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 31, 2001      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 18, 2002, there were outstanding  14,052,600 shares of the registrant's
common stock,  $.001 par value.  The aggregate market value of common stock held
by nonaffiliates of the registrant  (8,378,678 shares) based on the closing sale
price of the common stock as reported on the Nasdaq National Market on March 18,
2002,  was  $40,887,949.   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 2002  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 31, 2001

                                TABLE OF CONTENTS

PART I                                                                      PAGE
  ITEM 1.   BUSINESS.......................................................    1
  ITEM 2.   PROPERTIES.....................................................   24
  ITEM 3.   LEGAL PROCEEDINGS..............................................   24
  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............   24

PART II
  ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS..........................................   25
  ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA...........................   25
  ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS....................................   27
  ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....   34
  ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................   35
  ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE..........................   35

PART III
  ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............   36
  ITEM 11.  EXECUTIVE COMPENSATION.........................................   36
  ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT...................................................   36
  ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................   36

PART IV
  ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
              ON FORM 8-K..................................................   37

SIGNATURES.................................................................   40

                                   ----------

                 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 2002 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 five T.G.I. Friday's  restaurants.  We also own
five Redfish Cajun Grill and Bar restaurants  and five Bamboo Club  restaurants.
We currently  have under  construction  one T.G.I.  Friday's  restaurant and one
Redfish restaurant in Chandler,  Arizona that are scheduled to open in the later
part of April 2002 and in May 2002, respectively, and one Bamboo Club restaurant
in Tucson, Arizona scheduled to open in the beginning of April 2002. On November
19th, 2001, we entered into two license  agreements with Celebrity  Restaurants,
L.L.C.,  the  owner  of the  exclusive  rights  to  operate  Alice  Cooper'stown
restaurants  and which  operates one such  restaurant in Phoenix,  Arizona.  The
agreements  allow us to operate an Alice  Cooper'stown  restaurant in Cleveland,
Ohio and in San Diego,  California.  On approximately  April 1, 2002, we plan to
open an Alice  Cooper'stown  restaurant  in  Cleveland,  Ohio,  in the  location
formally occupied by one of our Redfish Cajun Grill and Bar restaurants.

     T.G.I. Friday's restaurants are full-service,  casual dining establishments
featuring a wide  selection of freshly  prepared,  popular  foods and  beverages
served by well-trained,  friendly  employees in relaxed settings.  Redfish Cajun
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.  Alice  Cooper'stown  restaurants are rock and
roll and sports  themed and feature a connection  to the music  celebrity  Alice
Cooper.

     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,

          -    the   development  of  our  rights  to  the  Alice   Cooper'stown
               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," the "Company" 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

                                       1
<PAGE>
predecessors,  has conducted a business since 1972 that is substantially similar
to the business currently conducted by its franchisees.  As of December 31 2001,
Carlson  Restaurants  Worldwide had 237  franchisor-operated  and 274 franchised
T.G.I. Friday's restaurants  operating worldwide.  Carlson Restaurants Worldwide
currently owns approximately  1.8% 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.

     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.  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 85 food items, including

     *    appetizers,  such as 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 $9 to $19 for beef, chicken, and seafood entrees; $9
to $12 for pasta and oriental and  southwestern  specialty  items;  $4 to $9 for
salads,  sandwiches,  and burgers;  and $6 to $12 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% 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,

                                       2
<PAGE>
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
2001 generated an average of approximately $3,381,000 in annual revenue.

OUR REDFISH  CAJUN GRILL AND BAR RESTAURANTS

THE REDFISH CONCEPT

     Redfish Cajun 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, although our Denver restaurant is not open on Sundays.
Hours of operation are usually from 11:00 a.m.  until  Midnight  Monday  through
Thursday and 11:00 a.m. until 2:00 a.m. on weekends.

MENU

     We have developed a menu of more than 50 items for our Redfish restaurants.
Signature dishes include blackened redfish,  Bourbon Street jambalaya,  southern
fried  catfish,  and  crawfish  etoufee.  The menu also  features a selection of
appetizers,  including Looziana egg rolls, Dungeness  Maryland-style crab cakes,
"Alligator Bites," buffalo crawfish tails, and crab & artichoke dip. Our Redfish
menu also features a variety of fresh seafood,  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 31%
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  mementos 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 that 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

                                       3
<PAGE>
local real estate and employment  markets.  Our Redfish  restaurants open during
all of fiscal 2001  generated an average of  approximately  $2,423,500 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
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. Monday 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 $16 for appetizers;  and
$9 to $29 for entrees.  The average guest check is approximately $25 per person.
Alcoholic  beverage  sales  account  for  approximately  22% of  total  revenue.
Take-out orders represent approximately 5% of total revenue. In addition,  sales
through  a  third-party   delivery  service  in  Phoenix,   Arizona,   represent
approximately 3% of total Phoenix 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 five  Bamboo  Club  restaurants  are  located  in  high-traffic  retail
shopping environments.  Each restaurant contains approximately 6,340 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. We have developed a prototype
for  use  in  developing  inline  Bamboo  Club  restaurants  in the  future.  We
constructed our first  restaurant using this prototype in Tampa,  Florida.  This
restaurant opened on September 25, 2001. Since that date we have opened two more
Bamboo Club  restaurants,  one in West Palm Beach,  Florida on October 12, 2001,
and the other in Tempe,  Arizona,  on  November  21,  2001.  We plan to use this
prototype whenever possible in order to standardize the construction process and

                                       4
<PAGE>
to reduce costs. We have signed a lease for a freestanding  Bamboo Club location
and currently are developing a prototype for this type of location.

UNIT ECONOMICS

     After  opening  three  Bamboo Club  restaurants,  our total cost of opening
averaged  $1,125,000,  exclusive  of  annual  operating  expenses.  These  costs
included   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)  $175,000 in
pre-opening expenses,  including hiring expenses,  wages for managers and hourly
employees,  and supplies.  We are currently developing plans for a free standing
Bamboo Club  restaurant and  anticipate  that this cost will be in excess of the
preceding  averages.  Actual costs for future  openings may vary  significantly,
depending on a variety of factors.  Our two Bamboo Club  restaurants open during
all of fiscal 2001  generated an average of  approximately  $3,026,600 in annual
revenue.

ALICE COOPER'STOWN RESTAURANTS

THE ALICE COOPER'STOWN CONCEPT

     The Alice  Cooper'stown  concept was  developed by  Celebrity  Restaurants,
L.L.C.  and is rock and roll and sports themed,  featuring a connection to Alice
Cooper.  We own no interest in  Celebrity  Restaurants,  L.L.C.,  and it owns no
interest  in  us.  Celebrity   Restaurants   operates  one  Alice   Cooper'stown
restaurant,  which opened in December 1998 in Phoenix, Arizona. Although we have
the right to operate Alice  Cooper'stown  restaurants in Cleveland,  Ohio and in
San Diego, California, we have to date only elected to open in Cleveland,  Ohio.
That restaurant is currently  scheduled for opening in April 2002, in a location
formally  occupied by a Redfish  Cajun Grill and Bar  restaurant.  The Cleveland
location's proximity to Jacobs Field, the home of the Cleveland Indians, and the
fact that  Cleveland is the home of the Rock and Roll Hall of Fame,  resulted in
our  decision  to convert  the  location  into a Alice  Cooper'stown.  Celebrity
Restaurant's  Alice  Cooper'stown  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 that are  sports and rock and roll  themed.  In
addition,  the  restaurants  sell  sports  and rock and  roll  memorabilia.  The
restaurants  feature quick,  efficient,  and friendly table service  designed to
minimize  customer-waiting time and facilitate table turnover.  Although we have
not yet opened our Alice  Cooper'stown  restaurant,  we believe it will  benefit
significantly  from the name  recognition  of Alice Cooper and the  proximity to
Jacobs Field, the home of the Cleveland  Indians,  and the Rock and Roll Hall of
Fame.

MENU

     Our menu in Cleveland will include salads and sandwiches, pizza and burgers
and tempting appetizers and desserts.

     Menu prices are  expected to range from $4.00 to $9.00 for  appetizers  and
desserts,  $5.00 to  $18.00  for  entrees  and $6.00 to $11.00  for  pizzas  and
burgers.

RESTAURANT LAYOUT AND STAFFING

     Our Alice  Cooper'stown  restaurant has been designed to feature a rock and
roll and sports theme,  featuring  the  connection to rock and roll legend Alice
Cooper.  The  general  decor is rock and roll and sports  memorabilia.  The logo
reads "Where Rock and Roll and Sports  Collide".  The restaurant  will feature a
video wall in the bar and a large screen  (semi)  video in the dining  room.  In
keeping with its sports bar theme,  there will be more than 35 TV screens in the
restaurant. Some of the Cleveland Redfish staff, including management personnel,
will be operating this restaurant.

UNIT ECONOMICS

We  anticipate  that the  construction  costs to convert this  location  will be
approximate $400,000 and that pre-opening expenses will approximate $150,000.

                                       5
<PAGE>
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, 2002.

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

DEVELOPED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
  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
</TABLE>

                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                                          IN       OPERATED BY
                                                  SQUARE    SEATING    OPERATION   OUR COMPANY
LOCATION                                          FOOTAGE   CAPACITY     SINCE        SINCE
--------                                          -------   --------   ---------   -----------
<S>                                               <C>       <C>        <C>         <C>
  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
  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, California.......    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 West, New Mexico.................    6,426       241        2001         2001
  Roseville, California........................    6,426       245        2001         2001
  Porter Ranch, California.....................    6,426       245        2001         2001

MANAGED T.G.I. FRIDAY'S RESTAURANTS
  San Bruno, California........................    8,345       200        1980         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...............................    4,800       198        1997         1997

ACQUIRED 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

DEVELOPED REDFISH RESTAURANTS
  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

DEVELOPED BAMBOO CLUB RESTAURANTS
  Tampa, Florida...............................    8,100       235        2001         2001
  West Palm Beach, Florida.....................    6,317       180        2001         2001
  Tempe, Arizona...............................    6,400       210        2001         2001
</TABLE>

                                       7
<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. The acquired  Bamboo Club  restaurants  average 5,400
square feet and our  developed  Bamboo Club  restaurants  average  approximately
6,340 square feet. The size of our Alice Cooper'stown restaurant to be opened in
Cleveland is 10,964 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.

T.G.I. FRIDAY'S, REDFISH, AND BAMBOO CLUB OPERATIONS

     Once a restaurant is integrated into our  operations,  we provide a variety
of corporate services to assure 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.

                                       8
<PAGE>
     We also maintain quality assurance procedures designed to assure compliance
with the high quality of products and services  mandated by our company and, for
our T.G.I. Friday's restaurants, by Carlson Restaurants Worldwide. We respond to
and  investigate  inquiries  and  complaints,  initiate  on-site  resolution  of
deficiencies,  and consult  with each  restaurant's  staff to assure that proper
action  is taken  to  correct  any  deficiency.  Our  personnel  and  contracted
third-party   quality  assurance   professionals   make  unannounced  visits  to
restaurants to evaluate the facilities,  products, and services. We believe that
our  quality  review  program  and  executive   oversight   enhance   restaurant
operations,   reduce  operating  costs,  improve  customer   satisfaction,   and
facilitate the highest level of compliance with the T.G.I. Friday's system.

     We maintain a zero tolerance policy for  discrimination of any type towards
both our employees and customers, and to this end constantly enforce this policy
through our  training of new  employees,  our policy and training  manuals,  and
periodic re-enforcement programs.

