<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

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

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

For the Second Quarter Ended July 13, 1997        Commission File No. 0-19840

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

                                 SHOLODGE, INC.
             (Exact name of registrant as specified in its charter)

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

                   TENNESSEE                                    62-1015641
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                         Identification Number)

217 WEST MAIN STREET, GALLATIN, TENNESSEE                        37066
(address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code          (615) 452-7200

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

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 as 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
       -----        -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.

              As of August 22, 1997, there were 8,255,126 shares of ShoLodge,
              Inc. common stock outstanding.





<PAGE>   2


                         SHOLODGE, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          JULY 13,        DECEMBER 29,
                                                                            1997            1996 (1)
                                ASSETS

<S>                                                                      <C>               <C>
CURRENT ASSETS:
 Cash and cash equivalents                                               $  3,857,387      $  4,259,768
 Accounts receivable                                                        3,808,823         2,676,083
 Construction contracts                                                       252,301           259,785
 Due from related parties
    Less profits not recognized on installment sales

 Prepaid expenses                                                           1,219,996           471,823
 Other current assets                                                         473,337           559,982

                                                                         ------------      ------------
             Total current assets                                           9,611,844         8,227,441

DIRECT FINANCING LEASES, less current portion                                 457,621           611,492

PROPERTY AND EQUIPMENT                                                    290,340,678       262,264,264
 Less accumulated depreciation and amortization                           -39,107,018       -33,888,495
                                                                         ------------      ------------
                                                                          251,233,660       228,375,769

DEFERRED CHARGES                                                           10,063,050         9,899,544

SECURITIES HELD TO MATURITY - RESTRICTED                                    8,681,148         8,255,810

SECURITIES AVAILABLE FOR SALE                                                 212,062           212,062

EXCESS OF COST OVER FAIR VALUE
 OF NET ASSETS ACQUIRED                                                     3,056,209         3,136,965

OTHER                                                                       4,949,921         4,990,095
                                                                         ------------      ------------


 TOTAL ASSETS                                                            $288,265,515      $263,709,178
                                                                         ============      ============
</TABLE>






(1)   Derived from fiscal year ended December 29, 1996 audited financial
      statements. See notes to consolidated financial statements.


<PAGE>   3



                         SHOLODGE, INC. AND SUBSIDIARIES
               CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)

<TABLE>
<CAPTION>
                                                                              JULY 13,       DECEMBER 29,
                                                                                1997            1996 (1)
<S>                                                                        <C>               <C>
   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                   $  7,747,669      $ 12,045,715
   Taxes other than on income                                                 1,892,109           984,855
   Income taxes payable                                                         337,319         1,116,972
   Current portion of long-term debt
      and capitalized lease obligations                                       4,021,815        15,824,914
                                                                           ------------------------------

               Total current liabilities                                     13,998,912        29,972,456

LONG-TERM DEBT ASSOCIATED WITH LODGING FACILITIES                            42,268,895        40,104,802

OTHER LONG-TERM DEBT                                                        129,508,269        97,227,576

CAPITALIZED LEASE OBLIGATIONS                                                 1,182,539         1,462,044

DEFERRED INCOME TAXES                                                         4,702,144         4,702,144

MINORITY INTERESTS IN EQUITY OF
   CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS                                   618,074           504,028

                                                                           ------------------------------
   TOTAL LIABILITIES                                                        192,278,833       173,973,050
                                                                           ------------------------------

SHAREHOLDERS' EQUITY:
   Series A redeemable nonparticipating stock
      (no par value; 1,000 shares authorized, none
        issued and outstanding)                                               -                 -
   Common stock (no par value; 20,000,000 shares
      authorized, 8,252,819 shares issued and outstanding
      as of  July 13, 1997 and 8,233,318 shares issued
      and outstanding as of December 29, 1996)                                    1,000             1,000
  Additional paid-in capital                                                 42,393,648        42,212,042
  Retained earnings                                                          53,532,295        47,463,347
  Unrealized gain on securities available for sale (net of tax)                  59,739            59,739
                                                                           ------------------------------
      TOTAL SHAREHOLDERS' EQUITY                                             95,986,682        89,736,128
                                                                           ------------------------------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $288,265,515      $263,709,178
                                                                           ==============================
</TABLE>




(1)   Derived from fiscal year ended December 29, 1996 audited financial
      statements. See notes to consolidated financial statements.



