UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                             --------------------

                                  FORM 10-Q

   (Mark One)
      [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended February 17, 2002
                                   OR
      [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from         to
                                               -------    -------

                         Commission file number 0-4377

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

                               SHONEY'S, INC.
           (Exact name of registrant as specified in its charter)

               TENNESSEE                          62-0799798
     (State or other jurisdiction of          (I.R.S. Employer
     incorporation or organization)                 Identification No.)


      1727 ELM HILL PIKE, NASHVILLE, TN              37210
   (Address of principal executive offices)        (Zip Code)


    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (615) 391-5201



     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   .
                                                    ---    ---

     As of March 8, 2002, there were 52,031,248 shares of Shoney's, Inc. $1
par value common stock outstanding.


Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
                              SHONEY'S, INC. AND SUBSIDIARIES
                            Consolidated Condensed Balance Sheet
                                       (Unaudited)

                                                         February 17,            October 28,
                                                             2002                   2001
                                                      ----------------        ---------------
<S>                                                   <C>                     <C>
ASSETS
Current assets:                                       $                       $
  Cash and cash equivalents                                 9,520,911              5,621,180
  Notes and accounts receivable, less allowance
   for doubtful accounts of $643,000 in 2002
   and $649,000 in 2001                                     3,994,584              4,424,791
Inventories                                                 4,327,880              4,539,419
Prepaid expenses and other current assets                   1,033,419              1,530,790
Net current assets held for sale                           13,822,967             19,451,708
                                                      -----------------       ----------------
  Total current assets                                     32,699,761             35,567,888

Property and equipment, at lower of cost or market        475,245,444            478,140,391
Less accumulated depreciation and amortization           (289,765,860)          (288,218,396)
                                                      -----------------       ----------------
  Net property and equipment                              185,479,584            189,921,995

Other assets:
  Goodwill (net of accumulated amortization of
    $8,549,000 in 2002 and $8,523,000 in 2001)              8,740,667              9,237,219
  Deferred charges and other intangible assets              7,965,160              8,684,963
  Restricted cash                                          10,262,342              6,849,639
  Other assets                                              3,888,402              3,995,353
                                                      -----------------       ----------------
  Total other assets                                       30,856,571             28,767,174
                                                      -----------------       ----------------
                                                      $   249,035,916         $  254,257,057
                                                      =================       ================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                    $    13,260,106         $   15,083,156
  Other accrued liabilities                                44,353,778             42,752,908
  Debt and capital lease obligations due within
   one year                                               135,095,759             10,320,962
                                                      -----------------       ----------------
  Total current liabilities                               192,709,643             68,157,026


Long-term debt and capital lease obligations              112,700,599            240,024,482

Other liabilities                                          42,851,855             45,647,164

Shareholders' deficit:
  Common stock, $1 par value: authorized
    200,000,000 shares; issued 52,031,248 in 2002
    and 51,709,122 in 2001                                 52,031,248             51,709,122
Additional paid-in capital                                136,613,520            136,861,557
Other comprehensive loss                                                          (1,091,364)
Accumulated deficit                                      (287,870,949)          (287,050,930)
                                                      ------------------      ----------------
    Total shareholders' deficit                           (99,226,181)           (99,571,615)
                                                      ------------------      ----------------
                                                      $   249,035,916         $  254,257,057
                                                      ==================      ================
</TABLE>
    See notes to consolidated condensed financial statements

                                      2

<TABLE>
                                SHONEY'S, INC. AND SUBSIDIARIES
                         Consolidated Condensed Statement of Operations
                                         (Unaudited)
                                                               Sixteen Weeks Ended
                                                           February 17,      February 18,
                                                               2002              2001
                                                         ----------------  ----------------
<S>                                                      <C>               <C>
Revenues
  Net sales                                              $  172,610,900    $  190,288,021
  Franchise fees                                              3,815,477         3,782,236
  Other income                                                2,837,055         3,702,251
                                                         ----------------  ----------------
    Total revenues                                          179,263,432       197,772,508

Costs and expenses
  Cost of sales                                             154,560,500       177,314,802
  General and administrative expenses                        15,839,516        17,436,782
  Interest expense                                           10,098,435        10,589,227
                                                         ----------------  ----------------
    Total costs and expenses                                180,498,451       205,340,811
                                                         ----------------  ----------------

Loss from continuing operations before income taxes          (1,235,019)       (7,568,303)

Provision for (benefit from) income taxes                      (415,000)           72,000
                                                         ----------------  ----------------

Loss from continuing operations                                (820,019)       (7,640,303)
Discontinued operations, net of income taxes                                   (1,451,894)
                                                         ----------------  ----------------

Net loss                                                 $     (820,019)   $   (9,092,197)
                                                         ================  ================
Earnings per common share
  Basic and diluted
    Loss from continuing operations                              ($0.02)           ($0.15)
    Discontinued operations, net of income taxes                   0.00             (0.03)
                                                         ----------------  ----------------
    Net loss                                                     ($0.02)           ($0.18)
                                                         ================  ================

Weighted average shares outstanding
    Basic and diluted                                        51,850,052        51,196,068

Common shares outstanding                                    52,031,248        51,693,846


Dividends per share                                                NONE              NONE

See notes to consolidated condensed financial statements
</TABLE>

                                      3

<TABLE>
                                SHONEY'S, INC. AND SUBSIDIARIES
                        Consolidated Condensed Statement of Cash Flows
                                        (Unaudited)
                                                                Sixteen Weeks Ended
                                                           February 17,      February 18,
                                                               2002              2001
                                                         ----------------  ----------------
<S>                                                      <C>               <C>
Operating activities
  Net loss                                               $     (820,019)   $   (9,092,197)
  Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
        Loss from discontinued operations, net of
            income taxes                                                        1,451,894
        Depreciation and amortization                         6,390,937         8,862,174
        Amortization of deferred charges and other
            non-cash charges                                  2,811,986         2,277,500
        Gain on disposal of property and equipment           (2,333,350)       (2,979,501)
        Changes in operating assets and liabilities            (614,173)       (4,147,932)
                                                         ----------------  ----------------
            Net cash provided (used) by continuing
                 operating activities                         5,435,381        (3,628,062)
            Net cash provided by discontinued operating
                 activities                                                     1,907,874
                                                         ----------------  ----------------
            Net cash provided (used) by operating
                 activities                                   5,435,381        (1,720,188)

Investing activities
  Cash required for property and equipment                   (1,798,461)       (4,411,851)
  Proceeds from disposal of property and equipment            8,255,048         5,367,571
  Cash used by other assets                                  (3,422,245)         (277,518)
                                                         ----------------  ----------------
            Net cash provided by continuing investing
                 activities                                   3,034,342           678,202
            Net cash used by discontinued investing
                 activities                                                       (95,242)
                                                         ----------------  ----------------
            Net cash provided by investing activities         3,034,342           582,960

Financing activities
  Payments on long-term debt and
    capital lease obligations                               (14,866,917)      (19,339,237)
  Proceeds from long-term debt                               10,100,000        23,000,000
  Net proceeds from short-term debt                           1,797,223         1,250,000
  Cash required for debt issue costs                         (1,600,298)         (731,885)
                                                         ----------------  ----------------
            Net cash provided (used) by continuing
                 financing activities                        (4,569,992)        4,178,878
            Net cash used by discontinued financing
                 activities                                                    (2,053,123)
                                                         ----------------  ----------------
            Net cash provided (used) by financing
                 activities                                  (4,569,992)        2,125,755
                                                         ----------------  ----------------
Change in cash and cash equivalents                      $    3,899,731    $      988,527
                                                         ================  =================

See notes to consolidated condensed financial statements
</TABLE>

                                      4

The forward-looking statements included in this Form 10-Q relating to certain
matters involve risks and uncertainties, including the ability of management
to successfully implement its strategy for improving Shoney's Restaurants
performance, the ability of management to effect asset sales consistent with
projected proceeds and timing expectations, the results of pending and
threatened litigation, adequacy of management personnel resources, shortages
of restaurant labor, commodity price increases, product shortages, adverse
general economic conditions, adverse weather conditions that may affect the
Company's markets, turnover and a variety of other similar matters. Forward-
looking statements generally can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "intend," "estimate," "could,"
"anticipate," "believe," or "continue" (or the negative thereof) or similar
terminology.  Actual results and experience could differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements as a result of a number of factors, including but not
limited to those discussed in Management's Discussion and Analysis of
Financial Condition and Results of Operations and under the caption "Risk
Factors" therein. Forward-looking information provided by the Company
pursuant to the safe harbor established under the Private Securities
Litigation Reform Act of 1995 should be evaluated in the context of these
factors. In addition, the Company disclaims any intent or obligation to
update these forward-looking statements.








                                      5

                          SHONEY'S, INC. AND SUBSIDIARIES
                Notes to Consolidated Condensed Financial Statements
                               February 17, 2002
                                  (Unaudited)


NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited Consolidated Condensed Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q.  As a
result, they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
The Company, in management's opinion, has included all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations.  Certain reclassifications have been made in
the Consolidated Condensed Financial Statements to conform to the 2002
presentation.  Operating results for the sixteen-week period ended February
17, 2002 are not necessarily indicative of the results that may be expected
for all or any balance of the fiscal year ending October 27, 2002.  For
further information, refer to the Consolidated Financial Statements and
Footnotes thereto included in the Shoney's, Inc. Annual Report on Form 10-K
for the year ended October 28, 2001 filed with the Securities and Exchange
Commission on February 12, 2002.

NOTE 2 - DISCONTINUED OPERATIONS

On May 25, 2001, the Company announced the execution of a definitive
agreement to sell its wholly-owned subsidiary, Commissary Operations, Inc.
("COI").  On June 11, 2001, the Company sold COI for $9.0 million cash less
expenses.  As a result, the Company has presented the COI line of business as
discontinued operations in the accompanying financial statements, net of any
related income tax expense.  All prior periods have been restated.  The
discontinued line of business had total revenue and net loss as follows:



                                   Quarter Ended         Quarter Ended
(in thousands)                   February 17, 2002     February 18, 2001
                                 -----------------     -----------------

Total revenue                    $      --             $      28,756
Net loss                         $      --             $      (1,452)


NOTE 3 - ACQUISITIONS

On September 9, 1996, the Company completed the acquisition of substantially
all of the assets of TPI Enterprises, Inc. ("TPI") which, as the then largest
franchisee of the Company, operated 176 Shoney's Restaurants and 67 Captain
D's restaurants.

