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 January 2, 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.
[ ]

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

     As of March 31, 2000, 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 $48.4 million.

     As of March 31, 2000, the number of shares of common stock  outstanding was
25,321,047.



<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 acquires, develops and operates growth-oriented,  niche-leading restaurant
brands.  At January 2, 2000,  the Company owned and operated  restaurants  in 30
states plus the District of Columbia  including 137 Don Pablo's  Mexican Kitchen
restaurants,  64 Hops  Restaurant  Bar & Brewery  restaurants,  26  McCormick  &
Schmick's  seafood dinner houses and 16 Canyon Cafe  restaurants.  Each of these
proprietary  brands  functions on a  decentralized  basis with its own executive
management,   real  estate  development,   purchasing,   recruiting,   training,
marketing,  accounting, 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.  Avado Brands also owns a
20-percent  equity  interest  in Belgo  Group  PLC,  a  16-unit  United  Kingdom
restaurant  company,  a 25-percent equity interest in 11 Harrigans Grill and Bar
restaurants,  and a  50-percent  interest  in  two  restaurants  operated  under
separate  joint  venture  agreements  with  Belgo  Group  PLC  and  London-based
PizzaExpress  PLC. For the 52-week period ended January 2, 2000 ("1999"),  total
restaurant  sales were $644.5  million which  included  revenue of $21.2 million
from 46 Applebee's restaurants which were sold during the first half of 1999.

     In November 1995, 44 Don Pablo's  restaurants and 12 Harrigans  restaurants
were acquired through a pooling of interests  transaction with DF&R Restaurants,
Inc.  During 1997,  three purchase  business  combinations  were completed which
included  the  acquisition  of 16  McCormick  & Schmick's  restaurants,  21 Hops
restaurants and 13 Canyon Cafe restaurants.  Also in 1997, the Company announced
its decision to sell its franchised Applebee's  restaurants in order to focus on
the continued  development of its higher margin,  better return,  greater growth
proprietary concepts.  The divestiture was substantially  completed in 1998 with
the sale of 46 remaining  locations  completed in 1999.  Gross proceeds from the
sale  transactions  totaled  $514.0  million  including  $9.5  million  in notes
outstanding  at January 2, 2000 and other  amounts due.  Also during  1998,  the
Company divested its Harrigans restaurants,  retaining a 25-percent ownership in
the ongoing  business,  acquired a 20-percent  interest in Belgo,  established a
50/50 joint  venture for the  development  of Belgo  restaurants  in the Western
Hemisphere and established a 50/50 joint venture with London-based PizzaExpress.
In January of 1999,  the first Belgo  restaurant in the United States was opened
in New York  City and in March of 1999 the  first  restaurant  under  the  joint
venture with PizzaExpress was opened in Philadelphia under the name San Marzano.

     On October 13, 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 brand, and the emphasis on a multi-brand  strategy.
In connection  with the corporate  name change,  the Company  changed the Nasdaq
National Market trading symbol of its common stock from "APSO" to "AVDO."

                                       2
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                       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 the 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.

     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 fajitas,  carne asada and chicken. The menu also includes tortilla soup,
a selection of salads,  Mexican-style  appetizers such as quesadillas and unique
desserts.  During 1999,  the cost of a typical meal,  including  beverages,  was
approximately  $6.00 to $9.00  for lunch and  $8.00 to  $15.00  for  dinner.  In
addition to its regular menu, Don Pablo's  offers 15 lunch specials  priced from
$4.49 to $7.39 each and a lower-priced children's menu. Full bar service is also
provided.  Alcoholic  beverage sales accounted for approximately 18% of sales in
1999.

     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 1999, the average cost of developing and opening a Don
Pablo's  restaurant  was  approximately  $1.8 million,  excluding land costs and
preopening  expenses.  The  cost of  land  for  these  restaurants  ranged  from
approximately  $869,000  to  $1,042,000;   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 $211,000.

     Field  Management.  Management  is shared by 20 area managers who report to
two Regional Vice  Presidents of  Operations.  The strategy is to have each area
manager  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 1999,
advertising  expense was 4.9% of revenue.  Although Don Pablo's typically spends
approximately  3.5% of revenue on  advertising,  in the fourth quarter of 1999 a
special  winter  campaign  was  implemented  and an  additional  $4.0 million in
advertising  expense was incurred.  The fourth  quarter  program drove  customer
counts  and  traffic  at the  restaurants  and  helped  improve  same-store-sale
comparisons   from  5%  negative  in  September  to  2%  positive  in  December.
Advertising  expenditures for 2000 are expected to return to a more typical 3.5%
level and will focus on efforts  designed to increase  traffic counts and appeal
to consumer desires for new and exciting tastes.

                                       3
<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.

     Menu.  The  restaurants  feature an  American-style  menu that includes top
choice  steaks and prime rib,  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 cost of a typical meal, including beverages, ranges from $6.00
to $9.00 per person for lunch and $13.00 to $15.00 per person for  dinner.  Each
restaurant offers four distinctive lager-style beers and ales, plus a variety of
blends of these 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 the only beers served in all
but  one of the  restaurants.  Full  bar  service  is  also  available  at  each
restaurant.  Alcoholic  beverages  accounted for  approximately  16% of sales in
1999.

     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.  The cost of developing and opening a restaurant  averaged
approximately  $1.6 million in 1999,  excluding  land and  preopening  costs but
including  approximately $165,000 in microbrewery  equipment.  Land costs ranged
from $780,000 to $1,285,000 and preopening costs averaged $180,000.

     Field  Management.  Management  is shared by seven  operating  partners and
seven area  supervisors  who report to both the Vice President of Operations and
the Chief  Executive  Officer.  Each  operating  partner or area  supervisor  is
ultimately  responsible for four to five 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 two
assistant  managers.  Hops also added the new position of Service  Specialist in
1999 to improve customer service and quality control at each restaurant. 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.  During 1999, 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.  Efforts are  expected to continue
into 2000 with the  continued  use of television  and radio  advertising,  print
media, limited outdoor advertising as well as ongoing grassroots programs.

                              McCormick & Schmick's

     McCormick & Schmick's was  established  in 1972 by  co-founders  William P.
McCormick and Douglas L. Schmick, current Chairman and President,  respectively.
Each restaurant is designed to capture the  distinctive  attributes of the 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 historical 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  29% of  sales in  1999.  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 and
Spenger's Fresh Fish Grotto.  McCormick & Schmick's  offers superior  service to
its guests and is positioned in a price range at the upper end of moderate.

                                       4
<PAGE>
     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  cost  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 13,000
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.   The  average  cost  of  developing  a  restaurant   was
approximately $3.0 million in 1999, including leasehold  improvements,  fixtures
and equipment.  All restaurant real estate is leased.  Additionally,  preopening
expenses averaged $397,000.

     Field  Management.  Management is shared by ten multi-unit senior managers,
three  of  which  have  regional  responsibility,  and  one  Vice  President  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.

                                   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. Canyon
Cafe is dedicated to the flavor and feel of the American Southwest.

     Menu.  The menu offers a wide  variety of unique  items such as Desert Fire
Pasta,  Chile  Rubbed  Grilled  Tuna and  Chipotle  Chicken.  A variety  of more
traditional  items  including  chicken tacos and grilled  chicken salad are also
offered. During 1999, the cost of a typical meal, including beverages, was $9.00
to $14.00 for lunch and $14.00 to $20.00 for  dinner.  Full bar  service is also
provided. Alcoholic beverages accounted for approximately 18% of sales in 1999.

     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.  The
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.  No new restaurants  were opened in 1999. In 1998, the cost
of developing  and opening a restaurant  averaged  $1,400,000  for  in-line/mall
locations and $1,600,000 for  freestanding  locations,  excluding land costs and
preopening expenses. Preopening expenses averaged $151,000.

                                       5
<PAGE>
     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 a Director  of  Operations.  All  managers  are
eligible  to  receive   bonuses   based  on  individual   restaurant   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 a  system-wide  "neighborhood
networking" program, are utilized to develop a direct relationship with targeted
customers.

                     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.

     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 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.
Purchasing  is handled by 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 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.

     The restaurant  concepts for the Company's  joint ventures with Belgo Group
PLC and  PizzaExpress  PLC are  licensed  from these  joint  venturers  or their
affiliates.  Such  licenses  are  essential  for the  operation  of these  joint
ventures and include the licensing of related trademarks and service marks.

                                       6
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                            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.

     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.

                                   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 in general  and Avado  Brands'  restaurants  in
particular.

                                    Employees

     As of January 2, 2000, Avado Brands employed  approximately  20,000 persons
in 30 states plus the District of Columbia.  Of those  employees,  approximately
280  held  management  or  administrative  positions,  1,600  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 good  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.

                                       7
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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  have  served  as  the  Company's   corporate  and  Applebee's
headquarters. In 1997, the Company completed construction of a new 44,100 square
foot  facility in Bedford,  Texas,  to house the Don Pablo's  headquarters.  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 and the
headquarters  for Canyon Cafe is located in  approximately  7,500 square feet of
leased space in Dallas, Texas. 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 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.

                                       8
<PAGE>
     As of January 2, 2000, the Company  operated 243  restaurants.  The Company
leases the underlying  real estate on which 120 of the  restaurants  are located
and leases both the  buildings and  underlying  real estate for an additional 46
restaurants.  The remaining 77 restaurants  and related real estate are owned by
the Company. The following table presents restaurant locations by brand:

                           Don                McCormick        Canyon
                          Pablo's    Hops    & Schmick's        Cafe      Total
   -----------------------------------------------------------------------------
   Florida                  18        31                                    49
   Texas                    15                     1              4         20
   Ohio                     15         2                                    17
   Indiana                  11         1                                    12
   Georgia                   5         4                          2         11
   Pennsylvania             11                                              11
   Virginia                  7         2           1                        10
   Tennessee                 5         3                          1          9
   California                                      7              1          8
   Colorado                            6           1              1          8
   Maryland                  5         1           2                         8
   Michigan                  8                                               8
   Minnesota                 7         1                                     8
   North Carolina            4         4                                     8
   Arizona                   3                     1              3          7
   South Carolina            3         4                                     7
   Kentucky                  4         2                                     6
   New York                  6                                               6
   Washington                                      4              2          6
   Oregon                                          5                         5
   Oklahoma                  4                                               4
   Missouri                            1                          2          3
   Washington, D.C.                                2                         2
   Illinois                  1                     1                         2
   New Jersey                2                                               2
   Alabama                   1                                               1
   Connecticut                         1                                     1
   Delaware                  1                                               1
   Iowa                      1                                               1
   Louisana                            1                                     1
   Nevada                                          1                         1
   -----------------------------------------------------------------------------
          Totals           137        64          26             16        243
   =============================================================================

                                       9
<PAGE>
Item 3.  Legal Proceedings
--------------------------
     Seven  lawsuits were filed against the Company and certain of its directors
and  officers in November  and December  1999 and are  currently  pending in the
Superior Court of Morgan County,  Georgia. The cases are related purported class
action  lawsuits  brought on behalf of  certain  shareholders.  The  plaintiffs'
allegations  are  based on a  proposal  by a  three-person  management  group to
acquire the Company.  All seven lawsuits (which Company counsel  believes may be
consolidated) generally allege that the offer being made by the management group
is unfair,  and that the price being  proposed  as payment  for  Company  common
shares is  inadequate.  The  plaintiff  shareholders  allege  that it would be a
breach of the Board's  fiduciary  duties to the Company and the  shareholders to
approve the  proposal  and  consummate  the  transaction  being  proposed by the
management group. The shareholders are seeking injunctive relief, an unspecified
amount of damages allegedly  arising from the acts of the Defendants,  and costs
and attorneys'  fees.  The Company's  Board of Directors has appointed a special
committee of disinterested  directors to evaluate the merits of the offer and to
consider other strategic alternatives for the Company.

     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 will again  consider the motion to dismiss the
case, and the  defendants  renewed their motion to dismiss in December 1999. The
Company is awaiting the court's  ruling.  Although  the ultimate  outcome of the
remaining  lawsuit cannot be determined at this time, the Company  believes that
the  allegations  therein are without  merit and  intends to  vigorously  defend
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 January 2, 2000.

                                       10
<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
Tony Shaffer, Director of Investor Relations      SunTrust Bank, Atlanta
Hancock at Washington                             Corporate Trust Division
Madison, GA 30650                                 P.O. Box 4625
Telephone:        (706) 342-4552                  Atlanta, GA 30302
Facsimile:        (706) 342-9283
E-mail:  tshaffer@corp.avado.com


Investor Information

     The Company's common stock and convertible  preferred securities are traded
on the NASDAQ  Stock  Market  (National  Market)  under the  symbols  "AVDO" and
"AVDOP",  respectively.  A list of the brokerage  firms  publishing  research on
Avado  Brands is  available  upon  request by  calling  the  Investor  Relations
department or writing Investor Relations.