<PAGE>   4


                         SHOLODGE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
        FOR THE TWENTY-EIGHT WEEKS ENDED JULY 13, 1997 AND JULY 14, 1996




<TABLE>
<CAPTION>
                                                        12 WEEKS ENDED               28 WEEKS ENDED
                                                     JULY 13,     JULY 14,        JULY 13,       JULY 14,
                                                       1997         1996            1997           1996
                                                   --------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>
REVENUES:
   Hotel                                           $18,295,327    $14,140,194    $39,148,612    $28,221,015
   Construction and development                              0            239              0        514,473
   Construction and development - other                      0              0              0        200,000
   Franchising                                         707,661      1,040,946      1,889,545      2,105,938
   Management                                           35,183         66,628         72,538        115,536

                                                   --------------------------------------------------------
           Total revenues                           19,038,171     15,248,007     41,110,695     31,156,962

COSTS AND EXPENSES:
   Operating expenses:
      Hotel                                          9,471,200      7,216,937     20,819,384     15,524,779
      Construction and development                           0            232              0        690,731
      Franchising                                      464,773        791,554      1,103,335      1,775,647

                                                   --------------------------------------------------------
           Total operating expenses                  9,935,973      8,008,723     21,922,719     17,991,157
                                                   --------------------------------------------------------

              Gross operating profit                 9,102,198      7,239,284     19,187,976     13,165,805

   General and administrative                          464,995        537,266      1,068,201      1,491,504
                                                   --------------------------------------------------------
   Earnings before interest, taxes,
     depreciation and amoritization                  8,637,203      6,702,018     18,119,775     11,674,301

   Depreciation and amortization                     2,659,121      1,736,213      5,908,594      3,820,425

                                                   --------------------------------------------------------
              Net operating profit (before
              interest and taxes)                    5,978,082      4,965,805     12,211,181      7,853,876

OTHER INCOME AND EXPENSES:
   Interest expense                                  2,513,145        424,028      5,218,083        905,074
   Interest income                                     311,435        210,738        665,291        842,546
                                                   --------------------------------------------------------
      Net interest expense                           2,201,710        213,290      4,552,792         62,528
   Other income                                      1,283,903        257,860      1,659,605        433,841

                                                   --------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
  MINORITY INTERESTS                                 5,060,275      5,010,375      9,317,994      8,225,189

INCOME TAXES                                         1,470,000      1,777,000      3,035,000      2,962,000

MINORITY INTEREST IN EARNINGS OF CONSOLIDATED
   SUBSIDIARIES & PARTNERSHIPS                         156,443        193,893        214,046        229,266


                                                   ========================================================
NET EARNINGS                                       $ 3,433,832    $ 3,039,482    $ 6,068,948    $ 5,033,923
                                                   ========================================================

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
        Primary                                    $      0.41    $      0.36    $      0.72    $      0.60
        Fully Diluted                              $      0.38    $      0.34    $      0.70    $      0.60

WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING
        Primary                                      8,448,923      8,494,133      8,452,986      8,443,028
        Fully Diluted                               10,765,525     10,810,735     10,769,588     10,759,630
                                                   --------------------------------------------------------
</TABLE>



See notes to consolidated financial statements.