RESTAURANT MANAGEMENT

     Our T.G.I.  Friday's  regional  and  restaurant  management  personnel  are
responsible  for  complying  with  Carlson   Restaurants   Worldwide's  and  our
operational  standards.  Our one  senior  regional  manager  and  five  regional
managers are responsible  for between 5 and 12 of our  restaurants  within their
region.  These regional managers and three Directors of Operations report to our
Senior Vice  President of Restaurant  Operations.  The Senior Vice  President of
Restaurant  Operations  and three other  Directors of  Operations  report to our
President and Chief Operating  Officer,  who has  responsibility  for our T.G.I.
Friday's  and  Redfish  operations.  Our Bamboo  Club  system is run by the Vice
President  of Bamboo Club  operations,  who reports to our  President  and Chief
Operating Officer. 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,
and a kitchen manager. Our T.G.I. Friday's restaurants average between 80 and 90
hourly  employees.  Our  Redfish  restaurants  average  approximately  65 hourly
employees  and our  Bamboo  Club  restaurants  average  approximately  72 hourly
employees.

     We have established a program of appointing multi-location general managers
in geographic  areas having locations close enough to each other to support this
concept. We currently have ten multi-location  general managers.  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, for our T.G.I. Friday's restaurants,  by 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 T.G.I. Friday's 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 14 weeks of  training.  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 plan to implement all of
our policies and  training  programs in order to operate the Alice  Cooper'stown
restaurant  with the same  high  standards  we have  established  for our  other
brands.

     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

                                       9
<PAGE>
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  T.G.I.  Friday's
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.  We are  currently  developing  plans to  convert  some of our T.G.I.
Friday's  locations to develop a take out  program,  and our  Chandler,  Arizona
T.G.I.  Friday's has been designed for this program.  One Bamboo Club restaurant
lease requires us to periodically refurbish the location.

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  frame  relay.  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
T.G.I.  Friday's we own and manage is currently supported by Carlson Restaurants
Worldwide.  We are presently  re-designing  our store point of sale (POS),  back
office  accounting  system and corporate  enterprise  resource  planning  system
(ERP). The selected software vendors are considered  restaurant  industry market
leaders  and are  expected  to  increase  our  store  productivity  and  enhance
corporate  information  flow. These new systems will not be supported by Carlson
Restaurants  Worldwide,  but will be utilized uniformly in all of our restaurant
concepts.  Management and support of the POS and back office  accounting  system
hardware and software will be outsourced to the selected POS vendor.  Management
and support of the corporate  ERP system will be  outsourced  to an  appropriate
third party  vendor.  We are  currently in final  negotiations  with each of the
selected vendors. Upon successful completion of the final contract negotiations,
full system  implementation  is expected to begin in April 2002 and be completed
by the end of fiscal year 2002.

     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

                                       10
<PAGE>
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.

     Celebrity  Restaurants is assisting us in converting the Cleveland location
into an Alice Cooper'stown restaurant. They are providing guidance in restaurant
design,  acquisition of themed  memorabilia for decor,  developing the menu, and
locating sources for the purchase of memorabilia for sale to guests.

     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  and  three  new  Bamboo  Club   restaurants   currently   utilize  the
distribution  operations  that  were in  place  when we  acquired  the  original
restaurants, although we are in negotiation to convert this distribution to U.S.
Foodservice.  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,  which were suspended by Carlson Restaurants
Worldwide  for the  fourth  quarter of 2001  because  they  changed  advertising
agencies.  These programs  resumed in February of 2002. 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.

                                       11
<PAGE>
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.

ALICE COOPER'STOWN RESTAURANT

     Our in-house marketing  department is developing  advertising and marketing
programs for our Alice Cooper'stown restaurant. We will emphasize the sports and
rock and roll connection and feature Alice Cooper.

EXPANSION OF OPERATIONS

     Between 1990 and 2001, 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
California that we continue to manage.  Between 1990 and 2001, we also developed
31 new T.G.I. Friday's  restaurants,  including three during 2001. These include
16 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 2001,  we closed our T.G.I.
Friday's restaurant in Texas. We plan to open two T.G.I. Friday's restaurants in
2002, one in Chandler, Arizona and the other in north Phoenix, Arizona.

     We, with the concurrence of the franchisee for whom we managed,  closed one
under-performing  T.G.I.  Friday's restaurant in San Francisco,  California,  in
2002.  We closed one  under-performing  T.G.I.  Friday's  restaurant in El Paso,
Texas  and one  under-performing  Redfish  Cajun  Grill  and Bar  restaurant  in
Cleveland, Ohio during 2001.

     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  Cajun  Grill and Bar  restaurants.  We opened two  additional
Redfish  restaurants in 1999 and closed one in each of 2000 and 2001. We plan to
open one Redfish  restaurant  in Chandler,  Arizona in 2002. We also may explore
opportunities to franchise the Redfish concept to third parties in the future.

     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.  In 2001 we opened three Bamboo Club  restaurants,  two in
Florida, in Tampa and West Palm Beach and one in Tempe, Arizona. We plan to open
seven  additional  Bamboo Clubs in 2002,  in Tucson,  Arizona;  Novi  (Detroit),
Michigan;  Fairfax (Washington D.C.), Virginia; San Antonio (River walk), Texas;
North Phoenix, Arizona; Aventura,  Florida; and Raleigh/Durham,  North Carolina.
We may open one  additional  Bamboo  Club  restaurant  in  Newport  (Cincinnati)
Kentucky.  We plan to expand the Bamboo Club concept by opening other additional
restaurants in the future.  We also may explore  opportunities  to franchise the
Bamboo Club concept to third parties in the future.

     Generally when we close a location due to underperformance or other reasons
that management  deems  appropriate,  our first priority is to transfer  useable
assets to other  locations.  Other assets that are not  transferable,  including
leasehold improvements and certain kitchen equipment are written off at the time
of closure.

     In November of 2001,  we received a license to open two Alice  Cooper'stown
restaurants; we plan to open one in Cleveland, Ohio in 2002.

     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 three T.G.I.  Friday's,  one Redfish,  and three
Bamboo Club restaurants during 2001.

                                       12
<PAGE>
     We have signed leases for nine locations and we are negotiating  leases for
three additional restaurants,  two of which are 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 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
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 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.

     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 could fully assess the effects of these issues.

                                       13
<PAGE>
We  subsequently  analyzed  these  effects  entered  into  modifications  of our
Northern and Southern California Development Agreements on November 6, 2001.

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

<TABLE>
<CAPTION>
                            SOUTHERN       NORTHERN
                           CALIFORNIA     CALIFORNIA     SOUTHWEST       MIDWEST
YEAR                      TERRITORY(1)   TERRITORY(1)   TERRITORY(2)   TERRITORY(3)   TOTAL
----                      ------------   ------------   ------------   ------------   -----
<S>                           <C>            <C>            <C>            <C>         <C>
2002...................         --             --              1              1           2
2003...................          2              1              1              1           5
                              ----           ----           ----           ----        ----
     Total.............          2              1              2              2           7
                              ====           ====           ====           ====        ====

Existing Restaurants...         30              6(4)          15(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 the four  restaurants  managed in the Northern  California
     Territory.
(5)  Does not include the one restaurant managed in the Southwest Territory.

     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
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  non-compete   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  $7,444,000 during fiscal 2001,
$6,634,000  during fiscal 2000 and $4,830,000 during fiscal 1999. 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 years 1999,  2000, and the first three quarters of 2001 to
the national marketing fund, this sum was reduced to 1.7% during the last fiscal
quarter of 2001, but has now been increased to 2.7%.  Marketing expenses totaled
$4,163,000 during fiscal 2000 and $4,774,000 during fiscal 2001.

                                       14
<PAGE>
     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.

LICENSE AGREEMENTS

     Our two license agreements with Celebrity Restaurants,  L.L.C., allow us to
open  Alice  Cooper'stown   restaurants  in  Cleveland,   Ohio  and  San  Diego,
California.  The  agreements  grant us the right to use  Celebrity  Restaurants'
exclusive  rights to Alice Cooper's  likeness and its trademarks and trade names
to operate sport and rock and roll themed restaurants featuring Alice Cooper.

     Each license agreement  requires us to pay Celebrity  Restaurants a royalty
fee in the  amount of 1% of gross  sales for food and  beverage  sales up to the
amount of gross sales  derived in 2001 in each  location  through  its  existing
operations;  2.5% from that point to $3,500,000 and 3% over $3,500,000.  For the
sale of merchandise products, such as logo and memorabilia,  we pay a royalty of
20 % of gross sales.

     Our license  agreements are not  inter-related and a default under one will
not be a default under the other.

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
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  2,410 people on a full-time basis, of whom 74 are
corporate  management and staff personnel.  We also employ  approximately  3,615
part-time  employees,  which results in our employment of 6,025 total personnel,
of which 5,951 are  restaurant  personnel.  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

                                       15
<PAGE>
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.....    70    Chief Executive Officer, and Director
William G. Shrader....    54    President, Chief Operating Officer, and Director
Lawrence K. White.....    37    Vice President - Finance and Treasurer
Jeff Smit.............    43    Senior Vice President-Restaurant Operations
David C. Moore........    52    Vice President of Bamboo Club Operations
Michael J. Herron.....    61    General Counsel and Secretary

     BART A.  BROWN,  JR. has  served as our Chief  Executive  Officer  and as a
director  since  December  1996. Mr. Brown served as our President from December
1996 until June 2001. 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 President and Chief  Operating
Officer and as a director  since March 1999. Mr. Shrader served as our Executive
Vice  President  from March 1999 until June 2001.  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  Treasurer
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.

     JEFF SMIT has served as our  Senior  Vice  President-Restaurant  Operations
since June 2001.  Mr. Smit served as our Vice  President of Operations  prior to
June of 2001.  Mr. Smit  joined us in 1994 and has been a general  and  regional
manager.  Prior to joining us, Mr. Smit worked for Carlson Restaurants Worldwide
as a general manager in its T.G.I.  Friday's operation.  Prior to that, Mr. Smit
worked in a variety of capacities in various restaurants.

     DAVID C. MOORE has served as vice president of Bamboo Club operations since
November of 2001.  From 1999 until he joined the  company  Mr.  Moore was in the
custom home building business, building under the name Ponderosa Homes, LLC, and
owned a sports  grill and bar  franchise  called  Famous Sams  through a company
called  Grand Slam 7, LLC.  From 1995  through  1999 Mr.  Moore was Senior  Vice
President for Tosco Marketing Company. Prior to that Mr. Moore was a Senior Vice
President of Circle K Corporation.

     MICHAEL J. HERRON  joined our company as General  Counsel in March 2001 and
has been Secretary since June 2001. Prior to joining us, Mr. Herron was actively
engaged in the  private  practice of law in Miami  Beach,  Florida and in Aspen,
Colorado.  From April 1990 to February  2001 Mr.  Herron was a member of the law
firm of  Garfield & Hecht,  P.C.,  in Aspen,  Colorado.  Mr.  Herron is a former
President of the Miami Beach,  Florida Bar  Association  and was a member of the
Florida Bar Association's standing Ethics Committee.

                                       16
<PAGE>
                       SPECIAL CONSIDERATIONS-RISK FACTORS

     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 five 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

                                       17
<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.
That sum was reduced to 1.7% during the last four months of 2001, as Carlson had
no national campaign during that period. In 2002, Carlson Restaurants  Worldwide
intends to increase  the national  marketing  pool to 2.7% and to have an active
national campaign.  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.

     During  2001,  we  renegotiated  our  development  agreements  with Carlson
Restaurants  Worldwide for southern and northern California.  While we expect to
fulfill our obligations  under the terms of our  development  agreements as they
exist for the  south and  Midwest  areas  and for  California  as they have been
renegotiated,  we can provide no  assurance  that we will  successfully  fulfill
these obligations.