Shareholder Information

     As of March 1, 2000, there were approximately  3,500 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
        ------------------------------------------------------------------------
           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

           1998
           First Quarter                          $ 15.44            $ 10.50
           Second Quarter                         $ 16.00            $ 12.44
           Third Quarter                          $ 15.44            $ 10.88
           Fourth Quarter                         $ 11.13            $  7.00
        ------------------------------------------------------------------------

Dividends

     The  following  table  shows  cash  dividends  declared  per  share  on the
Company's common stock

           Quarter ended                1999         1998         1997
          -----------------------------------------------------------------
              March                    $0.0125       0.0100        0.008
              June                     $0.0150       0.0125        0.010
              September                $0.0150       0.0125        0.010
              December                 $0.0150       0.0125        0.010
          -----------------------------------------------------------------
                      Total            $0.0575       0.0475        0.038
          -----------------------------------------------------------------

                                       11
<PAGE>
Item 6. Selected Financial Data
-------------------------------
<TABLE>
(In thousands, except per share data)
<CAPTION>                                               1999         1998         1997         1996          1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>          <C>          <C>           <C>
CONSOLIDATED STATEMENT OF EARNINGS DATA
Total restaurant sales                                $644,459      862,692      808,320      546,022       440,190
Operating income                                      $ 42,461       72,631       74,823       31,596        41,329
Net earnings                                          $  5,470       66,283       28,448       11,674        20,279
--------------------------------------------------------------------------------------------------------------------
PER SHARE DATA

Basic earnings per common share                       $   0.20         1.81         0.74         0.30          0.54
Diluted earnings per common share                     $   0.20         1.62         0.73         0.30          0.52
Cash dividends per common share                       $ 0.0575       0.0475        0.038        0.030         0.022
--------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA
Total assets                                          $656,596      670,597      804,289      457,827       369,138
Working capital (excluding assets held for sale)      $(39,497)    (210,947)     (33,989)     (21,439)      (17,778)
Long-term obligations                                 $328,076      116,978      381,843      215,891       118,726
Convertible preferred securities                      $115,000      115,000      115,000            -             -
Shareholders' equity                                  $112,624      112,029      220,782      191,429       203,221
--------------------------------------------------------------------------------------------------------------------
</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".

                                       12
<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 acquired McCormick & Schmick Holding Corp. ("McCormick & Schmick's") and
Hops  Restaurant  Bar & Brewery  ("Hops") in March 1997 and Canyon  Cafes,  Inc.
("Canyon Cafe") in July 1997. The pro forma information presented herein assumes
that these  acquisitions  had been  completed at the beginning of the respective
periods.  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  January  2, 2000  ("1999"),  the 53 weeks  ended  January  3, 1999
("1998") and the 52 weeks ended December 28, 1997 ("1997").

                          Consolidated Overview of 1999

     During 1999, Avado Brands, Inc. completed the divestiture of its franchised
Applebee's  Neighborhood  Grill & Bar ("Applebee's")  restaurants,  continued to
expand operations at its "core" brands which include Don Pablo's Mexican Kitchen
restaurants,  Hops,  McCormick &  Schmick's  and Canyon  Cafe and  continued  to
explore new investment  opportunities through the opening of two new restaurants
under  joint  venture  agreements  with  United  Kingdom-based  Belgo  Group PLC
("Belgo") and PizzaExpress PLC ("PizzaExpress").

     In August 1999, the Company  announced an initiative to evaluate  strategic
alternatives which could enhance and maximize shareholder value. On November 10,
1999, a management  group formed by Tom E. DuPree,  Jr., the Company's  Chairman
and Chief  Executive  Officer,  filed a  Schedule  13D with the  Securities  and
Exchange  Commission  indicating the  management  group was making a proposal to
acquire the Company. The Company received a letter outlining the proposal, which
is included as an exhibit to the Schedule 13D. In connection with this proposal,
a Special  Committee  of the  Company's  Board of  Directors,  comprised  of two
independent   directors,   was  formed.   The  Special   Committee  is  awaiting
management's  form of  acquisition  agreement  setting forth the final  proposed
terms and  conditions of the  acquisition  and will evaluate the proposal  along
with other strategic alternatives.

       Comparison of Historical Results - Fiscal Years 1999, 1998 and 1997

Restaurant Sales

     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
the Applebee's  brand which accounted for 39% of the Company's  revenues 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-sale  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.

     Restaurant  sales for 1998  increased  7% to  $862.7  million  from  $808.3
million in 1997  reflecting  increased  core brand  sales  which were  offset by
declining  revenues  associated  with the  divestitures  of the  Applebee's  and
Harrigans  brands.  In core brands,  1998 sales  increased 59% to $527.4 million
from $331.9  million in 1997. A  full-year's  sales  attributable  to the brands
acquired in 1997,  new unit growth,  increased  average unit volumes in Hops and
McCormick & Schmick's  and a 53-week  fiscal 1998  compared to a 52-week  fiscal
1997 contributed to the increase in core brand sales.  Operating weeks increased
by 60% in core brands due to a full-year's  sales from 50  restaurants  acquired
and 41 restaurants opened in 1997 and a partial-year's sales from 59 restaurants
opened in 1998,  partially offset by two Canyon Cafe restaurants closed in 1998.
Same-store-sale  comparisons  (for  restaurants  open a full  18  months  at the
beginning  of 1998) were  approximately  5% higher at Hops,  4% higher at Canyon
Cafe and 2% higher at both Don Pablo's and McCormick & Schmick's. On a pro forma
basis,  1998 core brand  restaurant  sales  increased by 44% and operating weeks
increased by 47% over 1997.

                                       13
<PAGE>
Restaurant Operating Expenses

     Consolidated  restaurant operating expenses as a percent of sales increased
130  basis  points  to 87.2% in 1999  from  85.9% in 1998.  The  resulting  1999
decrease in restaurant  operating  margins was principally due to an increase in
depreciation  from 2.0% of total  1998  sales to 3.2% of total  1999  sales as a
result of the declining  impact of the Applebee's  brand for which  depreciation
was suspended in December 1997 when the related assets were classified as assets
held for sale.

     The following  discussion of restaurant  operating expenses further focuses
on the percentages which certain items of expense bear to total restaurant sales
for (i) the Company's core brands and (ii) the Company's  brands which have been
discontinued  over  the  last  three  fiscal  years  which  include  Applebee's,
Harrigans, and Hardee's.

Core Brands

                                         Actual    Actual    Actual   Pro Forma
Fiscal                                    1999      1998      1997      1997
--------------------------------------------------------------------------------
 Restaurant sales:
   Canyon Cafe                            7.0%      9.1%      5.6%        9.3%
   Don Pablo's                           49.7      51.3      59.2        53.6
   Hops                                  23.2      20.2      14.9        15.7
   McCormick & Schmick's                 20.1      19.4      20.3        21.4
--------------------------------------------------------------------------------
 Total restaurant sales                 100.0     100.0     100.0       100.0
--------------------------------------------------------------------------------
 Restaurant operating expenses:
   Food and beverage                     28.4      28.0      27.8        27.9
   Payroll and benefits                  31.1      30.4      29.8        30.1
   Depreciation and amortization          3.3       3.2       3.7         3.6
   Other operating expenses              24.6      23.4      22.9        23.3
 -------------------------------------------------------------------------------
 Total restaurant operating expenses     87.4      85.0      84.1        84.9
 -------------------------------------------------------------------------------
 Income from restaurant operations       12.6%    15.0%      15.9%       15.1%
 -------------------------------------------------------------------------------

     Core  brand  restaurant  operating  expenses  for 1999 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  efforts
which  increased  other  operating  expenses  as well as food and  beverage  and
payroll and benefit  costs,  (ii)  additional  increases in payroll and benefits
related primarily to management labor costs 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.

     Increased marketing efforts impacted restaurant operating margins primarily
at Don Pablo's and Canyon Cafe. Don Pablo's typically spends  approximately 3.5%
of revenue on advertising, compared to total 1999 advertising expense of 4.9% of
revenue which was a result of a special  fourth  quarter  winter  campaign which
increased  advertising expense by $4.0 million. The fourth quarter program drove
customer   counts  and   traffic   at  the   restaurants   and  helped   improve
same-store-sale  comparisons  from 5%  negative in  September  to 2% positive in
December.   The   remainder  of  Don  Pablo's  1999   marketing   expenses  were
predominately related to a new summer promotional menu implemented in the second
quarter.  In  addition  to an impact on other  operating  expenses,  the  summer
promotion  resulted in an increase in food and beverage  expenses due to a focus
on higher cost food items and an increase in payroll and benefit costs resulting
from  increased  labor hours also  associated  with the menu changes.  Marketing
expenses at Canyon  Cafe were 5.8% of revenue in 1999  compared to 4.2% in 1998.
The 1999 increase was due to a  combination  of increased  marketing  efforts to
develop  brand  awareness  and a decrease in revenue  generated  by decreases in
average unit volumes and restaurant  closings.  On a total core brand basis, the
increased  food and beverage costs at Don Pablo's were  substantially  offset by
decreases at Hops gained  through a  combination  of  purchasing  contracts  for
chicken and red meat which stabilized  prices during 1999 and an increase in the
percentage of revenue from beer which has a lower cost.

                                       14
<PAGE>
     Increases in management labor were predominately attributable to management
base  pay  increases  at  Don  Pablo's  and  Hops  resulting  from   initiatives
implemented in 1999 to increase management depth and improve retention rates. In
addition,  in 1999 Hops added the new management  position of Service Specialist
to enhance customer service and quality control at each restaurant.

     Core  brand  restaurant  operating  expenses  for 1998 were  85.0% of sales
compared to 84.1% in 1997.  The increase was  primarily  attributable  to a full
year of  operations  related to the brands  acquired  in 1997 which  experienced
lower margins than the Don Pablo's  brand.  In addition,  the following  factors
also partially  contributed to the 1998 decrease in margins,  (i) an increase in
payroll  and  benefit  costs  related to an  increase  in the number of new unit
openings which typically  experience higher labor costs during the first several
months of  operations,  (ii) an increase in food and  beverage  costs  primarily
related to an increase in Hops' sales as a percentage  of total core brand sales
compared to prior year (Hops experiences higher food and beverage costs due to a
larger percentage of beef sales and a smaller  percentage of alcoholic  beverage
sales as compared  to the other  brands),  (iii) an increase in other  operating
expenses related primarily to an increase in advertising in Don Pablo's and Hops
and (iv) other operating costs also associated with an increase in the number of
new unit  openings  coupled  with the policy of  expensing  preopening  costs as
incurred which was adopted at the beginning of 1998.

Discontinued Brands

     For 1999 and 1998,  revenues  from the Company's  discontinued  brands were
solely attributable to Applebee's.  In 1999, Applebee's accounted for only 3% of
the Company's consolidated revenues.  Decreases in restaurant operating expenses
from  87.2%  in 1998 to  81.8%  in  1999  were  attributable  to a  decrease  in
preopening and training expenses due to no restaurant  openings in 1999 compared
to 15 Applebee's openings in 1998. In addition,  due to the Company's completion
of the  Applebee's  divestiture  early in 1999,  advertising  expenditures  were
substantially reduced from prior year levels.

     For  1998,  restaurant  operating  expenses  as a  percentage  of sales for
discontinued  brands  increased  to 87.2%  from  87.0% in  1997.  The  resulting
decrease in 1998 restaurant  operating  margins was principally due to increased
payroll  and  benefits  resulting  from  performance-based,   pay-to-stay  bonus
programs  implemented to control management  turnover and operating costs during
the Applebee's divestiture period.

General and Administrative Expenses

     General  and  administrative  expenses  related to core brands were 6.0% of
total core brand sales in 1999  compared to 6.5% in 1998 and 7.7% on a pro forma
basis for 1997. The 1999 decrease was primarily  attributable to leverage gained
from increases in absolute size at Don Pablo's,  Hops and McCormick & Schmick's.
General and  administrative  expenses  for all brands as a percent of sales were
5.9%  in  1999  compared  to 5.3% in 1998  and  4.9% in  1997.  Deleveraging  of
corporate expenses  associated with the sales from the divested Applebee's brand
was the primary contribution to the change in these rates.

Other Special Charges

     In 1999, the Company recorded a $2.2 million special charge reflecting fees
paid in  conjunction  with the  evaluation of strategic  alternatives  and other
amounts  associated with activities to reduce overhead costs,  including payroll
and employee  severance.  In the fourth quarter of 1998, programs were initiated
at Don  Pablo's,  Canyon  Cafe  and  the  Company's  corporate  headquarters  to
reorganize  management and reduce  overhead  costs. A charge of $2.9 million was
recorded,  the components of which related primarily to employee termination and
severance costs.

Interest and Other Expenses

     Interest expense decreased to $24.1 million from $25.3 million in 1998 as 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.  Interest  expense in 1998  increased to $25.3 million from
$20.5 million in 1997 due to higher average  borrowings  under revolving  credit
facilities.  These  increased  borrowings,  related to the  construction  of new
restaurants and the 1997  acquisitions,  were partially  offset by proceeds from
various  divestitures,  a  significant  portion  of which  were  used to  reduce
revolving debt  obligations.  The Company's  weighted  average  interest rate on
borrowings was approximately 9.5% in 1999, 8.0% in 1998 and 7.9% in 1997.

                                       15
<PAGE>
     "Gain on disposal of assets" primarily reflects the gains recognized on the
Applebee's  divestiture  of $7.8  million  in 1999 and  $81.3  million  in 1998.
Applebee's  divestiture  gains in both 1999 and 1998 were  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 $9.5 million
in notes  outstanding  at January 2, 2000,  against  which an  allowance of $2.5
million has been established.

     Income from investments  carried at equity reflects the Company's  pro-rata
share of earnings from its 20-percent  equity interest in Belgo offset by losses
associated  primarily with the start-up phase of two restaurants  opened in 1999
under the Company's joint venture  agreements with Belgo and  PizzaExpress.  The
Company also holds a  25-percent  equity  interest in 11  Harrigans  Grill & Bar
restaurants,  owned by Pinnacle  Restaurant  Group,  which are  currently  under
contract to be sold to a third  party.  The Company does not expect to realize a
significant gain or loss upon completion of this transaction.

         Other expenses  relate  primarily to  amortization  of goodwill.  Other
expenses  decreased in 1999 as a result of an increase in  miscellaneous  income
related  predominately  to rental income  received on various owned  properties.
Total 1998 other  expenses  were  comparable to 1997 as a result of increases in
amortization  expense  resulting from a full year of goodwill  amortization from
the brands acquired in 1997 which was offset by goodwill amortization related to
the  Applebee's  division  which was suspended in December 1997 when the related
assets were classified as assets held for sale.

