of background music,
and a general color theme of black, copper, and bamboo to create a "hip," exotic
feeling of warmth and color.

     The  restaurants  also  feature an  "exhibition  kitchen"  adjacent  to the
seating area,  where diners can watch highly skilled wok chefs prepare and serve
the  restaurants'  appetizers  and entrees.  Most dishes are prepared and served
within five to ten minutes from the time when the order is placed.

     The two existing Bamboo Club restaurants are located in high-traffic retail
shopping environments.  Each restaurant contains approximately 5,400 square feet
of space in leased facilities,  excluding patio areas. Each of these restaurants
feature  indoor  seating and bar area seating for a total of  approximately  200
guests, which does not include outdoor patio seating.

     Bamboo Club  restaurants  have developed an extensive  program to train and
motivate restaurant  employees.  The Bamboo Club serving staff are professional,
friendly,  highly skilled,  and knowledgeable about the restaurant's cuisine and
menu selections.  Servers are trained to make suggestions or recommendations for
new or different menu items or combinations  that patrons might try, which helps
each guest to enjoy a memorable dining experience.

UNIT ECONOMICS

     Although we have not completed construction or equipped the Tempe location,
we anticipate that our total cost of opening will be  approximately  $1,075,000,
exclusive of annual operating expenses.  These costs will include  approximately
(a)  $550,000,  net of a reduction  for  landlord's  contribution,  for building
improvements and permits, including liquor licenses, (b) $400,000 for furniture,
fixtures,  and equipment,  and (c) $125,000 in pre-opening  expenses,  including
hiring  expenses,  wages for managers and hourly  employees,  and  supplies.  We
anticipate  that  our  total  costs  of  opening  the  Tampa  location  will  be
approximately  $1,264,000,  exclusive of annual operating expenses.  These costs
will include  approximately  (a)  $649,000,  net of a reduction  for  landlord's
contribution,  for building improvements and permits, including liquor licenses,
(b)  $490,000  for  furniture,  fixtures,  and  equipment,  and (c)  $125,000 in
pre-opening expenses,  including hiring expenses,  wages for managers and hourly
employees,  and supplies. We anticipate that our total costs of opening the West
Palm  Beach  location  will be  approximately  $1,060,000,  exclusive  of annual
operating expenses.  These costs will include approximately (a) $535,000, net of

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<PAGE>
a reduction for landlord's contribution,  for building improvements and permits,
including liquor licenses, (b) $400,000 for furniture,  fixtures, and equipment,
and (c) $125,000 in pre-opening expenses,  including hiring expenses,  wages for
managers and hourly employees, and supplies. Actual costs may very significantly
depending on a variety of factors,  especially since we have not yet developed a
Bamboo Club restaurant.

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  Restaurants  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
Restaurants Worldwide's consent before we enter into definitive agreements for a
T.G.I. Friday's restaurant site.

CURRENT RESTAURANTS

     The following table sets forth  information  relating to each restaurant we
own or manage as of March 20, 2001.

<TABLE>
<CAPTION>
                                                                                  IN
                                                     SQUARE        SEATING     OPERATION   OPERATED BY OUR
LOCATION                                             FOOTAGE       CAPACITY      SINCE      COMPANY 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
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
                                                                                  IN
                                                     SQUARE        SEATING     OPERATION   OPERATED BY OUR
LOCATION                                             FOOTAGE       CAPACITY      SINCE      COMPANY SINCE
--------                                             -------       --------      -----      -------------
<S>                                                   <C>            <C>          <C>           <C>
DEVELOPED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
   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
   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.............................     6,000          240          1999          1999
   Goodyear, Arizona.............................     6,000          207          2000          2000
   Shawnee, Kansas...............................     6,400          245          2000          2000
   Thousand Oaks, California.....................     6,400          249          2000          2000
   Union City - San Francisco....................     6,400          240          2000          2000
   Leawood, Kansas...............................     7,248          240          2000          2000
   N. Long Beach, California.....................     7,177          291          2000          2000
   Scottsdale, Arizona...........................     7,100          263          2000          2000
   Albuquerque, New Mexico.......................     6,426          241          2001          2001

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

DEVELOPED REDFISH RESTAURANTS
   Denver, Colorado..............................     7,925          321          1997          1997
   Chicago, Illinois.............................     6,200          214          1996          1997
   Cincinnati, Ohio..............................     7,133          239          1997          1997
   San Diego, California.........................    11,994          347          1999          1999
   Cleveland, Ohio...............................    10,964          328          1999          1999
   Scottsdale, Arizona...........................     7,285          218          2001          2001

ACQUIRED BAMBOO CLUB RESTAURANTS
   Phoenix, Arizona..............................     5,400          200          1995          2000
   Scottsdale, Arizona...........................     5,400          200          1997          2000
</TABLE>
                                       6
<PAGE>
     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. The Redfish restaurants
average  8,600 square feet,  and the existing  Bamboo Club  restaurants  average
5,400 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  Restaurants  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
Restaurants 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 Restaurants Worldwide; and

     *    standards  for the  maintenance,  improvement,  and  modernization  of
          restaurants, equipment, furnishings, and decor.

     Carlson Restaurants  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 Restaurants
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 Restaurants 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  Restaurants  Worldwide.  We respond to and  investigate  inquiries  and
complaints,  initiate on-site resolution of deficiencies,  and consult with each

                                       7
<PAGE>
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  Restaurants  Worldwide's and our operational  standards.
Our  six  regional  managers  are  responsible  for  between  5 and  12  of  our
restaurants  within their region.  These regional  managers and two Directors of
Operations  report to our Vice  President  of  Restaurant  Operations.  The Vice
President of Restaurant  Operations and two other Directors 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.

     We recently  established  a program of  appointing  multi-location  general
managers in  geographic  areas  having  locations  close enough to each other to
support this concept. In addition to improving  efficiency,  this program allows
us to promote and  compensate  key general  managers and create a position  that
improves our ability to retain key employees in our company.  We currently  have
three employees in these positions.

RECRUITMENT AND TRAINING

     We attempt to hire employees who are committed to the standards  maintained
by our company and Carlson Restaurants Worldwide.  We also believe that our high
unit sales volume, the image and atmosphere of the T.G.I. Friday's, Redfish, and
Bamboo Club 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  Restaurants  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  Restaurants
Worldwide. This program provides our T.G.I. Friday's restaurant managers between
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 and Bamboo Club 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 and  re-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 and Bamboo Club  restaurants.  We also make  necessary
additions, alterations, repairs, and replacements to our restaurants as required
by Carlson Restaurants  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 Restaurants  Worldwide.  One Bamboo Club
restaurant lease requires us to periodically refurbish the location.

                                       8
<PAGE>
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 Restaurants  Worldwide as well as systems we
have developed for our Redfish and Bamboo Club  restaurants.  Inventory  control
and transaction  processing are  accomplished  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. Our existing in-store accounting system in the TGI Friday's
we own and manage is currently  supported by Carlson Restaurants  Worldwide.  We
have been notified that its support will cease in the middle of 2002. We plan to
replace  this  system  with a new  system  that  will  work in all  three of our
restaurant concepts.  We currently are in the design phase of this project. This
systems replacement will be a major effort for us during the next year.

     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  Restaurants  Worldwide.  In  order to be
approved  as  a  supplier,  a  prospective  supplier  must  demonstrate  to  the
reasonable satisfaction of Carlson Restaurants Worldwide its ability to meet the
then-current  standards and specifications of Carlson Restaurants  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   Restaurants
Worldwide.

     Carlson Restaurants  Worldwide maintains a list of approved suppliers and a
set  of  the  T.G.I.  Friday's  system  standards  and  specifications.  Carlson
Restaurants   Worldwide   receives  no   commissions  on  direct  sales  to  its
franchisees,   but  may  receive   rebates  and   promotional   discounts   from
manufacturers and suppliers,  some of which are passed on proportionately to our
company.  Carlson  Restaurants  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. We are not,
however,  required to purchase such items from Carlson Restaurants Worldwide. If
we elect to purchase  such items from  Carlson  Restaurants  Worldwide,  Carlson
Restaurants Worldwide may derive 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  Restaurants  Worldwide and all of its other  franchisees also purchased
from this  distributor,  which is not  affiliated  with our  company  or Carlson
Restaurants 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,  this  distributor  filed  for
protection  under Chapter 11 of the U. S.  Bankruptcy  Code. We asserted  claims
against the supplier and the supplier  asserted  claims against us, all of which
have been resolved.  See Item 3,  "Legal Proceedings" included elsewhere in this
Report.

                                       9
<PAGE>
     In January  2000,  we entered into an agreement  with U.S.  Foodservice,  a
company with which we had an existing  relationship,  to serve substantially all
of our restaurants in California, Arizona, and Nevada. During the second quarter
of fiscal 2000, we completed the  transition to U.S.  Foodservice in California,
Arizona,  and Nevada and to Performance Food Group in Missouri,  Kansas,  Texas,
and New Mexico for all our T.G.I.  Friday's  and  Redfish  restaurants.  Our two
acquired Bamboo Clubs restaurants currently utilize the distribution  operations
that were in place when we acquired those  restaurants,  and those  distribution
operations will be evaluated after we open the Tempe location.

     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,
          Redfish, and Bamboo Club restaurants;

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

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

     *    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 Restaurants Worldwide.  The programs use network and cable television
and  national   publications  and  feature  new  menu  innovations  and  various
promotional  programs.  In  addition,  from  time to  time,  we  supplement  the
marketing and advertising  programs conducted by Carlson  Restaurants  Worldwide
through local radio,  newspaper,  and magazine advertising media and sponsorship
of community  events.  In conjunction  with Carlson  Restaurants  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  Restaurants  Worldwide,  we are able to utilize
the trade names,  service marks,  trademarks,  emblems, and indicia of origin of
Carlson  Restaurants  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.

REDFISH AND BAMBOO CLUB RESTAURANTS

     Our  in-house  marketing  department  develops  advertising  and  marketing
programs for our Redfish and Bamboo Club restaurants.  We develop these programs
with an emphasis on building  awareness of the "Redfish" and "Bamboo Club" brand
in the communities in which we operate  Redfish and Bamboo Club  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 and Bamboo Club restaurant grand opening.

EXPANSION OF OPERATIONS

     Between 1990 and 2000, we acquired 31 existing T.G.I.  Friday's restaurants
as well as the exclusive and  co-development  rights to develop  restaurants  in
specified  territories.  The acquisitions  include 25 restaurants in California,
three  in  Arizona,  and  one in  each  of  Kansas,  Missouri,  and  Nevada.  We
subsequently  sold  five  of the  restaurants  we  had  previously  acquired  in

                                       10
<PAGE>
California,  which we continue to manage.  Between  1990 and 2000,  we also have
developed 30 new T.G.I. Friday's restaurants, including seven during 2000. These
include 15 in California,  six in Arizona,  three in Nevada,  two in each of New
Mexico and Kansas, and one in each of Missouri and Texas.

     In 1997, we acquired a 52%  ownership  interest and in 1999 we acquired the
remaining  minority  interest in Redfish  America,  LLC, which operated our four
original  Redfish  Seafood Grill and Bar  restaurants.  We opened two additional
Redfish restaurants in 1999 and closed one in 2000.

     In July 2000, we acquired the business and  substantially all of the assets
of two Bamboo Club restaurants. As part of the acquisition, we also acquired the
right,  title,  and  interest  under,  in,  and to the  "Bamboo  Club"  name and
restaurant  concept.  The two Bamboo Club restaurants are located in Phoenix and
Scottsdale,  Arizona.  We plan to expand  the  Bamboo  Club  concept  by opening
additional  restaurants.  We also may explore  opportunities  to  franchise  the
Bamboo Club concept to third parties in the future.