                                       18
<PAGE>
WE FACE RISKS  ASSOCIATED  WITH THE  ACQUISITION AND INTEGRATION OF THE REDFISH,
THE  BAMBOO  CLUB AND ALICE  COOPER'STOWN  RESTAURANTS,  AND ANY OTHER  ACQUIRED
RESTAURANTS, WITH OUR EXISTING OPERATIONS.

     We must  integrate  the  operations  of our Redfish,  Bamboo Club and Alice
Cooper'stown  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,  and Alice  Cooper'stown
restaurants will feature,  diverse menus served in an upscale atmosphere,  these
restaurants present operating  requirements that differ from our existing T.G.I.
Friday's   restaurants.   These   requirements  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,  Bamboo Club, and
          Alice Cooper'stown  operations or any future acquired  businesses with
          our existing operations;

     *    effectively  manage the Redfish,  Bamboo Club, and Alice  Cooper'stown
          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, Alice Cooper'stown, 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,  Bamboo  Club,  and  Alice  Cooper'stown  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;

                                       19
<PAGE>
     *    competitive factors; and

     *    general economic and business conditions.

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

     *    locate suitable sites in terms of

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

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

     *    negotiate acceptable leases or terms of purchase;

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

     *    recruit and train qualified personnel; and

     *    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 two T.G.I.  Friday's  restaurants,  the one new Redfish restaurant,  the one
Alice Cooper'stown restaurant, and the eight new Bamboo Club restaurants that we
plan to open during 2002.  We will require  funds to develop  additional  T.G.I.
Friday's,  Redfish,  Bamboo Club, and Alice Cooper'stown  restaurants after 2002
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.

                                       20
<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 31, 2001, we had long-term debt
of approximately $47.2 million and a working capital deficit of $8.0 million.

     Our  borrowings  will  result in  interest  expense of  approximately  $4.0
million in 2002 and $4.4 million in 2003, 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,  58 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 demographics;

     *    changing traffic patterns;

     *    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;

     *    changes in government regulation; and

     *    weather conditions.

                                       21
<PAGE>
     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.

     Employees may file claims or lawsuits against us based on discrimination or
wrongful  termination.  These  claims or lawsuits  could  result in  unfavorable
publicity and 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.

                                       22
<PAGE>
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

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

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

     *    changes in analysts' estimates of our financial performance;

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

     *    natural disasters; 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  5,673,  922 shares,  or 40.4%, of our  outstanding  common stock.
These  directors  and  officers  also hold  options to purchase an  aggregate of
2,172,000  shares of common stock at exercise prices ranging from $1.88 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 others  than  directors  or  officers,  to  acquire  an
aggregate  of 865,497  shares of common  stock  currently  are  outstanding.  An
additional 193,000 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 18, 2002, there were outstanding 14,052,600 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.

                                       23
<PAGE>
ITEM 2. PROPERTIES

     In December  1998, we entered into a five-year  lease for space to serve as
our corporate  offices.  We acquired  additional  space in 2001 and in the first
quarter of 2002.  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  usually  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, based on the advice of legal council, that we are subject to any
pending  litigation that will have a material  adverse effect on our business or
financial condition, results of operations or liquidity.

     In 2001,  we 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.

                                       24
<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
                                                         ------      ------
     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..............................     $ 3.13      $ 2.50
         Second Quarter.............................       4.15        2.94
         Third Quarter..............................       5.91        3.35
         Fourth Quarter.............................       5.81        3.55
     2002
         First Quarter (through March 18, 2002).....     $ 5.10      $ 4.00

     On March 18, 2002, there were 889 holders of record of our common stock. On
March 18,  2002,  the  closing  sale  price of our  common  stock on the  NASDAQ
National Market was $4.88 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.

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  ended  December  31, 2001 has been
derived from our consolidated  financial statements,  which have been audited by
Arthur Andersen LLP, our former independent accountants,  for the period through
December 25,  2000,  and for the year ended  December 31, 2001,  by KPMG LLP our
current independent accountants.

                                       25
<PAGE>
     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 YEARS ENDED
                                                                        (IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
                                                             -------------------------------------------------------------
                                                              DEC. 31,     DEC. 25,     DEC. 27,     DEC. 28,     DEC. 29,
                                                               2001         2000         1999         1998         1997
                                                             ---------    ---------    ---------    ---------    ---------
<S>                                                            <C>        <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenue ..................................................     211,823    $ 186,542    $ 140,294    $ 114,242    $ 107,018
Restaurant operating expenses:
  Cost of sales ..........................................      59,139       53,671       39,960       33,242       30,995
  Payroll and benefits ...................................      64,435       55,971       42,405       33,701       31,907
  Depreciation and amortization ..........................       8,632        7,490        4,664        3,730        3,265
  Other operating expenses ...............................      61,285       52,008       38,923       31,004       30,589
  Reduction of disputed liabilities ......................          --       (1,591)          --           --           --
                                                             ---------    ---------    ---------    ---------    ---------
    Total restaurant operating expenses ..................     193,491      167,549      125,952      101,677       96,756
                                                             ---------    ---------    ---------    ---------    ---------

Income from restaurant operations ........................      18,332       18,993       14,342       12,565       10,262
  Amortization of intangibles ............................       1,044          996          990          983          953
  General and administrative expenses ....................       8,105        7,868        5,955        4,906        4,559
  Pre-opening expenses ...................................       1,417        1,370        2,228          661          287
  New manager training expenses ..........................       1,676        1,914        1,748          731          562
  Impairment charges and other ...........................       3,453          (92)         494          (17)      (2,390)
  Management fee income ..................................        (432)        (611)        (865)      (1,082)        (979)
                                                             ---------    ---------    ---------    ---------    ---------

Operating income .........................................       3,069        7,548        3,792        6,383        7,270
  Non-operating gain .....................................          --          (11)          --           --           --
  Interest expense and other, net ........................       3,825        3,615        2,604        2,218        2,466
                                                             ---------    ---------    ---------    ---------    ---------

Income (loss) before income taxes, extraordinary loss, and
  cumulative effect of change in accounting principle ....        (756)       3,944        1,188        4,165        4,804
Income tax expense (benefit) .............................        (645)         250           50           --           --
                                                             ---------    ---------    ---------    ---------    ---------

Net income (loss) before extraordinary loss and cumulative
  effect of change in accounting principle ...............        (111)   $   3,694    $   1,138    $   4,165    $   4,804
                                                             =========    =========    =========    =========    =========

Net income (loss)(1)(2)(3) ...............................        (111)   $   3,678    $     970    $   4,165    $   3,166
                                                             =========    =========    =========    =========    =========

DILUTED EARNINGS PER SHARE:
  Net income (loss) before extraordinary loss and
    cumulative effect of change in accounting principle ..       (0.01)   $    0.34    $    0.11    $    0.39    $    0.47
  Net income (loss)(1)(2)(3) .............................       (0.01)   $    0.33    $    0.09    $    0.39    $    0.31
  Weighted average shares outstanding - diluted ..........      14,048       11,117       10,407       10,608       10,098

BALANCE SHEET DATA:
  Working capital (deficiency) ...........................   $  (7,987)   $  (7,692)   $ (16,652)   $  (2,807)   $  (1,330)
  Total assets ...........................................     112,462      108,261       86,525       70,255       61,168
  Long-term debt, net of current portion .................      47,232       44,395       31,513       28,264       24,308
  Stockholders' equity ...................................      40,207       40,499       27,383       26,372       22,203
</TABLE>

----------
(1)  Fiscal 2000 includes a charge of $16,000 for early extinguishment of debt.
(2)  Fiscal 1999 includes a charge of $168,000,  or $0.02 per share,  due to the
     cumulative effect of change in accounting principle related to the adoption
     of SOP 98-5. See Note 3 to our consolidated financial statements.
(3)  Fiscal 1997  includes an  extraordinary  loss from debt  extinguishment  of
     $1,638,000, or $0.16 per share.

                                       26
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

     The  following  table  presents   unaudited   consolidated   statements  of
operations  data for each of the eight quarters in the period ended December 31,
2001.  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)
                                                      2001                                            2000
                                  --------------------------------------------    ---------------------------------------------
                                  MAR. 26     JUNE 25     SEPT. 24    DEC. 31     MAR. 27     JUNE 26     SEPT. 25   DEC. 25(1)
                                  --------    --------    --------    --------    --------    --------    --------   ----------
<S>                               <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Revenue .......................   $ 51,705    $ 53,229    $ 52,222    $ 54,667    $ 44,339    $ 47,297    $ 48,293    $ 46,613
Cost of sales .................     14,598      14,783      14,628      15,130      13,273      13,697      13,561      13,140
Income (loss) before income
  taxes, extraordinary loss,
  and cumulative effect of
  change in accounting
  principle ...................        788       1,554         723      (3,821)        318       1,103       1,104       1,419
Net income (loss) .............        788       1,554         723      (3,176)        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 .....       0.06        0.11        0.05       (0.28)       0.04        0.11        0.10        0.08
Net income (loss) per share ...       0.06        0.11        0.05       (0.23)       0.04        0.11        0.10        0.08
                                  ========    ========    ========    ========    ========    ========    ========    ========
</TABLE>

----------
(1)  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.

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

     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 eleven
years, we have grown through acquisitions and development of new restaurants. We
currently own 66 restaurants and manage an additional five 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;  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.

     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. 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.

     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.

                                       27
<PAGE>
     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. The Bamboo Club acquisition was financed in part by our
rights offering to stockholders in 2000.

     In 2001,  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 6
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 8.54%.
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.

     In 2001,  operations were impacted by soft economic conditions,  especially
in the fourth  quarter and  subsequent to the September 11th attacks on America.
These  conditions  halted our positive  same store sales  increase  record at 18
consecutive quarters and predicated the fourth quarter impairment  write-down of
five  Company  owned  restaurants  and  the  management   agreement   impairment
write-down for six stores we manage in Northern  California and El Paso,  Texas.
The total  impairment  charges were $3,453,000,  of which $1,838,000  related to
Company  owned  assets  and  $1,615,000  related  to  the  management  agreement
impairment.  We also faced two  distinctive  challenges  in our T.G. I. Friday's
California market,  which affected operational  profitability;  a $0.50 per hour
minimum wage increase  effective  January 1, 2001 and controlling the escalating
utility prices.  To effectively  combat these  challenges,  we implemented a new
labor program for our top store managers to manage multiple locations,  where it
was  geographically  efficient;  and we implemented  utility programs to measure
optimum usage and to ensure cost efficiency.

     We opened seven new restaurants in 2001,  including  three  T.G.I.Friday's,
one  Redfish  and  three  Bamboo  Club  locations.  The  new  T.G.  I.  Friday's
restaurants are located in West Albuquerque,  New Mexico; Roseville,  California
(Sacramento  area);  and Porter Ranch,  California  (Los Angeles area).  The new
Redfish restaurant is located in North Scottsdale,  Arizona;  and the new Bamboo
Club restaurants are located in Tampa, Florida;  Wellington,  Florida (West Palm
Beach area);  and Tempe,  Arizona  (Phoenix area). We closed an under performing
T.G.  I.   Friday's   restaurant  in  El  Paso,   Texas.   We  will  convert  an
underperforming  Redfish  restaurant  in Cleveland,  Ohio to another  concept in
2002.  The new concept is Alice  Cooper'stown,  a rock 'n' roll / sports  themed
restaurant, will debut to coincide with the opening of the major league baseball
season in April 2002. The  restaurant is located near Jacobs Field,  home of the
Cleveland Indians and the Rock 'n' Roll Hall of Fame.

