<PAGE>   1


                                                                                
                                                                   EXHIBIT 10.26


                        AMENDMENT TO EMPLOYMENT AGREEMENT

         AMENDMENT to an Employment Agreement by and between BRUNO'S, INC., an
Alabama corporation (the "Company"), and JAMES A. DEMME ("Executive") dated
September 19, 1997, ("Employment Agreement"), made and effective this 31st day
of January 1998, by and between the Company and Executive.

         1. Section 2 of the Employment Agreement is amended to read as follows:

                           2. Term of Employment. Executive's term of employment
                  under this Agreement (the "Term") shall commence as soon as
                  possible after the date hereof, but in any event no later than
                  October 1, 1997 and, subject to the terms hereof, shall
                  continue until the termination of Executive's employment
                  pursuant to this Agreement (the "Termination Date"); provided,
                  however, that any termination of employment by Executive
                  (other than for death, Permanent Disability or Good Reason)
                  may only be made upon 90 days prior written notice to the
                  Company and any termination of employment by Executive for
                  Good Reason may only be made upon 60 days prior written notice
                  to the Company.

         2. Subsection (a) of Section 6.1 of the Employment Agreement is amended
to read as follows:

                           6.1. Termination Not for Cause or for Good Reason.
                  (a) The Company may terminate Executive's employment at any
                  time for any reason. If Executive's employment is terminated
                  by the Company other than for Cause (as defined in Section 6.4
                  hereof) or as a result of Executive's death or Permanent
                  Disability (as defined in Section 6.2 hereof) or if Executive
                  terminates his employment for Good Reason (as defined in
                  Section 6.1(c) hereof), Executive shall receive such payments,
                  if any, under applicable plans or programs, including but not
                  limited to those referred to in Section 3.4 and 4.1 hereof, to
                  which he is entitled pursuant to the terms of such plans or
                  programs. In addition, Executive shall be entitled to receive
                  an amount (the "Termination Amount") in lieu of


<PAGE>   2

                  any Bonus under the Company's Corporate Management Incentive
                  Plan in respect of all or any portion of the fiscal year in
                  which such termination occurs and any other cash compensation
                  (other than the Vacation Payment and the Compensation Payment,
                  as defined below), which Termination Amount shall be payable
                  in twenty-four monthly installments at the beginning of each
                  month following such termination of employment. The
                  Termination Amount shall consist of an amount equal to two
                  times the sum of the Executive's annual Base Salary plus
                  Target Bonus under the Company's Corporate Management
                  Incentive Plan, as in effect immediately prior to the event
                  giving rise to such termination. In addition, Executive shall
                  be entitled to receive a cash lump sum payment in respect of
                  accrued but unused vacation days (the "Vacation Payment") and
                  to compensation earned but not yet paid (including Base Salary
                  and any deferred Bonus payments ) (the "Compensation
                  Payment"), and to continued coverage for 24 months under any
                  employee medical, disability and life insurance plans in
                  accordance with the respective terms thereof. Any period of
                  continued coverage under the Company's medical plans shall not
                  be credited against any required period of coverage for
                  purposes of Part 6, Subtitle B, Title I of the Employment
                  Retirement Income Security Act of 1974, as amended.

         3. Subsection (c) of Section 6.1 of the Employment Agreement is amended
to read as follows:

                           (c) For purposes of this Agreement, "Good Reason"
                  shall mean any of the following (which occur without
                  Executive's express prior written consent):

                                    (i) any material breach by the Company of
                           any provision of this Agreement, including any
                           material reduction by the Company of Executive's
                           duties, authority, support or responsibilities
                           (except in connection with the termination of
                           Executive's employment for Cause, as a result of
                           Permanent Disability, as a result of Executive's
                           death or by 


                                       2
<PAGE>   3

                           Executive other than for Good Reason);

                                    (ii)  the Board requiring that Executive
                           perform his duties and responsibilities for the
                           Company at a location other than the Birmingham,
                           Alabama area; or

                                    (iii) a reduction by the Company in
                           Executive's employee benefits, Bonus opportunity
                           under the Company's Corporate Management Incentive
                           Plan, or Base Salary, other than a reduction in Base
                           Salary which is part of a general cost reduction
                           affecting at least ninety percent (90%) of the
                           officers of the Company and which does not exceed ten
                           percent (10%) of Executive's Base Salary in the
                           aggregate.

         4. Subsection (a) of Section 6.4 of the Employment Agreement is amended
so that "prior to September 30, 2000," as it appears in the first sentence
thereof is stricken.

         5. Section 6.5 of the Employment Agreement is stricken in its entirety.


                                    BRUNO'S, INC.



                                    By: /s/ Walter M. Grant
                                       -------------------------------
                                        Senior Vice President


                                        /s/ James A. Demme
                                       -------------------------------
                                       James A. Demme



                                       3