     We plan to expand our  restaurant  operations  through the  development  of
additional T.G.I.  Friday's restaurants in our existing development  territories
and the  development  of  additional  Redfish  and Bamboo  Club  restaurants  in
suitable  locations.  We opened two T.G.I.  Friday's and one Redfish  restaurant
during  the first  quarter of fiscal  2001.  We plan to open an  additional  two
T.G.I.  Friday's,  one  Redfish,  and three Bamboo Club  restaurants  during the
remainder  of 2001.  We plan to open a new  Bamboo  Club  restaurant  in  Tempe,
Arizona,  during the summer of 2001,  which is currently  under  construction in
6,700 square feet of leased space,  exclusive of patio  seating area.  The Tempe
restaurant will contain seating for approximately  206 guests,  exclusive of bar
and patio  seating.  In  addition,  we have  entered into leases for Bamboo Club
restaurant  locations  in  high-traffic  shopping  malls in Tampa  and West Palm
Beach,  Florida,  and expect to commence  construction so that we can open those
locations in the fall of 2001. The Tampa location contains 8,100 square feet and
the West Palm Beach location contains 6,317 square feet, both exclusive of patio
seating  areas.   The  Tampa  restaurant  is  planned  to  contain  seating  for
approximately  235  guests  and the West Palm  Beach  restaurant  is  planned to
contain seating for  approximately  180 guests,  both exclusive of bar and patio
seating.

     We are  negotiating  leases  or  purchase  agreements  for  six  additional
restaurants  scheduled to be developed during 2002. We currently are considering
other sites for  additional  restaurants,  but have not  entered  into leases or
purchase  agreements  for  such  sites.  We do not  know  how  many  sites  will
materialize, as that depends on a variety of factors and economic conditions.

     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,  utility,  and labor costs,  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 restaurants that are developed or
acquired will be profitable.  In addition, the opening of additional restaurants

                                       11
<PAGE>
in an existing market may have the effect of drawing customers from and reducing
the sales volume of our existing restaurants in those markets.

DEVELOPMENT AGREEMENTS

     We are a party to four  development  agreements  with  Carlson  Restaurants
Worldwide.  Each development agreement grants us the 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, and the Kansas City,  Kansas/Missouri
and E1 Paso, Texas  metropolitan  areas. We also have the  non-exclusive  right,
together  with  Carlson  Restaurants  Worldwide,  to develop  additional  T.G.I.
Friday's  restaurants in the state of California.  We plan to develop additional
T.G.I. Friday's restaurants in our existing development territories.

     In the past, we have successfully  renegotiated our franchisee  development
obligations for new T.G.I. Friday's locations, primarily in Northern California.
Our renegotiated  development schedule has reduced our development obligation in
Northern  California,  extended  the dates for new store  development  in all of
California,  and increased to a lesser  extent our  development  obligations  in
other territories.  As part of the new agreement,  Carlson Restaurants Worldwide
now has the right to  co-develop  the  California  market.  We  currently do not
expect  to meet the  amended  development  agreements,  but  instead  expect  to
renegotiate the terms of those agreements with Carlson Restaurants Worldwide.

     During  the  middle  of 2000,  we  experienced  difficulty  finding  sites,
particularly  in Northern  California,  that we  believed we could  successfully
develop and operate. We commenced discussions with Carlson Restaurants Worldwide
to  adjust  and  modify  our  development  agreements.  We  reached  substantial
agreement to reduce  development  obligations in certain areas and to alter some
area  obligations.  Before this agreement was  finalized,  increases in workers'
compensation,  minimum wage,  and energy costs made  development  in California,
especially Northern  California,  very problematic.  As a result, we agreed with
Carlson  Restaurants   Worldwide  not  to  enter  into  a  modification  of  our
development agreements until we can fully assess the effects of these issues.

     The  following   table  sets  forth   information   regarding  our  minimum
requirements  to  open  new  T.G.I.   Friday's  restaurants  under  our  current
development agreements,  absent the current moratorium, 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(1)    TERRITORY(2)     TERRITORY(3)     TOTAL
----                        ------------    ------------    ------------     ------------     -----
<S>                               <C>            <C>             <C>               <C>          <C>
Carry-over.................      --              3              --                --             3
2001 ......................       4              6               1                 1            12
2002 ......................       4              4               1                 1            10
2003 ......................       3              3            (TBD)             (TBD)            6
                                ---            ---            ----              ----           ---
     Total.................      11             16               2                 2            31
                                ===            ===            ====              ====           ===

Existing Restaurants.......      29              6 (4)          16 (5)             5            56
</TABLE>

----------
(1)    Carlson  Restaurants  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 Restaurants Worldwide and
       the Company during 2002.

     Each  development  agreement gives Carlson  Restaurants  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

                                       12
<PAGE>
development agreement or any franchise agreement relating to a restaurant within
that  development  territory as described above, or if our officers or directors
breach  the   confidentiality  or  noncompete   provisions  of  the  development
agreement.  The remedies available to Carlson Restaurants  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.  None of these remedies would
affect  adversely  our ability to continue to operate our  then-existing  T.G.I.
Friday's restaurants.

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  Restaurants  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 Restaurants Worldwide.

     Each franchise agreement requires us to pay Carlson  Restaurants  Worldwide
an initial franchise fee,  generally in the amount of $50,000.  In addition,  we
are obligated to pay Carlson Restaurants 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  $4,830,000 during fiscal 1999,
and $6,634,000 during fiscal 2000. Each franchise  agreement also requires us to
spend at least 4% of gross  sales  on local  marketing  and to  contribute  to a
national marketing pool Carlson  Restaurants  Worldwide  administers.  All funds
contributed  to the national  advertising  fund are  credited  against the local
advertising  requirement.  Carlson Restaurants  Worldwide required us as well as
all other franchisees to contribute 2.1% of gross sales in fiscal 1999, 2000 and
2001 to the national  marketing  pool.  Marketing  expenses  totaled  $2,733,000
during fiscal 1999 and $4,163,000 during fiscal 2000.

     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 on 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 the cost of workers' compensation insurance,  both of which
recently occurred in California,  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

                                       13
<PAGE>
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 possess. 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 we  believe  will be  premium  locations  for new
restaurants,  although we can provide no assurance that we will be successful in
these efforts.

EMPLOYEES

     We employ  approximately  2,450 people on a full-time basis, of whom 65 are
corporate management and staff personnel and 2,385 are restaurant personnel.  We
also employ  approximately 4,100 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.

EXECUTIVE OFFICERS

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

       NAME              AGE                      POSITION
       ----              ---                      --------
Bart A. Brown, Jr......  69   President, Chief Executive Officer, and Director
William G. Shrader.....  53   Executive Vice President, Chief Operating Officer,
                               and Director
Lawrence K. White......  36   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., and 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 until March
1996. In January 1996, Color Tile filed for  reorganization  under Chapter 11 of
the United States  Bankruptcy Code. 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.

     LAWRENCE  K.  WHITE  has  served  as our Vice  President-Finance  and Chief
Financial  Officer  since August 2000.  Prior to joining our company,  Mr. White
served as the Vice President of Accounting for the Arizona Diamondbacks of Major
League Baseball (MLB), the Phoenix Suns of the National  Basketball  Association
(NBA), Bank One Ballpark,  and America West Arena. Mr. White began his career in
public  accounting with the Boston offices of Price  Waterhouse and Pannell Kerr
Forster from 1987 through 1992.  Thereafter,  he worked for two Boston area real
estate companies until his hiring by the Arizona Diamondbacks in early 1996.

                                       14
<PAGE>
                             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 RESTAURANTS WORLDWIDE, INC.

     We currently operate 56 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
other franchisees.  Carlson Restaurants Worldwide,  Inc. (formerly TGI Friday's,
Inc.) is the  franchisor  of  T.G.I.  Friday's  restaurants.  As a result of the
nature of  franchising  and our franchise  agreements  with Carlson  Restaurants
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 Restaurants  Worldwide to identify and react to
          new trends in the restaurant  industry,  including the  development of
          popular menu items;

     *    the  ability of Carlson  Restaurants  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;

     *    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 Restaurants Worldwide and other T.G.I. Friday's franchisees.

     We  believe  that  the  experience,  reputation,  financial  strength,  and
franchisee support of Carlson  Restaurants  Worldwide represent positive factors
for our business. We have no control,  however, over the management or operation
of Carlson Restaurants Worldwide or other T.G.I. Friday's franchisees. A variety
of factors  affecting  Carlson  Restaurants  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   Restaurants   Worldwide  may
          encounter;

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

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

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

     *    negative  publicity with respect to Carlson  Restaurants  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  Restaurants  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 Restaurants  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

                                       15
<PAGE>
     *    spend up to 4% of the restaurant's  gross sales on advertising,  which
          may include contributions to a national marketing pool administered by
          Carlson Restaurants Worldwide.

During  fiscal 2000,  Carlson  Restaurants  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 requirements and specifications
established  by  Carlson   Restaurants   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.

OUR DEVELOPMENT AGREEMENTS WITH CARLSON RESTAURANTS WORLDWIDE REQUIRE US TO OPEN
ADDITIONAL T.G.I. FRIDAY'S RESTAURANTS.

     The  acquisition  of  restaurants  may 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 Restaurants  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 Restaurants 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 Restaurants 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 MAY NOT BE ABLE TO COMPLY  WITH ALL OF THE  REQUIREMENTS  OF OUR  DEVELOPMENT
AGREEMENTS.

     At  the  beginning  of  2001,  our  development   agreements  with  Carlson
Restaurants Worldwide required us to open at least 31 additional T.G.I. Friday's
restaurants  by December  31, 2003,  including 15 by the end of 2001.  We opened
seven  new  T.G.I.  Friday's  restaurants  during  fiscal  2000.  One  of  these
restaurants fulfilled our development requirements for 1999. We do not expect to
meet our California and midwest obligations under our development agreements but
instead expect to renegotiate our obligations under those agreements.

                                       16
<PAGE>
WE FACE RISKS ASSOCIATED WITH THE ACQUISITION AND INTEGRATION OF REDFISH AND THE
BAMBOO CLUB AND ANY OTHER ACQUIRED RESTAURANTS WITH OUR EXISTING OPERATIONS.

     We must integrate the operations of our Redfish and Bamboo Club restaurants
with our existing operations in order to enhance revenue,  realize cost savings,
and achieve anticipated operating efficiencies.  Because Redfish and Bamboo Club
restaurants  feature  diverse  menus  served  in an  upscale  atmosphere,  these
restaurants present operating  requirements that differ from our existing T.G.I.
Friday's  restaurants,  which could result in  unanticipated  challenges  to our
management  team.  We  may  wish  to  acquire  other  complementary   restaurant
operations in the future.  We may not be able to identify  suitable  acquisition
candidates or make acquisitions on commercially acceptable terms. We also cannot
provide assurance that we will be able to

     *    effectively  complete the  integration  of the Redfish and Bamboo Club
          operations  or  any  future  acquired  businesses  with  our  existing
          operations;

     *    effectively  manage the  Redfish and Bamboo  Club  restaurants  or the
          combined operations of our different restaurant concepts;

     *    achieve our  operating  and growth  strategies  with  respect to these
          businesses;

     *    obtain increased revenue  opportunities as a result of the anticipated
          synergies created by the Redfish, Bamboo Club, and other acquisitions;
          or

     *    reduce the  overall  selling,  general,  and  administrative  expenses
          associated with acquired operations.

     The integration of the management,  personnel,  restaurant operations,  and
facilities  of Redfish  and  Bamboo  Club and any other  businesses  that we may
acquire in the future could involve unforeseen difficulties.  These difficulties
could disrupt our ongoing business,  distract our management and employees,  and
increase  our  expenses,  which  could  have a  material  adverse  effect on our
business, financial condition, and operating results.

