======================================================================

                          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 August 1, 1999

                                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, Tennessee          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 September 2, 1999, there were 49,480,016 shares of Shoney's,
Inc. $1 par value common stock outstanding.

======================================================================

                                            Page 1 of 32 pages
                                            Exhibit index at page 30

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.

                      SHONEY'S, INC. AND SUBSIDIARIES
                    Consolidated Condensed Balance Sheet
                               (Unaudited)
<TABLE>
<CAPTION>
                                                              August 1,         October 25,
                                                                1999               1998
                                                           --------------    --------------
<S>                                                        <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents                                $   15,374,618    $  16,277,722
  Notes and accounts receivable, less allowance
    for doubtful accounts of $1,313,000 in 1999
    and $1,142,000 in 1998                                      8,303,346       10,263,490
  Inventories                                                  38,581,153       37,146,297
  Refundable income taxes                                                       14,005,359
  Prepaid expenses and other current assets                     2,529,833        3,390,458
  Net property, plant and equipment held for sale              21,503,518       69,878,238
                                                            -------------    -------------
     Total current assets                                      86,292,468      150,961,564

Property, plant and equipment, at lower of cost or market     661,227,038      677,978,782
Less accumulated depreciation and amortization               (358,521,211)    (350,673,367)
                                                            -------------    --------------
     Net property, plant and equipment                        302,705,827      327,305,415

Other assets:
  Goodwill (net of accumulated amortization of
    $7,420,000 in 1999 and $5,465,000 in 1998)                 23,475,584       29,819,721
  Deferred charges and other intangible assets                  6,790,659       10,581,373
  Other assets                                                  4,333,163        4,800,760
                                                            -------------    --------------
     Total other assets                                        34,599,406       45,201,854
                                                            -------------    --------------
                                                           $  423,597,701    $ 523,468,833
                                                            =============    ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                         $   35,177,647    $  37,522,186
  Other accrued liabilities                                    74,004,442       76,690,150
  Reserve for litigation settlements due within one year        7,372,961          372,961
  Debt and capital lease obligations due within one year       11,438,443       11,980,656
                                                            -------------    --------------
     Total current liabilities                                127,993,493      126,565,953

Long-term senior debt and capital lease obligations           206,004,552      282,354,696
Zero coupon subordinated convertible debentures               120,025,387      112,580,014
Subordinated convertible debentures, net of bond discount
  of $2,681,000 in 1999 and $3,255,000 in 1998                 48,882,244       48,308,400
Reserve for litigation settlements                                175,685          226,679

Other liabilities                                              67,125,149       72,920,262

Shareholders' deficit:
  Common stock, $1 par value: authorized 200,000,000;
    issued 49,455,016 in 1999, 48,694,865 in 1998              49,455,016       48,694,865
  Additional paid-in capital                                  137,819,496      137,296,111
  Accumulated deficit                                        (333,883,321)    (305,478,147)
                                                            -------------    --------------
     Total shareholders' deficit                             (146,608,809)    (119,487,171)
                                                            -------------    --------------
                                                           $  423,597,701    $ 523,468,833
                                                            =============    ==============
</TABLE>
See notes to consolidated condensed financial statements.

                                 -2-

                      SHONEY'S, INC. AND SUBSIDIARIES
              Consolidated Condensed Statement of Operations
                               (Unaudited)
<TABLE>
<CAPTION>
                                                    Forty Weeks Ended
                                               August 1,          August 2,
                                                 1999               1998
                                             -------------     -------------
<S>                                          <C>               <C>
Revenues
  Net sales                                  $ 739,416,036     $ 876,236,404
  Franchise fees                                11,491,143        11,321,652
  Other income                                  18,954,006         9,964,922
                                             -------------     -------------
                                               769,861,185       897,522,978

Costs and expenses
  Cost of sales                                672,210,668       801,640,703
  General and administrative expenses           59,889,724        66,543,889
  Impairment write down of long-lived assets    18,424,046        48,403,158
  Restructuring expense                            441,365         5,753,808
  Litigation settlement                         14,500,000
  Interest expense                              32,800,556        37,649,007
                                             -------------     -------------
      Total costs and expenses                 798,266,359       959,990,565
                                             -------------     -------------

Loss before income taxes and
  extraordinary charge                         (28,405,174)      (62,467,587)

Provision for income taxes                                        31,677,000
                                             -------------     -------------
Loss before extraordinary charge               (28,405,174)      (94,144,587)

Extraordinary charge on early extinguishment
  of debt, net of income taxes of $806,000                        (1,415,138)
                                             -------------     -------------
Net loss                                     $ (28,405,174)    $ (95,559,725)
                                             =============     =============
Earnings per common share
  Basic:
    Net loss before extraordinary charge           ($0.58)           ($1.93)
    Extraordinary charge for the early
      extinguishment of debt                                          (0.03)
                                                   -------           -------
    Net loss                                       ($0.58)           ($1.96)
                                                   =======           =======
  Diluted:
    Net loss before extraordinary charge           ($0.58)           ($1.93)
    Extraordinary charge for the early
      extinguishment of debt                                          (0.03)
                                                   -------           -------
    Net loss                                       ($0.58)           ($1.96)
                                                   =======           =======
Weighted average shares outstanding
  Basic                                         49,295,460        48,656,930

  Diluted                                       49,295,460        48,656,930

Common shares outstanding                       49,455,016        48,694,865

Dividends per share                                   NONE              NONE

</TABLE>
See notes to consolidated condensed financial statements.

                                 -3-


                      SHONEY'S, INC. AND SUBSIDIARIES
              Consolidated Condensed Statement of Operations
                               (Unaudited)
<TABLE>
<CAPTION>
                                                    Twelve Weeks Ended
                                               August 1,          August 2,
                                                 1999               1998
                                             -------------     -------------
<S>                                          <C>               <C>
Revenues
  Net sales                                  $ 223,616,591     $ 268,156,465
  Franchise fees                                 3,690,101         3,440,376
  Other income                                   2,578,746         5,689,661
                                             -------------     -------------
                                               229,885,438       277,286,502

Costs and expenses
  Cost of sales                                202,770,299       242,974,073
  General and administrative expenses           16,675,336        19,604,973
  Impairment write down of long-lived assets    18,424,046        45,809,676
  Restructuring expense                            441,365         3,102,515
  Interest expense                               9,092,222        10,977,144
                                             -------------     -------------
     Total costs and expenses                  247,403,268       322,468,381
                                             -------------     -------------

Loss before income taxes                       (17,517,830)      (45,181,879)

Provision for income taxes                               0        37,951,000
                                             -------------     -------------
Net loss                                     $ (17,517,830)    $ (83,132,879)
                                             =============     =============




Earnings per common share
  Basic:
    Net loss                                       ($0.35)           ($1.71)
                                                   =======           =======


  Diluted:
    Net loss                                       ($0.35)           ($1.71)
                                                   =======           =======


Weighted average shares outstanding
  Basic                                         49,451,512        48,694,364

  Diluted                                       49,451,512        48,694,364


Common shares outstanding                       49,455,016        48,694,865

Dividends per share                                   NONE              NONE

</TABLE>

See notes to consolidated condensed financial statements.

                                 -4-


                      SHONEY'S, INC. AND SUBSIDIARIES
               Consolidated Condensed Statement of Cash Flows
                               (Unaudited)
<TABLE>
<CAPTION>
                                                                Forty Weeks Ended
                                                            August 1,         August 2,
                                                              1999              1998
                                                         -------------     -------------
<S>                                                      <C>               <C>
Operating activities
  Net loss                                               $ (28,405,174)    $ (95,559,725)
  Adjustments to reconcile net loss to net cash
    provided by operating activities:
      Depreciation and amortization                         29,844,890        37,191,126
      Amortization of deferred charges and other
        non-cash charges                                    14,750,173        17,422,168
      Gain on disposal of property, plant and equipment    (17,506,864)       (6,547,957)
      Impairment write down of long-lived assets            18,424,046        48,403,158
      Tax valuation adjustment                                                38,088,000
      Litigation settlement                                 14,500,000
      Changes in operating assets and liabilities            9,204,955         8,875,389
                                                         --------------    -------------
        Net cash provided by operating activities           40,812,026        47,872,159


Investing activities
  Cash required for property, plant and equipment          (19,483,314)      (23,042,278)
  Proceeds from disposal of property, plant and equipment   62,758,995        23,472,357
  Cash provided by other assets                                 40,704         1,447,011
                                                         --------------    -------------
        Net cash provided by investing activities           43,316,385         1,877,090


Financing activities
  Payments on long-term debt and
    capital lease obligations                              (73,800,428)     (315,338,728)
  Proceeds from long-term debt                                               300,533,143
  Payments on litigation settlements                       (11,050,994)      (15,688,330)
  Cash required for debt issue costs                          (180,093)      (12,732,920)
  Proceeds from exercise of employee stock options                                39,495
                                                         --------------    -------------
        Net cash used by financing activities              (85,031,515)      (43,187,340)
                                                         --------------    -------------


  Change in cash and cash equivalents                    $    (903,104)    $   6,561,909
                                                         ==============    =============
</TABLE>

See notes to consolidated condensed financial statements.