     Our  strategy  is to  continue  reducing  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.

CRITICAL ACCOUNTING POLICIES

     The  preparation of  consolidated  financial  statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make a number of estimates and  assumptions  that affect
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of the financial  statements.  Such estimates
and assumptions  affect the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, we evaluate our estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our  estimates and  assumptions  are  reasonable  in the  circumstances;
however,  actual results may differ from these estimates under different  future
conditions.

We believe that the estimates  and  assumptions  that are most  important to the
portrayal of the our financial condition and results of operations, in that they
require management's most difficult,  subjective or complex judgments,  form the
basis for the accounting  policies deemed to be most critical to our operations.
These critical accounting policies relate to the valuation and amortizable lives
of long-lived  assets,  goodwill and to other  identifiable  intangible  assets,
valuation  of deferred  tax assets and reserves  related to  self-insurance.  We
periodically  perform asset impairment  analysis of long-lived assets related to
our restaurant locations,  goodwill and other identifiable intangible assets. We
record a valuation  allowance  to reduce our  deferred  tax assets to the amount
that  is  more  likely  than  not to be  realized.  We use  an  actuarial  based

                                       28
<PAGE>
methodology  utilizing  historical  experience  factors to  periodically  adjust
self-insurance  reserves.  We believe estimates and assumptions related to these
critical accounting  policies are appropriate under the circumstances;  however,
should future events or occurrences result in unanticipated consequences,  there
could be a  material  impact on our  future  financial  condition  or results of
operations.

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 31,    DECEMBER 25,    DECEMBER 27,
                                                                     2001            2000            1999
                                                                    ------          ------          ------
<S>                                                                 <C>             <C>             <C>
Revenue ..................................................           100.0%          100.0%          100.0%
Restaurant operating expenses:
   Cost of sales .........................................            27.9            28.8            28.5
   Payroll and benefits ..................................            30.4            30.0            30.2
   Depreciation and amortization .........................             4.1             4.0             3.3
   Other operating expenses ..............................            28.9            27.9            27.8
   Reduction of disputed liabilities .....................              --            (0.9)             --
                                                                    ------          ------          ------
   Total restaurant operating expenses ...................            91.3            89.8            89.8
                                                                    ------          ------          ------
Income from restaurant operations ........................             8.7            10.2            10.2

   Amortization of intangibles ...........................             0.5             0.6             0.7
   General and administrative expenses ...................             3.8             4.2             4.2
   Preopening expenses ...................................             0.7             0.7             1.6
   New manager training expenses .........................             0.8             1.0             1.2
   Impairment charges and other ..........................             1.6             0.0             0.4
   Management fee income .................................            (0.2)           (0.3)           (0.6)
                                                                    ------          ------          ------
Operating income .........................................             1.4             4.0             2.7
Interest expense and other, net ..........................             1.8             1.9             1.9
                                                                    ------          ------          ------
Income (loss) before income taxes, extraordinary loss, and
   cumulative effect of change in accounting principle ...            (0.4)%           2.1%            0.8%
                                                                    ======          ======          ======
</TABLE>

FISCAL 2001 COMPARED TO FISCAL 2000

     Revenue for the fiscal year ended  December  31,  2001  increased  13.6% to
$211.8  million  compared  with $186.5  million for the year ended  December 25,
2000.  This increase was primarily a result of opening seven new  restaurants in
2000 and seven new  restaurants  in 2001.  Same-store  sales  increased 1.9% for
fiscal 2001 as compared  with an  increase in  same-store  sales of 5.1% for the
comparable period in 2000. Revenue from alcoholic  beverages accounted for 24.5%
of revenue in 2001 and 24.4% in 2000.

     Cost of sales as a  percentage  of revenue  decreased to 27.9% in 2001 from
28.8% in 2000.  This decrease from the  comparable  period in 2000 resulted from
multiple  factors.  Food costs were higher in 2000  because we were  required to
find alternative food suppliers to replace Ameriserve, our primary food supplier
who  declared  bankruptcy  in  the  first  quarter  of  2000.  Additionally,  we
experienced  increased food costs in 2001 due to sales mix changes and increases
in meat and cheese costs. We offset these increases through improved operations,
better  margins on alcohol sales and maturing  relationships  with our suppliers
that have led to more favorable contract terms.

     Payroll and benefit costs  increased as a percentage of revenue to 30.4% in
2001 from 30.0% for the comparable  period in 2000.  This increase was primarily
due to the  $0.50  per hour  minimum  wage  increase  in our  California  market
effective  January 1, 2001 and higher  management  labor and benefits  resulting
from lower turnover.

                                       29
<PAGE>
     In total,  depreciation  and  amortization  increased  as a  percentage  of
revenue  to 4.1% in 2001  from  4.0% for the  comparable  period  in  2000.  The
increase was due  primarily to the number of new  restaurants  we have opened in
2000 and 2001.

     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.
In  2000,  the  pool  contribution  was 2.1% of net  sales.  In  2001,  the pool
contribution  was 2.1% of net sales for the first three fiscal quarters and 1.7%
of net sales for the fourth quarter. The pool contribution  percentage decreased
because Carlson  Restaurants  Worldwide  cancelled its T.G.I.  Friday's national
advertising campaign for the entire fourth quarter.  This contribution offsets a
portion of our  general  4%  marketing  requirement.  Other  operating  expenses
increased  as a  percentage  of  revenue  to 28.9% in 2001  from  27.9%  for the
comparable  period in 2000.  The increase was due primarily to  additional  unit
level  advertising  efforts,  store rent  increases,  and additional  energy and
workers' compensation costs, especially in California.

     Reduction  of  disputed   liabilities  in  2000   represents  the  one-time
settlement proceeds paid to us for the Ameriserve  bankruptcy claim.  Ameriserve
was our  primary  food  supplier  until they  declared  bankruptcy  in the first
quarter of 2000.

     Amortization  of intangible  expenses  include  amortization on capitalized
liquor  licenses,  loan financing  fees,  franchise  fees,  and goodwill.  These
amortization  expenses decreased as a percentage of revenue to 0.5% in 2001 from
0.6% for the  comparable  period in 2000. The decrease in 2001 was primarily due
to spreading a small increase in fixed expenses over a larger revenue base.

     General and administrative expenses decreased as a percentage of revenue to
3.8% in 2001 from 4.2% compared with the comparable period in 2000. The decrease
was primarily due to reduced legal fees and recruiting expenses as we hired both
an in house attorney and recruiter during 2001. In addition, reduction in travel
expenses  related  to  postponing  all  non-mandatory  travel  during the fourth
quarter  2001  after the  events of  September  11  contributed  to the  overall
decrease.

     Pre-opening  expenses of  $1,417,000,  or 0.7% of revenue,  were charged to
operations during the year ended December 31, 2001 as compared to $1,370,000, or
0.7% of revenue,  being charged to operations during the year ended December 25,
2000.  The  increase  was due to  opening  of two  Bamboo  Clubs  outside of our
Phoenix,  Arizona market  (Central  Florida) that resulted in additional  travel
expenses for our new store opening teams.

     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  decreased  to
$1,676,000, or 0.8% of revenue, for the year ended December 31, 2001 as compared
to  $1,914,000,  or 1.0 % of  revenue,  for the year  ended  December  25,  2000
primarily as a result of lower turnover.

     In 2001 and 2000,  impairment  charges and other included the impairment of
certain  leasehold  improvements  and other operating  assets in accordance with
SFAS No. 121. The charges  amounted to $1,838,000 and $832,000 in 2001 and 2000,
respectively  to reduce the carrying  value of these  assets to their  estimated
fair value. In addition,  we recorded an impairment expense of $1,615,000 in the
fourth  quarter of 2001  against a management  agreement  with CNL for six under
performing  locations  we manage in Northern  California  and one location in El
Paso,  Texas.  Other charges in 2000 included the final  settlement  proceeds of
$924,000, net, received from the City and County of San Francisco, California in
connection with condemnation proceedings against a Company owned restaurant.

     Management fee income  represents 3% of store gross revenue charged to five
T.G.I.  Friday's locations we manage in Northern  California and one location in
El Paso,  Texas for CNL. Based on the impairment of the management  agreement in
the fourth  quarter of 2001, we did not record any management fee income for the
fourth quarter of 2001.

     Interest  expense  and  other,  net was  approximately  $3,825,000  in 2001
compared with  $3,615,000 in 2000. The net expense  decreased as a percentage of
revenue to 1.8% in 2001 from 1.9% for the comparable period in 2000. Although we

                                       30
<PAGE>
incurred  additional debt and a subsequent increase in interest expense in 2001,
the increased expenses compared with 2000 were offset by more favorable interest
rate  conditions  on our variable  interest  rate debt. As of December 31, 2001,
approximately 50% of our total debt is tied to variable interest rates.

     An income tax benefit of $645,000  was  recorded in 2001  because we offset
net operating loss  carryforwards  against taxable income.  We were in a taxable
income  situation in 2001 due to the  recognition of various timing  differences
from 2000. In 2000, we recorded a $250,000 expense related to state income taxes
due in certain  states  where net  operating  loss  carryforwards  are no longer
available to us. At December 31, 2001,  we had  approximately  $6,600,000 of net
operating loss carryforwards  including capital loss carryforwards  available to
offset future income for federal income tax purposes.

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.
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 T.G.I.  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 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.

     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.

                                       31
<PAGE>
     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.

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

     In 2001,  we 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 T.G.I.  Friday's units
and equipment.

     In 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 is being used to
fund future new restaurant development.

     Net cash flows from  operating  activities  were  $12,547,000  in 2001, and
$3,824,000 in 2000. These were  supplemented by net cash flows from financing of
$3,864,000 in 2001,  $22,496,000 in 2000, and $3,755,000 in 1999,  which we used
to fund our acquisitions and development of new restaurants.

     Net cash used in investing activities was $11,510,000 in 2001,  $24,810,000
in 2000 and  $24,213,000  in 1999,  which we used primarily to fund property and
equipment  purchases for our new restaurants and to acquire franchise rights and
goodwill  related to both the  purchase  and opening of new  restaurants.  These
amounts  were  offset by cash  received  from the sale of assets  related to our
sale-leaseback transactions.

     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 31, 2001, we had a working capital deficit of
approximately $7,987,000.

     At December 31, 2001,  we had a cash  balance of  $9,466,000.  Monthly cash
receipts have been sufficient to pay all obligations as they become due.

     At December 31, 2001,  we had  long-term  debt of  $47,232,000  and current
portion of long-term debt of $3,012,000.

     Approximately  $17,539,000  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.

                                       32
<PAGE>
     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 31, 2001.  The line of credit  matures on July 15, 2002. At December
31, 2001, 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 4.42% at
December  31,  2001.  At December 31, 2001,  we had  outstanding  borrowings  of
$5,924,000 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 31, 2001 and December 25, 2000.

     The  remainder of our  long-term  debt consists of notes payable to various
lending  institutions.  These notes bear interest at rates ranging from 7.22% to
11.0% and mature at various times over the next 15 years.

     We plan to develop at least eleven  additional  restaurants  during  fiscal
2002.  Subsequent  to December 31, 2001,  we borrowed an  additional  $5,260,000
under  the  $15,000,000  facility  financing  agreement  with  Bank  of  America
described above, but we have not entered into any new credit  arrangements after
December  31, 2001.  As of March 27,  2002,  we have  permanent  debt  financing
commitments  totaling  approximately   $3,215,000  that  we  will  use  to  fund
restaurant  development  activity and working capital  requirements  through the
remainder  of  2002.  The  previously  discussed  $15,000,000  Bank  of  America
development line makes up this remaining commitment.

