UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



         /X/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE QUARTERLY PERIOD ENDED JULY 2, 1997

                         Commission File Number 1-13226


                                DENAMERICA CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               GEORGIA                                       58-1861457
----------------------------------------              --------------------------
    (State or Other Jurisdiction of                        (I.R.S. Employer
     Incorporation or Organization)                       Identification No.)

        7373 N. SCOTTSDALE ROAD
    SUITE D-120, SCOTTSDALE AZ 85253                            85253
----------------------------------------              --------------------------
(address of principal executive offices)                      (zip code)

                                 (602) 483-7055
                                 --------------
              (registrant's telephone number, including area code)



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 |_|

The  number of shares of the  issuer's  class of common  stock as of the  latest
practicable  date, is as follows:  
13,437,777 shares of Common Stock, $.10 par value, as of August 20, 1997.
-------------------------------------------------------------------------
<PAGE>
                                DENAMERICA CORP.
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JULY 2, 1997

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                      ----
PART I.  FINANCIAL INFORMATION

<S>                                                                                                      <C>                     
Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets -
                  January 1, 1997 and July 2, 1997 ...................................................    3

              Condensed Consolidated Statements of Operations -
                  13-Week Period ended July 2, 1997 and 14-Week Period ended July 3, 1996 and 
                  26-Week Period ended July 2, 1997 and 27-Week Period ended July 3, 1996.............    5

              Condensed Consolidated Statements of  Cash Flows -
                  13-Week Period ended July 2, 1997 and 14-Week Period ended July 3, 1996 and
                  26-Week Period ended July 2, 1997 and 27-Week Period ended July 3, 1996.............    6

              Notes to Condensed Consolidated Financial Statements....................................    7

Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................................................    8

PART II.      OTHER INFORMATION.......................................................................    18

              SIGNATURES..............................................................................    20
</TABLE>
                                        2
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                        DENAMERICA CORP. AND SUBSIDIARIES

                Condensed Consolidated Balance Sheets (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                               January 1,            July 2,
                                   Assets                                        1997                 1997
                                   ------                                     ------------        ------------
<S>                                                                              <C>                 <C>     
Current assets:
     Cash and cash equivalents............................................         $2,609              $1,134
     Receivables..........................................................          4,102               3,579
     Inventories..........................................................          3,520               3,661
     Deferred income taxes................................................          2,955               3,582
     Other current assets.................................................          1,196               2,026
                                                                                 --------            --------

          Total current assets............................................         14,382              13,982
                                                                                 --------            --------

     Property and equipment, net..........................................         73,724              68,865

     Intangibles, net.....................................................         71,924              71,732

     Deferred financing costs, net........................................          3,801               3,514
     Deferred income taxes................................................          7,174               7,174
     Other assets.........................................................          8,184               8,365
                                                                                 --------            --------

                                                                                 $179,189            $173,632
                                                                                 ========            ========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       3
<PAGE>
                        DENAMERICA CORP. AND SUBSIDIARIES

          Condensed Consolidated Balance Sheets, Continued (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 January 1,                  July 2,
                    Liabilities and Shareholders' Equity                           1997                       1997
                    ------------------------------------                       -------------              ------------

<S>                                                                                <C>                       <C>     
Current liabilities:
  Accounts payable........................................................          $18,202                   $18,600
  Accrued compensation and related costs..................................            8,487                     6,504
  Accrued taxes...........................................................            4,636                     3,852
  Other current liabilities...............................................            8,424                     5,799
  Current portion of long-term debt and
   obligations under capital leases.......................................            7,662                     7,912
                                                                                   --------                  --------

   Total current liabilities..............................................           47,411                    42,667
                                                                                   --------                  --------

Long-term debt, less current portion......................................           94,132                    94,441
Deferred rent and other...................................................           14,732                    14,630
                                                                                   --------                  --------

   Total liabilities......................................................          156,275                   151,738
                                                                                   --------                  --------

Minority interest in joint ventures.......................................              786                       581
                                                                                   --------                  --------

Shareholders' equity
  Common stock ...........................................................            1,340                     1,342
  Additional paid-in capital..............................................           35,706                    35,781
  Accumulated deficit.....................................................          (14,918)                  (15,810)
                                                                                   --------                  --------

   Total shareholders' equity.............................................           22,128                    21,313
                                                                                   --------                  --------

                                                                                   $179,189                  $173,632
                                                                                   ========                  ========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       4
<PAGE>
                        DENAMERICA CORP. AND SUBSIDIARIES

           Condensed Consolidated Statements of Operations (Unaudited)
                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                    Period ended                            Period ended
                                                          --------------------------------       --------------------------------   
                                                              July 3             July 2,            July 3,             July 2,
                                                               1996               1997               1996                1997
                                                          -------------       ------------       ------------       -------------   
                                                            (14 weeks)         (13 weeks)         (27 weeks)          (26 weeks)
                                                          
<S>                                                        <C>                <C>                <C>                  <C>       
Restaurant sales.......................................    $   59,012         $   76,185         $   79,173             $152,299
                                                           ----------         ----------         ----------           ----------

Restaurant operating expenses:
  Cost of food and beverage............................        16,339             20,840             21,971               41,453
  Payroll and payroll related costs....................        20,156             26,260             27,416               52,361
  Depreciation and amortization........................         1,920              2,324              2,836                4,590
  Other restaurant operating expenses..................        14,590             20,403             20,074               41,680
                                                           ----------         ----------         ----------           ----------