Income Tax Expense

     Income tax expense as a percent of earnings  before  income taxes was 30.9%
in 1999  compared to 36.7% in 1998 and 32.4% in 1997.  The higher  effective tax
rate in 1998 as compared  to 1999 and 1997 is 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.

Net Earnings

     Net earnings as a percent of sales was 0.8% in 1999,  7.7% in 1998 and 3.5%
in 1997.  The  decrease  from  1998 to 1999 and  increase  from 1997 to 1998 was
primarily a result of the $72.5 million  pre-tax gain on disposal of assets held
for sale recorded in 1998. In addition,  the 1999  completion of the  Applebee's
divestiture resulted in a decrease in operating income as compared to 1998.

                         Liquidity and Capital Resources

     The Company's  historical  growth and its preference to own the real estate
on which its  restaurants  are situated  typically  cause it to be a net user of
cash,  even after a  significant  amount of expansion  financing  is  internally
generated  from  operations.  Based  on  the  current  and  projected  borrowing
environment, the Company has committed to strategies to reduce its leverage over
time.  The extent of projected new  restaurant  development  has been reduced in
2000 and 2001;  the  leasing of new sites to reduce  initial  capital  will take
preference  over ownership;  an aggressive  program to realize cash from various
non-operating  assets  has been  implemented;  and other  initiatives  to reduce
leverage are being evaluated.

     Principal  financing  sources in 1999  consisted  of net  proceeds of $95.5
million from the issuance of $100.0 million,  11.75% Senior  Subordinated  Notes
due June 15, 2009,  proceeds of $87.2 million from  completion of the Applebee's
divestiture and sale of other assets and cash generated from operations of $13.6
million.   The  principal  uses  of  funds  during  1999  consisted  of  capital
expenditures  of $84.4 million,  treasury stock acquired  primarily  through the
settlement  of equity  forward  agreements  of $74.8  million (net of collateral
payments on equity  forward  contracts)  and net  repayment of revolving  credit
facilities of $27.9.

                                       16
<PAGE>
     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,  accounts payable and accrued liabilities occur as a
result of new restaurant  openings and the timing of settlement of the Company's
liabilities.  Further  increases in prepaid expenses and other from 1998 to 1999
relate  primarily to the  reclassification  of $8.0 million in notes  receivable
from  noncurrent to current and new officer  loans of $3.0  million.  Additional
decreases in other noncurrent  assets occurred during 1999 primarily as a result
of the sale of various  other assets  including  certain  Applebee's  properties
which were initially leased to several buyers.

     In 1999,  the Company  completed  the private  placement of $100 million of
11.75%  senior  subordinated  notes due June 15, 2009.  The notes were priced at
98.561 to yield 12%. Subsequent to their issuance,  the notes were exchanged for
identical notes registered under the Securities Act of 1933. Simultaneously with
the notes  offering,  a new,  three-year  $125  million  bank  revolving  credit
facility was executed. The proceeds of the notes offering, the new bank facility
and the  final  Applebee's  divestiture  transactions  were  used  to  refinance
existing  credit  facilities,  settle equity  forward  contracts and provide for
future  working  capital  and other  corporate  purposes.  At  January  2, 2000,
revolving credit agreements aggregated $127.0 million of which $14.5 million was
unused  and  available.  Terms  of the  Company's  notes  and  revolving  credit
agreements  include various  provisions which,  among other things,  require the
Company to (i) maintain  defined net worth and coverage  ratios,  (ii) limit the
incurrence of certain liens or encumbrances in excess of defined amounts,  (iii)
maintain defined leverage ratios and (iv) limit certain  payments.  In addition,
the revolving credit agreement and notes contain cross-default  provisions which
allow maturity of the notes to be accelerated if the revolving  credit agreement
maturity  is  accelerated.As  amended  on  April 3,  2000,  the  Company  was in
compliance with the various provisions.

     The  Board  of  Directors,  from  time  to time  and  depending  on  market
conditions,  authorizes  the  Company to  purchase  shares of its  common  stock
through open market transactions. In connection with these programs, during 1998
the Company  paid $4.2 million to the holders of the 9.75% Senior Notes to allow
for  additional  share  repurchases.  During 1998, a total of 7.3 million shares
were  repurchased.  Also in 1998, third parties purchased a total of 8.3 million
shares of the Company's common stock pursuant to four equity forward  contracts,
one of which was settled in 1998 with the remaining three settled in 1999.

     Capital  expenditures  during 1999  provided for the opening of 18 Hops, 15
Don Pablo's and four McCormick & Schmick's in addition to ongoing refurbishments
of existing  restaurants.  The following table presents  anticipated  restaurant
openings for the core brands for 2000 and 2001:

                                              2000          2001
     ----------------------------------------------------------------
         Don Pablo's                            5             5
         Hops                                  11            11
         McCormick & Schmick's                  4             4
         Canyon Cafe                            2             2
     ----------------------------------------------------------------
            Total                              22            22
     ----------------------------------------------------------------

     Capital  requirements  for the  construction  of new  core  restaurants  is
expected to approximate $90 million in 2000 through 2001, a substantial  portion
of which is  expected  to be  generated  internally.  The  remaining  funds  are
expected to be available under  revolving  credit  facilities  expected to be in
place as the Company  completes  its  evaluation of  alternatives  to reduce its
leverage.

                               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.

                                       17
<PAGE>
     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 June 29, 1997,  and the
Company's other filings with the Securities and Exchange Commission.

                                    Year 2000

     Historically,  certain computer  programs were written and certain computer
chips were designed using two-digit year designations.  These programs and chips
may  experience  problems  handling  dates beyond 1999.  Incomplete  or untimely
resolution of these problems by the Company,  by its critical  suppliers,  or by
governmental  entities  could have a material  adverse  effect on the  Company's
consolidated  financial  position  or results of  operations.  Work on Year 2000
related  issues  began  in  1997  with  executive  awareness  programs  and  the
engagement of outside consultants to assist in developing a consistent Year 2000
methodology,  time  line and  project  plan.  An  inventory  and  assessment  of
information  technology  ("IT")  systems as well as non-IT systems was completed
during 1998 and the solution implementation and testing phases were completed in
1999.  As the Company has invested  primarily in licensed  software  rather than
developing it internally,  remediation efforts and related expenditures have not
been  material.  An evaluation of key suppliers to determine the status of their
Year 2000 compliance programs was also completed during 1999 and the Company has
developed   contingency   plans  to  address  all  aspects  of  operation  level
functionality and vendor management in the event unforseen  circumstances arise.
Currently,  the Company has not  experienced and does not anticipate any adverse
effects related to Year 2000.

                          New Accounting Pronouncements

     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.

     Also at the  beginning of fiscal 1998,  AICPA  Statement of Position  98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use" was adopted. This statement requires that certain costs related to
the  development  or  purchase  of  internal-use  software  be  capitalized  and
amortized over the estimated  useful life of the software.  The adoption of this
statement did not have a material effect on the Company's consolidated financial
position or results of operations in 1998 or 1999.

     Also at the  beginning of fiscal  1998,  the Company  adopted  Statement of
Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting  Comprehensive
Income",   which  established   standards  for  reporting  and  presentation  of
comprehensive  income and its components in a full set of financial  statements.
Comprehensive  income primarily  consists of net income and net unrealized gains
(losses) on foreign currency and is presented in the  consolidated statements of
stockholders'  equity and  comprehensive  income.  The  Statement  requires only
additional  disclosures in the consolidated  financial  statements,  it does not
affect the Company's  financial  position or results of  operations.  Prior year
financial  statements have been  reclassified to conform to the  requirements of
SFAS No. 130.



                                       18
<PAGE>
     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities."  As amended by SFAS No. 137,  "Deferral of
the Effective  Date of FASB  Statement No. 133",  SFAS 133 will be effective for
the Company's first quarter financial statements in fiscal 2001. The Company has
not  completed  its  evaluation  of the impact,  if any,  that  adoption of this
statement  will  have on its  consolidated  financial  position  or  results  of
operation.

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 rate U.S. LIBOR  obligations on revolving credit and interest rate swap
agreements.  Interest  rate swap  agreements  are  utilized  to  manage  overall
borrowing costs and reduce  exposure to adverse  fluctuations in interest rates.
Three  interest  rate swap  agreements  are  currently  in place under which the
Company pays an average of certain foreign or U.S.  LIBOR-based  variable rates.
These  agreements  also contain  interest rate caps which further limit interest
rate  exposures.   If  interest  rates  related  to  the  Company's  U.S.  LIBOR
obligations increased by 100 basis points over the rates in effect at January 2,
2000,  interest  expense  for fiscal  2000,  after  considering  the  effects of
interest rate swap agreements,  would increase by approximately $2.1 million. If
an additional 100 basis point  interest rate increase  occurred in the Company's
foreign LIBOR-based obligations,  interest expense in fiscal 2000 would increase
by an additional $1.2 million.  These amounts were determined by considering the
impact  of  hypothetical  interest  rates on the  Company's  borrowing  cost and
interest  rate swap  agreements.  In the  event of a change  of such  magnitude,
management  would  likely  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.

                                       19
<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                                                                 1999             1998             1997
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C>              <C>
Restaurant sales:
    Canyon Cafe                                                               $    43,319           48,187           18,577
    Don Pablo's                                                                   309,863          270,399          196,457
    Hops                                                                          144,488          106,329           49,511
    McCormick & Schmick's                                                         125,613          102,489           67,373
    Applebee's                                                                     21,176          335,288          454,127
    Other                                                                               -                -           22,275
----------------------------------------------------------------------------------------------------------------------------
          Total restaurant sales                                                  644,459          862,692          808,320
----------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
    Food and beverage                                                             182,896          241,689          225,302
    Payroll and benefits                                                          200,820          279,274          249,356
    Depreciation and amortization                                                  20,519           17,014           31,441
    Other operating expenses                                                      157,566          202,994          187,781
----------------------------------------------------------------------------------------------------------------------------
          Total restaurant operating expenses                                     561,801          740,971          693,880
----------------------------------------------------------------------------------------------------------------------------
General and administrative expenses                                                38,011           46,150           39,617
Asset revaluation and other special charges                                         2,186            2,940                -
----------------------------------------------------------------------------------------------------------------------------
Operating income                                                                   42,461           72,631           74,823
----------------------------------------------------------------------------------------------------------------------------
Other income (expense):
    Interest expense, net                                                         (24,073)         (25,313)         (20,504)
    Distributions on preferred securities                                          (8,050)          (8,205)          (6,412)
    Gain on disposal of assets                                                      1,972           72,547                -
    Income (loss) from investments carried at equity                                 (311)           1,025                -
    Other, primarily goodwill amortization                                         (4,079)          (5,641)          (5,834)
----------------------------------------------------------------------------------------------------------------------------
          Total other income (expense)                                            (34,541)          34,413          (32,750)
----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
   effect of change in accounting principle                                         7,920          107,044           42,073
Income taxes                                                                        2,450           39,300           13,625
----------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
   change in accounting principle                                                   5,470           67,744           28,448
----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
   principle, net of tax benefit                                                        -            1,461                -
----------------------------------------------------------------------------------------------------------------------------
Net earnings                                                                  $     5,470           66,283           28,448
============================================================================================================================

Basic earnings per common share:
      Basic earnings before cumulative effect of
            change in accounting principle                                    $      0.20             1.85             0.74
      Cumulative effect of change in accounting principle                               -            (0.04)               -
----------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share                                               $      0.20             1.81             0.74
============================================================================================================================

Diluted earnings per common share:
      Diluted earnings before cumulative effect of
            change in accounting principle                                    $      0.20             1.65             0.73
      Cumulative effect of change in accounting principle                               -            (0.03)               -
----------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share                                             $      0.20             1.62             0.73
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                                                       20
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Balance Sheets

(In thousands, except share data)
<CAPTION>
Fiscal Year End                                                                   1999            1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C>
Assets
Current assets:
      Cash and cash equivalents                                               $     11,267           7,216
      Accounts receivable                                                            7,257           9,124
      Inventories                                                                    9,097           8,599
      Prepaid expenses and other                                                    17,399           3,232
      Assets held for sale                                                           1,205          72,814
-----------------------------------------------------------------------------------------------------------
           Total current assets                                                     46,225         100,985

Premises and equipment, net                                                        424,968         367,587
Goodwill, net                                                                      135,176         138,005
Investments in and advances to unconsolidated affiliates                            17,411          16,106
Other assets                                                                        32,816          47,914
-----------------------------------------------------------------------------------------------------------
                                                                              $    656,596         670,597
===========================================================================================================

Liabilities and Shareholders' Equity
Current liabilities:
      Accounts payable                                                        $     21,620          28,474
      Accrued liabilities                                                           34,727          42,053
      Current installments of long-term debt                                            11         140,500
      Income taxes                                                                  28,159          28,091
-----------------------------------------------------------------------------------------------------------
           Total current liabilities                                                84,517         239,118

Long-term debt                                                                     328,076         116,978
Deferred income taxes                                                                8,943           8,200
Other long-term liabilities                                                          7,436           8,177
-----------------------------------------------------------------------------------------------------------
           Total liabilities                                                       428,972         372,473
-----------------------------------------------------------------------------------------------------------

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                                                           115,000         115,000
Temporary equity, net                                                                    -          71,095

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;
          40,478,760 issued in 1999 and 1998                                           405             405
      Additional paid-in capital                                                   144,872          63,431
      Retained earnings                                                            166,305         162,411
      Accumulated other comprehensive income                                          (278)             24
      Treasury stock at cost; 15,157,713 shares in 1999 and 8,910,174
           shares in 1998                                                         (198,680)       (114,242)
-----------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                              112,624         112,029
-----------------------------------------------------------------------------------------------------------
                                                                              $    656,596         670,597
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
                                                                       21
<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
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 29, 1996                    39,125       $391   $132,976    $70,981          -       ($12,919)       $191,429
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>    <C>         <C>             <C>      <C>             <C>
Net earnings                                         -          -          -     28,448           -             -          28,448
Purchase of common stock                             -          -          -          -           -       (22,995)        (22,995)
Issuance of common stock for acquisitions        1,298         13     16,323          -           -             -          16,336
Issuance of treasury stock for acquisitions          -          -       (922)         -           -         6,078           5,156
Common stock issued to benefit plans                46          1        688          -           -             -             689
Exercise of options                                 10          -     (4,814)         -           -         7,039           2,225
Tax effect of exercise of options by employees       -          -      1,018          -           -             -           1,018
Cash dividends ($0.038 per share)                    -          -          -     (1,524)          -             -          (1,524)
-----------------------------------------------------------------------------------------------------------------------------------
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
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.