     We lease all of our  restaurants  with terms  ranging  from 10 to 20 years.
Minimum  payments on our existing  lease  obligations  are  approximately  $11.4
million in 2002 and $10.7 million per year through 2003.

     The Company's  future debt and lease  obligations are summarized by year as
follows:

                           Debt      Minimum Lease   Total Cash
                        Maturities    Commitments   Obligations
                        ----------    -----------   -----------
      2002               $  3,012      $ 11,367      $ 14,379
      2003                  2,956        10,748        13,704
      2004                  3,187         9,962        13,149
      2005                  3,472         9,457        12,929
      2006                  3,604         8,682        12,286
      Thereafter           34,013        84,793       118,806
                         --------      --------      --------
                         $ 50,244      $135,009      $185,253
                         ========      ========      ========

     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
April 2003.  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.

                                       33
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

In July 2001,  the FASB issued  Statement No. 141,  BUSINESS  COMBINATIONS,  and
Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as  all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  intangible  assets acquired in a purchase method business  combination
must meet to be recognized  and reported  apart from  goodwill,  noting that any
purchase  price  allocable to an assembled  workforce  may not be accounted  for
separately. Upon its initial adoption, Statement 142 eliminates the amortization
of all existing and newly acquired  goodwill on a prospective basis and requires
companies to assess goodwill  impairment,  at least annually,  based on the fair
value of the reporting  unit. The Company is required to adopt the provisions of
Statement 141 immediately.

As of the date of adoption,  the Company will have  unamortized  goodwill in the
amount of  $25,149,000  that will be subject  to the  transition  provisions  of
Statements  141  and  142.  Accumulated  amortization  related  to  goodwill  is
$5,914,000 as of December 31, 2001.  Because of the  extensive  effort needed to
comply with adopting Statements 141 and 142, it is not practicable to reasonably
estimate the impact of adopting  these  Statements  on the  Company's  financial
statements  at the  date of this  report,  including  whether  any  transitional
impairment  losses will be required to be recognized as the cumulative effect of
a change in accounting principle.

On October 3, 2001,  the FASB  issued  Statement  No.  144,  ACCOUNTING  FOR THE
IMPAIRMENT  OR  DISPOSAL  OF  LONG-LIVED  ASSETS,   which  addresses   financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
While  Statement  No. 144  supersedes  Statement  No.  121,  ACCOUNTING  FOR THE
IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, it
retains many of the fundamental provisions of that Statement.

Statement No. 144 also supersedes the accounting and reporting provisions of APB
Opinion No. 30,  REPORTING THE RESULTS OF  OPERATIONS--REPORTING  THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING EVENTS AND TRANSACTIONS,  for the disposal of a segment of a business.
However,  it retains  the  requirement  in Opinion  No. 30 to report  separately
discontinued  operations  and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment,  or in a distribution to
owners) or is classified as held for sale. By  broadening  the  presentation  of
discontinued  operations  to include more  disposal  transactions,  the FASB has
enhanced  managements'  ability to  provide  information  that  helps  financial
statement  users to assess the effects of a disposal  transaction on the ongoing
operations  of an entity.  Statement  No.  144 is  effective  for  fiscal  years
beginning  after  December 15, 2001.  At the current time,  management  does not
believe  that the  adoption  of this  statement  on  January 1, 2002 will have a
material impact on the Company's financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of December 31, 2001, we were  participating  in a derivative  financial
instrument for which fair value  disclosure is required under SFAS No. 133. From
inception,  we have reduced the fair value of the interest  rate swap  agreement
discussed in the notes to the consolidated  financial  statements to a liability
of $336,260 using "hedge  accounting" per SFAS No. 133 as a result of the recent
decline in interest rates. We have no other derivative financial instruments.

     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 prime less  0.50%,  1.125% over  prime,  3.20% over  LIBOR,  2.75% over
LIBOR, 3.50% over "30-Day Dealer Commercial Paper Rates," and 2.65% over "30-Day
Dealer  Commercial  Paper  Rates." At  December  31,  2001,  we had  outstanding
borrowings on these loans of approximately $25,069,000. Our net interest expense
for 2001 was $3,825,000.  A one percent variation on any of variable rates would
have increased or decreased our total interest expense by $251,000 for the year.

                                       34
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     On August 27, 2001, we engaged the  accounting  firm of KPMG LLP as our new
independent  public  accountants and dismissed Arthur Andersen LLP. The decision
to  change  our  accounting  firm was  recommended  and  approved  by the  audit
committee  of our board of  directors  and  approved by our board of  directors.
During the two most recent fiscal years and subsequent interim reporting periods
preceding the date of this report,  there were no  disagreements  between us and
Arthur  Andersen  LLP on any  matter  of  accounting  principles  or  practices,
financial statement disclosure, accounting scope or procedure, or any reportable
events.  The  report  of  Arthur  Andersen  LLP  on our  consolidated  financial
statements  for the past two  fiscal  years  contained  no  adverse  opinion  or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.  Prior to their engagement, we had not consulted
with KPMG LLP on either the  application  of  accounting  principles  or type of
opinion KPMG LLP might issue on our consolidated  financial  statements.  Arthur
Anderson LLP agreed with the above  statements and a letter from it was attached
to our Form 8-K filed on August 27, 2001.

                                       35
<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 2002 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 2002 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 2002 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 2002 Annual Meeting of Stockholders.

                                       36
<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)
10.18B         Second Amendment to Development Agreement dated November 6, 2001,
               between T.G.I.  Friday's.  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
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)
10.21A         Second Amendment to Development  Agreement dated October 20, 1999
               between T.G.I.  Friday's,  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
10.21B         Third Amendment to Development  Agreement dated  November6,  2001
               between T.G.I.  Friday's,  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
10.22          Stock Option Agreement dated August 5, 1996,  between the Company
               and John F. Antioco for 800,000 shares of Common Stock(9)

                                       37
<PAGE>
EXHIBIT
NUMBER         EXHIBIT
------         -------
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)
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. (12)
10.30          Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement  dated  November  22,  1999,  between  the  Company and
               Merrill Lynch Business Financial Services, Inc. (12)
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.) (12)
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.)
               (12)
10.35          Credit  Agreement  dated  April 2, 1999,  between the Company and
               Imperial Bank (13)
10.35A         First Amendment to Credit Agreement dated August 2, 1999, between
               the Company and Imperial Bank (13)
10.35B         Second Amendment to Credit Agreement dated July 13, 2000, between
               the Company and Imperial Bank (13)
10.35C         Third  Amendment  to  Credit  Agreement  and First  Amendment  to
               Promissory  Note dated  July 5, 2001,  between  the  Company  and
               Imperial Bank
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 (13)
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 (13)
10.38          Unconditional  Guarantee  of  Payment  of  Term  Promissory  Note
               executed by John F. Antioco,  as Guarantor,  in favor of Imperial
               Bank, as Lender (13)

                                       38
<PAGE>
EXHIBIT
NUMBER         EXHIBIT
------         -------
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 (13)
10.40          401(k) Profit Sharing Plan (14)
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 (15)
16             Letter  from  Arthur   Andersen  LLP   regarding  the  change  in
               certifying accountant (16)
21             List of Subsidiaries
23.1           Consent of KPMG LLP
23.2           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 10-K for the year ended
     December 27, 1999,  filed with the  Securities  and Exchange  Commission on
     March 28, 2000.
(13) 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.
(14) 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.
(15) Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 25, 2000,  filed with the  Securities  and Exchange  Commission on
     March 29, 2001.
(16) Incorporated  by reference  to the  Company's  Form 8-K dated  September 4,
     2001, as filed with the Securities and Exchange  Commission on September 4,
     2001.

                                       39
<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: April 1, 2002                    By: /s/ Bart A. Brown, Jr.
                                           -------------------------------------
                                           Bart A. Brown, Jr.
                                           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             April 1, 2002
-----------------------------
John F. Antioco

/s/ Bart A. Brown, Jr.           Chief Executive Officer           April 1, 2002
-----------------------------    and Director (Principal
Bart A. Brown, Jr.               Executive Officer)

/s/ William G. Shrader           President,                        April 1, 2002
-----------------------------    Chief Operating Officer,
William G. Shrader               and Director

/s/ Lawrence K. White            Vice President-Finance            April 1, 2002
-----------------------------    (Principal Financial
Lawrence K. White                and Accounting Officer)
                                 and Treasurer

/s/ David C. Moore               Vice President
-----------------------------    (Bamboo Club Operations)          April 1, 2002
David C. Moore

/s/ Michael J. Herron            Vice President
-----------------------------    General Counsel                   April 1, 2002
Michael J. Herron

/s/ Jane Evans                   Director                          April 1, 2002
-----------------------------
Jane Evans

/s/ John C. Metz                 Director                          April 1, 2002
-----------------------------
John C. Metz

/s/ Debra Bloy                   Director                          April 1, 2002
-----------------------------
Debra Bloy
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE

Independent Auditors' Report - KPMG LLP..................................... F-2

Report of Independent Public Accountants - Arthur Andersen LLP.............. F-3

Consolidated Balance Sheets as of December 31, 2001 and December 25, 2000... F-4

Consolidated Statements of Operations for the fiscal years ended
  December 31, 2001, December 25, 2000, and December 27, 1999............... F-5

Consolidated Statements of Changes in Stockholders' Equity for the
  fiscal years ended December 31, 2001, December 25, 2000, and
  December 27, 1999 ........................................................ F-6

Consolidated Statements of Cash Flows for the fiscal years ended
  December 31, 2001, December 25, 2000, and December 27, 1999 .............. F-7

Notes to Consolidated Financial Statements.................................. F-8

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Main Street and Main Incorporated:

We have audited the accompanying  consolidated  balance sheet of Main Street and
Main Incorporated (a Delaware  corporation) and subsidiaries (the Company) as of
December  31,  2001,  and the related  consolidated  statements  of  operations,
changes in stockholders'  equity and comprehensive  income (loss) and cash flows
for the  year  then  ended.  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 audit.

We conducted our audit in accordance with auditing standards  generally accepted
in United States of America.  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 audit provides a reasonable  basis
for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Main Street and Main
Incorporated  and  subsidiaries as of December 31, 2001 and the results of their
operations  and their cash flows for the year then  ended,  in  conformity  with
accounting principles generally accepted in United States of America.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
adopted the provisions of Statement of Financial  Accounting  Standards No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES,  effective January
1, 2001.