   Total restaurant operating expenses.................        53,006             69,827             72,298              140,084
                                                           ----------         ----------         ----------           ----------
Restaurant operating income............................         6,006              6,358              6,875               12,215
Administrative expenses................................         2,134              3,831              3,181                7,575
                                                           ----------         ----------         ----------           ----------
Operating income.......................................         3,873              2,527              3,695                4,640
Interest expense, net..................................         2,791              3,164              3,651                6,367
                                                           ----------         ----------         ----------           ----------
Income (loss) before minority interest in joint
  venture, income taxes, and extraordinary item........         1,082               (637)                44               (1,727)
Minority interest in joint venture.....................            13                (53)                11                 (162)
                                                           ----------         ----------         ----------           ----------

Income (loss) before income taxes and
  extraordinary item...................................         1,069               (584)                33               (1,565)
Income tax (benefit) expense...........................           372               (234)                13                 (626)
                                                           ----------         ----------         ----------           ----------
Income (loss) before extraordinary item...............           697               (350)                20                 (939)
Extraordinary item - loss on
  extinguishment of debt...............................          ----               ----               (497)                ----
                                                           ----------         ----------         ----------           ----------
Net income (loss)......................................           697               (350)              (477)                (939)
Preferred stock dividend and accretion.................          ----               ----               (149)                ----
                                                           ----------         ----------         ----------           ----------
Net income (loss) applicable to common                     
 shareholders..........................................    $      697         $     (350)        $     (626)          $     (939)
                                                           ==========         ==========         ==========           ========== 
Net income (loss) per common share                         
  before extraordinary item............................    $      .05         $     (.03)        $     (.01)          $     (.07)
                                                           ==========         ==========         ==========           ==========

Net income (loss) per common share.....................    $      .05         $     (.03)        $     (.06)          $     (.07)
                                                           ==========         ==========         ==========           ==========

Weighted average shares outstanding....................    13,649,000         13,414,000         10,293,000           13,414,000
                                                           ==========         ==========         ==========           ==========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       5
<PAGE>
                        DENAMERICA CORP. AND SUBSIDIARIES

           Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                      Period ended                        Period ended
                                                             ------------------------------      ------------------------------- 
                                                                July 3            July 2,           July 3,            July 2,
                                                                 1996               1997             1996               1997
                                                             ------------       -----------      ------------       ------------ 
                                                              (14 weeks)         (13 weeks)       (27 weeks)         (26 weeks)
                                                          
<S>                                                              <C>               <C>               <C>               <C>   
Cash flows from operating activities:
  Net income (loss)....................................          $  697            $ (350)           $ (477)           $ (939)
   Adjustments to reconcile net income
     to net cash provided by (used in)
     operating activities:
     Depreciation and amortization.....................           1,920             2,324             2,836             4,590
     Amortization of deferred financing costs..........              83               162               128               287
     Minority interest in joint venture................              13               (53)               11              (162)
     Deferred income taxes.............................             372              (234)               13              (626)
     Deferred rent - long term ........................              51               341               132               417
     Other.............................................              78              (263)              488              (133)
   Changes in operating assets and liabilities:
       Receivables.....................................          (1,182)              721            (1,399)              756
       Inventories.....................................            (490)               65              (548)             (141)
       Prepaid expenses and other assets...............            (574)             (917)           (1,009)             (830)
       Accounts payable and accrued liabilities........          (4,104)              465            (1,012)           (5,547)
                                                                 ------            ------            ------            ------
       Net cash provided by (used in)
         operating activities..........................          (3,136)            2,261              (837)           (2,328)
                                                                 ------            ------            ------            ------
Cash flows from investing activities:
  Purchase of property and equipment...................          (2,487)           (1,528)           (3,912)           (3,006)
  Purchase of intangibles..............................            (121)             (313)             (534)           (1,498)
  Payment for Acquisition of BEP and Merger,
   net of cash acquired                                           2,412              ----              (231)             ----
  Proceeds from the sale of assets.....................            ----               498              ----             6,734
                                                                 ------            ------            ------            ------
     Net cash (used in) provided by investing
       activities......................................            (196)           (1,343)           (4,677)            2,230
                                                                 ------            ------            ------            ------
Cash flows from financing activities:
  Borrowings, net......................................           9,711               759            13,361             2,230
  Principal reductions on long-term obligations........          (6,331)           (1,861)           (7,675)           (3,684)
  Issuance of Common Stock and other, net..............             (48)               28              (172)               77
                                                                 ------            ------            ------            ------
     Net cash provided by financing activities.........           3,332            (1,074)            5,514            (1,377)
                                                                 ------            ------            ------            ------
     Net change in cash and cash equivalents...........            ----              (156)             ----            (1,475)
Cash and cash equivalents at beginning of period.......            ----             1,290              ----             2,609
                                                                 ------            ------            ------            ------
Cash and cash equivalents at end of period.............          $ ----            $1,134            $ ----            $1,134
                                                                 ======            ======            ======            ======
Supplemental schedule of cash flow information: 
  Cash paid during period for:
  Interest.............................................          $2,083            $2,326            $3,033            $5,480
                                                                 ======            ======            ======            ======
  Income taxes.........................................          $   47            $ ----            $   47            $ ----
                                                                 ======            ======            ======            ======
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       6
<PAGE>
                        DENAMERICA CORP. AND SUBSIDIARIES

              Notes to Condensed Consolidated Financial Statements
                 (In thousands, except share and per share data)
                                   (Unaudited)

(1)      Basis of Presentation

General

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
DenAmerica  Corp.  and  Subsidiaries  (the  "Company")  have  been  prepared  in
accordance  with the  instructions  to Form 10-Q and do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial  statements.  In the opinion of the Company's management,
all adjustments  (consisting of normal recurring accruals)  considered necessary
for a fair presentation  have been included.  These statements should be read in
conjunction  with the  consolidated  financial  statements and notes thereto and
management's  discussion  and  analysis of  financial  condition  and results of
operations  included in the Company's  Annual Report on Form 10-K for the fiscal
year ended January 2, 1997.