<PAGE>   5


                        SHOLODGE , INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        FOR THE TWENTY-EIGHT WEEKS ENDED JULY 13, 1997 AND JULY 14, 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                       28 WEEKS ENDED
                                                                                  JULY 13,         JULY 14,
                                                                                    1997             1996
                                                                              ----------------------------------
<S>                                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   NET EARNINGS                                                                    $ 6,068,948      $ 5,033,923
   ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
      CASH PROVIDED BY OPERATING ACTIVITIES:
             DEPRECIATION AND AMORTIZATION                                           5,908,594        3,820,425
             INCREASE IN DEFERRED INCOME TAXES                                               0                0
              INCREASE IN MINORITY INTERESTS IN EQUITY
                  OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS                        214,046          229,266
             GAIN ON SALE OF PROPERTY & EQUIPMENT                                   -1,190,687                0
             ACCRETION OF DISCOUNT ON SECURITIES
               HELD TO MATURITY                                                       -425,338         -343,419
   CHANGES IN ASSETS AND LIABILITIES:
             (INCREASE) DECREASE IN ACCOUNTS RECEIVABLE                             -1,125,256          857,043
             (INCREASE) IN PREPAID EXPENSES                                         -1,073,173         -301,067
             (INCREASE) DECREASE IN OTHER ASSETS                                          -383          728,819
             (DECREASE) INCREASE IN ACCOUNTS PAYABLE
                AND ACCRUED EXPENSES                                                -4,298,046        1,745,154
             INCREASE IN INCOME AND OTHER TAXES                                        127,601        2,126,086
---------------------------------------------------------------------------------------------------------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                                      4,206,306       13,896,230

CASH FLOWS FROM INVESTING ACTIVITIES:
   REPAYMENT FROM RELATED PARTIES--NET                                                       0       42,418,759
   CAPITAL EXPENDITURES                                                            -28,629,091      -51,008,531
   PROCEEDS FROM SALE OF PROPERTY & EQUIPMENT                                        1,743,364                0
---------------------------------------------------------------------------------------------------------------
      NET CASH USED IN INVESTING ACTIVITIES                                        -26,885,727       -8,589,772

CASH FLOWS FROM FINANCING ACTIVITIES:
  (INCREASE) IN DEFERRED CHARGES                                                      -320,619         -303,691
   PROCEEDS FROM DIRECT FINANCING LEASES                                               153,871           31,621
   PROCEEDS FROM LONG-TERM DEBT                                                     61,200,000       52,472,371
   PAYMENTS ON LONG-TERM DEBT                                                      -38,558,313      -53,716,731
   PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS                                          -279,505         -287,894
   DISTRIBUTIONS TO MINORITY INTERESTS                                                -100,000         -183,554
   SALE OF SECURITIES AVAILABLE FOR SALE                                                     0          847,120
   EXERCISE OF STOCK OPTIONS                                                           181,606           26,452
---------------------------------------------------------------------------------------------------------------
      NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           22,277,040       -1,114,306
---------------------------------------------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                 ($402,381)     $ 4,192,152
===============================================================================================================

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                    $ 4,259,768      $ 2,444,990
===============================================================================================================

CASH AND CASH EQUIVALENTS - END OF PERIOD                                          $ 3,857,387      $ 6,637,142
===============================================================================================================
</TABLE>



See notes to consolidated financial statements.





<PAGE>   6


                         SHOLODGE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


A.     The consolidated financial statements have been prepared by the Company
       without audit.

       In Management's opinion, the information and amounts furnished in this
       report reflect all adjustments which are necessary for the fair
       presentation of the financial position and results of operations for the
       periods presented. All adjustments are of a normal and recurring nature.
       It is suggested that these financial statements be read in conjunction
       with the Company's Annual Report or Form 10-K for the fiscal year ended
       December 29, 1996 and the Company's Quarterly Report on Form 10-Q for the
       twenty-eight weeks ended July 13, 1997.

       There have been no changes in accounting policies nor has the composition
       of accounts substantially changed since the year ended December 29, 1996.

       The fiscal year consists of a 52/53 week year ending the last Sunday of
       the year.

       The Company has historically reported lower earnings in the first and
       fourth quarters of the year due to the seasonality of the Company's
       business. The results of operations for the quarters ended July 13, 1997
       and July 14, 1996 are not necessarily indicative of the operating results
       for the entire year.

B.     The net earnings per share is computed by dividing net earnings by the
       weighted average number of common and common equivalent shares
       outstanding.

