UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Check One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [NO FEE REQUIRED]

For The Fiscal Year Ended July 2, 2000

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from ___ to ___

Commission File Number:  0-22639


                           CHAMPPS ENTERTAINMENT, INC.
               (Formerly known as Unique Casual Restaurants, Inc.)
             (Exact name of registrant as specified in its charter)

Delaware                                                              04-3370491
(State or other jurisdiction                                    (I.R.S. Employer
of incorporation or organization)                            Identification No.)

5619 DTC Parkway, Suite 1000, Englewood, CO                                80111
(Address of principal executive offices)                              (Zip Code)


                                  303-804-1333
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:            N/A

Securities registered pursuant to Section 12 (g) of the Act:      Common Stock
                                                                  Title of Class

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 and (2) has been subject to such filing
requirements for the past 90 days.  YES   [X]   NO   [ ]

Indicate by check mark if disclosure of delinquent filers,  pursuant to Item 405
of Resolution S-K is not contained herein, and will not be contained to the best
of the registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of the Form 10-K: [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  based on the closing price of the Common Stock of the  registrant as
quoted on the National  Association of Securities  Dealers  Automated  Quotation
System on September 28, 2000 was $46,216,648  (for purposes of calculating  this
amount only,  directors,  officers and  beneficial  owners of 10% or more of the
Common Stock of the registrant may be deemed affiliates).

Number of shares of Common Stock, $.01 par value, outstanding at September 28,
2000:  11,683,482



                       DOCUMENTS INCORPORATED BY REFERENCE

The sections of the Company's  definitive Proxy Statement,  listed below,  which
have  been or will be filed by the  Company  with the  Securities  and  Exchange
Commission,  are  incorporated  in this Annual  Report by reference and shall be
deemed to be a part hereof:

      The Company's  definitive  Proxy  Statement  mailed in connection with its
      Annual  Meeting of  Stockholders  to be held on or about December 13, 2000
      pursuant to regulation 14A, which involves the election of directors.

                     Cross Reference Sheet between Items of

                   Registrant's Proxy Statement and Form 10-K
Item No.        Item in Form 10-K        Item in Proxy Statement
--------        ------------------------------------------------

                                    PART III

10        Directors and Executive        Election of Directors and Directors of
          Officers of the Registrant     Committees in the Company's Proxy
                                         Statement   relating   to  its   Annual
                                         Meeting of  Stockholders  to be held on
                                         or about December 13, 2000.

11                                       Executive     Compensation    Executive
                                         Compensation     in    the    Company's
                                         ProxyStatement  relating  to its Annual
                                         Meeting of  Stockholders  to be held on
                                         or about December 13, 2000.

12        Security Ownership of Certain  Principal Stockholders in the Company's
          Beneficial Owners and          Proxy Statement relating to its Annual
          Management                     Meeting of Stockholders to be held on
                                         or about December 13, 2000.

13        Certain Relationships and
          Related Transactions

Copies of all documents  incorporated  by reference  other than exhibits to such
documents will be provided  without charge to each person who receives a copy of
this Annual  Report upon written  request  addressed to  Stockholder  Relations,
Champps Entertainment,  Inc., 5619 DTC Parkway, Suite 1000, Englewood,  Colorado
80111.

                                 FORM 10-K INDEX

                                  PART I

Item 1     Business                                                    1

Item 2     Properties                                                 10

Item 3     Legal Proceedings                                          10

Item 4     Submission of Matters to a Vote of Security Holders        10

                                     PART II

Item 5     Market for the Registrant's Common Stock and Related
           Stockholder Matters                                        11

Item 6     Selected Financial Data                                    12

Item 7     Management's Discussion and Analysis of Results of
           Operations and Financial Condition                         14

Item 7a    Quantitative and Qualitative Disclosure About Market Risk  19

Item 8     Financial Statements and Supplementary Data                19

Item 9     Changes in and Disagreements with Accountants on
           Accounting Financial Disclosure                            19

                                 PART III

Item 10    Directors and Executive Officers of the Registrant         20

Item 11    Executive Compensation                                     22

Item 12    Security Ownership of Certain Beneficial Owners and
           Management                                                 22

Item 13    Certain Relationships and Related Transactions             22

                                     PART IV

Item 14    Exhibits, Financial Statement Schedules, and Reports on
           Form 8-K                                                   22



          From  time to time,  the  Company  may make  certain  statements  that
          contain  "forward-looking"  information  (as  defined  in the  Private
          Securities  Litigation  Reform Act of 1995).  Words such as "believe,"
          "anticipate,"  "estimate,"  "project,"  and  similar  expressions  are
          intended to identify such forward-looking statements.  Forward-looking
          statements may be made by management orally or in writing,  including,
          but not  limited  to,  in  press  releases,  as  part of  Management's
          Discussion  and  Analysis  of  Financial   Condition  and  Results  of
          Operations  as contained in this report and as part of other  sections
          of this Report or other  filings.  Readers are  cautioned not to place
          undue reliance on these forward-looking  statements,  which speak only
          as of their  respective  dates,  and are  subject  to  certain  risks,
          uncertainties  and  assumptions  including  those  set  forth  in  the
          Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations under the heading "Forward-Looking  Statements".
          Should one or more of these  risks or  uncertainties  materialize,  or
          should  any of the  underlying  assumptions  prove  incorrect,  actual
          results of current  and future  operations  may vary  materially  from
          those anticipated, estimated or projected.

                                     PART I

Item 1.           Business.

Champps Entertainment,  Inc. (formerly known as Unique Casual Restaurants, Inc.)
(the "Company") is a Delaware  corporation formed on May 27, 1997. The Company's
principal  executive  offices  are  located  at 5619 DTC  Parkway,  Suite  1000,
Englewood, Colorado 80111, and its telephone number is (303) 804-1333.

Disposition and Certain Other Transactions

At the time of its formation,  the Company was a wholly owned subsidiary of DAKA
International,  Inc. (DAKA  International).  The Company's business consisted of
owning,  operating and  franchising  casual dining  restaurants  through various
subsidiaries   under  the  Champps  Americana,   Fuddruckers   World's  Greatest
Hamburgers  ("Fuddruckers")  and  the  Great  Bagel  &  Coffee  Company  brands.
Additionally,  the Company also owned a 17% passive investment in La Salsa Fresh
Mexican Grill ("La Salsa") and a 50% interest in Restaurant Consulting Services,
Inc.  ("RCS").  Since the time of its  formation,  the Company has entered  into
numerous transactions which have altered the business the Company owns, operates
and franchises, as described below.

Spin-off Transaction

Pursuant to certain transactions, on July 17, 1997, DAKA International and Daka,
Inc., its wholly-owned subsidiary, merged with Compass Interim, Inc., a Delaware
corporation,  a wholly-owned  subsidiary of Compass  Holdings,  Inc., a Delaware
corporation,  a  wholly-owned  subsidiary of Compass Group PLC  incorporated  in
England and Wales (collectively "Compass") (the "Merger").  Prior to the Merger,
DAKA  International,  certain of its subsidiaries,  the Company and Compass made
various  contributions  of assets and equity interests to each other in the form
of dividends and capital  contributions in order to divest DAKA International of
its restaurant  businesses which were contributed to the Company.  Following the
Merger,  DAKA International  distributed to each common stockholder of record of
DAKA  International,  one share of common stock of the Company for each share of
DAKA International owned by such stockholder (the  "Distribution").  As a result
of the Distribution, the Company ceased to be a subsidiary of DAKA International
and began  operating as an  independent,  publicly held company on July 17, 1997
(the "Spin-off").

As part of the Merger and the Spin-off transaction,  the Company agreed it would
not compete  with  Compass or Daka for five years  following  the  Spin-off.  In
addition,  the Company  agreed to indemnify,  defend and hold harmless  Compass,
from and against, and pay or reimburse Compass for certain  indemnifiable losses
incurred  relating to or arising from the liabilities that Compass did not agree
to assume,  including but not limited to certain tax liabilities.  The scope and
amount of such liabilities are subject to a high degree of uncertainty and risk.
Although the Company has estimated the amount of  liabilities  due, there can be
no assurance  that such amounts to be  ultimately  paid will not differ from the
Company's estimate and such difference could be material.

Great Bagel & Coffee

The Company ceased all  operations of the Great Bagel & Coffee  business on June
28, 1998.

Sale of Fuddruckers

On November 24, 1998,  the Company sold all of the  outstanding  common stock of
Fuddruckers, Inc. to King Cannon, Inc. ("King Cannon") for $43.0 million in cash
(the "Fuddruckers Sale").

The Agreement  contains various standard  representations  and warranties by the
Company  which  survive the  closing  and will expire on December  31, 2000 (the
"Survival  Period"),  except that  representations  and  warranties  made by the
Company (i) relating to  environmental  matters survive until December 31, 2003,
(ii)  relating to employee  matters and income  taxes  survive the closing  date
until  expiration of applicable  statutes of  limitations  and (iii) relating to
organization,    corporate   power,    authorization,    non-contravention   and
capitalization  shall  survive  the  closing  indefinitely.   In  addition,  any
covenants or  agreements  of the Company  under the  Agreement,  and any and all
indemnification   obligations   relating   thereto  shall  survive  the  closing
indefinitely, unless earlier expiring in accordance with their respective terms.

The Company and Champps  Operating  Corporation,  Inc.  ("COC") are obligated to
jointly and severally  indemnify King Cannon,  Fuddruckers and their  respective
affiliates  from and  against  any  losses,  assessments,  liabilities,  claims,
obligations,  damages,  costs or expense which arise out of or relate to (i) any
misrepresentations  in or  breach  of any of  the  representations,  warranties,
undertakings,  covenants  or  agreements  of the Company,  Fuddruckers,  related
entities and  affiliates  contained  in the  Agreement;  (ii) any  environmental
matters  related  to  Fuddruckers  and its  affiliates;  (iii) any  retained  or
undisclosed liabilities; or (iv) the Company's obligations with respect to lease
termination amounts and rent adjustment amounts.  However,  the Company obtained
each required consent and required  estoppel from landlords prior to the closing
of the sale and, as a result, the Company believes the risk for a material claim
for  indemnification  related to each of the lease termination  amounts and rent
adjustment amounts provisions is remote. The maximum aggregate  liability of the
Company on account of any breach of any representation or warranty is limited to
the  amount  of the  final  purchase  price.  There  is no cap or  limit  on the
liability  of the Company to King Cannon on account of any breach by the Company
of any of its  covenants  or  agreements  under the  Agreement  or on account of
indemnification   obligations   covering   matters   other  than   breaches   of
representations  and  warranties,  provided  that, if King Cannon is entitled to
recover any losses in excess of the final purchase price, the Company may either
(i) require  King  Cannon to, in effect,  rescind  the  transaction,  subject to
certain  adjustments,  or (ii) pay to King Cannon all of the losses with respect
to which King Cannon is entitled to indemnification.

The  $1.0  million  indemnification  escrow  established  at  the  time  of  the
Distribution does not limit the Company's  maximum exposure for  indemnification
claims,  however,  the Company  believes the risk of such claims  exceeding  the
escrow amount is remote. As of July 2, 2000,  approximately $636,000 was paid to
King  Cannon  or  others  from the  escrow  fund for  indemnification  and other
predecessor  obligations relative to the Fuddruckers operation. In addition, for
a period of ten years  following the closing date of the  Fuddruckers  Sale, the
Company and Champps agree not to compete directly with Fuddruckers.

La Salsa Merger

On July 15, 1999,  La Salsa was  purchased  by Santa  Barbara  Restaurant  Group
("SBRG") and the Company exchanged its convertible  preferred shares of La Salsa
for common shares of SBRG. On December 7, 1999,  the Company sold all its common
shares  of SBRG,  recognizing  a loss on the sale of  marketable  securities  of
$1,034,000.  The Company has  retained  141,944  warrants for SBRG stock that it
estimates to be of no value.

RCS Disposition

On May 24, 1999,  the Company sold its 50% interest in RCS to RCS,  receiving in
consideration  certain assets of RCS,  including a note payable in the amount of
$750,000, which was subsequently paid in full on August 25, 1999.

Purchase of Franchised Restaurants

On June 29, 2000, the Company  acquired two Champps  Americana  restaurants from
existing franchisees.

In the first  acquisition,  pursuant to an Asset Purchase  Agreement dated as of
April 6,  2000 a wholly  owned  subsidiary  of  Champps  acquired  from  Prairie
Restaurant Group, Inc., a Minnesota corporation  ("Prairie"),  all of the assets
of Prairie, located in Eden Prairie,  Minnesota, for approximately $5,675,000 in
cash.  The  acquisition  was financed in part with the  proceeds  from a loan of
$4,750,000 provided by FINOVA Capital Corporation.

In the second  acquisition,  pursuant to an Asset Purchase Agreement dated as of
April 6,  2000 a wholly  owned  subsidiary  of  Champps  acquired  from  Bregean
Investment Group, Inc., a Minnesota corporation  ("Bregean"),  all of the assets
of Bregean,  located in Minnetonka,  Minnesota,  for approximately $5,675,000 in
cash.  The  acquisition  was financed in part with the  proceeds  from a loan of
$4,750,000 provided by FINOVA Capital Corporation.

Prior to acquisition, both the Prairie and the Bregean restaurants were owned or
controlled by Dean Vlahos, a former executive and director of the Company.

In connection with the two acquired restaurants, the Company recorded $3,825,000
of goodwill.  The Company  intends to amortize  this goodwill over a twenty year
period.

The  Minnetonka,  Minnesota  Champps  restaurant  was sold to Dean Vlahos by the
Company on February 2, 1998 for $2,900,000,  representing  the fair market value
of the restaurant  established by an independent  appraisal.  The purchase price
was  in  the  form  of a cash  payment  by Mr.  Vlahos  of  $1,500,000  and  the
cancellation of Mr. Vlahos'  employment  contract.  The Company recognized a net
gain in fiscal 1998 of approximately $700,000 on this transaction.

The Company at July 2, 2000

As a result of these  transactions,  at June 27, 1999, the Company operates in a
single business segment which owns,  operates and franchises  Champps  Americana
casual dining restaurants.  At July 2, 2000, the Company's principal  subsidiary
was  Champps  Operating  Corporation,  Inc.,  a Minnesota  corporation.  Champps
Operating  Corporation,  Inc. in turn, owns four subsidiaries,  each of which is
engaged in owning and operating Champps Americana restaurants.  See Exhibit 21.1
for a complete list of the Company's subsidiaries.

Although  formed on May 27, 1997,  for purposes of this Form 10-K and  financial
reporting  purposes,  the  Company has been  treated as if it was a  stand-alone
entity for all periods presented after giving effect to sale of the Fuddruckers'
business segment. For periods prior to July 17, 1997 the accompanying  financial
statements  include  allocations  and estimates of certain  expenses,  including
corporate accounting, tax, cash management,  information technology, legal, risk
management, purchasing and human resources, historically provided to the Company
by DAKA International.

Champps Americana Concept

Operations

The  Champps  Americana  ("Champps")  concept is based upon  providing  the best
possible food, value and service to its customers. Although food and service are
the most important parts of the Champps Americana concept, an atmosphere that is
entertaining  and  energetic,  yet  comfortable,  is  also  critical.  The  food
offerings at Champps' restaurants combine a wide selection of appetizers, soups,
salads,  innovative  sandwiches,  pizza, burgers, and entrees including chicken,
beef,  fish,  pasta and  desserts.  Selections  reflect a variety  of ethnic and
regional cuisines and traditional  favorites.  Because Champps' menu is not tied
to any particular type of food,  Champps can introduce and eliminate items based
on  current  consumer  trends  without  altering  its theme.  Portion  sizes are
generous and each dish is attractively  presented.  Champps  believes that these
qualities give customers a sense of value.  Entree prices  currently  range from
$4.95  to  $18.95.   Champps  emphasizes  freshness  and  quality  in  its  food
preparation.  Fresh sauces,  dressings,  batters and mixes are prepared daily on
the premises,  generally from original ingredients using fresh produce.  Champps
invests  substantial time in training and testing kitchen  employees to maintain
consistent food preparation.  Strict food standards at Champps-owned restaurants
have also been established to maintain quality.

The Champps  customer's  experience is enhanced by the attitude and attention of
restaurant  personnel.   Accordingly,  the  Champps  concept  emphasizes  prompt
greeting of arrivals,  frequent  visits to customer  tables to monitor  customer
satisfaction  and service and friendly  treatment of its  customers.  Service is
based upon a team concept so that  customers  are made to feel that any employee
can help  them and  they are  never  left  unattended.  Success  of the  Champps
restaurants  depends upon  employee  adherence to these  standards.  To maintain
these  standards,  Champps  seeks to hire and train  personnel  who will work in
accordance  with Champps'  philosophy  and  frequently  rewards  individual  and
restaurant  achievement through several  recognition  programs intended to build
and  maintain  employee  morale.  All of the service  personnel  at each Champps
restaurant meet with the managers at two daily pre-shift  motivational meetings.
Restaurant  promotions,  specials  and  quality  control are all  discussed  and
explained during these meetings.

Champps-owned, franchised and licensed restaurants are designed and decorated in
a  casual  theme,  although  they  differ  somewhat  from  each  other.  Champps
restaurants  generally range in size from  approximately  7,000 to 12,000 square
feet.  Champps' standard  restaurant  features a bar, open kitchen and dining on
multiple  levels.  Customers  can also dine at the bar or  outside on the patio,
where available.  The spacious design facilitates efficient service,  encourages
customer  participation  in  entertainment  and  promotional  events  and allows
customers  to view the  kitchen,  dining  area,  and bar.  Strategically  placed
television  monitors stimulate customer perception of activity and contribute to
the total entertainment experience and excitement of the restaurant.