The  three-month and six-month  periods ended July 2, 1997, as explained  below,
are not comparable to the prior periods.

Mergers

On March 29, 1996,  Denwest  Restaurant  Corp.  ("DRC") merged with and into the
Company, with the Company being the surviving  corporation (the "Merger").  Upon
consummation  of the Merger,  the Company  changed its name from American Family
Restaurants,  Inc. ("AFR") to DenAmerica Corp. The Merger has been accounted for
as a reverse purchase under generally accepted accounting principles as a result
of which DRC is  considered  to be the  acquiring  entity  and AFR the  acquired
entity for accounting purposes.

On July 3, 1996, the Company  acquired all of the issued and outstanding  common
stock of  Black-eyed  Pea U.S.A.,  Inc.  ("BEP") from BEP Holdings,  Inc.  ("BEP
Holdings")  pursuant to a Stock Purchase Agreement (the "BEP  Acquisition").  In
accordance  with the terms and conditions of the Stock Purchase  Agreement,  the
effective accounting date of the BEP Acquisition was June 24, 1996.

In  accordance  with  the  accounting   rules  for  a  purchase  and  a  reverse
acquisition,  the  consolidated  financial  statements  presented  herein are as
follows:

           (i)    Consolidated  Statements  of Operations of the Company for the
                  periods  ended  July 2, 1997  (which  include  the  results of
                  operations  of the  Company  following  the Merger and the BEP
                  Acquisition)  and July 3, 1996  (which  include the results of
                  operations  of the AFR  restaurants  since the March 27,  1996
                  accounting date of the Merger and the results of operations of
                  BEP  since  the  June  24,  1996  accounting  date  of the BEP
                  Acquisition); and
                                       7
<PAGE>
           (ii)   Consolidated  Statements  of Cash Flows of the Company for the
                  periods  ended  July 2, 1997  (which  include  the  results of
                  operations  of the  Company  following  the Merger and the BEP
                  acquisition)  and July 3, 1996  (which  include the results of
                  operations  of the AFR  restaurants  since the March 27,  1996
                  accounting date of the Merger and the results of operations of
                  BEP  since  the  June  24,  1996  accounting  date  of the BEP
                  Acquisition).

(2)      Earnings Per Share

         Earnings per share for the period ended July 3, 1996 has been  computed
based upon the weighted  average of (i) the shares of the Company's Common Stock
received in connection  with the Merger by the former  shareholders of DRC after
deducting  preferred  stock  dividends and  accretion on preferred  stock of DRC
outstanding prior to the Merger, and (ii) the Company's Common Stock outstanding
after the Merger.  Earnings per share for the period ended July 2, 1997 has been
computed based upon the weighted average of the common shares  outstanding as of
July 2, 1997.

(3)      Subsequent Events

         In July 1997,  the Company sold  fourteen  Denny's and two  non-Denny's
restaurants to an unrelated party for $2.1 million. In addition,  in August 1997
the Company  entered  into an  agreement  to sell 61 Denny's and 10  non-Denny's
restaurants for gross cash proceeds of $28.4 million,  a $3.0 million promissory
note due within 90 days of close,  and a promissory note in the principle amount
of $6.0 million which matures in 2000. The  consummation of this  transaction is
subject to various matters, including obtaining landlord and lender consents.

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

Basis of Presentation

         Upon consummation of the Merger,  the former  shareholders of DRC owned
an  aggregate  of  approximately  53.0% of the  outstanding  voting power of the
Company.  Accordingly,  the Merger has been accounted for as a reverse  purchase
under generally accepted accounting principles with an effective accounting date
of March 27,  1996,  the last day of DRC's  first  quarter for fiscal  1996.  In
addition, on July 3, 1996 the Company acquired all of the issued and outstanding
common stock of BEP. The effective  accounting  date of the BEP  Acquisition was
June 24, 1996.

         The results of operations for the 1997 periods were materially impacted
by the Merger and the BEP Acquisition. During the second quarter of 1997 and for
the six  month  period  then  ended,  revenue  and  related  expenses  increased
significantly over prior years primarily as a result of these acquisitions. As a
result,  the 1997  operating  results are not  comparable to prior  periods.  In
addition,  the 1997 second quarter contains thirteen weeks while the 1996 second
quarter contains fourteen weeks.
                                       8
<PAGE>
General

         The 1996 operating results reflect  fourteen-week and twenty-seven week
periods versus thirteen-week and twenty-six week periods in 1997. The additional
week in the 1996 periods is significant in that revenues are included  without a
corresponding  increase in certain fixed costs,  including occupancy,  utilities
and administrative expenses.