                                        /s/ KPMG LLP

Phoenix, Arizona
March 12, 2002

                                      F-2
<PAGE>
                               ARTHUR ANDERSEN LLP
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Main Street and Main Incorporated:

We have audited the accompanying  consolidated  balance sheet of MAIN STREET AND
MAIN INCORPORATED (a Delaware corporation) AND SUBSIDIARIES, (the Company) as of
December 25, 2000 and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for the years ended December 25, 2000 and
December  27,   1999.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

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


/s/ Arthur Andersen LLP

Phoenix, Arizona
March 12, 2001

                                      F-3
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)


<TABLE>
<CAPTION>
                                                             DECEMBER 31,      DECEMBER 25,
                                                                2001               2000
                                                              ---------         ---------
<S>                                                           <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents ..........................        $   9,466         $   4,565
  Accounts receivable ................................            2,683             6,263
  Inventories ........................................            2,416             1,624
  Prepaid expenses ...................................            1,255               744
                                                              ---------         ---------
     Total current assets ............................           15,820            13,196
Property and equipment, net ..........................           65,222            63,857
Other assets, net ....................................            3,969             2,466
Goodwill, net ........................................           25,149            26,355
Franchise fees, net ..................................            2,302             2,387
                                                              ---------         ---------

     Total assets ....................................        $ 112,462         $ 108,261
                                                              =========         =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt ..................        $   3,012         $   2,006
  Accounts payable ...................................            7,336             9,228
  Other accrued liabilities ..........................           13,459             9,654
                                                              ---------         ---------
     Total current liabilities .......................           23,807            20,888
Long-term debt, net of current portion ...............           47,232            44,395
Other liabilities and deferred credits ...............            1,216             2,479
                                                              ---------         ---------

     Total liabilities ...............................           72,255            67,762
                                                              ---------         ---------
Commitments,  contingencies and subsequent events
  (see notes 8 and 11)

Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares
  authorized, no shares issued and outstanding in 2001
  and 2000 ...........................................               --                --
Common stock, $.001 par value, 25,000,000 shares
  authorized, 14,052,600 and 14,044,791 shares issued
  and outstanding in 2001 and 2000, respectively .....               14                14
Additional paid-in capital ...........................           53,645            53,624
Accrued other comprehensive loss .....................             (202)               --
Accumulated deficit ..................................          (13,250)          (13,139)
                                                              ---------         ---------
     Total stockholders' equity ......................           40,207            40,499
                                                              ---------         ---------
          Total stockholders' equity and liabilities .        $ 112,462         $ 108,261
                                                              =========         =========
</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 OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                YEAR ENDED
                                                                             --------------------------------------------------
                                                                             DECEMBER 31,       DECEMBER 25,       DECEMBER 27,
                                                                                2001               2000               1999
                                                                              ---------          ---------          ---------
<S>                                                                           <C>                <C>                <C>
Revenue .............................................................         $ 211,823          $ 186,542          $ 140,294
                                                                              ---------          ---------          ---------
Restaurant operating expenses
  Cost of sales .....................................................            59,139             53,671             39,960
  Payroll and benefits ..............................................            64,435             55,971             42,405
  Depreciation and amortization .....................................             8,632              7,490              4,664
  Other operating expenses ..........................................            61,285             52,008             38,923
  Reduction of disputed liabilities .................................                --             (1,591)                --
                                                                              ---------          ---------          ---------
     Total restaurant operating expenses ............................           193,491            167,549            125,952
                                                                              ---------          ---------          ---------

Income from restaurant operations ...................................            18,332             18,993             14,342

Other operating expense and income:
  Amortization of intangible assets .................................             1,044                996                990
  General and administrative expenses ...............................             8,105              7,868              5,955
  Pre-opening expenses ..............................................             1,417              1,370              2,228
  New manager training expenses .....................................             1,676              1,914              1,748
  Impairment charges and other ......................................             3,453                (92)               494
  Management fee income .............................................              (432)              (611)              (865)
                                                                              ---------          ---------          ---------

Operating income ....................................................             3,069              7,548              3,792

  Non-operating gain ................................................                --                (11)                --
  Interest expense and other, net ...................................             3,825              3,615              2,604
                                                                              ---------          ---------          ---------
Income (loss) before income taxes, extraordinary loss,
  and cumulative effect of change in accounting principal ...........              (756)             3,944              1,188
  Income tax expense (benefit) ......................................              (645)               250                 50
                                                                              ---------          ---------          ---------
Net income before income taxes, extraordinary loss, and cumulative
  effect of change in accounting principal ..........................              (111)             3,694              1,138
  Debt extinguishment ...............................................                --                (16)                --
  Cumulative effect of change in accounting principle ...............                --                 --               (168)
                                                                              ---------          ---------          ---------

     Net income (loss)  .............................................         $    (111)         $   3,678          $     970
                                                                              =========          =========          =========
Basic earnings per share:
  Net income before cumulative effect of change in
    accounting principle ............................................         $   (0.01)         $    0.34          $    0.11
  Cumulative effect of change in accounting principle ...............                --                 --              (0.02)
                                                                              ---------          ---------          ---------
     Net income (loss) ..............................................         $   (0.01)         $    0.34          $    0.09
                                                                              =========          =========          =========
Diluted earnings per share:
   Net income before cumulative effect of change in
     accounting principle ...........................................         $   (0.01)         $    0.33          $    0.11
   Cumulative effect of change in accounting principle ..............                --                 --              (0.02)
                                                                              ---------          ---------          ---------
     Net income (loss) ..............................................         $   (0.01)         $    0.33          $    0.09
                                                                              =========          =========          =========
   Weighted average number of shares outstanding:
     Basic ..........................................................            14,048             10,944             10,008
                                                                              =========          =========          =========

     Diluted ........................................................            14,048             11,117             10,407
                                                                              =========          =========          =========
</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 CHANGES IN STOCKHOLDERS' EQUITY
                        AND COMPREHENSIVE INCOME (LOSS)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   COMMON STOCK                                    ACCUMULATED
                                             ----------------------    ADDITIONAL                     OTHER
                                                             PAR         PAID-IN    ACCUMULATED   COMPREHENSIVE
                                              SHARES        VALUE        CAPITAL      DEFICIT          LOSS       TOTAL
                                             --------      --------     --------     --------        --------      --------
<S>                                          <C>        <C>          <C>          <C>             <C>             <C>
BALANCES, 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
                                             --------      --------     --------     --------        --------      --------

BALANCES, 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
                                             --------      --------     --------     --------        --------      --------

BALANCES, December 27, 2000 ..............     14,045            14       53,624      (13,139)             --        40,499
                                             --------      --------     --------     --------        --------      --------
  Shares issued in connection with
    options exercised (net) ..............          7            --           21           --              --            21
  Shares issued to employees .............          1            --           --           --              --            --
Comprehensive income:
  Unrealized loss on hedging contract, net
    of $134,504 tax benefit ..............         --            --           --           --            (202)         (202)
  Net loss ...............................         --            --           --         (111)             --          (111)
                                             --------      --------     --------     --------        --------      --------
Comprehensive loss: ......................                                                                             (313)
                                                                                                                   --------

                                             --------      --------     --------     --------        --------      --------
BALANCES, December 31, 2001 ..............     14,053      $     14     $ 53,645     $(13,250)       $   (202)     $ 40,207
                                             ========      ========     ========     ========        ========      ========
</TABLE>

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

                                      F-6
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             YEARS ENDED
                                                              -----------------------------------------
                                                              DECEMBER 31,   DECEMBER 25,  DECEMBER 27,
                                                                  2001          2000          1999
                                                                --------      --------      --------
<S>                                                             <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) ........................................    $   (111)     $  3,678      $    970
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
     Depreciation and amortization .........................       9,676         8,486         5,654
     Gain on sale of assets ................................          --          (289)           --
     Impairment charges and other ..........................       3,453           (92)          494
     Extraordinary loss from debt extinguishments ..........          --            16            --
  Changes in assets and liabilities:
     Accounts receivable ...................................       1,994        (2,829)       (1,338)
     Inventories ...........................................        (792)         (171)         (613)
     Prepaid expenses ......................................        (511)         (123)          (28)
     Other assets, net .....................................      (1,610)         (414)           29
     Accounts payable ......................................      (1,892)       (4,805)        9,850
     Other accrued liabilities .............................       2,340           367         1,201
                                                                --------      --------      --------
          Cash provided by operating activities ............      12,547         3,824        16,219
                                                                --------      --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid to acquire additional interest in subsidiary....          --            --          (500)
  Net additions to property and equipment ..................     (14,343)      (18,103)      (31,401)
  Cash paid to acquire franchise rights and goodwill .......         (18)      (12,139)         (238)
  Cash received from the sale of assets ....................       2,851         5,432         7,926
                                                                --------      --------      --------
          Cash used by investing activities ................     (11,510)      (24,810)      (24,213)
                                                                --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of common stock .......................          --         9,541            41
  Financing and offering costs paid ........................          --          (103)           --
  Proceeds received from the exercise of stock options .....          21            --            --
  Long-term debt borrowings ................................       6,583        16,442         5,296
  Principal payments on long-term debt .....................      (2,740)       (3,384)       (1,582)
                                                                --------      --------      --------
          Cash provided by financing activities ............       3,864        22,496         3,755
                                                                --------      --------      --------

NET CHANGE IN CASH AND CASH EQUIVALENTS ....................       4,901         1,510        (4,239)

CASH AND CASH EQUIVALENTS, BEGINNING .......................       4,565         3,055         7,294
                                                                --------      --------      --------

CASH AND CASH EQUIVALENTS, ENDING ..........................    $  9,466      $  4,565      $  3,055
                                                                ========      ========      ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during the year for interest ..................    $  4,259      $  4,163      $  3,218
                                                                ========      ========      ========

   Cash paid during the year for income taxes ..............    $  1,408      $    539      $    154
                                                                ========      ========      ========
</TABLE>

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

                                      F-7
<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 five T.G.I.
Friday's  restaurants  under a management  agreement.  The Company also owns and
operates  five  Redfish,   five  Bamboo  Club  and  will  soon  open  one  Alice
Cooper'stown restaurant.

     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  consolidated   financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make a number of estimates and  assumptions  that affect
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of the financial  statements.  Such estimates
and assumptions  affect the reported amounts of revenues and expenses during the
reporting  period.  On an ongoing basis,  we evaluate  estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our  estimates and  assumptions  are  reasonable  in the  circumstances;
however,  actual results may differ from these estimates under different  future
conditions.

We believe that the estimates  and  assumptions  that are most  important to the
portrayal of the our financial condition and results of operations, in that they
require management's most difficult,  subjective or complex judgments,  form the
basis for the accounting  policies deemed to be most critical to our operations.
These critical accounting policies relate to the valuation and amortizable lives
of long-lived  assets,  goodwill and to other  identifiable  intangible  assets,
valuation  of deferred  tax assets and reserves  related to  self-insurance.  We
periodically  perform asset impairment  analysis of long-lived assets related to
our restaurant locations,  goodwill and other identifiable intangible assets. We
record a valuation  allowance  to reduce our  deferred  tax assets to the amount
that  is  more  likely  than  not to be  realized.  We use  an  actuarial  based
methodology  utilizing  historical  experience  factors to  periodically  adjust
self-insurance  reserves.  We believe estimates and assumptions related to these
critical accounting  policies are appropriate under the circumstances;  however,
should future events or occurrences result in unanticipated consequences,  there
could be a  material  impact on our  future  financial  condition  or results of
operations.

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.

     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.

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

     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 31,
2001, the Company managed six  restaurants,  although one closed on February 26,
2002. Management fee income has not been recorded by the Company since September
2001 as a  result  of not  meeting  the cash  flow  provisions  pursuant  to the
Management Agreement.

     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.

     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 similar
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
                                                  (YEARS)      DECEMBER 31, 2001   DECEMBER 25, 2000
                                                  -------      -----------------   -----------------
<S>                                               <C>              <C>                 <C>
Land ........................................                      $    534            $    534
Building and leasehold improvements .........       5-20             53,650              45,163
Kitchen equipment ...........................       5-7              21,591              19,004
Restaurant equipment ........................       5-10              9,094               8,205
Smallwares and decor ........................       5-10              7,557               7,077
Office equipment, software, and furniture ...       5-7               4,711               4,226
                                                                   --------            --------
                                                                     97,137              84,209
Less:  Accumulated depreciation and
   amortization .............................                       (33,277)            (25,737)
                                                                   --------            --------
                                                                     63,860              58,472

Construction in progress ....................                         1,362               5,385
                                                                   --------            --------
   Total ....................................                      $ 65,222            $ 63,857
                                                                   ========            ========
</TABLE>

     Depreciation and amortization  expense was $7,912,000 for 2001,  $7,087,000
for 2000, and $4,734,000 for 1999.