An important part of the Champps dining experience is the entertainment. Patrons
may watch one of several sporting events being broadcast, or listen to a variety
of music played by the disc  jockey,  music which is changed for the time of day
and season of the year. The exposed kitchen offers  customers the opportunity to
observe the cooks, and, in certain locations,  a discreetly located game room is
provided for arcade games. The entertainment  aspects of the Champps restaurants
are designed to  encourage  repeat  visits,  increase the length of a customer's
stay and attract customers outside of normal peak hours. In addition,  a variety
of creative  promotions and  activities  are conducted  such as "Family  Bingo,"
"Spring Time Big Bike  Give-Away" and Karaoke.  These  promotions and activities
allow for customer  participation  and are continually  changing.  Change of the
ambiance  is also  experienced  in each  restaurant  when  the  restaurants  are
decorated for the holidays. The different looks and activities of the restaurant
provide customers a different feel each time they visit, thus encouraging repeat
business.  Champps  sells  merchandise  such as T-shirts,  hats and  sweatshirts
bearing the Champps Americana name.  Although not currently a significant source
of revenue,  the sale of its merchandise is believed to be an effective means of
promoting the Champps name.

Champps restaurants are generally open from 11:00 a.m. to 1:00 a.m. seven days a
week serving lunch,  dinner and late night appetizers.  Closing times of Champps
restaurants will vary based upon state laws concerning  operating hours.  Sunday
brunch is served  beginning  at 10:00 a.m.  Each  Champps  restaurant  maintains
standardized  food preparation and service manuals which are designed to enhance
consistency of operations among the  restaurants.  Champps attempts to have each
Champps-owned  and  franchised  restaurant  operate under uniform  standards and
specifications which are formulated at its headquarters in Englewood, Colorado.

Management

The management  staff of a Champps  restaurant is divided into three areas,  the
General Manager, Front-of-House Managers and Back-of-House Managers. The General
Manager has responsibility for the entire restaurant.  Front-of-House management
generally  consists  of an  associate  manager,  two  floor  managers  and a bar
manager.  Back-of-House  management generally consists of a kitchen manager, two
to three  assistant  kitchen  managers and a daily  specials  chef.  All General
Managers  report   directly  to  the  Directors  of  Operations.   Managers  are
compensated  based on salary plus a monthly  bonus.  The bonus is  determined by
means of monthly restaurant sales and profit goals.

Marketing

Champps  restaurants have  historically  expended minimal amounts on traditional
media advertising and marketing,  but have relied on in-restaurant marketing and
promotions.

Site Selection

Champps uses its own personnel and  consultants to analyze markets and sites for
new  restaurants,  obtain the required  zoning and other permits,  negotiate the
leasing or real estate  purchase  and  oversee  all aspects of the  construction
process.  Champps  believes  that  location  is a key  factor in a  restaurant's
ability to operate a profitable lunch and dinner business, and considers several
demographic  factors in selecting  sites,  including  the average  income of the
neighboring  residential  population,   the  proximity  of  retail,  office  and
entertainment facilities, traffic patterns and the visibility of the site.

The cost to construct a typical Champps restaurant, where Champps purchases real
estate,  depending  upon its location,  is  approximately  $4.4 to $5.9 million,
which includes approximately $1.0 million for furniture, fixtures and equipment,
$1.5 to $2.5  million for building  and  improvements,  $1.5 to $2.0 million for
land and site  work,  and  $0.4  million  related  to  pre-opening  costs of the
restaurant.

The typical cost to construct a new Champps restaurant where Champps enters into
a leasing  arrangement is approximately  $2.9 to $3.4 million which is comprised
of  approximately  $1.0 million for furniture,  fixtures and equipment,  $1.5 to
$2.0 million for leasehold improvements, and $0.4 million related to pre-opening
costs of the restaurant.

Future development of Champps restaurants will be accomplished primarily through
the  development of  Champps-owned  restaurants.  The  development of additional
restaurants  is  contingent  upon  locating   satisfactory   sites,   financing,
negotiating  satisfactory  leases  or,  alternatively,  leasing  and  converting
existing  restaurant sites into Champps  restaurants.  It is also dependent upon
securing appropriate governmental permits and obtaining liquor licenses.  During
fiscal  2000,  four new Champps  Company-owned  restaurants  were opened and two
restaurants were acquired from a franchisee. During fiscal 1999, two new Champps
Company-owned  restaurants  were  opened.  At July 2, 2000,  the  Company was in
negotiations on several  additional sites.  Subsequent to year-end,  the Company
opened its Las Colinas,  Texas  restaurant on July 24, 2000. The Company expects
to open  three  to four  additional  stores  in  fiscal  2001  and six to  eight
additional stores in fiscal 2002. Development of Champps-owned  restaurants will
be concentrated in existing markets with population density levels sufficient to
support the  restaurants  and new markets with  consistent  demographics  to the
Company's most successful, existing restaurants.

Franchising and Licensing

Champps  has  offered  franchises  in  markets  where it deems  expansion  to be
advantageous  to  the  development  of  the  Champps  concept  and a  system  of
restaurants.  Pursuant  to  franchise  agreements,  franchisees  are  granted an
exclusive  territorial license to operate a single restaurant within a specified
area. As of July 2, 2000, there are thirteen franchised  restaurants,  of which,
two franchisees are operating multiple restaurants.

The franchisee  agreement requires a franchisee to pay an initial fee of $75,000
per  restaurant  (part of which may be  associated  with a  development  fee), a
continuing  royalty fee of 3 1/4% of gross sales, and may provide for a regional
and/or  national  advertising fee of 1/2% of gross sales at such time as Champps
establishes  a  regional/national  advertising  program.  Among the services and
materials that Champps may provide to franchisees are site selection assistance,
assistance in design  development,  an operating  manual that  includes  quality
control and service procedures,  training,  on-site pre-opening  supervision and
consultation  relating to the operation of the franchised  restaurants.  Champps
has granted both single and  multi-restaurant  development rights depending upon
market factors and  franchisee  capabilities.  With respect to  multi-restaurant
agreements, the franchisee's continuing right to obtain franchises is contingent
upon the  franchisee's  continuing  compliance  with the restaurant  development
schedule.

All  franchisees  are required to operate their  restaurants in accordance  with
Champps' standards and  specifications,  including controls over menu selection,
food quality and  preparation.  Champps  approves all restaurant site selections
and  applies  the same  criteria  used  for its own  restaurant  sites.  Champps
requires all new  franchisees  to provide at least annual  financial  statements
reviewed  by  an  independent  certified  public  accountant.  Periodic  on-site
inspections  are conducted to assure  compliance  with Champps  standards and to
assist  franchisees with operational  issues.  Franchisees bear all direct costs
involved in the development, construction and operation of their restaurants.

Champps Restaurant Locations

The following table sets forth the locations of restaurants  operated by Champps
and its franchisees as of September 28, 2000:

Company Owned Restaurant Locations              Franchised Restaurant Locations
Domestic - Total 25                             Domestic - Total 13

CALIFORNIA                                MINNESOTA
     Irvine                                    Burnsville
COLORADO                                       Duluth
     Denver                                    Maple Grove
FLORIDA                                        Maplewood
     Ft. Lauderdale                            Minnetonka
GEORGIA                                        New Brighton
     Alpharetta                                St. Paul
ILLINOIS                                       Woodbury
     Lombard                              NEBRASKA
     Schaumburg                                Omaha
INDIANA                                   NORTH CAROLINA
     Indianapolis                              Charlotte
MICHIGAN                                  SOUTH DAKOTA
     Livonia                                   Sioux Falls
     Troy                                 WISCONSIN
     West Bloomfield                           Milwaukee (2)
MINNESOTA

     Eden Prairie
     Minnetonka
     Richfield

NEW JERSEY
     Edison
     Marlton

OHIO
     Columbus (3)
     Dayton
     Lyndhurst

TEXAS

     Addison
     Houston

     Las Colinas
     San Antonio

VIRGINIA

     Reston

Purchasing

On  November  15,  1997,  the  Company  entered  into a  five-year  distribution
agreement with Sysco Corporation  ("Sysco")  pursuant to which Sysco is entitled
to distribute not less than 80% of food and  food-related  purchases of Champps.
The  agreement  with Sysco is  cancelable  by either  party upon 60 days notice.
Champps franchisees also have the option of purchasing from Sysco.

Accounting and Management Information Systems

Since its  inception  with the  Spin-off,  the Company has provided  each of its
operating  segments with centralized  financial and management  controls through
the  use  of an  automated  data  processing  system  and  prescribed  reporting
procedures. The Company continues to upgrade its computer hardware and financial
software.  Restaurants  forward weekly sales reports,  vendor invoices,  payroll
information  and  other  operating   information  to  the  Company's   corporate
headquarters.  The  Company  utilizes  this  data to  centrally  monitor  sales,
product,  labor and other costs and to prepare periodic financial and management
reports.  The Company believes that its centralized  accounting,  payroll,  cash
management and information  systems permit the Company to control and manage its
operations efficiently.

Effective July 1, 1997, the Company  entered into a sale and services  agreement
with RCS whereby the Company sold to RCS for an aggregate purchase price of $2.3
million  certain data  processing  equipment.  The purchase  price was evidenced
through a  promissory  note due June 30, 2002 which  accrued  interest at 6% per
annum.  The  promissory  note  was  contributed  to the  Company  as part of the
Additional  Capital  Contribution  described under the caption  "Spin-off".  The
Company  also  received  DAKA   International's  50%  interest  in  RCS  at  the
Transaction  Date.  In  connection  with this sale,  the Company  entered into a
management  agreement  with RCS whereby the  Company  agreed to provide  certain
managerial  services to RCS. In  addition,  the Company  entered into a two year
service  agreement with RCS for data  processing and consulting  services for an
annual fee of $1.8 million. This agreement was terminated,  and a new three year
agreement  between the Company and RCS was entered into as part of the Company's
sale  of its  ownership  interest  in  RCS.  See  "Acquisition  and  Disposition
Transactions".   See  "Management's   Discussion  and  Analysis  of  Results  of
Operations  and  Financial  Condition"  for a discussion  of the  Company's  Y2K
compliance initiatives.  The Company consolidated RCS operations for fiscal 1999
and 1998,  while the Company  maintained  50%  ownership of RCS and held the RCS
note.

Competition

The  restaurant  industry is highly  competitive.  Champps  competes  with other
national  and  international  restaurant  chains as well as local  and  regional
operations. Competition within the industry is based principally on the quality,
variety and price of food products served. Site location, quality of service and
attractiveness  of  facilities  are  also  important  factors  for a  successful
restaurant.  The restaurant industry is affected by general economic conditions,
changing  tastes,  population,  traffic  patterns and spending habits of guests.
Champps believes that their competitive position is enhanced by providing guests
with a diverse selection of menu items served in bountiful  portions at moderate
prices in an upscale and entertaining atmosphere.

The Company also believes  factors such as service,  cleanliness  and atmosphere
are as  important  in a guest's  dining  decision as menu and food  quality.  In
response  to this  trend,  the  Company has  provided  training,  education  and
motivational  programs for its associates to focus on providing  quality service
and to sustain a  sensitivity  to guest  needs.  The  Company  believes  that by
operating in a professional manner where each of its associates places the guest
first, Champps can win guest loyalty.

Government Regulation

The Company is subject to various  federal,  state and local laws  affecting its
business.  Its operations are subject to various  health,  sanitation and safety
standards, federal and state labor laws, zoning restrictions and state and local
licensing.  Federal and state environmental  regulations have not had a material
effect on the Company's  operations to date.  Champps is also subject to federal
and state laws  regulating  franchise  operations  and sales.  Such laws  impose
registration and disclosure requirements on franchisors in the offer and sale of
franchises,   or  impose  substantive  standards  on  the  relationship  between
franchisor and franchisee.

Champps restaurants are subject to state and local licensing and regulation with
respect  to selling  and  serving  alcoholic  beverages.  The sale of  alcoholic
beverages  accounted for  approximately  33% of Champps' total  restaurant sales
during fiscal year 2000 and 1999.  The failure to receive or retain,  or a delay
in obtaining,  a liquor license in a particular  location could adversely affect
Champps' or a franchisee's operation in that location.  Typically, licenses must
be renewed annually and may be revoked or suspended for cause.

Champps restaurants are subject to "dram shop" statutes in certain states. These
statutes  generally give a person injured by an intoxicated  person the right to
recover  damages from the  establishment  that has wrongfully  served  alcoholic
beverages to the intoxicated  person.  Champps carries liquor liability coverage
in the amount of $1.0 million per  occurrence  subject to a policy  aggregate of
$25.0 million.  However,  a judgment against Champps under a "dram shop" statute
in excess of Champps' liability coverage, or any inability to continue to obtain
such  insurance  coverage at  reasonable  costs,  could have a material  adverse
effect on the Company.

Research and Development

The Company is engaged in research  activities  relating to the  development  or
improvement of new and existing products or services. Champps, together with its
franchisees,  utilize  test kitchen  facilities  to develop  recipes,  test food
products and equipment and set nutritional and quality standards.  Champps,  and
their  franchisees  test additional menu items in various markets on an on-going
basis.  These  tests  are  coordinated   through  the  corporate   headquarters.
Furthermore,  the Company  employs a  professional  support  staff to establish,
maintain and enforce high  standards of  sanitation  and safety in all phases of
food preparation and service. The cost of research and development  currently is
not material to the Company's cost of operations.

Service Marks

The Company,  through its  operating  subsidiaries,  has  registered a number of
trademarks  and service marks,  in connection  with providing bar and restaurant
services,  with the United States  Patent and Trademark  Office and with certain
states,  including  the trade names:  "Champ's,"  "Champps,"  "Champps  American
Sports Cafe," and "Champps Entertainment," (collectively, the "Marks").

Pursuant to a Master Agreement dated February 1, 1994,  whereby Champps acquired
certain "Champ's" and "Champps"  service marks,  trademarks and trade names from
Champs Restaurants,  Inc. ("CRI"), Champps agreed to pay CRI an annual fee equal
to the lesser of  approximately  $260,000 or one-quarter  percent (0.25%) of the
gross  sales of  Champps  restaurants,  but in no event less than  $40,000.  The
maximum  fee  payable  by  Champps is  increased  annually  by the lesser of the
increase in the Consumer Price Index or 4%. Champps is currently arbitrating the
validity and term of the Master Agreement.

All  of the  service  marks,  trade  names  and  trademarks  are of  significant
importance to the  businesses of Champps.  Champps has also  registered  various
service marks in several  foreign  countries.  The Company and its  subsidiaries
intend to protect  their service marks  through  registration  with  appropriate
governmental authorities.

Seasonality

Champps sales are historically higher in the fall, winter and spring months, due
primarily to dining  habits of its guests,  the  interest in athletic  events at
these  times  of year  which  are  featured  on  video  walls  in the  Company's
restaurants and eating out trends of the general public.

Corporate Offices and Employees

Champps  Entertainment,  Inc.  is  incorporated  under  the laws of the State of
Delaware. As of July 2, 2000, the Company employs at its corporate  headquarters
approximately  28 employees on a full-time  basis,  four of which are  executive
officers.

Champps Operating Corporation,  Inc. is incorporated under the laws of the State
of  Minnesota  and employs  approximately  3,800  employees  on a full-time  and
part-time basis.  Substantially all restaurant employees,  other than restaurant
management, are compensated on an hourly basis.

None of the Company's or its  subsidiaries'  employees are covered by collective
bargaining agreements. The Company considers its relations with its employees to
be good.

The  Company  maintains  its  present  principal  executive  offices at 5619 DTC
Parkway,  Suite 1000,  Englewood,  Colorado 80111.  The telephone number for the
Company is (303) 804-1333.

Item 2.           Properties.

As of July 2, 2000, the Company leased approximately 7,500 square feet of office
space at its corporate headquarters in Englewood, Colorado, at an average annual
rent of $165,000,  through  January 2005. The Company has terminated both of its
former leases in Danvers, Massachusetts and Wayzata, Minnesota.

Item 3.           Legal Proceedings.

The Company  assumed certain  contingent  liabilities of DAKA  International  in
connection with the Spin-off and agreed to assume certain contingent liabilities
of Fuddruckers  for periods prior to its sale to King Cannon , see  "Disposition
Transactions" in this Form 10-K. Further, the Company is also engaged in various
other actions arising in the ordinary course of business.  The Company believes,
based upon consultation with legal counsel, that the ultimate collective outcome
of these other matters will not have a material  adverse effect on the Company's
consolidated financial condition,  results of operations or cash flows. See Item
1, "Business - Disposition and Certain Other Transactions - Spin-off Transaction
and Sale of Fuddruckers".

In the third  quarter of fiscal 2000, a  Washington,  D.C.  superior  court jury
awarded a former Daka, Inc. employee  $187,000 in compensatory  damages and $4.8
million  in  punitive  damages  based  on  the  employee's  claim  of  negligent
supervision and  retaliation,  due to alleged conduct that occurred in 1996 at a
former Daka food service  location.  While Daka is now a  subsidiary  of Compass
Group,  PLC.,  the  events at issue in the case took place  while a  predecessor
company of Champps owned Daka. On March 28, 2000, Daka filed post-trial motions,
including motions to reduce the damage awards, for judgment not withstanding the
verdict, or in the alternative, for a new trial. These motions were subsequently
denied by the court.  On September 20, 2000,  Daka filed a Notice of Appeal with
the Court of Appeals for the District of Columbia. The Company may be liable for
the payment of any amounts  ultimately due by Daka upon final  determination  of
the  appeal.  The Company is of the opinion  that the  ultimate  outcome of this
matter  will not have a  material  adverse  effect  on the  Company's  financial
position, results of operations or cash flows.

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

There  were no  matters  submitted  by the  Company  to a vote of  Stockholders,
through the  solicitation of proxies or otherwise,  during the fourth quarter of
the fiscal year for which this report is filed.

                                     PART II

Item 5.           Market for the Registrant's Common Stock and Related
                  Stockholder Matters.

The Company's  common stock  originally was listed on the NASDAQ National Market
("Nasdaq")  under the symbol  "UNIQ" from July 17,  1997,  the date on which the
Company became a publicly  traded company as a result of its spin-off from DAKA,
through  July 28,  1999.  On July 28,  1999,  the Company  changed its name from
Unique Casual Restaurants,  Inc. to Champps Entertainment,  Inc. and changed its
symbol on Nasdaq to "CMPP." The table below sets forth,  since such date and for
the calendar periods indicated, the high and low intra-day sales price per share
with respect to fiscal 1999 and closing price with respect to fiscal 2000 of the
Common  Stock as reported  on the  Nasdaq.  The Company has no history of market
price for its  common  stock  prior to such date,  and data with  respect to the
common stock of DAKA, as predecessor of the Company,  which was listed on Nasdaq
before July 17, 1997, would not be meaningful.