Twenty-eight of TPI's restaurants had been targeted for closure during the
Company's due diligence process as under-performing units. Costs to exit
these businesses were accrued as liabilities assumed in purchase accounting
and consisted principally of severance pay for certain employees and the
accrual of future minimum lease obligations in excess of anticipated sublease
rental income. The total amount of such liabilities included in the TPI
purchase price allocation was approximately $21.0 million. Approximately $0.1
million in costs to exit restaurants acquired were charged to this liability
during the first quarter of 2002 and the first quarter of 2001. Approximately
$2.3 million of anticipated exit costs related to the TPI acquisition remain
accrued at February 17, 2002.

                                     6


NOTE 4 - IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS HELD FOR DISPOSAL

The Company adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121"), at the beginning of the first quarter of
1997.

At February 17, 2002, the carrying value of 30 properties to be disposed of
was $13.8 million and is reflected on the Consolidated Condensed Balance
Sheet as net current assets held for sale. Under the provisions of SFAS 121,
depreciation and amortization are not recorded on assets held for sale during
the period in which such assets are being held for disposal.

If the Company's restaurants were to experience declines in comparable store
sales and operating margins, the Company could incur additional impairment
charges in the future.

NOTE 5 - RESTRUCTURING EXPENSE

When the decision to close a restaurant is made, the Company incurs certain
exit costs generally for the accrual of the remaining leasehold obligations
less anticipated sublease income related to leased units that are targeted to
be closed.  There were no exit costs recorded in the first quarter of 2002 or
the first quarter of 2001. The Company charged approximately $0.6 million and
$0.8 million against these exit costs reserves in the first quarter of 2002
and the first quarter of 2001, respectively. Approximately $4.7 million of
accrued exit costs remain at February 17, 2002.

During 2001, the Company closed 51 Company-owned restaurants and sold six
Shoney's Restaurants and 14 Captain D's restaurants to franchisees. During
the first sixteen weeks of 2002, six Shoney's Restaurants were closed and
eight Captain D's restaurants were sold to franchisees.  Management
continually evaluates the operating performance of its restaurants and may
close additional restaurants if, in management's opinion, operating results
cannot be improved within what management believes is a reasonable time
period.  In the event management elects to close additional leased
restaurants during 2002, the Company may incur additional restructuring
charges.

Below are sales and EBIT as defined, which is defined by the Company as
operating income before asset impairment charges, restructuring charges and
litigation settlements, for the first sixteen weeks of 2002 and 2001 for
restaurants closed or sold prior to February 17, 2002.


                                 Quarter Ended             Quarter Ended
(in thousands)                 February 17, 2002         February 18, 2001
                               -----------------         -----------------

                                         EBIT as                   EBIT as
                               Sales     defined         Sales     defined
                               -----     -------         -----     -------

Stores closed or sold          $1,853    $(430)          $23,352   $(2,905)
                               ======    =======         =======   ========

NOTE 6 - EARNINGS PER SHARE

As of February 17, 2002, the Company had outstanding approximately 3,472,728
options to purchase shares at prices ranging from $0.45 to $25.51 per share.
The Company also has outstanding subordinated zero coupon convertible debentures
and 8.25% subordinated convertible debentures, which are


                                     7

convertible into common stock at the option of the debenture holder. As of
February 17, 2002, the Company had reserved 537,908 shares related to the
subordinated zero coupon convertible debentures and 266,581 shares related to
the 8.25% convertible debentures. The zero coupon debentures are due in April
2004 and the 8.25% debentures are due in July 2002.  Because the Company
reported a net loss from continuing operations for both periods presented, the
effect of considering these potentially dilutive convertible securities was
anti-dilutive and was not included in the calculation of Diluted EPS.

NOTE 7 - INCOME TAXES

The Company has recorded an income tax benefit of $0.4 million for the
sixteen weeks ended February 17, 2002 and an income tax provision of $0.1
million for the sixteen weeks ended February 18, 2001. The effective tax rate
differs from the Federal statutory rate of 35% primarily due to goodwill
amortization which is not deductible for Federal income taxes and a change
in the valuation allowance against the gross deferred tax assets.  The income
tax benefit for the sixteen weeks ended February 17, 2002 includes a refund
of Federal income tax of $0.4 million from the carryback of a net operating
loss to a previous year.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.  As of
February 17, 2002, the Company increased the valuation allowance for gross
deferred tax assets for tax credit carryforwards and net operating loss
carryforwards.  The deferred tax asset valuation adjustment is in accordance
with Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109"), which requires that a deferred tax asset
valuation allowance be established if certain criteria are not met.  If the
deferred tax assets are realized in the future, the related tax benefits will
reduce income tax expense.

NOTE 8 - DEBT AND OBLIGATIONS UNDER CAPITAL LEASES

Debt and obligations under capital leases at February 17, 2002 and October
28, 2001 consisted of the following:

                                                2002             2001
                                                ----             ----
Shoney's - Mortgage Financing            $   89,745,050    $  95,538,337
Shoney's - Line of Credit                     3,500,000
Captain D's - Term Notes                    115,000,000      115,000,000
Captain D's - Line of Credit                  1,897,223        2,000,000
Subordinated zero coupon convertible
   debentures, due April 2004                15,332,845       14,943,615
Subordinated convertible debentures,
   due July 2002                              5,237,140        5,205,761
Industrial revenue bonds                      5,765,000        5,765,000
Notes payable to others                       2,877,815        2,988,828
                                         --------------    -------------
                                            239,355,073      241,441,541
Obligations under capital leases              8,441,285        8,903,903
                                         --------------    -------------
                                            247,796,358      250,345,444
Less amounts due within one year            135,095,759       10,320,962
                                         --------------    -------------
Amounts due after one year               $  112,700,599    $ 240,024,482
                                         ==============    =============

                                      8

Senior Debt Refinancing

On September 6, 2000, the Company completed a refinancing of approximately
$248.3 million in connection with a repurchase of approximately 90% of its
outstanding subordinated indebtedness for an aggregate price of approximately
$71.8 million.  Consummation of the debt repurchase and the related
refinancing resulted in an extraordinary gain on the early retirement of debt
of approximately $82.5 million, net of expenses and taxes, in the Company's
fourth quarter of 2000.

At the time of the debt repurchase and related refinancing, the Company
restructured its restaurant operations by separating its Shoney's and Captain
D's operations (the "Reorganization").  The Reorganization included
transferring substantially all of the assets of the Company's Captain D's
restaurants to a wholly-owned subsidiary, Captain D's, Inc. The
Reorganization allowed each of the Company's operating segments (Shoney's and
Captain D's) to be separately financed.  As a result of the Reorganization
and the refinancing of the Company's senior indebtedness, each operating
segment is intended to operate as an independent business unit and be
responsible for its own indebtedness and debt service. The senior lending
agreements generally prohibit the movement of cash between the operating
segments except for payments under certain tax sharing arrangements, payments
for administrative services and, under certain circumstances, Captain D's, Inc.
is allowed to make distributions of up to $5.0 million to the Company.

Shoney's - Mortgage Financing

In connection with the refinancing, on September 6, 2000, the Company entered
into a $99.0 million, 20-year mortgage financing (the "Shoney's Mortgage
Financing") which was secured by the land, buildings and equipment of 142
Shoney's Restaurants. The carrying value of the collateral for the mortgage
financing was $75.7 million at February 17, 2002. Principal reductions of
approximately $1.9 million are scheduled during 2002. A portion of this debt
carries a fixed rate of interest, and the remainder is at a floating rate
that is reset monthly based on the London Interbank Offered Rate (LIBOR).  As
of February 17, 2002, the effective interest rates on this debt were as
follows:

            Principal Amount       Fixed/Floating          Interest Rate
            ----------------       --------------          -------------
               $64,546,900             Fixed                   10.23%
               $ 8,565,707             Fixed                   10.35%
               $16,632,443            Floating                  6.02%

Shoney's - Line of Credit

On September 6, 2000, the Company entered into an amendment and restatement
of the 1997 Credit Facility which provided Shoney's with a $40.0 million line
of credit (the "Shoney's Line of Credit").  The Shoney's Line of Credit is
secured by Shoney's Restaurant properties not serving as collateral for the
Shoney's Mortgage Financing or other debt and certain surplus, office and
miscellaneous properties owned and leased by the Company. The Shoney's Line
of Credit was originally scheduled to expire on September 6, 2002.  In
addition, the letters of credit issued under the Shoney's Line of Credit were
scheduled to expire 60 days prior to the September 6, 2002 maturity, or July
8, 2002.  On February 11, 2002, the Shoney's Line of Credit was amended to
extend the termination date to November 29, 2002, and to extend the
expiration of the letters of credit issued under the Shoney's Line of Credit
to October 30, 2002.

                                     9

Pursuant to the terms of the Shoney's Line of Credit, the Company sold
certain other assets serving as collateral for the Shoney's Line of Credit
and retained and used in the business $15.0 million of the sale
proceeds.  During 2001, the Company sold $10.0 million of collateral
properties and reduced the availability under the Shoney's Line of Credit to
$30.0 million.  The carrying value of the collateral for the Shoney's Line of
Credit was $16.5 million at February 17, 2002.  In addition, the Company has
funded $7.7 million of proceeds from other asset sales into a cash collateral
account as required by the terms of the Shoney's Line of Credit.  This cash
collateral account is classified as and included in restricted cash on the
consolidated condensed balance sheet.  Available credit under the Shoney's
Line of Credit is reduced by letters of credit.  At February 17, 2002, the
Company had $3.5 million of funded debt under the Shoney's Line of Credit and
had outstanding letters of credit of $22.9 million, resulting in available
credit of $3.6 million.  Proceeds from the sale of certain other assets
will be used to either repay drawings under the line, which will also
permanently reduce availability, or cash collateralize the line. The Company
pays a commitment fee of 0.50% for unused available credit under the Shoney's
Line of Credit.  The interest rate for this facility is at floating rates
(4.25% over LIBOR or 3.25% over the prime rate).

