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 June 29, 1997

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


                         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.)


One Corporate Place, 55 Ferncroft Road, Danvers, MA                        01923
(Address of principal executive offices)                              (Zip Code)


                                  508-774-6606
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. YES X NO

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 October 2, 1997 was  $73,839,040  (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 October 2,
1997: 11,463,704

<PAGE>




                       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 December 9, 1997 pursuant
         to regulation 14A, which involves the election of directors.

                     Cross Reference Sheet between Items of
                   Registrant's Proxy Statement and Form 10-K

<TABLE>
<CAPTION>


FORM 10-K
Item No.            Item in Form 10-K                      Item in Proxy Statement
<S>       <C>                                   <C> 

PART III
                                                                                                           
10        Directors and Executive                Election of Directors and  Directors and  Committees
          Officers of the Registrant             in the  Company's  Proxy  Statement  relating to its
                                                 Annual   Meeting   of Stockholders   to  be  held on
                                                 December  9, 1997.

11        Executive Compensation                 Executive   Compensation   in  the  Company's  Proxy
                                                 Statement   relating   to  its  Annual   Meeting  of
                                                 Stockholders to be held on December 9, 1997.

12        Security Ownership of Certain          Principal   Stockholders   in  the  Company's  Proxy
          Beneficial Owners and Management       Statement   relating   to  its  Annual   Meeting  of
                                                 Stockholders   to  be held on December 9, 1997.

</TABLE>

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,
Unique  Casual  Restaurants,  Inc.,  One  Corporate  Place,  55 Ferncroft  Road,
Danvers, Massachusetts 01923.


<PAGE>


                                 FORM 10-K INDEX

                                     PART I


                                                                              

Item 1  Business

Item 2  Properties

Item 3  Legal Proceedings

Item 4  Submission of Matters to a Vote of Security Holders

                                  PART II

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

Item 6  Selected Financial Data                                                 

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

Item 8  Financial Statements and Supplementary Data                             

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

                                 PART III

Item 10 Directors and Executive Officers of the Registrant                      

Item 11 Executive Compensation                                                  

Item 12 Security Ownership of Certain Beneficial Owners and Management          

Item 13 Certain Relationships and Related Transactions                          

                                  PART IV

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



<PAGE>


              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.

Unique Casual Restaurants,  Inc. (the "Company") is a Delaware corporation which
was formed on May 27, 1997 prior to its  spin-off to holders of the common stock
of DAKA International,  Inc. ("DAKA International") pursuant to the transactions
described under the heading "Spin-off Transaction" herein (the "Spin-off").  The
Company's  principal  executive  offices are located at One Corporate  Place, 55
Ferncroft Road, Danvers,  Massachusetts 01923, and its telephone number is (508)
774-6606.  The  Company's  principal  business is to own,  operate and franchise
Fuddruckers, Champps Americana and Great Bagel & Coffee Company restaurants.

The Company's  Fuddruckers and Champps  operations serve customers in casual and
upscale restaurant settings,  respectively,  throughout the United States and in
Canada and the Middle East.  Great Bagel and Coffee  serves  coffee,  bagels and
sandwich  items in a cafe  setting in western  locations  of the United  States.
Restaurant operations are conducted through company-owned and franchised stores.

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 of  operations,  as presented in 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.

Recent Trends in Operations

For fiscal 1997, the Company  reported a net loss of $39 million compared with a
loss of $5.7 million in 1996.  Refer to the Combined  Financial  Statements  and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  for  information  regarding the Company's  financial  performance in
fiscal 1997 and 1996.
<PAGE>

Fuddruckers

Operations

Fuddruckers  restaurants,  with an average  bill of $6.45 per person and a "Kids
Eat Free" program after 4:00 p.m. on Monday  through  Thursday,  are designed to
appeal to both families and adults seeking value in a casual dining  atmosphere.
The restaurants offer a distinctive  atmosphere created by an open grill area, a
glassed-in  butcher shop, a display case featuring  choice steaks and hamburgers
that have been  freshly-cut  or ground and an open  bakery for  hamburger  buns,
brownies and cookies.  Each restaurant offers a substantially  similar menu that
prominently  features  Fuddruckers'  signature  hamburger in one-third pound and
one-half pound sizes.  Hamburgers are made from fresh beef, cut and ground daily
at each  restaurant  and  served on buns  baked  daily  "from  scratch"  at each
restaurant.  The hamburgers are available with optional  specialty toppings from
the grill. While the menu is focused on Fuddruckers' signature hamburger,  which
accounts for  approximately  65% of sales,  it also includes  fresh-cut,  ribeye
steak  sandwiches,  fresh-cut,  ribeye,  chopped steak and chicken platters with
baked potatoes,  various grilled chicken breast sandwiches,  hot dogs, a variety
of tossed and  specially  prepared  salads and soups,  fish  sandwiches,  french
fries, onion rings, soft drinks,  high quality milkshakes and bakery items. Beer
and wine are served and,  generally,  account for approximately 3% of restaurant
sales. The restaurants  permit guests to participate in the preparation of their
meals by allowing  them to garnish  their own entrees from a bountiful  array of
fresh lettuce,  tomatoes,  onions,  pickles, relish and a variety of condiments,
sauces and melted cheeses at the "fixin's bar." Guests generally place their own
orders and serve themselves, thereby minimizing waiting time.

Each restaurant  contains a principal  dining area from which guests may observe
the preparation of their meals, and, in some  restaurants,  an additional dining
area with a patio motif.  Decor of the  principal  dining area of a  Fuddruckers
restaurant  generally includes an open warehouse style with neon beverage signs,
wood tables and chairs and, in some instances, original shipping containers from
certain foods sold by the restaurant. The open grill area enables guests to view
the preparation of their meals, all of which are cooked to order.

The  typical  Fuddruckers  restaurant  is  located  in  a  suburban  area  in  a
free-standing  building  or in a shopping  center.  The area  within a five-mile
radius of the  restaurant  is usually zoned for retail,  office and  residential
uses.  Fuddruckers'  guests have an average  household  income of  approximately
$50,000.  Fuddruckers'  restaurants  typically range in size from 6,000 to 8,000
square feet with 200 to 300 seats and parking for between 100 and 200  vehicles.
Restaurants  built in fiscal years 1997 and 1996 are typically between 4,800 and
6,000 square feet with 160 to 220 seats.

The restaurants  are open seven days a week,  generally from 11:00 a.m. to 10:00
p.m.,  for lunch,  dinner and late night  meals.  Certain  restaurants  are open
earlier to accommodate the sale of freshly-baked goods. Restaurants are designed
to enable guests to complete their visit within a convenient  40-minute  period,
which  attracts  the  business  person  on a  limited  luncheon  schedule.  This
contributes to Fuddruckers' higher percentage of lunch (45%) versus dinner (55%)
sales than the industry average for casual dining restaurants.

All  restaurants   are  operated  in  accordance   with  strict   standards  and
specifications for the quality of ingredients,  preparation of food, maintenance
of premises and  associates  conduct,  as set forth in  Fuddruckers'  policy and
procedures manuals. At each restaurant, Fuddruckers emphasizes uniform standards
for product quality, portion control, courteous service and cleanliness.

<PAGE>

Fuddruckers establishes  specifications and approves purchasing arrangements for
basic menu  ingredients  and supplies for all its restaurants in order to obtain
favorable  prices and ensure  consistent  levels of quality and freshness.  Food
products in  Fuddruckers-owned  and  franchised  restaurants  are  regularly and
systematically tested for quality and compliance with Fuddruckers' standards.

Fuddruckers  emphasizes simplicity in its operations.  Its restaurants generally
have a total staff of one General Manager,  two or three Assistant  Managers and
25 to 45 other associates,  including full-time and part-time associates working
in  overlapping  shifts.  Since  Fuddruckers  generally  utilizes a self-service
concept, it typically does not employ waiters or waitresses.

During  fiscal  year  1996,  Fuddruckers   complemented  its  existing  menu  by
introducing "La Salsa Fresh Mexican Grill" in ten Fuddruckers restaurants in the
Los Angeles,  San Antonio,  Chicago and  Milwaukee  markets.  Seven outlets were
opened in fiscal 1997 and one location was closed. The La Salsa concept features
fresh,  healthy,  authentic  Mexican foods  prepared in a  stand-alone  "outlet"
inside the restaurant.  Under the terms of a 10-year  license  agreement with La
Salsa Holding,  Fuddruckers  will pay a franchise fee, royalty payments equal to
5% of gross  sales,  certain  training  costs and  marketing  fund fees for each
outlet  opened.  The  Company  does  not plan to open  any  additional  La Salsa
locations in fiscal 1998.

Management

Fuddruckers  restaurant  operations are currently divided into two regions, each
supervised by a Senior Vice President of Operations. The two regions are divided
into a total of fourteen districts, each supervised by a Director of Operations.
On average, each Director of Operations supervises eight restaurants and reports
to a Senior Vice President of Operations.

Marketing

Fuddruckers uses television, radio and print media to promote its various themes
in markets with a high  concentration of  Fuddruckers-owned  restaurants.  These
themes emphasize  Fuddruckers' unique name and fresh baked buns which are unique
characteristics  and  help  differentiate   Fuddruckers  from  other  restaurant
concepts.

Marketing research  conducted by Fuddruckers  indicates a strong consumer desire
for fresh,  high-quality  food.  Fuddruckers  restaurants,  which  feature fresh
produce  available at the "fixin's  bar," fresh beef ground daily and fresh buns
baked daily, address these consumer desires.

One of Fuddruckers'  most successful  marketing  programs is the "Kids Eat Free"
program. This program is designed to increase guest traffic during traditionally
slow days by allowing a child under age 12 to eat free Monday  through  Thursday
when an accompanying adult purchases a meal.

Fuddruckers has developed  local store marketing  manuals to assist its managers
and franchisees in the development of a marketing and public relations  strategy
for their geographic area.  Workshops,  seminars and marketing  manuals are made
available to all franchisees. In addition, Fuddruckers allows its franchisees to
use its  various  television,  radio  and  print  advertising  materials  in the
franchisees' markets for a nominal fee intended to cover Fuddruckers' cost.

Site Selection

Fuddruckers  uses  its own  personnel  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.
Fuddruckers  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 location.

<PAGE>

The average  total cost to  construct a typical  Fuddruckers  restaurant,  where
Fuddruckers purchases real estate, depending upon its location, is approximately
$1.5 million,  which includes  $265,000 for  furniture,  fixtures and equipment,
$510,000  for building and  improvements,  $680,000 for land and site work,  and
$50,000 related to pre-opening costs of the restaurant.  Since 1995, Fuddruckers
has arranged for  sale-leaseback  financing  whereby  Fuddruckers  acquires real
estate, constructs a new restaurant and then sells and leases back the property.
This has enabled  Fuddruckers  to open new  restaurants on sites where a leasing
arrangement was not available, with a minimal capital investment.

The  average  total  cost  to  construct  a  new  Fuddruckers  restaurant  where
Fuddruckers enters into a leasing arrangement is approximately $800,000 which is
comprised  of $265,000  for  furniture,  fixtures  and  equipment,  $485,000 for
leasehold improvements, and $50,000 related to pre-opening costs associated with
the  restaurant.  Fuddruckers  typically  receives  a  contribution  of  between
$300,000  and  $400,000  toward  the  construction  and  renovation  costs  from
landlords and believes that its growth enhances its ability to obtain attractive
leasing terms.  Despite this  favorable  condition,  there remains  considerable
competition among restaurant businesses for desirable sites.

Future development of Fuddruckers  restaurants will be accomplished  through the
sale  of  franchises  and  the  development  of  Fuddruckers-owned  restaurants,
although no new  Company-owned  restaurants  are planned  for fiscal  1998.  The
development of additional  restaurants is contingent upon locating  satisfactory
sites, financing, negotiating satisfactory leases or, alternatively, leasing and
converting  existing restaurant sites into Fuddruckers  restaurants.  It is also
dependent upon securing appropriate  governmental permits and obtaining beer and
wine licenses.

Franchising

Fuddruckers  offers  franchises  in  markets  where  it  deems  expansion  to be
advantageous  to the  development  of the  Fuddruckers'  concept  and  system of
restaurants.  Franchise  agreements  typically  grant  franchisees  an exclusive
territorial  license to operate a single  restaurant  within a  specified  area,
usually a four-mile radius  surrounding the franchised  restaurant.  Fuddruckers
has a close  relationship  with its franchisees and seeks to identify  potential
franchisees  with the  capability  and financial  resources to operate  multiple
restaurants. Of the 36 Fuddruckers franchisees, 17 operate multiple restaurants,
and 22 have operated Fuddruckers restaurants for more than five years.

Franchisees bear all direct costs involved in the development,  construction and
operation of their  restaurants.  In exchange for a franchise  fee,  Fuddruckers
provides its  franchisees  assistance in the following  areas:  site  selection,
prototypical  architectural  plans,  interior  and  exterior  design and layout,
training,  marketing and sales techniques,  assistance by a Fuddruckers "opening
team" at the time a franchised  restaurant  opens and  operations and accounting
guidelines set forth in various policies and procedures manuals.

All  franchisees  are required to operate their  restaurants in accordance  with
Fuddruckers'  standards and specifications,  including controls over menu items,
food quality and preparation.  Fuddruckers requires the successful completion of
its  training  program  by a  minimum  of three  managers  for  each  franchised
restaurant.  In addition,  franchised  restaurants  are  evaluated  regularly by
Fuddruckers for compliance with franchise  agreements,  including  standards and
specifications through the use of periodic, unannounced, on-site inspections and
standards evaluation reports.