     We conduct due diligence reviews of each acquired  business,  and we obtain
professional opinions regarding each acquired business.  Unforeseen  liabilities
and  difficulties,  however,  can arise in  connection  with the operation of an
acquired  business.  Contractual  or other  remedies  may not be  sufficient  to
compensate us in the event unforeseen liabilities or other difficulties arise.

     We strive to take advantage of the opportunities created by the combination
of  acquired  operations  to  achieve  significant  revenue   opportunities  and
substantial cost savings,  including  increased  product offerings and decreased
operating expenses as a result of the elimination of duplicative  facilities and
personnel  associated  with sales,  marketing,  administrative,  and  purchasing
functions.   Significant   uncertainties,   however,   accompany   any  business
combination.  We  may  not be  able  to  achieve  revenue  increases;  integrate
facilities, functions, and personnel in order to achieve operating efficiencies;
or otherwise realize cost savings as a result of acquisitions.  The inability to
achieve revenue  increases or cost savings could have a material  adverse effect
on our business, financial condition, and operating results.

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  retention 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.

                                       17
<PAGE>
     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

     *    manage successfully the rate of expansion and expanded operations.

     Increased   construction  costs  and  delays  resulting  from  governmental
regulatory approvals, strikes or work stoppages, adverse weather conditions, and
various acts of God may also affect the opening of new restaurants. 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 other  expenditures.  We expect that cash flow from
operations,  together with financing commitments,  will be sufficient to develop
the additional two T.G.I. Friday's restaurants,  the one new Redfish restaurant,
and the three new Bamboo Club  restaurants  that we plan to open during 2001. We
will require funds to develop additional T.G.I.  Friday's,  Redfish,  and Bamboo
Club restaurants after 2001 and to pursue any additional restaurant  development
or restaurant acquisition  opportunities that may develop. 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 Restaurants Worldwide or otherwise to expand
our restaurant operations.  See "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 add, 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.

                                       18
<PAGE>
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 25, 2000, we had long-term debt
of approximately $44.4 million and a working capital deficit of $7.7 million.

     Our  borrowings  will  result in  interest  expense of  approximately  $4.1
million  in 2001 and  $4.35  million  in 2002,  based  on  currently  prevailing
interest rates and assuming outstanding and contemplated 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,  56 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
"Special Considerations - We may need additional capital."

WE WILL BE SUBJECT TO THE RISKS  ASSOCIATED  WITH  FRANCHISING  OPERATIONS IF WE
BEGIN FRANCHISING THE REDFISH OR BAMBOO CLUB CONCEPTS.

     We will be subject to the risks  associated  with  franchising  if we begin
franchising  activities in the future. If we develop a franchising  program, our
success as a franchisor will depend upon our ability to

     *    develop and  implement a successful  system of concepts and  operating
          standards;

     *    attract and  identify  suitable  franchisees  with  adequate  business
          experience and access to sufficient capital to enable them to open and
          operate  restaurants  in a manner  consistent  with our  concepts  and
          operating standards;

     *    monitor the operations of our  franchisees to ensure  compliance  with
          our concepts and operating standards;

     *    identify suitable sites for restaurant development; and

     *    negotiate  favorable  purchasing  terms  with  national   distribution
          companies.

We cannot  provide  assurance that we would be able to  successfully  meet these
challenges as a franchisor.  In addition, as a franchisor we would be subject to
a variety of federal and state laws and  regulations,  including  Federal  Trade
Commission regulations,  governing the offer and sale of franchises.  These laws
and regulations

     *    impose registration and disclosure  requirements on franchisors in the
          offer and sale of franchises, and

     *    regulate  the   termination  of  franchises,   the  refusal  to  renew
          franchises, and other substantive aspects of the relationships between
          franchisors and franchisees.

These laws and regulations  could result in significant  increased  expenses and
potential  liabilities  for our  company  in the event we engage in  franchising
activities in the future.

WE FACE RISKS THAT AFFECT THE RESTAURANT INDUSTRY IN GENERAL.

     A variety of factors over which we have no control may affect the ownership
and operation of restaurants. These factors include the following:

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

     *    increased costs of labor or food products;

     *    fuel, utility, and energy and other price increases;

     *    competitive factors;

     *    the number, density, and location of competitors;

     *    changing consumer tastes, habits, and spending priorities;

     *    the cost and availability of insurance coverage;

     *    management problems;

     *    uninsured losses;

     *    limited alternative uses for properties and equipment;

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<PAGE>
     *    changing demographics;

     *    changing traffic patterns;

     *    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,  our business  could 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 possess.

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 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.

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:

                                       20
<PAGE>
     *    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; and

     *    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  fluctuations  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.

OUR MANAGEMENT  CONTROLS A SIGNIFICANT PORTION OF THE VOTING POWER OF OUR COMMON
STOCK.

     Our  directors  and  officers   currently  own,   directly  or  indirectly,
approximately 5,566,000 shares, or 40.3%, of our outstanding common stock. These
directors  and officers  also hold options to purchase an aggregate of 1,855,000
shares of common stock at exercise prices ranging from $2.00 to $5.00 per share.
As a result, these persons voting together will have significant voting power.

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

     Stock  options to acquire an aggregate of 2,733,000  shares of common stock
currently are outstanding. An additional 379,466 have been reserved for issuance
upon  exercise of options that may be granted  under our  existing  stock option
plans. In addition, warrants to acquire 231,000 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 us  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, 2001, there were outstanding 14,045,601 shares of our common stock.
All of these  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.  Affiliates  also are subject to certain of the
resale  limitations  of Rule 144.  Generally,  under Rule 144,  each person that
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.

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.

                                       21
<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  payment plus a percentage  of our
revenue in excess of a specified amount.

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.

     We have settled our dispute with Ameriserve,  our former primary restaurant
supplier,  which in January 2000 filed for  protection  under  Chapter 11 of the
U.S.   Bankruptcy   Code.   Under  the  terms  of  the  settlement  we  recouped
approximately  $1,591,000 (net of related expenses) of previously increased food
costs,  labor costs,  and other expenses we incurred as a result of Ameriserve's
breach of its obligations with us.

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

     Not applicable.

                                       22
<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
                                                               ----        ---
     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...................................     $3.47       $3.00
         Second Quarter..................................      3.56        2.78
         Third Quarter...................................      3.38        2.19
         Fourth Quarter..................................      3.56        2.63
     2001
         First Quarter (through March 20, 2001)..........     $3.09       $2.50

     On March 20, 2001, there were 914 holders of record of our common stock. On
March 20,  2001,  the  closing  sale  price of our  common  stock on the  Nasdaq
National Market was $3.00 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 limit our ability to pay cash dividends.

                                       23
<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 25, 2000 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. 30,      DEC. 29,     DEC. 28,      DEC. 27,     DEC. 25,
                                                                   1996          1997         1998          1999         2000
                                                                 --------      --------     --------      --------     --------
<S>                                                              <C>           <C>          <C>           <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenue .....................................................    $122,563      $107,018     $114,242      $140,294     $186,542
Restaurant operating expenses:
  Cost of sales .............................................      35,089        30,995       33,242        39,960       53,671
  Payroll and benefits ......................................      38,858        31,907       33,701        42,405       55,971
  Depreciation and amortization .............................       4,586         3,265        3,730         4,664        7,490
  Other operating expenses ..................................      36,944        30,589       31,004        38,923       52,008
  Reduction of disputed liabilities .........................          --            --           --            --       (1,591)
                                                                 --------      --------     --------      --------     --------
       Total restaurant operating expenses ..................     115,477        96,756      101,677       125,952      167,549
                                                                 --------      --------     --------      --------     --------

Income from restaurant operations ...........................       7,086        10,262       12,565        14,342       18,993
  Amortization of intangibles ...............................       1,450           953          983           990          996
  General and administrative expenses .......................       4,388         4,559        4,906         5,955        7,868
  Pre-opening expenses ......................................          --           287          661         2,228        1,370
  New manager training expenses .............................          --           562          731         1,748        1,914
  Non-recurring items .......................................      20,208        (2,390)         (17)          494          (92)
  Management fee income .....................................          --          (979)      (1,082)         (865)        (611)
                                                                 --------      --------     --------      --------     --------

Operating income (loss) .....................................     (18,960)        7,270        6,383         3,792        7,548
       Interest expense and other, net ......................       3,206         2,466        2,218         2,604        3,604
                                                                 --------      --------     --------      --------     --------
Income (loss) before income taxes, extraordinary loss, and
 cumulative effect of change in accounting principle ........     (22,166)        4,804        4,165         1,188        3,944
Provision for income taxes ..................................          --            --           --            50          250
                                                                 --------      --------     --------      --------     --------
Net income (loss) before extraordinary loss and cumulative
 effect of change in accounting principle ...................    $(22,166)     $  4,804     $  4,165      $  1,138     $  3,694
                                                                 ========      ========     ========      ========     ========

Net income (loss)(1)(2)(3) ..................................    $(22,166)     $  3,166     $  4,165      $    970     $  3,678
                                                                 ========      ========     ========      ========     ========
DILUTED EARNINGS PER SHARE:
  Net income (loss) before extraordinary loss and
   cumulative effect of change in accounting principle ......    $  (2.73)     $   0.47     $   0.39      $   0.11     $   0.33
  Net income (loss)(1)(2)(3) ................................    $  (2.73)     $   0.31     $   0.39      $   0.09     $   0.33
  Weighted average shares outstanding - diluted .............       8,110        10,098       10,608        10,407       11,117

BALANCE SHEET DATA:
  Working capital ...........................................    $ (1,343)     $ (1,330)    $ (2,807)     $(16,652)    $ (7,692)
  Total assets ..............................................      70,848        61,168       70,255        86,525      107,574
  Long-term debt, net of current portion ....................      33,809        24,308       28,264        31,513       44,395
  Stockholders' equity ......................................      16,585        22,203       26,372        27,383       40,499
</TABLE>

----------
(1)  Fiscal 2000 includes a charge of $16,000 for early extinguishment of debt.
(2)  Fiscal 1999  include 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.
(3)  Fiscal  1997  include an  extraordinary  loss from debt  extinguishment  of
     $1,638,000, or $0.16 per share.

                                       24
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

     The following table presents unaudited consolidated statement of operations
data for each of the eight  quarters in the period ended  December 25, 2000.  We
believe that all necessary  adjustments have been included to present fairly the
quarterly  information when read in conjunction with our consolidated  financial
statements. The operating results for any quarter are not necessarily indicative
of the results for any subsequent quarter.

<TABLE>
<CAPTION>
                                                                            FISCAL QUARTER ENDED
                                       --------------------------------------------------------------------------------------------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                          1999                                               2000
                                       ---------------------------------------------    -------------------------------------------
                                       MAR. 29(1)   JUNE 28    SEPT. 27   DEC. 27(2)    MAR. 27    JUNE 26    SEPT. 25   DEC. 25(3)
                                       ----------   -------    --------   ----------    -------    -------    --------   ----------
<S>                                     <C>         <C>         <C>       <C>           <C>        <C>        <C>         <C>
Revenue ..............................  $31,464     $35,615     $35,291   $ 37,921      $44,339    $47,297    $48,293     $46,613
Cost of sales ........................    8,964      10,080       9,911     11,005       13,273     13,697     13,561      13,140
Income (loss) before income taxes,
 extraordinary loss, and cumulative
 effect of change in accounting
 principle............................      731       1,148         735     (1,426)         318      1,103      1,104       1,419
                                        -------     -------     -------   --------      -------    -------    -------     -------
Net income (loss) ....................      563       1,148         735     (1,426)         404      1,083      1,013       1,178
                                        =======     =======     =======   ========      =======    =======    =======     =======
Net income (loss) per share
 before income taxes, extraordinary
 loss, and cumulative effect of
 change in accounting principle ......     0.07        0.11        0.07      (0.14)        0.04       0.11       0.10        0.08
                                        -------     -------     -------   --------      -------    -------    -------     -------
Net income (loss) per share ..........     0.05        0.11        0.07      (0.14)        0.04       0.11       0.10        0.08
                                        =======     =======     =======   ========     =======    =======    =======     =======
</TABLE>
----------
(1)  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)  Includes  a charge of  $494,000,  or $0.05 per  share,  due to the  lawsuit
     settlement in February 2000 offset by legal and settlement  costs. See Note
     2 to our consolidated financial statements.
(3)  Includes a net gain of $92,000,  or $0.01 per share,  due to the settlement
     of  condemnation  proceedings  offset by  impairment of the assets of three
     under-performing  restaurants.  Includes a reduction in liabilities related
     to the  Ameriserve  settlement. See  Note 2 to our  consolidated  financial
     statements.