Captain D's - Term Notes and Line of Credit

On September 6, 2000, Captain D's, Inc. ("Captain D's") entered into a credit
facility for up to $135.0 million, consisting of two term notes totaling
$115.0 million and a $20.0 million line of credit (the "Captain D's
Facility").  The Captain D's Facility is secured by all of the assets owned
by Captain D's, including owned land, buildings and equipment, certain leased
restaurant properties, and a pledge of certain other assets of Captain D's.
The carrying value of the collateral for the Captain D's Facility was $84.2
million at February 17, 2002. The Captain D's Facility had been scheduled to
mature on December 31, 2001.  On December 27, 2001, Captain D's received an
extension of the Captain D's Facility to March 31, 2002.  Additionally, in
connection with the merger agreement entered into by the Company on January
24, 2002, (See Note 15 - Merger Agreement), the Captain D's Facility was
acquired by Lone Star Funds, through certain of its affiliates, and was
extended until October 31, 2002.  In connection with the debt acquisition,
the Captain D's line of credit was reduced to $15.0 million, and the interest
rate on the Captain D's Facility was increased to 12.5% until May 15, 2002.
During the first quarter of 2002, Captain D's funded $2.4 million of proceeds
from asset sales into a cash collateral account as required by the terms of
the Captain D's Facility. This amount partially funds an extension fee equal to
2% of the Captain D's Facility which will be due on May 15, 2002. This cash
collateral account is classified as and included in restricted cash on the
consolidated condensed balance sheet.  Also, on May 15, 2002, the interest rate
will increase to 15%. At February 17, 2002, there was $115.0 million
outstanding under the term notes and $1.9 million outstanding under the line of
credit.  There are no scheduled payments under the term notes or the line of
credit prior to the termination date of the Captain D's Facility.  Available
credit under the line of credit is reduced by outstanding letters of credit.
At February 17, 2002, Captain D's outstanding letters of credit totaled $6.4
million, resulting in available credit of $6.7 million.  Captain D's pays a
commitment fee of 0.50% for unused available credit under the line of credit.
Prior to January 24, 2002, the interest rate on notes totaling $85.0 million
was at floating rates (4% over LIBOR or 3% over the prime rate) and, with
respect to term notes totaling $30.0 million, the interest rate was initially
at floating rates of 4% over LIBOR and 3% over the prime rate.  On January 1,
2001, the interest rate for the $30.0 million term notes increased by 0.50%
and, pursuant to the terms of the Captain D's Facility, increased by 0.50% on
the last day of each calendar quarter.  Prior to January 24, 2002, the interest
rate for the line of credit ranged from 3% to 4% over LIBOR or 2% to 3% over
the prime rate, based on certain defined financial ratios.

                                     10

Interest Rate Hedge Programs

The Captain D's Facility required Captain D's, Inc. to enter into an interest
rate hedge program covering a notional amount of not less than 50% of the
term notes outstanding ($57.5 million) within 45 days of the date of the loan
closing through December 31, 2001.  On October 16, 2000, Captain D's entered
into an interest rate swap agreement covering $57.5 million of debt, which
fixed the interest rate at 6.7% plus the applicable margin, through December
31, 2001. Additionally, on December 29, 2000 and January 2, 2001, Captain D's
entered into interest rate swap agreements covering $25.0 million and $32.5
million of debt, respectively, which fixed the interest rate at 5.9% and 5.8%,
respectively, plus the applicable margin, through December 31, 2001. These
interest rate swap agreements expired on December 31, 2001, and the Captain
D's credit agreement has been modified to provide for fixed rates of
interest.

In July and August 2000, the Company entered into forward agreements to lock
the interest rate on a portion of the Shoney's Mortgage Financing.  The
interest rate on this fixed rate debt was to be based on the ten year U.S.
Treasury Note rate between two and ten days prior to the closing of the
transaction.  Because the ten year U.S. Treasury Note rate decreased between
the date of the agreement and the date the financing was consummated
(September 6, 2000), the Company paid the interest rate differential between
the agreed upon interest rate and the market rate of the ten year U.S.
Treasury Note.  This amount is being amortized and recognized as an
adjustment to interest expense over the 20-year term of the financing.

Loan Covenants

The Company's senior debt agreements (consisting of the Shoney's Line of
Credit, the Captain D's Facility and the Shoney's Mortgage Financing) are
secured by substantially all of the Company's assets.  These debt agreements
(1) require satisfaction of certain financial ratios and tests; (2) impose
limitations on capital expenditures; (3) limit the ability to incur
additional debt and contingent liabilities; (4) prohibit dividends and
distributions on common stock (provided, however, that effective January 24,
2002, under certain circumstances, Captain D's, Inc. is allowed to make
distributions of up to $5.0 million to the Company); (5) prohibit mergers,
consolidations or similar transactions; and (6) include other affirmative and
negative covenants.

The Shoney's Mortgage Financing agreements provide that each property must be
continuously operated, except for a 120 day period every three years.  In May
2001, the Company began closing certain restaurants that secured the Shoney's
Mortgage Financing and has closed 31 restaurants as of February 17, 2002.
The Company received agreements in which the lenders agreed to forebear,
until October 31, 2002, from taking any action with respect to any failure by
the Company to meet the fixed charge coverage covenant and any closure of
certain restaurants. In addition, the Company received approval from the
lenders to move certain collateral properties among the various collateral
pools and to substitute three properties into the pools in an effort to
strengthen certain collateral pools' financial ratios. This reallocation of
collateral is expected to be completed during the second quarter of 2002. As of
February 17, 2002, the Company had sold 12 of the closed restaurants which
secured the Shoney's Mortgage Financing and reduced the outstanding
indebtedness in the amount of $6.7 million. Further, the Lender has agreed to
accept a 1% prepayment penalty with respect to the debt prepaid under the
Shoney's Mortgage Financing.

The Company expects to be in compliance with its remaining financial
covenants in 2002 and was in compliance with its financial covenants at the
end of the first quarter of 2002.

                                    11

Subordinated Zero Coupon Convertible Debentures, 8.5%, Due April 2004

The subordinated zero coupon convertible debentures were issued at $286.89
per $1,000 note. There are no periodic cash payments of interest. The issue
price represents a yield to maturity of 8.5% based on a semi-annual bond
equivalent basis.  Each note is convertible into 29.349 shares of the
Company's common stock at the option of the holder.  The Company has reserved
537,908 shares for future issuance pursuant to these debentures.

Subordinated Convertible Debentures, 8.25%, Due July 2002

In connection with the acquisition of substantially all of the assets of TPI
in September 1996, the Company assumed $51.6 million (principal amount) of
8.25% subordinated convertible debentures due July 15, 2002.  The bonds are
convertible at the holder's option, subject to compliance with the provisions
of the supplemental indenture, into 50.508 shares of the Company's stock for
each $1,000 debenture.  The Company has reserved 266,581 shares for future
issuance pursuant to the debentures.  In addition, upon conversion, debenture
holders are entitled to a cash distribution per share equal to the cash
distributions made by TPI to its common shareholders in connection with the
liquidation and dissolution of TPI.  Interest on the bonds is due semi-
annually in January and July.

Other Debt Information

The Company's industrial revenue bonds include $5.8 million at fixed interest
rates ranging from 9.0% to 10.0%.

The Company has standby letters of credit of $29.2 million outstanding at
February 17, 2002, which are principally utilized to support the Company's
insurance programs. The outstanding letters of credit are supported by the
Shoney's and Captain D's Lines of Credit in the amounts set forth in the
table below.

                                           Outstanding
                  Line of Credit        Letters of Credit
                  --------------        -----------------

                   Shoney's              $  22,873,863
                   Captain D's               6,356,000
                                        -----------------
                                         $  29,229,863


NOTE 9 - LITIGATION

The Company is a party to legal proceedings incidental to its business.  In
the opinion of management, based upon information currently available, the
ultimate liability with respect to these actions will not materially affect
the operating results or the financial position of the Company.  (See Note 16
- Subsequent Events).

NOTE 10 - CONCENTRATION OF RISKS AND USE OF ESTIMATES

As of February 17, 2002, the Company operated and franchised a chain of 935
restaurants in 28 states, which consists of two restaurant divisions:
Shoney's Restaurants and Captain D's. The majority of the Company's
restaurants are located in the southeastern United States. The Company's
restaurant concepts


                                     12

are Shoney's Restaurants, which are family dining restaurants offering full
table service and a broad menu, and Captain D's restaurants, which are
quick-service restaurants specializing in seafood. The Company also owned COI,
a food service business that manufactures and distributes food and supplies to
Company-owned restaurants, certain franchised restaurants and other customers.
On June 11, 2001, the Company completed the sale of COI.  The Company has
entered into long term purchase agreements with COI for essentially all of its
food products for both the Shoney's and Captain D's restaurant concepts.  The
Company believes that these contracts contain purchasing terms that are
competitive in today's marketplace, but the Company is dependent on COI for
essentially all of its food products. The Company extends credit to franchisee
customers for franchise fees on customary credit terms which generally do not
require customers to provide collateral or other security to the Company.
Except for the contracts with COI, the Company believes there is no
concentration of risk with any single customer, supplier, or small group of
customers or suppliers whose failure or nonperformance would materially affect
the Company's results of operations.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to use judgment and make estimates
that affect the amounts reported in the Consolidated Condensed Financial
Statements.  Management believes that such estimates have been based on
reasonable and supportable assumptions and that the resulting estimates are
reasonable for use in the preparation of the Consolidated Condensed Financial
Statements.  Changes in such estimates will be made as appropriate as
additional information becomes available and may affect amounts reported in
future periods.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Management Retention Agreements - The Company has management retention
agreements with certain officers and key employees of the Company to assist
in the retention of key management personnel.  Agreements covering 14
officers provide for payment of between one and two years of base salary and,
with respect to certain executive officers, bonus and incentive plan
payments, in the event that the executives are terminated without good cause
or if the executives resign for "good reason" (as defined in the agreements)
within a one year period or, with respect to certain executive officers, a
two year period, following a change in control of the Company. The Company,
through its subsidiary Captain D's, Inc., also has management retention
agreements with certain officers and key employees of Captain D's that
provide for special payments in the event of a change in control, on the
earliest to occur of (a) one year following the occurrence of a change in
control, (b) the termination of employment for any reason other than "good
cause" (as defined in the agreements) or (c) the termination of employment by
the employee for "good reason" (as defined in the agreements).  The Company's
total contingent liability with respect to the management retention
agreements is approximately $3.6 million. The Company's general policy for
officers not party to a management retention agreement is to provide
severance benefits of up to six months salary for such officers in the event
they are terminated without cause.

