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, 2000          Commission File No. 0-19542


                               AVADO BRANDS, INC.
             (Exact name of registrant as specified in its charter)

         Georgia                                         59-2778983
---------------------------                 ------------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)

   Hancock at Washington
     Madison, Georgia                                      30650
---------------------------                           ----------------
(Address of Principal Executive Offices)                (Zip Code)

      Registrant's telephone number, including area code: (706) 342-4552

           Securities registered pursuant to Section 12(b) of the Act:

                                      None
                                      ----

         Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
                     ---------------------------------------
                                (Title of Class)

     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 the definitive proxy statement incorporated
by  reference  in Part  III of this  Form  10-K or any  amendment  to this  Form
10-K.[X]

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

     As of March 21, 2001, the aggregate market value of the common stock of the
registrant held by non-affiliates  of the registrant,  as determined by the last
sales price on that day, was $11,116,000.

     As of March 21, 2001, the number of shares of common stock  outstanding was
28,447,264.


                      DOCUMENTS INCORPORATED BY REFERENCE:

     Definitive  Proxy  Statement  for use in  connection  with the 2001  Annual
Meeting of Shareholders (Part III of Form 10-K).

<PAGE>
                               TABLE OF CONTENTS


                                     PART I

Item 1.  Business..............................................................3
Item 2.  Properties............................................................9
Item 3.  Legal Proceedings....................................................11
Item 4.  Submission of Matters to a Vote of Security Holders..................11


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters..................................................12
Item 6.  Selected Financial Data..............................................13
Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations..................................14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........21
Item 8.  Financial Statements and Supplementary Data..........................22
Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.............................................44


                                    PART III

Item 10. Directors and Executive Officers of the Registrant...................44
Item 11. Executive Compensation...............................................44
Item 12. Security Ownership of Certain Beneficial Owners and Management.......44
Item 13. Certain Relationships and Related Transactions.......................44


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....45


                                       2
<PAGE>
                                     PART I

Item 1.  Business

                                     General

     Avado Brands,  Inc., including its wholly owned subsidiaries (the "Company"
or "Avado Brands"), is a leading full service, casual dining restaurant company,
which owns four decentralized,  niche-leading restaurant brands. At December 31,
2000, the Company owned and operated  restaurants in 33 states plus the District
of Columbia  including  139 Don Pablo's  Mexican  Kitchen  restaurants,  75 Hops
Restaurant o Bar o Brewery restaurants,  32 McCormick & Schmick's seafood dinner
houses and 17 Canyon Cafe restaurants. For the 52-week period ended December 31,
2000,  total core brand  restaurant  sales were $685.8 million  compared to 1999
core  brand  sales  of  $623.3  million.  Each  of  the  brands  functions  on a
decentralized basis with its own executive management,  purchasing,  recruiting,
training,  marketing and restaurant  operations.  This consumer-based  operating
philosophy  allows the Company to gain  competitive  advantage  by sharing  best
practices and centralizing non-brand critical processes such as human resources,
finance, treasury, accounting and capital formation.

     In 2000,  the Company  committed  to  strategies  to reduce  debt,  improve
liquidity and increase profitability. These strategies resulted in a significant
decrease in new restaurant openings, from 37 in 1999 to 19 in 2000, to a planned
4 in 2001, and a focus on restaurant  operations and marketing strategy.  In the
second quarter,  the Company relocated its corporate offices for Don Pablo's and
Canyon Cafe both from Texas to the Company's corporate headquarter's in Madison,
Georgia in order to reduce overhead  costs.  In the fourth quarter,  the Company
completed a $28.4 million sale-leaseback transaction for 20 Hops properties with
$20.0 million of the proceeds used to permanently reduce debt. In addition,  the
Company  suspended  the  $2.0  million,   quarterly   dividend  payment  on  its
convertible preferred  securities.  These payments may be suspended for up to 20
consecutive  quarters.  The Company also divested its 20-percent equity interest
in United  Kingdom-based  Belgo Group PLC for $8.5  million.  Nine  unprofitable
restaurant  locations  were  closed in early  January  2001 and four  additional
restaurants  were closed on March 29,  2001.  Unprofitable  U.S.  joint  venture
investments  with Belgo Group PLC and  PizzaExpress  PLC were exited in February
2001 and the Company continues to aggressively pursue the sale of other non-core
assets in order to focus on the operations of its core restaurants.

     In 1998, the Company changed its corporate name from "Apple South, Inc." to
"Avado  Brands,  Inc." The name change was made to reflect the  evolution of the
nature and character of the business, including the divestiture of the Company's
Applebee's  restaurants,  which was  completed  in 1999,  and the  emphasis on a
multi-brand  strategy. In connection with the corporate name change, the Company
changed the Nasdaq trading symbol of its common stock from "APSO" to "AVDO."


                                       3
<PAGE>
                       Avado Brands' Restaurant Concepts

                                   Don Pablo's

     The first Don Pablo's was opened in Lubbock, Texas in 1985. The restaurants
feature  traditional  Mexican  dishes served in a  distinctive,  festive  dining
atmosphere  reminiscent of a Mexican  village plaza.  Each restaurant is staffed
with a highly experienced management team that is visible in the dining area and
interacts with both customers and staff to ensure attentive customer service and
consistent  food quality.  Items are prepared  fresh on-site using  high-quality
ingredients at relatively low prices.  The diverse menu,  generous  portions and
attractive  price/value  relationship  appeal to a broad  customer base. The Don
Pablo's  mission  is to win every  guest  every  day by  delivering  real  guest
satisfaction through real people.

     Don  Pablo's  is  led  by  the  brand's  Chief  Executive   Officer  Robert
Andreotolla.  Mr.  Andreotolla  has  over  twenty  years  of  experience  in the
restaurant  industry  and has been  with  Avado  Brands  since  1987.  Under his
direction  in 2000,  Don  Pablo's  continued  to make  strides  to  improve  its
niche-leading  position  including  the  addition  of several new members to the
senior   management   marketing   and   operational   teams,   development   and
implementation of a new menu,  implementation of a new more aggressive  national
advertising campaign and an improved focus on operational  synergies,  including
the  implementation  of a  new  point-of-sale  system  and  improved  management
turnover rates.

     Menu.  The menu offers a wide variety of entrees  including  enchiladas and
tacos served with various sauces and homemade salsa plus mesquite-grilled  items
such as chicken  and beef  fajitas.  The menu also  includes  tortilla  soup,  a
selection of salads,  Mexican-style  appetizers  such as quesadillas  and unique
desserts.  During 2000, the price of a typical meal was $4.99 to $6.99 for lunch
and $7.99 to $10.99 for dinner.  In addition  to its regular  menu,  Don Pablo's
offers 19 lunch specials  priced from $4.99 each and a  lower-priced  children's
menu.  Full bar service is also  provided.  Alcoholic  beverages  accounted  for
approximately 19% of sales in 2000.

     Restaurant  Layout.  Distinctive  Mexican  architecture  and interior decor
provide a casual, fun dining atmosphere.  The restaurants have an open, spacious
feel, created with the use of sky-lights and a Mexican village plaza design, and
are  enhanced by an indoor  fountain and the use of stucco,  brick and tile,  as
well as plants, signs and art work. Homemade tortillas cooked in the dining area
underscore  the  commitment  to fresh,  authentic  Mexican  food.  Both one- and
two-story building designs are utilized. The two-story design features a balcony
which  provides  seating  for bar  patrons  and dining  customers  waiting to be
seated.  The one-story design  incorporates a smaller bar adjacent to the dining
area.  Both  designs  use high  ceiling  architecture  and have  similar  dining
capacities.  Restaurants  range in size from 6,000  square feet to 9,900  square
feet with the average restaurant containing approximately 8,000 square feet. The
restaurants  generally have dining room seating for  approximately 230 customers
and bar seating for approximately 70 additional customers.

     Unit  Economics.  In 2000,  Don  Pablo's  opened two new  restaurants.  The
average cost of developing and opening these restaurants was approximately  $1.7
million,  excluding land, capitalized costs and preopening expenses. The cost of
land for the new sites averaged  approximately  $900,000.  Preopening  expenses,
which  consist  primarily of wages and  salaries,  hourly  employee  recruiting,
license fees, meals, lodging and travel plus the cost of hiring and training the
management teams, averaged $250,000.

     Field  Management.  Management is shared by 17 directors of operations  who
report to three regional vice presidents of operations.  The strategy is to have
each director responsible for a limited number of restaurants, thus facilitating
a focus on quality of operations and unit profitability. The management staff of
a typical  restaurant  consists of one general manager,  one kitchen manager and
three assistant managers. The restaurant management staff is eligible to receive
bonuses based on equaling or exceeding their individual  restaurant's prior year
sales and profits.

     Advertising and Marketing.  Don Pablo's  advertising and marketing strategy
combines the use of television and radio  advertising in core markets along with
a focus on local efforts and community  involvement at all  locations.  In 2000,
advertising  expense was 5.6% of sales.  Although Don Pablo's  typically  spends
approximately  3.5% to 4.0% of sales on advertising,  a new aggressive  national
advertising strategy was implemented in the second half of the year. Advertising
expenditures  for 2001 are budgeted at 5.1% of sales,  reflecting a continuation
of this campaign that will focus on efforts  designed to increase traffic counts
and appeal to consumer desires for new and exciting tastes.


                                       4
<PAGE>
                         Hops Restaurant - Bar - Brewery

     The first Hops was opened in Clearwater,  Florida in 1989.  Each restaurant
offers a diverse menu of popular foods,  freshly  prepared in a display  kitchen
with a strict  commitment to quality and value.  Additionally,  each  restaurant
features an on-premises  microbrewery.  In 2000, a new Chief Executive  Officer,
Ronald  Magruder,  joined  the  brand.  Mr.  Magruder  has  nearly  30  years of
experience in the restaurant industry and was formerly the Chairman of the Board
of the National Restaurant Association. He was also formerly the Chief Operating
Officer of CBRL Group's  Cracker  Barrel Old Country  Store and Vice Chairman of
Darden  Hospitality.  Hops also made  several new  additions  to its  financial,
operating  and  marketing  senior  management  teams during  2000,  which should
continue to keep the brand focused on its niche-leading position.

     Menu.  The  restaurants  feature an  American-style  menu that includes top
choice  steaks,  smoked baby back ribs,  fresh fish,  chicken and pasta  dishes,
deluxe  burgers and  sandwiches,  hand-tossed  salads with  homemade  dressings,
appetizers,  soups  and  desserts.  The  menu  offers  separate  selections  for
children. The price of a typical meal, including beverages, ranges from $6.00 to
$9.00 per person for lunch and  $13.00 to $16.00  per  person for  dinner.  Each
restaurant offers four distinctive lager-style beers and ales, plus a variety of
blends of these beers as well as seasonal beers, that are brewed on-premises. An
observation  microbrewery at each restaurant allows customers to view the entire
brewing  process.  Except  for one  non-alcoholic  beer,  the  brewed  beers are
typically  the only beers  served.  Full bar service is also  available  at each
restaurant.  Alcoholic  beverages  accounted for  approximately  16% of sales in
2000.

     Restaurant Layout.  Restaurants range in size from  approximately  5,000 to
7,300 square  feet.  With booth  seating  throughout  approximately  70% of each
restaurant,  guests enjoy the comfort of privacy and soft lighting  amongst wood
and  brick  surfaces  in a  somewhat  rustic  design . The  ambiance  and  decor
complements the on-premise copper and stainless steel brewing equipment which is
visible  from both the bar and dining  room.  Customers  are invited to tour the
brewery,  which  occupies  from 450 to 750  square  feet,  with Hops' on premise
Brewmaster.

     Unit  Economics.  In 2000,  Hops  opened ten new  restaurants.  The cost of
developing and opening these restaurants  averaged  approximately  $1.8 million,
excluding  land and  preopening  costs but including  approximately  $165,000 in
microbrewery  equipment.  Land costs  ranged  from  $580,000 to  $1,011,000  and
preopening costs averaged $234,000.

     Field Management. Management is shared by five operating partners and eight
area  supervisors  who report to a regional  vice  president  who reports to the
brand's Chief Operating  Officer.  Each operating  partner or area supervisor is
ultimately responsible for four to seven restaurants,  thus facilitating a focus
on quality of  operations  and unit  profitability.  The  management  staff of a
typical  restaurant  consists of one general  manager,  one kitchen  manager and
three assistant managers.  General managers and kitchen managers are eligible to
receive bonuses equal to a percentage of their restaurant's controllable income,
subject to operating above a minimum operating margin.

     Advertising and Marketing.  Hops'  advertising  and marketing  strategy has
historically   focused   primarily  on  grassroots   efforts  utilizing  special
promotions  in local markets and special  event  equipment  designed to increase
customer  awareness  and name  recognition.  In recent  years,  advertising  and
marketing  efforts  were  expanded  to include  television  advertising  in core
markets as well as the continued use of radio  advertising,  outdoor  boards and
print media in regional editions of national publications.  These strategies are
expected to continue into 2001 with the  continued  use of television  and radio
advertising,  print  media,  limited  outdoor  advertising  as well  as  ongoing
grassroots programs. In 2000, advertising expense was 5.5% of sales.


                                       5
<PAGE>
                             McCormick & Schmick's

     McCormick & Schmick's was  established  in 1972 by  co-founders  William P.
McCormick and Douglas L. Schmick,  current  Chairman and President of the brand,
respectively.  Mr. McCormick also serves on the National Restaurant  Association
Board of Directors and on the Board of the American Culinary Institute. In 2000,
Mr. McCormick was elected to the Avado Brands Board of Directors.

     Each   McCormick  &  Schmick's   restaurant  is  designed  to  capture  the
distinctive   attributes  of  its  local  market.   Varying  in  design  from  a
traditional,  New England-style  fish house to a more contemporary  dinner house
with  spectacular  waterfront  views,  many of the  restaurants  are  located in
historic  buildings.  Traditional-style  bars are an integral  component of each
restaurant.  The same philosophy of distinctiveness  and quality applies equally
to the bar  operation  and the dining  rooms.  Alcoholic  beverages  represented
approximately  27% of sales in 2000.  Restaurants  are operated  under the names
McCormick & Schmick's, McCormick's Fish House, Harborside, Jake's, Jake's Famous
Crawfish, M&S Grill,  McCormick & Kuleto's,  Spenger's Fresh Fish Grotto and The
Heathman Hotel Restaurant.  McCormick & Schmick's offers superior service to its
guests and is positioned in a price range at the upper end of moderate.

     Menu.  McCormick & Schmick's  features a daily menu,  offering the freshest
seafood  available  based  on  price  and  product  availability.  With 25 to 30
distinctive species and over 85 individual  selections,  the menu gives range in
culinary  appeal  as well as  price  selection.  The  price of a  typical  meal,
including  beverage,  is approximately  $10.00 to $20.00 for lunch and $25.00 to
$35.00 for dinner.

     Restaurant Layout. Restaurants typically range in size from 6,000 to 14,000
square feet with an average  restaurant  containing  approximately  8,500 square
feet.  The  restaurants  generally  seat 200 to 350 customers in the dining room
with some locations having 40 to 60 additional patio seats available.

     Unit Economics.  In 2000, McCormick & Schmick's opened six new restaurants.
The average cost of developing these restaurants was approximately $3.5 million,
including leasehold  improvements,  fixtures and equipment.  All restaurant real
estate is leased. Additionally, preopening expenses averaged $355,000.

     Field  Management.  Management is shared by ten multi-unit senior managers,
three  of  which  have  regional  responsibility,  and two  Vice  Presidents  of
Operations.  Staffing  levels  vary  depending  on  restaurant  size.  A typical
restaurant  has a  general  manager,  an  executive  chef,  a sous chef and four
assistant managers and will employ 80 to 90 full- and part-time  employees.  The
McCormick & Schmick's operating philosophy  encourages and trains the management
of  individual  restaurants  to be  creative  by  promoting  a large  degree  of
self-sufficiency.

     Advertising and Marketing. Advertising and marketing efforts are focused on
a grassroots philosophy. Each region utilizes the services of a public relations
firm and makes full use of media events targeting the local market.  Advertising
strategies focus on existing and local customers, but also emphasize out-of-town
travelers as a key customer component.  Marketing begins in each restaurant with
daily printed menus and other local  efforts.  A primary focus is to expand name
and location awareness through the use of promotional discount  certificates and
periodic contact with  organizations in the  travel/convention  industry such as
hotels,  travel agents and convention centers. In 2000,  advertising expense was
3.4% of sales.

                                   Canyon Cafe

     Canyon Cafe  restaurants  operate under the names Canyon Cafe,  Desert Fire
and Sam's Cafe. The first  restaurant  was opened in Dallas,  Texas in 1989. The
Canyon  Cafe  concept  is  dedicated  to  delivering  the flavor and feel of the
American  Southwest  in a warm and  sophisticated  setting.  The brand is led by
Chief  Executive  Officer  Michael  Liedberg.  Mr.  Liedberg has been with Avado
Brands for over 10 years serving in key management  positions in both Applebee's
and Don Pablo's.  He has a strong operations and human resources  background and
serves  on  the  University  of  Georgia  Human   Resource  and   Organizational
Development Academic Advisory Committee.


                                       6
<PAGE>
     Menu. The menu offers a wide variety of unique items such as  Pecan-crusted
Crab Cakes,  Applewood  Smoked Pecan Salmon and Buffalo Short Ribs. A variety of
more  traditional  items  including  chicken tacos and grilled chicken salad are
also offered. During 2000, the price of a typical meal, including beverages, was
$10.00 to $13.00 for lunch and $15.00 to $20.00 for dinner.  Full bar service is
also provided.  Alcoholic  beverages accounted for approximately 19% of sales in
2000.

     Restaurant  Layout.  The  restaurants  are based on a Santa Fe design which
reflects a strong southwestern influence through the use of heavy ponderosa pine
timbers.  The walls,  floors and furniture reflect surfaces and colors native to
the American Southwest.  Restaurants are located in malls, in-line power centers
and as freestanding buildings.  In-line and mall sites average 7,000 square feet
with some  locations  featuring  an  additional  800-1,000  square  foot  patio.
Freestanding  buildings  have 6,700  square feet with a 1,050 square foot patio.
All locations  typically have a minimum of 190 interior dining seats, an average
of 26 bar seats and 45-50 patio seats.

     Unit  Economics.  One new  restaurant  was opened in 2000 at an approximate
cost of  $1,900,000.  Preopening  costs  for  the  location  were  approximately
$250,000.

     Field Management.  Management is structured with a general manager,  two to
three assistant managers,  an executive chef and a sous chef. Regional Directors
are responsible for quality of operations and sales and profitability of four to
five restaurants and report to the brands' Chief Executive Officer. All managers
are eligible to receive bonuses based on their individual restaurant's operating
performance.