                                 -5-

                    SHONEY'S, INC. AND SUBSIDIARIES
         Notes to Consolidated Condensed Financial Statements
                            August 1, 1999
                               (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 1999
presentation.  Operating results for the twelve and forty week periods ended
August 1, 1999 are not necessarily indicative of the results that may be
expected for all or any balance of the fiscal year ending October 31, 1999.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended October 25, 1998.


NOTE 2 - 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. The purchase price of $164.4 million consisted of the
issuance of 6,785,114 shares of the Company's common stock valued at $59.1
million, the assumption of $46.9 million of indebtedness under TPI's 8.25%
convertible subordinated debentures, the assumption or satisfaction of TPI's
outstanding debt of approximately $59.1 million and transaction costs of $3.0
million, net of cash acquired of $3.7 million.

The TPI acquisition was accounted for as a purchase and the purchase price
was allocated based on estimated fair values at the date of acquisition and
resulted in an excess of purchase price over net assets acquired (goodwill)
of approximately $50.6 million, which originally was amortized on a straight
line basis over 20 years.  During 1997, the Company adjusted its preliminary
estimate of goodwill by $4.2 million relating to a revised estimate of
deferred tax assets. In addition, the Company wrote-off goodwill associated
with the TPI acquisition in conjunction with its impaired asset analysis of
approximately $7.0 million in 1997, approximately $13.1 million in 1998 and
approximately $4.0 million in 1999 (see note 3). Effective with the first day
of fiscal 1999, the Company revised the estimated useful life of the TPI
goodwill to a remaining period of 10 years.  The change in estimate resulted
in $981,000 additional amortization in the first forty weeks of 1999.

As of August 1, 1999, of the properties acquired in the TPI transaction, the
Company had closed 84 Shoney's Restaurants (eight of which were sold to
franchisees in the first quarter of 1999), 10 Captain D's restaurants, two
distribution facilities that had provided TPI's restaurants with food and
supplies, and the former TPI corporate headquarters in West Palm Beach,
Florida. Certain of the restaurants had been targeted for closure during the
Company's due diligence process as under-performing units. Anticipated costs
to exit these businesses were accrued as liabilities assumed in the 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


                                  -6-

included in the TPI purchase price allocation was approximately $21.0
million. During the third quarter and first forty weeks of 1999,
approximately $300,000 and $1.4 million, respectively, in costs were charged
against this liability.  Approximately $10.3 million of anticipated exit
costs related to the TPI acquisition remain accrued at August 1, 1999.


NOTE 3 - 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. Based on a review of the Company's restaurants which had incurred
operating losses or negative cash flows during fiscal 1996 and a review of
the cash flows from individual properties rented to others ("rental
properties"), the Company determined that certain of its restaurant assets
and rental properties were impaired and recorded a loss to write them down to
their estimated fair values. The charge related to the initial adoption of
SFAS 121 in the first quarter of 1997 was $17.6 million.  The Company's
initial asset impairment analysis did not include any of the restaurants
acquired from TPI in 1996.  The Company recorded an additional asset
impairment charge of $36.4 million in the fourth quarter of 1997 as a result
of additional analysis by management and a full year's operating results from
the restaurants acquired from TPI. During the first quarter of 1998, the
Company recorded an additional impairment charge of $2.6 million of which
$0.9 million was related to assets held and used in the Company's operations
and $1.7 million related to the adjustment of fair values of assets held for
disposal. Based on the continued decline in operating performance of the
Company's restaurant operations during 1998, particularly the Shoney's
Restaurants division, the Company completed an asset impairment analysis
during the third quarter of 1998. As a result of this analysis, the Company
recorded an asset impairment charge of $45.8 million during the third quarter
of 1998. Approximately $42.9 million of the third quarter 1998 asset
impairment charge related to assets held and used in the Company's operations
and approximately $2.9 million related to assets held for disposal.

Because of continued declines in the operating performance of the Company's
Shoney's Restaurant division during 1999, the Company completed an asset
impairment analysis during the third quarter of 1999 and recorded an asset
impairment charge of $18.4 million. Approximately $17.1 million of the third
quarter 1999 asset impairment charge related to assets held and used in the
Company's operations and approximately $1.3 million related to assets held
for sale.  Of the $17.1 million relating to assets held and used in the
Company's operations, $15.6 million related to the Shoney's Restaurant
division.

At August 1, 1999, the carrying value of the forty-seven properties to be
disposed of was $21.5 million and is reflected on the consolidated condensed
balance sheet as net assets held for sale. Under the provisions of SFAS 121,
depreciation and amortization are not recorded during the period in which
assets are being held for disposal.


NOTE 4 - 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.  These exit costs are included in the consolidated condensed
statement of operations in the restructuring expense caption. During the
third quarter of 1999, the Company recorded approximately $441,000 in
severance and related costs pertaining to the planned closure of its
distribution center in Macon, Georgia.  In addition to amounts recorded in
previous years, the

                                 -7-

Company recorded approximately $10.7 million in exit costs during 1998 ($3.1
million in the third quarter and $5.8 million in the forty week period ended
August 2, 1998), primarily associated with the accrual of the remaining
leasehold obligations on restaurants closed or to be closed.  The Company
charged approximately $600,000 and $2.3 million against these exit costs
reserves in the third quarter and in the first forty weeks of 1999,
respectively. Approximately $9.1 million of accrued exit costs remain at
August 1, 1999.

During 1998, the Company closed 104 restaurants.  Forty-seven additional
restaurants were closed during the first quarter of 1999.  Sixteen
restaurants were closed during the second quarter and one previously closed
restaurant was reopened.  Below are sales and operating losses for the third
quarter and forty week periods of 1999 and the third quarter and forty week
periods of 1998 for the restaurants closed in each of those years.

<TABLE>
<CAPTION>
                                                       ($ in thousands)
                                                                         Forty                Forty
                            Quarter Ended      Quarter Ended          Weeks Ended           Weeks Ended
                            August 1, 1999     August 2, 1998       August 1, 1999        August 2, 1998
                           ----------------   ----------------    ------------------    ------------------
                                  Operating           Operating           Operating              Operating
                           Sales    Loss     Sales      Loss      Sales     Loss       Sales       Loss
                           -----    ----     -----      ----      -----     ----       -----       ----
<S>                        <C>      <C>      <C>       <C>        <C>       <C>        <C>        <C>
Stores closed during 1998  $  --    $(239)   $16,125   $(1,502)   $  --     $(1,433)   $ 62,074   $ (7,846)
Stores closed during 1999     --     (163)    19,531      (421)    14,629    (2,108)     61,010     (3,174)
                            -----    -----    ------    -------    ------    -------    ------     -------
Total                      $  --    $(402)   $35,656   $(1,923)   $14,629   $(3,541)   $123,084   $(11,020)
                            =====    =====    ======    =======    ======    =======    ======     =======
</TABLE>


































                                 -8-


NOTE 5 - EARNINGS PER SHARE

The Company adopted Statement of Financial Accounting Standard No. 128
"Earnings per Share" ("SFAS 128") at the beginning of the first quarter of
1998. SFAS 128 supersedes Accounting Principles Board Opinion No. 15
"Earnings per Share" ("APB 15") and was issued to simplify the computation of
earnings per share ("EPS") by replacing Primary EPS, which considers common
stock and common stock equivalents in its denominator, with Basic EPS, which
considers only the weighted-average common shares outstanding. SFAS 128 also
replaces Fully Diluted EPS with Diluted EPS, which considers all securities
that are exercisable or convertible into common stock and which would either
dilute or not affect Basic EPS.

The table below presents the computation of basic and diluted loss per share:

<TABLE>
<CAPTION>
                                                             (in thousands except EPS)
                                                                                  Forty             Forty
                                             Quarter Ended    Quarter Ended     Weeks Ended       Weeks Ended
                                            August 1, 1999   August 2, 1998    August 1, 1999    August 2, 1998
                                            --------------   --------------    --------------    --------------
<S>                                           <C>              <C>               <C>              <C>
Numerator:
----------
Loss before extraordinary loss -
  numerator for Basic EPS                     $  (17,518)      $  (83,133)       $(28,405)        $(95,560)
Loss before extraordinary loss
  after assumed conversion of debentures -
  numerator for Diluted EPS                   $  (17,518)      $  (83,133)       $(28,405)        $(95,560)

Denominator:
------------
Weighted-average shares outstanding -
  denominator for Basic EPS                       49,452            48,694         49,295           48,657
Dilutive potential shares -
  denominator for Diluted EPS                     49,452            48,694         49,295           48,657

Basic EPS loss                                $     (.35)      $     (1.71)      $   (.58)        $  (1.96)
Diluted EPS loss                              $     (.35)      $     (1.71)      $   (.58)        $  (1.96)
</TABLE>

As of August 1, 1999, the Company had outstanding approximately 5,528,000
options to purchase shares at prices ranging from $1.44 to $25.51.  In
addition to options to purchase shares, the Company had approximately 155,000
common shares reserved for future issuance pursuant to certain employment
agreements, and approximately 6,000 common shares reserved for future
issuance under its stock bonus plan. The Company also has subordinated zero
coupon convertible debentures and 8.25% subordinated convertible debentures
which are convertible into common stock at the option of the debenture
holder. As of August 1, 1999, the Company had reserved 5,205,632 and
2,604,328 shares, respectively, related to these 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 for all periods
presented, the effect of the potentially dilutive securities was anti-dilutive
and was not included in the calculation of Diluted EPS.


