SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549



                                FORM 10-K/A NO. 1


(Mark One) 
[x] ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE 
    ACT OF 1934 [FEE  REQUIRED] for the fiscal year ended December 29, 1996
                                       OR
[ ] TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
    EXCHANGE ACT OF 1934 [ FEE REQUIRED]

        For the transition period from ____________ to _________________

                         Commission file number 0-17980




                            RALLY'S HAMBURGERS, INC.
             (Exact name of registrant as specified in its charter)
Delaware                                                    62-1210077
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                         Identification No.)

          10002 Shelbyville Road, Suite 150, Louisville, Kentucky     40223
          (Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (502) 245-8900





The  purpose  of this  amendment  is to amend  Items 10,  11, 12 and 13 in their
entirety to read as set forth herein.






<PAGE>



Items 10, 11, 12 and 13 are  hereby  amended  to read in their  entirety  as set
forth below.



                                    PART III

Item 10.  Directors,  Executive  Officers,  Promoters and Control Persons of the
Registrant.

Directors

     Set forth below is a list of the current Board members, together with their
ages, all positions with Rally's  Hamburgers,  Inc. ("the  Company") and offices
currently  held by them and the year in which  each  person  joined the Board of
Directors.

                                                                     Director
Name                     Age(1)      Position or Office                Since
----                     ------      ------------------              --------   
Burt Sugarman              58        Chairman of the Board              1989
                                          and Director
Donald E. Doyle            50        President, Chief Executive         1996
                                     Officer and Director
                                        
Terry N. Christensen       56             Director                      1996
Willie D. Davis            62             Director                      1994
William P. Foley, II       52             Director                      1996
David Gotterer             68             Director                      1989
Ronald B. Maggard          47             Director                      1997
C. Thomas Thompson         47             Director                      1996
-------------------
(1)     Ages given as of March 31, 1997.

     Burt  Sugarman.  For more than the past five years,  Mr.  Sugarman has been
Chairman of the Board,  President  and Chief  Executive  Officer of GIANT Group,
LTD.  ("GIANT"),  a New York Stock Exchange company. As of March 31, 1997, GIANT
owned approximately  15.26% of the outstanding Common Stock of the Company.  Mr.
Sugarman served as Chief  Executive  Officer of the Company from 1990 and as its
Chairman of the Board since 1991, resigning from these offices in February 1994.
Mr. Sugarman resumed the position of Chairman of the Board in November 1994.

     Donald E. Doyle.  On March 18, 1996,  the Company  named Donald E. Doyle to
the  position of  President  and Chief  Executive  Officer.  Mr.  Doyle was also
appointed to the Company's  Board of Directors.  Prior thereto,  since 1994, Mr.
Doyle  served as Chief  Operating  Officer of  Hardee's  Foodsystems,  Inc.,  an
operator and franchisor of over 3,500 Hardee's  quick service  restaurants.  Mr.
Doyle served from 1992 to 1994 as President and Chief  Executive  Officer of CKE
Restaurants,  Inc.  ("CKE"),  the parent of the Carl's Jr. hamburger chain. From
1989 to 1992, Mr. Doyle served as President and Chief  Executive  Officer of the
Greater Louisville  Economic  Development  Partnership.  Prior to that date, Mr.
Doyle held a variety of senior  positions with KFC, finally serving as President
of KFC-USA from 1984 to 1988.

     Terry N.  Christensen.  For more than the past five years, Mr.  Christensen
has been a partner in the law firm of Christensen, Miller, Fink, Jacobs, Glaser,
Weil & Shapiro,  LLP,  which firm provides  legal  services to the Company.  Mr.
Christensen  is a director of GIANT,  MGM Grand,  Inc.  and  Checker's  Drive-In
Restaurants, Inc.

                                       2
<PAGE>


     Willie D. Davis. Mr. Davis has been the President and a director of All-Pro
Broadcasting, Inc., a holding company operating several radio stations, for more
than the past five years.  Mr. Davis currently  serves on the Board of Directors
of Sara Lee Corporation,  K-Mart Corporation,  Dow Chemical Company,  MGM Grand,
Inc., Alliance Bank, WICOR  Incorporated,  Johnson Controls  Incorporated,  L.A.
Gear and Strong Fund.