                                                            High        Low
Fiscal 1999

First Fiscal Quarter                                        7.38        4.88
Second Fiscal Quarter                                       6.94        4.56
Third Fiscal Quarter                                        6.38        4.56
Fourth Fiscal Quarter                                       5.25        3.56

Fiscal 2000

First Fiscal Quarter                                        3.38        2.13
Second Fiscal Quarter                                       3.50        1.94
Third Fiscal Quarter                                        4.50        2.94
Fourth Fiscal Quarter                                       5.50        3.81

On  September  28,  2000,  there were 2,591  holders of record of the  Company's
Common Stock.

The Company has never paid cash dividends on shares of its Common Stock and does
not expect to pay dividends in the foreseeable future. The Company presently has
no plans to buy back shares of the Company Common Stock in the open market.

Item 6.           Selected Financial Data.

                             SELECTED FINANCIAL DATA

The  following  table  presents  selected   consolidated  data  from  continuing
operations and balance sheet data of the Company. Data for periods prior to 1999
have been  restated  to  account  for the  Company's  Fuddruckers  segment  as a
discontinued  operation.  The  balance  sheet data as of July 2, 2000,  June 27,
1999,  June 28,  1998,  June 29,  1997 and June 29, 1996 and the  statements  of
operations  data for each of the five fiscal  years in the period  ended July 2,
2000  presented  below  are  derived  from the  Company's  audited  consolidated
financial statements.

For purposes of this Form 10-K and financial reporting purposes, the Company has
been treated as if it was a stand-alone  entity for all periods  presented.  The
Company's results from continuing and discontinued  operations,  as presented in
the table below for periods  prior to July 17,  1997,  include  allocations  and
estimates  of  certain  expenses,  including  corporate  accounting,  tax,  cash
management, information technology, legal, risk management, purchasing and human
resources, historically provided to the Company by DAKA International.

The selected consolidated  financial data should be read in conjunction with the
consolidated  financial  statements and related notes thereto of the Company and
"Management's  Discussion  and Analysis of Results of  Operations  and Financial
Condition" included elsewhere in this Annual Report on Form 10-K.

<TABLE>

                                                                                As of and for the Fiscal Years Ended
                                                                                ------------------------------------
<CAPTION>

                                                                            July 2,    June 27,    June 28,    June 29,     June 29,
                                                                             2000       1999        1998        1997         1996
                                                                            -------    --------    --------    --------     --------
<S>                                                                           <C>        <C>          <C>         <C>          <C>
Statements of Operations Data:
Total Revenues                                                             109,114      87,950      77,700       64,239      45,589
Income (loss) from continuing operations before cumulative
    effect of change in accounting for preopening cost                       2,350     (14,079)     (5,999)     (27,389)
Net Income (loss)                                                            2,273     (23,922)    (27,735)     (39,043)     (5,670)

Basic Income (loss) per share from continuing operations                      0.20       (1.21)      (0.52)
Proforma basic (loss) per share from continuing operations                                                        (2.40)      (1.11)

Diluted Income (loss) per share from continuing operations                    0.19       (1.21)      (0.52)
Proforma diluted (loss) per share from continuing operations                                                      (2.40)      (1.11)

Basic weighted average shares (in thousands):

     Historical                                                             11,654      11,622      11,489
     Proforma                                                                                                    11,426      11,426

Diluted weighted average shares (in thousands):

     Historical                                                             11,742      11,622      11,489
     Proforma                                                                                                    11,426      11,426

Balance Sheet Data:
Total assets                                                                67,093      57,142      86,660      110,267     125,239
Long-term debt related to continuing operations,
     including current portion                                              19,324       6,157       6,945        4,256       4,460
Total equity                                                                30,122      27,819      50,398       79,053     108,894

Discontinued operations:
     Minority interest and obligations under put agreement
          related to the discontinued operations                                 -           -       5,400        1,100       1,168
     Net long-term assets                                                        -           -      44,335       65,307      83,591
     Net current liabilities                                                     -           -      (4,202)      (6,492)       (132)
</TABLE>

Item 7.     Management's Discussion and Analysis of Results of Operations and
            Financial Condition.

General

The following Management's  Discussion and Analysis of Results of Operations and
Financial  Condition  is  based  upon  the  historical   consolidated  financial
statements of the Company,  which present the Company's  results from continuing
operations,  financial  position  and cash  flow.  Prior to July 17,  1997,  the
Company  historically  operated as part of DAKA  International.  The  historical
consolidated   financial   statements   for  fiscal  1997  include  the  assets,
liabilities,  income and expenses that were directly  related to the  restaurant
business  as operated  within  DAKA  International  prior to the  Spin-off.  The
Company's financial  statements for fiscal 1997 include all of the related costs
of doing business,  including charges for the use of facilities and for employee
benefits,  and includes an allocation  of certain  general  corporate  expenses,
including  costs for corporate  logistics,  information  technologies,  finance,
legal and corporate executives.  These allocations of general corporate expenses
were based on a number of factors including, for example, personnel, labor costs
and  sales  volumes.  Management  believes  these  allocations  as  well  as the
assumptions  underlying the preparation of the Company's  separate  consolidated
financial statements to be reasonable.

As a result of the Spin-off,  certain other non-restaurant  operating assets and
liabilities of DAKA  International  were contributed to the Company as described
in Note 2 to Financial  Statements.  Those assets and liabilities  consisting of
notes receivable,  property,  accounts payable, accrued expenses, and contingent
liabilities  have been recorded within their  respective  captions during fiscal
1998 and resulted in a decrease to stockholders' equity of $1.5 million.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in
the following Management's  Discussion and Analysis of Results of Operations and
Financial  Condition of the Company and  elsewhere in this Annual Report on Form
10-K are  forward-looking  statements  within the  meaning of Section 27A of the
Securities  Act and Section 21E of the Exchange  Act.  Words such as  "believe,"
"anticipate,"  "estimate,"  "project," and similar  expressions  are intended to
identify  such  forward-looking  statements.  Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
respective dates.  Forward-looking  statements  involve risks and uncertainties,
many of which may be beyond the Company's  control.  Should one or more of these
risks or uncertainties materialize,  or should any of the underlying assumptions
prove  incorrect,  actual  results of current  and  future  operations  may vary
materially  from those  anticipated,  estimated or  projected.  Factors that may
cause such a difference include, among others, the following: the ability of the
Company to successfully  implement strategies to improve overall  profitability;
the impact of  increasing  competition  in the casual and upscale  casual dining
segments of the  restaurant  industry;  changes in general  economic  conditions
which  impact  consumer  spending  for  restaurant  occasions;  adverse  weather
conditions;  competition  among  restaurant  companies for attractive  sites and
unforeseen   events  which  increase  the  cost  to  develop  and/or  delay  the
development and opening of new  restaurants;  increases in the costs of product,
labor,  and other  resources  necessary to operate the  restaurants;  unforeseen
difficulties in integrating acquired  businesses;  the availability and terms of
financing for the Company and any changes to that financing;  the revaluation of
any of the  Company's  assets (and related  expenses);  the ultimate  outcome of
certain  contingent  obligations  related to the  Company's  former  Fuddruckers
segment  and its other  predecessor  businesses;  the  issuance  and  renewal of
licenses and permits for restaurant  development and  operations,  including the
sale of alcoholic beverages; and the amount of, and any changes to, tax rates.

                              RESULTS OF OPERATIONS

Overview

The Company reported a net income of $2.3 million for the fiscal year ended July
2, 2000,  compared to a net loss of $23.9 million last year. Included in the net
income for fiscal 2000 were charges associated with exit and other charges ($0.5
million);  loss on the sale of marketable  securities ($1.0 million);  and, loss
associated with discounting a mortgage  receivable ($0.1 million).  Exclusive of
these  charges,  the  Company  would  have  reported  a profit  from  continuing
operations  of $3.9  million for fiscal  2000.  While the Company  believes  its
strategies  will  continue  to produce  overall  profitability,  there can be no
assurance that such strategies will continue to be successful.  Accordingly, the
Company may again incur operating losses. To sustain profitability,  the Company
must, among other things,  manage, within acceptable  parameters,  contingencies
associated with its former  businesses  including  Fuddruckers,  its former food
service  and Great  Bagel and Coffee  businesses,  continue  to reduce  selling,
general and  administrative  expenses as a percentage  of sales from  historical
levels  while  continuing  to increase  net revenues  from its  restaurants  and
successfully executing its growth strategy for the Champps Americana concept.

In Item 1, see  "Background"  for a discussion of events in fiscal 1999 and 2000
that, in part, will shape the future direction of the Company.

The Company's Champps Americana  restaurant chain is in the expansion phase. The
timing of revenues and expenses  associated  with the opening of new restaurants
are expected to result in  fluctuations  in the  Company's  quarterly and annual
results. In addition,  the Company's results,  and the results of the restaurant
industry as a whole,  may be adversely  affected by changes in consumer  tastes,
discretionary  spending  priorities,   national,   regional  or  local  economic
conditions,  demographic  trends,  consumer  confidence in the economy,  traffic
patterns,  weather  conditions,  employee  availability and the type, number and
location  of  competing  restaurants.  Changes  in any of  these  factors  could
adversely affect the Company.

Among other  factors,  the success of the  Company's  business and its operating
results are  dependent  upon its ability to  anticipate  and react to changes in
food and liquor costs and, particularly for Champps Americana  restaurants,  the
mix between  food and liquor  revenues.  Various  factors  beyond the  Company's
control, such as adverse weather changes, may affect food costs and increases in
federal,  state and local taxes may affect liquor costs.  While in the past, the
Company has been able to manage its exposure to the risk of increasing  food and
liquor  costs  through  certain  purchasing  practices,  menu  changes and price
adjustments, there can be no assurance that the Company will be able to do so in
the future or that changes in its sales mix or its overall buying power will not
adversely affect the Company's results of operations.

Notwithstanding these risks, the Company believes that its near-term strategies,
including,  but not  limited  to,  continued  expansion  of  Champps,  improving
operational   excellence,   and   anticipated   continued   lower   general  and
administrative  expenses from  historical  levels  resulting  from actions taken
since June 29, 1997 and the effects of the Spin-off,  the Fuddruckers  Sale, the
consolidation of corporate headquarters and the sale of non-essential assets and
businesses,  and other related transactions,  should provide the opportunity for
increased profitability.

Champps

The following table sets forth certain financial information for Champps.

                                                    (in thousands)
                                            2000         1999        1998
                                          ---------    ---------   ---------

Restaurant sales                          $108,312      $87,392     $73,387
                                          =========    =========   =========

Sales from Champps restaurants              100.0%       100.0%      100.0%
Operating Expenses:
     Labor costs                             (32.5)       (32.9)      (33.0)
     Product costs                           (28.5)       (28.8)      (29.0)
     Other restaurant operating expenses     (25.9)       (28.1)      (27.8)
     Depreciation and amortization            (3.8)        (3.9)       (3.9)
                                          ---------    ---------   ---------

Restaurant unit contribution                  9.3%         6.3%        6.3%
                                          =========    =========   =========

Restaurant unit contribution               $10,125      $ 5,539     $ 4,622
Gain on sale of franchise                                     -         677
Franchising and royalty income                 802          558         644
                                          ---------    ---------   ---------

Restaurant unit, franchising and royalty
     contribution                          $10,927      $ 6,097     $ 5,943
                                          =========    =========   =========

Comparison of Fiscal Years Ended July 2, 2000 and June 27, 1999

Sales in Company-owned  restaurants  increased  approximately  $20.9 million, or
23.9%,  to $108.3 million for fiscal 2000 compared with $87.4 million for fiscal
1999.  The  increase  reflects  both an increase in the number of  Company-owned
restaurants open between years, and an increase in same store sales. The Company
opened four new  restaurants  in fiscal  2000.  The Company  also  acquired  two
franchised   restaurants   at  June  29,  2000.   Same  store  sales   increased
approximately 4.7% in fiscal 2000.

Restaurant unit  contribution of $10.1 million for fiscal 2000 was up 82.8% from
$5.5 million in fiscal 1999. The restaurant unit  contribution  margin increased
to 9.3% for fiscal 2000 from 6.3% in fiscal 1999.  Improvements were made in all
expense categories.

Other restaurant  operating expenses include  controllable  restaurant operating
expenses,  occupancy costs and pre-opening expenses.  Other restaurant operating
expenses  expressed as a percentage of sales were 25.9% for fiscal 2000 compared
with 28.1% for fiscal 1999. This decrease reflects lower controllable restaurant
operating  expenses  between  periods,  offset,  in part, by higher  pre-opening
expenses.

Preopening expenses were approximately $1.5 million in fiscal 2000 compared with
$1.2 million in fiscal 1999.  This increase  relates  primarily to the number of
units opened,  the timing of construction,  and construction in progress between
years. Preopening expenses have historically been approximately $0.4 million per
location.

Comparison of Fiscal Years Ended June 27, 1999 and June 28, 1998

Sales in Company-owned  restaurants  increased  approximately  $14.0 million, or
19.1%,  to $87.4  million for fiscal 1999 compared with $73.4 million for fiscal
1998.  The  increase  reflects  both an increase in the number of  Company-owned
restaurants open between years, and an increase in same store sales. The Company
opened  two  new   restaurants  in  fiscal  1999.  Same  store  sales  increased
approximately 2.0% in fiscal 1999.

Restaurant  unit  contribution of $5.5 million for fiscal 1999 was up 19.9% from
$4.6 million in fiscal 1998.  Included in depreciation  was $0.4 million related
to the accelerated depreciation of existing point of sale systems. These systems
were replaced by new equipment in the first and second  quarters of fiscal 2000,
to enable the  implementation  of more efficient  software at both the operating
level and for corporate financial reporting. Other restaurant operating expenses
include controllable  restaurant operating expenses,  and also include occupancy
and pre-opening  expenses.  Other restaurant  operating  expenses expressed as a
percentage  of sales were 28.1% for fiscal 1999  compared  with 27.8% for fiscal
1998.  This  increase  reflects  both higher  occupancy  costs and  controllable
restaurant  operating  expenses  between  periods,  offset,  in  part,  by lower
pre-opening  expenses.  Occupancy  costs expressed as a percentage of sales have
increased from 8.5% to 9.2% in fiscal 1998 and 1999,  respectively,  as a result
of restaurants  opened over the last two years.  Such restaurants were generally
constructed under a sale-leaseback facility where substantially all of the costs
of construction were financed by the landlord. This facility allowed the Company
to conserve  cash but resulted in higher rents in these units when compared with
restaurants built in earlier years.

Pre-opening  expenses were approximately  $1.2 million in fiscal 1999,  compared
with $1.9 million in fiscal 1998. This decrease relates  primarily to the number
of units  opened,  the timing of  construction,  and  construction  in  progress
between years.  Pre-opening  expenses have historically been  approximately $0.4
million per location.

General and Administrative Expenses

Comparison of Fiscal Year Ended July 2, 2000 and June 27, 1999

General  and   administrative   expenses   from   continuing   operations   were
approximately  $6.4 million for fiscal 2000  compared with  approximately  $19.0
million in fiscal 1999. In fiscal 2000, there were no unusual expenses impacting
general and administrative expenses.

In fiscal  1999,  general and  administrative  expenses  include  losses of $2.7
million of the sale of non-essential  assets, $2.7 million in charges related to
predecessor  businesses  and $2.3 million of the total $2.7 million in losses on
business  and  lease   contracts.   Exclusive   of  these  costs,   general  and
administrative  expenses  for 1999 would have been $11.3  million.  General  and
administrative  expenses,  excluding  unusual  items have  decreased  from $11.3
million  in fiscal  1999 to $6.4  million  for  fiscal  2000.  The  decrease  is
primarily  the  result of  consolidation  of the  Company's  former  offices  in
Massachusetts and Minnesota into one office based in Englewood, Colorado.

Comparison of Fiscal Year Ended June 27, 1999 and June 28, 1998

General  and   administrative   expenses   from   continuing   operations   were
approximately  $19.0 million for fiscal 1999,  compared with approximately $10.8
million in fiscal 1998.  In fiscal  1999,  general and  administrative  expenses
include a loss of $2.7  million  of the sale of  non-essential  assets  and $2.7
million  in charges  related  to  predecessor  businesses,  and $2.3  million in
diminution  of business  contracts  and asset  lives.  Exclusive of these costs,
general and administrative expenses for 1999 would have been $11.3 million.

Income Taxes

Prior to July 17, 1997, the operations of the Company were generally included in
the  consolidated  U.S.  federal  income  tax return and  certain  combined  and
separate state and local tax returns of DAKA International. A benefit in lieu of
taxes for 1997 has been presented as if the Company was a separate taxpayer. For
fiscal year 2000, the Company  utilized its net operating loss  carryforwards to
offset  income  of $2.3  million.  No  benefit  for net  operating  losses  were
recognized  in fiscal 1999.  As of July 2, 2000,  the Company had net  operating
loss carryforwards of approximately $46.0 million.  The carryforwards  expire at
various dates through fiscal 2019. The  carryforwards  are not currently subject
to Section 382 limitations.

Year 2000 Compliance

The statements in the following section include "Year 2000 Readiness Disclosure"
within the meaning of the year 2000 Information and Readiness Disclosure Act.

The Company has  experienced no material Year 2000-date  related  disruptions or
other significant problems.

Through July 2, 2000, the Company has spent approximately  $640,000 on upgrading
its systems and  hardware to evaluate  and  mitigate its exposure in areas where
appropriate  including,   payroll,  point  of  sale,  accounting  and  financial
reporting core systems.  Based on currently  available  information,  management
continues to believe that Year 2000-date related  disruptions or other problems,
if any, will not have a significant adverse impact on its operational results or
financial condition.  As of July 2, 2000, the Company is anticipating no further
expenditures or issues relative to the Year 2000 issue.