NOTE 6 - INCOME TAXES

The Company is estimating an effective tax rate for fiscal 1999 of 0% and,
accordingly, has recorded no income tax provision or benefit for the twelve
and forty week periods ended August 1, 1999.  This effective tax rate differs
from the Federal statutory rate of 35% primarily due to goodwill amortization


                                -9-

which is not deductible for Federal income taxes and an adjustment in the
valuation allowance against the gross deferred tax assets.

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
August 1, 1999, the Company increased the valuation allowance for gross
deferred tax assets for deductible temporary differences, tax credit carry
forwards, and net operating loss carry forwards.  The deferred tax asset
valuation adjustment is in accordance with 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.

The provision for income taxes for the twelve and forty week period ended
August 2, 1998 was $37.9 million and $31.7 million, respectively.  The
provision differs from the amount computed by applying the Federal statutory
rate of 35% primarily due to goodwill amortization which is not deductible
for Federal income taxes and an adjustment in the valuation allowance against
the deferred tax assets.  During the third quarter of 1998, the Company
considered the criteria provided by SFAS 109 in connection with the asset
impairment charges recorded in the third quarter of 1998 (see note 3) and,
accordingly, increased the deferred tax asset valuation allowance by $51.3
million.


NOTE 7 - SENIOR DEBT

The Company's primary credit facility ("1997 Credit Facility") consists of a
$75.0 million line of credit ("Line of Credit"), and two term notes of $100.0
million and $200.0 million ("Term A Note" and "Term B Note"), respectively,
due in April 2002. As of August 1, 1999, the 1997 Credit Facility provided
for interest at 2.5% over LIBOR or 1.5% over the prime rate for amounts
outstanding under the Line of Credit and Term A Note, and 3.0% over LIBOR or
2.0% over the prime rate for Term B Note. Based on certain defined financial
ratios, the applicable interest rates can increase an additional 0.25% which
is the maximum allowed under the 1997 Credit Facility.

At August 1, 1999, the Company had approximately $48.5 million and $137.9
million outstanding under its Term A Note and Term B Note, respectively.
During the next four fiscal quarters, principal reductions of $16.1 million
are scheduled for the Term A Note and principal reductions of $706,000 are
scheduled for the Term B Note. Of these amounts, $7.5 million was prepaid as
of August 1, 1999. At August 1, 1999, the effective interest rates on the
term notes were 8.3% and 8.5% for Term A Note and Term B Note, respectively.

The Company had no borrowings outstanding under its $75.0 million Line of
Credit at August 1, 1999. Available credit under the Line of Credit is
reduced by outstanding letters of credit, which totaled $33.2 million at
August 1, 1999, resulting in available credit of $41.8 million. The Company
pays an annual fee of 0.5% for unused available credit under the Line of
Credit. Due to the nature of the loan covenants discussed below, as the
financial covenants become more restrictive, the Company's ability
to draw under the Line of Credit could be restricted.  Based on the financial
covenants at August 1, 1999, the Company could have drawn $4.9 million under
the Line of Credit and remained in compliance with its financial covenants.
At August 1, 1999, the interest rate for the Line of Credit was 10.5%.

The 1997 Credit Facility required the Company to enter into an interest rate
hedge program covering a notional amount of not less than $50.0 million and
not greater than $100.0 million within 60 days from the date of the loan
closing. A subsequent amendment to the 1997 Credit Facility allows the Company

                                -10-

to hedge up to a notional amount of $200 million.  The amount of the Company's
debt covered by the hedge program was $100.0 million at August 1, 1999, which
was comprised of two $40.0 million agreements, for which the interest rates
are fixed at approximately 6.1% plus the applicable margin, and an additional
$20.0 million hedge agreement which fixes the interest rate on the covered
amount of debt at 5.5% plus the applicable margin. At August 1, 1999, the
estimated cost to exit the Company's interest rate swap agreements was
approximately $11,000. The fair value of the swap agreements and changes in
the fair value as a result of changes in market interest rates are not
recognized in the consolidated condensed financial statements.

Debt and obligations under capital leases at August 1, 1999 and October 25,
1998 consisted of the following:

<TABLE>
<CAPTION>
                                                     ($ in thousands)
                                               August 1, 1999   October 25, 1998
                                               --------------   ----------------
<S>                                             <C>               <C>
Senior debt - Term A Note                       $  48,543         $    77,388
Senior debt - Term B Note                         137,930             181,114
Subordinated zero coupon convertible debentures   120,026             112,580
Subordinated convertible debentures                48,882              48,308
Industrial revenue bonds                           10,315              10,315
Notes payable to others                             4,914               5,268
                                                 --------          ----------
                                                  370,610             434,973
Obligations under capital leases                   15,740              20,251
                                                 --------          ----------
                                                  386,350             455,224
Less amounts due within one year                   11,438              11,981
                                                 --------          ----------
Amount due after one year                       $ 374,912         $   443,243
                                                 ========          ==========
</TABLE>

The 1997 Credit Facility is secured by substantially all of the Company's
assets. The 1997 Credit Facility (1) requires satisfaction of certain
financial ratios and tests (which become more restrictive during the term of
the credit facility); (2) imposes limitations on capital expenditures; (3)
limits the Company's ability to incur additional debt, leasehold obligations
and contingent liabilities; (4) prohibits dividends and distributions on
common stock; (5) prohibits mergers, consolidations or similar transactions;
and (6) includes other affirmative and negative covenants. During the third
quarter of 1998, management received approval from its lending group for
covenant modifications for the fourth quarter of 1998 and the first quarter
of 1999 that either maintained covenant ratios at existing levels or reduced
the restrictions. The financial covenant modifications were requested because
of lower than anticipated levels of sales of assets held for disposal and
lower than anticipated earnings from restaurant operations.

On March 20, 1999, the Company agreed to the material terms of a global
settlement of three class action lawsuits (see note 9 to the consolidated
condensed financial statements).  The settlement was subject to the approval
of the Company's lenders and the Court.  As part of the lender approval
process, the Company was required to seek certain financial covenant
modifications to the 1997 Credit Facility.  Lender and Court approval of the
global settlement have been received by the Company.

Based on current operating results, forecasted operating trends, anticipated
levels of asset sales, and approval of the litigation settlement and related
covenant modifications requested by the Company for the litigation
settlement, management believes that additional financial covenant
modifications could be required as early as the fourth quarter of fiscal 1999.
Based on preliminary discussions, management believes that the additional
covenant modifications could be obtained; however, no assurance can be

                                 -11-

given that such covenant modifications could be obtained.  If the Company were
unable to obtain the necessary modifications to the 1997 Credit Facility, the
Company's liquidity and financial position would be materially adversely
affected. At August 1, 1999, the Company was in compliance with all of its
debt covenants.

Prior to the refinancing in December 1997, the Company had unamortized debt
issue costs of $2.2 million related to the refinanced debt.  The write-off of
these unamortized costs during the first quarter of 1998 resulted in an
extraordinary loss, net of tax, of approximately $1.4 million or $0.03 per
common share.  The Company also incurred $1.1 million in additional interest
expense during the first quarter of 1998 to obtain waivers (for its inability
to make principal payments and comply with debt covenants) from its
predecessor lending group to facilitate the refinancing.


NOTE 8 - SETTLEMENT OF DISCRIMINATION LAWSUIT

In January 1993, Court approval was granted to a class action consent decree
settling certain employment litigation against the Company and its former
chairman. The majority of the payments required by the consent decree were
made as of March 1, 1998. Remaining payment obligations under the consent
decree are approximately $244,000.