                                                                       22
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Cash Flows

(In thousands)
Fiscal Year Ended                                                                     1999         1998          1997
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>           <C>
Cash flows from operating activities:
      Net earnings                                                              $     5,470        66,283       28,448
      Adjustments to reconcile net earnings to net cash
           provided by operating activities:
               Depreciation and amortization                                         26,176        23,221       39,972
               Deferred income taxes                                                    743        (6,031)       3,905
               Gain on disposal of assets                                            (1,972)      (72,547)          54
               Loss (income) from investments carried at equity                         311        (1,025)           -
               (Increase) decrease in assets:
                    Accounts receivable                                               1,863          (141)      (2,441)
                    Inventories                                                      (1,472)       (2,260)      (2,592)
                    Prepaid expenses and other                                           45         4,197       (1,965)
                Increase (decrease) in liabilities:
                     Accounts payable                                                (7,511)        3,655          703
                     Accrued liabilities                                             (9,534)       (4,725)      (1,447)
                     Income taxes                                                        68        28,091       (2,050)
                     Other long-term liabilities                                       (565)        2,309          164
--------------------------------------------------------------------------------------------------------------------------
                               Net cash provided by operating activities             13,622        41,027       62,751
--------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
      Capital expenditures                                                          (84,394)     (142,841)    (172,963)
      Proceeds from disposal of assets, net                                          87,152       373,814        5,798
      Investments in and advances to unconsolidated affiliates                       (2,475)      (15,057)           -
      Additions to noncurrent assets                                                   (969)      (24,633)      (5,676)
      Acquisition of businesses, net of cash acquired                                     -             -     (146,444)
--------------------------------------------------------------------------------------------------------------------------
                               Net cash provided by (used in) investing activities     (686)      191,283     (319,285)
--------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
      Proceeds from (repayment of) revolving credit agreements, net                 (27,920)     (114,726)     165,500
      Proceeds from issuance of long-term debt, net                                  95,467             -          823
      Principal payments on long-term debt                                              (32)       (8,500)        (865)
      Proceeds from issuance of preferred securities, net of issue costs                  -             -      111,261
      Proceeds from issuance of common stock                                              -           148        2,914
      Dividends declared and paid                                                    (1,576)       (1,777)      (1,524)
      Purchase of treasury stock                                                    (85,538)      (92,028)     (22,995)
      Collateral receipts (payments) on equity forward contracts                     10,714       (10,714)           -
--------------------------------------------------------------------------------------------------------------------------
                               Net cash provided by (used in) financing activities   (8,885)     (227,597)     255,114
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                  4,051         4,713       (1,420)
Cash and cash equivalents at the beginning of the period                              7,216         2,503        3,923
--------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period                              $    11,267         7,216        2,503
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.


                                                                       23

<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 30 states
plus the District of Columbia.  At January 2, 2000, the Company operated 137 Don
Pablo's Mexican Kitchen  restaurants  ("Don Pablo's"),  64 Hops Restaurant Bar &
Brewery  restaurants  ("Hops"),  26 McCormick & Schmick's  seafood dinner houses
("McCormick & Schmick's") and 16 Canyon Cafe restaurants ("Canyon Cafe"). All of
these  brands  are  owned  on a  proprietary  basis.  The  Company  also  owns a
20-percent  equity  interest  in Belgo  Group PLC  ("Belgo"),  a 16-unit  United
Kingdom-based  restaurant  company, a 25-percent equity interest in 11 Harrigans
Grill and Bar  Restaurants,  and a  50-percent  interest in two new  restaurants
operated  under separate joint venture  agreements  with Belgo and  London-based
PizzaExpress PLC ("PizzaExpress").

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  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  January  2,  2000
("1999"),  the 53 weeks ended  January 3, 1999  ("1998")  and the 52 weeks ended
December 28, 1997  ("1997").  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 various  properties held for sale at
January  2,  2000.  At  January  3,  1999,  assets  held for sale was  primarily
comprised of premises and equipment, franchise costs and goodwill related to the
Company's  Applebee's  division  (Note  2).  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.

Franchise Costs - Franchise  agreements for the divested Applebee's  restaurants
required  royalty fees equal to 4% of sales and advertising fees equal to 1 1/2%
of sales.  Such fees were expensed as incurred.  Total  royalty and  advertising
fees paid under franchise agreements were $1.2 million in 1999, $18.4 million in
1998 and $25.0 million in 1997.

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
cash flows using a discount rate reflecting the Company's average cost of funds.
Accumulated amortization of goodwill amounted to $9.4 million at January 2, 2000
and $ 5.9 million at January 3, 1999.  Amortization  expense was $3.5 million in
1999, $3.4 million in 1998 and $4.8 million in 1997.

                                       24
<PAGE>
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: $4.1 million in 1999, $5.0 million in 1998 and $4.7
million in 1997.

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
$28.7  million  in 1999,  $32.6  million in 1998 and $29.0  million in 1997,  in
addition to amounts paid to the franchisor of Applebee's.

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 14).

Interest Rate Contracts - Interest rate contracts are used  principally  for the
management  of interest  rate  exposures.  Differentials  to be received or paid
under  contracts  designated as hedges are recognized in income over the life of
the contracts as adjustments to interest expense.

Occasionally,  interest rate swap contracts are used for trading purposes. These
contracts are carried at fair value. Fair value for interest rate swap contracts
is based on pricing  models  intended to  approximate  the amounts that would be
received from or paid to a third party in settlement of the  contracts.  Factors
taken   into   consideration   include   credit   spreads,   market   liquidity,
concentrations,  and funding and administrative  costs incurred over the life of
the  instruments.  At January 2, 2000,  no  interest  rate swap  contracts  were
classified as trading instruments.

Counterparties to interest rate contracts are major financial  institutions with
which the Company  also has other  financial  relationships.  Exposure to credit
loss exists in the event of nonperformance by these counterparties. However, the
Company does not anticipate  nonperformance by the other parties and no material
loss would be expected from their nonperformance.

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.

Reclassifications - Certain accounts have been reclassified in the 1998 and 1997
financial statements to conform with the 1999 classifications.

                                       25
<PAGE>
Note 2 - Applebee's Divestiture

In December  1997,  the Company  announced  the decision to sell its  franchised
Applebee's  restaurants  in order to focus  on the  development  of  proprietary
restaurant  concepts  and  other  investment  opportunities.  During  1998,  the
divestiture was  substantially  completed 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 $9.5 million
in notes  outstanding at January 2, 2000. The current portion of the notes, $2.3
million,  is  included  in  "Prepaid  expenses  and  other" in the  accompanying
consolidated  balance  sheet;  the  remaining  notes,  net  of  a  $2.5  million
allowance, are included in "Other assets".

     "Gain on disposal of assets" in the accompanying consolidated statements of
earnings primarily  reflects the gains recognized on the Applebee's  divestiture
of $7.8 million in 1999 and $81.3  million in 1998.  Gains on the  completion of
the Applebee's  divestiture in  both 1999  and  1998 were offset  by  net losses
incurred on the divestiture of other various assets.

Note 3 - Other Special Charges

In  1999, the  Company  recorded a $2.2  million  special charge reflecting fees
paid in  conjunction  with the  evaluation of strategic  alternatives  and other
amounts  associated with activities to reduce overhead costs,  including payroll
and employee  severance.  In the fourth quarter of 1998, programs were initiated
at Don  Pablo's,  Canyon  Cafe  and  the  Company's  corporate  headquarters  to
reorganize  management and reduce  overhead  costs. A charge of $2.9 million was
recorded,  the components of which related primarily to employee termination and
severance costs.

Note 4 - Equity Investments and Acquisitions

During 1998,  the Company  acquired a 20-percent  interest in Belgo Group PLC, a
public  restaurant  company based in the United  Kingdom that owned and operated
two Belgo  restaurants  in London.  The  Company  has  invested  $15.2  million,
including  $0.4 million  invested in 1999, to acquire and maintain is 20-percent
interest.  Since  the  Company's  initial  investment,  Belgo  has  grown  to 16
restaurants, including six which were acquired in two separate transactions. The
investment in Belgo is accounted for under the equity method of accounting.  The
investment is 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.

In 1998,  the Company sold its  Harrigans  brand to Pinnacle  Restaurant  Group,
receiving  $3.0  million  in cash  plus a $4.0  million  note  and  retaining  a
25-percent equity interest in the ongoing business.  The transaction resulted in
a $0.6 million gain. Harrigans is currently under contract to be sold to a third
party.  The Company does not expect to realize a  significant  gain or loss upon
completion of this transaction.

In 1997, the Company acquired Canyon Cafes,  Inc., Hops Restaurant Bar & Brewery
and McCormick & Schmick Holding Corp. Each of the acquisitions was accounted for
using the purchase method.  Accordingly, a portion of the purchase consideration
was allocated to the net assets  acquired based on their  estimated fair values.
The aggregate fair value of identifiable assets acquired and liabilities assumed
was $68.0  million and $37.5  million,  respectively.  The  remaining  excess of
purchase  prices  over net assets  acquired,  $142.5  million,  was  recorded as
goodwill and is being amortized on a straight-line basis over 40 years.

                                       26
<PAGE>
Note 5 - Premises and Equipment

A summary of  premises  and  equipment  at  January 2, 2000 and  January 3, 1999
follows (amounts in thousands):


                                                 1999                 1998
  ------------------------------------------------------------------------------
     Land                                    $  71,930               69,154
     Buildings                                 250,108              198,554
     Equipment                                 109,314               79,371
     Leasehold improvements                     45,764               51,217
     Construction in progress                   19,395               23,628
  ------------------------------------------------------------------------------
       Total premises and equipment            496,511              421,924
       Less accumulated depreciation
            and amortization                    71,543               54,337
  ------------------------------------------------------------------------------
     Premises and equipment, net             $ 424,968              367,587
  ------------------------------------------------------------------------------

Note 6 - Long-Term Debt

Long-term debt at January 2, 2000 and January 3, 1999 consisted of the following
(amounts in thousands):

                                                        1999            1998
   ----------------------------------------------------------------------------
       Revolving credit agreements, unsecured,
          with variable rate interest
          (9.84% at January 2, 2000)                   $112,500        140,500
       Senior notes, unsecured                          116,500        116,500
       Senior subordinated notes, unsecured              98,633              -
       Other                                                454            478
   ----------------------------------------------------------------------------
            Total long-term debt                        328,087        257,478
            Less current installments                        11        140,500
   ----------------------------------------------------------------------------
            Long-term debt, excluding
              current installments                     $328,076        116,978
   ----------------------------------------------------------------------------


In  June  1999, the  Company  completed the  private placement of $100.0 million
of 11.75% Senior  Subordinated Notes due June 15, 2009. The notes were priced at
98.561 to yield 12.0%.  Subsequent  to issuance,  the notes were  exchanged  for
identical notes registered under the Securities Act of 1933. Simultaneously with
the notes  offering,  a new,  three year $125.0  million bank  revolving  credit
facility was executed. The proceeds of the notes offering, the new bank facility
and the  final  Applebee's  divestiture  transactions  were  used  to  refinance
existing  credit  facilities,  settle equity  forward  contracts and provide for
future working capital purposes. At January 2, 2000, revolving credit agreements
aggregated $127.0 million of which $14.5 million was unused and available. Terms
of  the  Company's  notes  and  revolving  credit  agreements   include  various
provisions  which,  among other  things,  require  the  Company to (i)  maintain
defined net worth and  coverage  ratios,  (ii) limit the  incurrence  of certain
liens or  encumbrances  in excess of defined  amounts,  (iii)  maintain  defined
leverage  ratios and (iv) limit  certain  payments.  In addition,  the revolving
credit agreement and notes contain cross-default provisions which allow maturity
of the notes to be accelerated  if the revolving  credit  agreement  maturity is
accelerated. As amended on April 3, 2000, the Company was in compliance with the
various provisions.

In 1996, $125.0 million of 9.75% Senior Notes were issued under a $200.0 million
shelf  registration.  The  notes  are  due  June   2006  with  interest  payable
semi-annually. In 1998, the Company repurchased $8.5 million of these notes.

Based on the borrowing rates  currently  available to the Company for loans with
similar  terms  and  average  maturities,  the  fair  value  of  long-term  debt
approximates the book value recorded.

The aggregate  annual  maturities of long-term debt for the years  subsequent to
January 2, 2000 are as follows:  2002 - $112.5  million,  2006 - $116.5 million,
2009 - $98.6 million and $0.5 million thereafter.