FINANCIAL CONDITION AND LIQUIDITY

The working  capital needs of companies  engaged in the restaurant  industry are
generally  low as sales are made for cash,  and  purchases of food and supplies,
and other  operating  expenses are generally paid in 30 to 60 days after receipt
of  invoices  and  labor  costs are paid  bi-weekly.  Capital  expenditures  for
expansion during fiscal 2000, 1999 and 1998 were generally provided through cash
balances  (including  in  fiscal  1999  a  portion  of  the  proceeds  from  the
Fuddruckers  Sale) and proceeds  from  sale-leaseback  and mortgage  facilities.
Capital  expenditures  were $13.9  million,  $10.4  million and $5.4 million for
continuing operations, respectively, for fiscal 2000, 1999 and 1998.

During 2000, the Company acquired two restaurants from existing franchisees. The
restaurants, located in Eden Prairie, Minnesota and Minnetonka,  Minnesota, were
acquired for  approximately  $11.4 million.  The assets  acquired were valued at
approximately  $7.5 million for building and equipment and an additional $60,000
for smallwares  inventory.  The resulting goodwill of approximately $3.8 million
will be amortized  over a  twenty-year  period.  The Company  obtained  mortgage
financing for these properties totaling $9.5 million.

At the end of fiscal 2000, the Company's  unrestricted cash was $4.4 million and
restricted cash was $0.4 million.  The Company anticipates that it will continue
to generate positive cash flow in the fiscal year 2001; however,  there are also
significant cash expenditures anticipated during the forthcoming year.

During  fiscal 2001,  the Company  anticipates  receipt of $0.5 million from the
sale of a former  Fuddruckers  property currently listed on the balance sheet as
"Asset held for sale." The Company  currently has a $3.0 million  commitment for
the sale leaseback of its Las Colinas,  Texas  restaurant  which was opened July
24, 2000.  The Company also has a tenant  improvement  allowance of $0.5 million
which it intends to receive in the second quarter of fiscal 2001 associated with
the completion of its West Bloomfield, Michigan restaurant.

Anticipated  in fiscal  2001 are capital  expenditures  of  approximately  $14.0
million,  primarily for new restaurants and standard  remodeling and upgrades in
existing  restaurants.  These expenditures will be funded through cash flow from
existing operations,  and through tenant improvement  allowances associated with
new restaurants.

It is also  anticipated  that there will be substantial  cash payments in fiscal
2001 associated  with  liabilities  previously  recorded in fiscal 1998 and 1999
related to the Spin-off  Transaction and Fuddruckers  Sale  transactions and the
consolidation  and  relocation  of  the  headquarters  to  Englewood,  Colorado.
Included  in these cash  payments,  the Company  anticipates  that there will be
payments  for prior year  insurance  claims,  tax audits and legal  settlements.
These latter  expenditures  are  estimated to range between $1.5 million to $2.5
million for fiscal 2001.

The impact of inflation and changing prices has had no measurable  impact on net
sales and revenue or income  from  continuing  operations  during the last three
fiscal years.

Item 7A.    Quantitative and Qualitative Market Risk Disclosures

The market risk exposure  inherent in the Company's  financial  instruments  and
consolidated  financial  position  represents the potential  losses arising from
adverse changes in interest rates.  The Company is exposed to such interest rate
risk primarily in its  significant  investment in cash and cash  equivalents and
the use of fixed and variable rate debt to fund its acquisitions of property and
equipment  in past  years  and the  implicit  investment  rate in the  Company's
sale-leaseback arrangements.

Market risk for cash and cash equivalents and fixed rate borrowings is estimated
as the potential change in the fair value of the assets or obligations resulting
from a hypothetical  ten percent adverse change in interest  rates,  which would
not have been  significant  to the  Company's  financial  position or results of
operations during 2000. The effect of a similar  hypothetical change in interest
rates on the Company's  variable rate debt and the investment  rates implicit in
the Company's sale-leaseback arrangements also would have been insignificant due
to the immaterial  amounts of borrowings  outstanding under the Company's credit
arrangements.   For  additional   information  about  the  Company's   financial
instruments  and  these  financing  arrangements,  see  "Notes  to  Consolidated
Financial Statements".

Item 8.           Financial Statements and Supplementary Data.

The  information  required  under this Item 8 is set forth on pages F-1  through
F-25 of this Report.

Item 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure.

Change in Accountants

On April 3, 2000, the Company determined not to renew the engagement of Deloitte
& Touche LLP as independent  accountants for the Company and the Company engaged
Arthur Andersen,  L.L.P. as independent accountants to audit and report upon the
Company's financial  statements for the current fiscal year ending July 2, 2000.
The  determination  by  management  and the  Audit  Committee  not to renew  the
engagement of Deloitte & Touche LLP was approved by the Board of Directors.

At the end of fiscal  1998 and in October  1999  Deloitte & Touche LLP  verbally
reported to the Audit Committee and senior management that the Company needed to
improve  certain  aspects  of its  internal  control  structure  and  accounting
operations  to ensure the filing of its  financial  statements on a reliable and
timely basis. Under standards established by the American Institute of Certified
Public  Accountants these matters were considered by Deloitte & Touche LLP to be
reportable conditions and material weaknesses when viewed in the aggregate.  The
Company has taken action on the recommendations  received from Deloitte & Touche
LLP.

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant.

Directors of the Registrant

Incumbent Directors

The following table sets forth certain information  regarding current members of
the Board of Directors:

<TABLE>
<CAPTION>

                                                  Principal                Director   Expiration
           Name               Age                Occupation                  Since    of Term    Class
---------------------------  ------  ------------------------------------  ---------- --------- ---------

<S>                           <C>                  <C>                        <C>       <C>       <C>
William H. Baumhauer          52        Chairman, President and Chief      June 1999    2001       II
                                      Executive Officer of the Company

Timothy R. Barakett           35     Chairman of Atticus Capital, L.L.C.   March 1999   2000       I

James Goodwin                 44           Independent Consultant          March 1999   2000       I

Nathaniel P.J.V. Rothschild   29            President of Atticus           August 1999  2001       II
                                               Capital, L.L.C.

Alan D. Schwartz              50         Senior Managing Director of       May 1997     2000       III
                                         Corporate Finance for Bear,
                                             Stearns & Co., Inc.
</TABLE>

The name,  age and  principal  occupation  during  the past five years and other
information concerning each director are set forth below:

William  H.  Baumhauer  has served as a Director  and  Chairman  of the Board of
Directors  since August 23, 1999, and as President and Chief  Executive  Officer
since June 24, 1999. Mr. Baumhauer also held these positions with the Company or
its  predecessors  from  September  1988 until July 24,  1998,  when he left the
Company to serve as President and Chief  Operating  Officer of Planet  Hollywood
International,  Inc., a position he held until his return to the Company on June
24, 1999.  Subsequent to his return to the Company,  on October 12, 1999, Planet
Hollywood filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Timothy R. Barakett,  35, has been the Chairman of Atticus  Capital,  L.L.C.,  a
private  investment  management  company and an affiliate  of Atticus  Partners,
since October 1995. From June 1993 until March 1995, Mr. Barakett was a Managing
Director at Junction Advisors, Inc. a private investment management company. Mr.
Barakett  also  serves as a director of RIT Capital  Partners  plc.,  and Groupe
Andre, SA.

James  Goodwin,  44, has been a private  investor  since  1998.  From 1990 until
February 1998, Mr. Goodwin was a Managing Director at Gleacher Natwest, Inc., an
investment  banking  company.  Mr.  Goodwin also serves as a Director for Kiewet
Materials Company located in Omaha, Nebraska.

Nathaniel P.V.J.  Rothschild,  29, has been President of Atticus Capital, L.L.C.
since January 2000, and member of Atticus Capital,  L.L.C., a private investment
management company and an affiliate of Atticus Partners,  since March 1996. From
March 1995 to March 1996 was a Financial Analyst at Gleacher  Natwest,  Inc., an
investment  banking  company.  Mr.  Rothschild  is the  Chairman and Director of
Groupe Andre, SA.

Alan  D.  Schwartz,  50,  has  served  as a  Director  of  the  Company  or  its
predecessors since September 1988 and served as a Director of Fuddruckers,  Inc.
from September  1984 until its merger with DAKA in 1988. Mr.  Schwartz is Senior
Managing Director-Corporate Finance of Bear, Stearns & Co., Inc., and a Director
of its parent The Bear Stearns Companies,  Inc. He has been associated with such
investment  banking  firms for more  than five  years.  Mr.  Schwartz  is also a
Director  of  Young &  Rubicam,  Inc.,  Atwood  Richards,  Inc.,  St.  Vincent's
Services,  the American Foundation for AIDS Research,  the New York Blood Center
and NYU Medical Center and a member of the Board of Visitors of the Fuqua School
of Business at Duke University.

Meetings and Committees

The Board of Directors of the Company has a Compensation Committee, a Nominating
Committee  and an Audit  Committee.  During the fiscal  year 2000,  the Board of
Directors  held seven meetings and the Audit  Committee held four meetings.  The
Nominating Committee and the Compensation Committee did not meet separately,  as
their  duties were  performed at meetings of the full Board of  Directors.  Each
director  attended  75% or more of the  aggregate  of (a) the  total  number  of
meetings of the board of Directors  during  fiscal year 2000,  and (b) the total
number of meetings  held by all  committees  of the Board of  Directors on which
such  director  served  during  fiscal year 2000.  The Audit  Committee  has the
responsibility of selecting the Company's independent auditors and communicating
with the Company's  independent  auditors on matters of auditing and accounting.
The Audit Committee is currently  composed of Mr. Barakett,  Mr. Goodwin and Mr.
Rothschild.

The  Compensation  Committee  has the  responsibility  of reviewing on an annual
basis all officer and  employee  compensation.  The  Compensation  Committee  is
currently  composed  of Mr.  Barakett,  Mr.  Goodwin,  Mr.  Rothschild  and  Mr.
Schwartz.

Executive Officers of the Registrant

Certain  information is set forth below concerning the executive officers of the
Company, each of whom has been elected to serve until the regular meeting of the
Board of Directors  and until his successor is duly elected and  qualified.  The
executive officers of the Company are as follows:

Name                       Age   Position

William H. Baumhauer       52    Director, Chairman of the Board of Directors,
                                 President and Chief Executive Officer

Donna L. Depoian           40    Vice President, General Counsel and Secretary

Frederick J. Dreibholz     45    Vice President, Chief Financial Officer,
                                  and Treasurer

William  H.  Baumhauer  has served as a Director  and  Chairman  of the Board of
Directors  since August 23, 1999, and as President and Chief  Executive  Officer
since June 24, 1999. Mr. Baumhauer also held these positions with the Company or
its  predecessors  from  September  1988 until July 24,  1998,  when he left the
Company to serve as President and Chief  Operating  Officer of Planet  Hollywood
International,  Inc., a position he held until his return to the Company on June
24, 1999.  Subsequent to his return to the Company,  on October 12, 1999, Planet
Hollywood filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Donna L. Depoian has served as Vice President,  General Counsel and Secretary of
the Company since May 1998. She served as Acting  General  Counsel and Assistant
Secretary from February 1998 to May 1998 and as Corporate  Counsel and Assistant
Secretary  since July 1997.  Ms.  Depoian also served as  Corporate  Counsel and
Assistant Secretary for DAKA International, Inc. since April 1994. From May 1989
to April 1994,  she practiced as an attorney for Bass & Doherty,  P.C., a Boston
law firm  concentrating  in business and commercial  real estate.  From February
1988 to April  1989 she  practiced  as an  attorney  for  Rossman,  Rossman  and
Eschelbacher, a Boston based law firm.

Frederick J. Dreibholz has served as Vice President, Chief Financial Officer and
Treasurer  since  October 1999.  From April 1997 to November  1998, he served as
Chief  Financial  Officer  of  Unique  Casual   Restaurants,   Inc.  and  Sforza
Enterprises, Inc. From November 1987 to April 1997, he served as Chief Financial
Officer  of Flik  International  Corp.  From  June 1977 to April  1987,  he held
various  management and finance  positions with Sky Chefs. From November 1998 to
October 1999,  Mr.  Dreibholz  acted as a consultant to numerous  restaurant and
food service clients in South Florida and New York City.

Item 11.    Executive Compensation.

The  information  required  by this Item is  incorporated  by  reference  to the
section captioned "Executive Compensation" in the Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Management.

The  information  required  by this Item is  incorporated  by  reference  to the
section  captioned   "Security   Ownership  of  Certain  Beneficial  Owners  and
Management" contained in the Proxy Statement.

Item 13.    Certain Relationships And Related Transactions.

The  information  required by this Item is  incorporated  by reference  from the
sections captioned "Certain Relationship and Related Transactions"  contained in
the Proxy Statement.

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

The following are being filed as part of this Annual Report on Form 10-K.

A.      Financial Statements:

        Reports of Independent Auditors

        Consolidated Balance Sheets - July 2, 2000 and June 27, 1999

        Consolidated Statements of Operations - Fiscal years ended July 2, 2000,
        June 27, 1999, and June 28, 1998

        Consolidated Statements of Cash Flows - Fiscal years ended July 2, 2000,
        June 27, 1999 and June 28, 1998

        Consolidated  Statements  of  Changes in  Stockholders'  Equity - Fiscal
        years ended July 2, 2000, June 27, 1999 and June 28, 1998

        Notes to Consolidated Financial Statements

B.      Financial Statement Schedules:

        There  are  no  Financial  Statement  Schedules  required  to be  filed.
        Information  required by Article 12 of  Regulation  S-X with  respect to
        Valuation and Qualifying  Accounts has been included in the Notes to the
        Consolidated Financial Statements.

C.      Exhibits:

*2.1    Agreement  and Plan of Merger,  dated as of May 27,  1997,  by and among
        Compass  Interim,  Inc.  ("Compass  Interim"),  Compass  Holdings,  Inc.
        ("Purchaser"), Compass Group PLC ("Parent") and DAKA International, Inc.
        ("DAKA International").

*2.2    Reorganization  Agreement  dated as of May 27,  1997,  by and among DAKA
        International,  Daka,  Inc.  ("Daka"),  the Company,  Parent and Compass
        Holdings, together with certain exhibits thereto.

*2.3    Agreement  and  Plan  of  Merger  among  Champps   Entertainment,   Inc.
        ("Champps"),  DAKA and CEI  Acquisition  Corp.,  dated as of October 10,
        1995,  incorporated herein by reference to DAKA's Registration Statement
        on Form S-4 (File No. 33-65425) ("1996 DAKA Form S-4").

**2.4   Series D Convertible  Preferred  Stock and Warrant  Purchase  Agreement,
        dated as of January  12,  1996,  by and among La Salsa  Holding  Co. and
        Casual Dining  Ventures,  Inc.  Pursuant to Item 601(b)(2) of Regulation
        S-K,  the  Schedules  to the Series D  Convertible  Preferred  Stock and
        Warrant Purchase Agreement are omitted. The Company hereby undertakes to
        furnish  supplementally a copy of any omitted Schedule to the Commission
        upon request.

**2.5   Stock  Purchase  Agreement,  dated as of March  18,  1996,  by and among
        Casual Dining Ventures,  Inc., DAKA,  Champps  Development  Group, Inc.,
        Steven J.  Wagenheim,  Arthur E. Pew,  III, PDS  Financial  Corporation,
        Douglas B. Tenpas and certain  other  stockholders  of Americana  Dining
        Corp. Pursuant to Item 601(b)(2) of Regulation S-K, the Schedules to the
        Stock Purchase  Agreement are omitted.  The Company hereby undertakes to
        furnish  supplementally a copy of any omitted Schedule to the Commission
        upon request.

**2.6   Asset Purchase Agreement, dated March 18, 1996, between Americana Dining
        Corp., as Seller, and New Brighton Ventures, Inc., as Buyer. Pursuant to
        Item  601(b)(2) of Regulation  S-K, the Schedules to the Asset  Purchase
        Agreement  are  omitted.   The  Company  hereby  undertakes  to  furnish
        supplementally  a copy of any omitted  Schedule to the  Commission  upon
        request.

**2.7   Stock Purchase Agreement, dated as of March 29, 1996, by and among DAKA,
        The Great Bagel & Coffee Franchising  Corp., GBC Credit Company,  Gemini
        Production  Facility,  Inc., The Great Bagel & Coffee  Company,  Mark C.
        Gordon, Brian H. Loeb, Jason R. Olivier,  Michael F. Zerbib, Nicholas D.
        Zerbib, and Thierry E. Zerbib.  Pursuant to Item 601(b)(2) of Regulation
        S-K, the  Schedules to the Stock  Purchase  Agreement  are omitted.  The
        Company  hereby  undertakes  to  furnish  supplementally  a copy  of any
        omitted Schedule to the Commission upon request.

**2.8   Stock  Purchase  Agreement,  dated as of March  31,  1996,  by and among
        Casual Dining Ventures, Inc., DAKA and Edgebrook,  Inc. Pursuant to Item
        601(b)(2)  of  Regulation  S-K,  the  Schedules  to the  Stock  Purchase
        Agreement  are  omitted.   The  Company  hereby  undertakes  to  furnish
        supplementally  a copy of any omitted  Schedule to the  Commission  upon
        request.

*3.1    Certificate of Incorporation of the Company.

*3.2    By-laws of the Company

*3.3    Form  of  Amended  and  Restated  Certificate  of  Incorporation  of the
        Company.

*3.4    Form of Amended and Restated By-laws of the Company.

3.5     Certificate  of  Designations,  Preferences  and  Rights  of a Series of
        Preferred  Stock of the Company,  dated  January 30, 1998,  incorporated
        herein by reference to the  Company's  Current  Report on Form 8-K filed
        February 2, 1998.

4.2     Amended and Restated  Shareholder Rights Agreement,  dated as of January
        30,  1998,  between the Company and  American  Stock  Transfer and Trust
        Company,  as  Rights  Agent,  incorporated  herein by  reference  to the
        Company's Current Report on Form 8-K filed February 2, 1998.

*4.1    Specimen Stock Certificate for shares of the UCRI Common Stock.

*10.1   Tax  Allocation  Agreement  dated as of May 27, 1997, by and among DAKA,
        the Company, and Parent.

*10.2   Post-Closing Covenants Agreement, dated as of May 27, 1997, by and among
        DAKA, Daka, Inc., the Company, Champps, Fuddruckers, Inc., Purchaser and
        Parent.

*10.3   Stock Purchase Agreement, dated as of May 26,1997, between DAKA, Parent,
        Purchaser, First Chicago Equity Corporation,  Cross Creek Partners I and
        the other holders of Series A Preferred Stock of DAKA.