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 ten
years, we have grown through acquisitions and development of new restaurants. We
currently own 64 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 our
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 our
consolidated financial statements).

     We also  renegotiated our development  agreements with Carlson  Restaurants
Worldwide,  Inc.  to reduce the number of T.G.I.  Friday's  restaurants  we were
required to build with the intent to focus on those development territories that
were  most  economically  favorable  (see Note 7 to our  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 our consolidated financial statements).

                                       25
<PAGE>
     After these steps,  we strengthened  our operation and commenced  expansion
plans,   principally  through  developing  T.G.I.  Friday's  restaurants.   This
expansion was financed by borrowings from various lenders.

     The  next  step was  taken in 1999  with  the  acquisition  of our  Redfish
restaurants  and  concept  and in 2000 with the  acquisition  of the Bamboo Club
restaurants  and concept.  This Bamboo Club  acquisition was financed in part by
our rights offering to stockholders in 2000.

     In 2000,  we entered  into a new loan with Bank of America in the amount of
$15,000,000,  which we  believe  will be  sufficient  to fund all of the  T.G.I.
Friday's  restaurants  we plan to complete by June 2002. We executed an interest
rate swap and locked in our interest rate on $12,500,000  of the loan total.  We
believe that this is a favorable rate, as our existing  financing is at a higher
rate,  and that this portion of the loan will be  sufficient to fund our current
construction  and  expansion  of  T.G.I.  Friday's  restaurants  for the next 18
months.  The interest  rate is  performance  based and indexed to the LIBOR rate
plus a  predetermined  spread  based upon our  adjusted  senior  funded debt (as
defined in the loan documents) to EBITDA.  The interest rate is currently 8.51%.
The interest rate swap  qualifies as a cash flow hedge in  accordance  with SFAS
No. 133. On a periodic  basis,  we will adjust the fair market value of the swap
on the balance sheet and offset the amount of the change to other  comprehensive
income.

     Our  strategy  is to reduce  operating  costs  and  expand  our  restaurant
operations.  This will entail continuing to build T.G.I. Friday's,  Redfish, and
Bamboo Club  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:

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED
                                                             --------------------------------------------
                                                             DECEMBER 28,    DECEMBER 27,    DECEMBER 25,
                                                                1998            1999            2000
                                                             ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>
      Revenue                                                  100.0%          100.0%          100.0%
      Restaurant operating expenses:
        Cost of sales ....................................      29.1            28.5            28.8
        Payroll and benefits .............................      29.5            30.2            30.0
        Depreciation and amortization ....................       3.3             3.3             4.0
        Other operating expenses .........................      27.1            27.8            27.9
        Reduction of disputed liabilities ................        --              --            (0.9)
                                                               -----           -----           -----

        Total restaurant operating expenses ..............      89.0            89.8            89.8
                                                               -----           -----           -----

      Income from restaurant operations ..................      11.0            10.2            10.2

        Amortization of intangibles ......................       0.9             0.7             0.6
        General and administrative expenses ..............       4.3             4.2             4.2
        Preopening expenses ..............................       0.6             1.6             0.7
        New manager training expenses ....................       0.6             1.2             1.0
        Non-recurring items ..............................      --               0.4             0.0
        Management fee income ............................      (0.9)           (0.6)           (0.3)
                                                               -----           -----           -----
      Operating income ...................................       5.5             2.7             4.0
      Interest expense and other, net ....................       1.9             1.9             1.9
                                                               -----           -----           -----
      Income before income taxes, extraordinary loss, and
       cumulative effect of change in accounting principle       3.6%            0.8%            2.1%
                                                               =====           =====           =====
</TABLE>

FISCAL 2000 COMPARED WITH FISCAL 1999

     Revenue for the fiscal year ended  December  25,  2000  increased  33.0% to
$186.5  million  compared  with $140.3  million for the year ended  December 27,
1999. This increase was primarily a result of opening 13 new restaurants in 1999
and seven new  restaurants in 2000.  Same-store  sales increased 5.1% for fiscal
2000 as  compared  with an increase  in  same-store  sales of 4.9% for the prior
year.  Additionally,  we purchased the two Bamboo Club restaurants in July 2000.

                                       26
<PAGE>
Revenue from  alcoholic  beverages  accounted  for 24.4% of revenue for both the
fiscal years.

     Cost of sales as a  percentage  of revenue  increased to 28.8% in 2000 from
28.5% in 1999.  This  increase was due primarily to supply  interruption  of our
food and related items.  We replaced our major supplier during the year. Much of
our loss was recouped from the past supplier.

     Labor  costs  decreased  as a  percentage  of revenue to 30.0% in 2000 from
30.2% in 1999.  This decrease was primarily due to a maturing of the restaurants
we opened in 1999.  Once a  restaurant  has reached  operating  maturity,  labor
costs, as a percentage of revenue, are 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 has
had the effect of  reducing  turnover  by  improving  the quality of life of our
managers, which we believe has ultimately led 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 Restaurants  Worldwide,  and
our company  require a 4% of net sales  royalty and a 4% of net sales  marketing
contribution. Each year we contribute to a TGI Friday's national marketing pool.
For  1999  and  2000,  the  pool  contribution  was  2.1%  of  net  sales.  This
contribution  offsets a portion of our general 4% marketing  requirement.  Other
operating  expenses  increased as a percentage  of revenue to 27.9% in 2000 from
27.8% in 1999. The increase was due primarily to additional  energy and workers'
compensation costs, especially in California.

     In total,  depreciation  and  amortization  increased  as a  percentage  of
revenue to 4.6% in 2000 from 4.0% in 1999. The increase was due primarily to the
number of new restaurants we have opened in 1999 and 2000.

     General and  administrative  expenses as a percentage of revenue of 4.2% in
2000 is the same as the 1999  percentage.  We have made a significant  effort to
keep this  expense in line.  Improved  expense  control,  tight  control on head
count, and a larger revenue base over which to spread some fixed expenses helped
us maintain this expense, as a percentage of sales, at last year's level.

     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
pre-opening  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  $1,370,000,  or  0.7% of  revenue,  were  charged  to
operations during the year ended December 25, 2000 as compared to $2,228,000, or
1.6% of revenue,  being charged to operations during the year ended December 27,
1999.

     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.   These  expenses  increased  to
$1,914,000, or 1.0% of revenue, for the year ended December 25, 2000 as compared
to $1,748,000, or 1.2% of revenue, for the year ended December 27, 1999.

     In 2000,  we  concluded  by  either  payment  or  settlement  the legal and
condemnation  issues that were reserved for in our  provision for  non-recurring
and projected  losses.  Concluded  items created the net decrease in the reserve
for losses account of $1,064,000,  leaving a balance of $149,000 on December 25,
2000 to cover three minor contingencies.

     Interest  expense  was  approximately  $3,615,000  in  2000  compared  with
$2,604,000 in 1999. This increase was due to debt incurred in the development of
new restaurants and generally higher interest rates for much of 2000.

     An income tax  provision  of $250,000  was  recorded in 2000 because of the
potential  income tax exposure in several of the states in which we operate.  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 25,
2000, we had  approximately  $8,100,000 of net operating loss  carryforwards  as
well as capital loss  carryforwards  and tax credits  available to offset future
income for federal income tax purposes. We have determined that a 100% valuation
allowance is  appropriate on the deferred tax asset created by the net operating
loss  carryforwards  as a result of our current  restaurant  expansion plans. We
re-evaluate the need for a valuation allowance at each quarter.

                                       27
<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 primarily 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 Restaurants 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.

                                       28
<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.

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,  the  completion of new
T.G.I. Friday's restaurants,  and the acquisition of the Redfish and Bamboo Club
restaurants and concepts.  These acquisitions were financed  principally through
the issuance of  long-term  debt and  internally  generated  cash.  We have also
expended  funds for the  development  of new  restaurants.

     During  2000,  we  purchased  the  remaining  minority  interest in Redfish
America, LLC for $500,000 in cash and two Bamboo Club restaurant  operations and
the "Bamboo  Club" name and concept for  approximately  $12,000,000  in cash. We
financed the acquisition of the Bamboo Club restaurants with  approximately $7.0
million from available  cash resources and $5.0 million of short-term  debt from
one of our lenders.  On October 10, 2000,  we completed our  stockholder  rights
offering by issuing 4,011,740 additional shares, or the maximum number available
to our qualified stockholders. The net proceeds of $9,425,000 were used to repay
the $5.0 million  short-term debt and the remaining $4.3 million will be used to
fund future new restaurant development.

     Net  cash  flows  from  operating   activities  were  $3,824,000  in  2000,
$16,219,000 in 1999, and  $11,124,000 in 1998.  These were  supplemented  by net
cash flows from  financing  of  $22,496,000  in 2000,  $3,755,000  in 1999,  and
$4,092,000 in 1998,  which we used to fund our  acquisitions  and development of
new restaurants.

     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 25, 2000, we had a deficit in working capital
of approximately $7,692,000.

     At December 25, 2000,  we had a cash  balance of  $4,565,000.  Monthly cash
receipts have been sufficient to pay all obligations as they become due.

     At December 25, 2000,  we had  long-term  debt of  $44,395,000  and current
portion of long-term debt of $2,006,000.

     Approximately  $18,454,000  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 bank 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 25, 2000.  The line of credit  matures on July 15, 2001. At December
25, 2000, we had no borrowings outstanding under this line of credit.

     During  November 1999, we entered into two working  capital  revolving 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 8.5% at
December  25,  2000.  At December 25, 2000,  we had  outstanding  borrowings  of
$6,320,000 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 25, 2000.

                                       29
<PAGE>
     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 six additional  restaurants during fiscal 2001.
Subsequent to December 25, 2000, we have not borrowed any funds under the credit
arrangements  described  above or new credit  arrangements  that we entered into
after  December  25,  2000.  As of March 16, 2001,  we have  permanent  debt and
sale-leaseback financing commitments totaling approximately  $17,500,000 that we
will  use  to  fund   restaurant   development   activity  and  working  capital
requirements through the remainder of 2001. The previously discussed $15,000,000
Bank of  America  development  line and  funds  from  one of our  sale-leaseback
providers of $2,500,000 make up this total commitment.  The terms of the Bank of
America loan are described in Note 10 to our consolidated  financial statements.
The terms of the pending sale-leaseback transactions are essentially the same as
the sale-leaseback transactions completed in 2000.

     We lease all of our  restaurants  with terms  ranging  from 10 to 20 years.
Minimum payments on our existing lease obligations are approximately $10,100,000
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 15 months at our anticipated  level of new restaurant  development.  We
may be required to obtain  additional  capital to fund our planned  growth after
June 2002.  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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     At December 25, 2000, 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 at variable  interest
rates of 1.125% over  prime,  3.20% over LIBOR,  and 2.65% over  "30-Day  Dealer
Commercial Paper Rates." At December 25, 2000, we had outstanding  borrowings on
these loans of approximately $19,651,000.  Our net interest expense for 2000 was
$3,604,000.  A one  percent  variation  in either the  30-day  LIBOR rate or the
Dealer  Commercial  Paper  Rates would have  increased  or  decreased  our total
interest expense by $196,000 for the year.