         As set forth  below,  the  Company's  restaurant  operating  income and
operating  income increased by $5.3 million and $945,000 for the twenty-six week
period ended July 2, 1997 as compared  with the  twenty-seven  week period ended
July 3, 1996.  For the thirteen  week period ended July 2, 1997,  these  amounts
increased $350,000 and decreased $1.4 million, respectively as compared with the
fourteen-week  period ended July 3, 1996.  The decrease in operating  income for
the thirteen-week period ended July 2, 1997 would have been $2.0 million without
the gain on sale of restaurants of $650,000. These changes result primarily from
the Merger and the BEP Acquisition,  the additional week of operating results in
1996, and the decline in Denny's same-store sales in 1997, as described below.

Denny's
-------

         As of July 2, 1997, the Company operated 190 Denny's  restaurants in 31
states.  In January 1996, the Company and Denny's,  Inc.  adopted the "Breakaway
Breakfast" value pricing promotion, which offered five breakfast items for $1.99
or less. In September  1996, the Company  withdrew from the Breakaway  Breakfast
and increased  the price of the Grand Slam  breakfast to $2.99.  The  withdrawal
from the  Breakaway  Breakfast  resulted  in the decline of  comparable  Denny's
restaurant  sales of 5.6% during the  thirteen  week period  ending July 2, 1997
compared  with the prior year.  The average  guest  check  increased  from $4.99
during the second quarter 1996 to $5.31 for the second quarter of 1997; however,
guest  counts  for  the  same  period  declined.  These  operating  results  are
consistent  with the  results  reported  for  Denny's  restaurants  operated  by
Denny's,  Inc. In order to mitigate the possible material negative impact of the
continued  decline in the  Denny's  sales  levels,  the  Company  has  adopted a
selective restaurant disposition strategy described below.

Black-eyed Pea
--------------

         As of July 2, 1996, the Company  operated 91 Black-eyed Pea restaurants
in 13 states and  franchised  25 Black-eyed  pea  restaurants  in 5 states.  The
Company operates 64 Black-eyed Pea restaurants in Texas and Oklahoma,  which the
Company considers to be its core market for Black-eyed Pea restaurants.  For the
twenty-six week period ended July 2, 1997, comparable same-store sales decreased
4.6% for all of the Company's Black-eyed Pea restaurants,  although only 2.4% in
the core  market.  The guest  check  average  at the  Company's  Black-eyed  Pea
restaurants  is  approximately  $7.90.  For  the  second  quarter,  alcohol  and
carry-out sales accounted for  approximately  2.3% and 10.1%,  respectively,  of
total sales at the Company's Black-eyed Pea restaurants. 
                                       9
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS

         The following table presents, for the periods indicated,  certain items
in the condensed consolidated  statements of operations as a percentage of total
restaurant  sales.  As  discussed  above,  as a  result  of the  Merger  and BEP
Acquisition, these results are not comparable.

<TABLE>
<CAPTION>
                                                            Period ended                 Period ended
                                                   ---------------------------     --------------------------
                                                      July 3,         July 2,        July 3,         July 2,
                                                        1996           1997           1996            1997
                                                   ------------    -----------     -----------    -----------
                                                    (14 weeks)     (13 weeks)      (27 weeks)      (26 weeks)
                                                                                    
<S>                                                   <C>             <C>            <C>              <C>     
Restaurant sales:                                     100.0  %        100.0  %       100.0  %         100.0  %
                                                                                    
Restaurant operating expenses:                                                      
   Cost of food and beverages....................      27.7            27.4           27.8             27.2
   Payroll and payroll related costs.............      34.2            34.5           34.6             34.4
   Depreciation and amortization.................       3.3             3.1            3.6              3.0
   Other restaurant operating cost...............      24.6            26.8           25.3             27.4
                                                      -----           -----          -----            -----   
       Total restaurant operating expenses..           89.8            91.7           91.3             92.0
                                                      -----           -----          -----            -----   
Restaurant operating income......................      10.2             8.3            8.7              8.0
Administrative expenses..........................       3.6             5.0            4.0              5.0
                                                      -----           -----          -----            -----   
                                                                                    
Operating income.................................       6.6             3.3            4.7              3.0
Interest expense.................................       4.8             4.2            4.6              4.1
                                                      -----           -----          -----            -----   
                                                                                    
Income (loss) before minority interest in joint                                     
  ventures, income taxes, and extraordinary                                         
  item...........................................       1.8            (.9)             .1            (1.1)         
Minority interest in joint ventures..............        .0            (.1)             .0             (.1)
                                                      -----           -----          -----            -----   
                                                                                    
Income (loss) before income taxes and                                               
  extraordinary item.............................       1.8            (.8)             .1            (1.0)
Income tax expense (benefit).....................        .6            (.3)             .0             (.4)
                                                      -----           -----          -----            -----   
                                                                                    
Income (loss) before extraordinary item..........       1.2            (.5)             .1             (.6)
Extraordinary item - loss on extinguishment                                         
       of debt...................................      ----             ---           (.6)  %           ---
                                                      -----           -----          -----            -----   
                                                                                    
Net income (loss)................................       1.2  %         (.5)  %        (.5)  %          (.6)  %
                                                      =====           =====          =====            =====   
</TABLE>
                                       10
<PAGE>
THIRTEEN-WEEK PERIOD ENDED JULY 2, 1997 COMPARED WITH FOURTEEN-WEEK PERIOD ENDED
JULY 3, 1996

         Restaurant sales.  Restaurant sales increased $17.2 million, or 29%, to
$76.2 million for the  thirteen-week  period ended July 2, 1997 as compared with
restaurant  sales of $59.0  million for the  fourteen-week  period ended July 3,
1996. This increase was primarily attributable to the BEP Acquisition.