*10.4   Form of the Company's 1997 Stock Option and Incentive Plan.

*10.5   Form of the Company's 1997 Stock Purchase Plan.

*10.6   Form of  Indemnification  Agreement,  by and  between  the  Company  and
        directors and officers of DAKA.

**10.7  Third Amended and Restated  Registration  Rights Agreement,  dated as of
        January 12,  1996,  by and among La Salsa  Holding  Co.,  FMA High Yield
        Income L.P.,  WSIS Flexible Income Partners L.P., WSIS High Income L.P.,
        Howdy  S.  Kabrins,   La  Salsa,   Inc.,  Crown  Associates  III,  L.P.,
        Crown-Glynn  Associates,  L.P.,  Nueberger  & Berman as Trustee  for the
        Crown  Trust,  Theodore H.  Ashford,  Noro-Moseley  Partners  II,  L.P.,
        Seidler Salsa,  L.P., Bankers Trust Company as Master Trustee for Hughes
        Aircraft Retirement Plans,  Charles A. Lynch, Sienna Limited Partnership
        I, Sienna Limited  Partnership  II, Sienna  Holdings,  Inc., as Nominee,
        InterWest  Partners  IV,  Donald  Benjamin,   Vicki  Tanner,  Ronald  D.
        Weinstock, Inc., Frank Holdraker, and Casual Dining Ventures, Inc.

**10.8  Fourth  Amended and Restated  Restricted  Stock  Agreement,  dated as of
        January 12, 1996, by and among La Salsa  Holding Co.,  Howdy S. Kabrins,
        La Salsa,  Inc.,  InterWest  Partners IV, Sienna Holding,  Inc.,  Sienna
        Limited  Partnership  I, Charles A. Lynch,  Theodore H.  Ashford,  Crown
        Associates III, L.P., Crown-Glynn  Associates,  L.P., Nueberger & Berman
        as Trustee for The Crown Trust,  Noro-Moseley Partners II, L.P., Seidler
        Salsa,  L.P.,  Bankers  Trust  Company,  as Master  Trustee,  for Hughes
        Aircraft  Retirement  Plans,  FMA High Yield Income L.P.,  WSIS Flexible
        Income  Partners  L.P.,  WSIS High Yield  Income  L.P.,  Sienna  Limited
        Partnership  II, Donald  Benjamin,  Vicki Tanner,  Ronald D.  Weinstock,
        Inc., Frank Holdraker, and Casual Dining Ventures, Inc.

**10.9  La Salsa Holding Co. Warrant to Purchase  Shares of Series D Convertible
        Preferred Stock,  dated as of January 12, 1996,  issued to Casual Dining
        Ventures, Inc. by La Salsa Holding Co.

**10.10 Severance,  Non-Competition and Confidentiality  Agreement,  dated as of
        March 18, 1996, between Steven J. Wagenheim and Americana Dining Corp.

**10.11 La Salsa  License  Agreement,  dated as of  February  14,  1996,  by and
        between La Salsa Franchise, Inc. and La Salsa Holding Co.

10.12   Separation Agreement, dated as of February 2, 1998, by and among Dean P.
        Vlahos, the Company and Champps.

10.13   Asset Purchase  Agreement,  dated as of February 2, 1998, by and between
        Dean P. Vlahos and Champps.

10.14   Champps Restaurant Development Agreement,  dated as of February 2, 1998,
        by and between Dean P. Vlahos and Champps.

10.15   Stock Purchase Agreement, dated as of July 31, 1998, by and between King
        Cannon, Inc. and Unique Casual Restaurants, Inc.

10.16   Employment Agreement, dated as of June 24, 1999, by and between Unique
        Casual Restaurants, Inc. and William H. Baumhauer.

10.17   Termination  Agreement and General Release,  dated July 21, 1999, by and
        between Champps  Entertainment,  Inc., Champps Operating Corporation and
        Donald C. Moore.

10.18   Non-negotiable  Promissory Note, dated August 2, 1999, payable by Donald
        C. Moore to Champps Entertainment, Inc.

10.19   Asset  Purchase  Agreement,  dated  April 6, 2000,  made by and  between
        Prairie Restaurant Group, Inc. and Champps Operating Corporation.

10.20   Asset Purchase Agreement,  dated April 6, 2000, made by and between Dean
        P. Vlahos and the Breagan  Investment  Group, Inc. and Champps Operating
        Corporation.

21.1    Subsidiaries of the Company.

23.1    Consent of Arthur Andersen, LLC

23.2    Consent of Deloitte & Touche LLP

24.1    Powers of Attorney.

*       Incorporated herein by reference to the Company's Registration Statement
        on Form 10 filed June 3, 1997, as amended.

**      Incorporated  herein by reference  to the Annual  Report on Form 10-K of
        DAKA International for the year ended June 29, 1996.

D.      Reports on Form 8-K

Not applicable.

                                   SIGNATURES

Pursuantto the  requirements  of Section 13 or 15(d) 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.

                                    CHAMPPS ENTERTAINMENT, INC.
                                  (Registrant)

                                    By:  /s/William H. Baumhauer
                                    William H. Baumhauer
                                    Chairman of the Board, President and
                                    Chief Executive Officer

                                    Date:  September 28, 2000

                                    By: /s/Frederick J. Dreibholz
                                    Frederick J. Dreibholz
                                    Vice President, Chief Financial Officer

                                  and Treasurer

                                    Date:  September 28, 2000

Pursuant to the requirement of the Securities  Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant,  and
in the capacities and on the date indicated.

      Signature                        Title

      William H. Baumhauer             Chairman of the Board

      Timothy Barakett*                Director

      James Goodwin*                   Director

      Nathaniel Rothschild*            Director

      Alan D. Schwartz*                Director

      *By: /s/Frederick J. Dreibholz   Date:  September 28, 2000
      Frederick J. Dreibholz
      Vice President, Chief Financial Officer and Treasure

                    Report of Independent Public Accountants

To:   Champps Entertainment, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Champps
Entertainment,  Inc.  and  subsidiaries  as of July  2,  2000  and  the  related
consolidated  statement of operations,  cash flows and changes in  shareholders'
equity  for  the  year  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly the consolidated  financial position of Champps  Entertainment,  Inc. and
subsidiaries  as of July 2, 2000 and the results of their  operations  and their
cash  flows for the year then ended in  conformity  with  accounting  principles
generally accepted in the United States.

Arthur Andersen LLP

Denver, Colorado,
September 5, 2000.
(except Note 13 as to which
the date is September 20, 2000)

INDEPENDENT AUDITORS' REPORT

Champps Entertainment, Inc.:

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Champps
Entertainment,  Inc. and subsidiaries (formerly Unique Casual Restaurants, Inc.)
as of June 27, 1999 and the related consolidated statements of operations,  cash
flows  and  changes  in  stockholders'  equity  for each of the two years in the
period ended June 27, 1999. These financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the companies as of June 27, 1999
and the  results  of their  operations  and their cash flows for each of the two
years in the period ended June 27, 1999, in conformity  with generally  accepted
accounting principles.

Deloitte & Touche LLP
Boston, Massachusetts
October 1, 1999

                           Champps Entertainment, Inc.

                           Consolidated Balance Sheets

                      As of July 2, 2000 and June 27, 1999
                                 (In thousands)

                                                              2000         1999
                                                             -----         -----

ASSETS
Current assets:

   Cash and cash equivalents                              $  4,373     $  7,240
   Restricted cash, current                                    437          397
   Accounts receivable, net                                  1,512        1,288
   Inventories                                               2,022        1,205
   Prepaid expenses and other current assets, net            1,320        1,637
   Net assets held for sale                                    452        1,665
                                                          --------     --------
     Total current assets                                   10,116       13,432

Restricted cash, non-current                                     -        2,596
Property and equipment, net                                 52,555       36,096
Investment                                                       -        2,748
Goodwill                                                     3,825            -
Other assets, net                                              597        2,270
                                                          --------     --------
   Total assets                                           $ 67,093     $ 57,142
                                                          ========     ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                       $  4,507     $  5,264
   Accrued expenses                                          7,520        8,679
   Current portion of capital lease obligations              1,873        1,843
   Current portion of notes payable                            657          167
                                                          --------     --------
     Total current liabilities                              14,557       15,953
Capital lease obligations, net of current portion            2,191        4,064
Notes payable, net of current portion                       14,603           83
Other long-term liabilities                                  5,620        9,223
                                                          --------     --------
     Total liabilities                                      36,971       29,323
                                                          --------     --------

Commitments and contingencies (Note 12 and 13)

Shareholders' equity:
   Common stock ($.01 par value per share;  authorized  30,000 shares and 11,659
     and 11,647 issued and outstanding at July 2,

     2000 and June 27, 1999, respectively)                     117          116
   Additional paid-in capital                               79,389       79,360
   Accumulated deficit                                     (49,384)     (51,657)
                                                          --------     --------
     Total shareholders' equity                             30,122       27,819
                                                          --------     --------
      Total liabilities and shareholders' equity          $ 67,093     $ 57,142
                                                          ========     ========


      The accompanying notes are an integral part of these balance sheets.

<TABLE>

                           CHAMPPS ENTERTAINMENT, INC.
                      CONSOLIDATED  STATEMENTS OF OPERATIONS  Fiscal Years Ended
        July 2, 2000, June 27, 1999 and June 28,1998

                      (In thousands, except per share data)
<CAPTION>

                                                      2000        1999        1998
                                                    --------    --------    ---------
Revenues:
<S>                                                   <C>         <C>          <C>
   Sales                                           $ 108,312   $  87,392    $  76,711
   Franchising and royalty, net                          802         558          989
                                                   ---------   ---------    ---------
      Total revenues                                 109,114      87,950       77,700
                                                   ---------   ---------    ---------
Costs and expenses:
   Cost of sales and operating expenses               94,115      78,412       69,310
   General and administrative expenses                 6,804      18,998       10,804
   Depreciation and amortization                       4,072       3,441        3,080
   Impairment, exit and other charges                    460       1,305        1,436
   Gain on sale of restaurant to related party             -           -         (677)
   Other expenses (income), net                          279        (127)        (254)
   Loss of sale of marketable securities               1,034           -            -
                                                   ---------   ---------    ---------
     Total costs and expenses                        106,764     102,029       83,699
                                                   ---------   ---------    ---------
Income (loss) from continuing operations before
   cumulative effect of change in accounting for
   preopening costs                                    2,350     (14,079)      (5,999)
                                                   ---------   ---------    ---------
Loss from discontinued operations:

   Income (loss) from discontinued operations              -         910      (20,749)
   Loss on disposal of discontinued operations             -     (10,753)           -
                                                   ---------   ---------    ---------
     Loss from discontinued operations                     -      (9,843)     (20,749)
                                                   ---------   ---------    ---------
Income (loss) before cumulative effect of change
   in accounting for preopening costs                  2,350     (23,922)     (26,748)
Cumulative effect of change in accounting for
   preopening costs                                        -           -         (987)
                                                   ---------   ---------    ---------
Net income (loss) before provision for income
   taxes                                               2,350     (23,922)     (27,735)
   Provision for income taxes                             77           -            -
                                                   ---------   ---------    ---------
Net income (loss)                                  $   2,273   $ (23,922)   $ (27,735)
                                                   =========   =========    =========

Basic income (loss) per share:
   Income (loss) before discontinued operations
     and cumulative effect of accounting change    $    0.20   $   (1.21)   $   (0.52)
   Loss from discontinued operations                       -       (0.85)       (1.81)
   Cumulative effect of accounting change                  -           -        (0.08)
                                                   ---------   ---------    ---------
     Net income (loss)                             $    0.20   $   (2.06)   $   (2.41)
                                                    =========   =========    =========

Diluted income (loss) per share:
   Income (loss) before discontinued operations
     and cumulative effect of accounting change    $    0.19   $   (1.21)   $   (0.52)
   Loss from discontinued operations                       -       (0.85)       (1.81)
   Cumulative effect of accounting change                  -           -        (0.08)
                                                   ---------   ---------    ---------
     Net income (loss)                             $    0.19   $   (2.06)   $   (2.41)
                                                   =========   =========    =========

Basic weighted average shares outstanding             11,654      11,622       11,489
                                                   =========   =========    =========

Diluted weighted average shares outstanding           11,742      11,622       11,489
                                                   =========   =========    =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<TABLE>

                           CHAMPPS ENTERTAINMENT, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
         Fiscal                  Years  Ended  July 2, 2000,  June 27,  1999 and
                                 June 28,1998 (In thousands)

<CAPTION>

                                                                             Additional

                                                                    Common    Paid-in       Accumulated       Group
                                                     Shares         Stock     Capital         Deficit         Equity          Total
                                                     ------         -----     -------         -------         ------          -----
<S>                                                    <C>           <C>          <C>           <C>            <C>            <C>
Balance, June 29, 1997                                    1      $      -      $      -      $      -       $ 79,053       $ 79,053
Net liabilities contributed by                            -
   former Parent                                          -             -             -             -         (1,528)        (1,528)
Common stock issued in                                    -
   connection with distribution                           -
   by former Parent                                  11,425           114        77,411             -        (77,525)             -
Common shares issued                                    167             2           606             -              -            608
Net loss                                                  -             -             -       (27,735)             -        (27,735)
                                                     -------------------------------------------------------------------------------
Balance, June 28, 1998                               11,593           116        78,017       (27,735)             -         50,398
Common shares issued                                     54             -           100             -              -            100
Non-cash compensation                                     -             -         1,243             -              -          1,243
Net loss                                                  -             -             -       (23,922)             -        (23,922)
                                                     -------------------------------------------------------------------------------
Balance, June 27, 1999                               11,647           116        79,360       (51,657)             -         27,819
Common shares issued                                     12             1            29             -              -             30
Net income                                                -             -             -         2,273              -          2,273
                                                     -------------------------------------------------------------------------------
Balance, July 2, 2000                                11,659      $    117      $ 79,389      $(49,384)      $      -       $ 30,122
                                                     ===============================================================================
</TABLE>

    The accompanying notes are an integral part of these financial statements.

<TABLE>

                           CHAMPPS ENTERTAINMENT, INC.
                      CONSOLIDATED  STATEMENTS  OF CASH FLOWS Fiscal Years Ended
         July 2, 2000, June 27, 1999 and June 28,1998

                                 (In thousands)

<CAPTION>

                                                                                             2000             1999             1998
                                                                                             ----             ----             ----
Cash flows from operating activities:

<S>                                                                                         <C>              <C>              <C>
Net income (loss)                                                                        $  2,273        $ (23,922)       $ (27,735)
Cumulative effect of change in accounting for preopening costs                                  -                -              987
Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
     Depreciation and amortization                                                          4,448            4,145           10,227
     Non-cash compensation from continuing operations                                         500              331              265
     Non-cash compensation from discontinuing operations                                        -              912                -
     Gain on sale of property and equipment                                                     -                -              (56)
     Gain on sale of restaurant to related party                                                -                -             (677)
     Loss on write-off of notes receivable                                                    146                -                -
     Impairment, exit costs and other charges                                                 460            1,305           24,625
     Loss on investment                                                                         -            2,252                -
     Loss on sale of La Salsa Investment                                                    1,034                -                -
Changes in assets and liabilities, net of dispositions:

   Restricted cash                                                                          2,556             (391)           2,398
   Changes in current assets and liabilities, net                                          (1,968)            (205)         (10,980)
   Changes in other long-term assets and liabilities, net                                  (1,639)           1,470            2,473
                                                                                         --------         --------         --------

     Net cash provided by (used in) operating activities                                    7,810          (14,103)           1,527
                                                                                         --------         --------         --------
 Cash flows from investing activities:

Net proceeds from sale of discontinued operations                                               -           33,068                -
Proceeds from sale of La Salsa Investment                                                   1,714                -                -
Purchase of property and equipment                                                        (13,929)         (10,391)          (7,318)
Purchase of restaurants from franchisees                                                  (11,350)               -                -
Proceeds from sale of restaurant to related party                                               -                -            1,515
Net proceeds from net assets held for sale                                                    768                -                -
                                                                                         --------         --------         --------
    Net cash (used in) provided by investing activities                                   (22,797)          22,677           (5,803)
                                                                                         --------         --------         --------
Cash flows from financing activities:

Proceeds from issuance of common stock                                                         30              100              343
Repayment of debt                                                                          (2,410)          (1,811)          (1,865)
Proceeds from equipment financing                                                               -            1,023            3,642
Proceeds from mortgage financing                                                           14,500                -                -
                                                                                         --------         --------         --------
   Net cash provided by (used in) financing activities                                     12,120             (688)           3,458
                                                                                         --------         --------         --------

Net (decrease) increase in cash and cash equivalents                                       (2,867)           7,886             (818)

Cash and cash equivalents (overdrafts), beginning of period                                 7,240             (646)             172
                                                                                         --------         --------         --------
Cash and cash equivalents (overdrafts), end of period                                    $  4,373         $  7,240         $   (646)
                                                                                         ========         ========         ========

</TABLE>

   The accompanying notes are an integral part of the financial statements.

                           CHAMPPS ENTERTAINMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal Years Ended
        July 2, 2000, June 27, 1999 and June 28, 1998

                (Dollars in thousands, except per share amounts)

1.    Background and Basis of Presentation

Background

Champps  Entertainment,  Inc. (the  "Company"),  formerly known as Unique Casual
Restaurants,  Inc.,  is a  Delaware  corporation  formed  on  May  27,  1997  in
connection   with  the   spin-off  to  holders  of  the  common  stock  of  DAKA
International,   Inc.  ("DAKA  International")   pursuant  to  the  transactions
described  below  in  Note 2 (the  "Spin-off"  or  "Spin-off  Transaction").  At
inception,  and  continuing  through  November  1998,  the  Company's  principal
business activities were to own and operate the restaurant operations previously
operated by various  subsidiaries and divisions of DAKA  International  prior to
the  formation and the Spin-off of the Company.  At July 2, 2000,  the Company's
principal  business  activity is to own, operate and franchise Champps Americana
casual dining  restaurants.  The Company's Champps operations serve customers in
upscale restaurant settings throughout the United States.