                                       27
<PAGE>
During  1999 and  1998,  the  Company  was  party to various  interest rate swap
agreements  with notional  amounts ranging from $75.0 million to $115.0 million.
At January 2, 1999,  three interest rate swap agreements were in place, two with
$100.0 million  notional  amounts and the third with a $115.0  million  notional
amount.  The Company's  $100.0 million swap agreements are a hedge of U.S. LIBOR
obligations  relating to  revolving  credit  facilities.  Under the terms of the
first  agreement,  the Company  pays an average of certain  foreign  LIBOR-based
variable rates (6.0% at January 2,2000) and receives a U.S. LIBOR-based variable
rate (6.2% at January 2,  2000).  Under the terms of the second  agreement,  the
Company pays a floating U.S.  LIBOR-based variable rate (6.1% at January 2,2000)
and receives a fixed rate of  6.2%. The remaining swap agreement  relates to the
7.0% fixed interest obligation on the Convertible Preferred Securities (Note 7).
Under the agreement,  the Company pays an average of certain foreign LIBOR-based
variable  rates  (5.9% at January 2, 2000) and  receives a 7.0% fixed  rate.  At
January 2, 2000,  the Company  estimates  that it would have paid  approximately
$9.3 million to terminate its swap agreements. Amounts received on interest rate
swap  agreements  accounted for as hedges  totaled $1.7 million in 1999 and $0.1
million in 1998.

On  April  3, 2000,  the  Company  amended  certain  covenants  related  to  its
revolving credit agreement and secured the amount that would have been necessary
to settle one of its interest rate swap agreements.


Note 7 - 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").

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 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.

Proceeds,  after  deducting  underwriters'  fees and other offering  expenses of
approximately $3.7 million,  of $111.3 million were used to repay revolving loan
advances  used for the  acquisition  of McCormick & Schmick's and to finance the
acquisition of Hops Restaurant Bar & Brewery, including in each case, retirement
of acquired company debt.

Note 8 - Leases

Various leases are utilized for restaurant 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.
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.

The Company has a $30.0 million master equipment lease agreement.  The agreement
provides for the rental of restaurant equipment for a five-year period,  subject
to renewal at the  Company's  option.  Pursuant to terms of the  agreement,  the
Company acted as purchasing agent for the lessor. Equipment was procured for new
restaurants,  with  payment  coming from the  lessor.  This  agreement  has been
accounted for as an operating lease for financial reporting purposes. At January
2, 2000, the $30.0 million commitment had been fully utilized.

                                       28
<PAGE>
Future minimum lease payments under noncancelable operating leases at January 2,
2000 are as follows (amounts in thousands):

              2000                                               $ 27,387
              2001                                                 27,899
              2002                                                 28,013
              2003                                                 25,101
              2004                                                 20,959
              Later years                                         113,028
             ------------------------------------------------------------
              Total minimum payments                             $242,387
             ------------------------------------------------------------

Total rental expense related to cancelable and  noncancelable  operating  leases
was $27.9  million in 1999,  $ 27.5  million in 1998 and $24.3  million in 1997.
Rental expense included contingent rentals of $2.1 million in 1999, $2.3 million
in 1998 and $1.0 million in 1997.

Note 9 - Accrued Liabilities

A summary of accrued  liabilities at January 2, 2000 and January 3, 1999 follows
(amounts in thousands):

                                                           1999         1998
              -----------------------------------------------------------------
               Payroll and related benefits              $13,417         13,584
               Insurance                                   5,210          6,615
               Gift certificates                           4,794          4,797
               Property taxes                              2,527          2,659
               Acquisition and divestiture costs           1,529          5,778
               Other                                       7,250          8,620
              -----------------------------------------------------------------
                                                         $34,727         42,053
              -----------------------------------------------------------------

                                       29
<PAGE>
Note 10 - 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):

                                                   1999       1998        1997
  ------------------------------------------------------------------------------
   Average number of common
     shares used in basic calculation             27,576     36,612      38,620
   Additional shares issuable
     pursuant to employee stock option
     plans at period-end market price                  -          9         206
   Shares issuable on assumed conversion
     of Convertible Preferred Securities               - *    7,774       6,101
  ------------------------------------------------------------------------------
   Average number of common
     shares used in diluted calculation           27,576     44,395      44,927
  ------------------------------------------------------------------------------
   Earnings before cumulative effect
     of change in accounting principle         $   5,470     67,744      28,448
   Cumulative effect of change in
     accounting principle, net of tax                  -      1,461           -
  ------------------------------------------------------------------------------
   Net earnings                                    5,470     66,283      28,448
   Distribution savings on assumed
     conversion of Convertible Preferred
     Securities, net of income taxes                   - *    5,415       4,336
  ------------------------------------------------------------------------------
   Net earnings for computation of
     diluted earnings per common share         $   5,470     71,698      32,784
  ==============================================================================
   Basic earnings before cumulative effect
     of change in accounting principle         $    0.20       1.85        0.74
   Cumulative effect of change in
     accounting principle                              -      (0.04)          -
  ------------------------------------------------------------------------------
   Basic earnings per common share             $    0.20       1.81        0.74
  ==============================================================================
   Diluted earnings before cumulative effect
     of change in accounting principle         $    0.20       1.65        0.73
   Cumulative effect of change in
     accounting principle                              -      (0.03)          -
  ------------------------------------------------------------------------------
   Diluted earnings per common share           $    0.20       1.62        0.73
  ==============================================================================

     *Diluted  earnings  (loss) per share ("EPS") for fiscal 1999 increases from
$0.20 to $0.31 when the 7.8 million shares related to the Convertible  Preferred
Securities are included in the  calculation.  As those shares are  antidilutive,
they are excluded from the computation of diluted EPS.

                                       30
<PAGE>
Note 11 - Supplemental Cash Flow Information

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

                                                      1999      1998      1997
 -------------------------------------------------------------------------------
   Interest paid                                    $23,322    25,739    20,452
 -------------------------------------------------------------------------------
   Distributions on preferred securities            $ 8,050     8,050     5,944
 -------------------------------------------------------------------------------
  Income taxes paid                                 $ 1,639    14,487     9,022
 -------------------------------------------------------------------------------
  Business acquisitions, net of cash acquired:
     Fair value of assets acquired, other than cash       -         -    64,861
     Liabilities assumed                                  -         -   (37,504)
     Merger consideration payable                         -         -    (1,890)
     Stock issued                                         -         -   (21,492)
     Purchase price in excess of net assets acquired      -         -   142,469
 -------------------------------------------------------------------------------
  Net cash used for acquisitions                    $     -         -   146,444
 -------------------------------------------------------------------------------

As  discussed  in note 2,  during  1999  and 1998  the  Company  sold 46 and 233
Applebee's  restaurants,  respectively.  The accompanying  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 and $281.3 million, decreases in assets not classified as held for
sale of $1.1 million and $5.5 million and  increases in accrued  liabilities  of
$1.0 million and $2.9 million, respectively.

Note 12 - Income Taxes

The  components of the provision for income taxes for the years ended January 2,
2000,  January  3,  1999 and  December  28,  1997  are as  follows  (amounts  in
thousands):

                                        Current    Deferred    Total
       ----------------------------------------------------------------
          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
       ----------------------------------------------------------------
          1997:
          Federal                     $  8,090      3,850       11,940
          State                          1,630         55        1,685
       ----------------------------------------------------------------
            Total                     $  9,720      3,905       13,625
       ----------------------------------------------------------------

                                       31
<PAGE>
A  reconciliation  of the  Federal  statutory  income tax rate to the  effective
income tax rate  applied to earnings  before  income  taxes in the  accompanying
consolidated statements of earnings for the years ended January 2, 2000, January
3, 1999 and December 28, 1997 follows:

                                                     1999       1998       1997
    ----------------------------------------------------------------------------
     Tax at federal statutory rate                   35.0%      35.0%     35.0%
     Increase (decrease) in taxes due to:
     State income tax, net of
          federal benefit                             2.8        4.1       4.0
     FICA tip and targeted
          jobs tax credits                          (25.7)      (3.4)    (10.1)
     Nondeductible goodwill                          13.5        1.0       2.0
     Other, net                                       5.3          -       1.5
    ----------------------------------------------------------------------------
     Effective tax rate                              30.9%      36.7%     32.4%
    ----------------------------------------------------------------------------

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax  liabilities  at January 2, 2000 and
January 3, 1999 are presented below (amounts in thousands):

                                                           1999           1998
    ----------------------------------------------------------------------------
      FICA tip credits not yet taken for
        federal tax purposes                           $ 13,492           2,392
      Asset impairment charges recorded
        for financial statement purposes
        but not yet taken for tax purposes                5,919          10,311
      Other                                               6,412           7,092
    ----------------------------------------------------------------------------
                   Total deferred tax assets             25,823          19,795
    ----------------------------------------------------------------------------
      Depreciation and amortization taken for
        tax purposes in excess of amounts taken
        for financial reporting purposes                (30,474)        (25,499)
      Other                                              (4,292)         (2,496)
    ----------------------------------------------------------------------------
      Deferred tax liability                           $ (8,943)         (8,200)
    ----------------------------------------------------------------------------

A  valuation  allowance  for  deferred  tax assets has not been  recorded  as of
January 2, 2000 or January 3, 1999. 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.

Note 13 - 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):

                                              1999          1998         1997
           ---------------------------------------------------------------------
           Interest cost capitalized       $  1,374         1,426        2,509
           Interest cost expensed            24,073        25,313       20,504
           ---------------------------------------------------------------------
                      Total                $ 25,447        26,739       23,013
           =====================================================================

                                       32
<PAGE>
Note 14 - 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 1992 DF&R  Stock  Option  Plan (the "DF&R  Option  Plan")  provides  for the
granting of 1,000,000  shares of common  stock to key  officers,  directors  and
employees.  Options  awarded under the DF&R Option Plan prior to the merger were
adjusted based on the exchange ratio of 1.5 shares of the Company's common stock
for each share of DF&R common stock.  Options awarded under the DF&R Option Plan
are generally granted at prices which equate to fair market value on the date of
grant. With limited exceptions,  all options are generally exercisable beginning
one year from the date of grant with annual  vesting  periods and  terminate not
later  than five years from the date of grant.  Management  does not  anticipate
granting any additional options under the DF&R Option Plan.

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 and
diluted  earnings  per share  would  have been  reduced  by  approximately  $2.3
million,  or $0.08 per share in 1999,  $0.6 million,  or $0.01 per share in 1998
and $2.3 million,  or $0.05 per share in 1997. The effects of 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  1999 is  estimated  as $5.22 on the  date of  grant  using  the
Black-Scholes  option-pricing  model with the  following  assumptions:  dividend
yield 1.4%,  volatility of 70%, risk-free interest rate of 6.5%, 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 29, 1996        2,494,192     $17.66        470,135
 Granted in 1997                         1,412,694      14.46
 Exercised in 1997                        (334,296)      6.66
 Canceled in 1997                         (574,460)     19.15
--------------------------------------------------------------------------------
 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
================================================================================

                                       33
<PAGE>
The following table  summarizes  information  concerning  currently  outstanding
and exercisable options:

                         Options Outstanding                Options Exercisable
               ------------------------------------------ ----------------------
                                                                        Average
  Exercise                      Average      Exercise                  Exercise
 Price Range      Shares          Life         Price        Shares       Price
--------------------------------------------------------- ----------------------
$ 5.01 - $10.00    1,489,123      9.15        $ 9.16           375     $ 8.33
$10.01 - $15.00      762,358      6.91         13.43        41,165      12.74
$15.01 - $20.00      527,191      6.12         19.23        90,309      19.94
$20.01 - $25.00      285,102      6.03         21.12        60,582      21.23
$25.01 - $30.00       19,400      6.41         25.68         1,940      25.68
--------------------------------------------------------- ----------------------
    Total          3,083,174      7.77       $ 13.15       194,371     $18.85
========================================================= ======================

15 - Employee Benefit Plans

A   noncontributory   Employee   Stock   Ownership   Plan  (the  "Plan")  covers
substantially all full-time employees. In accordance with the terms of the Plan,
the Company may make  contributions  to the Plan 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 Plan was $0 in 1999, $0.5 million in
1998, $0 in 1997.

The Avado Brands, Inc. Profit Sharing Plan and Trust,  established in accordance
with Section 401(k) of the Internal Revenue Code, 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  were $0.5 million in 1999, $0.4
million in 1998, $0.5 million in 1997.

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 Company
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. No Company matching contributions were made in 1999.

Note 16 - Shareholders' Equity and Equity Forward Contracts

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  primarily  through the  settlement of equity
forward contracts.  During 1998, the Company paid $4.2 million to the holders of
the 9.75% Senior Notes to allow for additional  share  repurchases and purchased
7.3 million of its common shares for $92.0 million through a combination of open
market  transactions  and equity forward  contracts.  At January 3, 1999,  third
party acquisition costs for shares held under equity forward  contracts,  net of
collateral  deposits  made by the Company,  are  reflected  in the  accompanying
consolidated  balance sheet as "Temporary  equity,  net". At January 2, 2000, no
equity forward contracts remained outstanding.

                                       34
<PAGE>
Note 17 - 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  $4.0  million and is  co-guarantor  of a $5.0  million  revolving
credit  facility  relating to its joint ventures with Belgo. At January 2, 2000,
$4.6 million was outstanding under this facility.  In connection with Applebee's
divestiture  transactions  completed  during 1999 and 1998, the Company  remains
contingently liable for lease obligations  relating to 85 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  $46.9  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.

Seven  lawsuits  were filed against the Company and certain of its directors and
officers in November and December 1999 and are currently pending in the Superior
Court of Morgan County,  Georgia.  The cases are related  purported class action
lawsuits brought on behalf of certain shareholders.  The plaintiffs' allegations
are based on a  proposal  by a  three-person  management  group to  acquire  the
Company. All seven lawsuits (which Company counsel believes may be consolidated)
generally  allege that the offer being made by the  management  group is unfair,
and that the price  being  proposed  as payment  for  Company  common  shares is
inadequate.  The plaintiff  shareholders allege that it would be a breach of the
Board's  fiduciary  duties to the  Company and the  shareholders  to approve the
proposal and consummate the transaction  being proposed by the management group.
The shareholders are seeking injunctive relief, an unspecified amount of damages
allegedly  arising  from the acts of the  Defendants,  and costs and  attorneys'
fees.  The Company's  Board of Directors  has  appointed a special  committee of
disinterested  directors  to  evaluate  the merits of the offer and to  consider
other strategic alternatives for the Company.