Assigned Leases - The Company has assigned its leasehold interest to third
parties with respect to approximately 40 properties on which the Company
remains contingently liable to the landlord for the performance of all
obligations of the party to whom the lease was assigned in the event that
party does not perform its obligations under the lease. The assigned leases
are for restaurant sites that the Company has closed. The Company estimates
its contingent liability associated with these assigned leases as of February
17, 2002 to be approximately $13.2 million.

Property Sublet to Others - The Company subleases approximately 57 properties
to others. The Company remains liable for the leasehold obligations in the
event these third parties do not make the


                                     13

required lease payments. The majority of the sublet properties are former
restaurant sites that the Company has closed or franchised. The Company
estimates its contingent liability associated with these sublet properties as
of February 17, 2002 to be approximately $11.2 million.

Lease Guaranty - The Company is a party to a guaranty agreement which
guarantees the obligations under a master lease pursuant to which COI, the
lessee and former wholly-owned subsidiary of the Company, leases 24 tractors
and 20 trailers.  The Company sold COI on June 11, 2001, but remains
contingently liable for these leasehold obligations in the event that COI
does not make the required lease payments.  The Company estimates its
contingent liability associated with this master lease to be $2.7 million as
of February 17, 2002.


NOTE 12 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142").  SFAS 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001, and that the use of the pooling-of-interest method is no longer
allowed.  SFAS 142 requires that upon adoption, amortization of goodwill will
cease, and instead, the carrying value of goodwill will be evaluated for
impairment on an annual basis.  Identifiable intangible assets will continue
to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of."  SFAS 142 is effective for
fiscal years beginning after December 15, 2001.  As of the date of adoption,
the Company expects to have unamortized goodwill in the amount of $7.9
million, which will be subject to the transition provisions of SFAS 142.
Amortization expense related to goodwill was $0.4 million for the quarter
ended February 17, 2002.  Because of the extensive effort needed to comply
with adopting SFAS 142, it is not practicable to reasonably estimate the
impact of adopting this statement on the Company's financial statements at
the date of this report, including whether any transitional impairment losses
will be required to be recognized as the cumulative effect of a change in
accounting principle.

In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144") which provides clarifications of certain implementation issues
within SFAS 121, along with additional guidance on the accounting for the
impairment or disposal of long-lived assets.  SFAS 144 supersedes SFAS 121
and applies to all long-lived assets (including discontinued operations) and
consequently amended APB 30 "Reporting the Effects of Disposal of a Segment
of a Business."  SFAS 144 develops one accounting model (based on the model
in SFAS 121) for long-lived assets that are to be disposed of by sale, as
well as addresses the principal implementation issues.  SFAS 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and early application is encouraged.  The Company is evaluating the
impact of the adoption of this standard and has not yet determined the effect
of adoption on its financial position and results of operations.

NOTE 13 - SEGMENT INFORMATION

The Company operates entirely in the food service industry with substantially
all revenues resulting from the sale of menu products from restaurants
operated by the Company and its subsidiaries. The Company has operations
principally in two industry segments, both of which are restaurant concepts.
The restaurant concepts are Shoney's and Captain D's. Effective with the
first quarter of 2001, the Company



                                    14

began allocating its general corporate or Restaurant Support Center ("RSC")
overhead expenses to its operating segments.  In addition, beginning in 2001,
certain asset gains or losses may be recognized in segment EBIT as defined
where previously all gains or losses had been reported in "corporate and
other".  Gains or losses on asset sales presented in segment information
represent internal presentation and may not equal gains and losses as presented
in GAAP.  The Company's corporate and other income and expenses consist
primarily of gains from the sale of property and equipment, rental income,
interest income and miscellaneous income or expense and do not constitute a
reportable segment of the Company as contemplated by Statement of Financial
Accounting Standards No. 131.  The Company evaluates performance based on
several factors, of which the primary financial measure is operating income
before interest, taxes, restructuring charges, litigation settlements and
impairment charges ("EBIT as defined").

Revenue
                                             Quarter Ended
(in thousands)                       February 17,       February 18,
                                         2002               2001
                               --------------------------------------------
Shoney's Restaurants           $       81,557       $     100,117
Franchise fees                          1,884               1,994
Other revenue                           1,180               2,333
                               --------------------------------------------
  Total Shoney's                       84,621             104,444
Captain D's restaurants                90,311              89,300
Franchise fees                          1,931               1,788
Other revenue                           1,434               1,050
                               --------------------------------------------
  Total Captain D's                    93,676              92,138
Corporate and other revenue               966               1,191
                               --------------------------------------------
Total consolidated revenue     $      179,263       $     197,773
                               ============================================



EBIT (as Defined)
                                             Quarter Ended
(in thousands)                       February 17,       February 18,
                                         2002               2001
                               --------------------------------------------
Shoney's operations            $          638       $      (5,664)
Shoney's asset gains                      478               1,480
                               --------------------------------------------
  Total Shoney's EBIT                   1,116              (4,184)
Captain D's operations                  6,375               5,672
Captain D's asset gains                 1,180                 939
                               --------------------------------------------
  Total Captain D's EBIT                7,555               6,611
Corporate and other income
 (expense)                               (428)                 65
Corporate and other asset
 gains                                    620                 529
                               --------------------------------------------
Total corporate and other
 income                                   192                 594
                               --------------------------------------------
Total EBIT for reportable
 segments                               8,863               3,021

Other charges:
  Interest expense                     10,098              10,589
                               --------------------------------------------
Consolidated loss from
 continuing operations before
 income taxes                  $       (1,235)      $      (7,568)
                               ============================================


                                      15

Depreciation and Amortization
                                             Quarter Ended
(in thousands)                       February 17,       February 18,
                                         2002               2001
                               --------------------------------------------
Shoney's                       $        2,832       $       4,649

Captain D's                             3,170               3,724

Corporate and other                       389                 489
                               --------------------------------------------
Total consolidated
 depreciation and amortization $        6,391       $       8,862
                               ============================================


NOTE 14 - ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133

The Company adopted Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities", as amended
("SFAS 133") effective October 30, 2000.

SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities on the balance sheet and measure those instruments at
fair value.  Derivatives that are not hedges must be adjusted to fair value
through income.  If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivatives will either be offset
against the change in the fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings.  The ineffective portion of
a derivative's change in fair value will be immediately recognized in
earnings.

On October 30, 2000, the date of the Company's adoption of SFAS 133, the
cumulative effect of adoption was a charge to other comprehensive income of
$0.1 million.  At October 28, 2001, the Company had unrealized losses related
to the interest rate swap agreements of $1.1 million, which was presented in
accumulated other comprehensive loss.  During the first quarter of fiscal
2002, the interest rate swap agreements expired, and the Company recognized
interest expense of $0.7 million related to these agreements.  At February 17,
2002, the Company had no derivatives as that term is defined in SFAS 133.


                                      16

NOTE 15 - MERGER AGREEMENT

On January 24, 2002, the Company entered into a definitive merger agreement
(the "Merger Agreement") with Lone Star U.S. Acquisitions LLC, U.S.
Restaurant Properties Operating Limited Partnership and LSF4 Acquisition, LLC
("LSF4 Acquisition") in which LSF4 Acquisition will merge with and into the
Company.  Pursuant to the terms of the Merger Agreement, the outstanding
shares of the Company's common stock will be acquired for $0.36 per share in
cash.  The Merger Agreement, which was unanimously approved by the Company's
Board of Directors, is subject to approval by the Company's shareholders at
a special meeting currently scheduled for April 10, 2002, and other customary
closing conditions, and is expected to close in the second quarter of 2002.


NOTE 16 - SUBSEQUENT EVENTS

On February 26, 2002, one of the Company's individual shareholders filed a
complaint against the Company and the Company's individual directors in the
Circuit Court for Davidson County in Nashville, Tennessee.  This complaint
purports to assert claims on behalf of all of the Company's public
shareholders who are similarly situated with the plaintiff.  This complaint
alleges that the Company and the members of the Company's Board of Directors
have breached fiduciary duties to the public shareholders, that the directors
engaged in self-dealing in connection with their approval of the merger with
LSF4 Acquisition (See Note 15 - Merger Agreement) and that the directors
failed to take steps to maximize the value of the Company to the public
shareholders.  This complaint seeks class certification and certain forms of
equitable relief, including enjoining the consummation of the merger with
LSF4 Acquisition.  A copy of the complaint filed in this matter was filed as
Exhibit 99 to the Company's Current Report on Form 8-K, which was filed with
the Securities and Exchange Commission on March 4, 2002.  The Company believes
that the allegations made in the complaint are without merit and intends to
vigorously contest this action.  There can, however, be no assurance that the
Company or the individual defendants will be successful in the defense of this
action.






                                      17


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the Consolidated Condensed Financial
Statements and Notes thereto. On May 25, 2001, the Company announced the
execution of a definitive agreement to sell its wholly-owned subsidiary,
Commissary Operations, Inc. ("COI").  On June 11, 2001, the Company sold COI
for $9.0 million cash less expenses.  As a result, the Company has presented
the COI line of business as discontinued operations in the accompanying
financial statements, net of any related income tax expense.  All prior
periods have been restated.  The first quarters of fiscal 2002 and 2001
covered periods of sixteen weeks.

CONSOLIDATED RESULTS OF OPERATIONS

CONSOLIDATED REVENUES

Consolidated revenues for the first quarters of 2002 and 2001 are as follows:


                                             Quarter Ended
(in millions)                        February 17,       February 18,
                                         2002               2001
                               -------------------------------------------
Net sales                      $        172.6      $       190.3
Franchise fees                            3.8                3.8
Other income                              2.9                3.7
                               -------------------------------------------
                               $        179.3      $        197.8
                               ===========================================

     Changes in the number of restaurants for the first sixteen weeks of 2002
and 2001 are as follows:

<TABLE>
              <C>          <C>         <C>         <C>         <C>          <C>         (C)         <C>
              February 17, Restaurants Restaurants October 28, February 18, Restaurants Restaurants October 29,
                  2002       Opened      Closed       2001        2001        Opened      Closed       2000
<S>
               -------------------------------------------------------------------------------------------------
Shoney's
 Company-owned     188          -           6          194         242           -           3          245
 Franchised        183          -          12          195         201           -          13          214
               -------------------------------------------------------------------------------------------------
                   371          -          18          389         443           -          16          459
               =================================================================================================
Captain D's
 Company-owned     334          -           8(1)       342         352           -           8(2)       360
 Franchised        230         11(1)        1          220         211           7(2)        -          204
               -------------------------------------------------------------------------------------------------

                   564         11           9          562         563           7           8          564
               -------------------------------------------------------------------------------------------------
                   935         11          27          951       1,006           7          24        1,023
               =================================================================================================
</TABLE>

     (1) Includes 8 restaurants sold to franchisees
     (2) Includes 6 restaurants sold to franchisees


                                      18

Consolidated revenues for the first quarter of 2002 declined $18.5 million,
or 9.4%, to $179.3 million, as compared to revenues of $197.8 million in the
first quarter of 2001.