     William P. Foley,  II. Mr.  Foley has served as the  Chairman of the Board,
and Chief Executive Officer of Fidelity National  Financial,  Inc.  ("Fidelity")
since its formation in 1984.  Mr. Foley was also President of Fidelity from 1984
until  December 31, 1994. He has been Chairman of the Board and Chief  Executive
Officer of Fidelity National Title Insurance Company since April 1981. Mr. Foley
is also currently  serving as Chairman of the Board and Chief Executive  Officer
of CKE and is a director of Micro General Corporation.

     David  Gotterer.  Mr. Gotterer has been a partner in the accounting firm of
Mason & Company, LLP, New York, New York, for more than the past five years. Mr.
Gotterer is a director and Vice Chairman of GIANT.

     Ronald B. Maggard.  For more than the past five years, Mr. Maggard has been
President of Maggard  Enterprises,  Newport Beach, which owns 25 franchised Long
John Silver restaurants and a franchised Fazoli's restaurant.

     C. Thomas  Thompson.  Mr.  Thompson has been President and Chief  Operating
Officer of Carl Karcher Enterprises, Inc. since 1994. Prior thereto, since 1984,
Mr.  Thompson  was a  partner  in a  partnership  which  owned and  operated  15
restaurants  under  the  Carl's  Jr.  franchise  system.  Mr.  Thompson  is also
currently  serving as Chief Executive  Officer and Vice Chairman of the Board of
Checker's Drive-In Restaurants, Inc.

     On  February  13,  1996,  a  derivative  lawsuit  naming the members of the
Company's  Board  of  Directors  was  filed  in  Delaware  Chancery  Court  by a
shareholder,  Harbor  Finance  Partners.  The suit alleges a breach of fiduciary
duty on the part of the Board of Directors in connection  with the purchase from
GIANT of the Company's  9.875% Senior Notes due in the year 2000 at an allegedly
inflated price. The Company and its Directors deny all allegations of wrongdoing
made by the plaintiff and intend to defend the suit vigorously.  Management does
not believe  that this  litigation  will have a material  adverse  effect on its
results of operating or financial condition.

Executive Officers

     Set forth  below are the  executive  officers  of the  Company at March 31,
1997, together with their ages, their positions with the Company and the year in
which they first became an officer of the Company:
<TABLE>
<CAPTION>
                                                                                       First Elected
        Name           Age(1)                        Position                             Officer
---------------------  -------  ----------------------------------------------------  -----------------
<S>                     <C>     <C>                                                         <C>                    
Burt Sugarman            58     Chairman of the Board and Director                          1990

Donald E. Doyle          50     President, Chief Executive Officer and Director             1996

Evan G. Hughes           30     Senior Vice President, Chief Administrative
                                Officer and Secretary                                       1995

Gary J. Beisler          40     Senior Vice President, Operations                           1991

Mark A. Noltemeyer       41     Senior Vice President, Finance                              1993
--------------------------
</TABLE>

(1)  Ages given at March 31, 1997.

     Mr. Hughes joined the Company as Senior  Executive Vice President and Chief
Administrative  Officer in March  1995.  In  December  1995,  due to a corporate
reorganization,  Mr. Hughes became Senior Vice President,  Chief  Administrative
Officer and Secretary.  He was a trade development  consultant in Houston, Texas
and  subsequently  a business  development  and  marketing  manager  with AT&T -
Network Systems in Morristown, New Jersey between April 1994 and March 1995. Mr.
Hughes  served as Director of  Administration  for Rally's from March 1993 until
March 1994.  Also, Mr. Hughes served as an appointee of the Bush  Administration
in

                                       3
<PAGE>

Washington,  D.C. from December 1988 until November  1992.  From late 1989 until
February  1992, he served as Director of  Operations  at the U.S.  Department of
Commerce.

     Mr. Beisler joined the Company in 1987 as an Area Franchise Director. Since
then, he has held  positions as District  Franchise  Director,  Area Director of
Company  Operations and Vice President of Franchise  Operations.  Currently,  as
Senior Vice President of Operations,  he is responsible for Company  Operations,
Franchise  Operations and Real Estate,  Development and  Construction.  Prior to
1987,  Mr.  Beisler owned and operated his own restaurant and served as Director
of Operations for The Fresher Cooker,  a  Louisville-based  fast food restaurant
chain.