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.

                                       30
<PAGE>
                                    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 2001 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 2001 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 2001 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 2001 Annual Meeting of Stockholders.

                                       31
<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 the  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 Company(1)
  3.2      Certificate of Amendment of Restated Certificate of Incorporation(l)
  3.3      Amended and Restated Bylaws of the Company(1)
  10.1     Company's 1990 Stock Option Plan(2)
  10.5     Form of  Franchise  Agreement  between the Company 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 Company(4)
  10.10    Master Incentive  Agreements between Main St. California II, Inc. and
           Main St. California, Inc., a wholly owned subsidiary of Company(4)
  10.11    Employment Agreement with Bart A. Brown, Jr.(5)
  10.11A   Employment  Agreement  dated  January 1, 1999 between the Company and
           Bart A. Brown, Jr.(6)
  10.13    Promissory Note between the Company and CNL Financial I, Inc.(5)
  10.14    Promissory Note between the Company and CNL Financial I, Inc.(5)
  10.15    Promissory Note between the Company and CNL Financial I, Inc.(5)
  10.16    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
           Company(8)
  10.18    Amended and Restated Development Agreement between TGI Friday's, Inc.
           and Main St.  California,  Inc.,  a wholly  owned  subsidiary  of the
           Company(8)
  10.18A   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 Company(6)
  10.19    Amended and Restated Development Agreement between TGI Friday's, Inc.
           and  Main  St.  Midwest,  Inc.,  a  wholly  owned  subsidiary  of the
           Company(8)
  10.20    Amended and Restated Purchase  Agreement  between RJR Holdings,  Inc.
           and Main St.  California,  Inc.,  a wholly  owned  Subsidiary  of the
           Company(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
           Company(6)
  10.22    Stock Option Agreement dated August 5, 1996,  between the Company and
           John F. Antioco for 800,000 shares of Common Stock(9)
  10.22A   Stock Option  Agreement dated June 15, 1998,  between the Company and
           John F. Antioco  amending the Stock Option  Agreement dated August 5,
           1996(9)

                                       32
<PAGE>
 EXHIBIT
 NUMBER                                 EXHIBIT
 ------                                 -------
  10.23    Stock Option  Agreement dated December 16, 1996,  between the Company
           and Bart A.  Brown,  Jr. for  250,000  shares of Common  Stock.  (The
           Company  issued three  additional  Stock Option  Agreements  that 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 Company and
           Bart A. Brown,  Jr. for 75,000 shares of Common  Stock.  (The Company
           issued one additional  Stock Option  Agreement that 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 Company and
           James Yeager for 15,000 shares of Common Stock.  (The Company  issued
           two  additional  Stock  Option   Agreements  that  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 Company
           and Tim Rose for 10,000 shares of Common Stock.  (The Company  issued
           one additional Stock Option Agreement that 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
           Company 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  the  Company  and  Merrill  Lynch
           Business Financial Services, Inc.
  10.30    Working Capital Management Agreement Reducing Revolver Loan Agreement
           dated  November  22,  1999,  between the  Company  and Merrill  Lynch
           Business Financial Services, Inc.
  10.31    Form of  Unconditional  Guaranty  executed in connection with Working
           Capital  Management  Agreement 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  Working
           Capital  Management  Agreement Reducing Revolver Loan Agreement dated
           November 22, 1999.  (Such security  agreements  were executed by Main
           St. California, Inc. and Cornerstone Productions, Inc.)
  10.35    Credit  Agreement  dated  April 2,  1999,  between  the  Company  and
           Imperial Bank (12)
  10.35A   First Amendment to Credit Agreement dated August 2, 1999, between the
           Company and Imperial Bank (12)
  10.35B   Second Amendment to Credit Agreement dated July 13, 2000, between the
           Company and Imperial Bank (12)
  10.36    Revolving  Promissory  Note dated  July 13,  2000,  in the  principal
           amount of $5,000,000 from the Company, as Borrower, to Imperial Bank,
           as Lender (12)
  10.37    Term Promissory Note dated July 13, 2000, in the principal  amount of
           $5,000,000 from the Company, as Borrower, to Imperial Bank, as Lender
           (12)
  10.38    Unconditional  Guarantee of Payment of Term  Promissory Note executed
           by John F.  Antioco,  as  Guarantor,  in favor of Imperial  Bank,  as
           Lender (12)
  10.39    Unconditional  Guarantee of Payment of Term  Promissory Note executed
           by Bart A. Brown,  Jr., as Guarantor,  in favor of Imperial  Bank, as
           Lender (12)
  10.40    401(k) Profit Sharing Plan (13)

                                       33
<PAGE>
 EXHIBIT
 NUMBER                                 EXHIBIT
 ------                                 -------
  10.41    Loan and Security  Agreement dated January 31, 2001,  between Bank of
           America,  N.A., the Company,  and certain subsidiaries of the Company
           listed therein
  21       List of Subsidiaries
  23       Consent of Arthur Andersen LLP

----------
(1)   Incorporated  by reference to the  Company'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 Company's  Registration Statement on Form
      S-1 (Registration No. 33-40993) which became effective in September 1991.
(3)   Incorporated  by  reference  to the  Company's  Form  8-K  filed  with the
      Securities and Exchange Commission on or about April 15, 1994.
(4)   Incorporated  by reference to the Company's Form 8-K Report filed with the
      Commission in January 1997.
(5)   Incorporated  by reference to the  Company'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  Company's  Form 10-K for the year ended
      December 28, 1998,  filed with the Securities  and Exchange  Commission on
      March 29, 1999.
(7)   Incorporated by reference to Company's Proxy Statement for its 1995 Annual
      Meeting of Stockholders.
(8)   Incorporated  by reference to the  Company'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 Company'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 Company's  Registration Statement on Form
      S-3 (Registration No. 333-78161) as declared effective on May 14, 1999.
(11)  Incorporated by reference to Company's  Registration Statement on Form S-8
      (Registration  No.  333-89931),  filed with the  Securities  and  Exchange
      Commission on October 29, 1999.
(12)  Incorporated  by reference to the Company's  Form 8-K dated July 21, 2000,
      as filed with the Securities and Exchange Commission on July 24, 2000.
(13)  Incorporated by reference to the Company's  Registration Statement on Form
      S-8  (Registration  No.  333-55100) filed with the Securities and Exchange
      Commission on February 6, 2001.

                                       34
<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


Date: March 26, 2001                 By: /s/ Bart A. Brown, Jr.
                                        ----------------------------------------
                                        Bart A. Brown, Jr.
                                        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.

       SIGNATURE                         POSITION                       DATE
       ---------                         --------                       ----

/s/ John F. Antioco          Chairman of the Board                March 26, 2001
--------------------------
John F. Antioco


/s/ Bart A. Brown, Jr.       President, Chief Executive           March 26, 2001
--------------------------   Officer, and Director (Principal
Bart A. Brown, Jr.           Executive Officer)


/s/ William G. Shrader       Executive Vice President,            March 26, 2001
--------------------------   Chief Operating Officer, and
William G. Shrader           Director


/s/ Lawrence K. White        Vice President-Finance (Principal    March 26, 2001
--------------------------   Financial and Accounting Officer),
Lawrence K. White            Secretary and Treasurer


/s/ Jane Evans               Director                             March 26, 2001
--------------------------
Jane Evans


/s/ John C. Metz             Director                             March 26, 2001
--------------------------
John C. Metz


/s/ Debra Bloy               Director                             March 26, 2001
--------------------------
Debra Bloy

                                       35
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                            PAGE
                                                                            ----

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

Consolidated Balance Sheets as of December 25, 2000 and
 December 27, 1999.........................................................  F-3

Consolidated Statements of Operations for the fiscal years ended
 December 25, 2000, December 27, 1999, and December 28, 1998...............  F-4

Consolidated Statements of Changes in Stockholders' Equity for the
 fiscal years ended December 25, 2000, December 27, 1999, and
 December 28, 1998.........................................................  F-5

Consolidated Statements of Cash Flows for the fiscal years ended
 December 25, 2000, December 27, 1999, and December 28, 1998...............  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 25, 2000 and December 27, 1999, and the related consolidated statements
of  operations,  changes  in  stockholders'  equity and cash flows for the years
ended  December 25,  2000,  December  27,  1999,  and  December 28, 1998.  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 audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Company as of December 25,
2000 and December 27, 1999, and the results of its operations and its cash flows
for the years ended December 25, 2000, December 27, 1999, and December 28, 1998,
in  conformity  with  accounting  principles  generally  accepted  in the United
States.


/s/ ARTHUR ANDERSEN LLP

Phoenix, Arizona
March 12, 2001

                                      F-2
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)


<TABLE>
<CAPTION>
                                                                          DECEMBER 25,      DECEMBER 27,
                                                                              2000              1999
                                                                          ------------      ------------
<S>                                                                       <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents ..........................................     $   4,565         $   3,055
  Accounts receivable ................................................         6,263             3,434
  Inventories ........................................................         1,624             1,453
  Prepaid expenses ...................................................           744               621
                                                                           ---------         ---------
        Total current assets .........................................        13,196             8,563
Property and equipment, net (Note 3) .................................        63,857            58,006
Other assets, net ....................................................         2,466             2,072
Goodwill, net (Note 3) ...............................................        26,355            15,779
Franchise costs, net (Note 3) ........................................         2,387             2,105
                                                                           ---------         ---------

        Total assets .................................................     $ 108,261         $  86,525
                                                                           =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt ..................................     $   2,006         $   1,830
  Accounts payable ...................................................         9,228            14,033
  Other accrued liabilities ..........................................         9,654             9,352
                                                                           ---------         ---------
        Total current liabilities ....................................        20,888            25,215

Long-term debt, net of current portion ...............................        44,395            31,513

Other liabilities and deferred credits ...............................         2,479             2,414
                                                                           ---------         ---------

Commitments and contingencies:

Stockholders' equity:
  Preferred stock, $.001 par value, 2,000,000 shares authorized,
   no shares issued and outstanding in 2000 and 1999..................            --                --
  Common stock, $.001 par value, 25,000,000 shares authorized,
   14,044,791 and 10,025,776 shares issued and outstanding in 2000
   and 1999, respectively.............................................            14                10
  Additional paid-in capital .........................................        53,624            44,190
  Accumulated deficit ................................................       (13,139)          (16,817)
                                                                           ---------         ---------
        Total stockholders equity ....................................        40,499            27,383
                                                                           ---------         ---------
        Total stockholders equity and liabilities ....................     $ 108,261         $  86,525
                                                                           =========         =========
</TABLE>

                 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 25,     DECEMBER 27,     DECEMBER 28,
                                                                            2000             1999             1998
                                                                        ------------     ------------     ------------
<S>                                                                      <C>              <C>              <C>
Revenue .............................................................    $ 186,542        $ 140,294        $ 114,242
                                                                         ---------        ---------        ---------
Restaurant operating expenses
  Cost of sales .....................................................       53,671           39,960           33,242
  Payroll and benefits ..............................................       55,971           42,405           33,701
  Depreciation and amortization .....................................        7,490            4,664            3,730
  Other operating expenses ..........................................       52,008           38,923           31,004
  Reduction of disputed liabilities .................................       (1,591)              --               --
                                                                         ---------        ---------        ---------
        Total restaurant operating expenses .........................      167,549          125,952          101,677
                                                                         ---------        ---------        ---------

Income from restaurant operations ...................................       18,993           14,342           12,565