     Advertising  and Marketing.  Advertising  and marketing  strategy relies on
grassroots  efforts  focused on  developing a strong  brand  identity and strong
core-customer  recommendations.  Advertising and marketing efforts include local
radio,  media appearances and event involvement as well as direct mail and other
print  media.  Additional  local  efforts,  such  as  system-wide   neighborhood
networking programs, are utilized to develop a direct relationship with targeted
customers. In 2000, advertising expense was 5.4% of sales.

                     Other Restaurant Operational Functions

     Quality Control. All levels of management are responsible for ensuring that
restaurants are operated in accordance with strict quality standards. Management
structure allows restaurant  general managers to spend a significant  portion of
their time in the dining area of the restaurant  supervising staff and providing
service to customers. Compliance with quality standards is monitored by periodic
on-site visits and formal periodic inspections by multi-unit  management as well
as brand executive management.

     Training.  Each brand requires  employees to participate in formal training
programs.  Management  training  programs  generally  last ten to 16  weeks  and
encompass  three  general  areas,  including  (i) all  service  positions,  (ii)
management accounting,  personnel management, and dining room and bar operations
and (iii)  kitchen  management.  Management  positions  at new  restaurants  are
typically  staffed  with  personnel  who  have  had  previous  experience  in  a
management  position  at  another  of the  respective  brands'  restaurants.  In
addition,  a highly experienced opening team assists in opening each restaurant.
Prior to opening,  all personnel  undergo  intensive  training  conducted by the
restaurant opening team.

     Purchasing.  Avado Brands strives to take advantage of purchasing synergies
in all  operational  areas.  In 2000, the national  marketing  strategies at Don
Pablo's  and Hops  were  greatly  enhanced  through  combined  media  purchasing
efforts.  The Company also coordinates its food and beverage  purchasing efforts
whenever  possible in order to obtain  consistent  quality items at  competitive
prices from  reliable  sources for all of its  brands.  The Company  continually
researches  and tests  various  products  in an effort to  maintain  the highest
quality  products and to be responsive  to changing  customer  tastes.  Overall,
purchasing is the  responsibility  of each brand,  which,  with the exception of
McCormick & Schmick's, uses one primary distributor for food products other than
locally  purchased  produce.  At McCormick & Schmick's,  purchasing is under the
direction of each  restaurants'  executive chef in order to obtain the freshest,
highest  quality  seafood  available with a focus on local tastes.  All food and


                                       7
<PAGE>
beverage  products are  available on short  notice from  alternative,  qualified
suppliers.  The Company has not experienced any significant  delays in receiving
food and beverage inventories, restaurant supplies or equipment.

     Restaurant   Reporting.   Financial   controls  are  maintained  through  a
centralized  accounting  system at each brands'  headquarters.  A  point-of-sale
reporting system is utilized in each restaurant.  Restaurant  management submits
to brand headquarters various daily and weekly reports of cash, deposits, sales,
labor costs,  etc. Physical  inventories of all food,  beverage and supply items
are taken at least  monthly.  Operating  results  compared to prior  periods and
budgets are closely monitored by both brand and corporate personnel.

                             Trademarks and Licenses

     Avado Brands has registered the principal trademarks and service marks used
by its restaurant brands with the United States Patent and Trademark Office. The
Company  believes  that its  trademarks  and  service  marks  are  integral  and
important  factors in establishing  the identity and marketing of its restaurant
brands.  Although the Company is aware of certain marks used by other persons in
certain  geographical  areas  which may be similar in  certain  respects  to the
Company's  marks, the Company believes that these other marks will not adversely
affect the Company or its business.

                             Governmental Regulation

     Alcoholic Beverage Regulation.  Each restaurant is subject to licensing and
regulation by a number of  governmental  authorities,  which  include  alcoholic
beverage control and health,  safety and fire agencies in the state,  county and
municipality  in which the  restaurant is located.  Difficulties  or failures in
obtaining the required  licenses or approvals could delay or prevent the opening
of a new restaurant in a particular area. Alcoholic beverage control regulations
require  restaurants to apply to a state  authority  and, in certain  locations,
county  or  municipal  authorities  for a license  or  permit to sell  alcoholic
beverages  on the  premises  and to provide  service for  extended  hours and on
Sundays.  Some  counties  prohibit the sale of  alcoholic  beverages on Sundays.
Typically,  licenses or permits  must be renewed  annually and may be revoked or
suspended for cause at any time.  Alcoholic beverage control  regulations relate
to  numerous  aspects of a  restaurant's  operations,  including  minimum age of
patrons and employees,  hours of operation,  advertising,  wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.

     The Company may be subject in certain states to "dram-shop"  statutes which
generally provide a person injured by an intoxicated patron the right to recover
damages from an establishment that wrongfully served alcoholic  beverages to the
intoxicated person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance coverage.

     Brewpub Regulation.  Hops is subject to additional  regulations as a result
of the on-premises microbrewery in each restaurant.  Historically, the alcoholic
beverage laws of most states  prohibited the manufacture and retail sale of beer
to consumers  by a single  person or entity or related  persons or entities.  At
present,  all 50 states  allow for the  limited  manufacture  and retail sale of
microbrewed  beer by restaurants and bars  classified as "brewpubs"  under state
law. The Hops restaurants are required to comply with such state brewpub laws in
order to obtain necessary state licenses and permits. Additionally,  many states
impose restrictions on the operations of brewpubs,  such as a prohibition on the
bottling  of beer,  a  prohibition  on the sale of beer for  consumption  off of
restaurant  premises,  and a limitation on the volume of beer that may be brewed
at any location, as well as certain geographic limitations. In addition, certain
states limit the number of brewpubs that may be owned by any person or entity or
a related  group of  entities.  The  Company's  ability to own and operate  Hops
restaurants  in any state is and will continue to be dependent  upon its ability
to operate within the regulatory scheme of such states.

       Other Regulation. The Company's restaurant operations are also subject to
federal  and  state  laws  governing  such  matters  as  minimum  wage,  working
conditions, overtime and tip credits.


                                       8
<PAGE>
                                   Competition

     The restaurant  industry in the U.S. is highly  competitive with respect to
price, service, location, and food type and quality, and competition is expected
to intensify. There are well-established  competitors with greater financial and
other  resources  than  Avado  Brands.  Some of these  competitors  have been in
existence for a substantially  longer period than Avado Brands and may be better
established  in  the  markets  where  the  Company's  restaurants  are or may be
located.  The  restaurant  business  is often  affected  by changes in  consumer
tastes,  national,  regional or local economic  conditions,  demographic trends,
traffic patterns, the availability and cost of suitable locations, and the type,
number and  location of  competing  restaurants.  The Company  also  experiences
competition in attracting and retaining  qualified  management  level  operating
personnel.  In addition,  factors such as inflation,  increased food,  labor and
benefits  costs,  and  difficulty in attracting  hourly  employees may adversely
affect the  restaurant  industry  generally  and Avado  Brands'  restaurants  in
particular.

                                    Employees

     As of December 31, 2000, Avado Brands employed approximately 20,000 persons
in 33 states plus the District of Columbia.  Of those  employees,  approximately
250  held  management  or  administrative  positions,  1,400  were  involved  in
restaurant  management,  and the  remainder  were  engaged in the  operation  of
restaurants.  Management  believes  that the  Company's  continued  success will
depend to a large degree on its ability to attract and retain quality management
employees.  While  the  Company  will  have to  continually  address  a level of
employee attrition normally expected in the food-service industry,  Avado Brands
has taken steps to attract and keep qualified  management  personnel through the
implementation  of a variety of employee  benefit  plans,  including an Employee
Stock  Ownership Plan, a 401(k) Plan, and an incentive stock option plan for its
key  employees.  None of the  Company's  employees  is covered  by a  collective
bargaining agreement. The Company considers its employee relations to be good.

Item 2.  Properties

     The  Company  owns a  renovated  historic  building  in  Madison,  Georgia,
containing  approximately  19,000  square feet of office  space and an adjoining
building  containing  approximately  41,000 square feet of office  space.  These
office  buildings serve as the Company's  corporate  headquarters.  In 2000, the
headquarters  of Don Pablo's and Canyon  Cafe were  relocated  from Texas to the
office  facility  in  Madison.  The  previous  headquarters  for Don Pablo's was
located in a Company owned 44,100 square foot facility in Bedford,  Texas, which
is currently held for sale. Canyon Cafe was previously headquartered in a leased
facility in Dallas, Texas. The headquarters for McCormick & Schmick's is located
in  approximately  17,600 square feet of leased space in Portland,  Oregon.  The
headquarters for Hops is located in  approximately  15,000 square feet of leased
space in Tampa,  Florida.  The Company  believes  that its  corporate  and brand
headquarters are sufficient for its present needs.

     In  selecting  restaurant  sites,  the Company  attempts  to acquire  prime
locations in market areas to maximize both short- and long-term  revenues.  Site
selection is made by each brand's development  department,  subject to executive
officer  approval  and,  beginning  in 1999,  final  approval  by the  Company's
management committee.  Within the target market areas, the brands evaluate major
retail and office  concentrations  and major traffic arteries to determine focal
points.  Site specific factors include  visibility,  ease of ingress and egress,
proximity  to direct  competition,  accessibility  to  utilities,  local  zoning
regulations,  laws regulating the sale of alcoholic beverages, and various other
factors.


                                       9
<PAGE>
     After the closing of 9 unprofitable  restaurant  locations in early January
2001, 254 restaurants were in operation.  The Company leases the underlying real
estate on which 123 of the restaurants are located and leases both the buildings
and underlying  real estate for an additional 74  restaurants.  The remaining 57
restaurants  and related  real estate are owned by the  Company.  The  following
table presents restaurant locations by brand as of January 10, 2001:

                      Don                  McCormick       Canyon
                    Pablo's      Hops     & Schmick's       Cafe        Total
   -----------------------------------------------------------------------------
   Florida             18         32                                      50
   Ohio                16          5                                      21
   Texas               14                       1             4           19
   Georgia              5          5            1             1           12
   Indiana             11                                                 11
   Virginia             7          3            1                         11
   Colorado                        7            1             2           10
   Pennsylvania         9                                                  9
   Minnesota            7          1            1                          9
   Tennessee            5          3                                       8
   Maryland             5          1            2                          8
   Michigan             8                                                  8
   North Carolina       4          4                                       8
   California                                   7                          7
   Arizona              3                       1             3            7
   South Carolina       3          4                                       7
   Washington                                   5             2            7
   Oregon                                       6                          6
   Kentucky             4          1                                       5
   New York             5                                                  5
   Oklahoma             4                                                  4
   Missouri                        1            1             2            4
   Washington, D.C.                             2                          2
   Illinois             1                       1                          2
   New Jersey           2                                                  2
   Alabama              2                                                  2
   Connecticut                     2                                       2
   Rhode Island                    2                                       2
   Delaware             1                                                  1
   Iowa                 1                                                  1
   Louisiana                       1                                       1
   Nevada                                       1                          1
   Massachusetts                                1                          1
   Mississippi                     1                                       1
   -----------------------------------------------------------------------------
          Totals      135         73           32            14          254
   =============================================================================


                                       10
<PAGE>
Item 3.  Legal Proceedings

     In 1997, two lawsuits were filed by persons seeking to represent a class of
shareholders of the Company who purchased  shares of the Company's  common stock
between May 26, 1995 and September 24, 1996.  Each  plaintiff  named the Company
and certain of its officers and directors as defendants.  The complaints alleged
acts  of  fraudulent  misrepresentation  by the  defendants  which  induced  the
plaintiffs to purchase the Company's  common stock and alleged  illegal  insider
trading by certain of the defendants, each of which allegedly resulted in losses
to the  plaintiffs  and  similarly  situated  shareholders  of the Company.  The
complaints  each sought  damages and other relief.  In 1998,  one of these suits
(Artel Foam  Corporation  Pension  Trust,  et al. v. Apple South,  Inc., et al.,
Civil Action No. CV-97-6189) was dismissed.  An amended  complaint,  styled John
Bryant, et al. vs. Apple South, Inc., et al. consolidating  previous actions was
filed in January 1998. During 1999, the Company received a favorable ruling from
the 11th Circuit Court of Appeals relating to the remaining suit. As a result of
the ruling,  the District Court again considered the motion to dismiss the case,
and the  defendants  renewed  their motion to dismiss in December  1999. In June
2000,  the District  Court  dismissed  with  prejudice the remaining  suit.  The
plaintiffs  have  appealed  the court's  final  decision.  Although the ultimate
outcome of the suit cannot be determined at this time, the Company believes that
the  allegations  therein are without  merit and intends to continue  vigorously
defending itself.

     The Company is involved in various other claims and legal  actions  arising
in the ordinary course of business.  In the opinion of management,  the ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position or results of operations.


Item 4.  Submission of Matters to a Vote of Security Holders

The Company did not submit any matter to a vote of its security  holders  during
the fourth quarter of the fiscal year ended December 31, 2000.


                                       11
<PAGE>
                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Corporate Headquarters                              Independent Auditors
Avado Brands, Inc.                                  KPMG LLP
Hancock at Washington                               303 Peachtree Street, N.E.
Madison, GA 30650                                   Suite 2000
Telephone:        (706) 342-4552                    Atlanta, GA 30308

Investor Relations                                  Transfer Agent and Registrar
Jillan Hatchett, Senior Investor                    SunTrust Bank, Atlanta
   Relations Analyst                                Corporate Trust Division
Hancock at Washington                               P.O. Box 4625
Madison, GA 30650                                   Atlanta, GA 30302
Telephone:        (706) 342-4552
Facsimile:        (706) 343-2434
E-mail:  jhatchett@corp.avado.com

Investor Information
The Company's  common stock currently trades on the Nasdaq SmallCap Market under
the symbol "AVDO". The Company's  Convertible Preferred Securities are traded on
the over the counter market.

Shareholder Information
As of March 1, 2001, there were  approximately  5,200  shareholders of record of
the Company's common stock.

Stock Price Performance
A summary of the high and low sales  prices per share for the  Company's  common
stock is presented below:

                                               High               Low
   -------------------------------------------------------------------------
   2000
   First Quarter                             $ 5.63             $ 1.75
   Second Quarter                            $ 2.53             $ 1.06
   Third Quarter                             $ 2.19             $ 0.75
   Fourth Quarter                            $ 1.06             $ 0.47

   1999
   First Quarter                             $ 9.75             $ 5.94
   Second Quarter                            $ 9.50             $ 6.25
   Third Quarter                             $ 9.44             $ 5.63
   Fourth Quarter                            $ 6.00             $ 4.06
   -------------------------------------------------------------------------

Dividends
A summary of cash dividends  declared per share on the Company's common stock is
presented below:

   Quarter ended                    2000            1999           1998
   -------------------------------------------------------------------------
   March                         $  0.00          0.0125         0.0100
   June                          $  0.00          0.0150         0.0125
   September                     $  0.00          0.0150         0.0125
   December                      $  0.00          0.0150         0.0125
   -------------------------------------------------------------------------
   Total                         $  0.00          0.0575         0.0475
   -------------------------------------------------------------------------


                                       12
<PAGE>
Item 6. Selected Financial Data
<TABLE>
(In thousands, except per share data)
<CAPTION>                                                2000        1999         1998         1997          1996
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>          <C>          <C>           <C>
CONSOLIDATED STATEMENT OF EARNINGS DATA
Total restaurant sales                           $     685,795      644,459      862,692      808,320       546,022
Operating income before asset revaluation
     and other special charges                   $      28,594       44,647       75,571       74,823        59,296
Asset revaluation and other special charges      $      38,200        2,186        2,940            -        27,700
Net earnings (loss)                              $     (65,734)       5,470       66,283       28,448        11,674
--------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Basic earnings (loss) per common share           $       (2.55)        0.20         1.81         0.74          0.30
Diluted earnings (loss) per common share         $       (2.55)        0.20         1.62         0.73          0.30
Cash dividends per common share                  $        0.00       0.0575       0.0475        0.038         0.030
--------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA
Total assets                                     $     609,681      656,596      670,597      804,289       457,827
Working capital (excluding assets held for sale) $    (120,357)     (39,497)    (210,947)     (33,989)      (21,439)
Long-term obligations                            $     291,507      328,076      116,978      381,843       215,891
Convertible preferred securities                 $      72,865      115,000      115,000      115,000             -
Shareholders' equity                             $      87,952      112,624      112,029      220,782       191,429
--------------------------------------------------------------------------------------------------------------------
</TABLE>
See  additional  discussion  of  financial  results  at  Item  7,  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
Item 8, "Financial Statements and Supplementary Data".


                                       13
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

     For an  understanding  of  the  significant  factors  that  influenced  the
performance of Avado Brands,  Inc. (the "Company")  during the past three fiscal
years,  the  following  discussion  should  be  read  in  conjunction  with  the
consolidated  financial  statements  appearing  elsewhere in this Form 10-K. The
Company's  fiscal year is a 52- or 53-week year ending on the Sunday  closest to
December 31.  Accordingly,  the  following  discussion is for the 52 weeks ended
December 31, 2000 ("2000"),  the 52 weeks ended January 2, 2000 ("1999") and the
53 weeks ended January 3, 1999 ("1998").

                          Consolidated Overview of 2000

     In 2000,  the Company  committed  to  strategies  to reduce  debt,  improve
liquidity and increase profitability. These strategies resulted in a significant
decrease in new restaurant openings, from 37 in 1999 to 19 in 2000, to a planned
4 in 2001, and a focus on restaurant  operations and marketing strategy.  In the
second quarter,  the Company relocated its corporate offices for Don Pablo's and
Canyon Cafe both from Texas to the Company's corporate headquarter's in Madison,
Georgia in order to reduce overhead  costs.  In the fourth quarter,  the Company
completed a $28.4 million sale-leaseback transaction for 20 Hops properties with
$20.0 million of the proceeds used to permanently reduce debt. In addition,  the
Company  suspended  the  $2.0  million,   quarterly   dividend  payment  on  its
convertible preferred  securities.  These payments may be suspended for up to 20
consecutive  quarters.  The Company also divested its 20-percent equity interest
in United  Kingdom-based  Belgo Group PLC for $8.5  million.  Nine  unprofitable
restaurant  locations  were  closed in early  January  2001 and four  additional
restaurants  were closed on March 29,  2001.  Unprofitable  U.S.  joint  venture
investments  with Belgo Group PLC and  PizzaExpress  PLC were exited in February
2001 and the Company continues to aggressively pursue the sale of other non-core
assets  in  order  to focus on the  operations  of its core  restaurants.  These
actions, in addition to other related costs,  resulted in asset revaluations and
other special charges of $38.2 million and a loss on disposal of assets of $22.8
million.