       The Company will adopt Statement of Financial Accounting Standards No.
       128 "Earnings Per Share" for the year ended December 28, 1997. This
       accounting pronouncement requires the disclosure of basic and diluted
       earnings per share. The Company believes that, upon adoption, diluted
       earnings per share will approximate earnings per share as previously
       reported. Because the concept of basic earnings per share does not
       include the impact of common stock equivalents, such as stock warrants
       and stock options, basic earnings per share will be generally higher than
       diluted earnings per share.

C.     The number of shares outstanding and earnings per share have been
       adjusted to reflect the effect of the 5-for-4 stock split on May 14,
       1993, and the 4-for-3 stock split on March 28, 1994.


<PAGE>   7


   ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of
                Financial Condition and Results of Operations

Results of Operations

For the Fiscal Quarters and Fiscal Year-to-date Periods Ended July 13, 1997 
and July 14, 1996

     Total revenues for the fiscal quarter ended July 13, 1997 increased 24.9%
to $19.0 million from $15.2 million for the same period in 1996. For the two 
fiscal quarters ended July 13, 1997, total revenues increased 31.9% to $41.1
million from $31.2 million for the same period in 1996.
 
     Revenues from hotel operations in the second fiscal quarter of 1997
increased 29.4% to $18.3 million from $14.1 million for the same period in 1996.
For the 38 hotels opened for all of both quarterly periods (same hotels),
average daily room rates in the second fiscal quarter of 1997 increased 2.8% to
$56.00 from $54.48 in the second quarter of 1996 and average occupancy rates
increased to 65.8% from 65.4%, resulting in a net increase in same hotel
revenues of 0.1%. The eight hotels opened after the first quarter of 1996
contributed $5.6 million to hotel revenues in the second quarter of 1997
compared to $1.5 million for the same period in fiscal 1996. Revenues from hotel
operations in the first two quarters of 1997 increased 38.7% to $39.1 million
from $28.2 million for the same period in 1996. For the 33 same hotels, average
daily room rates in the first two quarters of 1997 increased 3.0% to $53.88 from
$52.33 in the first two quarters of 1996 and average occupancy rates decreased
to 60.4% from 62.4%, resulting in a net increase in same hotel revenues of 1.5%.
The 13 hotels opened during 1996 and the first two quarters of 1997 contributed
$12.2 million to hotel revenues in the first two quarters of 1997 compared to
$1.7 million for the same period in fiscal 1996.

     There were no revenues from regular construction and development activities
for the second fiscal quarter of 1997 compared with a negligible amount for the
same period in 1996. There were no revenues from regular construction and
development activities for the first two quarters of 1997 compared to $514,000 
in the same period last year. Revenues from construction and development can
vary widely from quarter to quarter depending upon the volume of outside
contract work and the timing of those projects. No outside construction
projects were in progress during the first two quarters of 1997 compared with
the final portion of only one project during the comparable period in 1996. No
outside construction contracts are currently in progress.
 
     There were no revenues from "Construction and development -- other" in the
first two quarters of 1997 compared with $200,000 in the first quarter of 1996
and none in the second quarter of 1996, which represents a portion of profits
not previously recognized on installment sales. No revenues from this source
are expected to be generated in the future.
 
     Franchise revenues in the second quarter of 1997 decreased 32.0% to
$708,000 from $1.0 million for the comparable period last year. This decrease
was due primarily to the cancellation of reservation services by two hotel
chains in the first quarter of 1997 and a decline of $108,000 in initial
franchise fees in the second quarter of 1997 compared to the second quarter of
1996. Franchise revenues in the first two quarters of 1997 decreased 10.3% to
$1.9 million from $2.1 million for the comparable period last year. This
decrease was due primarily to the cancellation of reservation service contracts
by two hotel chains in the first quarter of 1997 and to a decrease of $107,000
in initial franchise fee revenues. Initial franchise fees may vary widely from
quarter to quarter.
 