Basis of Presentation

The accompanying  consolidated financial statements include, for various periods
of time, the accounts of the Company,  Champps Operating Corporation,  Inc., the
Great Bagel & Coffee Company ("Great Bagel & Coffee"),  Casual Dining  Ventures,
Inc. ("CDVI") and Restaurant  Consulting Services,  Inc. ("RCS").  Great Bagel &
Coffee ceased  operations on June 28, 1998. The Company sold its interest in RCS
on May 24, 1999. On November 24, 1998, the Company  completed the sale of all of
the  outstanding  common  stock of  Fuddruckers,  Inc.  ("Fuddruckers")  to King
Cannon,  Inc.  as  discussed  more  fully in Note 4. The  historical  results of
operations of  Fuddruckers,  Inc. and its majority  owned  subsidiary,  Atlantic
Restaurant Ventures,  Inc. ("ARVI") have been treated as discontinued operations
for all  periods.  The  historical  DAKA  International  basis in the assets and
liabilities of the spun-off operations  transferred to the Company in connection
with the  transactions  described in Note 2 have been  recorded as the Company's
initial cost basis. Significant intercompany balances and transactions have been
eliminated in consolidation.

2.    Formation of the Company

On May 27, 1997, DAKA International and its wholly-owned subsidiary, Daka, Inc.,
a  Massachusetts  corporation  ("Daka"),  entered into an Agreement  and Plan of
Merger  (the  "Merger  Agreement")  with  Compass  Interim,   Inc.,  a  Delaware
corporation,  a wholly-owned  subsidiary of Compass  Holdings,  Inc., a Delaware
corporation,  a  wholly-owned  subsidiary  of  Compass  Group PLC  (collectively
"Compass"),  pursuant to which  Compass  agreed to commence a tender  offer (the
"Offer") for all of the outstanding  shares of DAKA  International  common stock
(the  "Merger").  The  Offer was  consummated  on July 17,  1997 (the  "Spin-off
Transaction Date"). Immediately prior to the consummation of the Offer, pursuant
to a plan of contribution  and  distribution as described in the  Reorganization
Agreement  (the  "Reorganization  Agreement"),  dated as of May 27, 1997, by and
among DAKA International,  Daka, the Company and Compass, DAKA International and
certain of its  subsidiaries  made  various  contributions  of assets and equity
interests to each other in the form of dividends  and capital  contributions  in
order to divest  DAKA  International  of its  restaurant  businesses  which were
contributed to the Company.

During 1998, certain remaining  non-restaurant  operating assets and liabilities
of DAKA  International  were also  contributed  to the Company (the  "Additional
Capital Contribution")  consisting of notes receivable,  property and equipment,
and accounts payable, accrued expenses and certain contingent liabilities. These
assets  and  liabilities   resulted  in  a  net  decrease  to  group  equity  of
approximately  $1,500 and have been recorded  within their  respective  captions
during fiscal 1998.

Following  the  consummation  of the Offer,  Compass  merged  with and into DAKA
International.  Pursuant to the Offer,  DAKA  International  distributed to each
holder of record shares of DAKA International  common stock, one share of common
stock  of the  Company  for  each  share  of DAKA  International  owned  by such
stockholder   (the   "Distribution").   No   consideration   was  paid  by  DAKA
International's  stockholders for the shares of the Company's common stock. As a
result  of the  Distribution,  the  Company  ceased to be a  subsidiary  of DAKA
International  and began operating as an  independent,  publicly held company on
July 17, 1997.

3.    Purchase of Franchised Restaurants

On June 29, 2000, the Company purchased two restaurants  located in Eden Prairie
and Minnetonka,  Minnesota from existing franchisees. The Company paid $5,675 in
cash for each of the two  restaurants.  Concurrent  with the  acquisitions,  the
Company entered into two separate mortgage loan agreements each in the amount of
$4,750,  the terms of which are  described in Note 10. The Company has accounted
for the acquisition of the  restaurants  using the purchase method in accordance
with  Accounting  Principles  Board  ("APB")  Opinion No. 16.  Accordingly,  the
purchase price has been allocated to the assets and  liabilities  acquired based
upon their  estimated  fair value.  The excess of  purchase  price over the fair
value of identifiable assets and liabilities has been recorded as goodwill.  The
resulting  goodwill  balance  of $3,825 is being  amortized  over the  estimated
useful  life of 20 years  using the  straight-line  method.  The  allocation  of
purchase  price is  preliminary,  and is  subject to  adjustment  based upon the
results of  appraisals  and further  assessment  of the fair value of assets and
liabilities  to be  performed  during  the twelve  month  period  following  the
acquisition.

Had the acquisition of the two franchised  restaurants occurred at the beginning
of fiscal  year 2000,  unaudited  proforma  revenues  would have been  $122,300.
Unaudited proforma income would have been $2,900.

On  February  2,  1998,  the  Company  sold the  Minnetonka,  Minnesota  Champps
restaurant to a former officer and director (See Note 4).

4.    Disposition Transactions

Sale of Fuddruckers

On November 24, 1998, the Company  completed the sale of all of the  outstanding
common stock of  Fuddruckers  to King Cannon,  Inc. (the "Buyer")  pursuant to a
Stock  Purchase  Agreement  (the  "Agreement"),  dated as of July 31,  1998 (the
"Fuddruckers  Sale").  The sale price was  $43,000  in cash,  subject to certain
adjustments.  At the  closing,  the Company  disbursed  approximately  $2,500 to
escrow agents to be held pending  resolution of certain  contingent  obligations
discussed  further below.  At July 2, 2000,  $402 continues to be held in escrow
and is reported as restricted cash. In addition,  the Company paid approximately
$9,000  associated  with the early  termination  of  certain  leases,  obtaining
landlord consents to the transaction, certain litigation settlements, and legal,
accounting and severance  expenses.  An additional $5,500 was used to settle the
Company's  obligations under a put/call agreement which was originally due to be
paid in January 2000. The Company  received  approximately  $2,600 in previously
restricted  cash  balances,  which  were  released  by virtue  of the  Company's
settling certain of the obligations  discussed above. The Company also purchased
two closed  Fuddruckers  locations  and recorded  assets held for sale valued at
approximately  $1,600.  The  sale  was  approved  by a  vote  of  the  Company's
shareholders on November 5, 1998.

Pursuant to the  Agreement,  King  Cannon had 120 days from the closing  date to
review and propose  adjustments  to the portion of the estimated  purchase price
related to working capital. During November 1999, King Cannon sought payment for
additional  working  capital  adjustments  totaling  $78.  As this  request  was
received  beyond the 120-day period allowed for working  capital  adjustments as
defined in the  Agreement,  the Company has  recognized  no  liability  for this
assertion.  On April 6, 2000,  King Cannon filed for arbitration for the payment
of this  demand.  Prior to this  assertion,  the  Company  and King  Cannon have
adjusted the purchase price by approximately $1.5 million,  including  interest,
for working capital adjustments.  This reduction in estimated purchase price has
been  included  in the loss from  discontinued  operations  in the  accompanying
financial statements for fiscal year 1999.

Closure of Great Bagel & Coffee

On June 28, 1998,  the Company ceased all operations of the Great Bagel & Coffee
business.  Previously,  on December 30, 1997,  Great Bagel & Coffee had acquired
the assets and  liabilities of one of its former  franchisees,  then operating a
commissary and eight Great Bagel & Coffee restaurants in Phoenix,  Arizona.  The
Company had hoped that this transaction  would help Great Bagel & Coffee improve
sales and margins,  and also provide the best opportunity for a possible sale of
the  business.  However,  the business did not improve and no buyer or strategic
partner  could be  located.  Accordingly,  a decision  was  reached to close the
business.  The Company has recorded  impairment and exit costs  associated  with
this decision of $1,400 in the accompanying  consolidated  financial  statements
for fiscal 1998.

Other Transactions

Effective July 1, 1997, the Company  entered into a sale and services  agreement
with RCS whereby  the Company  sold to RCS for an  aggregate  purchase  price of
$2,300  certain data  processing  equipment.  The purchase  price was  evidenced
through a promissory note due June 30, 2002 which bore interest at 6% per annum.
The  promissory  note was  contributed  to the Company as part of the additional
capital  contribution.  The  Company  also  received  DAKA  International's  50%
interest in RCS at the Spin-off  Transaction  Date.  The Company  entered into a
two-year service agreement with RCS for data processing and consulting  services
for an annual fee of $1,800.  The Company  consolidated RCS' operations  through
May 24, 1999, when the Company sold its 50% interest in RCS to RCS pursuant to a
Stock  Redemption  and  Debt  Restructuring  Agreement  (the  "Stock  Redemption
Agreement"). As part of this transaction,  the Company also canceled all amounts
due to the Company from RCS, including a note and accrued interest in the amount
of  $2,500.  In  consideration  for  its  shares  of RCS  common  stock  and the
cancellation of the note and accrued interest,  the Company received cash in the
amount of $750,  certain computer equipment and software valued at approximately
$142, a commitment to complete  certain work in progress valued at approximately
$313 without charge to the Company,  a three year  consulting  and  professional
data processing  agreement  valued at  approximately  $750 without charge to the
Company,  cancellation of approximately $263 in accounts payable to RCS, and the
release of the Company for a contingent  obligation related to RCS employment of
its Chief Executive Officer.  The Company recorded a loss on this transaction of
approximately $350 in fiscal 1999.

On  February 2, 1998,  the  Company  sold a Champps  restaurant  in  Minnetonka,
Minnesota  to Dean  Vlahos,  a former  Director  of the  Company  and the former
President and Chief  Executive  Officer of Champps  Americana,  Inc., for $2,900
representing  the  fair  value  of the  restaurant  based  upon  an  independent
appraisal.  The purchase price was settled  through a cash payment by Mr. Vlahos
of $1,500 and the cancellation of Mr. Vlahos' employment  contract.  The Company
recognized a net gain in fiscal 1998 of approximately  $700 on this transaction.
The Company reacquired the restaurant in 2000 (see Note 3).

5.    Summary of Significant Accounting Policies

Fiscal Year

The Company's  fiscal year ends on the Sunday closest to June 30th. For purposes
of these notes to the consolidated financial statements,  the fiscal years ended
July 2, 2000,  June 27, 1999 and June 28, 1998,  are referred to as 2000,  1999,
and 1998, respectively. Fiscal 2000 contains 53 weeks. Fiscal 1999 and 1998 each
contain 52 weeks.

Significant Estimates by the Company

In the process of preparing its consolidated  financial statements in accordance
with accounting  principles generally accepted in the United States, the Company
estimates the appropriate carrying value of certain assets and liabilities which
are not readily apparent from other sources.  The primary  estimates  underlying
the Company's consolidated financial statements include allowances for potential
bad debts on accounts and notes receivable,  the useful lives and recoverability
of its assets  such as  property,  equipment  and  intangibles,  fair  values of
financial  instruments,  the realizable value of its tax assets and accruals for
workers  compensation,  general  liability  and health  insurance  programs  and
representations   and  warranties  provided  in  connection  with  the  Spin-off
Transaction  and  Fuddruckers  Sale.  Management  bases its estimates on certain
assumptions,  which they believe are reasonable in the present circumstances and
while actual  results  could differ from those  estimates,  management  does not
believe  that any  change in those  assumptions  in the near term  would  have a
material effect on the Company's  consolidated financial position or the results
of operations.

Concentration of Credit Risk

The Company extends credit to its Champps'  franchisees on an unsecured basis in
the normal course of business.  No individual  franchisee is  significant to the
Company's  franchisee base. The Company has policies  governing the extension of
credit and collection of amounts due from franchisees.

The Company's  allowance for uncollectible  accounts  receivable and related bad
debt expense are not material for each period presented.

Cash Equivalents and Restricted Cash

Cash equivalents  consist of highly liquid  investments with a maturity of three
months or less at the date of purchase.  These  investments are carried at cost,
which  approximates  fair value.  The Company placed  certificates of deposit to
serve as cash  collateral  for stand-by  letters of credit in the amount of $35,
$417 and $2,600 at July 2, 2000,  June 27,1999 and June 28, 1998,  respectively.
Such  collateral  commitments  have  expired or will  during  calendar  2000 and
accordingly  they have been  classified  as current  assets in the  accompanying
consolidated financial statements.

Inventories

Inventories are stated at the lower of cost,  principally  determined  using the
first-in,  first-out  method, or market value.  Inventories  include the initial
cost  of  smallwares  with  replacements  charged  to  expense  when  purchased.
Approximately  80% of the  Company's  food  products and supplies are  purchased
under a distribution contract with Sysco Corporation.

The components of inventories are as follows:

                                     2000        1999
                                     ----        ----
Food and liquor products            $ 830       $ 617
Smallwares                            865         292
Supplies                              327         296
                                  --------    --------
                                   $2,022      $1,205
                                  ========    ========

Prepaid Expenses and Other Current Assets

Through  June  29,  1997,  the  Company  had  capitalized   direct   incremental
pre-opening  costs associated with the opening of new or the expansion and major
remodeling of existing  restaurants  with such costs being amortized over twelve
months.  In April 1998, the American  Institute of Certified Public  Accountants
("AICPA") issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities"  ("SOP  98-5")  which  requires   companies  to  expense  all  costs
associated with pre-opening activities. The effect of adopting the provisions of
SOP 98-5  during 1998 was to expense  approximately  $987 of  capitalized  costs
existing at June 29, 1997, of which  approximately $800 is related to continuing
operations.  The Company has reported this expense as a cumulative  effect of an
accounting  change  in  the  accompanying  fiscal  1998  consolidated  financial
statements.

Property and Equipment

Property and equipment is stated at cost.  Property and equipment is depreciated
using the straight-line method over the estimated useful lives of the assets. As
a pre-condition to the Fuddruckers Sale, in November 1998, the Company purchased
certain  point  of  sale  terminals,  which  were  on an  operating  lease  with
Fuddruckers equipment. These point of sale terminals were written down to market
value, and a charge of $850 was included in general and administrative  expenses
in fiscal 1999. In June 1999, it was determined that the point of sale terminals
would  need  to  be  replaced  to   accommodate   new   software   requirements.
Consequently,   the  estimated  useful  life  was  shortened   resulting  in  an
accelerated  depreciation  charge of approximately $360. The remaining value was
depreciated  in the first  quarter  of  fiscal  2000 when  these  machines  were
retired. Leasehold improvements and assets capitalized pursuant to capital lease
obligations  are amortized over the shorter of the initial lease term,  contract
term or the  estimated  useful life.  Useful lives range from 15 to 20 years for
buildings and leasehold improvements and 3 to 10 years for equipment.

Accrued Insurance Costs

The Company has purchased commercial  insurance to cover workers'  compensation,
general  liability,  and various other risks for claims  incurred after June 29,
1997.  Through  June  29,  1997,  the  Company  was  self-insured  for  workers'
compensation, general liability, and various other risks up to specified limits.
The  Company's  share of  prior  workers'  compensation  and  general  liability
programs of DAKA International  through June 29, 1997 were allocated using labor
costs and the aggregate costs of such programs were determined through actuarial
studies  which  determined  the  estimated  amount  required to be provided  for
incurred incidents. In connection with the Spin-off Transaction,  the Company is
obligated to indemnify Compass for all claims arising subsequent to the Spin-off
Transaction,  including  claims related to employees of DAKA  International  not
continuing  with the  Company  after the  Spin-off  Transaction,  that relate to
events  occurring prior to the Spin-off  Transaction  Date. The Company believes
that any claims  related to its  obligation to further  indemnify  Compass after
July 2, 2000 are adequately accrued.

Reserves

The Company had previously  recorded  liabilities as of June 27, 1999 associated
with the activities of certain predecessor  companies which were either spun-off
or sold to other entities. In addition, the Company had previously recorded exit
costs associated with the Company's relocation to Denver, Colorado. For the year
ending  July 2,  2000,  certain  of  these  reserves  were  reallocated  to more
accurately  reflect  revisions to  estimates  occurring  during the period.  The
Company  believes that these  reserves are adequate but not excessive to provide
for the outcome of the related  contingencies.  Such  amounts are expected to be
paid over the next several  years as the amounts  become known and payable.  The
following tables display the activity and balances  relating to the reallocation
of the reserves:

<TABLE>
<CAPTION>

                                          Champps     Predecessor      Assets held      Total
                                        Obligations    Obligations      for sale       Reserves
                                        -----------    -----------      --------       --------
<S>                                        <C>             <C>             <C>            <C>
Balance at June 27, 1999                 $ 2,528         $ 6,643         $     -        $ 9,171
Additional expense recognition               460               -               -            460
Deductions                                (2,011)         (1,980)              -         (3,991)
Revision to estimate                        (139)           (311)            450              -
                                         -------         -------         -------        -------

Balance at July 2, 2000                  $   838         $ 4,352         $   450        $ 5,640
                                         =======         =======         =======        =======
</TABLE>

The reserve  for assets held for sale is netted  against the asset held for sale
value on the balance sheet. The exit and other costs and predecessor obligations
reserves  are  incorporated  into the  balances  for accrued  expenses and other
long-term liabilities.

Other Long-Term Liabilities

Other  long-term  liabilities  are  comprised of deferred rent  liabilities  and
management's estimate of the non-current portion of the liability related to the
Company's workers' compensation and general liability self-insurance program and
are included in the summary of reserves described above.

Deferred Rent Assets and Liabilities

Deferred rent assets, included in other assets, represent the difference between
the  cost  and  the  net  proceeds  received  from  property  sold  pursuant  to
sale-leaseback  agreements and are amortized on a  straight-line  basis over the
initial  term of the lease.  For leases  which  contain  rent  escalations,  the
Company  records the total rent payable during the lease term on a straight-line
basis over the term of the lease. In addition, lease incentive payments received
from landlords are recorded as deferred rent  liabilities and are amortized on a
straight-line basis over the lease term as a reduction of rent expense.

Group Equity

Prior  to the  Distribution,  group  equity  represented  the  net  intercompany
activities between the Company and DAKA International.  As of June 29, 1997, the
Company had issued 1,000 shares of its common  stock,  par value $.01 per share,
to DAKA  International  for $.01 in connection  with its formation.  Such shares
were  reported  within  group  equity  for  purposes  of the  1997  consolidated
financial statements.