     Comparison of Historical Results - Fiscal Years 2000, 1999 and 1998

Restaurant Sales

     In 2000, Avado Brands' sales were generated solely by the operations of its
four core brands.  Total  restaurant  sales of $685.8 million exceeded 1999 core
brand  sales by 10%.  Total 1999  restaurant  sales of $644.5  million  included
non-core sales of $21.2 million from  Applebee's,  the  divestiture of which was
completed  in  1999.  The  increase  in 2000  core  brand  sales  was  primarily
attributable  to new-unit  growth which  increased core brand operating weeks by
10%. The increase in operating  weeks was generated by a full-year's  sales from
37  restaurants  opened in 1999 and a  partial-year's  sales from 19 restaurants
opened in 2000.  Same-store-sales  comparisons  (for  restaurants open a full 18
months at the beginning of 2000) were approximately 7% higher at Hops, 3% higher
at McCormick &  Schmick's,  4% lower at Don Pablo's and 9% lower at Canyon Cafe.
Increased  marketing  efforts  during the  second  half of 2000  contributed  to
sustaining strong same-store-sales comparisons at Hops and increased Don Pablo's
same-store-sales  comparisons  from negative 8% in the second quarter of 2000 to
slightly  positive  by the  end of the  third  quarter.  Positive  results  from
increased  marketing were  diminished in the fourth  quarter by several  factors
including  economic   uncertainty,   political   indecision   generated  by  the
presidential  election,  unusually harsh winter weather  conditions and negative
publicity  related to  genetically  engineered  yellow corn which  prompted  Don
Pablo's to switch to white corn products.

     In 1999,  restaurant  sales for the Company's core brands  increased 18% to
$623.3 million from $527.4 million in 1998.  Total restaurant sales decreased to
$644.5 million in 1999 from $862.7 million in 1998 reflecting the divestiture of
Applebee's which accounted for 39% of sales in 1998 compared to only 3% in 1999.
Increased  core brand sales,  attributable  primarily to new-unit  growth,  were
partially  offset by a 52-week  fiscal 1999  compared to a 53-week  fiscal 1998.
Operating weeks increased by 21% in core brands due to a full-year's  sales from
59  restaurants  opened in 1998 and a  partial-year's  sales from 37 restaurants
opened in 1999.  Sales increases  attributable  to new restaurant  openings were
somewhat  offset by the  closing  of six core  brand  restaurants  during  1999.
Same-store-sales  comparisons  (for  restaurants  open a full 18  months  at the
beginning of 1999) were  approximately  6% higher at  McCormick & Schmick's,  1%
higher at Hops, 1% lower at Don Pablo's and 4% lower at Canyon Cafe.


                                       14
<PAGE>
Core Brand Restaurant Operating Expenses

     The following  discussion of restaurant  operating  expenses focuses on the
percentages  which certain items of expense bear to total  restaurant  sales for
the core brands. In 2000,  consolidated operating expenses related solely to the
core brands. For comparison purposes, the 1999 and 1998 amounts presented in the
following  table  have been  adjusted  to exclude  the  non-core  operations  of
Applebee's.

Fiscal                                       2000          1999         1998
--------------------------------------------------------------------------------
Restaurant sales:
  Canyon Cafe                                 5.8%          7.0%         9.1%
  Don Pablo's                                43.4          49.7         51.3
  Hops                                       27.2          23.2         20.2
  McCormick & Schmick's                      23.7          20.1         19.4
--------------------------------------------------------------------------------
Total restaurant sales                      100.0         100.0        100.0
--------------------------------------------------------------------------------
Restaurant operating expenses:
  Food and beverage                          28.9          28.4         28.0
  Payroll and benefits                       32.0          31.1         30.4
  Depreciation and amortization               3.6           3.3          3.2
  Other operating expenses                   25.7          24.6         23.4
--------------------------------------------------------------------------------
Total restaurant operating expenses          90.3          87.4         85.0
--------------------------------------------------------------------------------
Income from restaurant operations             9.7%         12.6%        15.0%
--------------------------------------------------------------------------------

     Core  brand  restaurant  operating  expenses  for 2000 were  90.3% of sales
compared to 87.4% in 1999. The resulting  decrease in 2000 restaurant  operating
margins was primarily due to (i)  increased  marketing  primarily at Don Pablo's
and Hops which  increased  other  operating  expenses,  (ii)  increased food and
beverage  costs at Don Pablo's  generated  by the  implementation  of a new menu
coupled with the increased  marketing  initiatives  which resulted in a shift in
sales mix to lower-priced,  lower-margin  items,  (iii) additional  increases in
food and  beverage  costs due to higher  beef  prices  impacting  primarily  Don
Pablo's  and Hops,  (iv) a decline in average  unit  volumes at Don  Pablo's and
Canyon Cafe which  resulted in  decreased  leverage  on fixed  management  labor
costs,  depreciation and amortization,  rent and other fixed operating  expenses
and (v) additional  increases in depreciation expense generated primarily by the
installation  of new  point-of-sale  systems  at Don  Pablo's  and  McCormick  &
Schmick's  in the fourth  quarter of 1999.  Increased  operating  expenses  were
somewhat  offset by a decrease in  preopening  expenses  due to a decline in new
restaurant  openings and increasing average unit volumes at Hops and McCormick &
Schmick's which improved leverage on fixed operating expenses.

     In 1999,  core  brand  restaurant  operating  expenses  were 87.4% of sales
compared to 85.0% in 1998. The resulting  decrease in 1999 restaurant  operating
margins was principally due to (i) the impact of increased marketing,  including
the  implementation  of a new  summer  promotional  menu at Don  Pablo's,  which
increased other operating  expenses as well as food and beverage and payroll and
benefit costs due to higher cost  promotional  items and  increased  labor hours
generated by the menu changes, (ii) additional increases in payroll and benefits
related  primarily to management  base pay increases at Don Pablo's and Hops and
(iii) a decrease in average unit  volumes at Don  Pablo's,  Hops and Canyon Cafe
which  decreased  leverage  on  certain  fixed  operating  expenses  as  well as
depreciation and amortization.

Applebee's Restaurant Operating Expenses

     For  1999  and  1998,  sales  from  Applebee's  accounted  for 3% and  39%,
respectively,  of consolidated restaurant sales. In 1999, consolidated operating
expenses were impacted slightly by Applebee's. Other operating expenses of 24.4%
on a consolidated  basis were lower than core brand expenses of 24.6% due to the
absence of preopening  expenses and limited  marketing at  Applebee's.  In 1998,
Applebee's  operations had a more significant  impact on consolidated  operating
results.  Payroll  and  benefit  expenses  were  32.4% on a  consolidated  basis
compared  to 30.4%  for the core  brands  due to  higher  payroll  and  benefits
resulting from  performance-based,  pay-to-stay  bonus  programs  implemented to
control   management   turnover  and  operating   costs  during  the  Applebee's


                                       15
<PAGE>
divestiture period. In addition,  consolidated  depreciation and amortization of
2.0% was lower than core brand  expense of 3.2% due to the impact of  Applebee's
for which  depreciation  was suspended in December 1997 when the related  assets
were classified as assets held for sale.

General and Administrative Expenses

     General  and  administrative  expenses  were  5.6% of  total  sales in 2000
compared to 5.9% in 1999 and 5.3% in 1998.  The  decrease in 2000 was  primarily
attributable to synergies  gained from the  consolidation of the Don Pablo's and
Canyon Cafe headquarters into the Madison, Georgia corporate office facility and
leverage  gained  from  increases  in  absolute  size at Don  Pablo's,  Hops and
McCormick & Schmick's.  General and administrative  expenses increased from 1998
to 1999  reflecting  a decline in leverage  resulting  from the  divestiture  of
Applebee's.

Asset Revaluation and Other Special Charges

     Asset  revaluation and other special charges totaled $38.2 million in 2000.
These  charges,  which were  predominately  noncash,  reflect the fourth quarter
decision to close 13 underperforming  core brand restaurants  including four Don
Pablo's,  three Canyon Cafes and two Hops restaurants which were closed in early
January  2001 and four  additional  Don  Pablo's  which were closed on March 29,
2001. In 2000,  these 13 locations  generated a combined  operating loss of $3.2
million.  The Company  recorded a $22.3 million charge related to these closings
which included adjusting the underlying fixed assets to estimated net realizable
value as well as  accruals  for lease  terminations  and other  related  closing
costs.  The Company also recorded an asset  revaluation  charge of $11.1 million
generated  primarily  by the  lack of  significant  new  restaurant  development
planned for the next several years  including the write off of costs  associated
with sites that are no longer  expected  to be  developed  in  addition to other
related development costs which are not anticipated to be fully recoverable.  In
addition,  in connection  with the  consolidation  of the Don Pablo's and Canyon
Cafe  office  facilities  and  the  conclusion  of  the  strategic  alternatives
evaluation,  the Company  recorded  charges in the second and third  quarters of
$3.2 million related to employee  severance and other costs  associated with the
office  consolidations  and $1.6 million  associated  with the completion of the
strategic alternatives evaluation.

     In 1999 and 1998, the Company  recorded special charges of $2.2 million and
$2.9 million, respectively. A portion of the 1999 charges reflected fees paid in
conjunction with the evaluation of strategic alternatives.  The remainder of the
1999 special  charge as well as the 1998  special  charge  related  primarily to
programs  initiated  at Don  Pablo's,  Canyon Cafe and the  Company's  corporate
headquarters  to reorganize  management  and reduce  overhead  costs,  including
payroll and employee termination and severance costs.

Interest and Other Expenses

     In 2000,  interest expense increased to $38.3 million from $24.1 million in
1999. The increase was predominately  attributable to (i) a full year's interest
expense associated with the $100 million 11.75% senior subordinated notes issued
in the second quarter of 1999, (ii) an increase of 3.2% in the weighted  average
interest rate associated with revolving credit, plus the impact of payments made
under a fixed-to-floating  interest rate swap, net of mark-to-market adjustments
related to the adoption of Statement of Financial  Accounting Standards ("SFAS")
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities" which
was adopted at the  beginning  of the fourth  quarter of 2000,  (iii)  increased
amortization  of  deferred  loan  costs  associated  with the  revolving  credit
agreement  amendment finalized in the second quarter of 2000 and (iv) a decrease
in interest  income as a result of the collection of notes  receivable  from the
Applebee's divestiture.

     The  decrease  in  interest  expense  from  $25.3  million in 1998 to $24.1
million in 1999 was a result of a decrease  in  average  borrowings  outstanding
under revolving credit facilities.  This decrease was substantially offset by an
increase in  interest  rates under  revolving  facilities  as well as the 11.75%
senior  subordinated  notes issued during 1999. The Company's  weighted  average
interest rate on borrowings was  approximately  10.9% in 2000, 9.5% in 1999, and
8.0% in 1998.


                                       16
<PAGE>
     Distribution  expense on preferred  securities relates to the 1997 issuance
of 2,300,000, $3.50 term convertible securities with a liquidation preference of
$50 per security and convertible into 3.3801 shares of Avado Brands common stock
for each security (the "Convertible Preferred Securities"). Distribution expense
related to the Convertible Preferred Securities decreased in 2000 as a result of
the fourth quarter conversion of 842,692 of the securities into 2,848,383 shares
of common stock issued from treasury. These conversions,  which were made at the
option of holders,  coupled  with  82,123  additional  conversions  in the first
quarter  of  2001,  will  result  in  a  decrease  in  distribution  expense  of
approximately $3.2 million annually.  In addition,  the Company has the right to
defer quarterly  distribution  payments on the Convertible  Preferred Securities
for up to 20  consecutive  quarters.  In the  fourth  quarter  of  2000,  at the
approval  of  the  Board  of  Directors,   the  Company  deferred  its  December
distribution  payment  and  expects to  continue  to defer such  payments  as it
continues its ongoing process of reducing leverage and increasing profitability.

     A loss on  disposal  of  assets  of  $22.8  million  in 2000  predominately
reflects the sale of a 20-percent equity interest in United  Kingdom-based Belgo
Group PLC for $8.5  million and the  commitment  to exit its  unprofitable  U.S.
joint venture investments with Belgo Group PLC and PizzaExpress PLC. The Company
also  recorded  charges to adjust  certain  assets held for sale,  including the
office  facility in Bedford,  Texas,  to  estimated  net  realizable  value.  In
addition, certain corporate assets which are not expected to have a future value
were written off. Gains on disposal of assets in 1999 and 1998 primarily reflect
amounts  recognized  on the  Applebee's  divestiture  of $7.8  million and $81.3
million,  respectively.  Applebee's divestiture gains in both 1999 and 1998 were
partially  offset by net losses  incurred on the  divestiture  of other  various
assets. The Applebee's divestiture was substantially  completed in 1998 with the
sale of 233 of 279 Applebee's locations.  Sale of the remaining 46 locations was
completed in 1999. Gross proceeds related to the divestiture were $514.0 million
including $5.6 million in notes outstanding at December 31, 2000,  against which
an allowance of $1.8 million has been established.

     Income from  investments  carried at equity  reflects the pro-rata share of
earnings from the 20-percent  equity  interest in Belgo Group PLC which was more
than offset by losses associated with three restaurants  opened in 1999 and 2000
under the joint venture agreements with Belgo Group PLC and PizzaExpress PLC.

     Other expenses relate  primarily to amortization of goodwill in addition to
other  miscellaneous   non-operating  and  typically  non-recurring  income  and
expenses.  These  expenses  increased in 2000 primarily due to the incurrence of
various tax penalties and the termination of an officer's life insurance policy.

Income Tax Expense

     For 2000,  the Company  recorded a tax  benefit  equal to 30.1% of earnings
before income taxes and cumulative effect of change in accounting principle. The
benefit was generated  primarily by losses associated with the asset revaluation
and other  special  charges of $38.2  million  and loss on disposal of assets of
$22.8 million. The tax benefit recognized in 2000 was significantly reduced by a
$6.8 million  valuation  allowance for deferred tax assets which was recorded as
of  December  31,  2000.  In 1999 and 1998,  income tax  expense as a percent of
earnings  before  income  taxes  was 30.9% and  36.7%,  respectively.  The lower
effective  tax rate in 1999 as  compared  to 1998 was due  primarily  to taxable
income  generated  by the gain on sale of  assets  in 1998  and a  corresponding
decrease in the impact of FICA tip credits.

                         Liquidity and Capital Resources

     The Company's  historical  growth and its historical  preference to own the
real estate on which its restaurants are situated typically have caused it to be
a net user of cash, even after a significant  amount of expansion  financing was
internally  generated  from  operations.  In  2000,  the  Company  committed  to
strategies to reduce its leverage over time. New restaurant development for 2000
and  plans  for the next  several  years  have been  dramatically  reduced  from
historical  levels; the leasing of new sites to reduce initial capital will take
preference  over  ownership;  and an  aggressive  program to  realize  cash from
various  operating  and  non-operating   assets  has  been  implemented.   These
initiatives to reduce  leverage in 2000 included a $28.4 million  sale-leaseback
transaction  which was completed in the fourth quarter with $20.0 million of the
proceeds used to permanently reduce debt under the revolving credit facility. In
addition,  the Board of Directors  approved the suspension of the quarterly $2.0
million dividend payment on its convertible  preferred  securities.  The Company


                                       17
<PAGE>
deferred its  December 1, 2000 payment and has the right to suspend  payment for
up to 20 consecutive quarters.

     Since substantially all sales in the Company's restaurants are for cash and
accounts  payable are generally due in 15 to 45 days, the Company  operates with
negative  working  capital.  Fluctuations in accounts  receivable,  inventories,
prepaid  expenses  and  other  current  assets,  accounts  payable  and  accrued
liabilities  typically  occur as a result  of new  restaurant  openings  and the
timing of settlement of liabilities.  Additional  increases in accounts  payable
and  accrued  liabilities  in 2000 were  attributable  primarily  to (i) accrued
expenses related to the fourth quarter decision to close 13 underperforming core
brand  restaurants,  (ii)  efforts  to reduce  leverage  through  improved  cash
management which has resulted in an increase in liabilities  (related  primarily
to sales and property taxes and capital  expenditures)  and (iii) increased gift
certificate  liabilities  generated  by  marketing  initiatives  during the 2000
holiday season.  Decreases in prepaid  expenses and other assets occurred during
2000 due primarily to the  reclassification of $11.0 million in notes receivable
from executive  officers to other noncurrent  assets.  The maturity of the notes
was extended by the Board of  Directors  to June 30, 2002 and the interest  rate
was  increased  to 11.5%.  Additional  increases in other assets were due to the
$6.8 million loss on the Hops sale-leaseback  transaction which was deferred and
is being  amortized over the initial 20-year term of the lease as an addition to
rent expense.

     Principal  financing sources in 2000 consisted of proceeds of $28.4 million
from  the  fourth  quarter  sale-leaseback  transaction,   cash  generated  from
operations  of $28.0  million,  and  proceeds  from the  disposal  of assets and
collection notes receivable of $14.1 million. The primary use of funds consisted
of capital  expenditures  of $53.8  million and repayment of $21.7 million under
revolving credit commitments.

     At December 31, 2000, the Company had one revolving  credit  facility which
was entered  into in 1999 with an initial  total credit  availability  of $125.0
million and  maturing in June 2002.  On April 3, 2000,  the Company  executed an
amendment  to the  agreement  which,  among  other  things,  reduced  the credit
availability  under the  facility by $10.0  million on each  October 1, 2000 and
December  31,  2000 with  additional  quarterly  commitment  reductions  of $7.5
million  beginning on April 4, 2001.  In  conjunction  with the  amendment,  the
Company  secured  the  facility  with  substantially  all of its  assets.  As of
December 31, 2000, the commitment  reduction  requirements through April 4, 2001
had been satisfied and revolving  credit  availability  totaled $96.8 million of
which $6.0 million was unused and available.

     On April 2, 2001,  the  Company  executed an amended  and  restated  credit
agreement  which,  among other things,  increases the  commitment  reductions to
$10.0  million on May 31, 2001,  September  4, 2001 and  December 31, 2001.  The
remaining  commitment  of $65.8 million  matures on March 29, 2002.  The Company
also agreed to limit capital  expenditures to $23.0 million in 2001 and to forgo
making any cash dividend payments on its common stock. In addition,  the amended
facility  contains certain  restructuring  fees,  including  approximately  $0.9
million which will accrue during the period from April 2, 2001 through September
4, 2001,  plus an additional  fee equal to two percent of the total  outstanding
obligation  under the facility at September 4, 2001.  Also on September 4, 2001,
the Company will be required to deliver to the lender, warrants to acquire Avado
common stock equal to five percent of the outstanding shares,  subject to a call
feature,  exercisable at the Company's option, to redeem the warrants at a fixed
price  equal to two  percent  of the  total  outstanding  obligation  under  the
facility at September 4, 2001. In addition, the Company has interest payments on
its senior and subordinated  notes,  which approximate $11.6 million in June and
December 2001.