     Management contract revenues for the second fiscal quarter of 1997
decreased 47.8% to $35,000 from $67,000 for the same period of 1996. 
Management contract revenues for the first two quarters of 1997 decreased 37.2%
to $73,000 from $116,000 for the same period last year. These decreases were
due to the cancellation of one management contract on one hotel in the third
quarter of 1996.
<PAGE>   8
 
     Operating expenses from hotel operations for the second fiscal quarter of
1997 increased 31.2% to $9.5 million from $7.2 million in the second quarter of
1996, due to the 29.4% increase in hotel operating revenues. Operating
expenses, expressed as a percentage of hotel operating revenues, increased to
51.8% in the second quarter of 1997 from 51.0% in the second quarter of 1996,
thus decreasing the gross profit margin on all hotels to 48.2% in the second
quarter of 1997 from 49.0% in the same period of 1996. This decrease was due
primarily to (i) a decrease in operating profit margins on the 33 hotels opened
prior to 1996 to 48.0% in the second quarter of 1997 from 50.0% in the second
quarter of 1996, offset in part by (ii) an increase in operating profit margins
for the 13 hotels opened since 1995 to 48.8% in the second quarter of 1997 from
39.6% in the second quarter of 1996. Eleven of the 13 new hotels are Sumner
Suites which command significantly higher room rates and generally operate at
higher gross operating profit margins as compared with Shoney's Inns. Operating
expenses from hotel operations for the first two quarters of 1997 increased
34.1% to $20.8 million in the first two quarters of 1997 from $15.5 million in
the first two quarters of 1996, due to the 38.7% increase in hotel operating
revenues. Operating expenses from hotel operations, expressed as a percentage
of hotel operating revenues, decreased to 53.2% in the first two quarters of
1997 from 55.0% in the same period of 1996, thus increasing the gross profit
margin on all hotels to 46.8% in the first two quarters of 1997 from 45.0% in
the same period of 1996. The gross profit margin on same hotels for the first
two quarters of 1997 increased to 46.2% from 45.3% for the same two quarters in
1996. The new hotels (primarily Sumner Suites) have experienced higher profit
margins than the same hotels and have generated a 48.3% profit margin in the
first two quarters of 1997.
 
     There were no costs and expenses of construction and development in the
first two quarters of 1997 compared with a negligible amount in the second
quarter of 1996 and $691,000 in the first two quarters of 1996. There were no
outside construction contracts in the first two fiscal quarters of 1997 compared
with one during the comparable period in 1996.
 
     Franchising operating expenses for the second quarter of 1997 decreased by
41.3% to $465,000 from $792,000 for the second quarter of 1997. Franchising
operating expenses for the first two quarters of 1997 decreased to $1.1 million
from $1.8 million in the same period last year. The primary reason for these
decreases was the cancellation in the fourth quarter of 1996 of the Company's
obligation to pay a portion of franchise fees collected to Shoney's. The
reduction in this royalty fee expense was $282,000 in the second quarter of
1997 and $584,000 in the first two quarters of 1997.
 
     General and administrative expense for the second quarter of 1997
decreased by 13.5% to $465,000 from $537,000 in the second quarter of 1996.
General and administrative expense for the first two quarters of 1997
decreased 28.4% to $1.1 million from $1.5 million in the same period of 1996.
These decreases were due primarily to reduced professional fees and increased 
capitalization of general and administrative expenses.
 
     Depreciation and amortization expense in the second quarter of 1997
increased by 53.2% to $2.7 million from $1.7 million in the second quarter of
1996. Thirteen hotels were opened during 1996 and the first two fiscal quarters
of 1997. These additional hotels resulted in $842,000 in depreciation and
amortization expense in the second quarter of 1997 as compared with $90,000 in
the same period of 1996. For the first two quarters of 1997, depreciation and
amortization expense increased 54.7% to $5.9 million from $3.8 million for the
same period last year. Increased depreciation and amortization on hotels opened
during 1996 and the first two fiscal quarters of 1997 was $1.7 million, while
depreciation and amortization due to renovations and other additions to same
hotels and to other assets increased by $344,000 over the first two quarters of
1996.
 
     Interest expense for the second quarter of 1997 increased $2.1 million and
interest income increased $101,000, as compared with the second quarter of
1996, resulting in an increase in net interest expense of $2.0 million. For 
the first two quarters of 1997, interest expense increased $4.3 million and
interest income decreased $177,000, resulting in an increase in net interest
expense of $4.5 million. The increase in interest expense resulted primarily
from the additional borrowings incurred for the 12 hotels opened in 1996 and
the one hotel opened in January 1997.
 