NOTE 9 - LITIGATION

Belcher I

On December 1, 1995, five current and/or former Shoney's Restaurant managers
or assistant restaurant managers filed the case of "Robert Belcher, et al. v.
Shoney's, Inc." ("Belcher I") in the U.S. District Court for the Middle
District of Tennessee claiming that the Company had violated the overtime
provisions of the Fair Labor Standards Act.  The Court granted provisional
class status and directed notice be sent to all former and current salaried
general managers and assistant restaurant managers who were employed by the
Company's Shoney's Restaurants during the three years prior to filing of the
suit.  Approximately 900 potential class members opted to participate in the
suit as of the cutoff date set by the Court.  After the cutoff date set by
the Court, approximately 240 additional potential class members opted to
participate in the suit.  On or about April 7, 1998, the plaintiffs filed a
motion for partial summary judgment in Belcher I.  The plaintiffs moved for
summary judgment on the issue of liability based on the Company's alleged
practice and policy of making allegedly improper deductions from the pay of
its general managers and assistant restaurant managers.  In April 1998,
plaintiffs made a demand to settle the case for $45 million plus costs and
attorney's fees, which the Company rejected.  On December 21, 1998, the Court
granted plaintiffs' motion for partial summary judgment on liability,
dismissed 192 plaintiffs who did not satisfy the provisional class definition
established by the Court (which included 120 of the roughly 240 opt-in
plaintiffs who failed to timely file their consents), and set the case for a
trial on damages to commence on June 1, 1999.  On January 21, 1999, the Court
denied the Company's motion to reconsider or certify the order for
interlocutory appeal.

As a result of the Court's ruling on liability, the Company recorded a charge
of $3.5 million in the fourth quarter of fiscal 1998, representing an
estimated amount of potential damages, fees, and costs that it might be
required to pay if the Court's December 21, 1998 ruling on liability
ultimately had been upheld and damages awarded.  On January 21, 1999, the
Court also ordered the parties to mediate in an attempt to determine whether
this case, Belcher II and Edelen (discussed below) could be resolved through
settlement.


                                -12-

On March 20, 1999, the parties agreed to the material terms of a global
settlement of Belcher I, Belcher II and Edelen.  Under the agreement, in
exchange for the dismissal of the three cases with prejudice and a release by
the plaintiffs relating to the subject matter of the cases, the Company
agreed to pay $18 million in three installments as follows: $11 million upon
Court approval of the settlement and dismissal of the cases, $3.5 million on
October 1, 1999 and $3.5 million on March 1, 2000.  The settlement required
the Company to record an additional charge of $14.5 million for the first
quarter ended February 14, 1999 (in addition to the $3.5 million previously
recorded in the fourth quarter of fiscal 1998).  On July 7, 1999, the Court
dismissed with prejudice the 34 persons who were not properly in the case and
entered final judgment approving the settlement and dismissing with prejudice
the Belcher I action against the Company.  In accordance with the approved
settlement of Belcher I, Belcher II and Edelen, the Company paid $11 million
into a qualified settlement fund on July 14, 1999.

Belcher II

On January 2, 1996, five current and/or former Shoney's hourly and/or
fluctuating work week employees filed the case of "Bonnie Belcher, et al. v.
Shoney's, Inc." ("Belcher II") in the U.S. District Court for the Middle
District of Tennessee claiming that the Company violated the Fair Labor
Standards Act by either not paying them for all hours worked or improperly
paying them for regular and/or overtime hours worked.  The Court granted
provisional class status and directed notice be sent to all current and
former Shoney's concept hourly and fluctuating work week employees who were
employed during the three years prior to filing of the suit.  Approximately
18,000 potential class members opted to participate in the suit as of the
cutoff date set by the Court.  After the cutoff date set by the Court,
approximately 1,800 additional potential class members opted to participate
in the suit.  On or about July 10, 1998, plaintiffs filed a motion to amend
their complaint to add state law class action allegations of fraud, breach of
contract, conversion, and civil conspiracy; add the Company's Senior Vice
President and Controller and certain unnamed individuals as defendants; and
include a prayer for $100 million in punitive damages.  That motion was
granted by the Court on January 4, 1999, and trial was scheduled to commence
on January 4, 2000.

As noted above in the description of Belcher I, on March 20, 1999, the
parties agreed to a global settlement of this case, Belcher I and Edelen.  On
July 7, 1999, the Court dismissed with prejudice the claims of three persons
who were not properly in the case and entered an order preliminarily
approving the settlement with respect to the Belcher II plaintiffs.  The
order also authorized the issuance of notice to members of the class having
state law claims informing them of their right to file written objections to
the settlement or requests to be excluded from that portion of the
settlement.  The Court established an August 19, 1999 hearing date to resolve
objections (if any) filed with the Court and determine whether final judgment
should be entered in the case.  On July 8, 1999, notice was sent to the class
members having state law claims.  No written objections to the settlement or
requests to be excluded were filed with the Court on or before the August 12,
1999 cutoff date established by the Court.  A hearing was held on August 19,
1999, and on
August 20, 1999, the Court entered an order for final judgment approving the
settlement and dismissing with prejudice the Belcher II action against the
Company.  In accordance with the approved settlement of Belcher I, Belcher II
and Edelen, the Company paid $11 million into a qualified settlement fund on
July 14, 1999.

                                -13-

Edelen

On December 3, 1997, two former Captain D's restaurant general managers or
assistant managers filed the case "Jerry Edelen, et al. v. Shoney's, Inc.
d/b/a Captain D's" ("Edelen") in the U.S. District Court for the Middle
District of Tennessee.  Plaintiffs' claims in this case are very similar to
those made in Belcher I.  On March 28, 1998, the Court granted provisional
class status and directed notice be sent to all former and current salaried
general managers and assistant general managers who were employed at the
Company's Captain D's concept restaurants during the three years prior to the
filing of the suit.  Notice was issued to potential class members on or about
July 28, 1998.  Approximately 250 potential class members opted to
participate in the suit as of the cutoff date set by the Court.  After the
cutoff date, approximately 90 additional potential class members opted to
participate in the suit.  On December 21, 1998, the Court transferred 11
persons who filed consents in Belcher I from that case to Edelen.

As noted above in the description of Belcher I, on March 20, 1999, the
parties agreed to a global settlement of this case, Belcher I and Belcher II.
On July 7, 1999, the Court entered final judgment approving the settlement
and dismissing with prejudice the Edelen action against the Company.  In
accordance with the approved settlement of Belcher I, Belcher II and Edelen,
the Company paid $11 million into a qualified settlement fund on July 14, 1999.

Baum

On April 17, 1998, five former TPI hourly and/or fluctuating work week
employees filed the case "Deborah Baum, et al. v. Shoney's, Inc. f/k/a TPI,
Inc." ("Baum") in the U.S. District Court for the Middle District of Florida.
TPI was the Company's largest franchisee and was acquired by the Company in
September 1996.  Plaintiffs purported to represent themselves and a class of
other similarly situated former and current employees of TPI.  Specifically,
plaintiffs allege that defendant failed to compensate properly certain
employees who were paid on a fluctuating work week basis, failed to
compensate employees properly at the required minimum wage, and improperly
required employees to work off the clock.  Plaintiffs allege that such acts
deprived plaintiffs of their rightful compensation, including minimum wages,
overtime pay, and bonus pay.  On December 3, 1998, the Court denied
plaintiffs' motion to provisionally certify the class and issue notice to
putative class members.  On January 4, 1999, plaintiffs filed a notice of
appeal regarding the Court's ruling denying class certification.  On February
18, 1999, the plaintiffs filed a motion in the Court of Appeals to
voluntarily dismiss their appeal with prejudice, and on February 23, 1999,
the parties filed a joint stipulation in the District Court to dismiss the
plaintiffs' complaint with prejudice.  On March 16, 1999, the District Court
granted the parties joint stipulation to dismiss the plaintiffs' complaint
with prejudice, and on March 17, 1999 the case was closed.  On July 21, 1999,
the Court of Appeals entered an order dismissing the plaintiffs' appeal.

In December 1997, plaintiffs' counsel in Belcher I, Belcher II, and Edelen
indicated that it may file a lawsuit that would involve the Captain D's
concept and would purportedly involve allegations similar to those in Belcher
II.  To date, plaintiffs' counsel has not served the Company or the Company's
counsel with such a suit, nor has plaintiffs' counsel provided any further
indication that it may file such a suit.  The Company is presently unable to
assess the likelihood of assertion of this threatened litigation.


                                -14-

Griffin

On August 5, 1997, an hourly employee filed the case of "Regina Griffin v.
Shoney's, Inc. d/b/a Fifth Quarter" ("Griffin") in the U.S. District Court
for the Northern District of Alabama.  Plaintiff claimed the Company failed
to pay her minimum wages and overtime pay in violation of the Fair Labor
Standards Act, and claimed to be entitled to an injunction, unpaid wages,
interest, and expenses.  On February 24, 1998 the plaintiff served the
Company with a Motion for Leave to Amend Complaint with an accompanying
proposed Amended Complaint for Violation of Fair Labor Standards Act seeking
to pursue the case as a class action on behalf of plaintiff and "all persons
who have performed the services of waiter or waitress for Shoney's (d/b/a
Fifth Quarter)."  On August 24, 1998, the Company filed a Motion to Dismiss
or, in the Alternative, for Summary Judgment as to the plaintiffs' claims.
Prior to a decision on that motion, plaintiff filed a motion to amend her
amended complaint, in order to substitute Shoney's and TPI as defendants in
the case.  The Court granted plaintiff's motion and on November 23, 1998,
Shoney's and TPI filed a consolidated answer to plaintiff's second amended
complaint.