         Cost of Food and Beverage. Cost of food and beverage decreased to 27.4%
of restaurant sales for the thirteen-week  period ended July 2, 1997 as compared
with 27.7% of restaurant sales for the fourteen-week  period ended July 3, 1996,
primarily as the result of discontinuing  several Denny's  promotional  programs
implemented  in  January  1996  and the  conversion  or sale of  certain  of the
Company's non-branded restaurants.

         Payroll and Payroll Costs. Payroll and payroll related costs were 34.5%
of restaurant  sales for the thirteen-week period ended July 2, 1997 as compared
with 34.2% of restaurant  sales for the fourteen-week period ended July 3, 1996.
This increase was primarily attributable to a decrease in comparable store sales
as well as  increased  training  and  employee  turnover  costs  in the  Denny's
restaurants.

         Depreciation  and   Amortization.   Depreciation  and  amortization  of
restaurant equipment,  leasehold  improvements,  intangible assets,  pre-opening
costs,   and  other  items  decreased  to  3.1%  of  restaurant  sales  for  the
thirteen-week  period  ended July 2, 1997 as  compared  with 3.3% of  restaurant
sales for the fourteen-week  period ended July 3, 1996. The increase of $400,000
was primarily  attributable to the amortization of intangible  assets associated
with the 1996 acquisitions.

         Other Restaurant Operating Costs. Other restaurant operating costs were
26.8% of  restaurant  sales for the  thirteen-week  period ended July 2, 1997 as
compared with 24.6% of restaurant sales for the fourteen-week  period ended July
3, 1996. Included in the 1997 results is a gain of $650,000 relating to the sale
of  eleven  non-branded  restaurants.  Excluding  this  gain,  other  restaurant
operating  costs,  expressed as a percentage of revenue,  would have been 27.6%.
This increase was primarily  attributable  to the inclusion of the BEP operating
results in 1997 (where  other  restaurant  operating  costs as a  percentage  of
revenues are higher than operating costs at the Company's Denny's  restaurants),
a decrease in comparable stores sales in the Denny's restaurants, and the impact
of a thirteen-week  operating  period in 1997 versus a  fourteen-week  operating
period in 1996.

         Restaurant  Operating  Income.  Restaurant  operating  income increased
$352,000 to $6.4 million for the  thirteen-week  period  ended July 2, 1997,  as
compared with $6.0 million for the fourteen-week period ended July 3, 1996. This
increase was principally the result of the factors described above.
                                       11
<PAGE>
         Administrative  Expenses.  Administrative expenses increased to 5.0% of
restaurant  sales for the  thirteen-week  period  ended July 2, 1997 as compared
with 3.6% of restaurant sales for the  fourteen-week  period ended July 3, 1996.
This increase was primarily the result of declining same store sales, the impact
of the thirteen-week  operating period in 1997 versus a fourteen-week  operating
period  in 1996,  as well as the  greater  administrative  support  required  to
operate as a franchisor as opposed to operating solely as a franchisee.

         Interest  Expense.  Interest  expense  was  $3.2  million,  or  4.2% of
restaurant  sales, for the  thirteen-week  period ended July 2, 1997 as compared
with $2.8 million,  or 4.8% of restaurant  sales, for the  fourteen-week  period
ended  July 3,  1996.  The  increase  is the  result of  increased  debt  levels
associated with the 1996 acquisitions.

         Income Tax  Benefit.  The  Company  recorded  an income tax  benefit of
approximately  $234,000,  an effective rate of 40%, for the thirteen-week period
ended  July 2,  1997 as  compared  with  income  tax  expense  of  approximately
$372,000,  or an effective rate of 35%, for the fourteen-week  period ended July
3, 1996.

         Net Income  (Loss).  The Company  recorded a net loss of  approximately
$350,000 for the  thirteen-week  period ended July 2, 1997 as compared  with net
income of $697,000 for the fourteen-week  period ended July 3, 1996, as a result
of the factors described above.

TWENTY-SIX WEEK PERIOD ENDED JULY 2, 1997 COMPARED WITH TWENTY-SEVEN WEEK PERIOD
ENDED JULY 3, 1996

         Restaurant sales.  Restaurant sales increased $73.1 million,  or 92.3%,
to $152.3 million for the twenty-six  week period ended July 2, 1997 as compared
with restaurant  sales of $79.2 million for the  twenty-seven  week period ended
July 3, 1996. This increase was primarily attributable to the Merger and the BEP
Acquisition.

         Cost of Food and Beverage. Cost of food and beverage decreased to 27.2%
of  restaurant  sales  for the  twenty-six  week  period  ended  July 2, 1997 as
compared with 27.8% of restaurant sales for the  twenty-seven  week period ended
July  3,  1996,  primarily  as  the  result  of  discontinuing  several  Denny's
promotional  programs  implemented in January 1996 and the conversion or sale of
certain of the Company's non-branded restaurants.