     Mr. Noltemeyer  joined the Company in 1993 as Chief Accounting  Officer and
in January 1994, was promoted to Vice President and Chief Accounting Officer. In
January 1997,  Mr.  Noltemeyer was promoted to Senior Vice  President,  Finance.
From 1985 to 1993,  Mr.  Noltemeyer  was employed by KFC in a variety of finance
positions.  At the time he left KFC,  he was  Worldwide  Director  of  Technical
Accounting  Services  having held such position since 1992. Mr.  Noltemeyer is a
Certified Public Accountant.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"),  requires that the Company's  directors and executive officers,
and persons who own more than 10% of a registered  class of the Company's equity
securities,  file with the Securities and Exchange Commission and NASDAQ reports
of  ownership  and  changes  in  ownership  of Common  Stock  and  other  equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

     Based  solely on review of the  copies  of such  reports  furnished  to the
Company or written  representations  that no other  reports were  required,  the
Company  believes  that,  during the 1996 fiscal year,  all filing  requirements
applicable to its officers,  directors  and greater than 10%  beneficial  owners
were complied  with except that (i) Messrs.  Foley and Thompson each filed their
initial  report on Form 3 late; and (ii) one report,  covering one  transaction,
was filed late by Jeffrey Rosenthal, a former director of the Company.

                                       4
<PAGE>


Item 11.  Executive Compensation

     Set  forth  below  is  information  concerning  the  annual  and  long-term
compensation of any person who served as the Chief Executive  Officer during any
portion of 1996, and the other four most highly  compensated  executive officers
of the Company as of December 29, 1996,  for services in all  capacities  to the
Company for the last three fiscal years.
<TABLE>
<CAPTION>
                                           Summary Compensation Table
                                                                                          Long-Term                                 
                                               Annual Compensation                       Compensation  
                                ---------------------------------------------   ----------------------------
                                                                Other Annual         Stock          All Other
                                         Salary       Bonus     Compensation        Options       Compensation
Name & Principal Position       Year       ($)        ($)(1)     ($)              (In Shares)         ($) 
-------------------------       ----    --------     -------    -------------     -----------     ------------
<S>                             <C>     <C>          <C>         <C>                 <C>            <C>
Donald E. Doyle                 1996    $227,116 (2) $      0    $18,000 (4)         350,000        $      0
   President and CEO            1995           0            0          0                   0               0
                                1994           0            0          0                   0               0

Gary J. Beisler                 1996    $161,154     $  5,400    $ 5,700              54,500        $      0
   Sr. Vice President,          1995     135,687       19,577          0              10,000               0
      Operations                1994     115,373            0      5,225              48,400               0

Michael E. Foss  (3)            1996    $187,692     $      0    $36,178 (4)          10,000        $      0
   Former Sr. Vice              1995      72,443 (5)  100,000          0             160,000               0
       President, Chief         1994           0            0          0                   0               0
       Financial Officer
Evan G. Hughes                  1996    $138,462     $      0    $     0              15,000        $      0
   Sr. Vice President,          1995      97,500 (6)   15,540      1,462              45,000               0
     Chief Administrative       1994      13,462 (6)        0          0                   0               0
       Officer and Secretary
Mark A. Noltemeyer              1996    $116,346     $      0    $     0              10,000        $      0
   Senior Vice President ,      1995     108,064        5,000          0              10,000               0
      Finance                   1994      98,269            0          0              22,150               0
-----------------------------
<FN>
     (1)  With the  exception of the amounts paid to Messrs.  Foss and Hughes in
          1995 related to recruitment  bonuses, the amounts shown in this column
          represent  payments  made  under the  Company's  Officer  Bonus  Plan,
          pursuant to which the executive  officers earned cash bonuses based on
          individual performance.

     (2)  Represents  partial  year  payment.  Mr.  Doyle  joined the Company as
          President and Chief Executive Officer in March 1996.

     (3)  Mr. Foss resigned from all positions he held in the Company in January
          1997.

     (4)  With respect to Messrs.  Doyle and Foss, the amount in 1996 represents
          a reimbursement of relocation expenses incurred.

     (5)  Represents partial year payment. Mr. Foss joined the Company as Senior
          Vice President and Chief Financial Officer in July 1995.

                                       5
<PAGE>

     (6)  Represents  partial year payment.  Mr. Hughes  rejoined the Company as
          Senior  Executive Vice President and Chief  Administrative  Officer in
          March 1995. In December 1995, due to a corporate  reorganization,  Mr.
          Hughes became Senior Vice President,  Chief Administrative Officer and
          Secretary.  Mr. Hughes  originally joined the Company in March 1993 as
          Director of Administration and resigned in March 1994.
</FN>
</TABLE>

Option Grants in Last Fiscal Year

     The following table sets forth information regarding options granted to the
named  executive  officers during the 1996 fiscal year pursuant to the Company's
1990 Stock Option Plan.  The Company  does not grant stock  appreciation  rights
("SARs").