On April 9, 1999, plaintiff moved for collective action certification, which
the Company opposed.  At this time, the Court has denied, without prejudice,
plaintiff's motion to proceed on a collective action basis.  The plaintiff,
however, has been permitted to conduct discovery on this issue, with leave to
refile a request for collective action certification at a later date.
Although plaintiff's counsel has stated orally that they intend to renew the
certification issue, to date, no relevant motion has been served on the
Company and the only additional discovery sought by plaintiff has been the
deposition of one of plaintiff's general managers.

On July 30, 1999, the Company filed a motion for Summary Judgment, requesting
dismissal of all plaintiff's claims.  Plaintiff's response is due four days
prior to the hearing date on the motion, which presently has not been
scheduled by the Court.  If the Company's pending motion for Summary Judgment
is denied, the trial, which is scheduled to commence on or after September 1,
1999, would involve only the claims of the single named plaintiff under the
Court's present rulings.  Management believes it has substantial defenses to
the claims made in this case and intends to vigorously defend the case.
However, neither the likelihood of an unfavorable outcome nor the amount of
ultimate liability, if any, with respect to this case can be determined at
this time.  Accordingly, no provision for any potential liability has been
made in the consolidated condensed financial statements with respect to this
case.

Wilkinson

On December 20, 1996, a jury in Wyandotte County, Kansas returned a verdict
against the Company in the case of "Wilkinson v. Shoney's, Inc." for $458,000
on a malicious prosecution and a wrongful discharge claim which was based on
the Company's unsuccessful challenge to plaintiff's application for
unemployment benefits after he was terminated.  The jury also found the
Company liable for punitive damages on the malicious prosecution claim in an
amount to be set by the trial Court.  Although the trial Court judge stated
that she did not find sufficient evidence to support punitive damages, the
trial judge overruled the Company's motion for judgment as a matter of law
and set punitive damages in the amount of $800,000.  The Company has appealed
the total judgment of approximately $1.3 million.  Management believes it has
substantial defenses to the claims made and that the Company will likely
prevail on appeal.  Accordingly, no provision for any potential liability has
been made in the consolidated condensed financial statements.



                                -15-

In addition to the litigation described in the preceding paragraphs, the
Company is a party to other legal proceedings incidental to its business.  In
the opinion of management, based upon information currently available, the
ultimate liability with respect to these other actions will not materially
affect the operating results or the financial position of the Company.


NOTE 10 - CONCENTRATION OF RISKS AND USE OF ESTIMATES

As of August 1, 1999, the Company operated and franchised a chain of 1,188
restaurants in 28 states which consists of three restaurant divisions:
Shoney's Restaurants, Captain D's, and a Casual Dining Group (which includes
two distinct restaurant concepts). The majority of the Company's restaurants
are located in the southeastern United States. The Company also operates a
distribution and manufacturing business that supplies food and supplies to
Company and certain franchised restaurants. Shoney's Restaurants are family
dining restaurants offering full table service and a broad menu, and Captain
D's restaurants are quick-service restaurants specializing in seafood. The
Company extends credit to franchisee customers for franchise fees and the
sale of food and supplies on customary credit terms.  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- LEASEHOLD INTERESTS ASSIGNED TO OTHERS

ASSIGNED LEASES - The Company has assigned its leasehold interest to third
parties with respect to approximately thirteen 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. Although the Company
has received guarantees of performance under the assigned leases from a
majority of the assignees, the Company estimates its contingent liability
associated with these assigned leases as of August 1, 1999 to be
approximately $7.0 million.


PROPERTY SUBLET TO OTHERS - The Company subleases approximately thirty-nine
properties to others. The Company remains liable for the leasehold obligation
in the event these third parties do not make the 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 August 1, 1999 to be
approximately $5.5 million.


NOTE 12 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No.130 "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 requires that companies report comprehensive income in either
the Statement of Shareholders' Equity or in the


                                -16-

Statement of Operations. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners.  As of the first day of fiscal 1999, the Company
adopted SFAS 130.  The adoption had no impact on the Company's results of
operations or shareholders' deficit.  For the third quarter of 1999 and 1998,
the total comprehensive losses amounted to $17.5 million and $83.1 million,
respectively.  For the forty week periods of 1999 and 1998 comprehensive
losses were $28.4 million and $95.6 million, respectively.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No.131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, which supersedes
Statement of Financial Accounting Standard No.14 "Financial Reporting for
Segments of a Business Enterprise," changes financial reporting requirements
for business segments from an Industry Segment approach to an Operating
Segment approach. Operating Segments are components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision-maker in deciding how to allocate resources
and in assessing performance. SFAS 131 is effective for fiscal years
beginning after December 15, 1997.

SFAS 131 will require the Company to provide disclosures regarding its
segments which it has not previously been required to provide. The
disclosures include certain financial and qualitative data about the
Company's operating segments. Management is unable at this time to assess
whether adding this disclosure will have a material effect upon a reader's
assessment of the financial performance and the financial condition of the
Company.

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP
98-1 is effective for fiscal years beginning after December 15, 1998 and will
require the capitalization of certain costs incurred in connection with
developing or obtaining software for internal use after the date of adoption.
The Company adopted this statement on the first day of fiscal 1999 and
management does not anticipate that the adoption of SOP 98-1 will have a
material effect on the results of operations or financial position of the
Company.

In May 1998, the AICPA issued Statement of Position 98-5 "Reporting on the
Costs of Startup Activities" ("SOP 98-5"). SOP 98-5 requires companies to
expense the costs of startup activities (including organization costs) as
incurred. The Company's present accounting policy is to expense costs
associated with startup activities systematically over a period not to exceed
twelve months. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. Management does not anticipate that the adoption of SOP
98-5 will have a material effect on the Company's results of operations.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No.133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This statement 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 in the statement of
financial position and measure those instruments at fair value. This
Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Earlier adoption is permitted. Management does not
anticipate that the adoption of SFAS 133 will have a material effect on the
Company's results of operations or financial position.


                                -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.  The third quarter and first three quarters of
both fiscal 1999 and 1998 covered periods of twelve and forty weeks,
respectively.  All references are to fiscal years unless otherwise noted.
The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations ("MD&A") relating
to certain matters, which reflect management's best judgment based on factors
currently known, involve risks and uncertainties, including the ability of
management to implement successfully its strategy for improving Shoney's
Restaurants performance, the necessity for closure of under performing
restaurants, 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, the effect of Year 2000 issues on the Company
and its key suppliers, turnover and a variety of other similar matters.
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 MD&A and under the caption "Risk Factors" herein.
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.

RESULTS OF OPERATIONS

REVENUES

     Revenues for the third quarter of 1999 declined $47.4 million, or 17.1%
to $229.9 million, as compared to revenues of $277.3 million in the third
quarter of 1998. For the first three quarters of 1999, revenues decreased
14.2% to $769.9 million as compared to the same period in 1998. The following
table summarizes the components of the decline in revenues:

<TABLE>
<CAPTION>
(In Millions)                                    Twelve weeks      Forty weeks
                                                     ended            ended
                                                August 1, 1999   August 1, 1999
                                                -------------------------------
<S>                                             <C>                <C>
Restaurant Revenue                              $ (40.5)           $(122.0)
Distribution and Manufacturing and Other Sales     (4.1)             (14.8)
Franchise Fees                                       .3                 .2
Other Income                                       (3.1)               9.0
                                                ----------------------------
                                                $ (47.4)           $(127.6)
                                                ============================
</TABLE>

     The decline in revenues during the third quarter and the first three
quarters of 1999 was principally due to a net decline in the number of
restaurants in operation and negative overall comparable store sales. Since
the beginning of 1998, there has been a net decline of 166 Company-owned
restaurants in operation. For the twelve week period, restaurant revenue
declined $35.7 million due to closing restaurants and $4.8 million due to the
decline in comparable store sales.  For the forty

                                 -18-

weeks, restaurant revenue declined $108.5 million and $13.5 million due to
closed restaurants and the decline in comparable store sales, respectively.
The table below presents comparable store sales for Company-owned restaurants
for the third quarter and first three quarters of 1999 by restaurant concept:

<TABLE>
<CAPTION>
                                              Twelve weeks     Forty weeks
                                                 ended            ended
                                             August 1, 1999   August 1, 1999
                                             -------------------------------
                                               Comparable       Comparable
                                               Store Sales      Store Sales
                                             -------------------------------
<S>                                              <C>              <C>
Shoney's Restaurants                             (4.4)%           (5.3)%
Captain D's                                       0.5              3.0
Fifth Quarter                                    (0.3)             0.5
Pargo's                                          (1.1)            (3.5)
                                             -------------------------------
   All Concepts                                  (2.5)%           (2.2)%
                                             ===============================
</TABLE>

     As reflected in the table above, during 1999, the Company's Shoney's
Restaurants continued to experience negative overall comparable store sales.
The Company is focusing on improving customer traffic and sales at its
Shoney's Restaurants through a variety of back-to-basics initiatives designed
to re-establish Shoney's Restaurants as a place for great-tasting food and
exceptional customer service.  The Company has enhanced its food
specifications on the majority of its menu items and continued to improve the
quality of its ingredients with the introduction of fresh ground chuck into
the Shoney's system during the second quarter of 1999.   Research and
development personnel have been given the responsibility for upgrading the
quality of menu items and developing new menu offerings to broaden customer
appeal.