The current standard franchise agreement provides for the payment to Fuddruckers
of a non-refundable  franchise fee of between $25,000 and $50,000 per restaurant
and  ongoing  royalties  of  5% of  gross  sales  of  each  restaurant.  Certain
multi-unit  franchisees  have  entered  into royalty  buy-down  agreements  with
Fuddruckers,  which  reduce  royalty  payments  required  under  the  respective
franchise  agreements.  The royalty buy-down agreements  generally provide for a
one-time payment to Fuddruckers  covering a period of twelve to fourteen months,
and an amendment of the underlying  franchise agreement to reduce the royalty to
3% of gross sales. Once a franchisee executes a buy-down agreement,  the royalty
on any  subsequent  franchise  agreement  will be  reduced to 3%. As of June 29,
1997, royalty buy-down agreements covered 53 franchise restaurants.



<PAGE>





                      Fuddruckers Locations - Company Owned

The following  table sets forth the locations of restaurants  owned and operated
by Fuddruckers as of October 1, 1997:

Domestic - Total 116   Domestic (Cont'd)          Domestic (Cont'd)

ALABAMA                INDIANA                    TEXAS
   Birmingham             Merrillville               Austin (3)
ARIZONA                KENTUCKY                      Clearlake
   Flagstaff              Florence                   Houston (11)
   Glendale            MARYLAND                      Irving
   Mesa (2)               Annapolis                  Kingwood
   Phoenix (2)            Baltimore                  Plano
   Scottsdale             Gaithersburg               San Antonio (4)
   Tempe                  Pikesville                 Stafford
   Tucson                 Rockville                  Woodlands
CALIFORNIA             MASSACHUSETTS              UTAH
   Burbank                Boston                     Layton
   Chula Vista            North Andover              Orem
   La Mesa                Saugus                     Sandy
   Lake Forest         MINNESOTA                     Taylorsville
   Lakewood               Bloomington             VIRGINIA
   Pasadena               Brooklyn Center            Alexandria
   San Diego              Burnsville                 Annandale
COLORADO                  Coon Rapids                Chesapeake (2)
   Aurora (2)             Eden Prairie               Colonial Heights
   Marston Park           Maple Grove                Fairfax
   Thornton               Roseville                  Falls Church
GEORGIA                   St. Louis Park             Fredericksburg
   Alpharetta          MISSOURI                      Herndon
   Atlanta                Maryland Heights           Midlothian
   Duluth                 St. Louis (2)              Newport News
   Kennasaw            OHIO                          Richmond
   Marietta               Cincinnati (2)             Vienna
   Norcross               Columbus (4)               Virginia Beach
   Peachtree City         Fields Ertel               Woodbridge
   Snellville             Forest Park             WISCONSIN
   Tucker                 Hilliard                   Brookfield
ILLINOIS                  Norwood
   Addison                
   Aurora
   Calumet City
   Downers Grove N
   Downers Grove S
   Highland Park
   Matteson
   Orland Park
   Palatine
   Schaumburg (2)








<PAGE>




Fuddruckers Restaurants - Franchised Locations

The  following  table  sets  forth the  locations  of  restaurants  operated  by
Fuddruckers franchisees as of October 1, 1997:

Domestic - Total 73      Domestic (Cont'd)         Domestic (Cont'd)

CALIFORNIA              NORTH CAROLINA             TEXAS
   Buena Park              Asheville                  Beaumont
   Citrus Heights          Charlotte                  College Station
   Concord                 Durham                     Killeen
   Walnut Creek            Greensboro                 Laredo
FLORIDA                    Hickory                    Lubbock
   Altamonte Springs       Huntersville               McAllen
   Clearwater              Jacksonville               Midland
   Coconut Grove           Matthews                   San Antonio (2)
   Coral Springs           Wilmington                 Temple
   Ft. Lauderdale       NORTH DAKOTA                  Waco
   Miami                   Fargo
   N. Miami Beach       OHIO
   Plantation              Akron                   International  - Total 10
   Tallahassee             Canton                  BAHRAIN
   Tampa                   Cleveland                  Adliya
MARYLAND                OREGON                        Manama
   Owings Mills            Lake Oswego             CANADA
MICHIGAN                   Portland                   Edmonton
   Flint                PENNSYLVANIA                  Saskatoon
   Kentwood                Greensburg              INDONESIA
   Sterling Heights        Harmarville                Kelapa Gading
MONTANA                    Lancaster               KUWAIT
   Billings                Philadelphia               Kuwait City
   Missoula                Fairless Hill           PUERTO RICO
NEBRASKA                SOUTH CAROLINA                Caguas
   Omaha                   Columbia                SAUDI ARABIA
NEW JERSEY                 Greenville (2)             Al Khobar
   New Brunswick           Hilton Head                Jeddah
   Paramus                 Myrtle Beach               Riyadh
   Parsippany              North Myrtle Beach
   Tom's River             Spartanburg
   Turnersville         SOUTH DAKOTA
   Union                   Rapids City
   Voorhees                Sioux Falls
   Wayne                TENNESSEE
NEW YORK                   Kingsport
   Amherst                 Nashville
   Westbury



<PAGE>




Champps

Operations

The Champps  Americana  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
$4.50  to  $14.25.   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 with 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  customer's  experience  is  enhanced  by  the  attitude  and  attention  of
restaurant  personnel.   Accordingly,  Champps  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.  Also,
employee enthusiasm is raised so that the employees can help increase the energy
level and excitement of the restaurant.

Champps-owned, franchised and licensed restaurants are designed and decorated in
a casual theme,  although they differ somewhat from each other. Existing Champps
restaurants range in size from 7,000 to 12,000 square feet while the new Champps
restaurant  prototype is  approximately  10,000 square feet.  Champps'  standard
restaurant  features a bar, open kitchen and dining on multiple levels including
a  diner-type  counter.  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 screens stimulate  customer  perception of activity and contribute to
the total entertainment experience and excitement of the restaurant.

An  important  part  of  the  Champps   Americana   dining   experience  is  the
entertainment.  Patrons may watch one of several  sporting events that are 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 and when the dress of the restaurant  staff is changed for the seasons.
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.  Although Champps  restaurants
differ  in some  respects,  Champps  attempts  to have  each  Champps-owned  and
franchised restaurant operate under uniform standards and specifications.

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
consists  of an  associate  manager,  two  floor  managers  and  a bar  manager.
Back-of-House  management 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 has achieved its historical  success while expending  minimal amounts on
advertising  and  marketing.  Champps  restaurants  have relied on location  and
customer word-of-mouth.  However,  Champps-owned  restaurants expend a different
amount of resources on in-restaurant marketing and promotions.

Site Selection

Champps uses its own personnel 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 location.

The average total cost to construct a typical Champps restaurant,  where Champps
purchases  real estate,  depending  upon its  location,  is  approximately  $4.5
million,  which  includes  approximately  $900,000 for  furniture,  fixtures and
equipment, $2.0 million for building and improvements, $1.2 million for land and
site work,  and $400,000  related to  pre-opening  costs of the  restaurant.  In
fiscal 1996, Champps arranged for sale-leaseback financing whereby Champps would
acquire real estate, construct a new restaurant and then sell and lease back the
property.  This has  enabled  Champps to open new  restaurants  on sites where a
leasing arrangement was not available, with minimal capital investment.


<PAGE>



The  average  total cost to  construct a new Champps  restaurant  where  Champps
enters  into a  leasing  arrangement  is  approximately  $3.3  million  which is
comprised of approximately $900,000 for furniture,  fixtures and equipment, $2.0
million for leasehold improvements, and $400,000 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. At June
29,  1997,  the Company had three new Champps  Company-owned  restaurants  under
construction and two Champps  restaurants under development,  which are expected
to open  in  fiscal  1998.  Development  of  Champps-owned  restaurants  will be
concentrated in selected  markets with population  density levels  sufficient to
support the restaurants.

Champps  believes its concept can be adapted to a variety of locations,  both in
terms of market  demographics and configuration of the restaurant.  The location
of Champps  restaurants are very  important.  Potential sites are reviewed for a
variety  of  factors,  including  trading-area  demographics,   such  as  target
population   density  and  household  income  levels;   an  evaluation  of  site
characteristics,   including  visibility,   accessibility,  traffic  volume  and
available  parking;  proximity to activity  centers,  such as shopping malls and
offices; and an analysis of potential competition.



Franchising

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.  Franchise  agreements grant  franchisees an exclusive  territorial
license to operate a single restaurant within a specified area. Currently, there
are two franchisees operating multiple restaurants.

A typical  franchisee pays an initial fee of $75,000 per restaurant,  of which a
part may be  associated  with a  development  fee, a  continuing  royalty fee of
3-1/4% of gross sales, and 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  provides 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.


<PAGE>



Champps Restaurant Locations

The following table sets forth the locations of restaurants  operated by Champps
and its franchisees as of October 1, 1997:

Company Owned Restaurant Locations         Franchised Restaurant Locations
   Domestic - Total 14                         Domestic - Total 11

CALIFORNIA                                 MINNESOTA
   Irvine                                     Burnsville
COLORADO                                      Maple Grove
   Denver                                     Maplewood
FLORIDA                                       Minneapolis
   Ft. Lauderdale                             New Brighton
INDIANA                                       Woodbury
   Indianapolis                               St. Paul
OHIO                                       NEBRASKA
   Columbus (2)                               Omaha
   Lyndhurst                               NORTH CAROLINA
MINNESOTA                                     Charlotte
   Minnetonka                              SOUTH DAKOTA
   Richfield                                  Sioux Falls
NEW JERSEY                                 WISCONSIN
   Edison                                     Greenfield
   Marlton
TEXAS
   Addison
   San Antonio
VIRGINIA
   Reston



<PAGE>



Centralized Functions

The Company  provides  Fuddruckers  and  Champps  with  centralized  purchasing,
accounting and management information services.

Purchasing

The Company capitalizes on the diversity of its businesses through a centralized
and coordinated  purchasing program and food distribution  network. On August 4,
1997, the Company  entered into a six-year  agreement with Alliant  Foodservice,
Inc.  ("Alliant",  formerly Kraft  Foodservice,  Inc.) pursuant to which Alliant
will  distribute  approximately  85%  of  food  and  food-related  purchases  of
Fuddruckers  and Champps.  The  agreement  with Alliant is  cancelable by either
party upon 90 days notice.  Fuddruckers  and Champps  franchisees  also have the
option of purchasing from Alliant. In addition, under the agreement,  Alliant is
furnishing to the Company  "Alliant-Link,"  Alliant's  on-line  product-ordering
software,   which  is  installed  in  all  Fuddruckers-owned  and  Champps-owned
restaurants.

The Company  also acts as a  restaurant  equipment  dealer,  enabling it to take
advantage of dealer pricing, manufacturer discounts and rebates. The Company has
not  experienced  any difficulty in obtaining an adequate supply of quality food
products at acceptable prices from its suppliers.

Accounting and Management Information Systems

The Company  provides  Fuddruckers  and Champps 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 and has recently implemented a new point of sale
system for its Fuddruckers  restaurants.  The  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 improve its ability
to control and manage its operations  efficiently.  Subsequent to June 29, 1997,
the  Company  has  outsourced  certain  of its data  processing  and  management
information systems to a 50% owned subsidiary,  Restaurant  Consulting Services,
Inc. See Note 2 to combined financial statements.

Competition

The restaurant industry is highly  competitive.  Fuddruckers and Champps compete
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.  Fuddruckers  believes  that their  competitive  position is enhanced by
providing   guests  with   moderately-priced   quality  food  in  a  comfortable
atmosphere.

The Company  believes  that the  businesses  of  Fuddruckers  and Champps  share
important  characteristics  in their desire to provide  guests with  discernible
value and the highest quality of customer service and dining atmosphere. 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,  restaurant-style
manner  where each of its  associates  place the guest  first,  Fuddruckers  and
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.  Fuddruckers  and Champps are 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.

Fuddruckers and 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 3% of Fuddruckers' and 37% of
Champps' total restaurants sales during fiscal year 1997. The failure to receive
or retain,  or a delay in obtaining,  a liquor license in a particular  location
could adversely  affect  Fuddruckers',  Champps' or a franchisee's  operation in
that  location  and could  impair  Fuddruckers',  Champps' or such  franchisee's
ability  to obtain  licenses  elsewhere.  Typically,  licenses  must be  renewed
annually and may be revoked or suspended for cause.

Fuddruckers  and 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.  Fuddruckers and Champps
each carry liquor  liability  coverage in the amount of $1 million.  However,  a
judgment against Fuddruckers or Champps under a "dram shop" statute in excess of
Fuddruckers'  or 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, Fuddruckers or Champps.

Research and Development

The Company is engaged in research  activities  relating to the  development  or
improvement of new and existing  products or services.  Fuddruckers and Champps,
together  with their  franchisees,  utilize test kitchen  facilities  to develop
recipes,  test food  products  and  equipment  and set  nutritional  and quality
standards.  Fuddruckers,  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 with the United States Patent and Trademark  Office
and with  certain  states,  including  the trade  names:  "Fuddruckers"  and the
"Fuddruckers  --  World's  Greatest  Hamburgers"  logo;  "Champ's",   "Champps",
"Champps American Sports Cafe" and "Champps Entertainment"; "The Great Bagel and
Coffee  Company";  the  "French  Quarter  Coffee  Co.;  and,  "Leo's  Deli",  in
connection  with providing bar and restaurant  services,  and in connection with
the sale of related food products (collectively, the "Marks").