The components of the change in consolidated revenues are summarized as
follows:

(in millions)                                Quarter Ended
                                           February 17, 2002
                                           -----------------

Restaurant sales                            $      (17.5)
Other revenues                                      (0.1)
Franchise revenues
Other income                                        (0.9)
                                           -----------------
                                            $      (18.5)
                                           =================

The decline in restaurant revenue during the first quarter of 2002 when
compared to the first quarter of 2001 was primarily attributable to the
closing of Company-owned restaurants.  Comparable restaurant sales of all of
the Company's restaurant concepts increased 2.0%.  During 2001, the Company
closed 51 Company-owned restaurants, sold 20 restaurants to franchisees and
opened two Captain D's restaurants. During the first sixteen weeks of 2002,
the Company closed six restaurants and sold eight restaurants to franchisees.

Franchise revenues increased slightly during the first quarter of 2002 when
compared to the same period last year.  The increase in franchise revenue in
the first quarter of 2002 was primarily attributable to initial fees from 11
new Captain D's franchised restaurants in the first quarter of 2002 and a net
increase of 26 Captain D's franchised restaurants since the beginning of
fiscal 2001, partially offset by a net decline of 31 Shoney's franchised
restaurants during the same period.

Other income decreased $0.9 million during the first quarter of 2002 when
compared to the first quarter of 2001, due primarily to a decline of $0.7
million in gains on asset sales and lower rental income of $0.2 million.

CONSOLIDATED COSTS AND EXPENSES

Consolidated cost of sales includes food and supplies, restaurant labor and
operating expenses. A summary of cost of sales as a percentage of
consolidated revenues is shown below:

                                 Quarter Ended        Quarter Ended
                               February 17, 2002    February 18, 2001
                               -----------------    -----------------

Food and supplies                    33.9%                34.2%
Restaurant labor                     30.8%                32.2%
Operating expenses                   21.5%                23.3%
                               -----------------    -----------------
  Total cost of sales                86.2%                89.7%
                               =================    =================

Fluctuations in other income from year to year affects the consolidated costs
and expenses when stated as a percentage of sales.  Excluding the effects of
other income, food and supplies costs, as a percentage of revenues, decreased
0.5% in the first quarter of 2002 when compared to the first quarter of 2001.
The decline in 2002 was principally a result of higher menu prices and
continuing benefits from the implementation of theoretical food costs systems
in both Shoney's and Captain D's.  Food and supplies

                                      19

costs, as a percentage of restaurant sales, declined in both Shoney's and
Captain D's in the first quarter of 2002 when compared to the first quarter of
2001.

Excluding the effects of other income, consolidated restaurant labor
decreased 1.6% as a percentage of sales in the first quarter of 2002 when
compared to the first quarter of 2001.  The decrease in restaurant labor, as
a percentage of sales, in the first quarter of 2002 when compared to the
first quarter of 2001, was attributable to more efficient use of labor in
Shoney's Restaurants.  Despite wage rate increases during the first quarter
of 2002 compared to the first quarter of 2001, improved labor scheduling and
management's emphasis on controlling labor in Shoney's Restaurants more than
offset the effects of higher wage rates.  Restaurant labor increased slightly
as a percentage of restaurant sales in Captain D's.  Despite the decline in
the current quarter, the Company expects continued upward pressure on
consolidated restaurant labor once the benefits from the improved labor
scheduling become comparable in the third quarter of 2002, unless meaningful
improvements in consolidated comparable restaurant sales are achieved.

Excluding the effects of other income, consolidated operating expenses
declined 1.8% as a percentage of total revenues in the first quarter of 2002
as compared to the prior year. The decrease in consolidated operating
expenses in 2002, as a percentage of sales, was primarily the result of lower
costs of repairs and maintenance, advertising and depreciation expense.

A summary of consolidated general and administrative expenses and interest
expense as a percentage of consolidated revenues is shown below:

                                 Quarter Ended        Quarter Ended
                               February 17, 2002    February 18, 2001
                               -----------------    -----------------

Consolidated general and
  administrative expenses            8.8%                 8.8%
Consolidated interest expense        5.6%                 5.4%

Excluding the effects of other income, consolidated general and
administrative expenses, as a percentage of revenues, were unchanged during
the first quarter of 2002 when compared to the first quarter of 2001.  During
2001, the Company significantly reduced salaries and related expenses in a
concentrated effort to lower administrative costs. Salaries and related
expenses declined $1.4 million in the first quarter of 2002 compared to the
first quarter of 2001.  The reduction in salaries and related expenses was
partially offset by $1.1 million of merger-related expenses. (See "Recent
Developments").

Consolidated interest expense declined $0.5 million in the first quarter of
2002 when compared to the first quarter of 2001.  The reduction in interest
expense in 2002 is principally the result of lower debt outstanding partially
offset by the effects of recognized losses related to the settlement of
interest rate swap agreements.  Such costs totaled $0.7 million during the
first quarter of fiscal 2002.

The Company recorded an income tax benefit of $0.4 million in the first
quarter of 2002 and an income tax provision of $0.1 million in the first
quarter of 2001.  The effective tax rate differs from the Federal statutory
rate of 35% primarily due to goodwill amortization which is not deductible for
Federal income tax purposes and an adjustment in the valuation allowance
against deferred tax assets.  The income tax benefit for the first quarter of
2002 includes a refund of Federal income tax of $0.4 million from the carryback
of a net operating loss to a previous year.


                                     20

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.  As of
February 17, 2002, the Company increased the valuation allowance for gross
deferred tax assets for tax credit carryforwards and net operating loss
carryforwards.  The deferred tax asset valuation adjustment is in accordance
with Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109"), which requires that a deferred tax asset
valuation allowance be established if certain criteria are not met.  If the
deferred tax assets are realized in the future, the related tax benefits will
reduce income tax expense.

OPERATING SEGMENTS

Shoney's Restaurants
($ in thousands except comparable                Quarter Ended
 store sales and operating data)        February 17,        February 18,
                                            2002                2001
                                      ------------------------------------
Restaurant revenue                      $   81,557          $  100,117
Franchise revenue                            1,884               1,994
Other revenue                                1,180               2,333
                                      ------------------------------------
  Total Shoney's revenue                    84,621             104,444
Expenses                                    83,505             108,628
                                      ------------------------------------
EBIT as defined (b)                     $    1,116          $   (4,184)
                                      ====================================

Comparable store sales decrease (a)           (0.3)%              (1.3)%

Operating restaurants at end
 of quarter:
  Company-owned                                188                 242
  Franchised                                   183                 201
                                      ------------------------------------
    Total                                      371                 443
                                      ====================================

(a) Prior year amounts have not been restated for comparable restaurants.
(b) EBIT, when that term is used in this Quarterly Report on Form 10-Q, means
income before interest, taxes, asset impairment charges, restructuring
charges and litigation settlements. Gains or losses on asset sales presented
in segment information represent internal presentation and may not equal
gains or losses as presented in GAAP.  EBIT is not a measure of financial
performance under generally accepted accounting principles and should not be
considered as an alternative to net income (or any other measure of
performance under generally accepted accounting principles) as a measure of
performance or to cash flows from operating, investing or financing
activities as an indication of cash flows or as a measure of liquidity. The
Company evaluates performance based on several factors, of which the primary
financial measure is income before interest, taxes, asset impairment charges,
litigation settlements and restructuring charges, or "EBIT as defined."

Shoney's concept total revenue declined $19.8 million, or 19.0%, in the first
quarter of 2002 when compared to the prior year period.  The components of
the change in Shoney's concept revenue are summarized as follows:

                                              Quarter Ended
(in millions)                               February 17, 2002
                                           -------------------

Sales from operating restaurants           $      ( 0.2)
Closed restaurants                               ( 18.3)
                                           -------------------
  Total change in restaurant sales               ( 18.5)
Franchise revenue                                  (0.1)
Other revenue                                      (1.2)
                                           -------------------
Total                                      $     ( 19.8)
                                           ===================

                                      21

Restaurant revenues were significantly reduced by the closing of 45 under-
performing Company-owned restaurants in 2001 and six additional restaurants
in 2002.  In addition, six Company-owned restaurants were sold to franchisees
in fiscal 2001. Shoney's Restaurants comparable store sales declined in the
first quarter of 2002 by 0.3%. Management believes that the decline in
comparable restaurant sales at its Shoney's Restaurants is the result of
numerous factors, including increased competition, insufficient capital to
significantly improve the restaurants and the lingering effects of the
Company's loss of operational focus.  Sales and EBIT as defined for Shoney's
Restaurants closed or sold are as follows:

                                          Quarter Ended
(in thousands)                    February 17,        February 18,
                                      2002                2001
                            -------------------------------------------
                                       EBIT as              EBIT as
                             Sales     defined    Sales     defined
                            -------------------------------------------
Stores closed or sold       $  440     $(379)    $18,788    $(2,785)
                            ===========================================

Franchise revenue decreased $0.1 million in the first quarter of 2002 when
compared to the prior year.  The decrease in franchise revenue in the first
quarter of 2002 is primarily the result of a net decline of 31 franchise
restaurants since the beginning of the first quarter of 2001.  Other revenue
decreased $1.2 million, primarily due to gains on asset sales of $0.5 million
in the first quarter of 2002 compared to $1.5 million of gains in the first
quarter of 2001 and lower rental income.

Expenses declined $25.1 million, or 23.1%, in the first quarter of 2002, when
compared to the same period in 2001.  Expenses as a percentage of revenue
were 98.7% in the first quarter of 2002 compared to 104.0% in the first
quarter of 2001.  As a percentage of revenues, food and supplies costs,
restaurant labor, operating expenses, depreciation, multi-unit supervisory
expenses and Restaurant Support Center ("RSC") expenses all declined.