     As of August 1, 1999, the Company had implemented a new menu (the "New
Menu") in 203 Company-owned Shoney's restaurants. The New Menu includes items
from the prior menu, ten new sandwiches, nine blue plate specials that
feature a meat and two vegetables and the addition of fresh vegetables and
side dishes to the all you care to eat soup, salad, and fruit bar.  In
addition, at the customers request, the number of soup rotations offered on
the all you care to eat soup, salad, and fruit bar has been doubled.
Comparable store sales for Shoney's Restaurants with the New Menu during the
third quarter of 1999 increased 1.4% over the prior year period.  Management
believes that the ultimate success of the New Menu on increasing comparable
store sales on a consistent basis can not be fully evaluated until at least
three to four months following full implementation.  The New Menu is expected
to be fully implemented in all Company-owned Restaurants during the fourth
quarter of 1999.

     The back-to-basics initiatives also focus on improving the training
function at the Shoney's Restaurants to train restaurant-level personnel on
delivering high-quality food with exceptional customer service.  During the
first three quarters of 1999, the Shoney's Restaurants training function
concentrated on hospitality, server training and customer satisfaction.
Shoney's Restaurant General Managers are required to be in the dining room
during meal periods to reinforce the 100% customer satisfaction guarantee.
For the remainder of 1999, the Shoney's Restaurants advertising program will
focus on food quality, new promotional items and the New Menu.  Restaurant
operating standards are continually monitored in an effort to bring them into
compliance with management's expectations.

     The Company's Captain D's restaurants reported comparable store sales
increases for the third quarter and first three quarters of 1999. Management
is pleased with the continued positive operating results of its Captain D's
restaurants and has as a goal continued improvement in performance through


                                 -19-

a variety of initiatives including advertising, promotional menu items and
the continued introduction of  "Coastal Classics" menu items.

     The "Coastal Classics" menu features items such as southern style
catfish, broiled salmon, orange roughy and rainbow trout, shrimp scampi,
fried flounder and gulf oysters. The "Coastal
Classics" menu is priced from $5.49 to $6.49 which is higher than the
concept's average guest check.  As of the end of the third quarter of 1999,
the "Coastal Classics" menu had been placed in approximately 162 restaurants,
with approximately 179 restaurants scheduled to have the menu by the end of
1999. For the stores that have the "Coastal Classics" menu implemented, the
menu accounts for approximately 3-7% of total unit sales.

     As of August 1, 1999, the Company operated 727 restaurants and franchised
an additional 461 restaurants.  The following table summarizes the change in
number of restaurants operated by the Company and its franchisees during the
first three quarters of 1999 and 1998:
<TABLE>
<CAPTION>
                                              Forty Weeks Ended
                                     ------------------------------------
                                     August 1, 1999        August 2, 1998
                                     ------------------------------------
<S>                                       <C>                   <C>
Company-owned restaurants opened            1                     0
Company-owned restaurants closed          (63)(1)               (42)
Franchised restaurants opened              11 (1)                13
Franchised restaurants closed             (22)                  (24)
                                     -------------------------------------
                                          (73)                  (53)
                                     =====================================
</TABLE>

(1) Includes 10 units sold to franchisees.

     Distribution and manufacturing and other revenues declined $4.1 million
during the third quarter of 1999 compared to the third quarter of 1998 and
declined $14.8 million for the first three quarters of 1999 as compared to
the same period in 1998. The decline in distribution and manufacturing
revenues is principally due to a decline in the number of franchised
restaurants in operation, increased competition, and a decline in the
comparable store sales of franchised Shoney's Restaurants.

     Franchise revenues increased approximately $250,000 during the third
quarter of 1999 and increased approximately $169,000 for the first three
quarters of 1999, as compared to the same periods last year.

     Other income declined $3.1 million during the third quarter of 1999 and
increased approximately $9.0 million for the first three quarters of 1999 as
compared to the same periods in 1998. The decrease in other income during the
third quarter of 1999 was due principally to lower net gains on asset sales
when compared to the third quarter of 1998.  The increase in other income for
the first forty weeks of 1999 was due principally to higher net gains on
asset sales than the prior year period.  The principal components of other
income for the third quarter of 1999 were net gains on asset sales ($2.1
million), interest income ($332,000) and rental income ($96,000). For the
first three quarters of 1999, the principal components of other income were
net gains on asset sales ($17.5 million), interest income ($870,000) and
rental income ($541,000).



                                 -20-

COSTS AND EXPENSES

Costs of sales declined during the third quarter and first three quarters of
1999 compared to the same periods in 1998 principally as a result of a
decline in restaurant sales.  Cost of sales as a percentage of revenues
increased for the third quarter of 1999 to 88.2% compared to 87.6% for the
same quarter of 1998. Cost of sales as a percentage of revenues was 87.3% for
the first three quarters of 1999 compared to 89.3% for the same period in
1998.  Food and supplies costs as a percentage of

total revenues were 37.0% and 36.7%, respectively, for the third quarter and
first three quarters of 1999 compared to 37.0% and 38.2%, respectively, in
the third quarter and first three quarters of 1998.   Excluding the effects
of other income, food and supplies costs declined as a percentage of sales in
both the third and first three quarters of 1999.  The decline in food and
supplies costs as a percentage of revenues, excluding other income, was
primarily the result of higher menu prices and the implementation of a Store
Waste Attack Tool ("SWAT") that allows the food costs of each individual
restaurant to be measured against its own theoretical cost of sales.  SWAT
was fully implemented in the Company's Captain D's restaurants at the end of
the first quarter of 1999 and was fully implemented in the Shoney's
Restaurants by the end of the second quarter of 1999.  Despite a 10% increase
in the cost of whitefish to Captain D's during the second quarter of 1999, as
a percentage of restaurant sales, food and supplies costs declined in Captain
D's during the third quarter and first three quarters when compared to the
prior year periods.  Food and supplies costs for the Shoney's concept, as a
percentage of restaurant sales, increased slightly in the third quarter due
to food costs associated with the rollout of the New Menu but declined
slightly for the first three quarters.

     Excluding the effects of other income, restaurant labor increased as a
percentage of total revenues for both the third quarter and first three
quarters of 1999 because of higher wages for restaurant employees.  The
higher wages were a result of tight labor market conditions in the majority
of markets in which the Company operates and increases in staffing levels at
the Company's Shoney's Restaurants in an effort to achieve the desired level
of customer service as one means by which to attempt to reverse the negative
comparable unit sales trend. This increase in staffing in the Shoney's
Restaurants and resulting higher labor costs are expected to continue for the
remainder of the 1999 fiscal year and into the year 2000. Restaurant labor as
a percentage of revenues was 28.0% for the third quarter of 1999, as compared
to 27.0% for the third quarter of 1998. For the first three quarters of 1999
restaurant labor, as a percentage of revenues, was 27.2% as compared to 26.8%
for the same period in 1998.  Restaurant labor, as a percent of restaurant
sales, increased in the third quarter and first three quarters of 1999 over
the prior year periods in both the Shoney's and Captain D's concepts.

     Operating expenses as a percentage of revenues decreased to 23.2% for
the third quarter of 1999 compared to 23.6% in the third quarter of 1998.
Operating expenses decreased to 23.4% for the first three quarters of 1999 as
compared to 24.3% in the same period in 1998. Operating expenses, as a
percentage of revenues, declined in both the third quarter and forty week
period due to lower depreciation, insurance and advertising costs partially
offset by higher repairs and maintenance expenses.

     General and administrative expenses decreased $2.9 million and $6.7
million in the third quarter and first three quarters of 1999, respectively.
As a percentage of revenues, however, general and administrative expenses
increased from 7.1% in the third quarter of 1998 to 7.3% in the third quarter
of 1999 and from 7.4% for the first three quarters of 1998 to 7.8% for the
first three quarters of 1999.  The decrease in general and administrative
expenses in the third quarter of 1999 was principally due to decreases in
salary and related expenses and lower legal expenses relating to certain
employment litigation.  The decrease in salary and related expenses for the
forty week period was due


                                 -21-


in large part to a decrease in severance and related expenses associated with
the termination or realignment of certain executives during the first two
quarters of 1998, which totaled $2.7 million.  The decreases in salary and
related expenses in the forty week period were partially offset by increased
legal expenses relating to certain employment litigation.

