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                                    AGREEMENT

         This Agreement is entered into as of the 15th day of July, 1997, by and
between Shoney's, Inc. ("Employer"), a Tennessee corporation with its principal
place of business at 1727 Elm Hill Pike, Nashville, Tennessee 37210 and F. E.
McDaniel, Jr. ("Executive").

                              W I T N E S S E T H:

         WHEREAS, the Executive is currently employed by Employer as the Senior
Vice President, Secretary & Treasurer of Employer, and Employer and Executive
desire to set forth certain rights and obligations of Employer and Executive in
the event of a change in control of Employer.

         NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:

         1. BENEFITS UPON TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN
CONTROL. If at any time within one year following the occurrence of a Change in
Control (as defined in Section 14 below) (i) the employment of Executive with
Employer is terminated by Employer for any reason other than Good Cause (as
defined in Section 14 below), or (ii) Executive terminates his or her employment
with Employer for Good Reason (as defined in Section 14 below), the following
provisions will apply:

          (a)  Employer shall pay Executive an amount equal to 200% of
               Executive's Base Salary (as defined in Section 14 below). Such
               amount will be paid to Executive in equal weekly payments using
               Employer's regular payroll periods.

          (b)  For purposes of any Incentive Plans, Executive shall be given
               service credit for all purposes for, and shall be deemed to be an
               employee of Employer during the Coverage Period (as defined in
               Section 14 below), notwithstanding the fact that Executive is not
               an employee of Employer or any Affiliate (as defined in Section
               14 below) thereof during the Coverage Period; provided that, if
               the terms of any of such Incentive Plans do not permit such
               credit or deemed employee treatment, Employer will make payments
               and distributions to Executive outside of the Incentive Plans in
               amounts substantially equivalent to the payments and
               distributions Executive would have received pursuant to the terms
               of the Incentive Plans and attributable to such credit or deemed
               employee treatment, had such credit or deemed employee treatment
               been permitted pursuant to the terms of the Incentive Plans.

          (c)  During the Coverage Period, Executive and his or her spouse and
               family will continue to be covered by all Welfare Plans (as
               defined in Section 14 below), maintained by Employer in which
               Executive or his or her spouse

 

                                   

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               or family were participating immediately prior to the date of
               Executive's termination as if Executive continued to be an
               employee of Employer; provided that, if participation in any one
               or more of such Welfare Plans is not possible under the terms
               thereof, Employer will provide substantially identical benefits.
               If, however, Executive obtains employment with another employer
               during the Coverage Period, such coverage shall be provided until
               the earlier of: (i) the end of the Coverage Period or (ii) the
               date on which the Executive and his or her spouse and family can
               be covered under the plans of a new employer without being
               excluded from full coverage because of any actual pre-existing
               condition. Nothing contained herein is intended to in any way
               limit Employee's rights under COBRA.

         Compensation under Section 1(a), (b) and (c) hereof is contingent upon
Executive's compliance with Section 4 hereof.

         2. SETOFF. With respect to Section 1, no payments or benefits payable
to or with respect to Executive pursuant to this Agreement shall be reduced by
any amount Executive or his or her spouse may earn or receive from employment
with another employer or from any other source, except as expressly provided in
Section 1(c).

         3. DEATH. If Executive dies during the Coverage Period:

            (a) All amounts not theretofore paid described in Section 1(a) 
shall be paid to his or her estate.

            (b) The spouse and family of Executive shall, during the remainder
of the Coverage Period, be covered under all Welfare Plans made available by
Employer to Executive or his or her spouse immediately prior to the date of
Executive's death; provided that, if participation in any one or more of such
plans and arrangements is not possible under the terms thereof, Employer will
provide substantially identical benefits.

         Any benefits payable under this Section 3 are in addition to any other
benefit due to Executive or his or her spouse or beneficiaries from Employer,
including, but not limited to, payments under any Incentive Plans.

         4. RESTRICTIVE COVENANTS.

            (a) Confidential Information. Executive agrees not to disclose,
following termination of his or her employment hereunder under the circumstances
described in Section 1 hereof, to any person (other than to any person
specifically authorized by the Board of Directors of Employer) any material
confidential information concerning the Employer or any of its Affiliates,
including, but not limited to, strategic plans, contract terms, financial costs,
pricing terms, sales data or business opportunities whether for existing, new or
developing businesses.