As a result of the above, EBIT as defined for Shoney's Restaurants increased
$5.3 million in the first quarter of 2002 when compared to the first quarter
of 2001.

The Company continually evaluates the operating performance of each of its
restaurants.  This evaluation process takes into account the anticipated
resources required to improve the operating performance of under-performing
restaurants to acceptable standards and the expected benefit from that
improvement.  As a result of these evaluations, the Company could close
and/or sell additional restaurants in the future.


                                      22

Captain D's Restaurants
($ in thousands except comparable store
  sales and operating data)                            Quarter Ended
                                                 February 17,    February 18,
                                                     2002            2001
                                                 ----------------------------
Restaurant revenue                               $   90,311      $   89,300
Franchise revenue                                     1,931           1,788
Other revenue                                         1,434           1,050
                                                 ----------------------------
  Total Captain D's revenue                          93,676          92,138
Expenses                                             86,121          85,527
                                                 ----------------------------
EBIT as defined (b)                              $    7,555      $    6,611
                                                 ============================

Comparable store sales increase (decrease) (a)          4.2%           (2.0)%
Operating restaurants at end of quarter:
  Company-owned                                         334             352
  Franchised                                            230             211
                                                 ----------------------------
    Total                                               564             563
                                                 ============================

     (a)    Prior year amounts have not been restated for comparable
            restaurants.
     (b)    See Note (b) "Operating Segments - Shoney's Restaurants" on
            page 21 hereof.


Captain D's total revenues increased $1.5 million, or 1.7%, in the first
quarter of 2002 when compared to the first quarter of 2001. The components of
the change in Captain D's concept revenue are summarized as follows:


(in millions)                                            Quarter Ended
                                                       February 17, 2002
                                                       -----------------

Sales from operating restaurants                            $  4.2
Closed or sold restaurants                                    (3.2)
                                                            -------
  Total change in restaurant sales                             1.0
Franchise revenues                                             0.1
Other revenue                                                  0.4
                                                            -------
Total                                                       $  1.5
                                                            =======

Revenue comparisons were affected by the increase in comparable store sales
and the closing of six under-performing Company-owned restaurants in 2001.
In addition, eight Company-owned Captain D's restaurants were sold to
franchisees during the first quarter of 2002 and 14 Company-owned Captain D's
restaurants were sold to franchisees during 2001. Sales and EBIT as defined
for Captain D's restaurants closed or sold are as follows:

                                                   Quarter Ended
(in thousands)                             February 17,      February 18,
                                               2002              2001
                                         ---------------------------------
                                                 EBIT as           EBIT as
                                         Sales   defined   Sales   Defined
                                         ---------------------------------
Stores closed or sold                    $1,413   $(51)    $4,563   $(120)
                                         =================================

                                    23

Management attributes the increase in comparable restaurant sales during the
first quarter of 2002 to the promotion of certain value meals and other
promotional items that have significantly improved customer traffic.
Comparable store sales increased 4.2% for the first sixteen weeks of fiscal
2002 and increased approximately 4.3% in the first three weeks of the second
quarter of 2002.  Franchise revenues increased $0.1 million in the first
quarter of 2002 when compared to the first quarter of the prior year.  The
increase in franchise revenues in the first quarter of 2002 is primarily due
to the initial fees from the sale of eight Company-owned restaurants sold to
franchisees during the quarter.  Other revenues increased $0.4 million in the
first quarter of 2002 when compared to the prior year first quarter,
primarily due to $1.2 million of gains on asset sales in the first quarter of
2002 compared to gains of $0.9 million in the prior year first quarter.

Expenses increased $0.6 million, or 0.7%, in the first quarter of 2002, when
compared to the same period in 2001.  Expenses as a percentage of revenues
were 91.9% in the first quarter of 2002, compared to 92.8% in the first
quarter of 2001.  As a percentage of sales, decreases in food and supplies
costs, operating expenses, multi-unit supervisory costs and RSC expenses were
partially offset by a slight increase in restaurant labor.

As a result of the above, EBIT as defined for Captain D's restaurants
increased $0.9 million in the first quarter of 2002 when compared to the
first quarter of 2001.

The Company continually evaluates the operating performance of each of its
restaurants.  This evaluation process takes into account the anticipated
resources required to improve the operating performance of under-performing
restaurants to acceptable standards and the expected benefit from this
improvement.  As a result of these evaluations, the Company could close
additional restaurants in the future.  The Company also may sell operating
restaurants to franchisees.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has met its liquidity requirements with cash
provided by operating activities supplemented by external borrowing. The
Company historically has operated with a substantial working capital deficit.
Management does not believe that the deficit hinders the Company's ability to
meet its obligations as they become due, as the Company's credit facilities
include lines of credit that are available to cover short term working
capital requirements.  However, in 2002, current liabilities include $135.1
million of current maturities of long-term debt.  This current portion of
long-term debt includes $116.9 million of Captain D's term notes and revolver
that matures on October 31, 2002, $5.3 million of subordinated convertible
debentures due July 2002 and $5.8 million of industrial revenue bonds that
mature in September and December of 2002.  (See "Risk Factors").

Cash provided by continuing operating activities improved $9.1 million in the
first quarter of 2002 compared to the first quarter of 2001.  The increase in
cash provided by continuing operating activities in the first quarter of
2002, when compared to the first quarter of 2001, was primarily the result of
the increase in operating income from restaurant operations and less cash
required for operating assets and liabilities, partially offset by lower
depreciation and amortization.  The use of cash by operating assets and
liabilities in the first quarter of 2002 was primarily the result of a
reduction in accounts payable.  The use of cash by operating assets and
liabilities in 2001 was primarily the result of a reduction in accrued
expenses and other liabilities.  Cash provided by discontinued operating
activities was $1.9 million in the first quarter of 2001.  Cash provided by
discontinued operating activities in the first quarter of 2001 was primarily
the result of a decline in inventory at COI during the first quarter of 2001.


                                    24

Cash provided by continuing investing activities during the first quarter of
2002 was $3.0 million. During the first quarter of 2002, the Company received
cash proceeds of $8.3 million, primarily from the sale of closed and operating
restaurant locations. Cash used for property and equipment additions in the
first quarter of 2002 was $1.8 million, and cash used for other assets was
$3.4 million.  Cash used by other assets was the result of $3.4 million of
cash deposits into cash collateral accounts as required by the Shoney's Line of
Credit and the Captain D's Facility.  Cash provided by continuing investing
activities in the first quarter of 2001 was $0.7 million.  During the first
quarter of 2001, the Company received $5.4 million in cash proceeds from the
sale of closed and operating restaurant properties. Cash used for property and
equipment additions was $4.4 million and cash used for other assets was $0.3
million.  Cash used by discontinued investing activities was $0.1 million in
the first quarter of 2001.

The Company balances its capital spending plan throughout the year based on
operating results and may from time to time decrease capital spending to
balance cash from operations and debt service requirements. Since the
beginning of 2001, the Company has closed 57 restaurants. These properties,
as well as real estate from prior restaurant closings, other surplus
properties, rental properties and leasehold interests, have been sold or are
being actively marketed.

Cash used by continuing financing activities was $4.6 million in the first
quarter of 2002.  In the first quarter of 2002, continuing financing
activities included net payments on long-term debt of $4.8 million, short
term borrowings of $1.8 million and $1.6 million of payments for debt issue
costs.  Cash provided by continuing operating activities was $4.2 million in
the first quarter of 2001.  Financing activities in the first quarter of 2001
included $23.0 million of long term borrowings under the Company's credit
agreements, $19.3 million of payments on long term debt and $1.3 million of
short term borrowings.  Financing activities for 2001 also included $0.7
million of payments for debt issue costs.  Cash used by discontinued
financing activities in 2001 of $2.1 million was the result of debt
reductions at COI.

The Company's credit agreements are secured by substantially all of the
Company's assets.  The debt agreements (1) require satisfaction of certain
financial ratios and tests; (2) impose limitations on capital expenditures;
(3) limit the ability to incur additional debt and contingent liabilities;
(4) prohibit dividends and distributions on common stock (provided, however,
that effective January 24, 2002, under certain circumstances, Captain D's,
Inc. is allowed to make certain distributions of up to $5.0 million to the
Company); (5) prohibit mergers, consolidations or similar transactions; and
(6) include other affirmative and negative covenants.

The Company's senior debt structure generally requires that working capital
sources be available for each operating segment.  The Shoney's Restaurant
segment's liquidity is provided by a $40.0 million working capital line of
credit (the "Shoney's Line of Credit") which, as a result of the receipt of
the extension of the September 6, 2002 maturity date on February 11, 2002,
has a termination date of November 29, 2002.  The Company had agreed to sell
during fiscal 2001 up to $10.0 million of properties serving as collateral
for the Shoney's Line of Credit, pay down outstanding amounts under the
Shoney's Line of Credit and permanently reduce the availability.  During
2001, the Company sold $10.0 million of collateral properties and reduced
availability under the Shoney's Line of Credit to $30.0 million.

Availability under the Shoney's Line of Credit is further reduced by
outstanding letters of credit of approximately $22.9 million, resulting in
approximately $7.1 million of availability of which $3.5 million was drawn at
February 17, 2002. Subsequent to the September 2000 debenture repurchase and
related refinancing, liquidity for the Shoney's segment was enhanced by
proceeds of $15.0 million from certain asset sales that the Company was
allowed to retain for its working capital needs. The terms of the Shoney's
Line of Credit allowed the Company to use the cash proceeds from the sale of
COI towards the

                                    25

$15.0 million retention for working capital and required the Company, at its
option, to apply the excess ($2.8 million) to either repay debt and permanently
reduce the Shoney's Line of Credit or cash collateralize the Shoney's Line of
Credit. As of February 17, 2002, since September 6, 2000, the Company had sold
and retained in the business $15.0 million of asset sale proceeds and had cash
collateralized the Shoney's Line of Credit in the amount of $7.7 million.  As
of March 8, 2002, there were $3.9 million of drawings under the Shoney's Line
of Credit, resulting in $2.8 million of availability after deducting
outstanding letters of credit. Following the Company's retention of $15.0
million from asset sales, the Company may sell certain other properties serving
as collateral for the Shoney's Line of Credit and use the cash proceeds to
either repay drawings under the Shoney's Line of Credit (which also will
permanently reduce availability) or cash collateralize the Shoney's Line of
Credit. Also, following the retention of $15.0 million from asset sales, the
Company's only current sources of liquidity for the Shoney's concept are from
the availability under the Shoney's Line of Credit, operating cash flows,
payments under the tax sharing agreement with Captain D's, payments for
administrative services from Captain D's, and, effective January 24, 2002,
under certain circumstances, distributions from Captain D's, Inc. of up to
$5.0 million. Management expects liquidity for the Shoney's Restaurants
segment to improve in the second quarter of 2002 over the first quarter of
2002, as sales and cash flows historically have improved during the spring and
summer.  If the Shoney's segment's operating trends and working capital
requirements vary from those forecasted, the liquidity, financial condition and
results of operations will be materially adversely affected.