     The Company incurred asset impairment charges of $18.4 million in the
third quarter of 1999.  SFAS 121 requires the Company to evaluate the
recoverability of long-lived assets on an individual restaurant basis.  When
a determination is made that the carrying value is not recoverable, the assets
are written down to their estimated fair value. Since the adoption of SFAS 121
in the first quarter of 1997, inclusive of the $18.4 million charge incurred
in the third quarter of 1999, the Company has recorded $120.8 million in asset
impairment charges. If the Company's Shoney's Restaurants continue to
experience declines in comparable store sales and operating margins, the
Company could incur additional asset impairment charges in the future.

     The Company incurred asset impairment charges of $2.6 million in the
first quarter of 1998. Asset impairment charges incurred during the first
quarter of 1998 were the result of additional analysis and the reassessment
of management's intentions as to the future disposition of certain assets.
The Company incurred asset impairment charges of $45.8 million during the
third quarter of 1998.  For the first three quarters of 1998, the Company
recorded $48.4 million in asset impairment charges.  The asset impairment
charges in the third quarter of 1998 and 1999 were primarily the result of
continued declines in comparable store sales and operating margins in the
Company's Shoney's Restaurants, which account for $40.2 million and $15.6
million of the third quarter 1998 and 1999 impairment charges, respectively.

     During the third quarter of 1999, the Company incurred $441,000 of
restructuring expense pertaining to severance expenses expected to be
incurred in the shut down of the Company's distribution center in Macon,
Georgia. The Company plans to open a larger and more efficient center in
Tifton, Georgia in the first quarter of fiscal 2000.  The new distribution
center is expected to lower labor and outside storage costs at this facility.
The Company incurred approximately $3.1 million and $5.8 million, in
restructuring charges associated with the accrual of the remaining leasehold
obligations on restaurants closed (or planned closures) during the third
quarter and first forty weeks of 1998, respectively.

     On March 20, 1999, the Company agreed to the material terms of a global
settlement in three class action lawsuits which alleged that the Company had
violated certain provisions of the Fair Labor Standards Act (see note 9 to
the consolidated condensed financial statements and Liquidity and Capital
Resources).  The Company agreed to pay $18.0 million in exchange for the
dismissal of all three cases with prejudice and a release by the plaintiffs
relating to the subject matter of the cases.  As a result of the settlement,
the Company recorded a litigation settlement charge of $14.5 million in the
first quarter of fiscal 1999 ($3.5 million had previously been recorded in
the fourth quarter of 1998).  The Court approved the settlement agreement and
entered final orders on July 7, 1999 (Belcher I and Edelen) and August 20,
1999 (Belcher II).

     Interest expense for the third quarter of 1999 decreased $1.9 million, or
17%, as compared to the same period last year, principally due to lower average
debt outstanding. Interest expense declined $4.8 million in the first three
quarters of 1999, as compared to the prior year period, principally the result
of lower average debt outstanding and a $1.1 million fee to obtain waivers
(for its inability to make principal payments and comply with debt covenants)
from its prior lenders to facilitate its $281.0 million refinancing in the
first quarter of 1998.  The reduction in debt outstanding is the result of


                                 -22-

proceeds from the sale of surplus restaurant properties and other real estate.
During the first quarter of 1998, the Company expensed unamortized costs of
$2.2 million related to the refinanced debt, which resulted in an
extraordinary loss, net of tax, of approximately $1.4 million (or $.03 per
common share outstanding).


LIQUIDITY AND CAPITAL RESOURCES

     The Company historically has met its liquidity requirements with cash
provided by operating activities supplemented by external borrowings from
lending institutions.  The Company historically has operated with a
substantial net 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 1997 Credit Facility includes a line of credit
("Line of Credit") that is available to cover any short term working capital
requirements.  During the first three quarters of 1999, cash provided by
operating activities was $40.8 million, a decrease of $7.1 million, as
compared to the first three quarters of 1998.

     Cash provided by investing activities during the first three quarters of
1999 totaled $43.3 million as compared to cash provided by investing
activities of $1.9 million in the same period of 1998.  The change in cash
provided by investing activities was due principally to an increase in
proceeds from disposal of property, plant and equipment and a decrease in
cash required for property, plant and equipment.

     The Company balances its capital spending throughout the year based on
operating results and will decrease capital spending, if needed, to balance
cash from operations, and debt service requirements.  The Company has planned
capital expenditures for 1999 of $32.4 million.  The Company does not plan to
build a significant number of new restaurants during 1999 and will invest its
capital in improvements to existing operations.  Budgeted capital
expenditures for 1999 include $13.9 million for remodeling, refurbishment and
new restaurants, $10.0 million for additions to existing restaurants and $8.5
million for other assets.  Cash required for capital expenditures totaled
$19.5 million for the first three quarters of 1999.

     The Company closed 104 restaurants during 1998 and an additional 63
restaurants in the first two quarters of 1999.  These properties, as well as
real estate from prior restaurant closings and other surplus properties and
leasehold interests, are being actively marketed.  The Company's primary
credit facility requires that net proceeds from asset disposals be applied to
reduce its senior debt.  At August 1, 1999, the Company had approximately 47
properties classified as assets held for sale with a carrying value of $21.5
million.  Cash proceeds from asset disposals were $62.8 million for the first
three quarters of 1999 compared to $23.5 million for the first three quarters
of 1998.

     The Company completed a refinancing of its senior debt on December 2,
1997.  The 1997 Credit Facility consists of a $75.0 million revolving Line of
Credit and two term notes of $100.0 million ("Term A Note") and $200.0
million ("Term B Note"), respectively, due in 2002.  The 1997 Credit Facility
provides the Company with additional liquidity and a debt amortization
schedule which better supports the Company's business improvement plans.

     During the first three quarters of 1999, cash used by financing
activities was $85.0 million compared with cash used by financing activities
of $43.2 million for the same period in 1998.  Of the $85.0 million of cash
used by financing activities, payments on senior indebtedness were $73.8
million and $11.1 million was paid in litigation settlements (see note 8 and
note 9).  During 1999,  $72.0 million of payments were made on the Term A and
Term B Notes, $60.5 million of which were

                                 -23-

required payments as a result of the sale of surplus property.  Significant
financing activities for the first three quarters of 1998 included the
refinancing of the Company's senior debt which provided cash of $300.0 million,
of which $280.4 million was used to retire the refinanced debt.  The Company
also made payments of $15.7 million on its litigation settlement (see note 8)
in the first three quarters of 1998.

     The Company had approximately $48.5 million and $137.9 million
outstanding under the Term A Note and Term B Note, respectively, at August 1,
1999.  The amounts available under the Line of Credit are reduced by letters
of credit of approximately $33.2 million resulting in available credit under
the Line of Credit of approximately $41.8 million at August 1, 1999.  Due to
the nature of the loan covenants contained in the Company's 1997 Credit
Facility, the Company's ability to draw under the Line of Credit could be
restricted.  Based upon the financial covenants at August 1, 1999, the
Company could have drawn an additional $4.9 million under the Line of Credit
and remained in compliance with its loan agreement.  At August 1, 1999, the
Company had cash and cash equivalents of approximately $15.4 million.

     On March 20, 1999, the parties to three cases that had been
provisionally certified as class actions (Belcher I, Belcher II and Edelen)
agreed to the material terms of a global settlement of the cases.  The
settlement agreement which was executed by the parties to the litigation on
June 24, 1999, requires the Company to pay $18 million as follows: $11
million upon Court approval of the settlement and dismissal of the cases,
$3.5 million on October 1, 1999 and $3.5 million on March 1, 2000.  As a
result of the settlement, the Company was required to take a charge of $14.5
million in the first quarter ended February 14, 1999, which was in addition
to a $3.5 million charge recorded in the fourth quarter of 1998.  The Court
approved the settlement agreement and entered final orders dismissing the
cases on July 7, 1999 (Belcher I and Edelen) and August 20, 1999 (Belcher
II).  On July 14, 1999, the Company paid $11 million into a qualified
settlement fund in accordance with the Court approved settlement, utilizing
funds from the Company's refunded income taxes and general working capital.
The Company will fund the remaining $7 million utilizing two irrevocable
letters of credit, each in the amount of $3.5 million that were issued on
July 13, 1999.

     Another case (Baum) was dismissed with prejudice on March 16, 1999.  The
Court of Appeals dismissed a related appeal on July 21, 1999, thereby closing
out the case.  In a remaining case (Griffin), the Court, at this time, has
denied plaintiff's request for class action certification.  Trial was
scheduled to commence on or after September 1, 1999 but no trial date has
been set by the Court.  Management believes that it has substantial defenses
to the claims made in this case and intends to vigorously defend the
litigation.  However, neither the likelihood of an unfavorable outcome nor
the amount of ultimate liability, if any, with respect to this case can
currently be determined and accordingly, no provision for any potential
liability has been made in the consolidated condensed financial statements.
In the event that an unfavorable outcome in this case results in a material
award to the plaintiffs, the Company's financial position, results of
operations and liquidity could be adversely affected.