  Amortization of intangible assets .................................          996              990              983
  General and administrative expenses ...............................        7,868            5,955            4,906
  Pre-opening expenses ..............................................        1,370            2,228              661
  New manager training expenses .....................................        1,914            1,748              731
  Non-recurring items ...............................................          (92)             494              (17)
  Management fees ...................................................         (611)            (865)          (1,082)
                                                                         ---------        ---------        ---------

Operating income ....................................................        7,548            3,792            6,383

  Interest expense and other, net....................................        3,604            2,604            2,218
                                                                         ---------        ---------        ---------
Income before income taxes, extraordinary loss, and cumulative
 effect of change in accounting principal............................        3,944            1,188            4,165
  Provision for income taxes ........................................          250               50               --
                                                                         ---------        ---------        ---------
Net income before income taxes, extraordinary loss, and
 cumulative effect of change in accounting principal.................        3,694            1,138            4,165
  Extraordinary loss on debt extinguishment .........................          (16)              --               --
  Cumulative effect of change in accounting principle ...............           --             (168)              --
                                                                         ---------        ---------        ---------

        Net income ..................................................    $   3,678        $     970        $   4,165
                                                                         =========        =========        =========
Basic earnings per share:
  Net income before extraordinary loss and cumulative effect of
   change in accounting principle....................................    $    0.34        $    0.11        $    0.42
  Extraordinary loss on debt extinguishment .........................           --               --               --
  Cumulative effect of change in accounting principle ...............           --            (0.02)              --
                                                                         ---------        ---------        ---------
        Net income ..................................................    $    0.34        $    0.09        $    0.42
                                                                         =========        =========        =========
Diluted earnings per share:
  Net income before extraordinary loss and cumulative effect of
   change in accounting principle....................................    $    0.33        $    0.11        $    0.39
  Extraordinary loss on debt extinguishment .........................           --               --               --
  Cumulative effect of change in accounting principle ...............           --            (0.02)              --
                                                                         ---------        ---------        ---------
        Net income ..................................................    $    0.33        $    0.09        $    0.39
                                                                         =========        =========        =========

  Weighted average number of shares outstanding:
    Basic ...........................................................       10,944           10,008            9,976
                                                                         =========        =========        =========

    Diluted .........................................................       11,117           10,407           10,608
                                                                         =========        =========        =========
</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 29, 1997 ........................      9,971    $   10       $ 44,145     $(21,952)     $ 22,203
  Shares issued in connection with options
   exercised (net).................................          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 (net).................................         50        --             41           --            41
  Net income ......................................         --        --             --          970           970
                                                       -------    ------       --------     --------      --------

BALANCE, December 27, 1999 ........................     10,026        10         44,190      (16,817)       27,383
  Shares issued in connection with rights
   offering (net)..................................      4,012         4          9,421           --         9,425
  Shares issued to employees ......................          7        --             13           --            13
  Net income ......................................         --        --             --        3,678         3,678
                                                       -------    ------       --------     --------      --------

BALANCE, December 25, 2000 ........................     14,045    $   14       $ 53,624     $(13,139)     $ 40,499
                                                       =======    ======       ========     ========      ========
</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 25,      DECEMBER 27,      DECEMBER 28,
                                                                     2000              1999              1998
                                                                 ------------      ------------      ------------
<S>                                                               <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ................................................     $  3,678          $    970          $  4,165
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization ...........................        8,486             5,654             5,374
    Gain on sale of assets ..................................         (289)               --             2,062
    Non-recurring items .....................................          (92)              494               (17)
    Extraordinary loss from debt extinguishments ............           16                --                --
  Changes in assets and liabilities:
    Accounts receivable .....................................       (2,829)           (1,338)             (865)
    Inventories .............................................         (171)             (613)              203
    Prepaid expenses ........................................         (123)              (28)             (304)
    Other assets, net .......................................         (414)               29              (341)
    Accounts payable ........................................       (4,085)            9,850               293
    Other accrued liabilities ...............................          367             1,201               554
                                                                  --------          --------          --------
        Cash provided by operating activities ...............        3,824            16,219            11,124
                                                                  --------          --------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash received from note receivable ........................           --                --               757
  Cash paid to acquire additional interest in subsidiary.....           --              (500)               --
  Net additions to property and equipment ...................      (18,103)          (31,401)          (19,002)
  Cash paid to acquire franchise rights and goodwill ........      (12,139)             (238)           (3,318)
  Cash received from the sale of assets .....................        5,432             7,926             6,791
                                                                  --------          --------          --------
        Cash used by investing activities ...................      (24,810)          (24,213)          (14,772)
                                                                  --------          --------          --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of common stock ........................        9,541                41                 4
  Financing and offering costs paid .........................         (103)               --                --
  Long-term debt financing ..................................       16,442             5,296             5,620
  Principal payments on long-term debt ......................       (3,384)           (1,582)           (1,532)
                                                                  --------          --------          --------
        Cash provided by financing activities ...............       22,496             3,755             4,092
                                                                  --------          --------          --------

NET CHANGE IN CASH AND CASH EQUIVALENTS .....................        1,510            (4,239)              444

CASH AND CASH EQUIVALENTS, BEGINNING ........................        3,055             7,294             6,850
                                                                  --------          --------          --------

CASH AND CASH EQUIVALENTS, ENDING ...........................     $  4,565          $  3,055          $  7,294
                                                                  ========          ========          ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Cash paid during the year for interest ....................     $  4,163          $  3,218          $  2,557
                                                                  ========          ========          ========
</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. The
Company  currently  owns 56 T.G.I.  Friday's  restaurants  and operates 6 T.G.I.
Friday's  restaurants  under  management  agreements.  The Company also owns and
operates six Redfish and two Bamboo Club 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 herein refer to the Company and
its subsidiaries.

FISCAL YEAR

     The Company  operates on a fiscal year that ends on the Monday on or before
December 31.

USE OF ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States 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. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES

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

CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents  include funds on hand,  short-term money market
investments,  and certificate of deposit accounts with original maturities of 90
days or less.

REVENUE RECOGNITION

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

DEFERRED GAINS

     Deferred gains on  sale-leaseback  transactions are accreted to income as a
reduction  of rent  expense  over the  related  lease terms in  accordance  with
Statement of Financial  Accounting  Standards  ("SFAS") No. 98,  ACCOUNTING  FOR
LEASES.

MANAGEMENT FEE INCOME

     The Company earns  management fees on restaurants  operated under contracts
with a single owner. The management fees are based upon a percentage of adjusted
revenues  in  accordance  with the  respective  management  agreements  for each
restaurant.  In January 2000,  three of the restaurants  were sold by the owner,
terminating the management agreements for those restaurants.  As of December 25,
2000, the Company managed six restaurants.

INVENTORIES

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

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


FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash equivalents,  accounts receivable, other assets,
accounts payable,  accrued liabilities,  and other liabilities  approximate fair
value due to the short-term nature of these instruments.  The revolving lines of
credit approximate fair value as they bear interest at indexed rates. Fixed rate
long-term  debt is currently  at rates  similar to current  quotations  for like
debt.

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):

<TABLE>
<CAPTION>
                                                         USEFUL LIVES    DECEMBER 25,     DECEMBER 27,
                                                           (YEARS)          2000             1999
                                                           -------       ------------     ------------
<S>                                                        <C>           <C>             <C>
Land ..................................................                  $    534          $    534
Building and leasehold improvements ...................     5-20           45,163            38,955
Kitchen equipment .....................................      5-7           19,004            15,431
Restaurant equipment ..................................     5-10            8,205             6,472
Smallwares and decor ..................................     5-10            7,077             5,849
Office equipment, software, and furniture..............      5-7            4,226             3,009
                                                                         --------          --------
                                                                           84,209            70,250

Less: Accumulated depreciation and amortization........                   (25,737)          (19,457)
                                                                         --------          --------
                                                                           58,472            50,793

Construction in progress ..............................                     4,982             7,213
                                                                         --------          --------
   Total ..............................................                  $ 63,454          $ 58,006
                                                                         ========          ========
</TABLE>

     Construction  in progress  (CIP)  represents  costs incurred by the Company
during the  development  of future  restaurant  sites for  fixtures and building
improvements at future  restaurant  sites. As of December 25, 2000, and December
27, 1999,  approximately  $4,800,000 and  $6,000,000,  respectively,  of the CIP
balance was related to assets held with the intent to sell upon  completion  and
subsequently lease back.

     Depreciation  expense was  $7,066,000  for 2000,  $4,734,000  for 1999, and
$3,786,000 for 1998.

OTHER ASSETS

     Other assets include  miscellaneous  assets that individually do not exceed
5% of total assets, and as such are not disclosed  separately.  Other assets, as
of December 25, 2000, and December 27, 1999,  were  $2,466,000  and  $2,072,000,
respectively,   net  of  accumulated  amortization  of  $754,000  and  $734,000,
respectively.

FRANCHISE COSTS

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

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

                                      AMORTIZATION
                                         PERIOD      DECEMBER 25,   DECEMBER 27,
                                        (YEARS)          2000          1999
                                      ------------   ------------   ------------

Franchise fees and license costs.....    20-30        $ 3,156         $ 2,708
Less: Accumulated amortization.......                    (769)           (603)
                                                      -------         -------
     Total ..........................                 $ 2,387         $ 2,105
                                                      =======         =======

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.

GOODWILL

     The Company has recorded  significant  goodwill in  conjunction  with major
acquisitions,  most  recently  the Bamboo Club  purchase.  These costs are being
amortized  on a  straight-line  basis  over  the  estimated  useful  life of the
goodwill and consist of the following (in thousands):

                                      AMORTIZATION
                                         PERIOD      DECEMBER 25,   DECEMBER 27,
                                        (YEARS)          2000          1999
                                      ------------   ------------   ------------

Acquisition of Main Street
 California .........................    20-30        $19,207         $19,222
Acquisition of Bamboo Club ..........    15            11,611              --
Less: Accumulated amortization ......                  (4,463)         (3,443)
                                                      -------         -------
     Total ..........................                 $26,355         $15,779
                                                      =======         =======

PRE-OPENING 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 pre-opening expenses as they are incurred. Prior to December 29,
1998,  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 December 29, 1998.

OTHER ACCRUED LIABILITIES

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

                                              DECEMBER 25,       DECEMBER 27,
                                                 2000               1999
                                              ------------       ------------

Accrued payroll ..........................       $3,139             $2,888
Reserve for projected losses .............          149              1,153
Accrued sales tax ........................        1,345              1,174
Accrued insurance ........................        1,669              1,594
Accrued rent .............................        1,661              1,995
Other accrued liabilities ................        1,691                548
                                                 ------             ------
     Total ...............................       $9,654             $9,352
                                                 ======             ======

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 temporary  differences between the
financial  reporting  basis  and the  tax  basis  of the  Company's  assets  and

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


liabilities,  using enacted tax rates in the years in which the  differences are
expected  to  reverse.   Deferred  tax  assets  are  reviewed  periodically  for
recoverability and valuation allowances are provided as necessary.

EARNINGS PER SHARE

     The Company has  calculated  earnings per share ("EPS") in accordance  with
SFAS No. 128,  "EARNINGS  PER SHARE." The  following  table sets forth basic and
diluted EPS  computations  for the years ended  December 25, 2000,  December 27,
1999, and December 28, 1998 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                       2000                            1999                              1998
                           ----------------------------    ----------------------------    ------------------------------
                                                  PER                             PER                                PER
                                                 SHARE                           SHARE                              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 ...............    $3,678     10,944    $0.34       $970      10,008    $0.09      $4,165       9,976      $0.42
Effect of stock
 options and warrants....        --        173     0.01         --         399       --          --         632       0.03
                             ------     ------    -----       ----      ------    -----      ------      ------      -----
Diluted EPS .............    $3,678     11,117    $0.33       $970      10,407    $0.09      $4,165      10,608      $0.39
                             ======     ======    =====       ====      ======    =====      ======      ======      =====

</TABLE>

SEGMENT REPORTING

     The Company has 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 three  operating  segments  that are managed  based on its
restaurant  concepts,  T.G.I.  Friday's,  Redfish, and Bamboo Club. SFAS No. 131
allows for aggregation of similar  operating  segments into a single  reportable
operating  segment  if the  components  are  considered  similar  under  certain
criteria.  As  a  result  of  the  foregoing,  the  Company  believes  that  its
restaurants meet the criteria supporting aggregation of all restaurants into one
operating segment. 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.