         Payroll and Payroll Costs. Payroll and payroll related costs were 34.4%
of  restaurant  sales  for the  twenty-six  week  period  ended  July 2, 1997 as
compared with 34.6% of restaurant sales for the  twenty-seven  week period ended
July 3, 1996.  This  decrease was  primarily  attributable  to the impact in the
first quarter of staffing  efficiencies created by discontinuing the promotional
program  implemented  in the first quarter of 1996 and the conversion or sale of
certain of the Company's non-branded restaurants.
                                       12
<PAGE>
         Amortization  and   Depreciation.   Amortization  and  depreciation  of
restaurant equipment,  leasehold  improvements,  intangible assets,  pre-opening
costs and other items  decreased to 3.0% of restaurant  sales for the twenty-six
week period ended July 2, 1997 as compared with 3.6% of restaurant sales for the
twenty-seven  week period  ended July 3, 1996.  The increase of $1.8 million was
primarily  attributable to the amortization of intangible assets associated with
the 1996 acquisitions.

         Other Restaurant Operating Costs. Other restaurant operating costs were
27.4% of restaurant  sales for the twenty-six  week period ended July 2, 1997 as
compared with 25.3% of restaurant sales for the  twenty-seven  week period ended
July 3, 1996. Included in the 1997 results is a gain of $650,000 relating to the
sale of eleven  non-branded  restaurants.  Excluding this gain, other restaurant
operating  costs  expressed as a percentage  of revenue,  would have been 27.8%.
This increase was primarily attributable to increased restaurant operating costs
associated with restaurants  acquired as a result of the BEP Acquisition  (where
other  restaurant  operating  costs as a percentage  of revenues are higher than
operating costs at the Company's Denny's restaurants),  a decrease in comparable
store sales in the Company's Denny's restaurants, and the impact of a twenty-six
week  operating  period in 1997 versus a twenty-seven  week operating  period in
1996.

         Restaurant Operating Income. Restaurant operating income increased $5.3
million to $12.2 million for the  twenty-six  week period ended July 2, 1997. as
compared with $6.9 million for the twenty-seven  week period ended July 3, 1996.
This increase was principally the result of the factors described above.

         Administrative  Expenses.  Administrative expenses increased to 5.0% of
restaurant  sales for the twenty-six  week period ended July 2, 1997 as compared
with 4.0% of  restaurant  sales for the  twenty-seven  week period ended July 3,
1996. This increase was primarily the result of declining same store sales,  the
impact of the  twenty-six  week  operating  period in 1997 versus a twenty-seven
week  operating  period in 1996, as well as the greater  administrative  support
required  to  operate  as a  franchisor  as  opposed  to  operating  solely as a
franchisee.

         Interest  Expense.  Interest  expense  was  $6.4  million,  or  4.1% of
restaurant  sales, for the twenty-six week period ended July 2, 1997 as compared
with $3.7 million, or 4.6% of restaurant sales, for the twenty-seven week period
ended  July 3,  1996.  The  increase  is the  result of the  increased  level of
long-term debt associated with the 1996 acquisitions.

         Income Tax  Benefit.  The  Company  recorded  an income tax  benefit of
approximately $626,000, an effective rate of 40%, for the twenty-six week period
ended July 2, 1997 as compared with income tax expense of approximately $13,000,
or an  effective  rate of 40%,  for the  twenty-seven  week period ended July 3,
1996.

         Net Loss. The Company recorded a net loss of approximately $939,000 for
the  twenty-six  week  period  ended July 2, 1997 as  compared  with net loss of
$626,000 after the  extraordinary  item for the  twenty-seven  week period ended
July 3, 1996, as a result of the factors described above.
                                       13
<PAGE>
Liquidity and Capital Resources

         The  Company,   and  the  restaurant   industry   generally,   receives
substantially  all of its  revenues in cash with a  relatively  small  amount of
receivables.  Therefore,  like many other companies in the restaurant  industry,
the Company  operates with a working  capital  deficit.  The  Company's  working
capital  deficit was $28.7  million at July 2, 1997 and $33.0 million at January
1, 1997. The Company  believes that it has funded the excessive  working capital
deficit  acquired in the Merger and that its current  working capital deficit is
consistent with the working capital position of restaurant  operators of similar
size.  The Company  anticipates  that it will continue to operate with a working
capital deficit.

         Over the past two quarters,  the Company has converted ten  non-Denny's
and non-Black-eyed Pea restaurants to the Denny's concept.  In addition,  during
1997 the Company has closed ten restaurants that were not achieving minimum cash
flow  requirements.  The Company  intends to continue to evaluate  its  existing
restaurant  portfolio  and to  close  or sell  restaurants  as  appropriate.  As
described above, the Denny's operating results have been negatively  impacted by
same-store sales  declines.  The Company  intends to pursue a strategy to lessen
its  dependence on the Denny's  brand,  and has  identified  certain  geographic
markets as available for disposition.  Proceeds from such  dispositions  will be
used to retire debt and to reduce the working capital  deficit.  As part of this
strategy, in April 1997 the Company sold eleven non-branded restaurants for cash
and notes totaling  $850,000.  This transaction  resulted in a gain of $650,000,
which has been included in the accompanying  financial statements as a reduction
of other restaurant operating expenses.