     Other income for the second quarter of 1997 increased to $1.3 million from
$258,000 in the second quarter of 1996. Other income for the first two quarters
of 1997 increased to $1.7 million compared with $434,000 in the first two
quarters of 1996. These increases were  due to a gain of $1.2 million on the
sale of excess land in the second quarter of 1997. Minority interest in
earnings and losses of consolidated subsidiaries and partnerships decreased
$37,000 for the second quarter of 1997 compared with the same period in 1996,
and $15,000 for the first two quarters of 1997, compared with the same period
in 1996, due to less profitable consolidated entities which include minority
ownership.
 
     The lower effective income tax rate (33.3% for the first two quarters of
1997 versus 37.0% for the comparable period last year) is due to a reduction in
applicable state tax rates.


<PAGE>   9

Liquidity and Capital Resources

         Net cash provided from operations was $4.2 million in the first two
fiscal quarters of 1997, $15.8 million in fiscal 1996, $31.6 million in fiscal
1995, and $5.8 million in fiscal 1994. Fiscal 1995 was an unusual year due to
the AmeriSuites Transaction discussed in the Company's Form 10-K relating to
fiscal 1996.
 
         The Company currently has a $75.0 million unsecured three-year
revolving credit facility with a group of five banks, which became effective
April 30, 1997. The interest rate on this credit facility through the third
fiscal quarter of 1997 is at the lenders' prime rate plus 0.25%, or two hundred
basis points over the 30, 60, 90, or 180 day LIBOR rate, at the Company's
option. Thereafter, the interest rate is based upon the ratio of senior debt to
EBITDA, as defined in the credit facility, (the "Senior Leverage Ratio") and
ranges from prime rate to prime rate plus 0.50%, or one hundred seventy five to
two hundred fifty basis points over the 30, 60, 90 or 180 day LIBOR rate, at the
Company's option. The weighted average rate on this facility at July 13, 1997
was 7.74%. The Company pays commitment fees on the unused portion of the
facility ranging from 0.20% to 0.50% based on the Senior Leverage Ratio and
certain other fees under the credit facility. The credit facility contains
covenants which, inter alia, limit or prohibit incurrences of certain additional
indebtedness, liens on assets, investments, asset sales, mergers, dividends and
amendments to indebtedness subordinated to the credit facility. It also contains
financial covenants by the Company, including covenants with respect to net
worth, indebtedness to total capitalization, interest coverage and the Senior
Leverage Ratio. As of July 13, 1997, the Company had $42.3 million outstanding
under this credit facility. In November of 1996 the Company issued $33.2 million
in 9 3/4% Senior Subordinated Notes, due 2006, Series A in the first series of
notes issued under a $125 million shelf registration. The Company intends to
file a prospectus supplement relating to the issuance of $30.0 million of Senior
Subordinated Notes, due 2007, Series B ("Series B Notes") under the Company's
shelf registration.  The Company expects to use the net proceeds of the offering
of the Series B Notes to reduce the outstanding balance under this credit
facility. The Company also has a $1.5 million unsecured line of credit with
another bank, bearing interest at the lender's prime rate, maturing May 31,
1998. As of July 13, 1997, no borrowings were outstanding on this facility.
 
         The Company requires capital principally for the construction and
acquisition of new lodging facilities and the purchase of equipment and
leasehold improvements. Capital expenditures for such purposes were $28.6
million in the first two fiscal quarters of 1997, $86.6 million in 1996 and
$56.2 million in 1995.

         The Company opened two Shoney's Inns and ten Sumner Suites hotels in
1996 and three Sumner Suites hotels thus far in 1997. Additionally, renovations
of several existing properties were completed in 1996 and in first two quarters
of 1997, and several others are scheduled for completion in fiscal 1997.
Furthermore, the Company's new corporate headquarters building is substantially
complete. The Company has six Summer Suites hotels scheduled to open by the end
of the first fiscal quarter of 1998, one of which is under construction. In
addition, the Company has another two sites under contract for purchase. The
Company expects that approximately $85.0 million in additional capital funds
will be necessary through second quarter 1998 to fulfill these plans.