Revenue Recognition

The Company  records  sales from its  restaurant  operations  and  franchise and
royalty fees as earned.  Coupons and other discounts are recorded as a reduction
of sales.

Franchising and Royalty Income

Franchise fees for new  franchises are recognized as revenue when  substantially
all  commitments and  obligations  have been fulfilled,  which is generally upon
commencement of operations by the franchisee.  The Company has also entered into
development  agreements granting  franchisees the exclusive right to develop and
operate  restaurants in certain territories in exchange for a development fee or
other consideration.

Amounts received in connection with such  development  agreements are recognized
as  franchise  fee  revenues  when earned  since the Company is not  required to
provide  any  future  services  and such  fees are  non-refundable.  Franchisees
entering into  development  agreements  are also  required to execute  franchise
agreements  and pay the standard  franchise fee which is sufficient to cover the
Company's contractual obligations to the franchisee for each unit opened. To the
extent that the Company provides services beyond its contractual obligation, the
Company charges the franchisee a fee for such additional  services.  The Company
recognized  development fee revenues of $86 in 1998. No development fee revenues
were recognized in fiscal 2000 or 1999.

Royalty  revenues from  franchised  restaurants  are recognized as revenues when
earned in  accordance  with the  respective  franchise  agreement.  The  Company
recognized  royalty revenues of $802, $558, and $903 during 2000, 1999 and 1998,
respectively.

Income Taxes

The Company  recognizes  deferred tax assets and  liabilities for the future tax
consequences   attributable  to  differences  between  the  carrying  value  for
financial  reporting  purposes  and the tax basis of assets and  liabilities  in
accordance with Statement of Financial  Accounting  Standards  ("SFAS") No. 109,
"Accounting for Income Taxes."  Deferred tax assets and liabilities are recorded
using the enacted tax rates  expected to apply to taxable income in the years in
which such  differences  are expected to be recovered or settled.  The effect on
deferred tax assets and  liabilities,  resulting from a change in tax rates,  is
recognized  as a component  of income tax expense  (benefit)  in the period that
such change  occurs.  Targeted  jobs tax  credits are treated as a reduction  of
income tax expense in the year such credits are utilized.

Prior to the Distribution,  the Spun-off  Operations were generally  included in
the  consolidated  U.S.  Federal  income  tax return and  certain  combined  and
separate state and local income tax returns of DAKA International.  For purposes
of the 1997 financial  statements,  a credit in lieu of taxes has been presented
as if the Company was a stand-alone  taxpayer.  Current  income tax  liabilities
(assets) were considered to have been paid  (received)  from DAKA  International
and were recorded through the group equity account.

The Company has entered into an indemnification  agreement,  whereby the Company
has agreed to indemnify  Compass  against all state and federal income and other
tax  liabilities  of DAKA  International  for any  period  before  the  Spin-off
Transaction  Date as well as any tax  consequences  resulting  from the Spin-off
Transaction.  The Company  believes  that any amounts due to Compass  under this
indemnification agreement after July 2, 2000 are adequately accrued.

As part of the sale of Fuddruckers, the Company agreed to indemnify the acquirer
against liabilities arising from breaches of the acquisition agreement,  as well
as identified pre-closing  liabilities,  including tax liabilities.  The Company
believes  that  any  amounts  due to  King  Cannon  under  this  indemnification
agreement after July 2, 2000, are adequately accrued.

As of  July 2,  2000,  the  Company  has  $2,573  accrued  for  tax  liabilities
associated  with Fuddrucker  pre-closing  events and DAKA  International  events
occuring prior to the Spin-off Transaction Date.

Accounting for Stock-Based Compensation

The Company continues to apply APB Opinion No. 25, which recognizes compensation
cost based on the intrinsic value of the equity instrument awarded.  The Company
discloses  the  required pro forma  effect on results  from  operations  and net
income  (loss)  per share in  accordance  with  SFAS No.  123,  "Accounting  for
Stock-Based Compensation".

Options to purchase shares of DAKA International  common stock held by employees
remaining with the Company after the Distribution were converted into options to
purchase shares of the Company's common stock in accordance with Emerging Issues
Task Force Abstract 90-9 and, accordingly,  such conversion had no effect on the
Company's 1998 consolidated financial position or results of operations.

In fiscal 1999, the Company  recorded  non-cash  compensation  expense of $1,243
related to extension of termination  dates and early vesting of stock options of
an officer of the Company.  Of this total,  $912 was related to the Fuddruckers'
sale and was included in the loss from discontinued  operations.  The balance of
$331 was included in general and administrative expense.

During 1998, the Company  recorded  compensation  expense of $236 related to the
repurchase  from certain  option holders of an aggregate of 172,044 common stock
options at an average price of $1.37 per option.

Cash Flow Information

Cash payments for interest  aggregated  $699,  $635 and $491 in 2000,  1999, and
1998, respectively.

Equity and Income (Loss) Per Share

The authorized  capital stock of the Company consists of 30,000 shares of common
stock,  of which 11,659 and 11,647 shares were issued and outstanding as of July
2, 2000 and June 27, 1999, respectively, and 5,000 shares of preferred stock, of
which no shares are issued and  outstanding.  Approximately  11,425  shares were
issued upon the consummation of the Spin-off Transaction.

For purposes of the fiscal 1999 and 1998 earnings per share calculations,  stock
options  have  been   excluded  from  the  diluted   computation   as  they  are
anti-dilutive.  Had such options been included in the computation,  the weighted
average shares would have increased by approximately 132 shares. For purposes of
the fiscal 2000 earnings per share  calculation,  stock options of approximately
88 have been  included in the diluted  computation.  At July 2, 2000 the Company
had approximately 1,615 options outstanding.

Impairment of Long-Lived Assets, Exit Costs and Other Charges

The  Company  evaluates  the  carrying  value  of  long-lived  assets  including
property,   equipment  and  related  goodwill  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  value  may not be  recoverable  in
accordance  with SFAS No. 121,  "Accounting  for the  Impairment  of  Long-Lived
Assets and for  Long-Lived  Assets to Be  Disposed  Of." Under SFAS No.  121, an
assessment is made to determine if the sum of the expected  future  undiscounted
cash flows from the use of the assets and eventual  disposition is less than the
carrying value. If the sum of the expected  undiscounted cash flows is less than
the carrying  value, an impairment loss is recognized by measuring the excess of
carrying  value  over  fair  value  (generally  estimated  by  projected  future
discounted cash flows from the applicable  operation or independent  appraisal).
In  2000,  the  Company  recorded  approximately  $460  in  exit  costs  against
continuing  operations.  Included in exit costs is approximately $152 related to
the termination of nine employees and the termination of the Wayzata,  Minnesota
lease and other obligations.

In 1999,  the  Company  recorded  approximately  $1,300  in exit  costs  against
continuing  operations.  Included in exit costs is approximately $250 related to
the termination of fifteen  employees  during fiscal 2000. The Company also paid
amounts related to non-severance costs in fiscal 2000.

In addition,  during 1999, the Company has recorded approximately $8,100 against
continuing  operations of which $2,700  represents  losses on the sale and write
down  of  non-essential  assets,  $2,700  represents  changes  in  estimates  of
continuing  obligations  for the  Company's  predecessor  businesses  and $2,700
represents losses on business and lease contracts.  The Company recorded accrued
liabilities aggregating $3,900 in connection with such charges.

In 1998, the Company  recorded a provision for  continuing  operations of $1,400
which  represents  exit costs  associated  with closing the Great Bagel & Coffee
business.

New Accounting Pronouncements

In June 1998, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative  Instruments and Hedging Activities," as amended
by SFAS No.138. SFAS No. 133 establishes standards for accounting for derivative
instruments as hedging activities.  The Company has determined that the adoption
of SFAS No. 133,  as amended by SFAS No. 138,  will have no material  impact on
the Company's results of operations or financial condition.

6.    Investments

In January  1996,  the Company  acquired a 16.7% equity  interest in the form of
convertible  redeemable  preferred stock (the "La Salsa Preferred  Stock") in La
Salsa  Holding Co. ("La Salsa"),  a franchisor  and operator of La Salsa Mexican
restaurants for approximately $5,000. On July 16, 1999, Santa Barbara Restaurant
Group ("SBRG"), a publicly held corporation,  reported that it had completed the
acquisition  of La Salsa.  In  connection  with this  transaction,  the  Company
exchanged  all of its Series D  Convertible  Preferred  Stock for  approximately
1,278 shares of common  stock of SBRG,  of which  approximately  121 shares have
been  placed  in  escrow  to cover any  claims  for  indemnification  by SBRG in
connection  with  this  transaction.   The  Company  recorded  a  loss  on  this
transaction  of  approximately  $2,252 in the fourth quarter of fiscal 1999. The
Company  accounted for the  investment in SBRG in accordance  with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". During 2000,
the Company recorded a loss of $1,034 upon the sale of the investment.

7.    Property and Equipment

Property and equipment consist of the following:

                                                             2000          1999
                                                             ----          ----
Land                                                      $  5,092       $    -
Buildings & leasehold improvements                          33,887       22,597
Equipment                                                   21,716       18,117
Construction in progress                                     4,779        7,506
                                                           --------     --------
                                                            65,474       48,220
Accumulated depreciation and amortization                  (12,919)     (12,124)
                                                           --------     --------
                                                          $ 52,555     $ 36,096
                                                           ========     ========

8.    Other Assets

The components of other assets are as follows:

                                                        2000               1999
                                                        ----               ----
Notes receivable                                      $   25            $ 1,904
Other                                                    572                366
                                                      ------             ------
                                                      $  597             $2,270
                                                      ======             ======

Notes  receivable  include a note from a  franchisee  bearing  interest  at 10%,
requires monthly payments and interest,  and matures in 2003. As part of the RCS
sale, a note payable of $750 was recorded in the fourth  quarter of fiscal 1999.
That note was paid in full during fiscal 2000.

9.    Accrued Expenses

The components of accrued expenses are as follows:

                                                             2000           1999
                                                             ----           ----
Salaries, wages and related taxes                          $1,447         $1,874
Accrued Taxes                                               2,761          2,305
Insurance accruals                                          1,708          2,987
Lease termination accruals                                      -          1,047
Legal expenses                                                566              -
Gift Certificates                                             197            145
Other                                                         841            321
                                                           ------         ------
                                                           $7,520         $8,679
                                                           ======         ======

10.   Long-Term Debt

The components of long-term debt are as follows:

                                                         2000              1999
                                                         ----              ----
Notes Payable                                        $ 15,260           $   250
Capital lease obligations                               4,064             5,907
                                                     --------          --------
                                                       19,324             6,157
Less current portion                                   (2,530)           (2,010)
                                                     --------          --------
   Total                                             $ 16,794          $  4,147
                                                     ========          ========

Maturities of long-term debt,  including capital lease  obligations,  at July 2,
2000 are as follows:

                2001                                  $ 2,530
                2002                                    1,558
                2003                                    1,369
                2004                                      460
                2005                                      349
                Thereafter                             13,058
                                                     --------
                                                     $ 19,324

                                                     ========


Notes payable and capital lease obligations consist of the following:

<TABLE>
<CAPTION>

                      Effective                                                                           Fiscal year
                      interest        Face        Current         Nature            Nature of           2000 interest
Lender                  rate         amount       Balance        of debt            collateral            expense           Maturity
------------------------------------------------------------------------------------------------------------------------------------

<S>                     <C>            <C>          <C>            <C>                 <C>                   <C>             <C>
FINOVA                                                           Mortgage            Lombard
                       10.23%        $ 5,000      $ 4,987       Financing           resaturant             $    43       April, 2020

FINOVA                                                           Mortgage          Eden Prairie
                       10.36%          4,750        4,744       Financing           restaurant                   4         May, 2020

FINOVA                                                           Mortgage           Minnetonka
                       10.36%          4,750        4,744       Financing           restaurant                   4         May, 2020

Capital Leases                                                   Capital        Various equipment
   (See Note 12)      Various        Various        4,064         Lease      and leasehold improvements        576           Various

Notes payable to                                                   Note
former employees      Various        Various          785        Payable               N/A                      72           Various
                                                 --------                                                  -------
                                                 $ 19,324                                                    $ 699
                                                 ========                                                  =======
</TABLE>

11.   Income Taxes

Deferred tax assets and (liabilities) are comprised of the following:

                                                 2000         1999         1998
                                                 ----         ----         ----
Current:
  Accrued expenses                           $   2,668    $  2,651     $    282
  Prepaid expenses                                (91)           -         (366)
  Other                                             -           86          526
                                             ---------   ---------     ---------
                                                 2,577       2,737          442
                                             ---------   ---------     ---------


Noncurrent:
  Net operating loss carryforwards           $ 16,083     $ 14,192     $  9,457
  Depreciation and amortization                  (905)       1,856       12,215
  Deferred income                                  62           73          268
                                             ---------    ---------    ---------
                                               15,240       16,121       21,940
                                             ---------    ---------    ---------

Less valuation allowance                     $(17,817)    $(18,858)    $(22,382)
                                             ---------    ---------    ---------
                                                    0            0            0
                                             =========    =========    =========

The following is a reconciliation  of income taxes at the federal statutory rate
to the Company's income tax expense (benefit):

<TABLE>

                                                             2000        1999        1998
                                                             ----        ----        ----

<S>                                                          <C>         <C>         <C>
Income tax provision (benefit) computed at statutory
   federal income tax rates                                 $ 823    $ (8,372)   $ (9,707)
Adjustment related to net operating loss limitations            -      11,860           -
Non-deductible costs                                          154          36         162
(Decrease) increase in the valuation allowance             (1,041)     (3,524)      7,298
State Income Tax Provision                                     77           -           -
Other, net                                                     64           -       2,247
                                                         ---------  ----------  ----------

   Provision for Income Taxes                                $ 77    $      -    $      -
                                                         =========  ==========  ==========
</TABLE>

As of July 2, 2000, the Company had federal net operating loss  carryforwards of
approximately  $45,951,  expiring at various dates through 2019.  For the fiscal
years ended 2000, 1999 and 1998, the Company provided a valuation  allowance for
the tax benefit of the deferred tax assets not expected to be utilized  based on
historical  operating  results and other available  evidence.  During the fiscal
years ended 1998 the valuation allowance was increased by $7,300, principally as
a result of the Company's losses. During 1999, the valuation allowance decreased
$3,500 on a net basis due to adjustments  to the Company's  deferred tax assets,
offset by current year  operating  losses.  During 2000 the valuation  allowance
decreased $1,041 on a net basis due to adjustments to the Comapny's deferred tax
assets offset by current year taxable losses.

12.   Commitments and Contingencies

Fuddruckers Representations and Indemnity

The Agreement  contains various  representations  and warranties by the Company.
These include, without limitation, representations and warranties by the Company
as to (i) the organization, good standing, and capitalization of Fuddruckers and
its subsidiaries;  (ii) proper corporate authority,  no conflicts, no violations
and requisite  approvals;  (iii) ownership of the Shares; (iv) material accuracy
of  financial  statements,   books  and  records;  (v)  absence  of  undisclosed
liabilities  and absence of material  adverse  change;  (vi)  litigation;  (vii)
compliance  with  law;  (viii)  status  of  employee  benefit  plans  and  labor
relations;  (ix) tax matters;  (x) title to and condition of assets; (xi) leases
and real property;  (xii) material contractual obligations and licenses;  (xiii)
intellectual property matters; (xiv) insurance policies;  (xv) brokers,  finders
and other fees; (xvi) franchises; and (xvii) environmental matters.

The Company's  representations and warranties contained in the Agreement survive
the closing and will expire on December 31, 2000 (the "Survival  Period") except
that  (i)  representations  and  warranties  made  by the  Company  relating  to
environmental  matters will  survive the closing  date until  December 31, 2003,
(ii)  representations  and warranties  made by the Company  relating to employee
matters  and income  taxes will  survive the closing  date until  expiration  of
applicable statutes of limitations and (iii) representations and warranties made
by the Company with respect to (a) the Company's power to execute the Agreement,
the Company's  having executed the Agreement with required  corporate action and
that the  Agreement  is valid and  binding by its terms,  the due  organization,
valid  existence  and good  standing  of the Company  and  Fuddruckers,  (b) the
representation stating the execution and delivery of the Agreement: (1) does not
violate any law,  order,  by-law or article of  incorporation  of the Company of
Fuddruckers; (2) does require approval of shareholders of Fuddruckers other than
the  Company;  (3) does not result in a lien or title defect in assets or shares
of Fuddruckers;  or (4) does result in a claim against Fuddruckers,  its assets,
shares of Fuddruckers  and King Cannon;  and (c) the  capitalization  and equity
securities of Fuddruckers shall survive the closing  indefinitely.  In addition,
any covenants or agreements of the Company under the Agreement,  and any and all
indemnification   obligations   relating   thereto  shall  survive  the  closing
indefinitely, unless earlier expiring in accordance with their respective terms,
including,  without limitation,  the Company's indemnification  obligations with
respect to covenants (i) regarding  environmental  matters, (ii) current pending
legal  proceedings;  (iii)  liability  for taxes;  (iv)  sub-leases  for certain
Fuddruckers restaurants; (v) undisclosed contractual obligations; (vi) violation
of the Company's  representations  and  warranties in the  Agreement;  and (vii)
obligations arising between the signing on the Agreement and the closing,  lease
termination amounts and rent adjustment amounts.

King Cannon's representations and warranties under the Stock Purchase Agreement,
and its  indemnification  obligations  arising  from  such  representations  and
warranties,  survive the Closing and will expire and  terminate  on December 31,
2000.  Any  covenants  or  agreements  of King Cannon  under the Stock  Purchase
Agreement, and any and all indemnification  obligations relating thereto survive
the Closing  indefinitely,  unless  earlier  expiring in  accordance  with their
respective terms.