         The Company  intends to continue to expand the number of its Black-eyed
Pea restaurants in its core market through the  development of new  restaurants.
As of July 2, 1997,  the Company has four stores  under  development,  which are
anticipated to open prior to year-end. In addition, the Company his entered into
two  agreements to purchase a total of nine  franchised  restaurants  located in
Arizona and Florida.  These  acquisitions are a part of an overall settlement of
threatened litigation by these franchisees.  Under these agreements, the Company
will forego  future  royalty  payments from an  additional  thirteen  franchised
restaurants in Colorado in exchange for various  releases and  indemnifications.
The effect of the loss of royalty income of approximately $1.4 million per annum
will be  partially  offset  by  operating  income  from  the  restaurants  to be
acquired.  These  acquisitions  require  the  approval of the  Company's  senior
lenders.  The Company's currently is negotiating with its lenders to obtain such
approvals.

         The Company historically has satisfied its capital requirements through
credit facilities and the sale and leaseback of Denny's restaurants. The Company
requires capital  principally for the development of new restaurants and to fund
the  acquisition  and  conversion  of  existing  restaurants.  Expenditures  for
property and equipment and intangibles  totaled  approximately  $1.8 million and
$4.5 million for the  thirteen-week  and  twenty-six  week periods ended July 2,
1997.  As  described   below,   the  Company   currently  has   commitments  for
approximately  $65.0 million of  sale-leaseback  financing  through August 1998,
which the Company  believes will be adequate to meet its financing  needs during
that period.
                                       14
<PAGE>
         The  Company  believes  that its future  capital  requirements  will be
primarily for the development of new  restaurants,  for continued  acquisitions,
and for conversion of restaurants to the Denny's or Black-eyed Pea concepts. The
Company  estimates that its costs to develop and open new Denny's and Black-eyed
Pea restaurants, excluding real estate and building costs, will be approximately
$350,000 to $450,000  per  restaurant,  and that its costs  associated  with the
conversion  of  a  non-branded   restaurant  to  the  Denny's  concept  will  be
approximately $160,000 to $450,000 per restaurant.

         The Company was not in compliance with certain of its debt covenants at
July 2, 1997,  for which the  Company  has  received  waivers.  The  Company has
obtained a  sale-leaseback  commitment of $25.0  million,  the proceeds of which
will be used to repay a  portion  of its  obligations  under its  senior  credit
facility,  which as of August 16, 1997 total  approximately  $42.0 million.  The
Company believes that it can obtain an amendment to its existing covenants to be
consistent  with its  current  operating  results  subsequent  to the  repayment
described above.

         An affiliate of CNL Group, Inc. ("CNL") has agreed,  subject to various
conditions,  including that there be no material adverse change in the financial
condition of the Company,  to make  available to the Company up to $65.0 million
over the twelve-month  period commencing August 30, 1997 in order to finance the
development of new Company  restaurants.  Each financing will take the form of a
"sale-leaseback,"  in which CNL would purchase a particular  restaurant property
and lease it back to the Company under a triple-net lease. The Company will have
a right of first  refusal on the sale of each property by CNL, and will have the
right to purchase each property after the expiration of the fifth lease year.

         Net cash used in operating  activities  increased  from $837,000 in the
first  twenty-seven  weeks of 1996 to $2.3 million in the first twenty-six weeks
of 1997. This increase is attributable to a reduction of accounts  payable,  the
payment of property taxes,  and costs associated with the closing and conversion
of certain restaurants.

         Net cash (used in)  provided by  investing  activities  increased  from
($4.7  million) in the first  twenty-seven  weeks of 1996 to $2.2 million in the
first  twenty-six  weeks of 1997.  This change  primarily is attributable to the
disposal of  approximately  $4.9 million of various  assets  acquired in the BEP
Acquisition, which were sold at their carrying value.

         Net cash provided by (used in) financing activities decreased from $5.5
million  in the first  twenty-seven  weeks of 1996 to $1.4  million in the first
twenty-six  weeks of 1997. Cash (used in) financing  activities  arose primarily
from the proceeds of borrowing  activities,  net of the principal  reductions in
long-term debt.
                                       15
<PAGE>
Seasonality

         The Company's  operating results fluctuate from quarter to quarter as a
result of the seasonal nature of the restaurant industry,  the temporary closing
of  existing  restaurants  for  conversion,  and other  factors.  The  Company's
restaurant  sales are generally  greater in the second and third fiscal quarters
(April through  September) than in the first and fourth fiscal quarters (October
through March).  Occupancy and other operating  costs,  which remain  relatively
constant, have a disproportionately  negative effect on operating results during
quarters with lower restaurant sales. The Company's working capital requirements
also fluctuate  seasonally,  with its greatest needs occurring  during its first
and fourth quarters.

Inflation

         The Company does not believe that  inflation has had a material  effect
on operating results in past years.  Although  increases in labor, food or other
operating costs could  adversely  affect the Company's  operations,  the Company
generally has been able to modify its operating procedures or to increase prices
to offset increases in its operating costs.

New Accounting Standards

         In February 1997,  the Financial  Accounting  Standards  Board ("FASB")
issued Statement of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings
per Share",  effective for both interim and annual periods ending after December
15, 1997. This statement specifies the computation,  presentation and disclosure
of earnings per share for entities  with publicly held common stock or potential
common stock. The Company will provide the required  disclosures in its year-end
report.  The effect on the Company's  earning per share  disclosure  will not be
material for the periods presented.