     The Company is investigating  various  alternatives to refinance its credit
facility and  management  anticipates it will be able to  successfully  complete
such  refinancing  prior to September 4, 2001.  Should  efforts to refinance the
facility be unsuccessful, management believes that cash flow from operations and
liquidation of other assets should be sufficient to satisfy its revolving credit
facility  obligations of $30.0 million (including the $10.0 million December 31,
2001  payment),  interest  payments  on its  senior  and  subordinated  notes of
approximately  $23.1 million and capital  expenditures of $23.0 million in 2001.
While management believes that cash flow from operations,  supplemented by sales
of  closed  restaurant  properties  and  other  assets  held  for  sale  will be
sufficient  to meet its  obligations,  these  proposed  sales of assets  are not
presently  subject to binding  agreements.  There can be no  assurance  that the
Company  will be able to satisfy  its  revolving  credit,  interest  payment and
capital  expenditures in 2001, without  generating  proceeds from sales of these
assets.

         As amended, terms of the Company's notes and revolving credit agreement
include various provisions which, among other things, require the Company to (i)


                                       18
<PAGE>
maintain defined net worth and coverage  ratios,  (ii) maintain defined leverage
ratios, (iii) limit the incurrence of certain liens or encumbrances in excess of
defined amounts and (iv) limit certain  payments.  The amended credit  agreement
also  requires  that  a  defined  quarterly  earnings  before  interest,  taxes,
depreciation and  amortization  amount be achieved.  In addition,  the revolving
credit agreement and notes contain cross-default provisions. As amended on April
2, 2001, the Company was in compliance with the various provisions.

     Capital  expenditures  in 2000  provided  for the opening of ten Hops,  six
McCormick  &  Schmick's,  two Don  Pablo's  and one Canyon  Cafe  restaurant  in
addition to maintenance capital for existing  restaurants.  In 2001, the Company
anticipates  opening four new restaurants  including three McCormick & Schmick's
and one Hops  restaurant.  Capital  requirements  for the  construction of these
restaurants  are  expected to  approximate  $8 to $12 million  with  maintenance
capital for existing restaurants expected to be an additional $8 to $10 million.
The Company does not currently  have any capital  commitments  extending  beyond
2001 and will evaluate  potential new  restaurant  openings in 2002 based on its
capital availability.

                               Effect of Inflation

     Management  believes  that  inflation  has not  had a  material  effect  on
earnings  during the past several years.  Inflationary  increases in the cost of
labor,  food and other  operating  costs could  adversely  affect the  Company's
restaurant  operating margins. In the past,  however,  the Company generally has
been able to modify its operations to offset increases in its operating costs.

     Various  federal  and state laws  increasing  minimum  wage rates have been
enacted over the past several years.  Such legislation,  however,  has typically
frozen  the wages of tipped  employees  at $2.13 per hour if the  difference  is
earned in tip income.  Although the Company has experienced  slight increases in
hourly labor costs in recent years, the effect of increases in minimum wage have
been  significantly  diluted due to the fact that the majority of the  Company's
hourly  employees  are  tipped  and  the  Company's  non-tipped  employees  have
historically earned wages greater than federal and state minimums.  As such, the
Company's  increases  in  hourly  labor  costs  have not been  proportionate  to
increases in minimum wage rates.

                           Forward-Looking Information

     Certain   information   contained  in  this  annual  report,   particularly
information  regarding the future economic performance and finances,  restaurant
development plans, capital requirements and objectives of management, is forward
looking.  In some cases,  information  regarding  certain important factors that
could cause actual results to differ  materially  from any such  forward-looking
statement  appear  together  with such  statement.  In addition,  the  following
factors,  in addition to other  possible  factors not listed,  could  affect the
Company's actual results and cause such results to differ  materially from those
expressed in  forward-looking  statements.  These  factors  include  competition
within the casual dining restaurant industry,  which remains intense; changes in
economic  conditions such as inflation or a recession;  consumer  perceptions of
food safety;  weather conditions;  changes in consumer tastes; labor and benefit
costs;  legal claims;  the continued  ability of the Company to obtain  suitable
locations and financing for new restaurant development;  government monetary and
fiscal  policies;  laws and regulations;  and  governmental  initiatives such as
minimum wage rates and taxes.  Other  factors  that may cause actual  results to
differ from the  forward-looking  statements  contained in this release and that
may affect the  Company's  prospects in general are described in Exhibit 99.1 to
the  Company's  Form 10-Q for the fiscal  quarter  ended April 2, 2000,  and the
Company's other filings with the Securities and Exchange Commission.

                          New Accounting Pronouncements

     As of the  beginning  of the fourth  quarter of 2000,  the Company  adopted
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative Instruments and Hedging Activities", and its amendments SFAS No. 137,
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective  Date of SFAS No. 133" and SFAS No. 138,  "Accounting  for  Derivative
Instruments and Certain Hedging Activities",  (collectively  referred to as SFAS


                                       19
<PAGE>
133).   SFAS  133   requires   all  derivative  financial  instruments   to   be
recognized in the consolidated  financial statements at fair value regardless of
the purpose or intent for holding the  instrument.  The adoption of SFAS 133 was
recorded as a cumulative  effect of change in accounting  principle and resulted
in a  cumulative  effect  charge  of  $10.0  million  ($6.3  million  net of tax
benefit).

     AICPA  Statement  of  Position  98-5,   "Reporting  the  Cost  of  Start-Up
Activities"  was  adopted at the  beginning  of 1998.  This  statement  requires
entities to expense the costs of start-up activities as incurred. As a result of
the adoption of this change in  accounting  policy,  from  expensing  preopening
costs in the first full month of a restaurant's  operations to expensing them as
incurred,  a cumulative effect charge from the change in accounting principle of
$2.2 million ($1.5 million net of tax benefit) was recorded in the first quarter
of 1998.

     In September 2000, SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and  Extinguishment  of Liabilities",  was issued.  SFAS 140 is
effective   for  all   transfers   and   servicing  of   financial   assets  and
extinguishments  of liabilities after March 31, 2001, the Statement is effective
for recognition and  reclassification of collateral and disclosures  relating to
securitization  transactions  and  collateral  for  fiscal  years  ending  after
December  15,  2000.  Due to the nature of its  business,  the Company  does not
expect a material  change to its results of  operations  as a result of adopting
SFAS 140.



                                       20
<PAGE>
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

     The  Company is exposed to market risk from  changes in interest  rates and
changes in commodity prices. Exposure to interest rate risk relates primarily to
variable  U.S.-based rates and  foreign-based  rate obligations on the Company's
revolving credit agreement and a fixed to floating interest rate swap agreement.
Interest rate swap agreements have  historically been utilized to manage overall
borrowing  costs and  balance  fixed and  floating  interest  rate  obligations.
Currently  the  Company  has only one such swap  agreement  in place.  Under the
agreement, which has a $115.0 million notional amount and terminates on March 1,
2008, the Company pays an average of certain foreign LIBOR-based  variable rates
(8.5% at December 31, 2000) and receives a fixed 7% rate tied to the Convertible
Preferred Securities.  The agreement has served to reduce the Company's exposure
to U.S.  interest  rates and also  contains an interest  rate cap which  further
limits interest rate exposure.

     At the beginning of the fourth  quarter of 2000,  the Company  adopted SFAS
133.  Although the Company's swap agreement is an effective  diversification  of
interest  rate  exposure,  it does not qualify  for fair value hedge  accounting
under SFAS 133. As such,  the Company has  recorded  the swap  agreement at fair
value in the  December  31,  2000  consolidated  balance  sheet and will  record
fluctuations  in the fair value on a  mark-to-market  basis as an  adjustment to
interest  expense.  At December 31, 2000, the settlement or fair market value of
the agreement was $8.9 million.  If interest rates related to the swap agreement
increased  by 100 basis  points over the rates in effect at December  31,  2000,
interest  expense for fiscal 2001 would not be  materially  impacted  due to the
interest rate cap protection  which limits the rate paid by the Company to 8.5%.
However,  a decrease in rates could result in a significant fair value increase.
Such a decrease  followed by an increase  in rates could  result in  significant
volatility in the fair value of the contract. If a 100 basis point interest rate
increase  occurred  in  the  Company's  variable  U.S.-based  rate  obligations,
interest expense in fiscal 2001 would increase by $0.9 million.  This amount was
determined  by  considering  the impact of  hypothetical  interest  rates on the
Company's borrowing cost. In the event of a change of such magnitude, management
could take actions to further mitigate interest rate exposures.

     The Company purchases certain commodities such as beef, chicken,  flour and
cooking  oil.  Purchases  of these  commodities  are  generally  based on vendor
agreements which often contain contractual features that limit the price paid by
establishing  price floors or caps. As commodity price aberrations are generally
short-term  in nature  and have not  historically  had a  significant  impact on
operating  performance,  financial  instruments  are not used to hedge commodity
price risk.


                                       21
<PAGE>
Item 8. Financial Statements and Supplementary Data

<TABLE>
Avado Brands, Inc.
Consolidated Statements of Earnings

(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended                                                        2000           1999            1998
------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                   <C>            <C>
Restaurant sales:
    Canyon Cafe                                                      $      39,598          43,319         48,187
    Don Pablo's                                                            297,347         309,863        270,399
    Hops                                                                   186,500         144,488        106,329
    McCormick & Schmick's                                                  162,350         125,613        102,489
    Applebee's                                                                   -          21,176        335,288
------------------------------------------------------------------------------------------------------------------
          Total restaurant sales                                           685,795         644,459        862,692
------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
    Food and beverage                                                      198,527         182,896        241,689
    Payroll and benefits                                                   219,529         200,820        279,274
    Depreciation and amortization                                           24,865          20,519         17,014
    Other operating expenses                                               176,058         157,566        202,994
------------------------------------------------------------------------------------------------------------------
          Total restaurant operating expenses                              618,979         561,801        740,971
------------------------------------------------------------------------------------------------------------------
General and administrative expenses                                         38,222          38,011         46,150
Asset revaluation and other special charges                                 38,200           2,186          2,940
------------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                     (9,606)         42,461         72,631
------------------------------------------------------------------------------------------------------------------
Other income (expense):
    Interest expense, net                                                  (38,262)        (24,073)       (25,313)
    Distribution expense on preferred securities                            (7,195)         (8,050)        (8,205)
    Gain (loss) on disposal of assets                                      (22,828)          1,972         72,547
    Income (loss) from investments carried at equity                           (69)           (311)         1,025
    Other, including goodwill amortization                                  (7,119)         (4,079)        (5,641)
------------------------------------------------------------------------------------------------------------------
          Total other income (expense)                                     (75,473)        (34,541)        34,413
------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes and cumulative
    effect of change in accounting principle                               (85,079)          7,920        107,044
Income taxes                                                               (25,600)          2,450         39,300
------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of change
    in accounting principle                                                (59,479)          5,470         67,744
------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
    principle, net of tax benefit                                           (6,255)              -         (1,461)
------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                                  $     (65,734)          5,470         66,283
==================================================================================================================

Basic earnings (loss) per common share:
    Basic earnings (loss) before cumulative effect of
        change in accounting principle                               $       (2.31)           0.20           1.85
    Cumulative effect of change in accounting principle                      (0.24)              -          (0.04)
------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share                               $       (2.55)           0.20           1.81
==================================================================================================================

Diluted earnings (loss) per common share:
    Diluted earnings (loss) before cumulative effect of
        change in accounting principle                               $       (2.31)           0.20           1.65
    Cumulative effect of change in accounting principle                      (0.24)              -          (0.03)
------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share                             $       (2.55)           0.20           1.62
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                                                22
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Balance Sheets

(In thousands, except share data)
<CAPTION>
Fiscal Year End                                                                          2000             1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                  <C>
Assets
Current assets:
      Cash and cash equivalents                                                      $       402           11,267
      Accounts receivable                                                                  7,621            7,257
      Inventories                                                                          9,418            9,097
      Prepaid expenses and other                                                           3,535           17,399
      Assets held for sale                                                                13,855            1,205
--------------------------------------------------------------------------------------------------------------------
          Total current assets                                                            34,831           46,225

Premises and equipment, net                                                              379,938          424,968
Goodwill, net                                                                            132,012          135,176
Investments in and advances to unconsolidated affiliates                                       -           17,411
Deferred income tax benefit                                                               18,900                -
Other assets                                                                              44,000           32,816
--------------------------------------------------------------------------------------------------------------------
                                                                                     $   609,681          656,596
====================================================================================================================

Liabilities and Shareholders' Equity
Current liabilities:
      Accounts payable                                                               $    31,568           17,923
      Accrued liabilities                                                                 64,567           38,424
      Current installments of long-term debt                                              15,034               11
      Income taxes                                                                        30,164           28,159
--------------------------------------------------------------------------------------------------------------------
           Total current liabilities                                                     141,333           84,517

Long-term debt                                                                           291,507          328,076
Deferred income tax liability                                                                  -            8,943
Other long-term liabilities                                                               16,024            7,436
--------------------------------------------------------------------------------------------------------------------
           Total liabilities                                                             448,864          428,972
--------------------------------------------------------------------------------------------------------------------

Company-obligated mandatorily redeemable preferred securities
      of Avado Financing I, a subsidiary holding solely Avado
      Brands, Inc. 7% convertible subordinated debentures
      due March 1, 2027                                                                   72,865          115,000

Shareholders' equity:
      Preferred stock, $0.01 par value. Authorized 10,000,000 shares;
          none issued                                                                          -                -
      Common stock, $0.01 par value. Authorized - 75,000,000 shares;
          issued - 40,478,760 in 2000 and 1999;
          outstanding - 28,206,673 in 2000 and 25,321,047 in 1999                            405              405
      Additional paid-in capital                                                         147,809          144,872
      Retained earnings                                                                  100,571          166,305
      Accumulated other comprehensive income                                                   -             (278)
      Treasury stock at cost; 12,272,087 shares in 2000 and 15,157,713 in 1999          (160,833)        (198,680)
--------------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                                     87,952          112,624
--------------------------------------------------------------------------------------------------------------------
                                                                                     $   609,681          656,596
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.



                                                                23
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
<CAPTION>

                                                                                             Accumulated
                                                                        Additional              Other                     Total
                                                     Common Stock        Paid-in   Retained  Comprehensive   Treasury  Shareholders'
(In thousands, except per share data)             Shares       Amount    Capital   Earnings     Income        Stock      Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>    <C>         <C>           <C>        <C>         <C>
Balance at December 28, 1997                      40,479         $405   $145,269    $97,905          -       ($22,797)   $220,782
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
     Net earnings                                      -            -          -     66,283          -              -      66,283
     Foreign currency translation adjustment           -            -          -          -        $24              -          24
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income                             -            -          -     66,283         24              -      66,307
-----------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock                               -            -          -          -          -        (92,028)    (92,028)
Common stock issued to benefit plans                   -            -         36          -          -            370         406
Exercise of options                                    -            -        (65)         -          -            213         148
Settlement of equity forward contracts                 -            -    (81,809)         -          -              -     (81,809)
Cash dividends ($0.0475 per share)                     -            -          -     (1,777)         -              -      (1,777)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at January 3, 1999                        40,479          405     63,431    162,411         24       (114,242)    112,029
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
     Net earnings                                      -            -          -      5,470          -              -       5,470
     Foreign currency translation adjustment           -            -          -          -       (302)             -        (302)
-----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income                             -            -          -      5,470       (302)             -       5,168
-----------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock                               -            -          -          -          -        (85,538)    (85,538)
Common stock issued to benefit plans                   -            -       (368)         -          -          1,100         732
Settlement of equity forward contracts                 -            -     81,809          -          -              -      81,809
Cash dividends ($0.0575 per share)                     -            -          -     (1,576)         -              -      (1,576)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at January 2, 2000                        40,479          405    144,872    166,305       (278)      (198,680)    112,624
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
     Net earnings (loss)                               -            -          -    (65,734)         -              -     (65,734)
     Foreign currency translation adjustment           -            -          -          -        278              -         278
-----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income (loss)                      -            -          -    (65,734)       278              -     (65,456)
-----------------------------------------------------------------------------------------------------------------------------------
Conversion of convertible preferred securities         -            -      3,366          -          -         37,335      40,701
Common stock issued to benefit plans                   -            -       (429)         -          -            512          83
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                      40,479         $405   $147,809   $100,571          -      ($160,833)    $87,952
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                                                24
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Cash Flows

(In thousands)
<CAPTION>
Fiscal Year Ended                                                                    2000          1999          1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                <C>           <C>
Cash flows from operating activities:
      Net earnings (loss)                                                      $    (65,734)       5,470        66,283
      Adjustments to reconcile net earnings (loss) to net cash
           provided by operating activities:
               Depreciation and amortization                                         33,122       26,176        23,221
               Deferred income taxes                                                (25,710)         743        (6,031)
               Asset revaluation and other special charges                           38,200        2,186         2,940
               Loss (gain) on disposal of assets                                     22,828       (1,972)      (72,547)
               Cumulative effect of change in accounting principle, net of taxes      6,255            -         1,461
               Loss (gain) on interest rate swap                                     (1,150)           -             -
               Loss (income) from investments carried at equity                          69          311        (1,025)
               (Increase) decrease in assets:
                    Accounts receivable                                              (2,180)       1,863          (141)
                    Inventories                                                      (1,078)      (1,472)       (2,260)
                    Prepaid expenses and other                                          819           45         2,736
                Increase (decrease) in liabilities:
                     Accounts payable                                                16,062       (7,511)        3,655
                     Accrued liabilities                                              3,037      (11,720)       (7,665)
                     Income taxes                                                     3,622           68        28,091
                     Other long-term liabilities                                       (183)        (565)        2,309
---------------------------------------------------------------------------------------------------------------------------
                         Net cash provided by operating activities                   27,979       13,622        41,027
---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
      Capital expenditures                                                          (53,808)     (84,394)     (142,841)
      Proceeds from sale-leaseback                                                   28,371            -             -
      Proceeds from notes receivable and disposal of assets, net                     14,074       87,152       373,814
      Investments in and advances to unconsolidated affiliates                       (3,099)      (2,475)      (15,057)
      Additions to noncurrent assets                                                 (2,692)        (969)      (24,633)
---------------------------------------------------------------------------------------------------------------------------
                         Net cash provided by (used in) investing activities        (17,154)        (686)      191,283
---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
      Net repayment of revolving credit agreements                                  (21,667)     (27,920)     (114,726)
      Proceeds from issuance of long-term debt                                            -       95,467             -
      Principal payments on long-term debt                                              (23)         (32)       (8,500)
      Dividends declared and paid                                                         -       (1,576)       (1,777)
      Proceeds from issuance of common stock                                              -            -           148
      Purchase of treasury stock                                                          -      (85,538)      (92,028)
      Net collateral payments on equity forward contracts                                 -       10,714       (10,714)
---------------------------------------------------------------------------------------------------------------------------
                         Net cash provided by (used in) financing activities        (21,690)      (8,885)     (227,597)
---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                (10,865)       4,051         4,713
Cash and cash equivalents at the beginning of the period                             11,267        7,216         2,503
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period                             $        402       11,267         7,216
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                                                25
<PAGE>
Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

Avado Brands, Inc., including its wholly owned subsidiaries (the "Company"),  is
a multi-concept restaurant company owning and operating restaurants in 33 states
plus the District of Columbia.  At December 31, 2000,  the Company  operated 139
Don Pablo's Mexican Kitchen  restaurants  ("Don Pablo's"),  75 Hops Restaurant o
Bar o Brewery  restaurants  ("Hops"),  32 McCormick & Schmick's  seafood  dinner
houses ("McCormick & Schmick's") and 17 Canyon Cafe restaurants ("Canyon Cafe").
All of these brands (the "core"  brands) are owned on a  proprietary  basis.  At
year end,  the Company  also  operated  three  restaurants  under joint  venture
agreements with Belgo Group PLC ("Belgo") and PizzaExpress PLC ("PizzaExpress").
Subsequent to year end, the Company  closed 13 core brand  restaurant  locations
including  eight Don Pablo's,  three Canyon Cafes and two Hops  restaurants  and
exited from both of its joint venture investments.