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            (b) Non-Competition. In the event of any termination of Executive's
employment pursuant to Section 1 hereby, Executive covenants and agrees that,
for a period of one year from the effective date of his or her termination from
active employment with the Employer, Executive will not engage in, own, manage,
operate, control, or participate in any food service business that conducts or
franchises activities which are the same as or similar to the restaurant
concepts and operations of Employer as an employer, employee, principal,
partner, director, agent, or otherwise, directly or indirectly, anywhere in the
United States of America.

            (c) Enforcement. Executive and the Employer acknowledge and
agree that any of the covenants contained in this Section 4 may be specifically
enforced through injunctive relief but such right to injunctive relief shall not
preclude the Employer from other remedies which may be available to it.

         5. EXECUTIVE ASSIGNMENT. No interest of Executive or his or her spouse
or any other beneficiary under this Agreement, or any right to receive any
payment or distribution hereunder, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind, nor may such interest or right to receive a payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of the
obligations or debts of, or other claims against, Executive or his or her spouse
or other beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.

         6. BENEFITS UNFUNDED. All rights of Executive and his or her spouse or
other beneficiary under this Agreement shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder. Neither Executive
nor his or her spouse or other beneficiary shall have any interest in or rights
against any specific assets of Employer, and Executive and his or her spouse or
other beneficiary shall have only the rights of a general unsecured creditor of
Employer.

         7. COST OF ENFORCEMENT; INTEREST. In the event that Executive collects
any part or all of the payments or benefits due hereunder or otherwise enforces
the terms of this Agreement following a dispute with Employer regarding the
terms of this Agreement by or through a lawyer or lawyers, Employer will pay all
costs of such collection or enforcement, including reasonable attorneys' and
accountants' fees and other out-of-pocket expenses incurred by the Executive, up
to that point when Employer offers to settle the dispute for an amount equal to
the amount which the Executive actually recovers; provided, however, that if the
Executive violates any provision of Section 4, this Section 7 shall be void and
of no further force and effect.

         8. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail to Executive's residence in the case of Executive, or to its principal
office in the case of the Employer and the date of mailing shall be deemed the
date which such notice has been provided.

         9. WAIVER OF BREACH. The waiver by either party of any provision of 
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by the other party.


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         10. ASSIGNMENT; SUCCESSORS. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer, including the surviving entity in any
merger, consolidation, share exchange or other transaction described in Section
14(c)(ii) hereof or any person, entity or group that has acquired a majority of
the outstanding shares of Common Stock (or securities convertible into Common
Stock) of Employer or all, or substantially all, of the assets of Employer. The
Executive acknowledges that the services to be rendered by him or her are unique
and personal, and Executive may not assign any of his or her rights or delegate
any of his or her duties or obligations under this Agreement.

         11. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and supersedes all other prior agreements, employment contracts and
understandings, both written and oral, express or implied with respect to the
subject matter of this Agreement and may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.

         12. APPLICABLE LAW. This Agreement shall be governed by the laws of 
the State of Tennessee, without giving effect to the principles of conflicts
of law thereof.

         13. HEADINGS. The sections, subjects and headings of this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

         14. DEFINITIONS. For purposes of this Agreement:

             (a) "Affiliate" shall have the meaning set forth in the Securities
 Exchange Act of 1934, as amended (the "Exchange Act").

             (b) "Base Salary" means the higher of (i) Executive's annual
base salary in effect immediately prior to the occurrence of the Change in
Control giving rise of an obligation on the part of Employer to make any
payments under this Agreement or (ii) Executive's annual base salary in effect
immediately prior to the termination of Executive's employment under the
circumstances described in Section 1 above.

             (c) "Change in Control" shall mean the occurrence of any of the 
following:

                (i) if any person or entity, including a "group" as defined in 
                    Section 13(d)(3) of the Exchange Act, other than Employer or
                    a wholly-owned subsidiary thereof or any employee benefit
                    plan of Employer or any of its subsidiaries, becomes the
                    beneficial owner of Employer securities having 50% or more
                    of the combined voting power of the then outstanding
                    securities of Employer that may be cast for the election of
                    directors of Employer; or

               (ii) as the result of, or in connection with, any cash tender or
                    exchange offer, merger or other business combination, sale
                    of substantially all