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 six
years as a result of intense competition and a decline in operational focus
occasioned by high management turnover. The Company


                                 -24-

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 three years have not resulted in improvements in sales and profit
margins and there can be no assurance that the current programs will be
successful. The Company has experienced increased costs for labor and
operating expenses at its Shoney's Restaurants concept which, coupled with a
decrease in average restaurant sales volumes, have reduced its operating
margins.  The Company does not expect to be able to significantly improve
operating margins until it can increase its comparable restaurant sales and
restaurant average sales volumes.

     The Company is highly leveraged and, under the terms of its 1997 Credit
Facility, generally is not permitted to incur additional debt and its annual
capital expenditures are limited to $35.0 million. The Company completed a
refinancing of approximately $281.0 million of its senior debt in December
1997. The interest rates under the 1997 Credit Facility are higher than those
for the debt refinanced which resulted in increased interest costs in 1998.
Management believes that proceeds from planned asset sales will result in a
reduction of total debt outstanding and should offset the impact of the
higher interest rates. However, there is no assurance that such asset sales
will occur as quickly as management anticipates or that actual sales proceeds
will correspond to management's estimates.  As of August 1, 1999, the 1997
Credit Facility requires, among other terms and conditions, payments in the
first half of fiscal 2002 of approximately $149.6 million. In addition, $51.6
million of 8.25% subordinated convertible debentures are due in July 2002 and
the Company's zero coupon subordinated debentures mature in 2004. The Company
plans to refinance these obligations as they become due.  However, there can
be no assurance that the debt can be refinanced on terms acceptable to the
Company.  If the Company is unable to refinance the indebtedness, the
Company's financial condition, results of operations and liquidity would be
materially adversely affected.

     The 1997 Credit Facility requires satisfaction of certain financial
covenants, as well as other affirmative and negative covenants, which were to
become more restrictive in the fourth quarter of 1998 and during 1999. During
the third quarter of 1998, management received approval from its lending
group for covenant modifications in the fourth quarter of 1998 and the first
quarter of 1999 that either maintain covenant ratios at existing levels or
reduce the restrictions. The financial covenant modifications were requested
because of lower than anticipated levels of sales of assets held for disposal
and lower than anticipated earnings from restaurant operations. Based on
current operating results, forecasted operating trends and anticipated levels
of asset sales, management believes that additional financial covenant
modifications could be required in the fourth quarter of fiscal 1999.  Based
on preliminary discussions, management believes that the additional covenant
modifications could be obtained; however, no assurance can be given in that
regard.  If the Company were unable to obtain the necessary modifications to
its existing credit agreement, the Company's liquidity and financial position
would be materially adversely affected.  As of August 1, 1999, the Company
was in compliance with its financial covenants.
















                                 -25-

YEAR 2000 ISSUES AND CONTINGENCIES

     The Year 2000 issue is the result of computer programs which have been
written using two rather than four digits to define the applicable year. Any
of the computer programs or operating systems that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process restaurant transactions, process orders from the
Company's distribution and manufacturing operation, or engage in normal
business activities.

     The Company conducts its business with a great degree of reliance on
internally-operated software systems. The Company's primary information
technology systems are as follows:

     Point of Sale Cash Register system ("POS system")-This system has been
fully operational in the Company's Shoney's Restaurants and Captain D's since
January 1998. The POS system affords the Company many efficiencies, including
electronic recording of transactions such as restaurant sales, product mix,
payroll time and attendance and cash accounting. The POS system also serves
as the means by which restaurants process orders with the Company's
Distribution and Manufacturing operation, transmit hours worked for hourly
employees resulting in the recording of restaurant labor costs for these
personnel, as well as providing numerous information uses for management in
the operation of the Company's business.

     Distribution and Manufacturing system ("Distribution system")-This
system provides information for the management of inventory at the Company's
three distribution centers, which provide Company-operated and certain
franchised restaurants the majority of the necessary food and supplies. This
system also processes transactions for the Company's purchasing function,
order processing, sales forecasting and inventory management. This system has
a major impact on the food cost recorded by the Company.

     General Ledger, Accounts Payable and Accounts Receivable system
("General Ledger system")-This system facilitates the maintenance of all
financial transactions to the Company's financial statements (general
ledger), as well as the processing of the Company's accounts payable,
accounts receivable, and property, plant and equipment records.

     Payroll system ("Payroll system")-This system accumulates, records and
processes all payroll related transactions.

     At present, management has completed the assessment of its Year 2000
issues and has completed the remediation, testing, and implementation phases
for all systems discussed above.  The Company believes it is Year 2000
compliant with the above systems.

     The Company does not have any material relationships with third parties
that involve the transmittal of data electronically, which would affect the
results of operations or financial position of the Company. The Company does
have material relationships with certain suppliers of food products. The
Company has surveyed its critical suppliers as to their Year 2000 readiness;
however, the Company has no way of assuring that its major suppliers will be
Year 2000 compliant and is unable to estimate the effect of their
noncompliance on the delivery of the necessary food products.  The Company is
dependent upon overseas suppliers for certain critical food products.  In
response to this


                                 -26-

concern, the Company, since the end of the second quarter of 1999, has
increased its inventory of white fish and shrimp and expects to maintain
higher than historical inventories of these products until after January, 2000.

     The Company also relies on numerous financial institutions for the
repository of monies from the Company's restaurant locations located mainly
across the southeastern United States. These funds are generally transferred
nightly to the Company's main depository bank. While management is
comfortable with the Company's main depository bank with respect to Year 2000
issues, there can be no assurance that the many institutions with which the
Company does business will be Year 2000 compliant. Such non-compliance could
have a material effect on the Company's liquidity or financial position.

     The Company relies on a number of other systems that could be affected
by Year 2000 related failures. The corporate phone system has been upgraded
to be Year 2000 compliant. The operating system for the corporate and
regional office network required software and hardware upgrades to become
Year 2000 compliant. The Company has received assurance from its credit card
processor that it is Year 2000 compliant.  The Year 2000 issue has and will
divert information systems resources from other projects. This diversion is
not expected to have a material effect on the Company's financial position or
results of operations.

     The Company has utilized both external and internal resources to
reprogram or replace, test and implement the software needed for Year 2000
modifications. The total cost incurred for Year 2000 software related
readiness is approximately $470,000.  The hardware upgrade for the corporate
and regional office network is estimated to be approximately $1.2 million.

     As of August 1999, the Company has not developed contingency plans for
the Year 2000 issue (except for certain inventory items).  Management believes
that all primary systems are Year 2000 compliant. Additional testing will be
performed on all systems to insure compliance.  For the remainder of 1999, in
addition to continued testing, the Company will evaluate the systems that may
require contingency plans and develop them if needed.

     Management of the Company believes it has an effective program in place
to resolve the Year 2000 issue in a timely manner. At this time, the Company
cannot quantify the potential impact of any Year 2000 failures. The Company's
Year 2000 program is being developed to address issues that are within the
Company's control. The program minimizes, but does not eliminate, the issues
of external parties.
























                                 -27-

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 January 22, 1999, is incorporated herein by this reference.


                       PART II OTHER INFORMATION


ITEM 1- LEGAL PROCEEDINGS

     Item 3 of the Company's Annual Report on Form 10-K, filed with the
Commission on January 22, 1999, is incorporated herein by this reference. See
also note 9 to the notes to consolidated condensed financial statements at
pages 12 through 16 of this Quarterly Report on Form 10-Q, which is
incorporated herein by this reference.


ITEM 5. OTHER INFORMATION

     Following notification by the New York Stock Exchange ("NYSE") that the
Company was not in compliance with the NYSE's continuing listing criteria, on
May 5, 1999, the Company submitted a plan to the NYSE in support of the
continued listing of the Company's common stock.  On May 21, 1999, the NYSE
notified the Company that the Company's stock, at this time, would continue
to trade on the NYSE; however, the Company's continued listing would be
reviewed on a quarterly basis.  Failure by the Company to meet the plan
submitted to the NYSE could have resulted in suspension from trading, and
subsequent delisting, of the Company's stock from the NYSE.

     On August 5, 1999, the NYSE notified the Company that the NYSE had
received approval from the SEC to amend the NYSE's continuing listing
criteria.  The NYSE indicated that the Company, at this time, meets the newly
effective continued listing standards.  Accordingly, the quarterly review of
the Company's business plan is no longer required.






























                                 -28-

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     (a) In accordance with the provisions of Item 601 of Regulation S-K, the
         following have been furnished as Exhibits to this Quarterly Report
on
         Form 10-Q.

         Exhibit
         Number              Description
         -------        ---------------------------------------------

         27             Financial Data Schedule (For SEC Use Only)

     (b) During the quarter ended August 1, 1999, the Company has not filed
         any reports on Form 8-K.


                               SIGNATURE

     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: September 6, 1999            By: /s/ V. Michael Payne
                                      ----------------------------
                                         V. Michael Payne
                                   Senior Vice President and Controller,
                                   Principal Financial and Chief
                                   Accounting Officer































                                 -29-

                             EXHIBIT INDEX

                                                                 Sequential
Exhibit No.               Description                            Page Number
----------       ----------------------------------              -----------
27               Financial Data Schedule (For SEC Use Only)               32