STAFF ACCOUNTING BULLETIN NO. 101

     On December 3, 1999, the Securities  and Exchange  Commission  issued Staff
Accounting   Bulletin   (SAB)  No.  101,   "REVENUE   RECOGNITION  IN  FINANCIAL
STATEMENTS," which provides  additional  guidance in applying generally accepted
accounting   principles  for  revenue  recognition  in  consolidated   financial
statements.  The  issuance of SAB No. 101 did not have a material  impact on the
revenue recognition method of the Company.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

     In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  137,  "ACCOUNTING  FOR  DERIVATIVE  INSTRUMENTS  AND HEDGING  ACTIVITIES  -
DEFERRAL OF THE  EFFECTIVE  DATE OF FASB  STATEMENT  NO.  133,"  which  deferred
implementation  of SFAS No. 133 until fiscal  quarters of fiscal years beginning
after June 15, 2000.  SFAS No. 133 requires all derivatives to be carried on the
balance sheet at fair value.  Changes in the fair value of  derivatives  must be
recognized  in the  Company's  Consolidated  Statement of  Operations  when they
occur; however,  there is an exception for derivatives that qualify as hedges as
defined by SFAS No. 133. If a  derivative  qualifies  as a hedge,  a company can
elect to use "hedge  accounting"  to  eliminate  or reduce the income  statement
volatility that would arise from reporting changes in a derivative's fair value.

     In June 2000,  the FASB  issued SFAS No. 138,  "ACCOUNTING  FOR  DERIVATIVE
INSTRUMENTS  AND HEDGING  ACTIVITIES - AN AMENDMENT OF FASB  STATEMENT NO. 133."
SFAS  No.  138  adds  to the  guidance  related  to  accounting  for  derivative
instruments   and  hedging   activities.   This  statement   should  be  adopted
concurrently with SFAS No. 133.

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


     The Company  adopted these  standards on December 26, 2000. The adoption of
both SFAS No.  133 and SFAS No. 138 is not  expected  to  materially  impact the
Company's financial results.

   RECLASSIFICATIONS

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

   ACCOUNTING FOR LONG-TERM ASSETS

     The FASB has  issued  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 the fair value of the assets.

     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 2000,  1999, and 1998, the
Company recognized a gain on the sale of assets,  certain non-recurring charges,
and impairment of certain assets as follows (in thousands):

<TABLE>
<CAPTION>
                                                         DECEMBER 25,    DECEMBER 27,    DECEMBER 28,
                                                            2000            1999            1998
                                                        ------------     ------------    ------------
<S>                                                         <C>              <C>              <C>
Impairment of core assets held for disposal ..........    $   --           $  --           $ (648)
Impairment of core assets used in operations .........       832              --               --
Other non-recurring items ............................      (924)            494              631
                                                          ------           -----           ------
                                                          $  (92)          $ 494           $  (17)
                                                          ======           =====           ======
</TABLE>

IMPAIRMENT OF CORE ASSETS HELD FOR DISPOSAL

     During 1998, a favorable  lease payoff was negotiated  related to the Front
Row Sports Grill, a restaurant the Company had developed in Portland,  Oregon. 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

     The company  reviews the operations and cash flows of each of its locations
on a  regular  basis.  At the end of the  fourth  quarter  of 2000,  events  and
circumstances  indicated that certain leasehold improvements and other operating
assets at three  under-performing  locations  were impaired  under SFAS No. 121.
Accordingly, the Company recorded a pre-tax charge in the fourth quarter of 2000
amounting to approximately $832,000 to adjust the carrying value of these assets
to their estimated fair market value.

OTHER NON-RECURRING ITEMS

     Other   non-recurring  costs  include  severance,   contract   termination,
professional  service costs,  and settlement of  non-recurring  litigation.  The
non-recurring  items of $924,000,  net, in 2000 represents the final  settlement
gain (in excess of book value) the company  expects to receive from the City and
County of San Francisco, California, in connection with condemnation proceedings
against a restaurant the Company operated.  The non-recurring  items of $494,000
in fiscal 1999 include an  approximately  $835,000  increase in reserves for the
final  settlement and legal costs,  which the Company  settled in February 2000.
This was offset by gains of approximately  $341,000 resulting primarily from the
adjustment of legal costs required to settle litigation.

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

REDUCTION OF DISPUTED LIABILITIES

     During the first quarter of 2000,  the Company's  primary food  distributor
declared  bankruptcy.  Leading up to the bankruptcy,  the Company  experienced a
reduction in  performance  by  Ameriserve,  causing  disruption in the Company's
operations  and an increase in delivery  and food costs as the Company  searched
for alternative  sources of supply.  The level of service provided by Ameriserve
continued to decline  subsequent to the  bankruptcy.  When  Ameriserve  declared
bankruptcy,  the Company had open accounts payable due Ameriserve,  but also had
the right of offset for costs incurred because  Ameriserve  dissolved its casual
dining  business.  As of December 25, 2000,  the Company was in  negotiation  to
resolve  the dispute  with  Ameriserve.  A final  settlement  was reached  which
reduced the liability due by approximately  $1,591,000.  This amount is included
in the fourth quarter of 2000.

   RESERVES

     Valuation  reserves for the years ended  December  25,  2000,  December 27,
1999, and December 28, 1998 consist of the following:

<TABLE>
<CAPTION>
                                     BEGINNING        EXPENSE       BALANCE AT        BALANCE AT
                                     OF PERIOD       RECORDED     PAYMENTS MADE     END OF PERIOD
                                     ---------       --------     -------------     -------------
<S>                                 <C>            <C>             <C>              <C>
RESERVE FOR PROJECTED LOSSES:
   Year ended December 25, 2000     $1,153,000     $   90,000      $(1,094,000)      $  149,000
   Year ended December 27, 1999      1,367,000        494,000         (708,000)       1,153,000
   Year ended December 28, 1998      2,115,000        631,000       (1,379,000)       1,367,000

INSURANCE AND CLAIMS RESERVES:
   Year ended December 25, 2000     $1,593,800     $3,764,600      $(3,689,700)      $1,668,700
   Year ended December 27, 1999      1,282,400      3,909,000       (3,597,600)       1,593,800
   Year ended December 28, 1998      1,536,500      3,234,000       (3,488,100)       1,282,400
</TABLE>

     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 had  increased  the reserve for  projected  losses by
approximately $494,000 because the cost of the now-settled lawsuit offset by the
adjustment  of  the  expected  reduced  legal  costs  in  conjunction  with  the
condemnation  proceeding  in  San  Francisco.   The  reserve  was  decreased  by
approximately  $329,000  related to a favorable  determination  in  condemnation
proceedings.  The  reserve  was  increased  by  approximately  $835,000  due  to
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 estimated
remaining legal and condemnation costs.

     In 2000,  the Company  settled and paid its pending  lawsuit in  connection
with the condemnation  proceedings in San Francisco.  Subsequently,  the Company
settled the  condemnation  proceedings in San  Francisco.  Due to resolutions of
these items and there being no other  contingent  events of which the Company is
aware,  the reserve for projected  losses  decreased to a balance of $149,000 at
December 25, 2000.

3. BUSINESS COMBINATIONS

     In July 2000,  the Company  acquired the assets,  name,  and concept of the
Bamboo Club  restaurants  for  $12,000,000 in cash.  This  acquisition  has been
accounted  for as a purchase,  and the  results of  operations  of the  acquired
business have been included in the consolidated  financial  statements since the
date of acquisition. The excess purchase price over the fair value of net assets
acquired  was  $11,611,000  and has  been  recorded  as  goodwill  and is  being
amortized  on a  straight-line  basis  over 15  years.  The net  book  value  of
leasehold,  equipment,  and other  assets was  $389,000.  Each of these is being
depreciated per current company policy.

     The following unaudited  consolidated pro forma information is presented as
if the Bamboo Club  acquisition  had  occurred at the  beginning  of the periods
presented.

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

<TABLE>
<CAPTION>
                                                                    DECEMBER 25,     DECEMBER 27,
                                                                        2000            1999
                                                                    ------------     ------------
                                                                        (In Thousands, Except
                                                                          Per Share Amounts)
<S>                                                                 <C>              <C>
Total revenues ..............................................        $ 189,848        $ 145,834
Net income before extraordinary loss and cumulative effect
  of change in accounting principle .........................            4,373            1,769
Net income ..................................................            4,357            1,601
                                                                     =========        =========

Basic earnings per share:
  Net income before extraordinary loss and cumulative effect
    of change in accounting principle .......................             0.40             0.18
  Net income after extraordinary loss and cumulative effect
    of change in accounting principle .......................             0.40             0.16
                                                                     =========        =========

Diluted earnings per share:
  Net income before extraordinary loss and cumulative effect
     of change in accounting principle ......................             0.39             0.17
  Net income after extraordinary loss and cumulative effect
     of change in accounting principle ......................             0.39             0.15
                                                                     =========        =========
</TABLE>

     The consolidated pro forma information  includes adjustments to give effect
to amortization of goodwill. The unaudited consolidated pro forma information is
not necessarily  indicative of the combined results that would have occurred had
the acquisition been made at the beginning of the periods  presented,  nor is it
indicative of the results that may occur in the future.

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 2000, 1999, and 1998
the Company utilized net operating losses.  The effect of temporary  differences
and carryforwards  that gave rise to deferred tax balances at December 25, 2000,
and December 27, 1999, were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     DECEMBER 25,       DECEMBER 27,
NET DEFERRED TAX ASSETS                                                  2000               1999
-----------------------                                              ------------       ------------
                                                                             (In Thousands)
<S>                                                                  <C>                 <C>
Temporary differences:
  Basis differences in investments .............................      $   664             $    --
  Basis differences in depreciable and amortizable assets.......       (1,930)               (799)
  Provision for estimated expenses .............................        2,019               1,353
  Revenue recognition ..........................................       (1,016)                 --
  Other ........................................................           --                (300)
Tax carryforwards:
  General business and AMT credits .............................        5,689               4,335
  Net operating loss and capital loss carryforwards.............        3,070               4,223
Valuation reserve ..............................................       (7,894)             (8,390)
                                                                      -------             -------
       Total ...................................................      $   602             $   422
                                                                      =======             =======
</TABLE>

     The amounts  recorded as net deferred tax assets at December 25, 2000,  and
December  27,  1999,  are  included  as a  component  of  other  assets  in  the
consolidated balance sheets. The remaining net deferred tax asset as of December
25, 2000,  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.

     At December 25, 2000, the Company had  approximately  $7,600,000 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.