Basis of  Presentation  - The  consolidated  financial  statements  include  the
accounts of Avado Brands, Inc. and its wholly owned subsidiaries. Investments in
20%- to  50%-owned  affiliates  and  partnerships,  over which the  Company  has
limited  or  shared  control,  are  accounted  for on  the  equity  method.  All
significant   intercompany   accounts  and   transactions   are   eliminated  in
consolidation.

Use of  Estimates -  Preparation  of financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions related to the reported amount of assets and liabilities and the
disclosure of contingent  assets and liabilities.  Actual results may ultimately
differ from estimates.

Fiscal Year - The  Company's  fiscal year is a 52- or 53-week year ending on the
Sunday  closest to  December  31.  Accordingly,  the  accompanying  consolidated
financial  statements  are as of and for the 52 weeks  ended  December  31, 2000
("2000"),  the 52 weeks ended  January 2, 2000  ("1999")  and the 53 weeks ended
January 3, 1999 ("1998"). All general references to years relate to fiscal years
unless otherwise noted.

Cash Equivalents - Cash equivalents  include all highly liquid investments which
have original maturities of three months or less.

Inventories - Inventories consist primarily of food,  beverages and supplies and
are  stated at the lower of cost  (using  the  first-in,  first-out  method)  or
market.

Assets  Held for Sale - Assets  held for sale are stated at the lower of cost or
estimated  net  realizable  value  and  include  primarily  office   facilities,
non-operating  restaurants  and  undeveloped  real estate.  In  accordance  with
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the Impairment of Long-Lived  Assets and  Long-Lived  Assets to be Disposed Of",
the Company does not recognize  depreciation or amortization  expense during the
period in which assets are being held for sale.

Premises and Equipment - Premises and equipment are stated at cost. Depreciation
of premises and equipment is calculated using the straight-line  method over the
estimated  useful lives of the related assets,  which  approximates 30 years for
buildings and seven years for equipment.  Leasehold improvements are depreciated
using the  straight-line  method over the  shorter of the lease term,  including
renewal periods, or the estimated useful life of the asset (Note 4).

Development  Costs -  Certain  direct  and  indirect  costs are  capitalized  in
conjunction  with  acquiring  land and  leaseholds and developing new restaurant
sites and amortized  over the life of the related  building.  Development  costs
were capitalized as follows: $2.9 million in 2000, $4.1 million in 1999 and $5.0
million in 1998.

Goodwill - Goodwill  represents  the excess of purchase price over fair value of
net assets  acquired and is amortized over the expected period to be benefitted,
typically  40 years,  using the  straight-line  method.  Recoverability  of this
intangible  asset is determined  by assessing  whether the  amortization  of the
goodwill balance over its remaining life can be recovered  through  undiscounted
future operating cash flows of the acquired  operations.  The amount of goodwill
impairment,  if any, is measured based on projected  discounted future operating


                                       26
<PAGE>
cash flows using a discount rate reflecting the Company's average cost of funds.
Accumulated  amortization of goodwill  amounted to $12.9 million at December 31,
2000 and $9.4 million at January 2, 2000.  Amortization expense was $3.6 million
in 2000, $3.5 million in 1999 and $3.4 million in 1998.

Deferred Loan and Lease Costs - Deferred loan costs include the costs associated
with  obtaining  revolving  credit  commitments  and the issuance of public debt
instruments and the Company's  Convertible Preferred Securities (Notes 6 and 8).
These costs are amortized on a straight-line  basis over the term of the related
security.  Deferred  lease costs are related to the Company's  master  equipment
lease and 2000  sale-leaseback  transaction  (Note 9).  Deferred lease costs are
amortized on a straight-line basis over the base lease terms (Note 5).

Preopening  Costs - Preopening  costs  consist  primarily of wages and salaries,
hourly employee  recruiting,  license fees,  meals,  lodging and travel plus the
cost of hiring and training the management  teams.  AICPA  Statement of Position
98-5, "Reporting the Cost of Start-Up  Activities",  which requires the costs of
start-up activities to be expensed as incurred,  was adopted at the beginning of
1998.  As a result of the  adoption of this change in  accounting  policy,  from
expensing preopening costs in the first full month of a restaurant's  operations
to expensing  them as incurred,  a cumulative  effect  charge from the change in
accounting  principle  of $2.2  million  ($1.5  million net of tax  benefit) was
recorded in the first quarter of 1998.

Advertising  -  Advertising  is  expensed  in the period  covered by the related
promotions.  Total advertising  expense included in other operating expenses was
$34.6  million  in 2000,  $28.7  million in 1999 and $32.6  million in 1998,  in
addition to amounts paid to the franchisor of Applebee's in 1999 and 1998.

Foreign Currency  Translation - Investments in foreign affiliates are translated
into U.S.  Dollars at the  period-end  exchange  rate,  while net  earnings  are
translated  at the  average  exchange  rate  during the  period.  The  resulting
translation  adjustments are recorded as a separate  component of  shareholders'
equity and comprehensive income.

Stock-Based  Compensation  - Stock-based  compensation  is determined  using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees",  and  related  Interpretations.
Accordingly,  compensation  cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's  stock at the date of the grant
over the amount an employee must pay to acquire the stock (Note 15).

Derivative Financial  Instruments - As of the beginning of the fourth quarter of
2000, the Company adopted Statement of Financial  Accounting  Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities", and its
amendments  SFAS No. 137,  "Accounting  for Derivative  Instruments  and Hedging
Activities - Deferral of the  Effective  Date of SFAS No. 133" and SFAS No. 138,
"Accounting  for  Derivative   Instruments  and  Certain  Hedging   Activities",
(collectively  referred  to as SFAS  133).  SFAS 133  requires  all  derivative
financial instruments to be recognized in the consolidated  financial statements
at fair value  regardless  of the purpose or intent for holding the  instrument.
The  adoption  of SFAS 133 was  recorded  as a  cumulative  effect  of change in
accounting principle and resulted in a charge of $10.0 million ($6.3 million net
of tax benefit).

Accounting for the changes in the fair value of derivative financial instruments
under  SFAS 133 is  dependent  on whether  the  instrument  qualifies  for hedge
accounting. The Company has one fixed-to-floating interest rate swap transaction
which was impacted by the adoption of SFAS 133. This swap transaction represents
a diversification  of the Company's interest rate exposures but does not qualify
for fair value hedge accounting  under SFAS 133. As such,  changes in fair value
of the  instrument  are  recognized  as a component of interest  expense as they
occur. In the fourth quarter, the Company recognized a $1.1 million reduction to
interest expense generated by changes in the instrument's fair value.

The  counterparty  to the Company's  interest rate contract is a major financial
institution  with  which the  Company  also has other  financial  relationships.
Exposure  to  credit  loss  exists  in  the  event  of   nonperformance  by  the
counterparty.  However,  the Company does not anticipate  nonperformance  by the
other party and no material loss would be expected from their nonperformance.


                                       27
<PAGE>
Income  Taxes - Income  taxes are  accounted  for under the asset and  liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date (Note 13).

Reclassifications - Certain accounts have been reclassified in the 1999 and 1998
financial statements to conform with the 2000 classifications.

Note 2 - Asset Revaluation and Other Special Charges

Asset revaluation and other special charges totaled $38.2 million in 2000. These
charges, which were predominately  noncash,  reflect the fourth quarter decision
to close 13 underperforming  core brand restaurants  including four Don Pablo's,
three Canyon Cafes and two Hops  restaurants  which were closed in early January
2001 and four  additional  Don Pablo's  which were closed on March 29, 2001.  In
2000,  these 13 locations  generated a combined  operating loss of $3.2 million.
The Company  recorded a $22.3 million  charge  related to these  closings  which
included adjusting the underlying fixed assets to estimated net realizable value
as well as accruals for lease  terminations and other related closing costs. The
Company also recorded an asset  revaluation  charge of $11.1  million  generated
primarily by the lack of significant new restaurant  development planned for the
next several years  including the write off of costs  associated with sites that
are no longer expected to be developed in addition to other related  development
costs  which  are not  anticipated  to be fully  recoverable.  In  addition,  in
connection  with the  consolidation  of the Don  Pablo's  and Canyon Cafe office
facilities  and the  conclusion of the strategic  alternatives  evaluation,  the
Company  recorded  charges  in the  second and third  quarters  of $3.2  million
related  to  employee  severance  and other  costs  associated  with the  office
consolidations  and $1.6 million associated with the completion of the strategic
alternatives evaluation.

In 1999 and 1998, the Company  recorded special charges of $2.2 million and $2.9
million,  respectively.  A portion of the 1999  charges  reflected  fees paid in
conjunction with the evaluation of strategic alternatives.  The remainder of the
1999 special  charge as well as the 1998  special  charge  related  primarily to
programs  initiated  at Don  Pablo's,  Canyon Cafe and the  Company's  corporate
headquarters  to reorganize  management  and reduce  overhead  costs,  including
payroll and employee  termination and severance costs. At December 31, 2000, all
amounts related to the 1999 and 1998 charges had been paid.

The major  components  of asset  revaluation  and other special  charges  follow
(amounts in thousands):

                                                       2000      1999      1998
--------------------------------------------------------------------------------
Write down of premises and equipment for
  restaurant closings                              $ 16,499         -         -
Accruals for lease termination and other
  closing costs                                       5,776         -         -
Asset revaluations                                   11,076         -         -
Office consolidation expenses                         1,919         -         -
Strategic alternatives evaluation expenses            1,645       776         -
Severance and other payroll related costs             1,285     1,410     2,160
Other                                                     -         -       780
--------------------------------------------------------------------------------
Total asset revaluation and other special charges  $ 38,200     2,186     2,940
--------------------------------------------------------------------------------

Note 3 - Equity and Joint Venture Investments

During 1998,  the Company  acquired a 20-percent  interest in Belgo Group PLC, a
public  restaurant  company based in the United Kingdom.  The Company invested a
total of $15.2 million to acquire and maintain its 20-percent  interest.  In the
fourth quarter of 2000, the Company sold its interest for total proceeds of $8.5
million. The transaction,  including the write off of undistributed earnings and
the  recognition  of foreign  currency  translation  losses,  resulted in a $9.1


                                       28
<PAGE>
million  loss which is  included  in "Gain  (loss) on disposal of assets" in the
accompanying consolidated statement of earnings.

Also in the  fourth  quarter of 2000,  the  Company  committed  to exit from its
unprofitable   U.S.   joint-venture   investments   with  Belgo  Group  PLC  and
PizzaExpress PLC. The venture with Belgo Group PLC operated one Belgo restaurant
in New York city  while the  venture  with  PizzaExpress  PLC  operated  two San
Marzano  restaurants  located in  Philadelphia  and Washington D.C. In the first
quarter of 2001, the Belgo location was closed and the Company sold its interest
in the two San Marzano restaurants to PizzaExpress for $0.3 million.  The fourth
quarter  commitment to exit these  businesses  resulted in a loss on disposal of
assets of $3.6 million.

Note 4 - Premises and Equipment

A summary of premises  and  equipment  at December  31, 2000 and January 2, 2000
follows (amounts in thousands):
                                                         2000            1999
--------------------------------------------------------------------------------
Land                                                $  48,547          71,930
Buildings                                              85,123         110,808
Buildings subject to ground leases                    145,275         139,300
Equipment                                             124,440         109,314
Leasehold improvements                                 56,942          45,764
Construction in progress                               12,135          19,395
--------------------------------------------------------------------------------
Total premises and equipment                          472,462         496,511
Less accumulated depreciation and amortization         92,524          71,543
--------------------------------------------------------------------------------
Premises and equipment, net                         $ 379,938         424,968
--------------------------------------------------------------------------------

Note 5 - Other Assets

A summary of other  assets at  December  31,  2000 and  January 2, 2000  follows
(amounts in thousands):

                                                         2000            1999
--------------------------------------------------------------------------------
Deferred loan and lease costs                       $  16,010          17,461
Officer notes receivable                               11,000               -
Deferred loss on sale-leaseback                         6,828               -
Liquor licenses                                         2,906           2,799
Long-term portion of notes receivable                   3,210           4,683
Other                                                   4,046           7,873
--------------------------------------------------------------------------------
Total other assets                                  $  44,000          32,816
--------------------------------------------------------------------------------

Note 6 - Long-Term Debt

Long-term  debt at  December  31,  2000 and  January  2, 2000  consisted  of the
following (amounts in thousands):

                                                         2000            1999
--------------------------------------------------------------------------------
Revolving credit agreement, secured
   (11.5% at December 31, 2000)                      $ 90,832         112,500
Senior Notes, unsecured                               116,500         116,500
Senior Subordinated Notes, unsecured                   98,777          98,633
Other                                                     432             454
--------------------------------------------------------------------------------
Total long-term debt                                  306,541         328,087
Less current installments                              15,034              11
--------------------------------------------------------------------------------
Total long-term debt, excluding current installments $291,507         328,076
--------------------------------------------------------------------------------


                                       29
<PAGE>
At December 31, 2000,  the Company had one revolving  credit  facility which was
entered into in 1999 with an initial total credit availability of $125.0 million
and maturing in June 2002. On April 3, 2000,  the Company  executed an amendment
to the  agreement  which,  among other things,  reduced the credit  availability
under the  facility by $10.0  million on each  October 1, 2000 and  December 31,
2000 with additional quarterly  commitment  reductions of $7.5 million beginning
on April 4, 2001. In  conjunction  with the amendment,  the Company  secured the
facility  with  substantially  all of its assets.  As of December 31, 2000,  the
commitment  reduction  requirements through April 4, 2001 had been satisfied and
revolving  credit  availability  totaled $96.8 million of which $6.0 million was
unused and available.

In 1999, the Company issued $100.0 million of 11.75% Senior  Subordinated  Notes
priced to yield  12.0% and due in June 2009.  In 1996,  $125.0  million of 9.75%
Senior Notes were issued under a $200.0 million shelf  registration  and are due
in June 2006.  In 1998,  the Company  repurchased  $8.5  million of these notes.
Interest on both note issues are payable semi-annually in June and December.

At December 31,  2000,  the  aggregate  estimated  fair value,  based on trading
prices,  of the unsecured Senior Notes and Senior  Subordinated  Notes was $47.3
million  compared to the carrying value of $215.3 million.  The Company believes
the fair value of its current assets and  liabilities  and its revolving  credit
facility,  approximates  book value since the current assets and liabilities are
short-term  in  nature  and  the  revolving   credit   facility  is  secured  by
substantially all assets of the Company.

The aggregate  annual  maturities of long-term debt for the years  subsequent to
December 31, 2000 are as follows:  2001 - $15.0  million,  2002 - $75.8 million,
2006 - $116.5 million, 2009 - $98.8 million and $0.4 million thereafter.

Note 7 - Liquidity

On April 2, 2001, the Company  executed an amended and restated credit agreement
which, among other things,  increases the commitment reductions to $10.0 million
on May 31,  2001,  September  4,  2001 and  December  31,  2001.  The  remaining
commitment of $65.8 million  matures on March 29, 2002.  The Company also agreed
to limit capital  expenditures  to $23.0 million in 2001 and to forgo making any
cash dividend  payments on its common stock. In addition,  the amended  facility
contains certain restructuring fees, including  approximately $0.9 million which
will accrue during the period from April 2, 2001 through September 4, 2001, plus
an additional fee equal to two percent of the total outstanding obligation under
the facility at September 4, 2001.  Also on September 4, 2001,  the Company will
be required to deliver to the lender,  warrants to acquire  Avado  common  stock
equal to five  percent of the  outstanding  shares,  subject to a call  feature,
exercisable  at the  Company's  option,  to redeem the warrants at a fixed price
equal to two percent of the total  outstanding  obligation under the facility at
September 4, 2001. In addition,  the Company has interest payments on its senior
and subordinated  notes,  which  approximate  $11.6 million in June and December
2001.

     The Company is investigating  various  alternatives to refinance its credit
facility and  management  anticipates it will be able to  successfully  complete
such  refinancing  prior to September 4, 2001.  Should  efforts to refinance the
facility be unsuccessful, management believes that cash flow from operations and
liquidation of other assets should be sufficient to satisfy its revolving credit
facility  obligations of $30.0 million (including the $10.0 million December 31,
2001  payment),  interest  payments  on its  senior  and  subordinated  notes of
approximately  $23.2 million and capital  expenditures of $23.0 million in 2001.
While management believes that cash flow from operations,  supplemented by sales
of  closed  restaurant  properties  and  other  assets  held  for  sale  will be
sufficient  to meet its  obligations,  these  proposed  sales of assets  are not
presently  subject to binding  agreements.  There can be no  assurance  that the
Company  will be able to satisfy  its  revolving  credit,  interest  payment and
capital  expenditures in 2001, without  generating  proceeds from sales of these
assets.