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

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

     FRANCHISE FEES

     Franchise fees 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. These costs are being amortized on a straight-line  basis over
the life of the agreement and consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                   AMORTIZATION
                                                      PERIOD
                                                      (YEARS)       DECEMBER 31, 2001    DECEMBER 25, 2000
                                                      -------       -----------------    -----------------
<S>                                                   <C>          <C>                  <C>
Franchise fees and license costs............           20-30            $   3,163            $   3,156
Less:  Accumulated amortization.............                                 (861)                (769)
                                                                        ---------            ---------
   Total....................................                            $   2,302            $   2,387
                                                                        =========            =========
</TABLE>

     GOODWILL

     The Company has recorded  significant  goodwill in  conjunction  with major
acquisitions.  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):

<TABLE>
<CAPTION>
                                                   AMORTIZATION
                                                      PERIOD
                                                      (YEARS)       DECEMBER 31, 2001    DECEMBER 25, 2000
                                                      -------       -----------------    -----------------
<S>                                                   <C>          <C>                  <C>
Acquisition of Main Street California.......           15-30             $  16,632           $  16,391
Acquisition of Main Street Midwest..........           28-30                 2,182               2,182
Acquisition of Redfish, LLC.................           25                      500                 500
Acquisition of Cornerstone .................           15-20                   134                 134
Acquisition of Bamboo Club..................           15                   11,615              11,611
     Less:  Accumulated amortization........                                (5,914)             (4,463)
                                                                         ---------           ---------
         Total..............................                             $  25,149           $  26,355
                                                                         =========           =========
</TABLE>

     OTHER ACCRUED LIABILITIES

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

                                          DECEMBER 31, 2001   DECEMBER 25, 2000
                                          -----------------   -----------------

Accrued payroll..........................    $   2,264           $   3,139
Accrued property and sales tax...........        1,763               1,345
Accrued insurance........................        2,616               1,669
Accrued rent.............................        2,120               1,661
Gift certificate liability ..............          951                 945
Other accrued liabilities................        3,745                 895
                                             ---------           ---------
         Total...........................    $  13,459           $   9,654
                                             =========           =========

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

     INCOME TAXES

     The Company  utilizes  the asset and  liability  method of  accounting  for
income taxes. Under the asset and 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  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

     Basic  earnings  (loss) per share ("EPS") is computed by dividing  earnings
(loss)  available  to  stockholders  by the  weighted-average  number  of shares
outstanding  for the period.  Diluted  earnings  (loss) per share  reflects  the
potential  dilution  that could occur if securities or contracts to issue common
stock were  exercised or converted to stock or resulted in the issuance of stock
or resulted in the issuance of stock that then shared in the earnings or loss of
the Company. The assumed exercise of outstanding stock options and warrants have
been  excluded  from the  calculations  of  diluted  net loss per share as their
effect is antidilutive.

     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 31, 2001,  December 25,
2000, and December 27, 1999, (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                           2001                           2000                          1999
                               ----------------------------    --------------------------    -------------------------
                                                      PER                           PER                          PER
                                                     SHARE      NET                SHARE       NET              SHARE
                               NET LOSS   SHARES     AMOUNT    INCOME    SHARES    AMOUNT    INCOME    SHARES   AMOUNT
                               --------   ------     ------    ------    ------    ------    ------    ------   ------
<S>                            <C>         <C>       <C>       <C>        <C>      <C>       <C>        <C>      <C>
Basic EPS ..................   $  (111)    14,048    $(0.01)   $ 3,678    10,944   $0.34     $   970    10,008   $0.09
Effect of stock
  options and warrants .....        --        533        --         --       173    0.01          --       399      --
Anti-dilutive stock ........        --         --
  options and warrants .....        --       (533)       --         --        --      --          --        --      --
                               -------    -------    ------    -------   -------   -----     -------   -------   -----
Diluted EPS ................   $  (111)    14,048    $(0.01)   $ 3,678    11,117   $0.33     $   970    10,407   $0.09
                               =======    =======    ======    =======   =======   =====     =======   =======   =====
</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. It may soon open
a fourth for Alice Cooper'stown.  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.

     DERIVATIVE FINANCIAL INSTRUMENTS

     The  Company  has  only  limited  involvement  with  derivative   financial
instruments and does not use them for trading purposes.  The Company utilizes an
interest rate swap  agreement to hedge the effects of  fluctuations  in interest
rates related to one of its long-term debt  instruments.  The interest rate swap
agreement met the criteria for cash flow hedge accounting. Amounts receivable or
payable due to settlement of the interest rate swap  agreement are recognized as
interest expense on a monthly basis. A mark-to market  adjustment is recorded as

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

a component of stockholders'  equity, net of taxes, to reflect the fair value of
the interest rate swap  agreement.  The Company  discontinues  hedge  accounting
prospectively if it is determined that the derivative is no longer effective.

     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.

     The Company  adopted  these  standards on December 26, 2000. 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  total  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 spread over 30-day  LIBOR being in the range of
1.75% to 2.75%.  As of December 31, 2001,  the interest rate swap agreement with
Bank of  America  has a  notional  principal  amount  of  $6,525,000.  The  swap
qualifies as a cash flow hedge in  accordance  with SFAS No. 133. On a quarterly
basis,  the Company will adjust the fair value of the swap on the balance  sheet
(and charge/credit the amount of the change to other  comprehensive  income). As
of December  31,  2001,  the fair value of the hedge  resulted in a liability of
$336,260.   The  net-of-tax   effect  was   ($201,756)  in   accumulated   other
comprehensive loss with a deferred tax asset of $134,504.

     NEW ACCOUNTING PRONOUNCEMENTS

     In July 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and
Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as  all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  intangible  assets acquired in a purchase method business  combination
must meet to be recognized  and reported  apart from  goodwill,  noting that any
purchase  price  allocable to an assembled  workforce  may not be accounted  for
separately. Upon its initial adoption, Statement 142 eliminates the amortization
of all existing and newly acquired  goodwill on a prospective basis and requires
companies to assess goodwill  impairment,  at least annually,  based on the fair
value of the reporting unit. The Company was required to adopt the provisions of
Statement 141 immediately.

     As of the date of adoption,  the Company will have unamortized  goodwill in
the amount of $25,149,000 which will be subject to the transition  provisions of
Statements  141  and  142.  Accumulated  amortization  related  to  goodwill  is
$5,914,000 as of December 31, 2001.  Because of the  extensive  effort needed to
comply with adopting Statements 141 and 142, it is not practicable to reasonably
estimate the impact of adopting  these  Statements  on the  Company's  financial
statements  at the  date of this  report,  including  whether  any  transitional
impairment  losses will be required to be recognized as the cumulative effect of
a change in accounting principle.

     On October 3, 2001, the FASB issued  Statement No. 144,  ACCOUNTING FOR THE
IMPAIRMENT  OR  DISPOSAL  OF  LONG-LIVED  ASSETS,   which  addresses   financial
accounting and reporting for the impairment or disposal of long-lived assets.

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

     While  Statement No. 144 supersedes  Statement No. 121,  ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, it
retains many of the fundamental provisions of that Statement.

     Statement No. 144 also  supersedes the accounting and reporting  provisions
of APB  Opinion  No. 30,  REPORTING  THE  RESULTS OF  OPERATIONS--REPORTING  THE
EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS,  AND EXTRAORDINARY,  UNUSUAL AND
INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a segment of
a  business.  However,  it retains the  requirement  in Opinion No. 30 to report
separately  discontinued operations and extends that reporting to a component of
an entity  that  either  has been  disposed  of (by sale,  abandonment,  or in a
distribution  to owners) or is classified  as held for sale.  By broadening  the
presentation of discontinued  operations to include more disposal  transactions,
the FASB has enhanced  managements'  ability to provide  information  that helps
financial statement users to assess the effects of a disposal transaction on the
ongoing operations of an entity. Statement No. 144 is effective for fiscal years
beginning  after  December 15, 2001.  At the current time,  management  does not
believe  that the  adoption  of this  statement  on  January 1, 2002 will have a
material impact on the Company's financial position.

     RECLASSIFICATIONS

     Certain amounts in 2000 and 1999 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.

     The Company has a policy of  identifying  and disposing of  underperforming
assets.  Under this policy,  management  reviews the  operations and current and
projected cash flows.  As a result of applying this policy,  during fiscal years
ended 2001, 2000, and 1999, the Company  recognized a loss (gain) on the sale of
assets and impairment of certain assets as follows (in thousands):

                                     DECEMBER 31,   DECEMBER 25,   DECEMBER 27,
                                        2001           2000           1999
                                        ----           ----           ----
Impairment charges and other ......   $ 3,453        $   (92)        $   494
                                      =======        =======         =======

     IMPAIRMENT CHARGES AND OTHER

     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  2001  and  2000,
respectively,  current and projected  cash flow deficits  indicated that certain
leasehold  improvements and other operating  assets of several  under-performing
locations were impaired under SFAS No. 121. Accordingly,  the Company recorded a
pre-tax charge  amounting to  approximately  $1,838,000 in the fourth quarter of
2001 and  approximately  $832,000  in the  fourth  quarter of 2000 to adjust the
carrying  value of these assets to their  estimated  fair value.  Estimated fair
value of assets was determined  primarily on the likelihood of future use of the
assets  and the fair  value  of the  assets  if the  Company  were to close  the
specified  locations.  The  majority  of  the  assets  impaired  were  leasehold
improvements and certain kitchen equipment that would have no value in the event
of future  liquidation.  Management  determined that these assets have no future
value because  these items are  permanently  affixed to the premises,  and would
cause physical damage to the structure if removed and/or would be more costly to
move than their net book  value.  During the fourth  quarter  2001,  the Company
recorded an impairment charge of approximately $1,615,000 against its management
agreement  with  CNL for  five  Northern  California  locations  and the El Paso
location.

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

     Other charges include severance, contract termination, professional service
costs,  and  settlement of litigation.  Other charges of $924,000,  net, in 2000
represents  the final  settlement  gain (in excess of book  value)  the  Company
received  from the City and County of San  Francisco,  California  in connection
with condemnation  proceedings against a restaurant the Company operated.  Other
charges 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.

     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 causal
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  31,  2001,  December 25,
2000, and December 27, 1999 consist of the following:

<TABLE>
<CAPTION>
                                         BALANCE AT
                                        BEGINNING OF     EXPENSE                    BALANCE AT
                                           PERIOD       RECORDED   PAYMENTS MADE  END OF PERIOD
                                        -----------   -----------   -----------    -----------
<S>                                    <C>           <C>           <C>            <C>
RESERVE FOR SETTLEMENT LOSSES:

   Year ended December 31, 2001         $   149,000   $        --   $  (115,000)   $    34,000
   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

INSURANCE AND CLAIMS RESERVES:

   Year ended December 31, 2001         $ 1,668,700   $ 5,258,539   $(4,310,939)   $ 2,616,300
   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
</TABLE>

     In 2001,  the Company  paid the balance of the legal fees  reserved  for in
2000  amounting  to  $111,000.  The  remaining  balance of $34,000  represents a
reserve for the settlement of the remaining  outstanding gift  certificates from
stores acquired in California during 1998.

     In 2000, the Company  settled and paid its pending  lawsuit.  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 settlement  losses decreased to a balance
of $149,000 at December 25, 2000.

     In 1999,  the Company had  increased the reserve for  settlement  losses by
approximately  $494,000 because of 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  $341,000  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.

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

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.