<TABLE>
<CAPTION>
                          Number of      Percentage of
                         Securities      Total Options
                         Underlying        Granted to      Exercise of                    Grant Date
                           Options        Employees in     Base Price     Expiration       Present
Name                     Granted(#)       Fiscal 1996       ($/Share)        Date        Value ($)(1)
----                     ----------       -----------       ---------        ----        ------------
<S>                        <C>               <C>              <C>          <C>             <C>    
Donald E. Doyle            350,000           13.90%           $1.75        03/17/01        $360,325
Gary J. Beisler             40,000            1.59%           $1.625       02/26/06        $ 40,224
Gary J. Beisler             14,500            0.58%           $2.94        06/21/06        $ 26,405
Michael E. Foss             10,000 (2)        0.40%           $1.625       02/26/06        $ 10,056
Evan G. Hughes              15,000            0.60%           $1.625       02/26/06        $ 15,084
Mark A. Noltemeyer          10,000            0.40%           $1.625       02/26/06        $ 10,056
---------------------
<FN>
     (1)  The  Company  used the  Black-Scholes  model of  option  valuation  to
          determine grant date present value.  The present value  calculation is
          based on, among other things, the following assumptions:  (a) interest
          of 6.81% for the  February  26,  1996 and March 18, 1996  grants,  and
          6.84% for the June 21, 1996 grant,  based on the then quoted  yield of
          Treasury Bills  maturing in eight years;  (b) dividend yield of 0% per
          share based on the Company's history of no dividend payments;  and (c)
          stock price expected future  volatility of 45.7% determined based upon
          the monthly  stock  closing  prices for the past four to five years of
          companies  included in the Company's peer group.  The Company does not
          advocate  or  necessarily  agree  that  the  Black-Scholes  model  can
          properly determine the value of an option.  There is no assurance that
          the value,  if any,  realized by the option  holder will be at or near
          the value estimated under the Black-Scholes model.

     (2)  These options  terminated upon Mr. Foss'  resignation from the Company
          and became  available for future grants under the Company's 1990 Stock
          Option plan.
</FN>
</TABLE>
                                       6
<PAGE>


Aggregated  Option  Exercises  In Last  Fiscal  Year And Fiscal  Year End Option
Values

     Set forth below is  information  with  respect to options  exercised by the
named  executive  officers during the 1996 fiscal year, and the number and value
of unexercised stock options held by the named executive  officers at the end of
the fiscal year. There were no SARs outstanding at the 1996 fiscal year end.

<TABLE>
<CAPTION>
                                                                Number of Securities
                                                               Underlying Unexercised        Value of Unexercised In-
                                                               Options Held At Fiscal          The-Money Options at
                                                                      Year End                  Fiscal Year End(1)
                         Shares Acquired    Value Realized
Name                     on Exercise (#)         ($)         Exercisable   Unexercisable   Exercisable    Unexercisable
----                     ---------------    --------------   -----------   -------------   -----------    -------------
<S>                             <C>              <C>            <C>            <C>          <C>              <C>
Donald E. Doyle                 0                N/A                 0         350,000      $       0        $ 920,499
Gary J. Beisler                 0                N/A            35,599          77,301         13,259          145,260
Michael E. Foss                 0                N/A            53,333         116,667         60,265          148,081
Evan G. Hughes                  0                N/A            14,999          45,001         24,047           89,426
Mark A. Noltemeyer              0                N/A            18,098          24,052          8,795           39,499
---------------------
<FN>

     (1)  Based on the difference  between the option exercise price and closing
          price of the  Company's  Common  Stock on the NASDAQ  National  Market
          system on December 29, 1996 ($4.375).
</FN>
</TABLE>

Compensation of Directors

     Directors not employed by the Company are  compensated at a rate of $10,000
per  annum,  paid  quarterly,   plus  $500  for  each  Board  meeting  attended.
Non-employee  directors also receive $500 for each committee meeting attended on
a date other than a date on which a Board  meeting is held,  and are eligible to
participate in the Company's 1995 Stock Option Plan for Non-Employee Directors.