Liquidity for the Captain D's segment was provided by a $20.0 million line of
credit (the "Captain D's Line of Credit").  The Captain D's Line of Credit
and the Captain D's term notes (the "Captain D's Facility") were scheduled to
mature on December 31, 2001.  On December 27, 2001, Captain D's received an
extension of the Captain D's Facility to March 31, 2002.  On January 24,
2002, the maturity date of the Captain D's Facility was further extended to
October 31, 2002. In connection with the January 24, 2002 extension, the
Captain D's Line of Credit was reduced to $15.0 million. In addition, during
the first quarter of 2002, Captain D's funded $2.4 million of proceeds from
asset sales into a cash collateral account as required by the Captain D's
Facility.  Availability under the Captain D's Line of Credit is reduced by
outstanding letters of credit of approximately $6.4 million, resulting in
availability of approximately $8.6 million, of which $1.9 million was drawn
at February 17, 2002.   As of March 8, 2002, there were $0.9 million of
borrowings under the Captain D's Line of Credit, resulting in $7.7 million of
availability after deducting amounts attributable to letters of credit. (See
"Recent Developments").

RISK FACTORS

The Company's business is highly competitive with respect to food quality,
concept, location, service and price. In addition, there are a number of
well-established food service competitors with substantially greater
financial and other resources compared to the Company. The Company's Shoney's
Restaurants have experienced declining customer traffic during the past ten
years as a result of intense competition and a decline in operational focus
occasioned by high management turnover. The Company has initiated a number of
programs to address the decline in customer traffic; however, performance
improvement efforts for the Shoney's Restaurants during the past five years
have not resulted in sales increases, and there can be no assurance that the
current programs will be successful in the future. However, comparable store
sales in the Shoney's concept for the third and fourth quarters of 2001
declined only 0.8% and 1.0%, respectively, and comparable store sales
declined only 0.3% in the first quarter of 2002. Three weeks into the second
quarter of 2002, comparable store sales had declined approximately 2.8%. In
recent years, the Company has experienced increased costs for labor and
operating expenses at its restaurant concepts which, coupled with a decrease
in average restaurant sales volumes in its Shoney's Restaurants, have


                                    26

reduced its operating margins. During the third quarter of 2001, the Shoney's
concept initiated a plan designed specifically to improve the concept's
operating cash flows.  The operating plan included further reduction in
corporate staff, increasing the span of control for restaurant supervision,
adjusting labor schedules to reduce hourly labor, lower advertising
expenditures and the closure of certain under-performing restaurants.  These
initiatives resulted in improved margins compared to the prior year periods
during the third and fourth quarters of 2001 and the first quarter of 2002.
Management expects the margin improvement to continue into the second quarter
of 2002.  The Company does not expect to be able to further improve Shoney's
Restaurants' operating margins until it can consistently increase its
comparable restaurant sales.

The Company is highly leveraged and, under the terms of its credit
agreements, generally is not permitted to incur additional debt and is
limited to annual capital expenditures of approximately $18.0 million.
Management believes the annual capital expenditures permitted under the
credit agreements are sufficient for the execution of its business plan;
however, the current level of capital spending in the Shoney's concept may
put the Shoney's Restaurants in an unfavorable competitive position when
compared to its competition who may be able to better maintain their
properties.

As of February 17, 2002, 31 of the restaurants that the Company had closed
("Closures") secure the borrowings under the Shoney's Mortgage Financing.  As
the units were closed, the Company intended to sell the properties and apply
the proceeds to indebtedness under the Shoney's Mortgage Financing.  The
Company received preliminary verbal approval, in the second quarter of 2001,
from the Shoney's Mortgage Financing lender for the Closures, with a further
agreement that, in addition to the debt reduction, the lender would accept a
1% prepayment penalty with respect to the debt prepaid under the Shoney's
Mortgage Financing.

As of February 17, 2002, the Company had sold 12 of the closed properties
that secure the Shoney's Mortgage Financing and repaid $6.7 million of the
existing indebtedness. In addition, as of February 17, 2002, the Company had
contracts to sell three additional properties. The Shoney's Mortgage
Financing agreements provide that each property must be continuously operated
except for a 120 day period every three years.  The Company has received from
the Shoney's Mortgage Financing lender agreements in which the lenders agree
to forebear, until October 31, 2002, from taking any action with respect to
the Closures and the failure of the Company to meet the fixed charge coverage
covenant on certain closed or under-performing restaurants for 2001 and 2002.
As part of the agreement, the Company received approval from the lender to
move certain collateral properties among the various collateral pools and to
replace three existing properties with better performing properties in an
effort to strengthen certain collateral pools' financial ratios.  This
reallocation of collateral is expected to be completed during the second
quarter of 2002. With these arrangements in place, the Company expects to be in
compliance through 2002 with the financial covenants on the remaining
restaurants under the Shoney's Mortgage Financing.

The Company expects to be in compliance with its remaining financial
covenants in 2002 and was in compliance with its financial covenants at the
end of the first quarter of 2002.

As of February 17, 2002, the Company had current maturities of long-term debt
that included $116.9 million of Captain D's term notes and revolver that
matures on October 31, 2002, $5.3 million of subordinated convertible
debentures due July 2002 and $5.8 million of industrial revenue bonds that
mature in September and December of 2002.  The Company expects to either
refinance or pay this indebtedness as it matures; however, no assurance can
be given that this indebtedness can be refinanced


                                   27

on terms acceptable to the Company or paid as it matures.  Without such
refinancing or payment, the Company's financial position and liquidity will be
materially and adversely affected.

The Company continues to focus on improving its comparable store sales,
controlling food and labor costs, reducing general and administrative
expenses, selling closed restaurant properties and increasing operating cash
flows.  During the third and fourth quarters of 2001 and the first quarter of
2002, operating margins improved in the Shoney's Restaurants concept.  Unless
the Company's efforts to increase comparable store sales in its Shoney's
concept and to maintain the improvement in Shoney's operating margins are
successful, the Company could  experience negative operating cash flows from
the Shoney's Restaurant concept.

RECENT DEVELOPMENTS

On January 24, 2002, the Company entered into a definitive merger agreement
(the "Merger Agreement") with Lone Star U.S. Acquisitions LLC, U.S.
Restaurant Properties Operating Limited Partnership and LSF4 Acquisition,
LLC.  Pursuant to the terms of the Merger Agreement, the outstanding shares
of the Company's common stock will be acquired for $0.36 per share in cash.
The Merger Agreement, which remains subject to approval by shareholders of
the Company at a special meeting currently scheduled to be held on April 10,
2002 and other customary closing conditions, is expected to close in the
second quarter of 2002.  No assurance can be given that the merger will be
completed.

Immediately prior to the execution of the Merger Agreement, Lone Star Funds,
through certain of its affiliates, acquired the outstanding indebtedness
under the Captain D's Facility.  The Captain D's Facility, which was then
scheduled to mature on March 31, 2002, was extended to October 31, 2002.  In
connection with the debt acquisition, the Captain D's Line of Credit was
reduced to $15.0 million, and the interest rate on the facility was increased
to 12.5% until May 15, 2002.  On May 15, 2002, Captain D's will be required
to pay an extension fee equal to 2% of the facility ($2.4 million of this fee
was funded into a cash collateral account during the first quarter of 2002),
and the interest rate will increase to 15%.  Additionally, in connection with
the acquisition of the Captain D's Facility by certain affiliates of Lone
Star Funds, Captain D's, Inc. may, under certain circumstances, make
distributions of up to $5.0 million to the Company.

On February 26, 2002, one of the Company's individual shareholders filed a
complaint against the Company and the Company's individual directors in the
Circuit Court for Davidson County in Nashville, Tennessee.  This complaint
purports to assert claims on behalf of all of the Company's public
shareholders who are similarly situated with the plaintiff.  This complaint
alleges that the Company and the members of the Company's Board of Directors
have breached fiduciary duties to the public shareholders, that the directors
engaged in self-dealing in connection with their approval of the merger with
LSF4 Acquisition (See Note 15 - Merger Agreement) and that the directors
failed to take steps to maximize the value of the Company to the public
shareholders.  This complaint seeks class certification and certain forms of
equitable relief, including enjoining the consummation of the merger with
LSF4 Acquisition.  A copy of the complaint filed in this matter was filed as
Exhibit 99 to the Company's Current Report on Form 8-K, which was filed with
the Securities and Exchange Commission on March 4, 2002.  The Company believes
that the allegations made in the complaint are without merit and intends to
vigorously contest this action.  There can, however, be no assurance that the
Company or the individual defendants will be successful in the defense of this
action.



                                    28


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Item 7A of the Company's Annual Report on Form 10-K, filed with the
Commission on February 12, 2002, is incorporated herein by this reference.

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

      See Note 16 of the Notes to the Consolidated Condensed Financial
      Statements on page 17, which is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits.  See Exhibit Index beginning on page 31.
          --------

     (b)  Reports on Form 8-K.
          -------------------

            (1)   The Company filed a Current Report on Form 8-K,
                  dated January 24, 2002, with the Commission on
                  January 31, 2002 to report, pursuant to Item 5, the
                  execution of an Agreement and Plan of Merger with
                  Lone Star U.S. Acquisitions LLC, U.S. Restaurant
                  Properties Operating Limited Partnership and LSF4
                  Acquisition, LLC, pursuant to which LSF4
                  Acquisition will merge with and into the Company,
                  subject to shareholder approval and certain other
                  closing conditions.  The Company also reported that
                  certain affiliates of Lone Star and U.S. Restaurant
                  Properties had acquired the outstanding
                  indebtedness under a senior credit facility
                  pursuant to which Captain D's, Inc. was indebted
                  and had agreed to extend the maturity of, and make
                  certain modifications to, that senior credit
                  facility pursuant to the terms of a fifth amendment
                  to the senior credit facility.

