THIRD AMENDMENT TO PARTICIPATION AGREEMENT


     THIS THIRD AMENDMENT TO PARTICIPATION AGREEMENT (hereinafter,  as it may be
modified,  amended or supplemented from time to time, called this  "Amendment"),
made and entered  into as of November  13, 1998,  among (i) AVADO  BRANDS,  INC.
formerly known as Apple South, Inc., a corporation  organized and existing under
the laws of Georgia (herein,  together with its successors and assigns permitted
hereunder, called the "Lessee"), (ii) FIRST SECURITY BANK, NATIONAL ASSOCIATION,
a  national  banking  association  ("First  Security"),  not in  its  individual
capacity except as expressly  provided herein, but solely as Owner Trustee under
Apple  South  Trust  No.  97-1  (herein  in such  capacity,  together  with  its
successors and assigns permitted hereunder,  called the "Owner Trustee"),  (iii)
STI CREDIT  CORPORATION,  a Nevada  corporation,  as assignee of SunTrust  Bank,
Atlanta,  in its capacity as the holder of the beneficial  interest in the trust
estate  established under Apple South Trust No. 97-1 (in such capacity as of the
date  hereof,  the  "Holder",  and  together  with its  successors  and  assigns
permitted hereunder,  called the "Holders"), (iv) the financial institutions now
parties to the  Participation  Agreement  (as  defined  below) as Lenders  (each
herein in such  capacity,  together with its  successors  and assigns  permitted
hereunder, called a "Lender" and collectively,  the "Lenders"), and (v) SUNTRUST
BANK,  ATLANTA, a banking  corporation  organized and existing under the laws of
Georgia,  ("SunTrust"),  as collateral  agent and  administrative  agent for the
Lenders and the Holders (in such capacity, the "Administrative Agent").

                               W I T N E S S E T H

     WHEREAS,  the Lessee,  the Owner Trustee,  the Holder,  the Lenders and the
Administrative Agent are parties to that certain Participation Agreement,  dated
as of September 24, 1997, as amended by the First Amendment to the Participation
Agreement,  dated as of March 27, 1998 and as amended by the Second Amendment to
the  Participation  Agreement,  dated as of August 14, 1998 (as so amended,  the
"Participation Agreement");

     WHEREAS,  the Lessee,  the Owner Trustee,  the Holder,  the Lenders and the
Administrative Agent have agreed to amend the Participation Agreement in certain
respects, as described more particularly below;

     NOW,  THEREFORE,  in consideration of the sum of TEN DOLLARS ($10.00),  the
foregoing  premises,  to  induce  the  Holder  and  the  Lenders  to  amend  the
Participation Agreement and to continue to perform their obligations thereunder,
and for other good and valuable  consideration,  the  sufficiency and receipt of
all of which are acknowledged,  the Lessee,  the Owner Trustee,  the Holder, the
Lenders and the Administrative Agent agree as follows:

                                 A. DEFINITIONS

     Unless the context  otherwise  requires,  all capitalized terms used herein
and not otherwise defined herein shall have the meanings set forth in Appendix A
to the Participation  Agreement for all purposes of this Amendment.  The General
Provisions of Appendix A to the Participation  Agreement are hereby incorporated
by reference herein.

                                 B. AMENDMENTS:

     1.  Amendment  to Existing  Section  5.11.  Existing  Section 5.11 shall be
amended by placing "; or" at the end of existing clause (l) thereof,  and adding
a new clause (m) thereof, to read as follows:

     (m) Other  Advances.  Make loans or advances to  Affiliates,  shareholders,
directors,  officers or employees, in addition to those described in clauses (a)
through  (l)  hereinabove,  in an  aggregate  amount,  as to all such  loans and
advances at any one time  outstanding  to all such Persons,  not to exceed Eight
Million  Dollars  ($8,000,000),  so long as, and provided  that, (A) no Event of
Default  then exists and (B) each such loan or advance is repaid,  in full,  not
later than two (2) years from the date of its disbursement.



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                                C. MISCELLANEOUS

     1. Upon the Administrative Agent's receipt of executed signature pages from
all parties to this  Amendment,  all amendments to the  Participation  Agreement
made herein shall become  effective as of October 15, 1998.  Pursuant to Section
10.1 (a) of the Trust  Agreement,  the Holder  authorizes  and request  that the
Owner Trustee execute this Amendment.