Employment and Severance Agreements

     In April  1995,  the Company and Evan  Hughes  entered  into an  Employment
Agreement  pursuant to which Mr.  Hughes was to serve as Senior  Executive  Vice
President and Chief Administrative  Officer for a term of 30 months beginning on
March 28,  1995 at an annual  salary of not less than  $130,000.  Mr.  Hughes is
eligible to participate in the Company's  incentive bonus programs.  Pursuant to
the terms and conditions of the Company's 1990 Stock Option Plan, Mr. Hughes was
granted an option to purchase  35,000  shares of the  Company's  Common Stock at
$2.75 per share.  Upon  joining the  Company,  Mr.  Hughes was awarded a signing
bonus of  $10,000  after  federal,  state and local  tax  deductions.  Under the
Agreement,  Mr.  Hughes has agreed not to compete with the Company in the double
drive-thru hamburger business for a period of 18 months after the termination of
his employment with the Company.

     In July 1995,  the Company  and Michael  Foss  entered  into an  Employment
Agreement  pursuant  to which Mr.  Foss  served  as the  Company's  Senior  Vice
President and Chief  Financial  Officer for a term  commenced on August 1, 1995,
and expired on January 31, 1997, at an annual salary of not less than  $175,000.
Mr. Foss was eligible to  participate  during his  employment  in the  Company's
incentive bonus programs.  Pursuant to the terms and conditions of the Company's
1990 Stock  Option  Plan,  Mr. Foss was  granted an option to  purchase  160,000
shares of the Company's Common Stock at $3.25 per share. On joining the Company,
Mr.  Foss was awarded a signing  bonus of $100,000 in cash and 30,188  shares of
Common  Stock  having a value  of  $100,000  as an  inducement  for Mr.  Foss to
terminate  his  previous  employment.  Mr. Foss  agreed,  during the term of his
Employment Agreement and for three years thereafter, not to disclose, other than
to  employees  of the  Company or to persons to whom  disclosure  is  reasonably
necessary  or  appropriate  in  connection  with the  performance  of his duties
thereunder,  any material,  confidential  information relating to certain of the
operations of the Company, the

                                       7
<PAGE>

disclosure  of which  would be  materially  damaging  to the  Company.  Mr. Foss
resigned all positions held with the Company effective January 31, 1997.

     In March 1996,  the Company and Donald E. Doyle  entered into an Employment
Agreement  pursuant to which Mr. Doyle serves as President  and Chief  Executive
Officer of the Company for a term  commencing  March 18, 1996 and expiring March
17, 1998, at an annual base salary of $295,000,  subject to annual review.  This
agreement  is  renewable  on an  annual  basis  for a new  two-year  term at the
discretion of the Board.  Mr. Doyle is eligible to  participate in the Company's
incentive  and bonus  programs.  Pursuant  to the terms  and  conditions  of the
Company's  1990 Stock Option  Plan,  Mr. Doyle was granted an option to purchase
350,000 shares of the Company's  Common Stock at $1.75 a share, the market price
on the date of Mr. Doyle's employment by the Company.  Under the Agreement,  Mr.
Doyle has  agreed  not to compete  with the  Company  in the  double  drive-thru
hamburger  business  for a period of two  years  after  the  termination  of his
employment with the Company. In addition,  Mr. Doyle has agreed, during the term
of his  Employment  Agreement and for three years  thereafter,  not to disclose,
other than to  employees  of the  Company or to  persons to whom  disclosure  is
reasonably  necessary or appropriate in connection  with the  performance of his
duties thereunder,  any material confidential information relating to certain of
the  operations  of the Company,  the  disclosure  of which would be  materially
damaging to the Company.  In February  1997,  the Company and Mr. Doyle  entered
into a Supplemental  Agreement  pursuant to which the  Employment  Agreement was
modified to state that Mr. Doyle's  employment will be on an "at will" basis. In
addition,  the  Supplemental  Agreement  provides  for the  acceleration  of the
vesting of 57,142 of the options granted to Mr. Doyle upon occurrence of certain
changes in Mr.  Doyle's  employment  status prior to the normal vesting date for
these options.