         In June 1997 the FASB  issued  SFAS No.  130  "Reporting  Comprehensive
Income," which is effective for fiscal years  beginning after December 31, 1997.
The statement  changes the reporting of certain items currently  reported in the
stockholders' equity section of the balance sheet and establishes  standards for
reporting of  comprehensive  income and its  components in a full set of general
purpose financial statements.  The Company does not expect this standard to have
a material effect on the its financial statements.

         In June 1997,  the FASB also issued SFAS No.  131,  "Disclosures  About
Segments of an  Enterprise  and Related  Information,"  which is  effective  for
fiscal years beginning after December 31, 1997. This standard  requires segments
of a business  enterprise to be reported based on the way  management  organizes
and  evaluates   segments  within  the  company.   The  standard  also  requires
disclosures  regarding  products  and  services,  geographical  areas  and major
customers.  The Company  currently is evaluating  the impact of this standard on
its disclosures.

         The Company plans to adopt both SFAS No. 130 and No. 131 in 1998.
                                       16
<PAGE>
Forward Looking Statements

         This Report on Form 10-Q contains forward-looking statements, including
statements regarding the Company's business strategies,  the Company's business,
and the industry in which the Company operates. These forward-looking statements
are based primarily on the Company's expectations and are subject to a number of
risks and uncertainties,  some of which are beyond the Company's control. Actual
results could differ materially from the forward-looking  statements as a result
of numerous factors, including those set forth under "Special Considerations" in
the Company's report on Form 10-K for the year ended January 1, 1997.
                                       17
<PAGE>
PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

         On July 24, 1997,  the Company filed a lawsuit  against Beck  Holdings,
Inc. f/k/a/ BEP Holdings, Inc., and Unigate Holdings, N.V. (the "defendants") in
the United States  District  Court for the District of Arizona (Civil Action No.
CIV 97-1546 PHX RGS). The lawsuit  alleges that the defendants  breached a stock
purchase  agreement  and guaranty and violated  Sections  10(b) and 20(a) of the
Securities  Exchange Act of 1934 and Rule 10(b)5, as well as A.R.S. s.s. 44-1991
et seq. (the Arizona securities fraud statute).  The lawsuit also asserts common
law claims for breach of the implied  covenant  of good faith and fair  dealing,
fraudulent  misrepresentation  and  negligent  misrepresentation.  All of  these
claims relate to the Company's  acquisition  on July 3, 1996 of the  outstanding
capital stock of BEP. The claims arise from the defendants' failure to indemnify
the Company in connection with a settlement it reached in July 1997 with Arizona
and Colorado  franchisees.  As part of this  settlement,  the Company  agreed to
acquire six Arizona  Black-eyed  Pea  restaurants  for a purchase price of $3.25
million. Other claims included in the lawsuit involve misrepresentations made by
the defendants in connection  with the 1996  acquisition of BEP. The lawsuit was
served upon Beck  Holdings,  Inc.  on July 28, 1997 and, as of August 20,  1997,
Unigate Holdings,  N.V. has not been served.  The Company has requested monetary
damages,  including the cancellation of a $15 million  promissory note, from the
defendants.

ITEM 2.     CHANGES IN SECURITIES

            Not applicable.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

            Not applicable.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            The Company's 1997 Annual Meeting of  Shareholders  was held on June
26,  1997.  The  following  nominees  were  elected  to the  Company's  Board of
Directors,  to serve until their  successors are elected or have been qualified,
or until their earlier resignation or removal:

             Nominee                                Votes in Favor      Withheld
             -------                                --------------      --------
             Jack M. Lloyd                            10,636,261           0
             William J. Howard                        10,652,566           0
             William G. Cox                           10,651,566           0
             Todd S. Brown                            10,651,566           0
             John M. Holliman, III                    10,651,566           0
             C. Alan MacDonald                        10,651,566           0
             Fred W. Martin                           10,651,566           0

                                       18
<PAGE>
           The following items were voted upon by the Company's shareholders:

           (a) Proposal to approve the Company's 1996 Stock Option Plan.


             Votes in Favor        Opposed        Abstained      Broker Non-Vote
             --------------        -------        ---------      ---------------
             10,356,569            956,501         54,446               0

           (b)  Proposal  to  approve an  amendment  to the  Company's  Restated
                Articles of  Incorporation  to increase  the number of shares of
                the Company's Common Stock that are authorized for issuance from
                the current maximum of 20,000,000 shares to a maximum 40,000,000
                shares,  and (b) authorize  5,000,000 shares of serial preferred
                stock, par value $.01 per share.


             Votes in Favor        Opposed        Abstained      Broker Non-Vote
             --------------        -------        ---------      ---------------
             7,672,499             909,817         275,563          2,509,637

           (c)  Proposal to ratify the  appointment  of Deloitte & Touche LLP as
                the  independent  auditors  of the  Company  for the fiscal year
                ending December 31, 1997.


             Votes in Favor        Opposed        Abstained      Broker Non-Vote
             --------------        -------        ---------      ---------------
             10,910,053            428,072         29,391               0

ITEM 5.     OTHER INFORMATION

            Not applicable.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits.

             11.1 Statement regarding computation of per share income

             27.1 Financial Data Schedule
                                       19
<PAGE>
                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          DENAMERICA CORP.


Dated:  August 20, 1997                   By: /s/ Todd S. Brown
                                             ------------------
                                                Todd S. Brown
                                                Vice President, Chief Financial 
                                                Officer, and Treasurer

                                                (Duly authorized officer of the
                                                registrant, principal financial
                                                and accounting officer)
                                       20