<PAGE>



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 pays CRI an annual fee equal to the
lesser of  approximately  $260,000 or  one-quarter  percent ( 1/4%) 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%.

All  of the  service  marks,  trade  names  and  trademarks  are of  significant
importance to the businesses of Fuddruckers and Champps. Fuddruckers and Champps
have 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

Fuddruckers  and  Champps  sales  are  historically  higher  in the  spring  and
summer-time  months, due primarily to dining habits of its guests and eating out
trends of the general  public.

Corporate Offices and Associates

The Company is incorporated  under the laws of the State of Delaware and employs
approximately  70  associates  on a  full-time  basis,  three who are  executive
officers.

Fuddruckers  is  incorporated  under the laws of the State of Texas and  employs
approximately 5,000 associates on a full-time and part-time basis.

Champps is  incorporated  under the laws of the State of  Minnesota  and employs
approximately 2,000 associates on a full-time and part-time basis. Substantially
all restaurant associates,  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 associates
to be good.

The Company,  Fuddruckers  and Great Bagel and Coffee  maintain their  principal
executive   offices  at  One  Corporate  Place,  55  Ferncroft  Road,   Danvers,
Massachusetts 01923. The telephone number for the Company is (508) 774-6606.

Champps  maintains  its  principal  executive  offices at 153 East Lake  Street,
Wayzata, Minnesota, 55391. The telephone number for Champps is (602) 449-4841.

Spin-off Transaction

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  incorporated  in
England and Wales  (collectively  "Compass"),  pursuant to which Compass agreed,
upon the  satisfaction  of certain  conditions,  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. 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,
including Daka and the Company,  made various contributions of assets and equity
interests to each other in the form of dividends and capital  contributions (the
"Contribution")  in  order  to  divest  DAKA  International  of  its  restaurant
businesses (the  "Transferred  Businesses")  and such assets were contributed to
the Company. Following these transactions,  the remaining business activities of
DAKA  International  consisted  only of its  foodservice  operations.  Following
consummation of the Offer, DAKA International  became a wholly-owned  subsidiary
of  Compass.  On or about the same time as the  acceptance  for the  purchase of
shares  of  DAKA  International   common  stock  pursuant  to  the  Offer,  DAKA
International   distributed   to  each  holder  of  record  of  shares  of  DAKA
International  common  stock,  one share of common stock of the Company for each
share of DAKA International owned by such shareholder (the "Distribution"),  and
the Company  became a separate  public  company  with its shares of common stock
trading on the over the counter market through NASDAQ.


<PAGE>

Certain  other   non-restaurant   operating   assets  and  liabilities  of  DAKA
International  were contributed (the "Additional  Capital  Contribution") to the
Company  after  the  Distribution  on July 18,  1997 (the  "Transaction  Date").
However,  those assets and liabilities  consisting of trade accounts receivable,
certain  prepaid  assets,  property and  equipment,  accounts  payable,  accrued
expenses,  contingent  liabilities  and deferred taxes have not been included in
the  accompanying   combined   financial   statements  since  those  assets  and
liabilities  are  principally  related  to  DAKA   International's   Foodservice
Businesses  and  have  not  been  used  in  the  historical  operations  of  the
Transferred  Businesses.  Pursuant  to  the  terms  of  the  Additional  Capital
Contribution,  Compass or its  affiliates  will act as an agent to  process  the
account  receivable  and  accounts  payable  related to the  Additional  Capital
Contribution (the "Contributed Working Capital").

The following summary of certain  provisions of the Agreements with Compass does
not purport to be complete  and is qualified in its entirety by reference to the
full text of such  Agreements  (copies of which have been filed as an exhibit to
the Registration Statement on Form 10 filed June 3, 1997.

The Tax-Allocation Agreement

The Company,  DAKA  International and Compass have entered into a tax allocation
agreement which sets forth each party's rights and  obligations  with respect to
payments  and refunds,  if any, of federal,  state,  local or foreign  taxes for
periods  before and after the Merger and related  matters  such as the filing of
tax  returns and the  conduct of audits and other tax  proceedings.  In general,
under the tax allocation agreement,  the Company will be responsible for all tax
liabilities  of DAKA  International  and Daka and the  Company  for  periods (or
portions of periods) ending on or before the effective date of the  Distribution
and will have the benefit of any tax refunds,  tax credits or loss carryforwards
arising in such  pre-Distribution  periods. For periods (or portions of periods)
beginning after the effective date of the Distribution,  in general, the Company
will be responsible for tax liabilities of the Company,  and DAKA  International
will be responsible for tax liabilities of DAKA International and Daka.

Post-Closing Covenants Agreement

The Post-Closing  Covenants Agreement entered into by the Company and Compass in
connection with the Spin-off  includes  significant  undertakings on the part of
the Company with  respect to its  operations  after the  Spin-off and  potential
liability  and payments due to  International  and Compass.  While the amount of
payments,  if any, which might be payable to DAKA  International  by the Company
under the  Post-Closing  Covenants  Agreement cannot be quantified at this time,
the aggregate amount of such payments is currently expected to range from $10 to
$15  million.  Further,  such  amounts  payable are subject to possible  offsets
against future tax benefits  available to Compass,  and further  calculation and
negotiation.

Indemnification by the Company.

The  Post-Closing   Covenants   Agreement  provides  that  except  as  otherwise
specifically  provided the Company,  will  indemnify,  defend and hold  harmless
Compass,  from and  against,  and pay or  reimburse  Compass  for,  all  losses,
liabilities,  damages,  deficiencies,   obligations,  fines,  expenses,  claims,
demands,  actions,  suits,  proceedings,  judgments  or  settlements,  including
certain interest and penalties, out-of-pocket expenses and reasonable attorneys'
and accountants'  fees and expenses  incurred in the investigation or defense of
any of the same or in asserting,  preserving or enforcing any of Compass' rights
suffered by Compass ("Indemnifiable Losses"), as incurred relating to or arising
from (i) the  Assumed  Liabilities,  including  without  limitation  the Special
Liabilities (as defined in the Post Closing Covenants Agreement)  (including the
failure by the Company or any of its  subsidiaries to pay,  perform or otherwise
discharge such Assumed Liabilities in accordance with their terms), whether such
Indemnifiable  Losses  relate to or arise  from  events,  occurrences,  actions,
omissions, facts or circumstances occurring,  existing or asserted before, at or
after the  Spin-off;  (ii) a claim by any  person  who is not the  Company or an
affiliate  of the  Company  (a "Third  Party  Claim")  that  there is any untrue
statement or alleged untrue statement of a material fact contained in any of the
documents  filed or with the  Securities  and Exchange  Commission in connection
with the Spin-off (the "Filings"),  or any omission or alleged omission to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading, with certain stated exceptions;  (iii) the breach by the Company
or any of its subsidiaries of any agreement or covenant or from an inaccuracy in
any  representation  or warranty of DAKA  International or Daka contained in the
Merger  Agreement  or an  ancillary  agreement  (iv) any Special  Liability  (as
defined in the Post-Closing Covenants Agreement),  including,  among others, any
civil  action  or  any  action  by a  Governmental  Entity  (as  defined  in the
Post-Closing  Covenants  Agreement) where such Indemnifiable Losses relate to or
arise from  events,  occurrences,  actions,  omissions,  facts or  circumstances
occurring  or  existing  prior to the Offer  Closing  Time and  relating to DAKA
International,   including,   but  not  limited  to,  Venturino  etal.  v.  DAKA
International, Inc. and William H. Baumhauer, Civil Action No. 96-12109-GAO (the
"Venturino  Lawsuit")  and any other  litigation  pending as of or relating to a
time  period  prior to the Offer  Closing  Time,  as well as claims  and  action
relating to or arising from actions or  omissions  occurring  prior to the Offer
Closing Time by DAKA International,  Daka or their affiliates in connection with
the performance of the transactions  contemplated by the Merger Agreement or the
Ancillary Agreements or any other matter set forth in the Post-Closing  Covenant
Agreement;  (v) any actual or alleged  criminal  violation  of any law,  rule or
regulation of any Governmental Entity ("Criminal Matters") by DAKA International
or any of its subsidiaries,  including Daka, or any director,  officer, employee
or agent  of DAKA  International  or any of its  subsidiaries,  including  Daka,
occurring  or alleged to have  occurred  prior to the Offer  Closing Time or any
Criminal  Matters by the Company or any of its  subsidiaries,  or any  director,
officer, employee or agent of the Company or any of its subsidiaries,  occurring
or alleged to have occurred prior to or after the Spin-off;  (vi) any claim that
the execution,  delivery or performance by the Company,  DAKA  International  or
Daka  of  each  of the  Merger  Agreement  or the  ancillary  agreements  or the
consummation of the transactions  contemplated thereby results in a violation or
breach of, or constitutes a default or  impermissible  transfer  under, or gives
rise to any right of  termination,  first refusal or consent under or gives rise
to any right of amendment,  cancellation or acceleration of any material benefit
under,  any  material  contract  other than a customer  contract;  (vii) (a) the
benefit plans or multi-employer  plans sponsored or contributed to by any member
of the DAKA  International  Group, but only with regard to events,  occurrences,
actions, omissions, facts or circumstances occurring, existing or asserted prior
to  the  Spin-off  or  occurring  in  connection  with  or as a  result  of  the
consummation of certain  transactions  contemplated by the Merger  Agreement and
the  Reorganization  Agreement,  (b) the employment of any Foodservice  Employee
during the period ending at the Spin-off,  or (c) the  employment or termination
of any employee of the Company whether before, on or after the Spin-off;  (viii)
the collection of trade receivables or the payment of trade payables,  provided,
the Company will have no obligation to indemnify for  Indemnifiable  Losses that
are finally  determined to have resulted  primarily from the gross negligence or
willful  misconduct of Compass (ix) the repayment by Compass or its subsidiaries
of any bonus or similar payments paid to DAKA International or Daka prior to the
Spin-off under the purchasing  contacts set forth in the Post-Closing  Covenants
Agreement on a prorated basis, as further provided therein;  and (x) relating to
the lease agreement by which DAKA  International  leases its  headquarters.  The
scope and amount of such  liabilities is 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.  Under
the terms of the  Merger  Agreement  and  related  agreements,  the  Company  is
required to  collateralize  or  otherwise  ensure for the benefit of Compass its
ability to meet its obligations with respect to its indemnification  obligations
and other liabilities.  Such requirement may reduce the Company's access to cash
balances  for a  significant  period  of time  after the  Spin-off  and may also
constrain the Company's cash flow.

<PAGE>

The   amount  of  any   Indemnifiable   Loss  or  other   liability   for  which
indemnification is provided in the Post-Closing  Covenants Agreement will be net
of  any  amounts  actually  recovered  by  the  indemnitee  from  third  parties
(including amounts actually received under insurance policies). In addition, the
Company will not have any liability for indemnification for Indemnifiable Losses
unless the aggregate of all  Indemnifiable  Losses for which it would be liable,
but for certain  limitations  described therein exceeds on a cumulative  pre-tax
basis  $250,000  (the  "Basket  Amount")  and then only the amount by which such
Indemnifiable  Losses exceed the Basket  Amount  provided that the Basket Amount
will not apply to amounts paid in connection  with certain  Special  Liabilities
(which amounts will be paid in their entirety).

Transitional Arrangements.

The Company and Compass  have agreed to enter into an  agreement  or  agreements
with  respect  to  certain   transitional   arrangements   effective   upon  the
consummation of the Spin-off. Such arrangements address, among other things, the
allocation of employees; overhead support services; the sublease by Compass of a
portion of the Company's  leased  headquarters  office  facilities;  information
support services;  licensed  software;  representations  and covenants as to the
nature and extent of the Company's software resources and the software necessary
for the conduct of the  foodservice  business;  accounting and payroll  business
practices;  division of headquarters  assets; and records retention issues. Such
arrangements  could  place  significant  strain  on  the  Company's  management,
customer  service and  support,  operations  and  administrative  personnel  and
resources for a considerable period of time. The Company's ability to manage the
arrangements  depends on the  Company's  success  in  organizing,  managing  and
structuring operating, management,  information and financial systems, which may
adversely  impact the Company's  ability to reorganize its corporate and support
functions and to reduce its selling,  general and administrative expenses. Under
the terms of the Merger  Agreement,  the Company will assume the  obligations of
DAKA International under the lease with respect to the Company's headquarters in
Danvers, Massachusetts.

Covenant Not to Compete.

In the Post-Closing  Covenants Agreement,  the Company agreed that, for a period
of five years  following the Spin-off,  it would directly or indirectly,  either
individually or as an agent, partner,  shareholder,  investor,  consultant or in
any  other  capacity,  (i)  participate  or  engage  in,  or  assist  others  in
participating  or engaging  in, the  business of  providing  contract  catering,
contract  food and  vending  services  to  business  and  industry,  educational
institutions,  airports,  healthcare or museums or similar leisure facilities in
the  continental  United  States but  excluding  food service at certain  retail
outlets (the "Restricted Business");  (ii) influence or attempt to influence any
customer of Compass or Daka to divert its  business  from Compass or Daka to any
person then engaged in any aspect of the Restricted Business in competition with
Compass or Daka;  or (iii) solicit or hire any of the  foodservice  employees at
the district  manager  level or above,  either  during the term of such person's
employment by DAKA International or Daka or within 12 months after such person's
employment  has ceased for any reason,  to work for the Company or any person in
any aspect of  foodservice  (including  vending  service)  in  competition  with
Compass, or Daka.