<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. In. 2001, 2000, and 1999, the
Company  utilized  net  operating  loss  carryforwards.  The effect of temporary
differences  and  carryforwards  that  gave rise to  deferred  tax  balances  at
December 31, 2001, and December 25, 2000, were as follows (in thousands):

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

<TABLE>
<CAPTION>
NET DEFERRED TAX ASSETS/(LIABILITIES)                        DECEMBER 31, 2001       DECEMBER 25, 2000
-------------------------------------                        -----------------       -----------------
                                                                           (In Thousands)
<S>                                                               <C>                      <C>
Temporary differences:
  Basis differences in investments .....................          $   652                  $   664
  Basis differences in depreciable and amortizable
    assets .............................................           (3,944)                  (1,930)
  Provision for estimated expenses .....................            2,301                    2,019
  Revenue recognition ..................................               63                   (1,016)
Tax carryforwards:
  General business and AMT credits .....................            5,958                    5,689
  Net operating loss and capital loss carryforwards ....            2,320                    3,070
Valuation reserve ......................................           (5,700)                  (7,894)
                                                                  -------                  -------
          Total ........................................          $ 1,650                  $   602
                                                                  =======                  =======
</TABLE>

     The amounts  recorded as net  deferred  tax assets at December 31, 2001 and
December  25,  2000,  are  included  as a  component  of  other  assets  in  the
consolidated balance sheets.

     Income tax expense (benefit) consists of the following (in thousands):

                                      CURRENT          DEFERRED          TOTAL
                                      -------          --------         -------
Year ended December 31, 2001:
U.S. Federal ...................      $   228          $  (913)         $  (685)
State and local ................          175             (135)              40
                                      -------          -------          -------
                                      $   403          $(1,048)         $  (645)
                                      =======          =======          =======

     The net change in the total valuation allowance for the year ended December
31,  2001 was a  decrease  of  $2,194,000,  and there was no change for the year
ended  December 25, 2000.  At December 31, 2001,  the Company had  approximately
$6,600,000 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 2020.  Management  believes  that its  ability to utilize  its net
operating loss carryforwards and certain of its general business and AMT credits
to offset future taxable income within the  carryforward  periods under existing
tax laws and regulations is more likely than not. Reconciliations of the federal
income tax rate to the Company's effective tax rate were as follows:

<TABLE>
<CAPTION>
                                               DECEMBER 31, 2001     DECEMBER 25, 2000     DECEMBER 27, 1999
                                               -----------------     -----------------     -----------------
<S>                                            <C>                  <C>                    <C>
Statutory federal rate ....................           34.0%                34.0%                  34.0%
State taxes, net of federal benefit .......          (51.4)                 6.0                    6.0
Nondeductible expenses ....................           (4.4)                 0.4                    1.4
Benefit of FICA credit ....................             --                (17.5)                 (58.7)
Change in valuation allowance .............          107.1                (16.5)                  21.5
                                                     -----                -----                  -----
                                                      85.3%                 6.4%                   4.2%
                                                     =====                =====                  =====
</TABLE>

     At December  31, 2001 and December  25,  2000,  $1,072,000  and $461,000 of
estimated income tax payments are included in prepaid expenses.

5. LINE OF CREDIT

     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

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

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 31, 2001.  During the quarter ended
September  21,  2001,  we renewed our $5 million  operating  line at 1.125% over
prime.  The line of credit  matures on July 15, 2002. At December 31, 2001,  and
December 25, 2000 the Company had no borrowings  outstanding  under this line of
credit.

6. LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                    MATURITY                                               DECEMBER 31,      DECEMBER 25,
                                     DATES        INTEREST RATES       MONTHLY PAYMENT        2001              2000
                                     -----        --------------       ---------------        ----              ----
<S>                               <C>           <C>                        <C>           <C>               <C>
CNL Term Loan II, .............      2012         9.457% and the             $ 87          $  17,539         $  18,454
  secured by assets of 16                         one month LIBOR
  T.G.I Friday's Restaurants                      rate plus 320
                                                  basis points

Bank of America ...............      2013          6.25 - 8.52%                30              6,525                --

Merrill Lynch .................    2007-2015              8.25%                15              5,925             6,324

FFCA ..........................    2002-2016        10.5%-11.0%                17                985             1,226

GE Capital ....................    2002-2014        7.22%-8.01%                38              3,442             3,789

FMAC ..........................    2010-2015        7.64%-11.0%                69             15,828            16,608
                                                                             ----          ---------         ---------

     Total ....................                                              $256             50,244            46,401
                                                                             ====
Less current portion ..........                                                               (3,012)           (2,006)
                                                                                           ---------          ---------
     Total ....................                                                            $  47,232          $  44,395
                                                                                            =========          =========
</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  from CNL ("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.

     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.  During 2001, the company borrowed
$6,525,000 from the new permanent  long-term  financing to fund the construction
of  three  new  locations.  Those  locations  include  a TGI  Friday's  in North
Scottsdale AZ, Thousand Oaks, CA and N. Long Beach CA.

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

     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.

     All  long-term  debt is  secured by  certain  assets of various  restaurant
locations.

     Maturities of long-term  debt,  giving effect to the  borrowings  discussed
above, are as follows at December 31, 2001 (in thousands):

           2002.......................................       $   3,012
           2003.......................................           2,956
           2004.......................................           3,187
           2005.......................................           3,472
           2006.......................................           3,604
           Thereafter.................................          34,013
                                                             ---------
                Total.................................       $  50,244
                                                             =========

7. 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

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

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:

                                 DECEMBER 31,      DECEMBER 25,     DECEMBER 27,
                                     2001              2000             1999
                                     ----              ----             ----
                                     (In Thousands, Except Per Share Amounts)
Net Income (loss):
    As Reported........             $(111)             $3,678          $ 970
    Pro Forma..........             $(961)             $2,736          $ 169

Basic EPS:
    As Reported........            $(0.01)              $0.34          $0.09
    Pro Forma..........             (0.07)               0.25           0.02

     A summary of the status of the Company's stock option plans at December 31,
2001,  December 25, 2000,  and December 27, 1999,  and changes  during the years
then ended is presented in the table and narrative below:

<TABLE>
<CAPTION>
                                             2001                       2000                        1999
                                     --------------------       --------------------        --------------------
                                                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.....................   2,733,000     $3.05        2,439,000     $3.22         2,381,000     $2.98
Granted..........................     447,000      3.79          473,000      3.38           737,000      3.30
Exercised........................      (6,999)     3.02                0      0.00          (234,459)     2.42
Cancelled........................    (135,504)     3.47         (179,000)     2.88          (444,541)     3.77
                                    ---------                  ---------                   ---------
Options outstanding at end
   of period.....................   3,037,497      3.14        2,733,000      3.05         2,439,000      3.22
                                    =========                  =========                   =========

Exercisable at end of period.....   2,112,332      2.96        1,859,333      2.91         1,642,544      2.79
                                    =========                  =========                   =========
Weighted average fair value of
   options granted...............                 $2.56                      $1.52                       $1.82
                                                  =====                      =====                       =====
</TABLE>

     The weighted  average  fair value at the date of grant for options  granted
during fiscal 2001, 2000 and 1999 were estimated using the Black-Scholes pricing
model with the following  assumptions:  weighted average risk-free interest rate
of 5.22%,  6.29% and 5.95%;  weighted average  volatility of 50.00%,  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 31, 2001 are as
follows:

                               OUTSTANDING                      EXERCISABLE
                 -----------------------------------------  --------------------
                                  WEIGHTED        WEIGHTED              WEIGHTED
                                  AVERAGE         AVERAGE               AVERAGE
  RANGE OF        NUMBER OF      REMAINING        EXERCISE  NUMBER OF   EXERCISE
EXERCISE PRICE      SHARES    CONTRACTUAL LIFE     PRICE      SHARES     PRICE
--------------      ------    ----------------     -----      ------     -----
$1.72 - $2.75       950,500      5.20 years        $2.24      917,167    $2.20
$3.00 - $3.65     1,801,997      7.73 years        $3.35      990,165    $3.26
$4.00 - $5.19       285,000      4.87 years        $3.85      205,000    $4.76
                  ---------                                 ---------
Total.........    3,037,497                                 2,112,332
                  =========                                 =========

     COMMON STOCK WARRANTS

     As of December  31, 2001 and  December  25,  2000,  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-19
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES

     DEVELOPMENT AGREEMENTS

     The Company is obligated  under four separate  development  agreements with
Carlson Restaurants  Worldwide to open 7 new T.G.I. Friday's restaurants through
2003. 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. In 2001, the development  agreements were amended to create
the above obligation. The Company estimates that it will invest approximately $5
million to open two stores in 2002 and approximately  $12.5 million to open five
stores in 2003.

     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  $7,444,000,  $6,634,000,  and
$4,830,000,under these agreements during 2001, 2000, and 1999, respectively.  In
addition,  the  Company  could be  required  to spend up to 4% of gross sales on
marketing.  Marketing  expense  for T.  G. I.  Friday's  locations  under  these
agreements were approximately  $4,772,000,  $4,163,000,  and $2,733,000,  during
2001, 2000, and 1999, 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 31, 2001, were as follows (in thousands):

          2002.......................................       $   11,367
          2003.......................................           10,748
          2004.......................................            9,962
          2005.......................................            9,457
          2006.......................................            8,682
          Thereafter.................................           84,793
                                                            ----------
               Total.................................       $  135,009
                                                            ==========

     Rent expense during 2001,  2000, and 1999, was  approximately  $10,836,000,
$8,662,000,  and  $6,948,000,   respectively.  In  addition,  the  Company  paid
contingent rentals of $1,060,000, $957,000, and $678,000, during 2001, 2000, and
1999,  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

     During  the first  quarter  of  fiscal  2001,  the  Company  completed  two
sale-leaseback  transactions  with  regard  to  the  buildings,   fixtures,  and
improvements  at two  restaurant  sites  whereby  the  Company  leased  back the
restaurant  sites under operating  leases over a twenty-year  period under terms
similar to those in the preceding  paragraph.  The Company received  proceeds of
approximately  $3,219,000.  The  transactions  resulted  in a  deferred  gain of
approximately  $41,000,  which will be accreted to income as a reduction of rent
over the twenty-year lease terms. Pursuant to the lease agreements,  annual base
rent was  approximately  $469,000 as of December 31, 2001, 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
2001, no percentage rent was required for these locations.

                                      F-20
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)

     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.

     CONTINGENCIES

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

     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, results of operations or liquidity

9. 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 $ 248,000,  $174,000,  and $122,000,  during 2001, 2000, and 1999,
respectively.

10. RELATED PARTY TRANSACTIONS

     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
$253,000, $224,000, and $244,000, were paid in rent for this leased space during
2001, 2000, and 1999,  respectively.  In addition,  a new lease was entered into
with the same entity in 2002 wherein the Company leased  additional office space
with a term commencing on April 1, 2002.

     The Company is under contract to manage five  restaurants with an unrelated
party.  The Company is  obligated  to provide  both  restaurant  management  and
capital to the  operations.  The  Company  receives a  management  fee for these
services.  The fees totaled  $432,000,  $611,000,  and $865,000,  in each of the
fiscal years of 2001,  2000, and 1999,  respectively.  Management fee income has
not been earned or recorded  by the Company  since the end of the first  quarter
2001 as a  result  of not  meeting  the cash  flow  provisions  pursuant  to the
Management  Agreement.  At December 31, 2001 the company  recorded an impairment
charge against the Management Agreement in the amount of $1,615,000. The Company
had  receivables  of  approximately  $1,167,000 and $2,210,000 for 2001 and 2000
respectively, related to the funding of the operations.

11. SUBSEQUENT EVENT

     On March 19, 2002,  the Company  purchased  the land and building of the El
Paso store that was closed in the fourth quarter of 2001 for $1,603,000.

                                      F-21