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                    of the assets or contested election, or any combination of
                    the foregoing transactions less than a majority of the
                    combined voting power of the then-outstanding securities of
                    Employer or any successor corporation or entity entitled to
                    vote generally in the election of the directors of the
                    Employer or such other corporation or entity after such
                    transaction is held in the aggregate by the holders of
                    Employer securities entitled to vote generally in the
                    election of directors of Employer immediately prior to such
                    transaction; or

              (iii) following the date of this Agreement, individuals who on 
                    such date constitute the Board of Directors of Employer
                    cease for any reason to constitute at least a majority
                    thereof, unless the election, or the nomination for election
                    by Employer's shareholders, of each director of Employer
                    first elected following such date was approved by a vote of
                    at least two-thirds of the directors of Employer then still
                    in office who were directors on the date of this Agreement.

            (d) "Coverage Period" shall mean the period beginning on the
date the Executive's employment with Employer terminates under circumstances
described in Section 1 and ending on the date that is twelve (12) months
thereafter.

            (e) "Good Cause" shall mean the occurrence of any one of the 
following after a Change in Control:

                 (i) Executive's personal dishonesty;

                (ii) Executive's willful misconduct;

               (iii) breach of fiduciary duty involving personal profit by
                     Executive;

                (iv) conviction of Executive for any felony or crime involving 
                     moral turpitude;

                 (v) material intentional breach by Executive of any provision 
                     of this Agreement; or

                (vi) unsatisfactory performance by Executive of the duties 
                     designated for Executive as a result of alcohol or drug use
                     by Executive.

         Without limiting the generality of the foregoing, if Executive acted in
good faith and in a manner he or she reasonably believed to be in, and not
opposed to, the best interest of Employer and had no reasonable cause to believe
his or her conduct was unlawful in connection with any action taken by Executive
in connection with his or her duties, it shall not constitute Good Cause.



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         Notwithstanding anything herein to the contrary, in the event Employer
shall terminate the employment of Executive for Good Cause hereunder, Employer
shall give at least 30 days prior written notice to Executive specifying in
detail the reason or reasons for Executive's termination.

             (f) "Good Reason" shall exist if after the occurrence of a Change
                 of Control:

                 (i) there is a significant change in the nature or the scope of
                     Executive's authority;

                (ii) there is a reduction in Executive's rate of base salary;

               (iii) Employer changes the principal location in which Executive
                     is required to perform services outside a thirty-five mile
                     radius of such location without Executive's consent;

                (iv) there is a reasonable determination by Executive that, as
                     a result of a change in circumstances significantly
                     affecting his or her position, Executive is unable to
                     exercise the authority, powers, function or duties attached
                     to his or her position; or

                 (v) Employer terminates or amends any Incentive Plan so that,
                     when considered in the aggregate with any substitute plan
                     or other substitute compensation, the Incentive Plan in
                     which Executive is participating fails to provide Executive
                     with a level of benefits equivalent to at least 75% of the
                     value of the level of benefits provided in the aggregate by
                     the terminated or amended Incentive Plan at the date of
                     such termination or amendment; provided, however, that Good
                     Reason shall not be deemed to exist under this clause (v)
                     if the decline in Incentive Plan compensation is related to
                     a decline in performance.

             (g) "Incentive Plans" shall mean any incentive, bonus, deferred 
compensation or similar plan or arrangement currently or hereafter made
available by Employer in which Executive is eligible to participate.

             (h) "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Employer in which Executive is eligible
to participate.

         15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original.

         16. SEVERABILITY; CONSTRUCTION. In the event any provision of this
Agreement is held illegal or invalid, the remaining provisions of this Agreement
shall not be affected thereby. In the


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event that Section 4(b) is deemed by any court of competent jurisdiction to
be invalid due to overbreadth, such Section 4(b) shall be construed as narrowly
as necessary to be enforceable.

         17. EXCLUSIVITY. The benefits provided Executive pursuant to this
Agreement shall be the exclusive benefits to which Executive is entitled upon
termination of employment following a Change in Control notwithstanding any
other plan or agreement in effect, whether written or oral, between Executive
and Employer providing for the payment of benefits following a termination of
employment.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.



                          ----------------------------------------------------  
                          F. E. McDaniel, Jr.


                          SHONEY'S, INC.

                          By:
                              ------------------------------------------------
                          Title: Chairman, Chief Executive Officer & President






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