     2. Except as expressly set forth herein, this Amendment shall be deemed not
to waive or modify any  provision  of the  Participation  Agreement or the other
Operative Agreements,  and all terms of the Participation  Agreement, as amended
hereby, and all other Operative Agreements shall be and remain in full force and
effect and shall constitute a legal, valid, binding and enforceable  obligations
of the Lessee.  All references to the Participation  Agreement shall hereinafter
be references to the  Participation  Agreement as amended by this Amendment.  To
the extent any terms and  conditions  in any of the Operative  Agreements  shall
contradict or be in conflict  with any terms or conditions of the  Participation
Agreement,  after giving effect to this Amendment, such terms and conditions are
hereby  deemed  modified  and  amended  accordingly  to  reflect  the  terms and
conditions of the Participation  Agreement as modified and amended hereby. It is
not intended by the parties that this Amendment  constitute,  and this Amendment
shall not constitute, a novation or accord and satisfaction.

     3.  To  induce  the  Owner  Trustee,   the  Holder,  the  Lenders  and  the
Administrative Agent to enter into this Amendment (A) Lessee hereby restates and
renews each and every  representation and warranty  heretofore made by it under,
or in  connection  with,  the  execution  and  delivery  of,  the  Participation
Agreement;  (B) Lessee hereby  restates,  ratifies and reaffirms  each and every
term and condition set forth in the Participation  Agreement, as amended hereby,
and in  the  Operative  Agreements  as  amended  hereby,  and  in the  Operative
Agreements,  effective as of the date hereof;  and (C) Lessee  hereby  certifies
that no Lease Event of Default has occurred and is continuing.

     4. THIS AMENDMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF GEORGIA AND ALL APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.

     5. This  Amendment  may be  executed in one or more  counterparts,  each of
which shall be deemed an original,  but all of which together  shall  constitute
one and the same document.

     6. This  Amendment  shall be binding on, and shall inure to the benefit of,
the successors and assigns of the parties hereto.

     7. In the  event  that  any  part of this  Agreement  shall  be found to be
illegal or in violation of public  policy,  or for any reason  unenforceable  at
law, such finding shall not invalidate any other part thereof.

     8. TIME IS OF THE ESSENCE UNDER THIS AGREEMENT.

     9. The parties agree that their  signatures by telecopy or facsimile  shall
be effective  and binding upon them as though  executed in ink on paper but that
the parties shall exchange original ink signatures  promptly  following any such
delivery by telecopy or facsimile.

     10.  Lessee  agrees to pay all costs and expenses of  Administrative  Agent
incurred in connection with the preparation, execution, delivery and enforcement
of this  Amendment  and all other  Operative  Agreements  executed in connection
herewith,   including  the  reasonable  fees  and   out-of-pocket   expenses  of
Administrative Agent's counsel.

     11. This Amendment shall constitute a Operative  Agreement for all purposes
of the Participation Agreement and shall be governed accordingly.

                      [Signatures set forth on next page.]



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                      [SIGNATURE PAGE TO THIRD AMENDMENT TO
                            PARTICIPATION AGREEMENT]


     IN WITNESS WHEREOF,  the Lessee, the Owner Trustee, the Holder, each Lender
and the  Administrative  Agent have set their hands as of the day and year first
above written.

                                "LESSEE"

                                AVADO BRANDS, INC. formerly known as
                                Apple South, Inc.

                                By:_________________________________
                                Erich J. Booth, Chief Financial
                                Officer and Treasurer

                                Attest:_____________________________
                                Tonya Benjamin, Assistant Secretary


                                "OWNER TRUSTEE"
  
                                FIRST SECURITY BANK, N.A.

                                By:_________________________________
                                Name:____________________________
                                Title:_____________________________


                                "HOLDER"
   
                                STI CREDIT CORPORATION

                                By:_________________________________
                                Name:____________________________
                                Title:_____________________________


                                "LENDERS"
 
                                 SUNTRUST BANK, ATLANTA, as the Administrative 
                                 Agent and as a Lender

                                 By:_________________________________
                                 Name:____________________________
                                 Title:_____________________________

                                 By:_________________________________
                                 Name:____________________________
                                 Title:_____________________________

     
                                 BANCBOSTON LEASING, INC.

                                 By:_________________________________
                                 Name:____________________________
                                 Title:_____________________________


                                 SOUTHTRUST BANK, N.A.

                                 By:_________________________________
                                 Name:____________________________
                                 Title:_____________________________


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