            (2)   The Company filed a Current Report on Form 8-K,
                  dated January 11, 2002, with the Commission on
                  January 17, 2002 to report, pursuant to Item 5, the
                  deadline pursuant to which shareholder proposals
                  may be submitted for the Company's 2002 Annual
                  Shareholder Meeting.


                                    29


                                SIGNATURES


     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized both on behalf of the registrant and in
his capacity as principal financial officer of the registrant.


                                    SHONEY'S, INC.

Date: March 15, 2002                By: /s/ V. Michael Payne
                                        -------------------------------------
                                        V. Michael Payne
                                        Chief Financial Officer,
                                        Principal Financial and Chief
                                        Accounting Officer





                                    30


                              EXHIBIT INDEX
  Exhibit No.     Description
  -----------     -----------

      2.1         Agreement and Plan of Merger dated January 24,
                  2002, by and among Lone Star U.S. Acquisitions LLC,
                  U.S. Restaurant Properties Operating Limited
                  Partnership, LSF4 Acquisition, LLC and Shoney's,
                  Inc., filed as Exhibit 2.1 to the Company's Current
                  Report on Form 8-K filed with the Commission on
                  January 31, 2002, and incorporated herein by this
                  reference.

      10.1        Amendment No. 4 to the Captain D's Credit
                  Agreement, dated as of December 27, 2001, among
                  Captain D's, Inc., the Lenders (as defined therein)
                  and Bank of America, N.A., as Administrative Agent,
                  filed as Exhibit 10.48 to the Company's Annual
                  Report on Form 10-K filed with the Commission on
                  February 12, 2002, and incorporated herein by this
                  reference.

      10.2        Amendment No. 5 to the Captain D's Credit
                  Agreement, dated as of January 24, 2002, among
                  Captain D's, Inc., the Lenders (as defined
                  therein), and Hudson Advisors, L.L.C., as
                  Administrative Agent, filed as Exhibit 99.3 to the
                  Company's Current Report on Form 8-K filed with the
                  Commission on January 31, 2002, and incorporated
                  herein by this reference.

      10.3        Voting Agreement dated as of January 24, 2002, by
                  and among the Company, LSF4 Acquisition, LLC, Lone
                  Star U.S. Acquisitions LLC, U.S. Restaurant
                  Properties Operating Limited Partnership and the
                  Shareholders (as defined therein), filed as Exhibit
                  99.1 to the Company's Current Report on Form 8-K
                  filed with the Commission on January 31, 2002, and
                  incorporated herein by this reference.

      10.4        Voting Agreement dated as of January 24, 2002, by
                  and among the Company, LSF4 Acquisition, LLC, Lone
                  Star U.S. Acquisitions LLC, U.S. Restaurant
                  Properties Operating Limited Partnership and the
                  Shareholders (as defined therein), filed as Exhibit
                  99.2 to the Company's Current Report on Form 8-K
                  filed with the Commission on January 31, 2002, and
                  incorporated herein by this reference.

      10.5        Amendment to Loan Agreement dated as of January
                  23, 2002, by and between Shoney's Properties
                  Group 1, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (2)

      10.6        Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 1, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation).

      10.7        Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 1, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (1)

                                     31

      10.8        Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 1, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (1)

      10.9        Amendment to Loan Agreement dated as of November
                  30, 2001, by and between Shoney's
                  Properties Group 1, LLC and GE Capital Franchise
                  Finance Corporation (successor by merger to FFCA
                  Funding Corporation). (2)

      10.10       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 1,
                  LLC and Shoney's, Inc.

      10.11       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 1,
                  LLC and Shoney's, Inc. (3)

      10.12       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 1,
                  LLC and Shoney's, Inc. (3)

      10.13       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of January 23, 2002, by
                  and between Shoney's Properties Group 1, LLC and
                  Shoney's, Inc. ($1,048,800 Base Annual Rental) (4)

      10.14       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of November 30, 2001, by
                  and between Shoney's Properties Group 1, LLC and
                  Shoney's, Inc. ($1,120,799.88 Base Annual Rental) (4)

      10.15       Amendment to Loan Agreement dated as of October 31,
                  2001, by and between Shoney's Properties Group 2,
                  LLC and GE Capital Franchise Finance Corporation
                  (successor by merger to FFCA Funding Corporation).

      10.16       Amendment to Loan Agreement dated as of November
                  30, 2001, by and between Shoney's Properties Group
                  2, LLC and GE Capital Franchise Finance Corporation
                  (successor by merger to FFCA Funding Corporation).

      10.17       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties Group
                  2, LLC and GE Capital Franchise Finance Corporation
                  (successor by merger to FFCA Funding Corporation)
                  (1)

      10.18       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties Group
                  2, LLC and GE Capital Franchise Finance Corporation
                  (successor by merger to FFCA Funding Corporation)
                  (1)

      10.19       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 2,
                  LLC and Shoney's, Inc. (3)

      10.20       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 2,
                  LLC and Shoney's, Inc. (3)

                                    32

      10.21       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of October 31, 2001, by and
                  between Shoney's Properties Group 2, LLC and
                  Shoney's, Inc.

      10.22       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of November 30, 2001, by
                  and between Shoney's Properties Group 2, LLC and
                  Shoney's, Inc.

      10.23       Amendment to Loan Agreement dated as of November
                  30, 2001, by and between Shoney's Properties
                  Group 3, LLC and LaSalle Bank National Association,
                  as Indenture Trustee.

      10.24       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 3, LLC and LaSalle Bank National Association,
                  as Indenture Trustee.

      10.25       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 3, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.26       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 3, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.27       Amendment to Master Lease dated as of November 30,
                  2001, by and between Shoney's Properties Group 3,
                  LLC and Shoney's, Inc.

      10.28       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 3,
                  LLC and Shoney's, Inc.

      10.29       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 3,
                  LLC and Shoney's, Inc. (6)

      10.30       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 3,
                  LLC and Shoney's, Inc. (6)

      10.31       Amendment to Loan Agreement dated as of January
                  23, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (7)

      10.32       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.33       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

                                    33

      10.34       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.35       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.36       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 4, LLC and LaSalle Bank National Association,
                  as Indenture Trustee. (5)

      10.37       Amendment to Loan Agreement dated as of
                  November 30, 2001, by and between Shoney's
                  Properties Group 4, LLC and LaSalle Bank National
                  Association, as Indenture Trustee. (7)

      10.38       Amendment to Loan Agreement dated as of
                  November 30, 2001, by and between Shoney's
                  Properties Group 4, LLC and LaSalle Bank National
                  Association, as Indenture Trustee. (7)

      10.39       Amendment to Master Lease dated as of January 23,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (8)

      10.40       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (6)

      10.41       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (6)

      10.42       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (6)

      10.43       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (6)

      10.44       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (6)

      10.45       Amendment to Master Lease dated as of November 30,
                  2001, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (8)

      10.46       Amendment to Master Lease dated as of November 30,
                  2001, by and between Shoney's Properties Group 4,
                  LLC and Shoney's, Inc. (8)

                                    34

      10.47       Amendment to Loan Agreement dated as of November
                  30, 2001, by and between Shoney's Properties
                  Group 5, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation).

      10.48       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 5, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (1)

      10.49       Amendment to Master Lease dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 5, LLC and Shoney's, Inc. (3)

      10.50       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of November 30, 2001, by
                  and between Shoney's Properties Group 5, LLC and
                  Shoney's, Inc. ($839,680.08 Base Annual Rental).

      10.51       Amendment to Loan Agreement dated as of November 9,
                  2001, by and between Shoney's Properties Group 6,
                  LLC and GE Capital Franchise Finance Corporation
                  (successor by merger to FFCA Funding Corporation).

      10.52       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 6, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (1)

      10.53       Amendment to Loan Agreement dated as of January
                  28, 2002, by and between Shoney's Properties
                  Group 6, LLC and GE Capital Franchise Finance
                  Corporation (successor by merger to FFCA Funding
                  Corporation). (1)

      10.54       Amendment to Loan Agreement dated as of
                  November 30, 2001, by and between Shoney's
                  Properties Group 6, LLC and GE Capital Franchise
                  Finance Corporation (successor by merger to FFCA
                  Funding Corporation). (2)

      10.55       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 6,
                  LLC and Shoney's, Inc. (3)

      10.56       Amendment to Master Lease dated as of January 28,
                  2002, by and between Shoney's Properties Group 6,
                  LLC and Shoney's, Inc. (3)

      10.57       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of November 9, 2001, by and
                  between Shoney's Properties Group 6, LLC and
                  Shoney's, Inc.

      10.58       Partial Termination of Master Lease and Partial
                  Mutual Release dated as of November 30, 2001,
                  by and between Shoney's Properties Group 6, LLC and
                  Shoney's, Inc. ($1,070,399.88 Base Annual Rental) (4)

                                      35

      10.59       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 1, LLC, Shoney's Properties Group 2, LLC, Shoney's
                  Properties Group 3, LLC, Shoney's Properties Group 4, LLC,
                  Shoney's Properties Group 5, LLC, Shoney's Properties Group
                  6, LLC and Shoney's, Inc.

      10.60       Letter Agreement dated January 28, 2002, by and between GE
                  Capital Franchise Finance Corporation and Shoney's, Inc.

      10.61       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 1, LLC and Shoney's, Inc.

      10.62       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 2, LLC and Shoney's, Inc.

      10.63       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 3, LLC and Shoney's, Inc.

      10.64       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 4, LLC and Shoney's, Inc.

      10.65       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 5, LLC and Shoney's, Inc.

      10.66       Letter Agreement dated January 28, 2002, by and among GE
                  Capital Franchise Finance Corporation, Shoney's Properties
                  Group 6, LLC and Shoney's, Inc.

(1) Document not filed because substantially similar to Exhibit 10.6.
(2) Document not filed because substantially similar to Exhibit 10.47.
(3) Document not filed because substantially similar to Exhibit 10.10.
(4) Document not filed because substantially similar to Exhibit 10.50.
(5) Document not filed because substantially similar to Exhibit 10.24.
(6) Document not filed because substantially similar to Exhibit 10.28.
(7) Document not filed because substantially similar to Exhibit 10.23.
(8) Document not filed because substantially similar to Exhibit 10.27.



                                    36