Compensation Committee Interlocks And Insider Participation

     The  Compensation  Committee of the Board of Directors is  responsible  for
executive compensation decisions as described above. The Committee was comprised
of Messrs.  Christensen,  Foley and Gotterer since May 1996.  Prior to May 1996,
the  Committee was  comprised of Messrs.  Fleishman,  Gotterer and Sugarman (the
latter only until March 1996). Mr.  Christensen is a partner in a law firm which
provided  legal services to the Company during 1996 and which will provide legal
services to the Company in the  future.  Mr.  Foley is Chairman of the Board and
Chief  Executive  Officer of  Fidelity  and CKE,  which,  as of March 31,  1997,
beneficially  owned  approximately  9.62%  and  21.23%,  respectively,   of  the
outstanding shares of Common Stock of the Company.  Mr. Fleishman is a member in
a law firm which  provided  legal  services to the Company during 1996 and which
will  provide  legal  services to the Company in the future.  Mr.  Sugarman is a
director of the Company and serves as Chairman of the Board.  Mr.  Sugarman also
serves as the Chairman of the Board,  President and Chief  Executive  Officer of
GIANT, which as of the Record Date owned approximately 15.26% of the outstanding
Common Stock of the Company. Mr. Gotterer, a director of the Company,  serves as
a director and Vice Chairman of the Board of GIANT.  Mr. Gotterer also serves on
the Compensation Committee of GIANT.

     On July 1, 1996, the Company  entered into a ten-year  Operating  Agreement
with Carl Karcher  Enterprises,  Inc., a subsidiary of CKE which is the operator
of the Carl's Jr. restaurant chain. Pursuant to the agreement,  28 Rally's owned
restaurants  located in California  and Arizona are being  operated by CKE. Such
agreement is cancelable after an initial  five-year period, at the discretion of
CKE. A portion of these restaurants,  at the discretion of CKE, may be converted
to the Carl's Jr.  format.  To date,  one  restaurant  has been  converted.  The
agreement  was  approved  by a  majority  of the  independent  Directors  of the
Company.  Prior  to the  agreement,  the  Company's  independent  Directors  had
received an opinion as to the fairness of the agreement,  from a financial point
of view, from an investment banking firm of national standing.

     Under  the  terms  of  the  Operating  Agreement,  CKE is  responsible  for
conversion costs associated with  transforming the restaurants to the Carl's Jr.
format,  as well as the  operating  expenses  of all  the  restaurants.  Rally's
retains  ownership of all 28 restaurants and is entitled to receive a percentage
of gross revenues generated by each restaurant. Subsequent to the agreement, the
Company's  revenues  have been,  and will,  until the first  anniversary  of the
agreement,  continue to be,  reduced by the absence of the  restaurants'  sales,
somewhat  offset by the fee paid to the Company by CKE. The Company  anticipates
that the agreement  will continue to positively  impact both net income and cash
flow.  While the overall  impact of the agreement is not expected to be material
to the financial statements, it will allow management to concentrate its efforts
in more fully  developed  Rally's  markets.  The  agreement  will also allow the
Company to take advantage of any improvements in restaurant  operations attained
by 

                                       8
<PAGE>


CKE by implementing these improvements in Company stores. In the event of a sale
by  Rally's of any of the 28  restaurants,  Rally's  and CKE would  share in the
proceeds based upon the relative value of their respective  capital  investments
in such restaurant.

     On December 20, 1996,  the Company  issued  warrants  (the  "Warrants")  to
purchase an aggregate of 1,500,000 restricted shares of its Common Stock equally
to CKE and Fidelity  National  Financial,  Inc. The Warrants  were granted as an
incentive to CKE and Fidelity to continue to participate  in the  identification
and  exploitation of synergistic  opportunities  with the Company.  The Warrants
have a three-year  term and are not  exercisable  until  December 20, 1997.  The
exercise  price is $4.375 per share,  the closing  price of the Common  Stock on
December  20,  1996.  The  underlying  shares  of  Common  Stock  have  not been
registered with the Securities and Exchange Commission and,  therefore,  are not
freely tradable.  Upon exercise,  the Warrants would provide  approximately $6.6
million in additional  capital to the Company.  The Company obtained a valuation
analysis from an  investment  banking firm of national  standing.  Such analysis
estimated the value of the Warrants to be  approximately  $960,000 which will be
expensed by the Company over the one-year vesting period.

     Rally's has entered into a marketing-sharing agreement with CKE restaurants
covering the use of  advertising  created by the Company's  advertising  agency,
Mendelsohn/Zien Advertising, for the benefit of the Company and its franchisees,
based  on  a  successful  advertising  campaign  originally  developed  for  the
California-based  Carl's Jr.  chain.  The  agreement  is for a  one-year  period
beginning December 1, 1996, renewable for additional  successive one-year terms,
and calls for the  reimbursement per commercial to CKE for 30% of its production
costs (not to exceed $100,000).

     In addition,  the Company  entered into a Consulting  Agreement with CKE in
October 1996 to assist and advise the Company in  connection  with its operation
of the business.  The Consulting  Agreement  expired  February 28, 1997, but has
been extended until February 28, 1998.  Payments under the Consulting  Agreement
are $3,000 per month plus ordinary expenses.