<PAGE>



Net Worth.

The Post-Closing  Covenants  Agreement  provides that for a period ending on the
later  of  July  18,  2000  or  the  final  resolution  of  certain  claims  for
indemnification  thereunder,  the Company will maintain a consolidated net worth
(determined  in  accordance  with  generally  accepted  accounting   principles,
consistently  applied) of not less than  $50,000,000  (the "Minimum Net Worth").
During the same  period,  the Company  will  provide to Compass,  within 45 days
following the end of each of the Company's fiscal quarters, a certificate of the
chief  financial  officer of the Company  certifying  the  Company's  continuing
compliance  with such  covenant.  If the  Company  fails to meet the Minimum Net
Worth,  it will  immediately  provide  alternative  secured  collateral for such
deficiency in a form reasonably satisfactory to Compass .

Trade Receivables and Trade Obligations.

The  Reorganization  Agreement  provides that the trade receivables and payables
have been assigned and transferred to the Company.  Pursuant to the Post-Closing
Covenants Agreement,  the Company appointed Daka as its agent after the Spin-off
for the purposes of collection of the trade receivables and payment of the trade
obligations, and authorized Daka to pay the obligations and to collect the trade
receivables. Daka will serve in such capacity for a period of not more than four
months  after July 18,  1997 using  prompt,  diligent  and  reasonable  efforts,
consistent with its regular collection practices, for its own trade receivables,
to collect  those  trade  receivables  owned by the  Company.  Daka will have no
obligation to institute any action or other litigation before any court, agency,
arbitrator  or  tribunal  to collect or enforce  any right of the  Company  with
respect to its trade  receivables.  In each instance where the institution of an
action or a lawsuit is appropriate,  Daka will allow the Company to collect such
trade  receivables  and to pursue  any such  remedies.  However,  Daka will not,
without the Company's prior written consent,  compromise or settle for less than
full value of any trade receivables unless Daka pays the Company the full amount
of any deficiency.  In connection with Daka's  collection  efforts,  the Company
will  assist  Daka,  subject to certain  limitations,  with  special  collection
efforts on selected trade teceivables if Daka in reasonable  discretion requests
such efforts.  With respect to trade obligations,  for a period of not more than
four  months  after  July  18,  1997,  Daka  will pay  when  due  certain  trade
obligations of the Company.  Daka will pay such  Obligations  from the collected
Trade  Receivables,  and the obligation of Daka to pay such  Obligations will be
limited to the actual amount of trade receivables collected by Daka. The Company
may elect to provide to Daka, from time to time, a schedule of proposed payments
of trade obligations,  which Daka will follow,  unless Daka determines adherence
to such schedule will have a material  adverse  effect on its ability to operate
the foodservice business in the ordinary course or impair the credit of Daka.

Daka shall not be obligated  to remit to the Company any net  proceeds  from the
collection of trade  receivables  for eight weeks after the Spin-off.  Not later
than the  business  day  following  the last day of the  eighth  week  after the
Spin-off,  Daka is  obligated  to remit to the Company  the amount of  collected
trade receivables in excess of the aggregate amount of trade obligations paid by
Daka,  provided  that  Compass  may  retain  an amount  sufficient  to cover any
payments  that  Compass in good faith  determines  to be due to Compass from the
Company  under  the terms of the Post  Closing  Covenants  Agreement  (including
certain  post-closing  purchase price  adjustments,  now being negotiated by the
Company with Compass), even if the amount of such payments or the obligations of
the Company to make such payments has not been finally established.  The Company
does not  anticipate  Compass  remitting  any excess  receivables  pending final
resolution  of  the  Post-Closing  Covenants  Purchase  Price  Adjustments.  See
"Post-Closing Covenants". The extent to which Compass can control the timing and
amount of cash payments to the Company from the collection of trade receivables,
such control could have a material adverse effect on the Company's cash flow and
financial condition.


<PAGE>



Item 2.  Properties

As of June 29, 1997,  the Company  leased  approximately  40,000  square feet of
office space at its  corporate  headquarters  in Danvers,  Massachusetts,  at an
average annual rental of $722,000  through November 30, 2001. Under the terms of
various  agreements  with  Compass,  on a  transitional  basis the Company  will
sublease to DAKA  International one half of the leased space for a term up to 18
months after the Spin-off.

Fuddruckers   owns  the  land  and  related   improvements  at  13  of  the  123
Fuddruckers-owned  restaurants  with the  balance  of the  restaurants  operated
pursuant to long-term leases.

Champps leases approximately 4,000 square feet for its corporate office, located
in Wayzata, Minnesota, pursuant to a five-year lease at an average annual rental
of $70,800.  Champps also leases approximately 1,200 square feet adjacent to the
Minnetonka restaurant,  pursuant to a lease expiring in 2000. This space is used
by Champps' management and support staff.

Item 3.  Legal Proceedings

On October 18, 1996, the Venturino Lawsuit was filed against DAKA  International
in the United States District Court for the District of  Massachusetts on behalf
of persons who acquired DAKA Common Stock between October 30, 1995 and September
9, 1996. The complaint  alleges  violations of federal and state securities laws
by, among other  things,  allegedly  misrepresenting  and/or  omitting  material
information  concerning  the results and  prospects of  Fuddruckers  during that
period  and seeks  compensatory  damages  and  reasonable  costs  and  expenses,
including counsel fees. On May 22, 1997, DAKA International filed with the court
a motion to dismiss plaintiffs'  complaint.  The Company has agreed to indemnify
Compass for any losses or expenses  associated with the Venturino  Lawsuit.  The
Company  believes the  Venturino  Lawsuit is without merit and intends to defend
itself vigorously unless the litigation is settled.  Settlement negotiations are
in process.  While the outcome of the case is not  presently  determinable,  the
Company  believes  that the  ultimate  outcome  of this  matter  will not have a
material  adverse  effect  on the  Company's  financial  condition,  results  of
operations or cash flows.

From time to time,  the  Company  has been  involved  in other  disputes  and/or
litigation with respect to the operations of the Transferred  Assets encountered
in its normal course of business. In the opinion of management, however, none of
these  legal  proceedings  would  result in final  judgments  which would 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.


<PAGE>


                                     PART II

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

The Common Stock of the Company is traded  over-the-counter and is quoted on the
Nasdaq Stock Market  National Market under the symbol "UNIQ." The Company became
a public  company on July 15,  1997 and had no  history of market  price for its
common stock prior to that date.

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 intends to
retain  all of its  available  funds  for the  operation  and  expansion  of its
business.

Item 6.    Selected Financial Data.

                        SELECTED COMBINED FINANCIAL DATA
                      (In thousands, except per share data)

The following  table  presents  selected  combined  statement of operations  and
balance sheet data of the Company.  The balance sheet data presented below as of
June 29, 1997 and 1996 and July 1, 1995 and the  statement  of  operations  data
presented below for each of the fiscal years in the four-year  period ended June
29, 1997 are derived from the Company's audited combined  financial  statements.
The balance sheet data as of July 2, 1994 and June 26, 1993 and the statement of
operations data for the year ended June 26, 1993 were derived from the Company's
accounting records, which, in the opinion of the Company's management, have been
prepared  on  the  same  basis  as the  Company's  audited  historical  combined
financial  statements  and include all  adjustments  (consisting  only of normal
recurring adjustments and accruals) necessary for a fair presentation thereof.

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 of  operations,  as presented in 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.

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

<TABLE>
<CAPTION>
                                                               As of and for the Fiscal Year Ended
                                                    -------------------------------------------------------
                                                    June 29,   June 29,    July 1,    July 2,    June 26,
                                                      1997       1996        1995       1994       1993
                                                              (in thousands, except per share data)
<S>                                                  <C>        <C>         <C>        <C>         <C>
Statements of Operations Data:
Total revenues                                       $205,884   $183,755    $137,730   $100,677    $ 83,723
Income (loss) from  continuing  operations  before
   income taxes and minority interests               (42,832)    (6,931)       4,697      3,980        (38)
Net income (loss)                                    (39,043)    (5,670)       1,798      1,300         361
Pro forma loss per share                               (3.42)       -           -          -           -
Balance Sheet Data:
Total assets                                          125,209    142,348     102,431     78,365      52,517
Long-term debt, including current portion               5,128      6,366       4,009      3,372       3,253
Group equity                                           79,053    108,894      73,979     57,666      39,921
</TABLE>




<PAGE>


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

General

The following  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations is based upon the historical combined financial statements
of the Company,  which present the Company's  results of  operations,  financial
position  and cash  flow.  The  Company  historically  operated  as part of DAKA
International.  These  historical  combined  financial  statements  include  the
assets,  liabilities,  income and  expenses  that were  directly  related to the
restaurant  business as it was operated within DAKA  International  prior to the
Spin-off.  The  Company's  statement of  operations  includes 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  combined
financial statements to be reasonable.

Certain  other   non-restaurant   operating   assets  and  liabilities  of  DAKA
International   were  contributed  to  the  Company  (the  "Additional   Capital
Contribution").  However,  those  assets  and  liabilities  consisting  of trade
accounts receivable,  certain prepaid assets,  property and equipment,  accounts
payable,  accrued expenses,  contingent  liabilities and deferred taxes have not
been included in the  accompanying  combined  financial  statements  since those
assets  and  liabilities  are  principally   related  to  DAKA   International's
Foodservice Businesses and have not been used in the historical operation of the
Transferred  Businesses.  Pursuant  to  the  terms  of  the  Additional  Capital
Contribution,  Compass or its  affiliates  will act as an agent to  process  the
accounts  receivable  and accounts  payable  related to the  Additional  Capital
Contribution.

The  financial  information  included  herein may not  necessarily  reflect  the
results of  operations,  financial  position and cash flows of the Company as it
will operate in the future or what the results of operations, financial position
and cash flows  would have been had the  Company  been a  separate,  stand-alone
entity during the periods  presented.  This is due, in part,  to the  historical
operation of the Company as an integral part of DAKA International.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in
the following  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations 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  Company's  ability to manage the  Transitional  Arrangements;  the ultimate
resolution  and   disposition   of  the  Company's   assumed   obligations   and
indemnifications  pursuant  to  the  Contribution;   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 amount and rate of growth of general and administrative expenses
associated  with building a  strengthened  corporate  infrastructure  to support
operations;  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); and the amount of, and any changes to, tax rates.

<PAGE>

                              RESULTS OF OPERATIONS

Overview

The Company has incurred  significant  operating  losses over the past two years
and had a loss before income tax benefit and minority interests of approximately
$42.8  million  for the  fiscal  year  ended June 29,  1997.  While the  Company
believes it has strategies  that will give it the best  opportunity to return to
overall  profitability,  there can be no assurance that such  strategies will be
implemented within the anticipated time frame or at all, or if implemented, will
be successful.  Accordingly,  the Company may continue to incur  substantial and
increasing  operating  losses  over the next  several  years.  The amount of net
operating  losses  and the time  required  by the  Company  to  reach  sustained
profitability  are highly  uncertain  and to achieve  profitability  the Company
must,  among  other  things,  address  operational  issues  in  the  Fuddruckers
restaurant  chain,  successfully  reduce  selling,  general  and  administrative
expenses as a percentage  of sales from  historical  levels while  continuing to
increase net revenues from its existing restaurants and successfully execute its
growth  strategy for the Champps  Americana  restaurant  chain.  There can be no
assurance that the Company will be able to achieve  profitability at all or on a
sustained basis.

Notwithstanding these risks, the Company believes that its near-term strategies,
including,  but not  limited  to,  product  and menu  introductions,  marketing,
improving operational excellence in Fuddruckers,  and anticipated lower selling,
general and administrative  expenses resulting from actions taken since June 29,
1997 and the effects of the Spin-off and related transactions, should provide it
with the best opportunity for improved overall profitability.

In recent periods the Company's  Fuddruckers  restaurant  chain has  experienced
operational difficulties which have impacted its profitability. The Company also
believes  certain of its  Fuddruckers  opened in fiscal 1995, 1996 and 1997 have
underperformed principally due to poor real estate selection and, in certain new
markets,  consumer  confusion over the Fuddruckers  core concept of the "World's
Greatest  Hamburger".  The Company  believes such consumer  confusion was due in
part to design changes to its restaurants  opened in the last three fiscal years
which  de-emphasized  the Butcher Shop and Bakery which,  the Company  believes,
resulted in new  customers  not  realizing  the quality of the  ingredients  and
freshness of the  products  used in making its  sandwiches  and other menu items
when compared with its competitors.  The Company believes it has addressed these
issues for future  Fuddruckers  locations,  although no Company  restaurants are
presently  planned to open in fiscal  1998.  As  discussed  further  below,  the
Company has  decided to close or  refranchise  certain of these  underperforming
Fuddruckers locations in fiscal 1998.

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
or the closing or repositioning  of existing  restaurants are expected to result
in fluctuations in the Company's quarterly 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
Fuddruckers  and Champps have been able to manage their  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.