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 will again  consider the motion to dismiss the
case, and the  defendants  renewed their motion to dismiss in December 1999. The
Company is awaiting the court's  ruling.  Although  the ultimate  outcome of the
remaining  lawsuit cannot be determined at this time, the Company  believes that
the  allegations  therein are without  merit and  intends to  vigorously  defend
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.

Note 18 - Related Party Transactions

At January 2, 2000 and January 3, 1999, the Company held three notes  receivable
from Tom E. DuPree,  Jr., the Chairman of the Board and Chief Executive  Officer
of the  Company,  totaling  $7,851,500.  These  notes  are due in  November  and
December of 2000,  or earlier upon demand of the Company,  and bear  interest at
7.0% per annum with interest payable at maturity. In addition,  the Company held
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 due on June 30,  2000 and bear  interest at
9.84%  with  interest  payment  due at  maturity.  The  Company  also  holds  an
additional  note  receivable  from Mr. DuPree in the amount of $3,000,000 due on
June 30,  2000,  bearing  interest at 9.84% per annum and secured by real estate
owned by Mr. DuPree.  At January 2, 2000, the $11.0 million in notes  receivable
were included in "Prepaid  expenses and other" in the accompanying  consolidated
balance  sheet.  At January 3, 1999,  the $8.0 million in notes  receivable  was
included in "Other assets".

                                       35
<PAGE>
Note 19 - Quarterly Financial Data (unaudited)

                               First    Second     Third     Fourth      Total
                              Quarter   Quarter   Quarter    Quarter      Year
--------------------------------------------------------------------------------
 1999:
 Restaurant sales           $ 164,075   164,721   157,251    158,412   644,459
 Gross profit*              $  67,244    67,039    65,541     60,919    60,743
 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**

 1998:
 Restaurant sales           $ 241,676   239,843   204,442    176,731   862,692
 Gross profit*              $  95,711    95,136    79,965     70,917   341,729
 Net earnings (loss)        $  38,539     6,325    24,438     (1,558)   67,744
 Basic earnings
   (loss) per share***      $    0.99      0.17      0.67      (0.05)     1.85
 Diluted earnings
   (loss) per share***      $    0.85      0.17      0.58      (0.05)     1.65


                 * 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 the fourth
        quarters  of  1999  and  1998  and  for  the  fiscal  year  ended  1999
        increases from $(0.35) to $(0.23), $(0.05) to $0.00, and $0.20 to $0.31,
        respectively,  when the Convertible Preferred Securities are included in
        the  calculation.  As those shares are  antidilutive,  they are excluded
        from the computation of diluted EPS.

                *** Amounts are presented before the cumulative effect of change
        in accounting principle related to preopening expenses.

NOTE 20 - 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
January 2, 2000 and January 3, 1999,  these  partnerships  in the  non-guarantor
subsidiaries  operated 51 and 36,  respectively,  of the Company's  restaurants.
Accordingly,  condensed  consolidated  balance  sheets as of January 2, 2000 and
January 3, 1999,  and  condensed  consolidated  statements  of earnings and cash
flows for the fiscal years ended  January 2, 2000,  January 3, 1999 and December
29,  1998  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.

                                       36
<PAGE>
<TABLE>
                  Condensed Consolidated Statement of Earnings
                             Fiscal Year Ended 1999
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                         Guarantor        Non-Guarantor
                                                        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
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                         Guarantor        Non-Guarantor
                                                        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
General and administrative expenses                           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>
<TABLE>
                  Condensed Consolidated Statement of Earnings
                             Fiscal Year Ended 1997
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                         Guarantor        Non-Guarantor
                                                        Subsidiaries      Subsidiaries      Eliminations    Consolidated
----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                        <C>                  <C>        <C>
Restaurant sales                                     $      776,410             31,910               -          808,320
Restaurant operating expenses                               665,347             28,533               -          693,880
General and administrative expenses                          38,136              1,481               -           39,617
----------------------------------------------------------------------------------------------------------------------------
Operating income                                             72,927              1,896               -           74,823
----------------------------------------------------------------------------------------------------------------------------
Other income (expense)                                      (32,085)              (665)              -          (32,750)
Earnings before income taxes                                 40,842              1,231               -           42,073
Income taxes                                                 13,200                425               -           13,625
----------------------------------------------------------------------------------------------------------------------------
Net earnings                                         $       27,642                806               -           28,448
============================================================================================================================
</TABLE>

                                       37
<PAGE>
<TABLE>
                    Condensed Consolidated Balance Sheet
                              Fiscal Year End 1999
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                         Guarantor        Non-Guarantor
                                                        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>
<TABLE>

                      Condensed Consolidated Balance Sheet
                              Fiscal Year End 1998
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                         Guarantor        Non-Guarantor
                                                        Subsidiaries      Subsidiaries      Eliminations    Consolidated
----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                        <C>            <C>              <C>
ASSETS
Current assets                                       $       99,129              1,856               -          100,985
Premises and equipment, net                                 309,919             57,668               -          367,587
Goodwill, net                                               116,014             21,991               -          138,005
Investments carried at equity                                16,106                  -               -           16,106
Other assets                                                 47,588                326               -           47,914
Intercompany investments                                     44,699                  -         (44,699)               -
Intercompany advances                                        33,103                  -         (33,103)               -
----------------------------------------------------------------------------------------------------------------------------
                                                     $      666,558             81,841         (77,802)         670,597
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                                  $      235,497              3,621               -          239,118
Long-term liabilities                                       132,937                418               -          133,355
Intercompany payables                                             -             33,103        (33,103)                -
Convertible preferred securities                            115,000                  -               -          115,000
Temporary equity, net                                        71,095                  -               -           71,095
Shareholders' equity                                        112,029             44,699        (44,699)          112,029
----------------------------------------------------------------------------------------------------------------------------
                                                     $      666,558             81,841        (77,802)          670,597
============================================================================================================================
</TABLE>

                                       38
<PAGE>
<TABLE>
                 Condensed Consolidated Statement of Cash Flows
                             Fiscal Year Ended 1999
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                           Guarantor      Non-Guarantor
                                                          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 proceeds from (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 cash equivalents at the beginning of the period      7,162                 54               -            7,216
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period      $    11,190                 77               -           11,267
============================================================================================================================
</TABLE>
<TABLE>
                 Condensed Consolidated Statement of Cash Flows
                             Fiscal Year Ended 1998
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                           Guarantor      Non-Guarantor
                                                          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 proceeds from (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 cash equivalents at the beginning of the period      2,471                 32               -            2,503
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period      $     7,162                 54               -            7,216
============================================================================================================================
</TABLE>

                                       39
<PAGE>
<TABLE>

                Condensed Consolidated Statement of Cash Flows
                             Fiscal Year Ended 1997
                                 (In thousands)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                           Guarantor      Non-Guarantor
                                                          Subsidiaries     Subsidiaries     Eliminations     Consolidated
----------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                    <C>                   <C>       <C>
Net cash provided by operating activities               $    61,360              1,391               -           62,751
Cash flows from investing activities:
     Capital expenditures                                  (159,890)           (13,073)              -         (172,963)
     Proceeds from disposal of assets, net                    5,798                  -               -            5,798
     Other investing activities                            (151,515)              (605)              -         (152,120)
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities        (305,607)           (13,678)              -         (319,285)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Net proceeds from (repayment of) revolving
        credit agreements                                   165,500                  -               -          165,500
     Purchase of treasury stock                             (22,995)                 -               -          (22,995)
     Proceeds from (payment of) intercompany advances       (12,299)            12,299               -                -
     Other financing activities                             112,609                  -               -          112,609
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities         242,815             12,299               -          255,114
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents         (1,432)                12               -           (1,420)
Cash and cash equivalents at the beginning of the period      3,903                 22               -            3,923
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period      $     2,471                 32               -            2,503
============================================================================================================================
</TABLE>

                                       40
<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 January 2, 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 January 2, 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

                                       41
<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 January 2, 2000 and January 3, 1999, 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 January 2, 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  generally  accepted  auditing
standards.  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 January 2, 2000 and January 3, 1999, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended January 2, 2000, in conformity with generally  accepted
accounting principles.

     As discussed in Note 1 to the consolidated  financial  statements,  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 28, 2000, except for the last paragraph of Note 6, which is as of April
3, 2000

                                       42
<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

                                    DIRECTORS

     Tom E. DuPree,  Jr.  founded the Company and has been Chairman of the Board
of Directors and Chief  Executive  Officer of the Company since its formation in
1986.  Mr.  DuPree  has  been  actively  involved  in  developing  and  managing
restaurants  since 1978. He is a graduate of the Georgia Institute of Technology
and holds a Master's  degree in Accounting  from Georgia State  University.  Mr.
DuPree is 47 years old.

     Erich J. Booth became a director of the Company in June 1997. Mr. Booth has
served as the Chief  Financial  Officer and Treasurer of the Company since 1991.
In addition,  in 1998 he became Acting Group President of the Company's Hops and
McCormick & Schmick's  brands.  Before  joining the Company,  Mr. Booth had been
Vice  President of Finance of Dun &  Bradstreet  Software  (formerly  Management
Science  America,  Inc.)  since  1989.  From  1984 to 1989,  he  served  as Vice
President  and Chief  Financial  Officer  of Ward  White USA  Holding,  Inc.,  a
diversified,  United  Kingdom-based  parent,  specialty  retailer.  Mr. Booth, a
Certified  Public  Accountant,  worked  from  1973 to 1984  for  Peat,  Marwick,
Mitchell  & Co.  He is a  graduate  of  the  University  of  North  Carolina  at
Greensboro. Mr. Booth is 51 years old.

     Dr. Ruth G. Shaw  became a director  of the  Company in May 1996.  She also
serves as Chairperson of the  Compensation  and Human Resources  Committee.  Dr.
Shaw is  Executive  Vice  President  and Chief  Administrative  Officer for Duke
Energy  Corporation.  She  joined  Duke  Energy  in 1992 as  Vice  President  of
Corporate Communications,  was named Senior Vice President in 1994 and Executive
Vice  President  in 1997.  Prior to joining Duke  Energy,  she was  President of
Charlotte's  Central Piedmont Community College from 1986 to 1992. Dr. Shaw is a
director of First Union Corporation and of TEPPCO. Dr. Shaw is 52 years old.

     John L. Moorhead  became a director of the Company in January 1997. He also
serves as  Chairperson  of the Audit  Committee.  Mr.  Moorhead is  President of
Bestfoods Affiliates.  He joined Bestfoods in 1992 as Vice President of Business
Management and Marketing.  Prior to joining Bestfoods, he was with PepsiCo, Inc.
from 1979 to 1991 and last served as Vice  President of  Marketing  Services for
the  Pepsi-Cola  Company,  a division of  PepsiCo,  Inc.  Prior to  establishing
Pepsi-Cola's Marketing Services Group, Mr. Moorhead had served as Vice President
of Marketing for the Taco Bell Worldwide  Division,  Marketing Director at Frito
Lay and within the brand management  system at General Mills. Mr. Moorhead is 57
years old.

                              DIRECTOR COMPENSATION

     Directors,  who are not officers of the Company, receive an annual retainer
of  $20,000,  plus  $1,000  for each  Board  meeting  attended,  $1,000 for each
committee  meeting  attended,  $500 for each special  meeting in which he or she
participates by telephone and reimbursement of out-of-pocket expenses. Directors
also receive an annual  retainer of $3,000 for serving as chairperson of a Board
committee.

                                       43
<PAGE>
     In 1999,  the  Committee  recommended  and the Board  approved a  temporary
amendment to the outside director  compensation plan, the effect of which was to
eliminate  the  committee  meeting  fee  and  provide  for a fee of  $1,500  per
committee  meeting  attended  for the  committee  chairperson.  Under  the basic
compensation  plan as amended,  described above, the Company's outside directors
received total meeting fees and retainers of approximately $38,000 each in 1999.

     Directors may elect  annually to defer receipt of their cash  compensation,
or any portion thereof, and receive credits of deferred stock units, pursuant to
the Company's Outside Director Deferred Stock Unit Plan.

     The  Board  established  a  Special  Committee  in 1999  consisting  of the
Company's outside  directors for the purpose of evaluating  alternatives for the
future  ownership,  financing and operation of the Company  including a proposal
involving the acquisition of the Company by certain  members of management.  The
Board approved a separate plan for compensating the outside  directors for their
service on the Special Committee (the "Committee") as follows:

     a monthly  retainer of $10,000 for the first month  following  formation of
the  Committee,  $5,000 for each of the second and third  months  following  the
formation of the Committee and $2,500 for each month thereafter;

     a meeting fee of $1,000 for each meeting attended;

     a  retainer  of  $10,000  for  Dr.  Shaw as lead  Director  of the  Special
Committee;

     reimbursement of out of pocket expenses incurred in attending meetings.

     The Company paid  retainers and meeting fees to Dr. Shaw of $31,000 and Mr.
Moorhead of $21,000 for their service on the Special Committee in 1999.

     The Special  Committee  retained  the  services of James W. Rowe,  a former
member of the Board of Directors of the Company, as an advisor to the Committee.
Mr. Rowe receives $5,000 per month for each of the first three months of service
and  $2,500  per  month   thereafter  plus  $1,000  per  meeting   attended  and
reimbursement  of expenses.  In 1999,  the Company paid Mr. Rowe $14,000 for his
service as advisor to the Committee.

     In addition to cash  compensation,  each outside  director  received  stock
option  grants of 7,832  shares at the market  price of the stock on the date of
grant and vested at the rate of 33% per year for three years.