The Company and Champps Operating Corporation, Inc. are obligated to jointly and
severally indemnify King Cannon and Fuddruckers and their respective  affiliates
from and against  any losses,  assessments,  liabilities,  claims,  obligations,
damages,   costs  or  expense   which   arise  out  of  or  relate  to  (i)  any
misrepresentations  in,  breach  of  or  failure  to  comply  with  any  of  the
representations,  warranties,  undertakings,  covenants  or  agreements  of  the
Company,  Fuddruckers  and related  entities,  and any  affiliate of any of them
contained  in the  Stock  Purchase  Agreement;  (ii) any  environmental  matters
related to  Fuddruckers,  its  affiliates  of  business;  (iii) any  retained or
undisclosed liabilities; or (iv) the Company's obligations with respect to lease
termination   amounts  and  rent  adjustment   amounts.   With  respect  to  the
indemnification for lease termination  amounts and rent adjustment amounts,  the
Company  obtained each  required  consent and required  estoppel from  landlords
prior to the closing of the sale. As a result, the Company believes the risk for
a material claim for  indemnification  related to any environmental  matters, or
each of the lease termination  amounts and rent adjustment amounts provisions is
remote.

Further, at the closing, the Company established a $1.0 million cash escrow as a
fund for payment of any claims for  indemnification  pursuant to the  Agreement.
Such  escrow  does  not  serve to  limit  the  Company's  maximum  exposure  for
indemnification  claims.  However,  the Company believes the risk of a claim for
indemnification exceeding the $1.0 million escrow is remote. As of July 2, 2000,
$636 was  disbursed  for  amounts  presented  to the  Company by King Cannon for
indemnification. Certain of these amounts are currently being disputed.

The maximum  aggregate  liability of the Company on account of any breach of any
representation or warranty is limited to the amount of the final purchase price.
There is no cap or limit on the  liability  of the  Company  to King  Cannon  on
account of any breach by the Company of any of its covenants or agreements under
the Stock  Purchase  Agreement  or on  account  of  indemnification  obligations
covering matters other than breaches of representations and warranties, provided
that,  if King  Cannon is  entitled to recover any losses in excess of the final
purchase  price,  the Company may either (i) require  King Cannon to reconvey to
the  Company  full  ownership  and  control of the shares and all assets (to the
extent  then owned by King  Cannon or  Fuddruckers)  that are being  transferred
pursuant  to the Stock  Purchase  Agreement  in such a manner as to rescind  the
transactions  contemplated  by the Stock Purchase  Agreement,  in which case the
Company  will pay King Cannon an amount  equal to (x) the final  purchase  price
plus (y) all additional  investments  made in Fuddruckers  following the closing
plus (z) an amount  equal to an internal  rate of return equal to 25% on the sum
of items (x) and (y); or (ii) pay to King Cannon all of the losses with  respect
to which King Cannon is entitled to indemnification.

As part of the  consideration  under the Stock Purchase  Agreement,  each of the
Company and Champps Operating Corporation agreed that, for a period of ten years
following  the closing  date,  neither  will (i)  directly or  indirectly,  own,
manage,  operate,  finance,  join, or control,  or participate in the ownership,
management, operation, financing or control of, or be associated as a partner or
representative  in  connection  with,  any  restaurant  business  that is in the
gourmet  hamburger  business  or whose  method of  operation  or trade  dress is
similar to that employed in the operation of the "Fuddruckers"  restaurants;  or
(ii) directly or indirectly solicit, induce or attempt to induce any person then
employed  by  Fuddruckers  or King  Cannon to enter the employ of the Company or
Champps Operating Corporation, or any of their respective affiliates.

Nothing  contained  in the  Stock  Purchase  Agreement  limits  the right of the
Company  or  Champps  to operate  the  business  of  Champps as it is  currently
conducted  or  other  restaurant  concepts  that do not  compete  directly  with
Fuddruckers  or to own  less  than a 5%  legal or  beneficial  ownership  in the
outstanding equity securities of any publicly traded corporation.

Spin-Off Indemnifications

The  Company  agreed  to  assume  certain  liabilities  in  connection  with the
Spin-off.  In  addition,  the  Company  entered  into a  Post-Closing  Covenants
Agreement  which  provides for  post-closing  payments by the Company to Compass
under certain  circumstances.  The Company also agreed to indemnify  Compass for
certain losses on liabilities  existing prior to the Spin-off  Transaction  Date
but unidentified at such date. This indemnification  began to expire on December
31,  1999.   The  Company   believes  the  risk  of  a  significant   claim  for
indemnification being presented by Compass is remote.

Pursuant  to the terms of the  Spin-off  Transaction,  the  Company  assumed the
existing  lease  obligations  and  purchase  commitments  of DAKA  International
consisting principally of the corporate  headquarters in Danvers,  Massachusetts
which expires  during 2001. In 2000, the Company exited this location and paid a
lease termination penalty of $758.

Leases

The Company has entered into lease agreements for certain restaurant  facilities
and office  space.  The fixed  terms of the leases  range up to 20 years and, in
general,  contain multiple renewal options for various periods ranging from 5 to
25 years.  Certain leases contain provisions which require  additional  payments
based on sales  performance and the payment of common area  maintenance  charges
and real estate taxes.

In December 1995,  Champps  obtained a commitment for a $40,000  development and
sale-leaseback  financing  facility  from AEI  Fund  Management,  Inc.  ("AEI").
Pursuant to the terms of the  agreement,  the Company would sell and  lease-back
from AEI,  Champps  restaurants to be constructed and would pay a commitment fee
of 1% of the sale price of each property  sold to AEI. The purchase  price would
be equal to the total project cost of the property, as defined in the agreement,
not to exceed its appraised value (the "Purchase Price").  The unused commitment
expired on December 31, 1998.  The leases provide for a fixed minimum rent based
on a  percentage  of  the  respective  property's  Purchase  Price,  subject  to
subsequent  increases based on the Consumer Price Index. The leases also provide
for an initial term of 20 years with two 5-year renewal  options  exercisable at
the option of Champps.  As of July 2, 2000,  eight Champps  restaurants had been
fully funded under this commitment and none had been partially funded.

Future minimum lease payments pursuant to leases with non-cancelable lease terms
in excess of one year at July 2, 2000 are as follows:

                                                         Operating       Capital
Fiscal Years Ending                                       Leases         Leases
-----------------------------------------                ---------       -------

2001                                                    $   6,716      $   2,150
2002                                                        6,699          1,320
2003                                                        6,578            996
2004                                                        6,551             63
2005                                                        6,479              -
Thereafter                                                 71,796              -
                                                        ---------      ---------
Total future minimum lease payments                     $ 104,819          4,529
                                                        =========
Less amount representing interest                                          (465)
                                                                       ---------
Present value of future minimum lease payments                         $   4,064
                                                                       =========

Total  rent  expense  in 2000,  1999 and 1998  approximated  $7,055,  $6,509 and
$4,315,  respectively.  Contingent  rentals  included  in rent  expense  are not
material for the periods presented.

Included in property  and  equipment  in 2000,  1999 and 1998 are  approximately
$9,300, $9,300 and $9,300,  respectively,  of equipment held pursuant to capital
lease  arrangements.  The related  accumulated  amortization  was  approximately
$5,000, $3,700 and $2,400, respectively.

13.  Litigation

The  Company  has  agreed  to  assume  certain  contingent  liabilities  of DAKA
International  in connection  with the Spin-off and has agreed to assume certain
contingent  liabilities  of  Fuddruckers  for periods  prior to its sale to King
Cannon as discussed  elsewhere in this Form 10-K.  Further,  the Company is also
engaged in various  actions  arising in the  ordinary  course of  business.  The
Company believes,  based upon consultation with legal counsel, that the ultimate
collective  outcome of these matters will not have a material  adverse effect on
the Company's  consolidated  financial condition,  results of operations or cash
flows.

In the third  quarter of fiscal 2000, a  Washington,  D.C.  superior  court jury
awarded a former  Daka  employee  $187 in  compensatory  damages  and  $4,813 in
punitive  damages based on the  employee's  claim of negligent  supervision  and
retaliation,  due to alleged conduct that occurred in 1996 at a former Daka food
service location. While Daka was formerly a subsidiary of DAKA International and
while DAKA  International is now a subsidiary of Compass Group, PLC., the events
at issue in the case took place  while a  predecessor  company of Champps  owned
DAKA  International.  On March 28, 2000,  DAKA  International  filed  post-trial
motions,  including  motions to reduce  the  damage  awards,  for  judgment  not
withstanding the verdict, or in the alternative,  for a new trial. These motions
were  subsequently  denied by the court.  On September  20,  2000,  Daka filed a
Notice of Appeal with the Court of Appeals for the  District  of  Columbia.  The
Company may be liable for the payment of any amounts ultimately due by Daka upon
final determination of the case. The Company has not accrued any amounts related
to the punitive damages in this matter. Any such amounts will be reported in the
period that payment becomes probable. Based upon its analysis, and the advice of
counsel,  the Company believes that the ultimate outcome of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.

14.   Stock Options and Employee Benefit Plans

Stock Options

On July 17, 1998, the Company  adopted a stock option and restricted  stock plan
for the  benefit of the  employee  and  non-employee  directors  of the  Company
whereby the Company  authorized and reserved for issuance 1,250 shares of common
stock. In connection with the Spin-off Transaction, each outstanding option held
by a Company employee to acquire DAKA  International  common stock was converted
into an option to acquire one share of common stock of the Company and one share
of common stock of DAKA  International  (the "Adjusted  Options").  The exercise
prices of the Adjusted Options were determined such that each option holder will
remain  in an  equivalent  economic  position  before  and  after  the  Spin-off
Transaction.

On November 4, 1999, the Company authorized and reserved for issuance 750 shares
of common stock in connection with a non-qualified  stock option  agreement with
the Company's Chief Executive  Officer.  The options expire on June 30, 2001 and
are exercisable at $4.00 per share.

Through  the  date  of  the  Spin-off   Transaction,   the  Company's  employees
participated in various incentive and non-qualified stock option plans sponsored
by DAKA  International  (the  "Plans").  The Plans  provided for the granting of
options for terms of up to ten years to eligible  employees  at exercise  prices
equal to the fair market  value of the DAKA  International  common  stock on the
date of the  grant.  In  recognition  of the  terms of stock  option  plans,  on
November 24, 1998,  with the sale of Fuddruckers,  all outstanding  stock option
grants became fully vested.  All option grants held by employees who transferred
to King Cannon as part of the  Fuddruckers  sale  expired at the end of February
1999.

The  Company  has  granted  options  to its  executive  officers,  managers  and
directors in the corporate office,  the regional directors of operations and the
general manager of the  restaurants.  In addition,  options have been granted to
the corporate office employees below the level of manager and director.

The following table presents activity under the Company's stock option plan:

                                                        Weighted     Weighted
                                                         Average   Average Grant

                                        Number of       Exercise     Date Fair
                                         Options          Price       Value
                                        ---------       --------   -------------
Outstanding at June 28, 1998               851,230     $   5.11
    Granted                              1,028,500         5.79       $   1.70
    Exercised                              (35,150)        1.48
    Forfeited                           (1,026,905)        6.57
                                        -----------    --------
Outstanding at June 27, 1999               817,675         5.12
    Granted                                963,750         4.00           2.94
    Exercised                                    -       N/A
    Forfeited                             (165,975)        5.71
                                        -----------    --------
Outstanding at July 2, 2000              1,615,450     $   4.39
                                        ===========    ========

The  number  of  options  exercisable  at the  dates  presented  below and their
weighted average exercise price were as follows:

                                                                        Weighted
                                                                         Average

                                                 Options      Excercisable
                                               Exercisable       Price
                                              ------------   ------------

          June 28, 1998                           246,265     $     3.16

          June 27, 1999                           817,675           5.12

          July 2, 2000                            715,950           4.89


The following table sets forth information regarding options outstanding at July
2, 2000:

<TABLE>
<CAPTION>

                                                   Weighted Average                      Weighted Average
   Number of      Range of      Weighted Average      Remaining       Number Currently  Price for Currently
    Options        Prices           Price          Contractual Life     Exercisable        Exercisable
----------------------------------------------------------------------------------------------------------

      <S>             <C>             <C>                <C>                <C>                  <C>
    193,500      $1.21 - 2.41      $   1.95               1               193,500            $   1.95
    967,000       4.00 - 4.86          4.03               9                67,500                4.38
     64,500       5.12 - 5.85          5.22               5                64,500                5.22
    383,000       6.03 - 6.72          6.34               2               383,000                6.34
      7,450      7.00 - 13.80          8.23               4                 7,450                8.23
</TABLE>



The Company  applies APB  Opinion  No. 25 to account  for various  stock  plans.
Accordingly,  pursuant to the terms of the plans, no compensation  cost has been
recognized for the stock plans.  However,  if compensation cost for stock option
grants  issued  to  Company  employees  during  2000,  1999  and  1998  had been
determined using the fair value method under the provisions of SFAS No. 123, the
Company's net income (loss) and pro forma net income (loss) per share would have
been decreased/increased to the pro forma amounts shown below:

                                            2000           1999            1998
                                            ----           ----            ----
Net income (loss):
   As reported                           $ 2,273       $(23,922)       $(27,735)
   Proforma                                1,314        (24,532)        (28,869)
Net income (loss) per share:

   As reported                           $  0.20       $  (2.06)       $  (2.41)
   Proforma                                 0.11          (2.11)          (2.51)


The pro forma net income (loss)  reflects the  compensation  cost only for those
options granted during 2000, 1999 and 1998.  Compensation cost is reflected over
a stock option's vesting period and compensation  cost for options granted prior
to July 2, 1995 is not considered.

The fair value of each stock  option  granted in 2000,  1999 and 1998 under DAKA
International  stock option  plans was  estimated on the date of grant using the
Black-Scholes  option-pricing  model. The following key assumptions were used to
value grants issued for each year:

                        Weighted      Average

                      Average Risk   Expected                    Dividend
                       Free Rate       Life       Volatility       Yield
                      ------------   --------     ----------     --------

          1998          5.360%        4 Years       14.73%         0.00%

          1999          5.720%        2 Years       53.44%         0.00%

          2000          5.710%        4 Years       80.14%         0.00%



The weighted-average fair values per share of stock options granted during 2000,
1999 and 1998 were $0.95, $5.79 and $2.14, respectively. It should be noted that
the option  pricing  model used was  designed to value  readily  tradable  stock
options with  relatively  short lives.  The options granted to employees are not
tradable  and have  contractual  lives of up to ten years.  However,  management
believes  that the  assumptions  used and the model  applied to value the awards
yields a  reasonable  estimate  of the fair value of the  grants  made under the
circumstances.

Employee Stock Purchase Plan

The Company has reserved  400,000 shares of its common stock to be offered under
its 1997 Stock  Purchase Plan (the  "Purchase  Plan").  Under the Purchase Plan,
eligible  employees of the Company may  participate  in  quarterly  offerings of
shares made by the Company.  The  participating  employees  purchase shares at a
discount from the lower of fair value at the beginning or end of each  quarterly
offering period through payroll deductions.  In fiscal 2000, employees purchased
approximately 12,000 shares for a total of $30.

Shareholders' Rights Plan

On January 30, 1998, the Company  adopted a Shareholder  Rights Plan designed to
enhance the Company's ability to protect all of its shareholders'  interests and
ensure  that  all  shareholders  receive  fair  treatment  in the  event  of any
potential  sale of the  Company.  On  December  8, 1999 the  Company's  Board of
Directors  approved  the  termination  of  Champps'   Shareholder  Rights  Plan,
effective on that date.

Employee Benefit Plan

The Company  sponsors a 401(k)  retirement  plan and,  prior to the  Transaction
Date, the Company's employees participated in a 401(k) retirement plan sponsored
by DAKA  International.  Both plans enabled employees to contribute up to 15% of
their annual  compensation.  The Company's  discretionary  contributions  to the
401(k) Plan have been  determined  by the Board for fiscal 2000,  1999 and 1998,
and by  DAKA  International  before  the  Spin-off  Transaction.  The  Company's
contribution  to the Plan for fiscal years 2000, 1999 and 1998 were $40, $30 and
$65, respectively.

15.   Fair Value of Financial Instruments

The estimated  fair value of financial  instruments  has been  determined by the
Company  using  available   market   information   and   appropriate   valuation
methodologies.  The following  methods and assumptions were used to estimate the
fair value of the Company's  financial  instruments for which it was practicable
to estimate that value:

Current  Assets  and  Liabilities  -  The  carrying  amount  of  cash,  accounts
receivable,  accounts  payable  and  accrued  expenses  approximates  fair value
because of the short maturity of these instruments.

Notes  Receivable - The carrying  value of notes  receivable  approximates  fair
value and was estimated  based on discounted  cash flows expected to be received
using  interest  rates at which similar loans are made to borrowers with similar
credit ratings, or if the loan is collateral dependent, management's estimate of
the fair value of the collateral.

Capital  lease  obligations - The carrying  value of capital  lease  obligations
approximates fair value based upon current market interest rates.

16.   Related Party Transactions

The Company's Chief Executive Officer received various below market stock option
grants in fiscal  1999.  The options  were an  extension  of options  previously
granted and recorded in prior periods.  The extension was awarded upon the Chief
Executive Officer's return to the Company. Non-cash compensation expense related
to these grants aggregated $1,243.

Fiscal 1999 results  included a $150 payment made to Atticus  Partners,  L.P., a
related  party,  as part of a proxy  settlement.  These  expenses were a partial
reimbursement of legal expenses.

In fiscal 1999,  Bear Stearns & Co. Inc.,  Inc.,  the employer of Alan Schwartz,
member of the  Company's  Board of  Directors,  received a fee of  approximately
$1,800 for services  related to the 1997 Spin-off  Transaction.  In fiscal 1999,
Bear Stearns provided services related to the Company's  financial and strategic
alternatives.

In fiscal 2000, Bear Stearns & Co.,  received  payment of $50 for  out-of-pocket
expenses associated with these services provided and accrued in fiscal 1999.

Joseph  O'Donnell,  who resigned from the Company's Board of Directors in August
1999,  is a principal of Osgood,  O'Donnell & Walsh,  which  provides  marketing
consulting services. In fiscal 1999, the Company paid Osgood,  O'Donnell & Walsh
approximately  $30 for such  services.  Mr.  O'Donnell  also owns a  controlling
interest in Pulseback,  Inc., which provides  restaurant  related services.  The
Company  holds notes payable from  Pulseback,  Inc. for  approximately  $75. The
Company  wrote off the full  value of this note in fiscal  1999.  During  fiscal
1999,  the Company  paid  Pulseback  approximately  $68 for  services  rendered,
primarily to Fuddruckers.