         The Company has principal payments totaling approximately $4.0 million
due under existing debt instruments through second fiscal quarter 1998. The
Company believes that a combination of net proceeds from the offering of Series
B Notes, net cash provided from operations, borrowings under existing or new
credit facilities, proceeds from the sale of excess land and available
furniture, fixtures and equipment financing packages will be sufficient to fund
its scheduled development and debt repayments for the next twelve months.



<PAGE>   10


                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          There have been no material developments during the quarter.

Item 2.   Changes in Securities

          Not applicable

Item 3.   Defaults Upon Senior Securities

          None.

Item 4.   Submission of Matters to a Vote of Security Holders

          At the Company's Annual Meeting of Shareholders held on May 30, 1997,
          8,233,985 shares were outstanding and eligible to vote. The
          Shareholders considered and voted to reelect the following director:

          Name of Nominee                          Vote Cast
          ---------------                          ---------

                                          For                    Withheld
                                          ---                    --------
          Leon Moore                   6,396,280                 131,782


          The Shareholders also considered and voted for an amendment to the
          1991 Stock Option Plan to delete the requirement that members of the
          committee administering the plan be "disinterested" as defined by
          former SEC Rule 16b-3 and to reduce the number of required members of
          such committee from three (3) to two (2). The majority of the shares
          voted at the meeting were cast in favor of the proposed amendment to
          the Company's 1991 Stock Option Plan.


Item 5.   Other Information

          Not applicable

Item 6.   Exhibits and Reports on Form 8-K

          6 (a)  Exhibits -

                   3.1    Amendment to Charter filed July 1, 1997 creating
                          Series A Subordinated Preferred Stock(1)

                   4.1    Second Amendment to Registration Rights Agreement
                          between the Company and Richard L. Johnson dated as
                          of June 20, 1997

                   4.2    Second Amendment to the Company's 1991 Stock Option
                          Plan(2)

                  10.1    Second Amendment to Amended and Restated Stock Option
                          Agreement dated as of June 20, 1997, between Leon
                          Moore and Richard L. Johnson.

                  10.2    Credit Agreement dated as of April 30, 1997 by and
                          among the Company and certain subsidiaries of the
                          Company, as Borrowers, and the Lenders referred to
                          therein, First Union National Bank of Tennessee, as
                          Administrative Agent, and NationsBank of Tennessee,
                          as Co-Agent

                  10.3    Joinder Agreement No. 1 to the Credit Agreement,
                          dated as of June 11, 1997.

                  10.4    Rights Agreement between the Company and
                          SunTrust Atlanta, as Rights Agent, dated as of
                          June 27, 1997(1)

                    11    Statement Re:  Computation of per share earnings

                    27    Financial Data Schedule

    ----------
    (1)  Incorporated by reference to the Company's Registration Statement
         on Form 8-A filed with the Commission on July 3, 1997.

    (2)  Incorporated by reference to the Company's Registration Statement on
         Form S-8 filed with the Commission on June 24, 1997.


          6 (b)  Reports on Form 8-K

                    A Form 8-K was filed on July 3, 1997, relating to the
                    Rights Agreement between the Company and SunTrust Atlanta,
                    as Rights Agent, dated as of June 27, 1997.

<PAGE>   11





                                   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.


                               ShoLodge, Inc.



Date:  August 25, 1997         /S/  Leon Moore
                               ---------------------------------------------
                               Leon Moore
                               President, Chairman of the Board
                               and Director (Chief Executive Officer)


Date:  August 25, 1997         /S/  Bob Marlowe
                               ---------------------------------------------
                               Bob Marlowe
                               Secretary, Treasurer and Director
                               (Chief Accounting Officer)



Date:  August 25, 1997         /S/  Michael A. Corbett
                               ---------------------------------------------
                               Michael A. Corbett
                               Chief Financial Officer