     Directors  who  are  also  officers  of  the  Company  do not  receive  any
additional compensation for serving as directors.

                               EXECUTIVE OFFICERS

     In addition to the directors named above, the following  persons also serve
as executive officers of the Company.

     John G. McLeod,  Jr. has served as Senior Vice President of Human Resources
since 1992,  Vice President of Human Resources from 1987 to 1992, and a director
and Secretary of the Company since its formation in 1986. Mr. McLeod rotated off
the Board of Directors  in December  1997,  but  continues to serve as Corporate
Secretary and Senior Vice President of Human  Resources.  From 1983 to 1987, Mr.
McLeod was the  Personnel  Director of a  predecessor  of the  Company.  He is a
graduate of Wofford College. Mr. McLeod is 56 years old.

     Margaret E.  Waldrep was  elected to the  position of Chief  Administrative
Officer of the Company in May 1997. In addition, in 1998 she became Acting Group
President  of the  Company's  Don Pablo's and Canyon Cafe  brands.  Ms.  Waldrep
joined the Company in 1985.  From 1978 to 1985,  Ms.  Waldrep  was a  long-range
planner with the Greenville Planning Commission in Greenville, S.C. She earned a
Bachelor's degree in Political Science in 1977 and a Master's degree in City and
Regional Planning in 1979 from Clemson  University in Clemson,  S.C. Ms. Waldrep
is 43 years old.

                                       44
<PAGE>
     Louis J. Profumo  joined the Company in July 1997 as Senior Vice  President
of Planning and  Acquisitions  and was  appointed to the position of Senior Vice
President of Finance and Chief Accounting  Officer in November 1998. Mr. Profumo
ended his  employment  with the  Company in March 2000.  From 1974 to 1997,  Mr.
Profumo  worked for KPMG Peat Marwick LLP serving as an Audit Partner since 1986
in the firm's  manufacturing,  retailing and distribution  practice. He received
both a  bachelor's  of  science  degree  in hotel  administration  in 1973 and a
master's of business administration in 1974 from Cornell University. Mr. Profumo
is 48 years old.

     There are no family  relationships  among the Company's  executive officers
and  directors.  Officers of the Company  serve at the  pleasure of the Board of
Directors.  The term of office for each director of the Company ends at the next
annual  meeting of the  Company's  shareholders  or when his or her successor is
elected and has qualified.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Pursuant to Section 16(a) of the Securities Exchange Act of 1934, officers,
directors  and  beneficial  owners of more than ten  percent of the  outstanding
Common  Stock are  required to file  reports  with the  Securities  and Exchange
Commission  reporting their beneficial ownership of the Common Stock at the time
that they become subject to the reporting requirements and changes in beneficial
ownership  occurring  thereafter.  Based on a review of reports submitted to the
Company  and written  representations  from  persons  known to the Company to be
subject to these  reporting  requirements,  the Company  believes  that all such
reports  due in 1999 were filed on a timely  basis with the  exception  that the
Company filed a Form 4 on behalf of each Messrs. DuPree, McLeod, Booth, Profumo,
and Ms.  Waldrep,  approximately  one month late.  Each of these  forms  related
solely to the granting of stock  options  pursuant to the  Company's  1995 Stock
Incentive  Plan and were filed late as a result of the timing of grant  approval
by the Company's Compensation and Human Resources Committee.

                                       45
<PAGE>
Item 11.  Executive Compensation
--------------------------------

     The following  table  summarizes  the  compensation  paid or accrued by the
Company for services  rendered during the years indicated to the Chief Executive
Officer and the four most highly compensated executive officers,  other than the
Chief Executive Officer. The Company did not grant any stock appreciation rights
or make any long-term  incentive  plan payouts  during the years  indicated.  In
1999,  the  Company's  Compensation  and Human  Resources  Committee  approved a
Management  Severance  Plan  that  provides  severance  benefits  to  any  named
executive  officer,  in addition to certain other  management  employees,  whose
employment  is  terminated  within one year of and due to a change in control of
the  Company.  The amount of  severance  payment  depends  on the  participant's
position in the  Company and is  calculated  as a multiple  of base  salary.  No
benefits were paid pursuant to this plan in 1999.
<TABLE>
                                                                                   Long-Term
                                                                                 Compensation
                                                                           -----------------------
                                                 Annual Compensation       Restricted  Securities         All Other
                                            ---------------------------     Stock      Underlying       Compensation
    Name and Principle Position   Year      Salary ($)(1)  Bonus ($)(2)     Awards     Options (#)        ($) (3)
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>               <C>                <C>     <C>               <C>
Tom E. DuPree, Jr.                1999      525,000           255,398            -       805,594           397,744
Chairman and Chief Executive      1998      525,000           269,600            -             -           265,762
Officer                           1997      425,000                 -            -             -           195,470

Erich J. Booth                    1999      335,000           118,977            -       112,447             1,744
Chief Financial Officer and       1998      245,000           141,000            -             -             5,226
Treasurer                         1997      230,000                 -            -        10,125             4,600

Margaret E. Waldrep               1999      335,000            83,045            -       112,448             1,744
Chief Administrative Officer      1998      220,000            82,950            -             -             5,226
                                  1997      171,291                 -            -         6,835             3,426

Louis J. Profumo  (4)             1999      240,000            64,261            -        33,566             1,744
Chief Accounting Officer          1998      259,965            45,740            -             -             5,226
                                  1997      111,635                 -       72,500        65,000                 -

John G. McLeod, Jr.               1999      126,000            67,045            -        17,622             1,744
Senior Vice President of Human    1998      120,000            82,950            -             -             3,919
Resources and Secretary           1997      120,000                 -            -             -             2,400
</TABLE>

     (1)  1999  salary  amounts  for Mr.  Booth  and  Ms.  Waldrep  reflect  the
additional  responsibilities of Acting Group President of the Hops and McCormick
&  Schmicks's  brands and Acting  Group  President of the Don Pablo's and Canyon
Cafe brands, respectively.

     (2)  Amounts  shown in the  Bonus  column  for 1999  consist  primarily  of
payments  to the named  executive  officers  pursuant to the  Company's  Special
Transition Bonus Plan which was instituted in connection with the divestiture of
the Applebee's brand which was completed in 1999.

     (3) Except for Mr.  DuPree,  the amounts  shown in this  column  consist of
contributions  by the Company to its 401(k)  savings plan on behalf of the named
executive  officers,  and the  fair  market  value of  shares  of  Common  Stock
allocated to the executive  officer's account pursuant to the Company's Employee
Stock  Ownership  Plan and Trust  ("ESOP").  Mr. DuPree does not  participate in
either the ESOP or the 401(k)  plan.  The  amount  shown in this  column for Mr.
DuPree includes  $397,744  reflecting the current dollar value of the benefit to
Mr. DuPree of the unreimbursed  portion of the premiums paid by the Company with
respect to a split-dollar  insurance  agreement (See "Certain  Relationships and
Related Transactions" below for a description of such agreement),  which benefit
was determined by calculating  the time value of money (using the Company's 1999
weighted  average  borrowing rate of 9.54%) of the  unreimbursed  portion of the
premiums paid by the Company for the period ended January 2, 2000.

     (4) Mr. Profumo ended his employment with the Company in March 2000.

                                       46
<PAGE>
                        OPTION GRANTS IN LAST FISCAL YEAR

         The following table sets forth information  concerning  options granted
during the fiscal year ended  January 2, 2000,  under the  Company's  1995 Stock
Incentive Plan to the executives named in the Summary Compensation Table:

<TABLE>
                                   Individual Grants
                             ----------------------------
                                             Percentage of
                             Number of       Total Options
                             Securities        Granted to      Exercise or                          Grant Date
                             underlying       Employees in      Base Price        Expiration          Present
Name                      Options Granted         1999          ($/share)            Date           Value ($)(1)
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S>                            <C>               <C>              <C>             <C>
Tom E. DuPree, Jr.             600,000           40.3%            9.29            05/04/09           3,498,000
                               205,594           13.8%            9.70            01/04/09           1,252,067
Erich J. Booth                 112,447            7.6%            8.94            01/04/09             630,828
Margaret E. Waldrep            112,448            7.6%            8.94            01/04/09             630,833
Louis J. Profumo                33,566            2.3%            8.94            01/04/09             188,305
John G. McLeod, Jr.             17,622            1.2%            8.94            01/04/09              98,859
</TABLE>

            (1)   Grant   date   present   value   was   determined   using  the
                  Black-Scholes   option-pricing   model   with  the   following
                  assumptions:  dividend yield 1.39%,  volatility 70%, risk-free
                  interest rate 6.5% and an expected option life of 6.5 years.


               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND

                          FISCAL YEAR-END OPTION VALUES

     The  following  table  sets  forth  information  concerning  the  value  of
unexercised  options as of January 2, 2000 held by the  executives  named in the
Summary  Compensation  Table.  No options were exercised  during the fiscal year
ended January 2, 2000 by the executives named in the summary  compensation table
and no stock appreciation rights were outstanding during fiscal 1999.
<TABLE>
                                                                 Number of Shares         Value of Unexercised
                                                              Underlying Unexercised          In-the-Money
                                      Shares                        Options at                 Options at
                                     Acquired                     January 2, 2000 (#)       January 2, 2000 ($)
                                       on          Value      -------------------------   ------------------------
          Name                     Exercise(#)   Realized($)  Exercisable/Unexercisable   Exercisable/Unexercisable
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>          <C>                              <C>
Tom E. DuPree, Jr.                      -             -            46,305 / 959,005                 - / -
Erich J. Booth                          -             -            18,143 / 179,304                 - / -
Margaret E. Waldrep                     -             -            15,266 / 167,182                 - / -
Louis J. Profumo                        -             -                 - /  98,566                 - / -
John G. McLeod, Jr.                     -             -                 - /  17,622                 - / -
</TABLE>

                                       47
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

                 VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

     The following table sets forth certain information regarding the beneficial
ownership  of the  Company's  Common  Stock as of February  28, 2000 by (i) each
person known by the Company to own  beneficially  more than 5% of the  Company's
Common Stock,  (ii) each director and executive officer of the Company and (iii)
all executive officers and directors of the Company as a group.

                                                    Shares Beneficially
                                                        Owned(1)(2)
                                                 ----------------------------
                Name                              Number            Percent
-----------------------------------------------------------------------------
       Tom E. DuPree, Jr. (3)                    7,982,855            31.5%
       John G. McLeod, Jr. (4)                     258,448             *
       Erich J. Booth (5)                           68,254             *
       Margaret E. Waldrep (6)                      51,318             *
       Louis J. Profumo (7)                          7,357             *
       Dr. Ruth G. Shaw (8)                          4,000             *
       John L. Moorhead (9)                          1,249             *

       State of Wisconsin Investment Board (10)  3,786,000            15.0
       All directors and executive officers
                    as a group (7 persons) (11)  8,193,388            32.3%



     Mr.  DuPree  and the  State  of  Wisconsin  Investment  Board  are the only
shareholders known by the Company to be the beneficial owners of more than 5% of
the  Company's  Common Stock.  Mr.  DuPree's  address is Hancock at  Washington,
Madison,  Georgia 30650. The address of the State of Wisconsin  Investment Board
is P.O. Box 7842, Madison, Wisconsin 53707.
-------------------------------------------------
    *Less than one percent.

     (1) The named  shareholders  have sole  voting  and  investing  power  with
respect to all shares  shown as being  beneficially  owned by them  except  with
respect to the shares owned by the Company's  Employee Stock  Ownership Plan and
Trust ("ESOP").  Each  participant in the ESOP has the right to direct voting of
all  shares  allocated  to his  account  on all  matters.  Power to  direct  the
investment  of  shares  held by the ESOP  presently  rests  with  the  Company's
Employee  Benefit  Committee,  whose  members  are  Messrs.  DuPree and  McLeod;
however,  each ESOP participant,  age 55 and with 10 years of service, may elect
to direct the investment of 25% of shares allocated to his account.

     (2) Except as  indicated  below,  does not  include  shares  issuable  upon
exercise  of  stock  options.

     (3) Includes 645,812 shares held by various  Foundations,  Partnerships and
Trusts of which Mr. Dupree's wife is the sole trustee.  Includes  232,500 shares
held by DuPree  Holdings,  LLC.  Includes 46,305 shares which Mr. DuPree has the
right to acquire within 60 days upon the exercise of stock options at an average
exercise  price of $20.39.  Includes  171,631  shares held by the ESOP which are
allocated  to other  employees  and for which Mr.  DuPree has shared  investment
power.  See  Footnote  (1) above.  Mr.  DuPree is the  Chairman  of the Board of
Directors and Chief Executive Officer of the Company.

     (4) Includes  11,477 shares held by the ESOP which are vested and allocated
to Mr.  McLeod and 160,154  shares held by the ESOP which are allocated to other
employees and for which Mr. McLeod has shared investment power. See Footnote (1)
above.  Also includes 1,962 shares held in the Avado Brands,  Inc.  Supplemental
Deferred  Compensation  Plan.  Mr. McLeod is the Senior Vice  President of Human
Resources and the Secretary of the Company.

                                       48
<PAGE>
     (5) Includes  1,166 shares held by the ESOP which are vested and  allocated
to Mr.  Booth.  Includes  18,143 shares which Mr. Booth has the right to acquire
within 60 days upon the exercise of stock options at an average  exercise  price
of $19.64.  Mr. Booth is Chief Financial Officer and Treasurer and a Director of
the  Company.

     (6) Includes  7,296 shares held by the ESOP which are vested and  allocated
to Ms.  Waldrep.  Includes  15,266  shares  which Ms.  Waldrep  has the right to
acquire within 60 days upon the exercise of stock options at an average exercise
price of $20.00. Ms. Waldrep is Chief Administrative Officer of the Company.