<PAGE>



In February 1996,  CEI  Acquisition  Corp.,  a  wholly-owned  subsidiary of DAKA
International,  merged with  Champps  whereupon  Champps  became a  wholly-owned
subsidiary of DAKA International.  In April 1996, DAKA International also merged
with  Great  Bagel  and  Coffee  whereupon  Great  Bagel  and  Coffee  became  a
wholly-owned  subsidiary  of DAKA  International.  Both  transactions  have been
accounted for as poolings-of-interests,  and accordingly, the combined financial
statements and this Management's Discussion and Analysis reflect the accounts of
Champps and Great Bagel and Coffee for all periods presented.

Overall Results of Operations

The Company incurred a net loss of $39.0 million for fiscal 1997 compared with a
net loss of $5.7 million for fiscal  1996.  Included  within  these  amounts are
impairment,  exit costs and other  charges  aggregating  $21.7  million and $5.9
million for 1997 and 1996, respectively.

In the fourth  quarter of fiscal 1997,  the Company made  decisions to close its
non-traditional   Specialty  Concepts  segment   restaurants  and  to  close  or
refranchise certain underperforming  Fuddruckers restaurants which resulted in a
pre-tax  charge of  approximately  $16.2  million.  Included  in these costs are
charges for impairment to the carrying value of assets now expected to be closed
or  refranchised  within  fiscal  1998,   reacquired   franchise  rights,  lease
termination fees and other exit costs,  including  severance  costs,  associated
with the restaurants to be closed.  The Company  estimates $2.5 million of these
charges  will  result in  future  cash  outlays  with the  balance  representing
write-offs of carrying value.

Exclusive of impairment, exit costs and other charges and merger costs, the loss
from operations before income taxes and minority interests would have been $21.2
million in 1997 and $1.0 million in 1996. This increase in operating  losses was
primarily   attributable   to   significantly   higher   selling,   general  and
administrative  expenses  between  years,  lower  average  store  sales  in  the
Fuddruckers segment which reduced the Company's ability to leverage fixed costs,
lower  Fuddruckers  franchise  income,  losses from  operations in the Specialty
Concepts segment and higher depreciation and amortization charges.

Total revenues for the fiscal year ended June 29, 1997,  increased 12% to $205.9
million compared with $183.8 million last year.

The Company recorded a loss before income taxes and minority interests in fiscal
1996 of $6.9  million  compared  with income  before  income  taxes and minority
interests of $4.7 million in fiscal 1995.  Operations  in 1996 were  impacted by
non-recurring charges relating to merger costs and impairment charges associated
with the  adoption  of a new  accounting  standard,  along  with poor  operating
performance in the Fuddruckers' segment and increased corporate selling, general
and  administrative  expenses.  Income after income taxes and minority interests
decreased $7.5 million to a loss of $5.7 million in 1996 compared with income of
$1.8 million in 1995.

In fiscal 1996,  the Company  adopted the  provisions  of Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets and  Long-Lived  Assets to Be  Disposed  Of," which  resulted  in a third
quarter fiscal 1996 pretax charge of approximately  $3.0 million.  The provision
included  charges for  impairments to the carrying  value of certain  restaurant
assets,  reacquired  franchise rights,  investments and certain other assets. In
addition,  fiscal 1996 combined  operating results include a non-tax  deductible
charge of $2.9 million  relating to the mergers with Champps and Great Bagel and
Coffee.  Included in these costs are legal,  investment banking and professional
fees associated with the  transactions,  and costs associated with combining the
operations of previously  separate  companies and instituting  certain operating
efficiencies.


<PAGE>



Fuddruckers

The following table sets forth,  for the periods  presented,  certain  financial
information for Fuddruckers.

<TABLE>
<CAPTION>
                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                          <C>           <C>           <C>     
Restaurant sales                                                             $137,624      $131,592      $110,703
                                                                             ========      ========      ========

Sales from Fuddruckers-owned restaurants                                        100.0%        100.0%        100.0%
Operating expenses:
   Labor costs                                                                  (32.8)        (31.9)        (30.9)
   Product costs                                                                (28.0)        (29.0)        (28.5)
   Other operating expenses                                                     (28.1)        (23.3)        (22.9)
   Depreciation and amortization                                                 (6.6)         (6.1)         (4.8)
    Impairment, exit costs and other charges                                     (6.6)         (1.9)           -
                                                                             --------       --------     --------
Restaurant unit contribution                                                     (2.1)%         7.8%         12.9%
                                                                             ========       ========     ========

Restaurant unit contribution                                                 $ (2,952)       $ 10,323     $ 14,251
Franchising and royalty income                                                  4,021           6,574        5,372
                                                                             --------        --------     --------
Restaurant unit, franchising and royalty contribution                        $  1,069        $ 16,897     $ 19,623
                                                                             ========        ========     ========
</TABLE>

Comparison of Fiscal Years Ended June 29, 1997 and June 29, 1996

Sales from Fuddruckers-owned  restaurants increased  approximately $6.0 million,
or 4.6%, to $137.6  million for fiscal 1997 compared with $131.6 million for the
comparable  period last year.  This  increase  reflects  the addition of six new
Fuddruckers-owned  restaurants  during fiscal 1997 and the impact of a full year
of operations of 26 restaurants  opened in fiscal 1996, offset by a 6.6% decline
in comparable restaurant sales.

Restaurant  unit  contribution,  excluding  impairment,  exit  costs  and  other
charges, decreased approximately $6.7 million. Operating margins continued to be
negatively  impacted  by poor sales  levels,  higher  labor and other  operating
costs, and higher depreciation and amortization expenses offset, in part, by the
impact of menu changes, a 3% price increase effective in early December 1996 and
improved product costs as a percentage of sales.  Changes between years in labor
costs, other operating expenses and depreciation and amortization expressed as a
percent of sales  reflect the impact of lower  average  sales which  reduced the
ability of the Company to leverage these relatively fixed expenses.

Franchising and royalty income decreased  approximately  $2.6 million for fiscal
1997.  During  fiscal  1997,  the  Company  did not  execute  any  international
multi-unit  development  agreements.  Royalty  income from  domestic  franchised
restaurants remained consistent for fiscal 1997 compared to last year.

Comparison of Fiscal Years Ended June 29, 1996 and July 1, 1995

Sales in  Fuddruckers-owned  restaurants  increased  $20.9  million  or 18.9% to
$131.6  million in 1996 compared with $110.7  million in 1995.  This increase is
due to $3.3 million of incremental  sales for a full year from five  restaurants
acquired from franchisees  during 1995 and $30.3 million of sales at restaurants
during their first year of  operation,  including 26 new  restaurants  opened in
1996 offset,  in part, by a 4.9% decrease in comparable  restaurant  sales and a
$4.4  million  decrease  in  sales  due to the  closing  and/or  sale  of  three
restaurants.  Comparable  restaurant  sales  decreased  primarily as a result of
inclement  weather  in many  Fuddruckers  major  markets  throughout  the  third
quarter.


<PAGE>



Restaurant  unit  contribution,  excluding  impairment,  exit  costs  and  other
charges,  decreased $1.5 million or 10.4% to $12.8 million in 1996 compared with
$14.3  million in 1995 while  margins as a percentage  of sales  decreased  from
12.9% in 1995 to 9.7% in 1996  exclusive of impairment  charges of 1.9%.  Higher
costs as a percentage of sales in all cost  components  reflect the large number
of new  restaurants,  lower than  anticipated  sales levels and  start-up  costs
associated  with  new  concepts.  Operating  margins  decreased  by 3.2% in 1996
principally due to  weather-related  expenses.  Depreciation and amortization in
1996  increased  significantly  as a percentage of sales  compared with 1995 due
primarily  to  increased  pre-opening  costs  associated  with new  restaurants,
pre-opening  costs  related to the "La Salsa Fresh  Mexican  Grill"  concept and
continued installation of new point-of-sale equipment.

Franchising  and royalty  income  increased  $1.2 million in 1996  compared with
1995,   primarily  due  to  revenue   generated   from  sales  of  domestic  and
international   multi-unit  development   agreements.   The  remaining  increase
represents  additional royalty income relating to 13 new franchised  restaurants
opened,  partially  offset,  by the closing of 7 franchised  restaurants  during
1996.

Champps

The  following  table sets  forth  certain  financial  information  for  Champps
restaurants.

<TABLE>
<CAPTION>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                          <C>           <C>           <C>      
Restaurant sales                                                             $ 57,832      $ 41,593      $ 19,257
                                                                             ========      ========      ========

Sales from Champps restaurants                                                  100.0%        100.0%        100.0%
Operating expenses:
   Labor costs                                                                  (33.0)        (33.1)        (31.0)
   Product costs                                                                (28.9)        (28.8)        (29.0)
   Other operating expenses                                                     (25.7)        (23.2)        (21.7)
   Depreciation and amortization                                                 (8.2)         (8.6)         (5.5)
   Impairment, exit costs and other charges                                       -            (0.2)          -
   Merger costs                                                                   -            (6.3)          -
                                                                             --------      --------      -------- 

Restaurant unit contribution                                                      4.2%         (0.2)%        12.8%
                                                                             ========      ========      ========

Restaurant unit contribution                                                 $  2,435      $    (74)     $  2,463
Franchising and royalty income                                                    539           555           636
                                                                             --------      --------      -------- 
Restaurant unit, franchising and royalty contribution                        $  2,974      $    481      $  3,099
                                                                             ========      ========      ========
</TABLE>

Comparison of Fiscal Years Ended June 29, 1997 and June 29, 1996

Sales in Champps-owned  restaurants  increased  approximately  $16.2 million, or
39%, to $57.8  million for fiscal 1997  compared  with $41.6 million a year ago.
The  increase   primarily   reflects  the  addition  of  six  new  Champps-owned
restaurants  in fiscal  1996  (open for all of  1997),  three new  Champps-owned
restaurants  opened in 1997,  and higher per  restaurant  average sales volumes.
Same store sales increased approximately 1% in 1997.


<PAGE>



Restaurant unit contribution, excluding impairment, exit costs and other charges
and merger costs, for fiscal 1997 decreased  approximately  $0.2 million to $2.4
million compared with $2.6 million a year ago.  Operating  margins for 1997 were
impacted by higher other operating expenses, primarily occupancy, lease and bank
charges and initial higher  operating  expenses  expressed as a percent of sales
for new restaurants opened in 1997 during their first few months of operations.

Comparison of Fiscal Years Ended June 29, 1996 and July 1, 1995

Sales in  Champps-owned  restaurants  increased $22.3 million or 115.5% to $41.6
million  in 1996 as  compared  to $19.3  million  in 1995  primarily  due to the
opening of six new restaurants,  increased comparable  restaurant sales of 8.7%,
offset by the sale of one restaurant in the last quarter of 1996.

Restaurant unit contribution, excluding impairment, exit costs and other charges
and merger  costs,  increased  5.1% to $2.6  million in 1996 as compared to $2.5
million in 1995. This increase is due to increased revenues derived from six new
restaurants,  increased comparable restaurant sales of 8.7%, offset by increased
labor, overhead and depreciation and amortization expenses associated with these
new  restaurants.  In addition,  one  restaurant was sold in the last quarter of
1996.

Specialty Concepts

The  following  table sets forth  certain  financial  information  for Specialty
Concepts.  Specialty  Concepts has  historically  included the operations of the
Great Bagel and Coffee  Company and the  operations  of certain  non-traditional
foodservice  venues such as  restaurant  operations  conducted by the Company in
Home Depot locations under the names Leo's  Delicatessen and Fudd Cafes.  During
the fourth  quarter,  the  Company  decided  to  terminate  its  non-traditional
restaurant operations.

<TABLE>
<CAPTION>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                         <C>            <C>            <C>       
Unit sales                                                                   $  5,285      $  2,865       $  1,738
                                                                             ========      ========       ========

Sales from unit operations                                                      100.0%        100.0%        100.0%
Operating expenses:
   Labor costs                                                                  (50.3)        (29.5)        (37.0)
   Product costs                                                                (41.3)        (42.7)        (24.8)
   Other operating expenses (income)                                            (12.8)          6.6          (7.9)
   Depreciation and amortization                                                (18.6)         (5.3)         (3.0)
   Impairment, exit costs and other charges                                    (134.8)        (17.9)          -
   Merger costs                                                                   -           (10.5)          -
                                                                             --------      --------      --------

Unit contribution                                                              (157.8)%         0.7%         27.3%
                                                                             ========      ========      ========

Unit contribution                                                            $ (8,339)     $     19      $    475
Franchising and royalty income                                                    583           576            24
                                                                             --------      --------      --------
Unit and franchising contribution                                            $ (7,756)     $    595      $    499
                                                                             ========      ========      ========
</TABLE>

<PAGE>


Comparison of Fiscal Years Ended June 29, 1997 and June 29, 1996

Sales in Specialty  Concepts units increased  approximately $2.4 million to $5.3
million for fiscal 1997 compared with $2.9 million for last year.  This increase
reflects the expansion  initiatives in nontraditional  restaurant venues in late
fiscal 1996 and throughout  most of fiscal 1997.  Unit  contribution,  excluding
impairment charges and merger costs,  within the Specialty Concepts segment were
unprofitable in fiscal 1997 due to higher operating costs in the Fudd Cafe units
and the development and construction of the Company's "Leo's Deli" concept.

Comparison of Fiscal Years Ended June 29, 1996 and July 1, 1995

Sales in Specialty  Concepts units increased  approximately $1.2 million to $2.9
million in 1996 compared with $1.7 million in 1995.  These  increases  primarily
reflect the on-going expansion  initiatives in nontraditional  restaurant venues
and the opening of one Great Bagel and Coffee unit in 1996. No units were opened
in 1995. Unit contribution,  excluding impairment,  exit costs and other charges
and merger costs,  increased  $0.3 million to $0.8 million in 1996 compared with
unit contribution of approximately $0.5 million in 1995.