As amended,  terms of the Company's notes and revolving credit agreement include
various  provisions  which,  among  other  things,  require  the  Company to (i)
maintain defined net worth and coverage  ratios,  (ii) maintain defined leverage
ratios, (iii) limit the incurrence of certain liens or encumbrances in excess of
defined amounts and (iv) limit certain  payments.  The amended credit  agreement
also  requires  that  a  defined  quarterly  earnings  before  interest,  taxes,
depreciation and  amortization  amount be achieved.  In addition,  the revolving
credit agreement and notes contain cross-default provisions. As amended on April
2, 2001, the Company was in compliance with the various provisions.


                                       30
<PAGE>
Note 8 - Convertible Preferred Securities

In 1997,  Avado  Financing I (formerly  Apple South  Financing I) (the  "Trust")
issued 2,300,000, $3.50 term convertible securities,  Series A (the "Convertible
Preferred Securities"), having a liquidation preference of $50 per security. The
Trust, a statutory business trust, is a wholly owned, consolidated subsidiary of
the Company with its sole asset being $115.0 million aggregate  principal amount
of 7%  convertible  subordinated  debentures  due March 1, 2027 of Avado Brands,
Inc. (the "Convertible  Debentures").  Proceeds,  after deducting  underwriters'
fees and other  offering  expenses of  approximately  $3.7 million,  were $111.3
million.

The Convertible  Preferred  Securities are convertible  until 2027 at an initial
rate of 3.3801 shares of Avado Brands common stock for each security (equivalent
to a conversion  price of $14.793 per share).  A guarantee  has been executed by
Avado Brands with regard to the Convertible Preferred Securities. The guarantee,
when taken together with the obligations under the Convertible  Debentures,  the
indenture  pursuant to which the  Convertible  Debentures  were issued,  and the
declaration  of trust of Avado  Financing I,  provides a full and  unconditional
guarantee of amounts due under the Convertible Preferred Securities.

Distribution  expense related to the Convertible  Preferred Securities decreased
in 2000 as a result of the fourth quarter conversion, at the holders' option, of
842,692 of the  securities  into  2,848,383  shares of common  stock  which were
issued from treasury.  An additional  82,123 of the securities were converted in
the first  quarter  of 2001.  The  Company,  consistent  with its right to defer
quarterly  distribution  payments on the Convertible Preferred Securities for up
to 20  consecutive  quarters,  deferred  its December  distribution  payment and
expects  to  continue  to defer such  payments  during  its  ongoing  process of
reducing debt and increasing profitability.

Note 9 - Leases

Various  leases  are  utilized  for  land,   buildings,   equipment  and  office
facilities.  Land and building lease terms  typically range from 10 to 20 years,
with  renewal  options  ranging  from five to 20 years.  Equipment  lease  terms
generally range from four to eight years. In the normal course of business, some
leases are expected to be renewed or replaced by leases on other properties.

In October 2000, the Company completed a sale-leaseback transaction involving 20
Hops restaurant  properties.  The transaction  included the sale of the land and
buildings for total consideration of $28.4 million.  The lease covers an initial
term of 20 years with options to extend the lease for four periods of five years
each.  Rent  expense  during  the  first  year  of  the  initial  term  will  be
approximately  $3.4 million and will escalate by 1.2% each year thereafter.  The
transaction,  which has been accounted for as an operating lease,  resulted in a
$6.8 million loss which is being  amortized over the initial 20 year term of the
lease as an addition to rent  expense.  The  Company  used $20.0  million of the
proceeds from the  sale-leaseback to permanently reduce the obligation under its
revolving credit facility.

The Company also has a $30.0  million  master  equipment  lease  agreement.  The
agreement  provides  for the  rental of  restaurant  equipment  for a  five-year
period.  This  agreement  has  been  accounted  for as an  operating  lease  for
financial reporting purposes.

Future minimum lease payments under  noncancelable  operating leases,  including
the sale-leaseback  transaction, at December 31, 2000 are as follows (amounts in
thousands):

        2001                                        $  34,266
        2002                                           34,680
        2003                                           31,781
        2004                                           27,673
        2005                                           26,117
        Later years                                   173,133
        -------------------------------------------------------
        Total minimum payments                      $ 327,650
        -------------------------------------------------------


                                       31
<PAGE>
Future minimum lease  payments do not include  amounts  payable for  maintenance
costs, real estate taxes,  insurance,  etc., or contingent rentals payable based
on a  percentage  of  sales in  excess  of  stipulated  amounts  for  restaurant
facilities.  Total  rental  expense  related  to  cancelable  and  noncancelable
operating  leases was $32.6  million in 2000,  $27.9  million in 1999 and $ 27.5
million in 1998.  Rental expense included  contingent  rentals of $3.1million in
2000, $2.1 million in 1999 and $2.3 million in 1998.

Note 10 - Accrued Liabilities

A summary  of accrued  liabilities  at  December  31,  2000 and  January 2, 2000
follows (amounts in thousands):

                                                         2000            1999
--------------------------------------------------------------------------------
Payroll and related benefits                         $ 14,490          13,417
Taxes other than payroll and income                    15,817           6,224
Restaurant closings and divestitures                    7,257             840
Insurance                                               5,813           5,210
Gift certificates                                       5,584           4,794
Interest                                                4,708           2,764
Other                                                  10,898           5,175
--------------------------------------------------------------------------------
Total accrued liabilities                            $ 64,567          38,424
--------------------------------------------------------------------------------

Note 11 - Earnings Per Share Information

The following  table presents a  reconciliation  of weighted  average shares and
earnings per share amounts (amounts in thousands, except per share data):
<TABLE>
<CAPTION>
                                                                                2000           1999            1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>             <C>
Average number of common shares used in basic calculation                     25,729         27,576          36,612
Additional shares issuable pursuant to employee stock
   option plans at period-end market price                                         -              -               9
Shares issuable on assumed conversion of Convertible
    Preferred Securities                                                           -*             -*          7,774
--------------------------------------------------------------------------------------------------------------------
Average number of common shares used in diluted calculation                   25,729         27,576          44,395
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of change in
   accounting principle                                                    $ (59,479)         5,470          67,744
Cumulative effect of change in accounting principle, net of tax               (6,255)             -          (1,461)
--------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                                          (65,734)         5,470          66,283
Distribution savings on assumed conversion of Convertible
   Preferred Securities, net of income taxes                                       -*             -*          5,415
--------------------------------------------------------------------------------------------------------------------
Net earnings (loss) for computation of diluted earnings
   per common share                                                        $ (65,734)         5,470          71,698
--------------------------------------------------------------------------------------------------------------------

Basic earnings (loss) before cumulative effect of change in
   accounting principle                                                    $   (2.31)          0.20            1.85
Cumulative effect of change in accounting principle                            (0.24)             -           (0.04)
--------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share                                     $   (2.55)          0.20            1.81
--------------------------------------------------------------------------------------------------------------------

Diluted earnings (loss) before cumulative effect of change in
   accounting principle                                                    $   (2.31)          0.20            1.65
Cumulative effect of change in accounting principle                            (0.24)             -           (0.03)
--------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share                                   $   (2.55)          0.20            1.62
--------------------------------------------------------------------------------------------------------------------
</TABLE>
     * Inclusion of the shares related to the Convertible  Preferred  Securities
results in an increase to earnings (loss) per share ("EPS") in 2000 and 1999. As
those shares are antidilutive, they are excluded from the computation of diluted
EPS.


                                       32
<PAGE>
Note 12 - Supplemental Cash Flow Information

The following supplements the consolidated  statements of cash flows (amounts in
thousands):

                                                    2000        1999       1998
--------------------------------------------------------------------------------
Interest paid (net of amounts capitalized)     $  35,849      23,322     25,739
Distributions on preferred securities          $   6,038       8,050      8,050
Income taxes paid (refunded)                   $  (3,512)      1,639     14,487
--------------------------------------------------------------------------------

During 1999, the Company sold 46 Applebee's  restaurants.  The 1999 consolidated
balance sheet reflects  changes in asset and liability  accounts  related to the
divestiture of these restaurants as follows: decrease in assets held for sale of
$68.6  million,  decrease  in  assets  not  classified  as held for sale of $1.1
million and increase in accrued liabilities of $1.0 million.

Note 13 - Income Taxes

The  components of the  provision for income taxes for the years ended  December
31,  2000,  January  2, 2000 and  January  3, 1999 are as  follows  (amounts  in
thousands):

                                                 Current    Deferred      Total
--------------------------------------------------------------------------------
2000:
Federal                                        $  (3,806)    (19,238)   (23,044)
State                                                166      (2,722)    (2,556)
--------------------------------------------------------------------------------
Total                                          $  (3,640)    (21,960)   (25,600)
--------------------------------------------------------------------------------
1999:
Federal                                        $   1,346         596      1,942
State                                                361         147        508
--------------------------------------------------------------------------------
Total                                          $   1,707         743      2,450
--------------------------------------------------------------------------------
1998:
Federal                                        $  36,035      (3,861)    32,174
State                                              9,296      (2,170)     7,126
--------------------------------------------------------------------------------
Total                                          $  45,331      (6,031)    39,300
--------------------------------------------------------------------------------

A reconciliation  of the Federal  statutory income tax expense (benefit) rate to
the effective  income tax rate applied to earnings (loss) before income taxes in
the  accompanying  consolidated  statements  of  earnings  for the  years  ended
December 31, 2000, January 2, 2000 and January 3, 1999 follows:

                                                    2000        1999       1998
--------------------------------------------------------------------------------
Tax (benefit) at federal statutory rate            (35.0)%      35.0%      35.0%
Increase (decrease) in taxes due to:
  State income tax, net of federal benefit          (2.6)        2.8        4.1
  FICA tip and targeted jobs tax credits            (2.8)      (25.7)      (3.4)
Valuation allowance for deferred tax assets          8.0           -          -
Nondeductible goodwill                               1.2        13.5        1.0
Other, net                                           1.1         5.3          -
--------------------------------------------------------------------------------
Effective tax (benefit) rate                       (30.1)%      30.9%      36.7%
--------------------------------------------------------------------------------


                                       33
<PAGE>
The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2000 and
January 2, 2000 are presented below (amounts in thousands):

                                                                2000       1999
--------------------------------------------------------------------------------
FICA tip credits not yet taken for federal tax purposes     $ 24,554     13,492
Asset impairment charges recorded for financial statement
  purposes but not yet taken for tax purposes                 18,760      5,919
Net operating loss carryforwards not yet taken for tax
  purposes                                                     8,628          -
Other                                                          7,912      6,412
Valuation allowance for deferred tax assets                   (6,821)         -
--------------------------------------------------------------------------------
Total deferred tax assets                                     53,033     25,823
--------------------------------------------------------------------------------
Depreciation and amortization taken for tax purposes in
  excess of amounts taken for financial reporting purposes   (29,790)   (30,474)
Other                                                         (4,343)    (4,292)
--------------------------------------------------------------------------------
Deferred tax asset (liability)                              $ 18,900     (8,943)
--------------------------------------------------------------------------------

A $6.8  million  valuation  allowance  for  deferred  tax assets  was  initially
recorded for the year ended  December 31, 2000,  whereas none was recorded as of
January  2, 2000.  In  assessing  the  realizability  of  deferred  tax  assets,
management considers whether it is more likely than not that some portion or all
of the  deferred tax assets will not be realized.  The ultimate  realization  of
deferred tax assets is dependent  upon the  generation of future  taxable income
during the  periods in which  those  temporary  differences  become  deductible.
Management  considers  the  scheduled  reversal  of  deferred  tax  liabilities,
projected  future  taxable  income,  and tax planning  strategies in making this
assessment. Based upon these factors, management believes it is more likely than
not the Company  will  realize the benefits of the  deductible  differences  for
which no valuation allowance is provided.

The Company has $18.7 million of net operating  loss  carryforwards  for federal
income tax  purposes  as of  December  31,  2000 that will  expire in 2020.  The
Company  has $24.6  million of FICA tip tax  credit  carryforwards  for  federal
income tax  purposes as of December  31, 2000 that will expire  between 2010 and
2020.

Note 14 - Interest Expense

Following is a summary of interest cost  incurred and interest cost  capitalized
as a component of the cost of construction in progress (amounts in thousands):

                                                    2000        1999       1998
--------------------------------------------------------------------------------
Interest cost capitalized                       $    924       1,374      1,426
Interest cost expensed                            38,262      24,073     25,313
--------------------------------------------------------------------------------
Total                                           $ 39,186      25,447     26,739
--------------------------------------------------------------------------------

Note 15 - Stock Option Plans

The 1988 stock option plan (the "Stock Option Plan") and the 1993 and 1995 Stock
Incentive  Plans (the  "Stock  Incentive  Plans")  provide  for the  granting of
nonqualified and incentive  options for up to 1,974,375  shares,  450,000 shares
and  3,600,000  shares,  respectively,  of common  stock of the  Company  to key
officers,  directors and employees.  Generally,  options awarded under the Stock
Option Plan and Stock  Incentive  Plans are  granted at prices  which equal fair
market value on the date of the grant,  are exercisable  over three to 10 years,
and expire 10 years subsequent to grant.

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees,"  and related  Interpretations  in accounting for its
stock option plans. Accordingly, no compensation expense has been recognized for
its stock-based  compensation  plans.  Had  compensation  cost for the Company's
stock  option  plans  been  determined  based  upon the fair  value  methodology
prescribed under Statement of Financial  Accounting  Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," the Company's net earnings (loss) and
diluted  earnings  (loss) per share would have been  increased by  approximately
$0.4 million, or $0.01 per share in 2000 and decreased by $2.3 million, or $0.08
per share in 1999 and $0.6 million,  or $0.01 per share in 1998.  The effects of


                                       34
<PAGE>
either  recognizing  or disclosing  compensation  cost under SFAS 123 may not be
representative  of the effects on reported net earnings  for future  years.  The
fair value of the options  granted during 2000 is estimated as $1.37 on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions:  dividend yield of zero, volatility of 70%, risk-free interest rate
of 5.1%,  and an expected  life of 6.5 years.  Further  information  relating to
total options is as follows:

                                                                        Options
                                                         Average    Exercisable
                                              Shares       Price    at Year End
--------------------------------------------------------------------------------
Outstanding at December 28, 1997           2,998,130     $ 17.04        273,339
Granted in 1998                              183,425       13.15
Exercised in 1998                            (15,885)       9.42
Canceled in 1998                          (1,149,880)      17.10
--------------------------------------------------------------------------------
Outstanding at January 3, 1999             2,015,790       16.60        191,075
--------------------------------------------------------------------------------
Granted in 1999                            1,486,105        9.16
Exercised in 1999                                  -           -
Canceled in 1999                            (418,721)      15.65
--------------------------------------------------------------------------------
Outstanding at January 2, 2000             3,083,174       13.15        194,371
--------------------------------------------------------------------------------
Granted in 2000                            1,511,121        2.00
Exercised in 2000                                  -           -
Canceled in 2000                          (1,559,811)      11.78
--------------------------------------------------------------------------------
Outstanding at December 31, 2000           3,034,484     $  7.95        390,994
--------------------------------------------------------------------------------

The following table summarizes  information concerning currently outstanding and
exercisable options:

                           Options Outstanding               Options Exercisable
                 -----------------------------------------   -------------------
                                               Average                   Average
    Exercise                     Average      Exercise                  Exercise
  Price Range      Shares          Life         Price        Shares       Price
--------------------------------------------------------------------------------
$ 1.01 -  $5.00     1,515,697      9.32        $ 2.00              -     $     -
$ 5.01 - $10.00       528,295      8.02          8.91        169,434        8.94
$10.01 - $15.00       499,035      6.30         13.37         50,195       13.41
$15.01 - $20.00       347,620      5.25         18.90        125,607       19.74
$20.01 - $25.00       130,187      4.96         21.36         43,028       21.13
$25.01 - $30.00        13,650      5.41         25.68          2,730       25.68
--------------------------------------------------------------------------------
Total               3,034,484      7.93        $ 7.95        390,994     $ 14.44
--------------------------------------------------------------------------------

Note 16 - Employee Benefit Plans

The Avado Brands, Inc. Profit Sharing Plan and Trust,  established in accordance
with Section  401(k) of the Internal  Revenue Code (the "401(k)  Plan"),  allows
eligible  participating  employees  to  defer  receipt  of a  portion  of  their
compensation  and  contribute  such  amount  to one or  more  investment  funds.
Employee  contributions  are  matched by the  Company  dollar for dollar for the
first 2% of the employee's  income deferred.  Matching funds vest at the rate of
20% each year, beginning after three years of service.  Company contributions to
the 401(k) Plan were $0.5 million in 2000, $0.5 million in 1999 and $0.4 million
in 1998.

The Supplemental  Deferred  Compensation Plan ("Supplemental  Plan"),  effective
January 1, 1999, is a nonqualified plan which allows eligible employees to defer
receipt of a portion of their compensation and contribute such amounts to one or
more investment funds or to invest their contributions in shares of Avado Brands
common stock. The maximum  aggregate amount deferred under the Supplemental Plan
and the  401(k)  Plan  may not  exceed  15% of  compensation.  Company  matching
contributions  to the Supplemental  Plan may not exceed 2% of compensation.  The
Company, in its discretion,  may make matching contributions to the Supplemental
Plan in the form of Company stock.  Company matching  contributions were $47,000
in 2000 and $0 in 1999.


                                       35
<PAGE>
A  noncontributory  Employee  Stock  Ownership  Plan (the  "ESOP  Plan")  covers
substantially all full-time employees.  In accordance with the terms of the ESOP
Plan, the Company may make  contributions  in amounts as determined by the Board
of Directors. Participants become 20% vested in their accounts after three years
of service,  escalating  20% each year  thereafter  until they are fully vested.
Contribution  expense  related to the ESOP Plan was $0 in 2000 and 1999 and $0.5
million in 1998.

Effective  January 1, 2001, the Company changed the vesting  schedule for all of
its employee benefit plans.  Beginning in 2001,  participants  become 20% vested
after one year of service escalating 20% each year thereafter.  In addition, the
maximum  Company   matching   contribution   related  to  the  401(k)  Plan  and
Supplemental  Plan  was  increased  from  2% to 3%.  Under  the  new  structure,
participants  are matched  dollar for dollar for the first 2% of the  employee's
income deferred plus an additional  $0.25 on the dollar up to 6% of compensation
for a potential total match of 3%.

Note 17 - Shareholders' Equity

The Board of Directors,  from time to time and  depending on market  conditions,
authorizes  the Company to purchase  shares of its common  stock.  In connection
with these programs, during 1999 the Company purchased 6.3 million shares of its
common  stock for $85.5  million and in 1998 the Company  purchased  7.3 million
shares for $92.0 million. The Company made no share repurchases in 2000.