     (7) Includes  3,000 shares held under a Restricted  Stock  Agreement.  Also
includes  1,357  shares held in the Avado  Brands,  Inc.  Supplemental  Deferred
Compensation  Plan.  Does not  include  264  shares  held by the ESOP  which are
allocated to Mr. Profumo but are unvested. Mr. Profumo is the former Senior Vice
President of Finance and Chief Accounting  Officer of the Company.

     (8) Includes 2,000 shares which Dr. Shaw has the right to acquire within 60
days upon the exercise of stock options at an average  exercise price of $21.25.
Dr. Shaw is a director of the Company.

     (9) Includes 1,174 deferred stock units credited to Mr. Moorhead's  account
in  the  Company's   Outside  Director  Deferred  Stock  Unit  Plan,  which  are
convertible to shares of common stock upon  termination  of Board  service.  Mr.
Moorhead is a director of the Company.

     (10) Based on a Form 13G/A dated  January 26,  2000,  filed by the State of
Wisconsin  Investment  Board.

     (11) Includes 81,714 shares which the officers and directors have the right
to  acquire  within 60 days upon the  exercise  of stock  options  at an average
exercise  price of $20.13 per share,  20,203  shares  held by the ESOP which are
vested and allocated to executive officers,  and 151,428 shares held by the ESOP
which are unvested or allocated to other employees. See Footnote (1) above.

                                       49
<PAGE>
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 is the owner and beneficiary.  These policies provide a total of
$50  million in death  proceeds  payable  upon death of the  survivor  of Tom E.
DuPree,  Jr., and his wife.  The devisees  under the wills of Mr. DuPree and his
wife are the beneficiaries of the Trust.

     The Trust has agreed to  reimburse  the Company on an annual basis for that
portion of the premiums which equals the current value of the economic  benefit,
as defined by the Internal Revenue  Service,  attributable to the life insurance
protection provided.

     The premiums due under the policies total $850,000 per year. Reimbursements
for the current value of the economic benefit attributable to the life insurance
provided in fiscal 1999 totaled $2,847.  There were no reimbursements due to the
Company from the Trust at January 2, 2000.

     The  Company  or the Trust  can  cancel  the  Agreement  at any time.  Upon
cancellation, the Trust is obligated to repay the Company an amount equal to the
lesser of either the cash surrender value of the policies or the total amount of
unreimbursed  premiums paid by the Company.  Upon receipt of the death  proceeds
under  the  policies,  the  Trust is  required  to  repay  the  Company  for all
unreimbursed premium payments. The policies have been assigned to the Company to
secure the repayment obligations of the Trust.

     At  January  2, 2000 and  January 3, 1999,  the  Company  held three  notes
receivable  from Tom E.  DuPree,  Jr.,  the  Chairman  of the  Board  and  Chief
Executive Officer of the Company,  totaling  $7,851,500.  These notes are due in
November and December of 2000,  or earlier upon demand of the Company,  and bear
interest at 7.0% per annum with interest payable at maturity.  In addition,  the
Company held 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 due on June  30,  2000  and bear
interest at 9.84% with interest payment due at maturity.  The Company also holds
an additional note receivable from Mr. DuPree in the amount of $3,000,000 due on
June 30,  2000,  bearing  interest at 9.84% per annum and secured by real estate
owned by Mr. DuPree.

                                       50
<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  January 2, 2000,
January 3, 1999 and December 28, 1997

     Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999

     Consolidated  Statements of Shareholders'  Equity and Comprehensive  Income
for the years ended January 2, 2000, January 3, 1999, December 28, 1997

     Consolidated  Statements of Cash Flows for the years ended January 2, 2000,
January 3, 1999 and December 28, 1997

     Notes to Consolidated Financial Statements

     Report of Management

     Independent Auditors' Report

     2. Financial Statement Schedules

         None

     3. Exhibits

     2.1 Agreement  and Plan of Merger,  dated August 15, 1995, by and among the
Company, SALSA Acquisition Corp., and DF&R Restaurants, Inc. (4)

     2.2 Agreement and Plan of Merger among Apple South,  Inc., M&S  Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et. al., dated February
6, 1997. (6)

     2.3 Agreements  and Plan of Merger among Apple South,  Inc., HG Acquisition
Corp., and Mason and Schelldorf  Leasing Company,  Hops  Restaurants,  Inc., et.
al., dated February 6, 1997. (6)

     2.4  Agreement  and  Plan  of  Merger  among  Apple  South,   Inc.,  Coyote
Acquisition Corp., and Canyon Cafes, Inc., et. al., dated June 19, 1997. (7)

     2.5  Asset  Purchase  Agreement  dated  December  23,  1997  by  and  among
Applebee's International, Inc. and Apple South, Inc. (8)

     2.6 Asset  Purchase  Agreement  dated March 16,  1998 by and among  Quality
Restaurant Concepts, L.L.C., and Apple South, Inc. (10)

     2.7 Asset purchase agreement dated April 23, 1998, by an among Apple South,
Inc. and Whit-Mart, Inc. (12)

                                       51
<PAGE>
     2.8 Asset purchase  agreement  dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz. (12)

     2.9 Asset purchase  agreement  dated May 4, 1998, by and among Apple South,
Inc. and Florida  Apple North,  LLC.,Florida  Apple South,  LLC.,  Florida Apple
West, LLC., and Wigel Partnership. (12)

     2.10 Asset  purchase  agreement  dated June 19,  1998,  by and among  Apple
South, Inc. and U.S. Restaurant Properties Operating LP. (12)

     2.11 Asset  purchase  agreement  dated June 19,  1998,  by and among  Apple
South, Inc. and Darrel L. Rolph. (12)

     2.12 Asset  purchase  agreement  dated July 31,  1998,  by and among  Apple
South, Inc. Delta Bluff , LLC. (13)

     2.13 Asset  purchase  agreement  dated August 20, 1998,  by and among Apple
South,  Inc. and WHG Real Estate South,  LLC. and Wisconsin  Hospitality  Group,
LLC. (14)

     2.14 Asset  purchase  agreement  dated August 20, 1998,  by and among Apple
South, Inc. and WHG Real Estate East, LLC. and Wisconsin Hospitality Group, LLC.
(14)

     2.15 Asset  purchase  agreement  dated  April 6, 1998,  by and among  Apple
South, Inc. and Woodland Group, Inc. (14)

     2.16 Asset purchase agreement dated May 15, 1998, by and among Apple South,
Inc. and Bloomin' Apple, LLC. (14)

     2.17 Asset  purchase  agreement  dated June 26,  1998,  by and among  Apple
South, Inc. and Apple J, L.P. (14)

     2.18 Asset purchase  agreement dated September 15, 1998, by and among Apple
South,  Inc., and WHG Real Estate North,  LLC and Wisconsin  Hospitality  Group,
LLC. (17)

     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, First Union
Bank of Delaware and Lansing S. Patterson. (9)

     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. (9)

     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. (9)

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

                                       52
<PAGE>
     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. (9)

     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. (9)

     4.9  Solicitation of Consents to Proposed  Amendments to 9.75% Senior Notes
due 2006 of Apple South, Inc. (12)

     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). (15)

     4.11 Registration  Rights  Agreement,  dated as of June 22, 1999, among the
Company,  certain  guaranteeing  subsidiaries and the initial  purchasers of the
Notes. (15)

     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) (5)

     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) (5)

     10.6 Apple South, Inc. Profit Sharing Plan and Trust. (1) (5)

     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. (10)

     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. (11)

     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. (17)

                                       53
<PAGE>
     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. (17)

     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. (17)

     10.17 $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. (16)

     10.18 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. (16)

     10.19 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. (16)

     10.20 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. (16)

     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. (7)


     (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  Quarterly Report on Form
10-Q for its fiscal quarter ended October 1, 1995.

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

     (6) Incorporated by reference to the registrant's  Quarterly Report on Form
10-Q for its fiscal quarter ended March 30, 1997.

     (7) Incorporated by reference to the registrant's  Quarterly Report on Form
10-Q for its fiscal quarter ended June 29, 1997.

     (8) Incorporated by reference to the registrant's  Report on Form 8-K dated
January 15, 1998.

                                       54
<PAGE>
     (9) Incorporated by reference to the registrants's  registration  statement
on Form S-3, File No. 333-25205.

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

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

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

     (13) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended September 27, 1998.

     (14) Incorporated by reference to the registrant's Report on Form 8-K dated
September 14, 1998.

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

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

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

(b)   Reports on Form 8-K

         None

                                       55
<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 21, 2000
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 21, 2000
-----------------------   Directors and Chief Executive
Tom E. DuPree, Jr.        Officer (principal executive officer)


/s/ Erich J. Booth        Director and Chief Financial Officer    March 21, 2000
-----------------------   (principal financial officer)
Erich J. Booth


/s/ John G. McLeod, Jr.   Senior Vice President - Human           March 21, 2000
-----------------------   Resources, and Secretary
John G. McLeod, Jr.

/s/ Margaret E. Waldrep   Chief Administrative Officer            March 21, 2000
-----------------------
Margaret E. Waldrep

/s/ Dr. Ruth G. Shaw      Director                                March 21, 2000
-----------------------
Dr. Ruth G. Shaw

/s/ John L. Moorhead      Director                                March 21, 2000
-----------------------
John L. Moorhead


                                       56

<PAGE>
                                 EXHIBIT INDEX

     2.1 Agreement  and Plan of Merger,  dated August 15, 1995, by and among the
Company, SALSA Acquisition Corp., and DF&R Restaurants, Inc. (4)

     2.2 Agreement and Plan of Merger among Apple South,  Inc., M&S  Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et. al., dated February
6, 1997. (6)

     2.3 Agreements  and Plan of Merger among Apple South,  Inc., HG Acquisition
Corp., and Mason and Schelldorf  Leasing Company,  Hops  Restaurants,  Inc., et.
al., dated February 6, 1997. (6)

     2.4  Agreement  and  Plan  of  Merger  among  Apple  South,   Inc.,  Coyote
Acquisition Corp., and Canyon Cafes, Inc., et. al., dated June 19, 1997. (7)

     2.5  Asset  Purchase  Agreement  dated  December  23,  1997  by  and  among
Applebee's International, Inc. and Apple South, Inc. (8)

     2.6 Asset  Purchase  Agreement  dated March 16,  1998 by and among  Quality
Restaurant Concepts, L.L.C., and Apple South, Inc. (10)

     2.7 Asset purchase agreement dated April 23, 1998, by an among Apple South,
Inc. and Whit-Mart, Inc. (12)

     2.8 Asset purchase  agreement  dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz. (12)

     2.9 Asset purchase  agreement  dated May 4, 1998, by and among Apple South,
Inc. and Florida  Apple North,  LLC.,Florida  Apple South,  LLC.,  Florida Apple
West, LLC., and Wigel Partnership. (12)

     2.10 Asset  purchase  agreement  dated June 19,  1998,  by and among  Apple
South, Inc. and U.S. Restaurant Properties Operating LP. (12)

     2.11 Asset  purchase  agreement  dated June 19,  1998,  by and among  Apple
South, Inc. and Darrel L. Rolph. (12)

     2.12 Asset  purchase  agreement  dated July 31,  1998,  by and among  Apple
South, Inc. Delta Bluff , LLC. (13)

     2.13 Asset  purchase  agreement  dated August 20, 1998,  by and among Apple
South,  Inc. and WHG Real Estate South,  LLC. and Wisconsin  Hospitality  Group,
LLC. (14)

     2.14 Asset  purchase  agreement  dated August 20, 1998,  by and among Apple
South, Inc. and WHG Real Estate East, LLC. and Wisconsin Hospitality Group, LLC.
(14)

     2.15 Asset  purchase  agreement  dated  April 6, 1998,  by and among  Apple
South, Inc. and Woodland Group, Inc. (14)

     2.16 Asset purchase agreement dated May 15, 1998, by and among Apple South,
Inc. and Bloomin' Apple, LLC. (14)

     2.17 Asset  purchase  agreement  dated June 26,  1998,  by and among  Apple
South, Inc. and Apple J, L.P. (14)

     2.18 Asset purchase  agreement dated September 15, 1998, by and among Apple
South,  Inc., and WHG Real Estate North,  LLC and Wisconsin  Hospitality  Group,
LLC. (17)

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


                                       57
<PAGE>
     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, First Union
Bank of Delaware and Lansing S. Patterson. (9)

     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. (9)

     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. (9)

     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. (9)

     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. (9)

     4.9  Solicitation of Consents to Proposed  Amendments to 9.75% Senior Notes
due 2006 of Apple South, Inc. (12)

     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). (15)

     4.11 Registration  Rights  Agreement,  dated as of June 22, 1999, among the
Company,  certain  guaranteeing  subsidiaries and the initial  purchasers of the
Notes. (15)

     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) (5)

     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) (5)

     10.6 Apple South, Inc. Profit Sharing Plan and Trust. (1) (5)

     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)


                                       58
<PAGE>
     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. (10)

     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. (11)

     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. (17)

     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. (17)

     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. (17)

     10.17 $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. (16)

     10.18 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. (16)

     10.19 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. (16)

     10.20 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. (16)

     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. (7)

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

                                       59
<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  Quarterly Report on Form
10-Q for its fiscal quarter ended October 1, 1995.

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

     (6) Incorporated by reference to the registrant's  Quarterly Report on Form
10-Q for its fiscal quarter ended March 30, 1997.

     (7) Incorporated by reference to the registrant's  Quarterly Report on Form
10-Q for its fiscal quarter ended June 29, 1997.

     (8) Incorporated by reference to the registrant's  Report on Form 8-K dated
January 15, 1998.

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

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

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

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

     (13) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended September 27, 1998.

     (14) Incorporated by reference to the registrant's Report on Form 8-K dated
September 14, 1998.

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

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

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


                                       60