     On  January  29,  1996,  the  Company   repurchased   from  GIANT,  in  two
transactions,  at a price of $678.75 per $1,000  principal  amount,  $22 million
face value of its 9.875%  Senior  Notes due in the year 2000.  The price paid in
each  transaction  represented  the market closing price of the notes on January
26, 1996.  The first  transaction  involved the  repurchase  of $16 million face
value of the notes for $11.1 million in cash.  The second  transaction  involved
the  purchase of $6 million  face value of notes in exchange  for a $4.1 million
short-term  note due in three  installments  of principal and interest issued by
Rally's to GIANT bearing interest at the highest publicly  announced  referenced
rate of interest  maintained by a large banking institution for commercial loans
of short-term  maturities to its most credit-worthy  large corporate  borrowers.
The purchases  were approved by a majority of the  independent  Directors of the
Company,  all of whom were unaffiliated with GIANT. Prior to the purchases,  the
Company's  independent  Directors  had received an opinion as to the fairness of
the  transactions,  from a financial point of view,  from an investment  banking
firm of national  standing.  GIANT  purchased the notes for $11.4 million during
the last two years.

     In early February 1996,  GIANT entered into a one-year credit facility with
the Company.  Such credit  facility was evidenced by a note payable to GIANT for
up to $2 million. Any monies advanced under said Note Agreement bore interest at
the highest publicly announced referenced rate of interest maintained by a large
banking  institution for commercial  loans of short-term  maturities to its most
credit-worthy  large  corporate  borrowers.  Interest was payable  monthly.  The
facility was terminated upon the Company's completion of its Shareholders Rights
Offering.  In addition,  during 1996 GIANT issued certain irrevocable letters of
credit  to secure  the  obligation  of the  Company  under  its high  deductible
workers'  compensation  insurance  program and to secure  certain  surety  bonds
previously  issued by the Company.  Such letters of credit were  replaced by the
Company  during 1996 with  irrevocable  Letters of Credit  issued by the Company
which are secured by Certificates of Deposit purchased by the Company.

                                       9
<PAGE>

Item 12.  Stock Ownership of Principal Holders and Management.

     The following table sets forth as of March 31, 1997 information  concerning
each stockholder known by the Company to beneficially own more than five percent
of the  outstanding  Common  Stock of the  Company  and by each  director,  each
executive  officer  named in the Summary  Compensation  Table in Item 11 and all
directors and executive officers as a group.


                                           Number of                Percent of
                                           Shares (1)                Class (2)
                                           ----------               ---------- 
Gary J. Beisler........................      54,212    (3)              *
Terry N. Christensen...................     168,230    (4)              *
Willie D. Davis........................     245,000    (5)            1.18%
Donald E. Doyle........................     201,146    (6)              *
William P. Foley, II (16)..............     222,500    (7)            1.07%
Michael E. Foss........................     102,409    (8)              *
David Gotterer.........................     279,730    (9)            1.34%
Evan G. Hughes.........................      35,798    (10)             *
Ronald B. Maggard .....................      30,000                     *
Mark A. Noltemeyer.....................      30,882    (11)             *
Burt Sugarman (15).....................     485,833    (12)           2.31%
C. Thomas Thompson.....................     222,500    (13)           1.07%
All current directors and 
  executive officers as a group 
  (12 persons, included above).........   2,078,240    (14)           9.26%

5% Beneficial Owners
--------------------
GIANT GROUP, LTD. (15).................   3,136,849                  15.26%
Fidelity National Financial, Inc. (16).   2,009,788    (17)           9.62%
CKE Restaurants, Inc. (18).............   4,528,015    (19)          21.23%
Travelers Group, Inc. (20).............   2,263,974    (21)          10.50%
  *Represents less than 1% of class.

     (1)  Based upon information  furnished to the Company by the named persons,
          and information  contained in filings with the Securities and Exchange
          Commission (the  "Commission").  Under the rules of the Commission,  a
          person is deemed to beneficially  own shares over which the person has
          or shares voting or investment power or which the person has the right
          to acquire  beneficial  ownership of within 60 days.  Unless otherwise
          indicated,  the named  persons have sole voting and  investment  power
          with respect to their respective shares.

     (2)  Based on 20,552,404 shares outstanding as of March 31, 1997. Shares of
          Common Stock subject to options  exercisable  within 60 days under the
          Company's  stock option plan are deemed  outstanding for computing the
          percentage  of class of the person  holding  such  options but are not
          deemed outstanding for computing the percentage of class for any other
          person.