Franchising  and royalty  income  increased  approximately  $0.5 million in 1996
compared with 1995 amounts due to an increased  number of  multi-unit  franchise
agreements signed with Great Bagel and Coffee franchisees.

Selling, General and Administrative Expenses

As noted above,  included within the Company's  historical selling,  general and
administrative expenses are allocations of certain general corporate expenses of
DAKA  International.  Management  believes  these  allocations  as  well  as the
assumptions  underlying  the  development  of the  Company's  separate  combined
financial  statements to be reasonable  although not relevant to the anticipated
selling,  general  and  administrative  costs of the  Company  in  fiscal  1998.
Management  believes  that  its  overall  selling,  general  and  administrative
expenses  in 1998  will  approximate  9% to 10% of total  revenue  although  the
percentage in the first half of fiscal 1998 may exceed these overall levels.

Comparison of Fiscal Year Ended June 29, 1997 and June 29, 1996

Selling,  general  and  administrative   expenses,   including  a  component  of
depreciation and amortization  related to corporate assets of DAKA International
allocated to the Company,  increased approximately $8.8 million to $33.4 million
for fiscal  1997.  This  increase  primarily  reflects  the impact of  increased
marketing  efforts  and  costs  for  Fuddruckers,   higher  overhead,  including
severance  costs,  associated  with the Specialty  Concepts  segment and ongoing
investment  in  corporate   infrastructures.   Amounts  for  1997  also  include
write-downs of assets and establishment of legal and other reserves which became
effective in connection with the overall organization of the Company.

Comparison of Fiscal Years Ended June 29, 1996 and July 1, 1995

Selling,  general  and  administrative   expenses,   including  a  component  of
depreciation and amortization  related to corporate assets of DAKA International
allocated to the Company,  amounted to $24.6  million and $18.8  million in 1996
and 1995,  respectively.  Selling,  general  and  administrative  expenses  as a
percentage of total restaurant and unit sales of approximately  $176 million and
$132  million  in 1996 and  1995,  respectively,  aggregated  14.0%  and  14.2%,
respectively.


<PAGE>



The $5.6 million  increase in selling,  general and  administrative  expenses in
1996, compared with 1995, was primarily due to additional  corporate staff hired
to support Champps' expansion plans,  ongoing investment in information  systems
and divisional  infrastructures,  and the pursuit of  nontraditional  restaurant
venues within the Specialty Concepts segment.

Income Taxes

The operations of the Company are 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 charge  (credit)  in lieu of taxes  has been
presented as if the Company was a separate taxpayer. The Company's effective tax
benefit rate was  approximately  8.7% for 1997,  compared  with an effective tax
benefit rate of  approximately  7.7% for the comparable  period last year. As of
June 29, 1997 the Company had net operating loss  carryforwards of approximately
$12.8  million.  The  carryforwards  expire at various  dates through 2012 and a
portion of such  carryforwards can only be applied against the taxable income of
Fuddruckers  and a portion  against  the  earnings  of the  Company's  63% owned
subsidiary, Atlantic Restaurant Ventures, Inc.

Accounting Pronouncements Not Yet Adopted

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 128, "Earnings per Share," which the
Company  will  adopt in fiscal  1998.  Had SFAS No. 128 been  effective  for the
fiscal  year ended June 29,  1997,  there would be an  immaterial  effect to the
Company's reported pro forma loss per share.

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 130,
"Reporting  Comprehensive  Income" and SFAS No. 131, "Disclosures about Segments
of an  Enterprise  and  Related  Information."  The  Company  will  adopt  these
statements  during  fiscal  year 1998 and does not expect  that the  adoption of
these  statements  will  have  a  material  impact  on  the  combined  financial
statements.

                        FINANCIAL CONDITION AND LIQUIDITY

At June 29, 1997, the Company had a working capital deficiency of $14.5 million,
a decrease of $16.0 million  compared to working capital of $1.5 million at June
29,  1996.  The  decrease  in  working  capital is  principally  due to the loss
incurred  by the  Company  during the period and  accrued  transaction  costs of
approximately   $6.3  million  incurred  in  connection  with  the  transactions
discussed under the heading  "Spin-off  Transaction".  Capital  expenditures for
restaurant  expansion  during  fiscal 1997 were funded  primarily  through $11.5
million of sale-leaseback and equipment  financing under existing facilities and
$9.1 million in cash contributions of group equity by DAKA International.

The working  capital needs of companies  engaged in the restaurant  industry are
generally low as sales are made for cash and inventory and labor costs and other
operating  expenses are generally  paid on terms.  Given the  Company's  limited
plans for expansion of its Fuddruckers  restaurant chain and existing sources of
financing through sale-leaseback facilities, the Company does not anticipate any
significant  need for working  capital for its  primary  business  over the next
twelve months.  However,  as discussed  further below, the Company is subject to
certain  payments to be made pursuant to  provisions of agreements  entered into
with  respect to the Spin-off and other costs on payments to be made as a result
of the Spin-off. The Company expects the Additional Capital Contribution will be
sufficient  to cover  these  payments;  although  the timing of  converting  the
Additional Capital  Contribution into cash and the ultimate amount of cash to be
collected is uncertain.  See Pro Forma Combined  Balance Sheet at June 29, 1997,
below.

DAKA  International  historically  funded the Company's  operations  and capital
expenditures.  As a result of the Offer, Compass assumed such debt and repaid it
in full upon  consummation  of the Offer.  As a result,  the Company has no bank
debt. The Company continues to be obligated under  sale-leaseback  financing and
equipment  financing in connection  with  Company-owned  restaurants.  While the
Company  currently  believes  that  a  curtailment  of  Fuddruckers   restaurant
expansion,  improved  cash flows from  operations,  existing  cash  balances and
working capital, available sale-leaseback financing and equipment financing will
provide  sufficient  liquidity  to meet  its  short-term  obligations  and  fund
Fuddruckers  capital  expenditures,  the Company expects to be required to raise
additional  funds through bank  financing or other means to meet its longer term
needs. The Company is seeking to obtain a  line-of-credit  on its own behalf and
is optimistic that a  line-of-credit  between $5.0 million and $10.0 million can
be  obtained,  although  the timing and  amount of any such  facility  cannot be
assured.

<PAGE>

At June 29,  1997,  the Company had three new  Champps-owned  restaurants  under
construction and two Champps restaurants under development which are expected to
open in fiscal 1998. The Company had no new Fuddruckers-owned  restaurants under
construction  or  development.  There  are  no  other  restaurant  expansion  or
development efforts planned by the Company for fiscal 1998.

In January 1997,  Fuddruckers obtained $7.5 million of sale-leaseback  financing
for the  construction  of up to six new Fuddruckers  restaurants  from Franchise
Financing  Corporation of America.  Any unused commitment expires on January 30,
1998.  In  December  1995,  Champps  obtained  $40  million  of sale-  leaseback
financing for the construction of up to 10 new Champps restaurants.  At June 29,
1997,  $32.8  million was available  for use. Any unused  commitment  expires in
December 1997.


The Company and Compass  have entered  into a post  closing  covenant  agreement
which  provides  for  Compass  to act as agent  for the  Company  in  collecting
receivables  and paying  payables  included  as part of the  Additional  Capital
Contribution  for  120  days  after  the  Spin-off.  After  120  days,  the  net
uncollected  receivables  and unpaid  payables,  if any, will be returned to the
Company.  The extent to which  Compass can control the timing and amount of cash
payments to the Company from the  collection of trade  accounts  receivable  can
have a  material  adverse  effect  on the  Company's  cash  flow  and  financial
condition.

Below is a Pro Forma  Combined  Balance  Sheet as of June 29, 1997,  which gives
effect to the Additional  Capital  Contribution as if it had been consummated on
June 29, 1997. This one-time  contribution  of certain  current  foodservice net
assets to the Company (the "Additional Capital  Contribution") is to provide the
Company with  additional  working  capital to fund operations as such assets and
liabilities  are  liquidated  either by the Company,  or in the case of accounts
receivable and accounts  payable,  by DAKA  International  pursuant to an agency
relationship set forth in the Post-Closing  Covenants  Agreement.  See Note 2 of
Notes to  Combined  Financial  Statements.  Due to the nature of the  Additional
Capital  Contribution  and the effect  that such a  non-continuing  contribution
would have on the historical financial statements of the Company, the Additional
Capital  Contribution  is  presented  on a pro  forma  basis  as part of  "group
equity".


<PAGE>



<TABLE>
<CAPTION>
                                                                                       Net
Pro Forma Combined Balance Sheet                                                   Contributed        Combined
as of June 29, 1997                                               Historical         Assets            Assets
                                                                  ----------         ------            ------
                                                                 (Dollars in
                                                                  thousands)
<S>                                                                    <C>              <C>               <C> 
Assets:
   Total current assets                                                $  14,910        $  19,409         $  34,319
   Other assets                                                          110,299            4,097           114,396
                                                                       ---------        ---------         ---------
     Total assets                                                      $ 125,209        $  23,506         $ 148,715
                                                                       =========        =========         =========

Liabilities:
   Total current liabilities                                              29,394                             29,394
   Other liabilities                                                      16,762            2,133            18,895
                                                                       ---------        ---------         ---------
     Total liabilities                                                    46,156            2,133            48,289
                                                                       ---------        ---------         ---------
Group equity*                                                             79,053           21,373           100,426
                                                                       ---------        ---------         ---------
     Total liabilities & equity                                        $ 125,209       $   23,506         $ 148,715
                                                                       =========       ==========         =========
</TABLE>


*        The pro forma balance sheet  reflects a net  contribution  of assets of
         approximately   $21.4   million,   and  pro  forma   group   equity  of
         approximately  $100  million  before  any  purchase  price  adjustments
         payable by the Company to Compass.  Such purchase price adjustments are
         to be calculated  pursuant to provisions  contained in the post-closing
         covenants  agreement.  Management currently estimates these adjustments
         will range between $10 and $15 million, although such amount is subject
         to offsets  against  future tax  benefits  available  to  Compass,  and
         further  calculation and  negotiation  which have not been completed at
         this time.  There can be no assurance  that the ultimate  amount of the
         purchase price  adjustments paid to Compass as finally  determined will
         not differ from  Management's  estimate  and such  difference  could be
         material.

Item 8.  Financial Statements and Supplementary Data.

The  information  required  under this Item 8 is set forth on pages F-1  through
F-26 of this Report.

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

Not applicable.

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.

Directors of the Registrant

There is incorporated in this Item 10 by reference that portion of the Company's
definitive Proxy Statement relating to its Annual Meeting to be held on December
9, 1997,  appearing  therein  under the  captions  "Election of  Directors"  and
"Directors and Committees."


<PAGE>



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          49                      Chairman of the Board,
                                                      President and Chief
                                                      Executive Officer

Donald C. Moore               43                      Senior Vice President,
                                                      Chief Financial Officer
                                                      and Treasurer

Charles W. Redepenning, Jr.   41                      Senior Vice President,
                                                      General Counsel and
                                                      Secretary

William H.  Baumhauer  has served as Chairman of the Board,  President and Chief
Executive  Officer  Chairman  of the Board and Chief  Executive  Officer  of the
Company  since May 1997.  He served as  Chairman  of the Board  Chief  Executive
Officer Chairman of the Board and Chief Executive Officer of DAKA  International
from  November  1990 to July 1997.  Mr.  Baumhauer  also serves  Fuddruckers  as
Chairman of the Board and President since 1985 and previously in other executive
officer capacities since joining Fuddruckers in 1983.

Donald C. Moore has served as Senior Vice President and Chief Financial  Officer
and Treasurer of the Company since May, 1997. He served as Senior Vice President
and Chief  Financial  Officer and Treasurer of DAKA  International  from January
1997 to May 1997.  From November  1995 through  October 1996 he served as Senior
Vice  President  and Chief  Financial  Officer  for Al Copeland  Investments,  a
multi-business,  privately held corporation.  From August 1990 until August 1995
he served  principally as Senior Vice President and Chief  Financial  Officer of
Rally's  Hamburgers,  Inc., a publicly held multi-unit  quick service  hamburger
operator and franchiser.

Charles W. Redepenning,  Jr. has served as Secretary,  Senior Vice President and
General  Counsel of the Company since July 1997. He served as Secretary,  Senior
Vice President and General  Counsel of DAKA  International  from January 1991 to
July 1997 and as  General  Counsel  and  Secretary  of DAKA  International  from
November 1988 to July 1997. He also served as Vice  President,  General  Counsel
and Secretary of Fuddruckers since July 1987.

Item 11.   Executive Compensation.

There  are  incorporated  in this Item 11 by  reference  those  portions  of the
Company's  definitive Proxy Statement  relating to its Annual Meeting to be held
on  December  9,  1997,   appearing   therein   under  the  caption   "Executive
Compensation."

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

There is incorporated in this Item 12 by reference that portion of the Company's
definitive Proxy Statement relating to its Annual Meeting to be held on December
9, 1997, appearing therein under the caption "Principle Stockholders."

Item 13.   Certain Relationships And Related Transactions.

There are no items that are required to be disclosed pursuant to this item.