Note 18 - Commitments and Contingencies

Under the Company's  insurance  programs,  coverage is obtained for  significant
exposures as well as those risks  required to be insured by law or contract.  It
is the Company's  preference to retain a significant portion of certain expected
losses related  primarily to workers'  compensation,  physical loss to property,
and comprehensive general liability.  Provisions for losses expected under these
programs are recorded  based on estimates of the aggregate  liability for claims
incurred.  The Company is contingently  liable for letters of credit aggregating
approximately $10.9 million related primarily to its insurance programs.

In connection with Applebee's divestiture transactions completed during 1999 and
1998, the Company remains  contingently liable for lease obligations relating to
86 restaurants.  Assuming that each respective  purchaser became  insolvent,  an
event management believes to be highly unlikely, the Company could be liable for
lease payments extending through 2035 with minimum lease payments totaling $40.2
million.  Management believes that the ultimate  disposition of these contingent
liabilities   will  not  have  a  material   adverse  effect  on  the  Company's
consolidated financial position or results of operations.

In 1997,  two  lawsuits  were filed by persons  seeking to  represent a class of
shareholders of the Company who purchased  shares of the Company's  common stock
between May 26, 1995 and September 24, 1996.  Each  plaintiff  named the Company
and certain of its officers and directors as defendants.  The complaints alleged
acts  of  fraudulent  misrepresentation  by the  defendants  which  induced  the
plaintiffs to purchase the Company's  common stock and alleged  illegal  insider
trading by certain of the defendants, each of which allegedly resulted in losses
to the  plaintiffs  and  similarly  situated  shareholders  of the Company.  The
complaints  each sought  damages and other relief.  In 1998,  one of these suits
(Artel Foam  Corporation  Pension  Trust,  et al. v. Apple South,  Inc., et al.,
Civil Action No. CV-97-6189) was dismissed.  An amended  complaint,  styled John
Bryant, et al. vs. Apple South, Inc., et al. consolidating  previous actions was
filed in January 1998. During 1999, the Company received a favorable ruling from
the 11th Circuit Court of Appeals relating to the remaining suit. As a result of
the ruling,  the District Court again considered the motion to dismiss the case,
and the  defendants  renewed  their motion to dismiss in December  1999. In June
2000,  the District  Court  dismissed  with  prejudice the remaining  suit.  The
plaintiffs  have  appealed  the court's  final  decision.  Although the ultimate
outcome of the suit cannot be determined at this time, the Company believes that
the  allegations  therein are without  merit and intends to continue  vigorously
defending itself.

The Company is involved in various other claims and legal actions arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position or results of operations.


                                       36
<PAGE>
Note 19 - Related Party Transactions

At December 31, 2000 and January 2, 2000, the Company held notes receivable from
Tom E. DuPree, Jr., the Chairman of the Board and Chief Executive Officer of the
Company,  totaling $10,851,500.  In 2000, the maturity of the notes was extended
by the Board of Directors to June 30, 2002 and the interest  rate was  increased
from 7.0% to 11.5% with interest payable at maturity. In addition,  $3.0 million
of these notes are secured by real estate owned by Mr. DuPree.  The Company also
holds  notes  receivable  from  Erich J.  Booth,  Chief  Financial  Officer  and
Treasurer,  totaling $107,000 and from Margaret E. Waldrep, Chief Administrative
Officer,  totaling  $41,500.  These notes are also due on June 30, 2002 and bear
interest at 11.5%.  At December  31, 2000,  the officer  notes  receivable  were
included in "Other assets" in the  accompanying  consolidated  balance sheet. At
January 2, 2000, the notes were included in "Prepaid expenses and other".

Note 20 - Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
                                              First        Second        Third       Fourth        Total
                                            Quarter       Quarter      Quarter      Quarter         Year
---------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>          <C>          <C>
2000:
Restaurant sales                           $167,020       174,479      174,079      170,217      685,795
Gross profit*                              $ 66,636        70,055       66,813       64,235      267,739
Earnings (loss) before cumulative
  effect of change in accounting principle $   (537)       (1,665)      (8,266)     (49,011)     (59,479)
Net earnings (loss)                        $   (537)       (1,665)      (8,266)     (55,266)     (65,734)
Basic earnings (loss) per share before
  cumulative effect of change in
  accounting principle                     $  (0.02)        (0.07)       (0.33)       (1.82)       (2.31)
Basic earnings (loss) per share            $  (0.02)        (0.07)       (0.33)       (2.05)       (2.55)
Diluted earnings (loss) per share
  before cumulative effect of change in
  accounting principle**                   $  (0.02)        (0.07)       (0.33)       (1.82)       (2.31)
Diluted earnings (loss) per share**        $  (0.02)        (0.07)       (0.33)       (2.05)       (2.55)

1999:
Restaurant sales                           $164,075       164,721      157,251      158,412      644,459
Gross profit*                              $ 67,244        67,039       65,541       60,919      260,743
Net earnings (loss)                        $  5,952         5,968        2,431       (8,881)       5,470
Basic earnings (loss) per share            $   0.19          0.21         0.10        (0.35)        0.20
Diluted earnings (loss) per share**        $   0.19          0.20         0.10        (0.35)        0.20
---------------------------------------------------------------------------------------------------------
</TABLE>
     * The Company defines gross profit as total  restaurant sales less the cost
of food and  beverage  and  payroll and  benefits.  These  costs  represent  the
expenses associated directly with providing the Company's products and services.

     ** Diluted  earnings  (loss) per share ("EPS") for all quarters in 2000 and
for the  fourth  quarter  of  1999  increases  when  the  Convertible  Preferred
Securities are included in the  calculation.  As those shares are  antidilutive,
they are excluded from the computation of diluted EPS.

Note 21 - Guarantor Subsidiaries

The  Company's  senior  notes  and  revolving  credit  facilities  are fully and
unconditionally  guaranteed on a joint and several basis by substantially all of
its wholly owned subsidiaries.  The Company's  indebtedness is not guaranteed by
its non-wholly owned subsidiaries.  These non-guarantor  subsidiaries  primarily
include  certain  partnerships of which the Company is typically a 90% owner. At
December 31, 2000 and January 2, 2000, these  partnerships in the  non-guarantor
subsidiaries  operated 61 and 51,  respectively,  of the Company's  restaurants.
Accordingly,  condensed  consolidated balance sheets as of December 31, 2000 and


                                       37
<PAGE>
January 2, 2000,  and  condensed  consolidated  statements  of earnings and cash
flows for the fiscal years ended December 31, 2000,  January 2, 2000 and January
3, 1999 are provided for such guarantor and non-guarantor subsidiaries. Separate
financial  statements  and  other  disclosures   concerning  the  guarantor  and
non-guarantor  subsidiaries are not presented because  management has determined
that they are not material to investors.  There are no contractual  restrictions
on the  ability  of the  guarantor  subsidiaries  to make  distributions  to the
Company.
<TABLE>
Condensed Consolidated Statement of Earnings
Fiscal Year Ended 2000
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations     Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                   <C>        <C>
Restaurant sales                                     $   539,852           145,943               -          685,795
Restaurant operating expenses                            485,539           133,440               -          618,979
General and administrative expenses                       31,651             6,571                           38,222
Asset revaluation and other special charges               30,748             7,452               -           38,200
--------------------------------------------------------------------------------------------------------------------
Operating income                                          (8,086)           (1,520)              -           (9,606)
--------------------------------------------------------------------------------------------------------------------
Other income (expense)                                   (73,684)           (1,789)              -          (75,473)
Earnings (loss) before income taxes and cumulative
  effect of change in accounting principle               (81,770)           (3,309)              -          (85,079)
Income taxes                                             (23,550)           (2,050)              -          (25,600)
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of
  change in accounting principle                         (58,220)           (1,259)              -          (59,479)
Cumulative effect of change in accounting
  principle, net of tax benefit                           (6,255)                -               -           (6,255)
--------------------------------------------------------------------------------------------------------------------
Net earnings                                         $   (64,475)           (1,259)              -          (65,734)
====================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Earnings
Fiscal Year Ended 1999
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations     Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                   <C>        <C>
Restaurant sales                                     $   535,691           108,768               -          644,459
Restaurant operating expenses                            465,712            96,089               -          561,801
General and administrative expenses                       32,649             5,362                           38,011
Other special charges                                      2,186                 -               -            2,186
--------------------------------------------------------------------------------------------------------------------
Operating income                                          35,144             7,317               -           42,461
--------------------------------------------------------------------------------------------------------------------
Other income (expense)                                   (32,091)           (2,450)              -          (34,541)
Earnings before income taxes                               3,053             4,867               -            7,920
Income taxes                                                 950             1,500               -            2,450
--------------------------------------------------------------------------------------------------------------------
Net earnings                                         $     2,103             3,367               -            5,470
====================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Earnings
Fiscal Year Ended 1998
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                  <C>        <C>
Restaurant sales                                     $   785,300            77,392               -          862,692
Restaurant operating expenses                            673,968            67,003               -          740,971
General and administrative expenses                       42,385             3,765               -           46,150
Other special charges                                      2,940                 -               -            2,940
--------------------------------------------------------------------------------------------------------------------
Operating income                                          66,007             6,624               -           72,631
--------------------------------------------------------------------------------------------------------------------
Other income (expense)                                    35,427            (1,014)              -           34,413
Earnings before income taxes and cumulative
      effect of change in accounting principle           101,434             5,610               -          107,044
Income taxes                                              37,400             1,900               -           39,300
--------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
     accounting principle                                 64,034             3,710               -           67,744
Cumulative effect of change in accounting
     principle, net of tax benefit                        (1,461)                -               -           (1,461)
--------------------------------------------------------------------------------------------------------------------
Net earnings                                         $    62,573             3,710               -           66,283
====================================================================================================================
</TABLE>
                                       38
<PAGE>
<TABLE>
Condensed Consolidated Balance Sheet
Fiscal Year End 2000
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>            <C>              <C>
ASSETS
Current assets                                       $    32,449             2,382               -           34,831
Premises and equipment, net                              347,646            32,292               -          379,938
Goodwill, net                                            110,164            21,848               -          132,012
Deferred income tax benefit                               18,900                 -               -           18,900
Other assets                                              38,419             5,581               -           44,000
Intercompany investments                                  46,525                 -         (46,525)               -
Intercompany advances                                     12,010                 -         (12,010)               -
--------------------------------------------------------------------------------------------------------------------
                                                     $   606,113            62,103         (58,535)         609,681
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                                  $   138,011             3,322               -          141,333
Long-term liabilities                                    307,285               246               -          307,531
Intercompany payables                                          -            12,010         (12,010)               -
Convertible preferred securities                          72,865                 -               -           72,865
Shareholders' equity                                      87,952            46,525         (46,525)          87,952
--------------------------------------------------------------------------------------------------------------------
                                                     $   606,113            62,103         (58,535)         609,681
====================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Balance Sheet
Fiscal Year End 1999
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>            <C>              <C>
ASSETS
Current assets                                       $    44,245             1,980               -           46,225
Premises and equipment, net                              363,280            61,688               -          424,968
Goodwill, net                                            113,161            22,015               -          135,176
Investments carried at equity                             17,411                 -               -           17,411
Other assets                                              32,534               282               -           32,816
Intercompany investments                                  47,784                 -         (47,784)               -
Intercompany advances                                     34,408                 -         (34,408)               -
--------------------------------------------------------------------------------------------------------------------
                                                     $   652,823            85,965         (82,192)         656,596
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                                  $    81,024             3,493               -           84,517
Long-term liabilities                                    344,175               280               -          344,455
Intercompany payables                                          -            34,408         (34,408)               -
Convertible preferred securities                         115,000                 -               -          115,000
Shareholders' equity                                     112,624            47,784         (47,784)         112,624
--------------------------------------------------------------------------------------------------------------------
                                                     $   652,823            85,965         (82,192)         656,596
====================================================================================================================
</TABLE>

                                       39
<PAGE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Fiscal Year Ended 2000
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                  <C>        <C>
Net cash provided by operating activities            $    24,438             3,541               -           27,979
Cash flows from investing activities:
  Capital expenditures                                   (52,615)           (1,193)              -          (53,808)
  Proceeds from sale-leaseback                             8,055            20,316               -           28,371
  Proceeds from disposal of assets, net                   14,074                 -               -           14,074
  Other investing activities                              (5,540)             (251)              -           (5,791)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities      (36,026)           18,872               -          (17,154)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Net repayment of revolving credit agreements           (21,667)                -               -          (21,667)
  Proceeds from (payment of) intercompany advances        22,398           (22,398)              -                -
  Other financing activities                                 (23)                -               -              (23)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities          708           (22,398)              -          (21,690)
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents     (10,880)               15               -          (10,865)
Cash and equivalents at the beginning of the period       11,190                77               -           11,267
--------------------------------------------------------------------------------------------------------------------
Cash and equivalents at the end of the period        $       310                92               -              402
====================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Fiscal Year Ended 1999
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                  <C>        <C>
Net cash provided by operating activities            $     5,426             8,196               -           13,622
Cash flows from investing activities:
  Capital expenditures                                   (75,572)           (8,822)              -          (84,394)
  Proceeds from disposal of assets, net                   87,152                 -               -           87,152
  Other investing activities                              (2,788)             (656)              -           (3,444)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities        8,792            (9,478)              -             (686)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Net repayment of revolving credit agreements           (27,920)                -               -          (27,920)
  Proceeds from issuance of long-term debt                95,467                 -               -           95,467
  Purchase of treasury stock                             (74,824)                -               -          (74,824)
  Proceeds from (payment of) intercompany advances        (1,305)            1,305               -                -
  Other financing activities                              (1,608)                -               -           (1,608)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities      (10,190)            1,305               -           (8,885)
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       4,028                23               -            4,051
Cash and equivalents at the beginning of the period        7,162                54               -            7,216
--------------------------------------------------------------------------------------------------------------------
Cash and equivalents at the end of the period        $    11,190                77               -           11,267
====================================================================================================================
</TABLE>

                                       40
<PAGE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Fiscal Year Ended 1998
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                      Guarantor      Non-Guarantor
(In thousands)                                      Subsidiaries      Subsidiaries     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                   <C>         <C>
Net cash provided by operating activities            $    32,266             8,761               -           41,027
Cash flows from investing activities:
  Capital expenditures                                  (113,166)          (29,675)              -         (142,841)
  Proceeds from disposal of assets, net                  373,814                 -               -          373,814
  Other investing activities                             (39,690)                -               -          (39,690)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities      220,958           (29,675)              -          191,283
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Net repayment of revolving credit agreements          (114,726)                -               -         (114,726)
  Purchase of treasury stock                             (92,028)                -               -          (92,028)
  Proceeds from (payment of) intercompany advances       (20,936)           20,936               -                -
  Other financing activities                             (20,843)                -               -          (20,843)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities     (248,533)           20,936               -         (227,597)
--------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                  4,691                22               -            4,713
Cash and equivalents at the beginning of the period        2,471                32               -            2,503
--------------------------------------------------------------------------------------------------------------------
Cash and equivalents at the end of the period        $     7,162                54               -            7,216
====================================================================================================================
</TABLE>

                                       41
<PAGE>
                              Report of Management

     The  management  of  Avado  Brands,  Inc.  has  prepared  the  consolidated
financial statements and all other financial  information appearing in this Form
10-K  and  is  responsible  for  their  integrity.  The  consolidated  financial
statements  were  prepared in  conformity  with  generally  accepted  accounting
principles and, accordingly,  include certain amounts based on management's best
judgments and estimates.

     Management   maintains  a  system  of  internal   accounting  controls  and
procedures  designed  to  provide  reasonable   assurance,   at  an  appropriate
cost/benefit   relationship,   regarding  the   reliability   of  the  published
consolidated  financial  statements  and  the  safeguarding  of  assets  against
unauthorized acquisition, use or disposition.

     The independent auditors, KPMG LLP, were recommended by the Audit Committee
of the Board of Directors, and that recommendation was ratified by the Company's
shareholders. The Audit Committee, which is composed solely of directors who are
not officers of the Company,  meets  periodically with the independent  auditors
and  management  to ensure that they are  fulfilling  their  obligations  and to
discuss internal accounting controls,  auditing and financial reporting matters.
The Audit  Committee  also reviews with the  independent  auditors the scope and
results of the audit effort.  The independent  auditors  periodically meet alone
with the  Audit  Committee  and have full and  unrestricted  access to the Audit
Committee at any time.

     The recommendations of the independent auditors are reviewed by management.
Control procedures have been implemented or revised as appropriate to respond to
these  recommendations.  No material  weaknesses in internal  controls have been
brought to the attention of management.

     The Company  assessed its internal  control system as of December 31, 2000,
in relation to criteria for effective internal control over financial  reporting
described in "Internal Control Integrated  Framework" issued by the Committee of
Sponsoring  Organizations of the Treadway  Commission.  Based on its assessment,
the Company  believes  that,  as of December  31,  2000,  its system of internal
control  over  financial  reporting  and over  safeguarding  of  assets  against
unauthorized acquisition, use or disposition, met those criteria.


Tom E. DuPree, Jr.
Chairman of the Board and Chief Executive Officer

Erich J. Booth
Chief Financial Officer and Corporate Treasurer



                                       42
<PAGE>

                          Independent Auditors' Report

The Board of Directors
Avado Brands, Inc.

     We have  audited  the  accompanying  consolidated  balance  sheets of Avado
Brands,  Inc. and  subsidiaries as of December 31, 2000 and January 2, 2000, and
the  related  consolidated  statements  of  earnings,  shareholders'  equity and
comprehensive  income  and cash  flows for each of the  years in the  three-year
period ended December 31, 2000. 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 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  audits  provide  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 Avado
Brands,  Inc. and subsidiaries at December 31, 2000 and January 2, 2000, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended  December  31,  2000,  in  conformity  with  accounting
principles generally accepted in the United States of America.

     As discussed in Note 1 to the consolidated financial statements,  effective
October 2, 2000 the Company adopted Statement of Financial  Accounting Standards
("SFAS")  No.  133,   "Accounting   for  Derivative   Instruments   and  Hedging
Activities",  and its  amendments,  SFAS No.  137,  "Accounting  for  Derivative
Instruments and Hedging  Activities - Deferral of the Effective Date of SFAS No.
133",  and SFAS No. 138,  "Accounting  for  Derivative  Instruments  and Certain
Hedging  Activities."  In 1998,  the  Company  adopted the  provisions  of AICPA
Statement of Position 98-5, "Reporting the Cost of Start-Up Activities."

KPMG LLP

Atlanta, Georgia
January 26, 2001, except for Note 7 which is as of April 2, 2001


                                       43
<PAGE>
Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     Not applicable


                                    Part III

Item 10.  Directors and Executive Officers of the Registrant

     Information  in response to this item is  incorporated  by reference to the
information  contained  under the headings  "Nominees for  Director",  Executive
Officers",  and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's  definitive Proxy Statement for use in connection with the 2001 Annual
Meeting of Shareholders, filed with the Commission on April 3, 2001.