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


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

                                        DECEMBER 25,  DECEMBER 27,  DECEMBER 28,
                                            2000          1999          1998
                                        ------------  ------------  ------------
Statutory federal rate ................     34.0%         34.0%         34.0%
State taxes, net of federal benefit....      6.0           6.0           6.0
Nondeductible expenses ................      0.4           1.4           6.3
Benefit of FICA credit ................    (17.5)        (58.7)        (15.2)
Change in valuation allowance .........    (16.5)         21.5         (31.1)
                                          ------        ------        ------
                                             6.4%          4.2%          0.0%
                                          ======        ======        ======

5. LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                               MATURITY                         DECEMBER 25,    DECEMBER 27,
                                DATES       INTEREST RATES         2000            1999
                                -----       --------------         ----            ----
<S>                          <C>           <C>                   <C>          <C>
Term Loan II ..............      2012     9.457% and the one      $18,454      $19,329
                                           month LIBOR rate
                                            plus 320 basis
                                                points

Other notes payable .......   1999-2015     7.75 - 11.0%           27,947       14,014
                                                                  -------      -------
     Total ................                                        46,401       33,343

Less current portion ......                                        (2,006)      (1,830)
                                                                  -------      -------
     Total ................                                       $44,395      $31,513
                                                                  =======      =======
</TABLE>

     In March 1997, the Company repaid existing debt with $8,000,000 of proceeds
from the Northern California sale 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 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.

     In May 1998,  the  Company  acquired  six T.G.I.  Friday's  restaurants  in
northern  California  for  approximately  $6,800,000,  funded  in  part  by  the
assumption of existing long-term debt and the addition of new long-term debt for
a total increase in debt of $5,737,000.

     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 bank prime plus 112.5 basis
points. The line of credit includes covenants related to net worth, fixed charge
coverage  ratio,  profitability,  and  access to  capital.  The  Company  was in
compliance with these covenants at December 25, 2000. The line of credit matures
on  July  15,  2001.  At  December  25,  2000,  the  Company  had no  borrowings
outstanding under this line of credit.

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


     Maturities of long-term  debt,  giving effect to the  borrowings  discussed
above, are as follows at December 25, 2000 (in thousands):

         2001 ..............................   $ 2,006
         2002 ..............................     2,403
         2003 ..............................     2,006
         2004 ..............................     2,198
         2005 ..............................     2,383
         Thereafter ........................    35,405
                                               -------
              Total ........................   $46,401
                                               =======

6. STOCKHOLDERS' EQUITY

     In  October  2000,  the  Company  completed  a rights  offering  by selling
4,011,740  shares of its  common  stock to its  existing  stockholders.  The net
proceeds were $9,425,000.

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.

     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  sock  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.

     In addition to the 1990,  1995, and 1999 Stock Option Plans,  the Company's
Board of Directors approved 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-BASED COMPENSATION PLANS

     FASB Statement No.123 "ACCOUNTING FOR STOCK-BASED  COMPENSATION" was issued
by the FASB in 1995 and, if fully adopted,  changes the methods for  recognition
of cost on plans similar to those of the Company. Adoption of FASB Statement No.
123 is optional;  however,  pro forma  disclosures as if the Company had adopted
the cost  recognition  method  are  required.  Had  compensation  cost for stock
options awarded under this plan been  determined  consistent with FASB Statement
No. 123, the  Company's  net income and earnings per share would have  reflected
the following pro forma amounts:

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


                                     DECEMBER 25,    DECEMBER 27,   DECEMBER 27,
                                        2000            1999           1998
                                    ------------     -----------    ------------
                                      (In Thousands, Except Per Share Amount)
     Net Income:
       As Reported ..............      $3,678          $ 970           $4,165
       Pro Forma ................      $2,736          $ 169           $3,351

     Primary EPS:
       As Reported ..............      $ 0.34          $0.09           $ 0.42
       Pro Forma ................        0.25           0.02             0.33

     A summary of the status of the Company's stock option plans at December 25,
2000,  December 27, 1999,  and December 28, 1998,  and changes  during the years
then ended is presented in the table and narrative below:

<TABLE>
<CAPTION>
                                                 2000                     1999                    1998
                                         --------------------    ---------------------    ---------------------
                                                    WTD. AVG.                WTD. AVG.                WTD. AVG.
                                         SHARES       PRICE      SHARES        PRICE      SHARES       PRICE
                                         ------       -----      ------        -----      ------       -----
<S>                                     <C>           <C>       <C>            <C>       <C>           <C>
Options outstanding at beginning
 of period .........................    2,439,000     $3.22     2,381,000      $2.98     2,077,500     $2.90
Granted ............................      473,000      3.38       737,000       3.30       416,000      3.27
Exercised ..........................            0      0.00      (234,459)      2.42        (2,500)     2.50
Cancelled ..........................     (179,000)     2.88      (444,541)      3.77      (110,000)     2.54
                                        ---------               ---------                ---------
Options outstanding at end
 of period .........................    2,733,000      3.05     2,439,000       3.22     2,381,000      2.98
                                        =========               =========                =========

Exercisable at end of period .......    1,859,333      2.91     1,642,544       2.79     1,590,577      2.56
                                        =========               =========                =========
Weighted average fair value of
 options granted ...................                  $1.52                    $1.82                   $1.87
                                                      =====                    =====                   =====
</TABLE>

     The weighted  average  fair value at the date of grant for options  granted
during fiscal 2000 and 1999 were estimated using the Black-Scholes pricing model
with the following  assumptions:  weighted  average  risk-free  interest rate of
6.29% and 5.95%; weighted average volatility of 52.70% and 65.76%; expected life
of 4 years; and weighted average dividend yield of 0.0%.

     Details  regarding the options  outstanding  as of December 25, 2000 are as
follows:

<TABLE>
<CAPTION>
                                     OUTSTANDING                            EXERCISABLE
                    ---------------------------------------------     -----------------------
                                       WEIGHTED          WEIGHTED                    WEIGHTED
                                       AVERAGE           AVERAGE                     AVERAGE
   RANGE OF           NUMBER          REMAINING          EXERCISE     NUMBER OF      EXERCISE
EXERCISE PRICE      OF SHARES      CONTRACTUAL LIFE       PRICE        SHARES         PRICE
--------------      ---------      ----------------       -----        ------         -----
<S>                <C>               <C>                <C>          <C>            <C>
$1.72 - $2.75         927,500           6.05              $2.22        927,500        $2.22
$3.00 - $3.63       1,560,500           8.39              $3.29        686,833        $3.23
$4.00 - $5.00         245,000           6.15              $4.63        245,000        $4.63
                    ---------                                        ---------
Total ..........    2,733,000                                        1,859,333
                    =========                                        =========
</TABLE>

COMMON STOCK WARRANTS

     As of December  25, 2000,  and  December 27, 1999,  the Company had 231,277
outstanding  warrants to acquire its common stock with its lenders in connection
with the issuances of previously  paid off debt. The warrants are exercisable at
$9.08 per share and expire in March 2004.

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


7. COMMITMENTS AND CONTINGENCIES

   DEVELOPMENT AGREEMENTS

     The Company is obligated under four separate development agreements to open
31 new  T.G.I.  Friday's  restaurants  through  2003.  Due to the  tighter  2000
economic environment,  especially in California, the Company's primary operating
area,  the Company was unable to fully comply with its  development  agreements.
Early in the year,  the  Company  began  discussions  with  Carlson  Restaurants
Worldwide to amend its development  agreements.  The development agreements give
Carlson Restaurants Worldwide 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.

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  $6,634,000,  $4,830,000,  and
$3,929,000 under these agreements during 2000, 1999, and 1998, 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
$4,163,000,   $2,733,000,   and   $1,805,000   during  2000,   1999,  and  1998,
respectively.

OPERATING LEASES

     The Company leases land and restaurant  facilities  under operating  leases
having terms  expiring at various dates through  January  2020.  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 a
percentage of gross sales.  The Company's  minimum  future lease  payments as of
December 27, 1999, were as follows (in thousands):

             2001 .........................   $ 10,058
             2002 .........................      9,617
             2003 .........................      9,041
             2004 .........................      8,353
             2005 .........................      7,656
             Thereafter ...................     70,218
                                              --------
                  Total ...................   $114,943
                                              ========

     Rental expense during 2000,  1999, and 1998 was  approximately  $8,662,000,
$6,948,000,  and  $5,604,000,   respectively.  In  addition,  the  Company  paid
contingent  rentals of $957,000,  $678,000,  and $523,000 during 2000, 1999, and
1998,  respectively.  The  difference  between  rent  expense  and rent  paid is
included  in  other   liabilities  and  deferred  credits  in  the  accompanying
consolidated balance sheets.

SALE-LEASEBACK TRANSACTIONS

     Historically,  the Company has entered into sale-leaseback  transactions in
order to provide further funds for development  activities.  During fiscal 2000,
the Company completed five  sale-leaseback  transactions at an aggregate selling
price  of  $14,494,000.   The  transactions  resulted  in  a  deferred  gain  of
approximately  $1,316,000,  which will be accreted  to income as a reduction  of
rent expense over the twenty-year lease terms. Pursuant to the lease agreements,
annual base rent equals  approximately  $1,449,000 as of December 25, 2000, with
10% increases in base rent occurring in 2005,  2010, and 2015. In addition,  the
Company may be required to pay  percentage  rent if revenue levels reach certain
break points.  In 2000, no percentage rent was required for these locations.  In
1999,  the Company  completed two  sale-leaseback  transactions  at an aggregate
selling price of $5,229,000,  which resulted in a deferred gain of $245,000.  In
1998,  the Company  completed two  sale-leaseback  transactions  at an aggregate
selling price of $4,000,000, which resulted in a deferred gain of $110,000.

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


     During the first  quarter of fiscal 2001,  the Company  expects to complete
two  sale-leaseback  transactions  with regard to the buildings,  fixtures,  and
improvements  at two  restaurant  sites  whereby  the  Company  leases  back the
restaurant  sites under operating  leases over a twenty-year  period under terms
similar to those in the preceding  paragraph.  The Company will receive proceeds
of  approximately  $2,500,000.  The  transactions  are  expected  to result in a
deferred gain that is not currently determinable, but will be accreted to income
as a reduction of rent over the twenty-year lease term.

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  $174,000,  $122,000,  and $100,000  during 2000,  1999, and 1998,
respectively.

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.  Sherman
Restaurants, LLC is controlled by Samuel Sherman, the brother of Steven Sherman.
Steven Sherman served as a director of the Company until February 2000,  when he
resigned from the Board.

     In December 1993, the Company  entered into a five year lease agreement for
corporate office space with an entity  controlled by Steven Sherman,  who served
as a director  of the Company  until  February  2000.  During 1998 the lease was
amended to extend the  original  term through  January 31,  2004.  Approximately
$224,000,  $244,000, and $177,000 were paid in rent for this leased space during
2000, 1999, and 1998, respectively.

     The Company is management  partner in joint ventures with another party. As
a result,  the Company is obligated to provide both  restaurant  management  and
capital to the joint ventures.  The Company  receives a management fee for these
services.  The fees totaled  $611,000,  $865,000,  and $1,082,000 in each of the
fiscal years of 2000, 1999, and 1998, respectively.  The Company had receivables
of  approximately  $2,210,000 and  $1,756,000  for 2000 and 1999,  respectively,
related to the funding of operations of the joint ventures.

10. SUBSEQUENT EVENTS

     On January 31, 2001,  the Company  entered into a  $15,000,000  Development
Facility  financing  agreement with Bank of America.  For a period of 18 months,
Bank of America will provide  construction  and permanent  financing for certain
Company T.G.I.  Friday's units and equipment  based upon either the appraised or
real estate values.  On January 31, 2001,  the Company  entered into an interest
rate  swap  agreement  with  Bank of  America.  This  swap  agreement  fixes the
Company's  one-month  LIBOR  base to 6.26%  per  annum on a  notional  amount of
$12,500,000  through  June  2014.  All the  loans  provided  by the  Development
Facility  have interest  rates that have a  performance  based formula of senior
funded debt to EBITDA,  with the range over  30-day  LIBOR being 1.75% to 2.75%.
The swap  qualifies as a cash flow hedge in  accordance  with SFAS No. 133. On a
periodic basis, the Company will adjust the fair market value of the swap on the
balance sheet and offset the amount of the change to other comprehensive income.

                                      F-18
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