<PAGE>


                                     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:

              Independent Auditors' Report

              Combined Balance Sheets - June 29, 1997 and 1996.

              Combined  Statements of Operations - Years ended June 29, 1997 and
              1996 and July 1, 1995.

              Combined  Statements of Cash Flows - Years ended June 29, 1997 and
              1996, and July 1, 1995.

              Combined Statements of Stockholders' Equity - Years ended June 29,
              1997 and 1996, and July 1, 1995.

              Notes to Combined Financial Statements - Years ended June 29, 1997
              and 1996, and July 1, 1995.

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.


<PAGE>



**   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 and Coffee  Franchising  Corp.,  GBC Credit
              Company,  Gemini  Production  Facility,  Inc., The Great Bagel and
              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.

*    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     Employment Agreement,  dated as of January 1, 1997, by and between
              DAKA and William H. Baumhauer.

*    10.8     Employment Agreement,  dated as of January 1, 1997, by and between
              DAKA and Allen R. Maxwell.

*    10.9     Employment  Agreement,  dated  as of May 23,  1997,  by and  among
              Compass Group USA,  Inc.,  DAKA,  Daka, Inc. and Allen R. Maxwell.

*    10.10    Employment Agreement,  dated as of February 21, 1996, by and among
              Dean P. Vlahos, DAKA and Champps.

**   10.11    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.

**   10.12    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.

**   10.13    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.

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

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


<PAGE>



     21.1     Subsidiaries of the Company.

     23.1     Consent of Deloitte & Touche LLP

     23.2     Consent of Arthur Andersen 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.



<PAGE>


                                   SIGNATURES

Pursuant to 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.



                                  UNIQUE CASUAL RESTAURANTS, INC.
                                  (Registrant)


                                  By:  /s/Donald C. Moore
                                     --------------------
                                     Donald C. Moore
                                     Senior Vice President, Chief
                                     Financial Officer and Treasurer
                                     (Principal Financial and Principal
                                     Accounting Officer)

Date:  October 13, 1997


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

/s/William H. Baumhauer                     Chairman of the Board and
   William H. Baumhauer                     Chief Executive Officer (Principal
                                            Executive Officer)

Allen R. Maxwell*                           Director

E. L. Cox*                                  Director

Joseph W. O'Donnell*                        Director

Erline Belton*                              Director

Alan D. Schwartz*                           Director


/s/Donald C. Moore                          Senior Vice President, Chief
   Donald C. Moore                          Financial Officer and Treasurer
                                            (Principal Financial and Principal
                                            Accounting Officer)

*By: /s/William H. Baumhauer                Date:  October 13, 1997
     --------------------------
        William H. Baumhauer
        Attorney-In-Fact


<PAGE>


                                      




INDEPENDENT AUDITORS' REPORT


Unique Casual Restaurants, Inc.:


We have  audited  the  accompanying  combined  balance  sheets of Unique  Casual
Restaurants,  Inc.  as of June  29,  1997  and  1996  and the  related  combined
statements  of  operations,  cash  flows and group  equity for each of the three
years in the period  ended June 29, 1997.  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 did not audit for
the year ended July 1, 1995 the  consolidated  financial  statements  of Champps
Entertainment,   Inc.  (an  acquisition  by  the  Company  accounted  for  as  a
pooling-of-interests),  which  statements  reflect total  revenues  constituting
14.4% of combined total revenues for the year ended July 1, 1995, and net income
constituting 11.7% of combined total net income for the year ended July 1, 1995.
Those  statements were audited by other auditors whose report has been furnished
to us,  and our  opinion,  insofar as it relates  to the  amounts  included  for
Champps  Entertainment,  Inc.,  is based  solely  on the  report  of such  other
auditors.

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  and the  report of the other  auditors  provide a
reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other auditors,  such
combined  financial  statements  present fairly, in all material  respects,  the
financial  position of Unique Casual  Restaurants,  Inc. as of June 29, 1997 and
1996 and the results of its  operations and its cash flows for each of the three
years in the period ended June 29, 1997, in conformity  with generally  accepted
accounting principles.

As discussed in Notes 1,2 and 3, the combined  financial  statements include the
accounts of certain majority controlled subsidiaries of DAKA International which
were  transferred  to the  Company  prior to July 17,  1997.  In  addition,  the
combined  results of  operations  include  allocations  and estimates of certain
expenses  provided  to the  Company  by  DAKA  International.  The  accompanying
combined  financial   statements  may  not  necessarily  be  indicative  of  the
conditions  that would have existed or the results of  operations if the Company
had been operated as an unaffiliated company.

As  discussed in Note 3 to the combined  financial  statements,  during the year
ended June 29,  1996,  the  Company  adopted  the  provisions  of  Statement  of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived Assets and Long-Lived Assets to Be Disposed of."


Deloitte & Touche LLP

Boston, Massachusetts
September 17, 1997



<PAGE>









REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Champps Entertainment, Inc.:

We have audited the  consolidated  statements  of operations  and  shareholders'
investment  and  cash  flows  of  Champps   Entertainment,   Inc.  (a  Minnesota
corporation)  for the year  ended  July 2,  1995,  not  included  herein.  These
consolidated  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 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the results of their operations and cash flows of Champps
Entertainment,  Inc.  and  Subsidiaries  for the  year  ended  July  2,  1995 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
April 5, 1996




<PAGE>





                         UNIQUE CASUAL RESTAURANTS, INC.
                             COMBINED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                             June 29,          June 29,
                                                                                               1997              1996
                                                                                              ----              ----
<S>                                                                                          <C>            <C> 
ASSETS:
Current assets:
   Cash                                                                                      $     172      $   5,281
   Accounts receivable, net                                                                      4,376          5,509
   Inventories                                                                                   3,975          3,488
   Prepaid expenses and other current assets                                                     6,387          2,174
                                                                                             ---------      ---------
     Total current assets                                                                       14,910         16,452
                                                                                             ---------      ---------
Property and equipment:
   Land                                                                                          8,039         10,587
   Buildings and leasehold improvements                                                         82,260         80,787
   Equipment                                                                                    35,084         42,073
                                                                                             ---------      ---------
                                                                                               125,383        133,447
   Accumulated depreciation and amortization                                                   (30,710)       (26,168)
                                                                                             ---------      ---------
     Property and equipment, net                                                                94,673        107,279
                                                                                             ---------      ---------
Investments in, and advances to, affiliates                                                      5,000          5,000
Deferred tax assets                                                                               --              682
Other assets, net                                                                               10,626         12,935
                                                                                             ---------      ---------
                                                                                             $ 125,209      $ 142,348
                                                                                             =========      =========
LIABILITIES AND GROUP EQUITY:
Current liabilities:
   Accounts payable                                                                          $  10,397      $   6,305
   Accrued expenses                                                                             11,548          7,177
   Accrued transaction costs                                                                     6,347           --
    Current portion of long-term debt                                                            1,102          1,299
    Deferred tax liabilities                                                                      --              228
                                                                                             ---------      ---------

     Total current liabilities                                                                  29,394         15,009
Long-term debt                                                                                   4,026          5,067
Other long-term liabilities                                                                     11,036         12,210
Minority interests                                                                               1,100          1,168

Commitments and contingencies (Note 11)

Group equity                                                                                    79,053        108,894
                                                                                             ---------      ---------
                                                                                             $ 125,209      $ 142,348
                                                                                             =========      =========
</TABLE>







See notes to combined financial statements.


<PAGE>


                         UNIQUE CASUAL RESTAURANTS, INC.
                        COMBINED STATEMENTS OF OPERATIONS
           Fiscal Years Ended June 29, 1997 and 1996 and July 1, 1995
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                   1997                1996                  1995
                                                                                   ----                ----                  ----
                                                           
<S>                                                                             <C>                  <C>                  <C>
Revenues:
   Sales                                                                        $ 200,741            $ 176,050            $ 131,698
   Franchising and royalty income                                                   5,143                7,705                6,032
                                                                                ---------            ---------            ---------
     Total                                                                        205,884              183,755              137,730
                                                                                ---------            ---------            ---------

Costs and expenses:
   Cost of sales and operating expenses                                           178,638              148,155              108,126
   Selling, general and administrative expenses                                    32,603               24,181               18,566
   Depreciation and amortization                                                   15,547               12,136                6,632
    Impairment, exit costs and other charges                                       21,671                3,026                 --
    Merger costs                                                                     --                  2,900                 --
   Interest expense                                                                   744                  641                  331
   Interest income                                                                   (487)                (353)                (622)
                                                                                ---------            ---------            ---------
     Total                                                                        248,716              190,686              133,033
                                                                                ---------            ---------            ---------

Income (loss) before income taxes (benefit) and
   minority interests                                                             (42,832)              (6,931)               4,697
Income tax expense (benefit)                                                       (3,721)                (536)               3,068
Minority interests                                                                    (68)                (725)                (169)
                                                                                ---------            ---------            ---------
Net income (loss)                                                               $ (39,043)           $  (5,670)           $   1,798
                                                                                =========            =========            =========

Pro forma loss per share                                                        $   (3.42)
Pro forma weighted average common shares
   outstanding                                                                     11,425

</TABLE>
















See notes to combined financial statements.


<PAGE>


                         UNIQUE CASUAL RESTAURANTS, INC.
                        COMBINED STATEMENTS OF CASH FLOWS
           Fiscal Years Ended June 29, 1997 and 1996 and July 1, 1995
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                       1997               1996               1995
                                                                                       ----               ----               ----

<S>                                                                                  <C>                <C>                <C>
Cash flows from operating activities:
Net income (loss)                                                                    $(39,043)          $ (5,670)          $  1,798
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
   Depreciation and amortization                                                       15,547             12,136              6,632
    Impairment, exit costs and other charges                                           21,671              3,026               --
   Deferred income taxes                                                                  454                763                (36)
   Minority interests                                                                     (68)              (725)              (169)
Change in assets and liabilities, net of acquisitions:
   Accounts receivable                                                                  1,133             (2,733)              (657)
   Inventories                                                                         (1,312)              (855)              (705)
   Prepaid expenses and other assets                                                   (6,428)            (7,849)            (3,140)
   Accounts payable and accrued expenses                                                8,481               (845)             3,700
   Other long-term liabilities                                                            398              1,385              1,889
                                                                                     --------           --------           --------
     Net cash provided by (used in)
       operating activities                                                               833             (1,367)             9,312
                                                                                     --------           --------           --------

Cash flows from investing activities:
Purchase of property and equipment                                                    (23,865)           (51,572)           (32,146)
Cash paid for acquisitions, net                                                          --                 --                 (623)
Investment in, and advances to affiliates                                                --               (5,000)              --
                                                                                     --------           --------           --------

     Net cash used in investing activities                                            (23,865)           (56,572)           (32,769)
                                                                                     --------           --------           --------

Cash flows from financing activities:
Proceeds from sale-leaseback facility                                                  11,489             18,651              5,742
Contributed capital                                                                     9,080             39,932             14,179
Repayments of capital lease obligations                                                (2,646)            (1,090)            (1,588)
                                                                                     --------           --------           --------
     Net cash provided by financing activities                                         17,923             57,493             18,333
                                                                                     --------           --------           --------

Net decrease in cash                                                                   (5,109)              (446)            (5,124)

Cash, beginning of year                                                                 5,281              5,727             10,851
                                                                                     --------           --------           --------
Cash, end of year                                                                    $    172           $  5,281           $  5,727
                                                                                     ========           ========           ========
</TABLE>






See notes to combined financial statements.


<PAGE>


                         UNIQUE CASUAL RESTAURANTS, INC.
                       COMBINED STATEMENTS OF GROUP EQUITY
           Fiscal Years Ended June 29, 1997 and 1996 and July 1, 1995
                             (Dollars in thousands)


Balance, July 2, 1994                                          $ 57,666
Contributed capital:
   Cash                                                          14,179
   Non-cash                                                         336
Net income                                                        1,798
                                                                -------
Balance,  July 1, 1995                                           73,979
Contributed capital:
   Cash                                                          39,932
   Non-cash                                                         653
Net loss                                                        (5,670)
                                                               --------
Balance, June 29, 1996                                          108,894
Contributed capital:
   Cash                                                           9,080
   Non-cash                                                         122
Net loss                                                        (39,043)
                                                               --------
Balance, June 29, 1997                                         $ 79,053
                                                               ========













See notes to combined financial statements.


<PAGE>


                         UNIQUE CASUAL RESTAURANTS, INC.
                     NOTES TO COMBINED FINANCIAL STATEMENTS
           Fiscal Years Ended June 29, 1997 and 1996 and July 1, 1995
                (Dollars in thousands, except per share amounts)

1.       Background and Basis of Presentation

Background

Unique Casual Restaurants, Inc. (the "Company") is a Delaware corporation formed
on May 27, 1997 in  anticipation of a 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").  The Company's  principal  business
activities  will be 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.

Basis of Presentation and Business

The  accompanying  combined  financial  statements  include the  accounts of the
following DAKA International majority controlled subsidiaries transferred to the
Company  prior  to the  Spin-off,  Fuddruckers,  Inc.  ("Fuddruckers"),  Champps
Entertainment,  Inc.  ("CEI" or  "Champps"),  The Great Bagel and Coffee Company
("Great Bagel and Coffee"),  Casual Dining Ventures,  Inc. ("CDVI") and Atlantic
Restaurant Ventures,  Inc. ("ARVI").  The historical DAKA International basis in
the assets and  liabilities  transferred  to the Company in connection  with the
transactions  described in Note 2 have been  recorded as the  Company's  initial
cost basis.  In addition,  the combined  statements of operations and cash flows
include the combined  financial  statements  of the Company,  Fuddruckers,  CEI,
Great   Bagel   and   Coffee,   CDVI  and  ARVI  in  a  manner   similar   to  a
pooling-of-interests. Minority shareholders' equity in earnings (losses) of less
than  100%  owned  subsidiaries  is  presented  as  minority  interests  in  the
accompanying  combined financial statements.  Significant  intercompany balances
and transactions have been eliminated in combination.