Item 11.  Executive Compensation

     Information  in response to this item is  incorporated  by reference to the
information  contained under the heading "Compensation of Executive Officers" in
the Company's  definitive  Proxy  Statement for use in connection  with the 2001
Annual Meeting of  Shareholders,  filed with the Commission on April 3, 2001. In
no event  shall  the  information  contained  in the Proxy  Statement  under the
heading  "Comparison  of  Five-Year  Cumulative  Shareholder  Return"  be deemed
incorporated herein by such reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     Information  in response to this item is  incorporated  by reference to the
information contained under the heading "Voting Securities and Principal Holders
Thereof" in the Company's  definitive Proxy Statement for use in connection with
the 2001 Annual Meeting of  Shareholders,  filed with the Commission on April 3,
2001.

Item 13.  Certain Relationships and Related Transactions

     In March 1995, the Company entered into a Split Dollar Insurance  Agreement
(the  "Agreement")  with The DuPree  Insurance  Trust (the "Trust")  whereby the
Company agreed to make premium  payments on certain life  insurance  policies of
which the Trust was the owner and beneficiary.  In 2000, the insurance  policies
were canceled and no premium payments were made by the Company.

     At December 31, 2000 and January 2, 2000, the Company held notes receivable
from Tom E. DuPree,  Jr., the Chairman of the Board and Chief Executive  Officer
of the Company,  totaling  $10,851,500.  In 2000,  the maturity of the notes was
extended by the Board of Directors  to June 30, 2002 and the  interest  rate was
increased to from 7.0% to 11.5% with interest payable at maturity.  In addition,
$3.0 million of these notes are secured by real estate owned by Mr. DuPree.  The
Company also holds notes receivable from Erich J. Booth, Chief Financial Officer
and  Treasurer,   totaling   $107,000  and  from  Margaret  E.  Waldrep,   Chief
Administrative  Officer,  totaling $41,500. These notes are also due on June 30,
2002 and bear interest at 11.5%.


                                       44
<PAGE>
                                     Part IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)   The following documents are filed as part of this Report:

   1.  Financial Statements

     Consolidated  Statements of Earnings for the years ended December 31, 2000,
     January 2, 2000 and January 3, 1999

     Consolidated Balance Sheets as of December 31, 2000 and January 2, 2000

     Consolidated  Statements of Shareholders'  Equity and Comprehensive  Income
     for the years ended December 31, 2000, January 2, 2000 and January 3, 1999

     Consolidated  Statements  of Cash Flows for the years  ended  December  31,
     2000, January 2, 2000 and, January 3, 1999

     Notes to Consolidated Financial Statements

     Report of Management

     Independent Auditors' Report

   2.  Financial Statement Schedules

     None

   3. Exhibits

     3.1 Amended and  Restated  Articles of  Incorporation  of the  Company,  as
amended October 13, 1998. (3)

     3.2 By-laws of the Company. (1)

     4.1 See Exhibits 3.1 and 3.2 for  provisions in the  Company's  Amended and
Restated Articles of Incorporation and by-laws defining the rights of holders of
the Company's Common Stock. (1) (3)

     4.2 Trust  Agreement  of Apple South  Financing I, dated as of February 18,
1997,  among Apple South,  Inc.,  First Union National Bank of Georgia and First
Union Bank of Delaware. (5)

     4.3 Amended and Restated  Declaration of Trust of Apple South  Financing I,
dated as of March 11, 1997,  among Apple South,  Inc.,  as Sponsor,  First Union
National  Bank  of  Georgia,  as  Institutional  Trustee,  First  Union  Bank of
Delaware, as Delaware Trustee, and the Regular Trustees named therein. (5)

     4.4 Indenture for the 7% Convertible Subordinated  Debentures,  dated as of
March 6, 1997,  between  Apple  South,  Inc.  and First Union  National  Bank of
Georgia, as Trustee. (5)

     4.5 Form of $3.50 Term Convertible Security,  Series A (included in Exhibit
4.3).

     4.6 Form of 7%  Convertible  Subordinated  Debenture  (included  in Exhibit
4.4).

     4.7 Preferred Securities  Guarantee Agreement,  dated as of March 11, 1997,
between  Apple South,  Inc.,  as  Guarantor,  and First Union  National  Bank of
Georgia, as Preferred Guarantee Trustee. (5)


                                       45
<PAGE>
     4.8 Registration  Rights Agreement,  dated as of March 11, 1997 among Apple
South,  Inc., Apple South Financing I, J.P. Morgan  Securities,  Inc., and Smith
Barney, Inc. (5)

     4.9  Solicitation of Consents to Proposed  Amendments to 9.75% Senior Notes
due 2006 of Apple South, Inc. (8)

     4.10  Indenture,  dated as of June 22,  1999,  among the  Company,  certain
guaranteeing  subsidiaries and SunTrust Bank, Atlanta, as Trustee (including the
form of Note). (9)

     4.11 Registration  Rights  Agreement,  dated as of June 22, 1999, among the
Company,  certain  guaranteeing  subsidiaries and the initial  purchasers of the
Notes. (9)

     4.12 The Hops Grill & Bar, Inc. MP Equity Investment Plan (14)

     10.1 Apple South, Inc. 1988 Stock Option Plan. (1)

     10.2 Form of Stock Option Agreement under the Apple South,  Inc. 1988 Stock
Option Plan. (1) (4)

     10.3  Form  of  Apple  South,  Inc.  Director's  Indemnification  Agreement
executed by and  between the Company and each member of its Board of  Directors.
(1)

     10.4 Form of Apple South, Inc. Officer's Indemnification Agreement executed
between the Company and each of its executive officers. (1)

     10.5 Apple South, Inc. Employee Stock Ownership Plan and Trust. (1) (4)

     10.6 Apple South, Inc. Profit Sharing Plan and Trust. (1) (4)

     10.7 Amendment No. 2 to the Apple South, Inc. Employee Stock Ownership Plan
and Trust, dated November 22, 1993. (2)

     10.8 Apple  South,  Inc.  [Restated]  Profit  Sharing  Plan and Trust dated
October 26, 1993. (2)

     10.9  Amended form of Stock Option  Agreement  under the Apple South,  Inc.
1988 Stock Option Plan. (2)

     10.10 Apple South, Inc. 1993 Stock Incentive Plan. (2)

     10.11 Form of Stock Option Agreement under the Apple South, Inc. 1993 Stock
Incentive Plan. (2)

     10.12 Participation Agreement (Apple South Trust No. 97-1), dated September
24, 1997,  among Apple South,  Inc., as lessee,  First Security  Bank,  National
Association, as lessor, SunTrust Bank, Atlanta, as administrative agent, and the
holders and lenders signatory thereto. (6)

     10.13  First  amendment,  dated  as of March  27,  1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (7)

     10.14  Second  amendment,  dated as of August 14,  1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)

     10.15 Third  amendment,  dated as of November  13, 1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)


                                       46
<PAGE>
     10.16 Fourth  amendment,  dated as of February 22, 1999,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)

     10.17  Fifth  amendment,  dated as of August  24,  1999,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto.

     10.18 Sixth  amendment,  dated as of December  20, 2000,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto.

     10.19 $125 million Credit Agreement, dated as of June 22, 1999, among Avado
Brands, Inc. as borrower and Wachovia Bank, National Association and BankBoston,
N.A. (10)

     10.20 First  amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)

     10.21 Second amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)

     10.22 Third  amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)

     10.23 Fourth amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBostion, N.A. (13)

     10.24 Master lease agreement,  dated as of October 19, 2000, by and between
Pubs Property, LLC and Hops Grill & Bar, Inc.

     10.25 Sale-leaseback agreement,  dated as of October 19, 2000, by and among
Pubs Property, LLC, Avado Brands, Inc. and Hops Grill & Bar Inc.

     23.1 Consent of KPMG LLP.

     27.1 Financial Data Schedule (EDGAR version only).

     99.1 Safe harbor  under the  Private  Securities  Litigation  Reform Act of
1995. (12)


                                       47
<PAGE>

     (1)  Incorporated  by reference to the  corresponding  exhibit number filed
          with the registrant's Registration  Statement  on  Form  S-1, File No.
          33-42662.

     (2)  Incorporated  by reference to the  registrant's  Annual Report on Form
          10-K for its fiscal year ended December 31, 1993.

     (3)  Incorporated by reference to the  registrant's  Current Report on Form
          8-K dated October 13, 1998.

     (4)  Incorporated  by reference to the  registrant's  Annual Report on Form
          10-K for the fiscal year ended December 31, 1995.

     (5)  Incorporated by reference to the registrants's registration  statement
          on Form S-3, File No. 333-25205.

     (6)  Incorporated  by reference to the  registrant's  Annual Report on form
          10-K for the fiscal year ended December 28, 1997.

     (7) Incorporated by reference to the registrant's  Quarterly Report on Form
         10-Q for its fiscal quarter ended March 29, 1998.

     (8) Incorporated by reference to the registrant's  Quarterly Report on Form
         10-Q for its fiscal quarter ended June 28, 1998.

     (9) Incorporated by reference to the Company's  Registration  Statement on
         Form S-4, File No. 333-82345, filed on July 6, 1999.

     (10)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended July 4, 1999

     (11)Incorporated by reference to the  registrant's  Annual Report on form
         10-K for the fiscal year ended January 3, 1999.

     (12)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended April 2, 2000.

     (13)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended October 1, 2000.

     (14)Incorporated by reference to the Company's  Registration  Statement on
         Form S-8, File No. 333-56138, filed on February 23, 2001.

     (15)Incorporated by reference to the  registrant's  Annual Report on form
         10-K for the fiscal year ended January 2, 2000.

(b)   Reports on Form 8-K

         None


                                       48
<PAGE>
SIGNATURES

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


                                              AVADO BRANDS, INC.

                                              By:    /s/ Tom E. DuPree, Jr.
                                                     ---------------------------
                                                     Tom E. DuPree, Jr.
                                                     Chief Executive Officer and
                                                     Chairman of the Board
March 27, 2001
Atlanta, Georgia

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, 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                                  Title                        Date

/s/ Tom E. DuPree, Jr.       Chairman of the Board of             March 27, 2001
---------------------------  Directors and Chief Executive
Tom E. DuPree, Jr.           Officer (principal executive officer)

/s/ Erich J. Booth           Director and Chief Financial Officer March 27, 2001
---------------------------  (principal financial officer)
Erich J. Booth

/s/ Margaret E. Waldrep      Director and Chief Administrative    March 27, 2001
---------------------------  Officer
Margaret E. Waldrep

/s/ Percy V. Williams        Director                             March 27, 2001
---------------------------
Percy V. Williams

/s/ Jerome A. Atkinson       Director                             March 27, 2001
---------------------------
Jerome A. Atkinson

/s/ William V. Lapham        Director                             March 27, 2001
---------------------------
William V. Lapham

/s/ Emilio Alvarez-Recio     Director                             March 27, 2001
---------------------------
Emilio Alvarez-Recio

/s/ Robert Sroka             Director                             March 27, 2001
---------------------------
Robert Sroka


                                       49

<PAGE>
                                 EXHIBIT INDEX

     3.1 Amended and  Restated  Articles of  Incorporation  of the  Company,  as
amended October 13, 1998. (3)

     3.2 By-laws of the Company. (1)

     4.1 See Exhibits 3.1 and 3.2 for  provisions in the  Company's  Amended and
Restated Articles of Incorporation and by-laws defining the rights of holders of
the Company's Common Stock. (1) (3)

     4.2 Trust  Agreement  of Apple South  Financing I, dated as of February 18,
1997,  among Apple South,  Inc.,  First Union National Bank of Georgia and First
Union Bank of Delaware. (5)

     4.3 Amended and Restated  Declaration of Trust of Apple South  Financing I,
dated as of March 11, 1997,  among Apple South,  Inc.,  as Sponsor,  First Union
National  Bank  of  Georgia,  as  Institutional  Trustee,  First  Union  Bank of
Delaware, as Delaware Trustee, and the Regular Trustees named therein. (5)

     4.4 Indenture for the 7% Convertible Subordinated  Debentures,  dated as of
March 6, 1997,  between  Apple  South,  Inc.  and First Union  National  Bank of
Georgia, as Trustee. (5)

     4.5 Form of $3.50 Term Convertible Security,  Series A (included in Exhibit
4.3).

     4.6 Form of 7%  Convertible  Subordinated  Debenture  (included  in Exhibit
4.4).

     4.7 Preferred Securities  Guarantee Agreement,  dated as of March 11, 1997,
between  Apple South,  Inc.,  as  Guarantor,  and First Union  National  Bank of
Georgia, as Preferred Guarantee Trustee. (5)

     4.8 Registration  Rights Agreement,  dated as of March 11, 1997 among Apple
South,  Inc., Apple South Financing I, J.P. Morgan  Securities,  Inc., and Smith
Barney, Inc. (5)

     4.9  Solicitation of Consents to Proposed  Amendments to 9.75% Senior Notes
due 2006 of Apple South, Inc. (8)

     4.10  Indenture,  dated as of June 22,  1999,  among the  Company,  certain
guaranteeing  subsidiaries and SunTrust Bank, Atlanta, as Trustee (including the
form of Note). (9)

     4.11 Registration  Rights  Agreement,  dated as of June 22, 1999, among the
Company,  certain  guaranteeing  subsidiaries and the initial  purchasers of the
Notes. (9)

     4.12 The Hops Grill & Bar, Inc. MP Equity Investment Plan (14)

     10.1 Apple South, Inc. 1988 Stock Option Plan. (1)

     10.2 Form of Stock Option Agreement under the Apple South,  Inc. 1988 Stock
Option Plan. (1) (4)

     10.3  Form  of  Apple  South,  Inc.  Director's  Indemnification  Agreement
executed by and  between the Company and each member of its Board of  Directors.
(1)

     10.4 Form of Apple South, Inc. Officer's Indemnification Agreement executed
between the Company and each of its executive officers. (1)

     10.5 Apple South, Inc. Employee Stock Ownership Plan and Trust. (1) (4)

     10.6 Apple South, Inc. Profit Sharing Plan and Trust. (1) (4)


                                       50

<PAGE>
     10.7 Amendment No. 2 to the Apple South, Inc. Employee Stock Ownership Plan
and Trust, dated November 22, 1993. (2)

     10.8 Apple  South,  Inc.  [Restated]  Profit  Sharing  Plan and Trust dated
October 26, 1993. (2)

     10.9  Amended form of Stock Option  Agreement  under the Apple South,  Inc.
1988 Stock Option Plan. (2)

     10.10 Apple South, Inc. 1993 Stock Incentive Plan. (2)

     10.11 Form of Stock Option Agreement under the Apple South, Inc. 1993 Stock
Incentive Plan. (2)

     10.12 Participation Agreement (Apple South Trust No. 97-1), dated September
24, 1997,  among Apple South,  Inc., as lessee,  First Security  Bank,  National
Association, as lessor, SunTrust Bank, Atlanta, as administrative agent, and the
holders and lenders signatory thereto. (6)

     10.13  First  amendment,  dated  as of March  27,  1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (7)

     10.14  Second  amendment,  dated as of August 14,  1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)

     10.15 Third  amendment,  dated as of November  13, 1998,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)

     10.16 Fourth  amendment,  dated as of February 22, 1999,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto. (11)

     10.17  Fifth  amendment,  dated as of August  24,  1999,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto.

     10.18 Sixth  amendment,  dated as of December  20, 2000,  to  Participation
Agreement  (Apple South Trust No. 97-1),  dated September 24, 1997,  among Apple
South, Inc., as lessee,  First Security Bank, National  Association,  as lessor,
SunTrust Bank,  Atlanta,  as  administrative  agent, and the holders and lenders
signatory thereto.

     10.19 $125 million Credit Agreement, dated as of June 22, 1999, among Avado
Brands, Inc. as borrower and Wachovia Bank, National Association and BankBoston,
N.A. (10)

     10.20 First  amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)

     10.21 Second amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)


                                       51
<PAGE>
     10.22 Third  amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBoston, N.A. (15)

     10.23 Fourth amendment to $125 million Credit  Agreement,  dated as of June
22, 1999,  among Avado  Brands,  Inc. as borrower and  Wachovia  Bank,  National
Association and BankBostion, N.A. (13)

     10.24 Master lease agreement,  dated as of October 19, 2000, by and between
Pubs Property, LLC and Hops Grill & Bar, Inc.

     10.25 Sale-leaseback agreement,  dated as of October 19, 2000, by and among
Pubs Property, LLC, Avado Brands, Inc. and Hops Grill & Bar Inc.

     23.1 Consent of KPMG LLP.

     27.1 Financial Data Schedule (EDGAR version only).

     99.1 Safe harbor  under the  Private  Securities  Litigation  Reform Act of
1995. (12)

   --------------------------------------------------------------------------
     (1)  Incorporated  by reference to the  corresponding  exhibit number filed
          with the registrant's Registration  Statement  on  Form  S-1, File No.
          33-42662.

     (2)  Incorporated  by reference to the  registrant's  Annual Report on Form
          10-K for its fiscal year ended December 31, 1993.

     (3)  Incorporated by reference to the  registrant's  Current Report on Form
          8-K dated October 13, 1998.

     (4)  Incorporated  by reference to the  registrant's  Annual Report on Form
          10-K for the fiscal year ended December 31, 1995.

     (5)  Incorporated by reference to the registrants's registration  statement
          on Form S-3, File No. 333-25205.

     (6)  Incorporated  by reference to the  registrant's  Annual Report on form
          10-K for the fiscal year ended December 28, 1997.

     (7) Incorporated by reference to the registrant's  Quarterly Report on Form
         10-Q for its fiscal quarter ended March 29, 1998.

     (8) Incorporated by reference to the registrant's  Quarterly Report on Form
         10-Q for its fiscal quarter ended June 28, 1998.

     (9) Incorporated by reference to the Company's  Registration  Statement on
         Form S-4, File No. 333-82345, filed on July 6, 1999.

     (10)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended July 4, 1999

     (11)Incorporated by reference to the  registrant's  Annual Report on form
         10-K for the fiscal year ended January 3, 1999.

     (12)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended April 2, 2000.

     (13)Incorporated by reference to the Company's  Quarterly  Report on Form
         10-Q for the quarter ended October 1, 2000.

     (14)Incorporated by reference to the Company's  Registration  Statement on
         Form S-8, File No. 333-56138, filed on February 23, 2001.

     (15)Incorporated by reference to the  registrant's  Annual Report on form
         10-K for the fiscal year ended January 2, 2000.


                                       51