                                       10
<PAGE>

     (3)  Includes 52,474 shares that Mr. Beisler may purchase pursuant to stock
          options and warrants.

     (4)  Includes 165,615 shares that Mr.  Christensen may purchase pursuant to
          stock options and warrants.

     (5)  Represents  245,000  shares that Mr.  Davis may  purchase  pursuant to
          stock options.

     (6)  Includes 133,406 shares that Mr. Doyle may purchase  pursuant to stock
          options and warrants.

     (7)  Represents  222,500  shares that Mr.  Foley may  purchase  pursuant to
          stock options.  Excludes 6,760,303 shares which are beneficially owned
          by  Fidelity  and CKE,  as to which  Mr.  Foley  disclaims  beneficial
          ownership. See Notes (17) and (19) below. Mr. Foley is the Chairman of
          the Board and Chief Executive Officer of Fidelity and CKE, and he owns
          20.3% of the outstanding shares of common stock of Fidelity. A limited
          partnership  whose  general  partner is  controlled  by Mr. Foley owns
          15.8% of the  outstanding  common stock of CKE.  Fidelity owns 2.2% of
          the  outstanding  common stock of CKE. Mr. Foley may be deemed to be a
          controlling person of CKE and Fidelity.

     (8)  Includes  62,777  shares that Mr. Foss may purchase  pursuant to stock
          options and warrants. Mr. Foss resigned from all positions held in the
          Company in January 1997.

     (9)  Includes  251,615  shares that Mr.  Gotterer may purchase  pursuant to
          options and warrants,  but excludes 22,500 shares  underlying  options
          held by Mr.  Gotterer,  as to which  shares  he  disclaims  beneficial
          ownership  since a business  partner  is  entitled  to the  beneficial
          ownership of such shares upon any exercise of such options.

     (10) Includes  35,072  shares  that Mr.  Hughes may  purchase  pursuant  to
          options and warrants.

     (11) Includes  25,864 shares that Mr.  Noltemeyer may purchase  pursuant to
          options and warrants.

     (12) Represents  485,833 shares that Mr. Sugarman may purchase  pursuant to
          stock options.  Excludes  3,136,849 shares owned by GIANT of which Mr.
          Sugarman  may be  deemed  to be a  controlling  person.  Mr.  Sugarman
          disclaims  beneficial  ownership  of the shares  owned by GIANT.  Also
          excludes 2,615 shares held by Mr.  Sugarman as custodian for his minor
          child and 145,884 shares  beneficially  owned by Mr. Sugarman's spouse
          (including  104,692  shares  subject to options and  warrants),  as to
          which shares Mr. Sugarman disclaims beneficial ownership. Mr. Sugarman
          is the Chairman of the Board,  President & Chief Executive  Officer of
          GIANT,  and, as of March 14, 1997,  he owned 55.2% of the  outstanding
          common stock of GIANT.

     (13) Represents  222,500 shares that Mr. Thompson may purchase  pursuant to
          options.

     (14) Includes  1,902,656  shares which may be acquired by all directors and
          executive officers as a group pursuant to stock options and warrants.

     (15) The address of Burt Sugarman and GIANT is 9000 Sunset  Boulevard,  Los
          Angeles, California 90069.

     (16) The  address of Mr.  Foley and  Fidelity  is 17911 Von Karman  Avenue,
          Irvine, California 92714.

     (17) Includes 1,663,101 shares owned directly and 346,687 shares underlying
          currently exercisable warrants.

     (18) The address of CKE is 1200 North Harbor Boulevard, Anaheim, California
          92801.

     (19) Includes 3,752,527 shares owned directly and 775,488 shares underlying
          currently exercisable warrants.

     (20) The address of Travelers  Group,  Inc. is 388  Greenwich  Street,  New
          York, New York 10013.

     (21) Includes 1,016,787 shares underlying currently exercisable warrants.

                                       11
<PAGE>

Item 13. Certain Relationships and Related Transactions

     "Item 10. Executive  Compensation - Compensation  Committee  Interlocks and
Insider Participation" is incorporated herein by reference.

                                       12
<PAGE>


                                   SIGNATURES

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

                            RALLY'S HAMBURGERS, INC.
Date:  April 28, 1997

                              By:           /s/ Mark A. Noltemeyer
                                   --------------------------------------
                                            Mark A. Noltemeyer
                                        Senior Vice President, Finance




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