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 the Compass  agreed,  upon the  satisfaction  of
certain  conditions,  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.  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,  including Daka and the Company,
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 (the  "Transferred  Businesses") and
such assets were contributed to the Company.  Following these transactions,  the
remaining business activities of DAKA International  consists of its foodservice
operations.


<PAGE>



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.

Certain  other   non-restaurant   operating   assets  and  liabilities  of  DAKA
International  were contributed (the "Additional  Capital  Contribution") to the
Company prior to the  Distribution  on July 17, 1997 (the  "Transaction  Date").
However,  those assets and liabilities  consisting of trade accounts receivable,
certain  prepaid  assets,  property and  equipment,  accounts  payable,  accrued
expenses,  contingent  liabilities  and deferred taxes have not been included in
the  accompanying   combined   financial   statements  since  those  assets  and
liabilities  are  principally  related  to  DAKA   International's   Foodservice
Businesses and have not been used in the historical operation of the Transferred
Businesses.  Pursuant to the terms of the Additional Capital  Contribution,  the
Purchaser  or its  affiliates  will  act as an  agent to  process  the  accounts
receivable and accounts payable related to the Additional  Capital  Contribution
(the "Contributed Working Capital").

The  Company  entered  into a  sale  and  services  agreements  with  Restaurant
Consulting Services,  Inc. ("RCS") (a Delaware  Corporation) whereby the Company
sold  to RCS for an  aggregate  purchase  price  of $2.3  million  certain  data
processing  equipment  which  had  been  contributed  to  the  Company  by  DAKA
International  as part of the  Additional  Capital  Contribution.  The sales and
services  agreements  were effective as of July 1, 1997. The purchase price will
be satisfied  through the repayment of a promissory note due June 30, 2002 which
bears interest at 6% per annum.  The Company also received DAKA  International's
50% interest in RCS at the  Transaction  Date. In connection with this sale, the
Company has entered into a management agreement with RCS whereby the Company has
agreed to provide certain managerial  services to RCS. In addition,  the Company
has entered into a two year service  agreement with RCS for data  processing and
consulting  services  for an annual fee of $1.8  million.  The  Company has also
provided RCS with a $300 line-of-credit agreement which bears interest at 6% and
is payable in full on or before December 31, 1999. The Company will  consolidate
RCS's  operations  until such time as the  obligations of RCS to the Company are
satisfied.

3.       Summary of Significant Accounting Policies

Business Activities of the Company

Following the consummation of the transactions described in Notes 1 and 2, which
are collectively referred to as "the Transaction" for purposes of these combined
financial  statements,  the Company  will be a  diversified  restaurant  company
serving  customers  through a variety of venues.  The Company's  Fuddruckers and
Champps  operations serve customers in casual and upscale  restaurant  settings,
respectively,  throughout  the United  States and in Canada and the Middle East.
The Company's  Specialty  Concepts business unit consists  principally of French
Quarter  Coffee and Great  Bagel and Coffee,  which  serves  coffee,  bagels and
sandwich  items in a cafe  setting in western  locations  of the United  States.
Restaurant operations are conducted through Company-owned and franchised stores.


<PAGE>



During the fiscal years ended June 29, 1997 and 1996, respectively,  the Company
incurred losses before income tax benefit and minority  interests of $42,832 and
$6,931,  respectively.  Management  expects  to  significantly  reduce  selling,
general  and  administrative  expenses  as a  percentage  of sales,  from levels
reflected in the  Company's  historical  combined  financial  statements,  while
continuing  to  increase  net  revenues,  resulting  in  improvement  in overall
operating results.  However, the ultimate attainment of profitable operations is
dependent  upon  favorable  events  including  obtaining  adequate  financing to
continue to expand Champps and revitalize the  Fuddruckers  concept.  Management
believes that its existing cash balances,  together with the Additional  Capital
Contribution,  will be sufficient to fund the Company's  cash flow  requirements
and operating activities through fiscal 1998, although the Company expects to be
required to raise  additional  funds through bank  financing;  or other means to
meet its long-term needs.

Fiscal Year

Beginning in fiscal 1997,  the Company's  fiscal year ends on the Sunday closest
to June 30th.  Prior to fiscal  1997,  the  Company's  fiscal  year ended on the
Saturday  closest to June 30th.  For  purposes  of these  notes to the  combined
financial  statements,  the fiscal years ended June 29, 1997,  June 29, 1996 and
July 1, 1995 are referred to as 1997, 1996 and 1995, respectively.  Fiscal 1997,
1996 and 1995 contain 52 weeks.

Allocation of Certain Expenses

The  restaurant  operations,   as  presented  herein,  include  allocations  and
estimates of certain expenses,  principally  corporate  accounting and tax, cash
management, corporate information technology, legal, risk management, purchasing
and human resources, historically provided to the Company by DAKA International.
The amount of such  allocated  expenses in these combined  financial  statements
have been allocated by management based upon a variety of factors including, for
example,  personnel,  labor costs and sales volumes.  Such allocations have been
reported  within  selling,  general and  administrative  expenses and  aggregate
$9,828,  $7,790  and $6,550 for 1997,  1996 and 1995,  respectively.  Management
believes these allocations have been made on a reasonable basis and the expenses
associated with such activities  should not increase  following the Transaction.
However,  the accompanying  combined financial statements may not necessarily be
indicative of the conditions that would have existed, the financial position, or
results of  operations,  if the  restaurant  operations  had been  operated as a
separate entity.

The accompanying  combined financial  statements do not include an allocation of
interest expense associated with DAKA International's  revolving  line-of-credit
agreements as such  obligations  were assumed by the  Purchaser  pursuant to the
terms of the Transaction.  Interest on long-term obligations  transferred to the
Company has been  included in the  Company's  statement  of  operations  for all
periods presented.

Significant Estimates

In the process of  preparing  its  combined  financial  statements,  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 combined financial statements include allowances for potential bad
debts on accounts and notes receivable,  the useful lives and  recoverability of
its  assets  such  as  property  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. 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  combined  financial
position or the results of operations.


<PAGE>



Concentration of Credit Risk

The Company  extends  credit to its  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.

Inventories

Inventories  are  stated at the lower of cost,  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.

The components of inventories are as follows:
                                                        1997              1996
                                                        ----              ----
Food and liquor                                      $  1,234          $  1,109
Smallwares                                              1,871             1,970
Supplies                                                  870               409
                                                     --------          --------
                                                     $  3,975          $  3,488
                                                     ========          ========

Prepaid Expenses and Other Current Assets

Included in prepaid expenses and other current assets is a $5 million  insurance
deposit.

Property and Equipment

Property  and  equipment  is stated at cost and  includes an  allocation  of the
purchase  price for assets  acquired in connection  with the purchase of certain
restaurant  businesses.  The allocation of the purchase price is generally based
upon independent  appraisals of the assets  acquired.  Property and equipment is
depreciated  using the  straight-line  method over the estimated useful lives of
the assets.  Leasehold  improvements and assets capitalized  pursuant to capital
lease  obligations  are amortized  over the shorter of the lease term,  contract
term or the  estimated  useful life.  Useful lives range from 20 to 30 years for
buildings and leasehold improvements and three to ten years for equipment.

Interest costs incurred by DAKA International during the construction of new, or
the expansion and major remodeling of existing  restaurants are capitalized as a
component of the cost of the  property and  allocated to the Company in the form
of a credit to the group equity account.  During 1997, 1996 and 1995, $122, $653
and $336 of interest costs were capitalized.

Accrued Transaction Costs

Accrued  Transaction costs include legal,  accounting and other costs associated
with completing the Spin-off.


<PAGE>



Accrued Insurance Costs

The Company is self-insured  for workers'  compensation,  general  liability and
various  other  risks up to  specified  limits.  In  addition,  the  Company  is
self-insured up to certain limits for risks  associated with the healthcare plan
provided for its employees.  The Company's  share of workers'  compensation  and
general  liability  programs of DAKA  International  were allocated  using labor
costs and the aggregate costs of such programs was determined  through actuarial
studies which  determine the estimated  amount  required to provide for incurred
incidents.  Management has allocated  expenses  associated  with these liability
programs  to the  Company  based  upon  labor  costs.  In  connection  with  the
Transaction,  the Company is obligated to indemnify the Purchaser for all claims
arising subsequent to the Transaction,  including claims related to employees of
DAKA  International not continuing with the Company after the Transaction,  that
relate to events occurring prior to the Transaction.

Other Long-Term Liabilities

Other long-term  liabilities are comprised of deferred royalty buydown payments,
the liability under the long-term  incentive  compensation  plan,  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.

Deferred Rent Assets and Liabilities

Deferred rent assets, included in other assets, represent the difference between
the cost and the net  proceeds  received  related to 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

Group equity represents 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 $0.1 in
connection with its formation.  Such shares are reported within group equity for
purposes of these combined financial statements.

Revenue Recognition

The Company  records  sales from its  restaurant  operations  and  franchise and
royalty fees as earned.

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  also enters into
development  agreements granting  franchisees the exclusive right to develop and
operate  Fuddruckers  restaurants  in  certain  territories  in  exchange  for a
development fee. 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.  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  and franchise  fee revenues of $690,  $3,406 and $2,205
during 1997, 1996 and 1995, respectively.

Royalty  revenues from  franchised  restaurants  are recognized as revenues when
earned in accordance with the respective franchise  agreement.  Advance payments
received in  connection  with  royalty  buy-down  agreements  are  deferred  and
recognized  at the  reduced  royalty  rate during the  royalty  buy-down  period
specified in the agreements.  The remaining  balance of the advance  payments is
recognized on a  straight-line  basis over the remaining  term of the agreement.
The Company  recognized  royalty  revenues of $4,453,  $4,299 and $3,827  during
1997, 1996, and 1995, respectively.

Preopening Expenses

Direct  incremental  preopening costs associated with the opening of new, or the
expansion  and major  remodeling of existing  restaurants  are  capitalized  and
amortized  over twelve  months.  Net  preopening  costs included in other assets
amounted to $1,176 and $3,310 at June 29, 1997 and 1996, respectively.

Income Taxes

The restaurant  operations of the Transferred  Businesses are 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 these combined financial  statements,  a charge (credit) in lieu of taxes has
been  presented as if the Company was a separate  taxpayer.  Current  income tax
liabilities  (assets)  are  considered  to have been paid  (received)  from DAKA
International and are recorded through the group equity account.

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 in the period that such change
occurs.  Targeted  jobs tax  credits  and  foreign  tax credits are treated as a
reduction of income tax expense in the year such credits are utilized.

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 Transaction is
consummated as well as any tax consequences resulting from the Transaction.

Accounting for Stock-Based Compensation

Effective  June 30,  1996,  the Company  adopted SFAS No. 123,  "Accounting  for
Stock-Based  Compensation,"  which requires expanded  disclosures of stock-based
compensation  arrangements  with employees and encourages (but does not require)
compensation  cost  to be  measured  based  on the  fair  value  of  the  equity
instrument  awarded.  Companies  are  permitted,  however,  to continue to apply
Accounting   Principles   Board  ("APB")   Opinion  No.  25,  which   recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The  Company  will  continue  to apply APB  Opinion  No.  25 to its  stock-based
compensation awards to employees and will disclose the required pro forma effect
on results from operations and net income (loss) per share.


<PAGE>



Adjustments  resulting from the Transaction to stock options for common stock of
DAKA  International  held by  employees  of the Company  will be  determined  in
accordance with Emerging Issues Task Force Abstract 90-9 and, accordingly,  such
adjustments will have no effect on the Company's  combined financial position or
results of operations.

Subsequent to June 29, 1997, the Company  purchased from certain option holders,
an aggregate of 172,044 options for aggregate  consideration of $236,  one-third
of which was paid in cash in the form of withholding tax and two-thirds in stock
of the Company,  except for those  individuals  requiring no withholding tax, in
which case the entire amount of the consideration was paid in Company stock. The
Company will record the aggregate  consideration  in the first quarter of fiscal
1998.

Cash Flow Information

The Company  participated in DAKA  International's  centralized  cash management
system.  As a result,  the amount reported as cash in the accompanying  combined
financial  statements consists principally of cash funds held at restaurant unit
levels and funds not transferred into the centralized cash management system.

Cash payments for interest  associated with long-term  obligations  that will be
transferred  to the Company  aggregated  $454,  $641 and $331 in 1997,  1996 and
1995, respectively.

Capital lease  obligations  of $1,605,  $3,447 and $2,225 were incurred when the
Company  entered into leases for new  restaurant  and office  equipment in 1997,
1996 and 1995, respectively.

Significant other non-cash investing and financing transactions are as follows:

1997

                  The Company sold a restaurant under  construction  with a book
                  value of $1,205, in exchange for a $1,200 promissory note.

1996

                   The Company sold a restaurant with a book value of $1,306, in
                   exchange for a $1,280 promissory note.

1995

                  The  Company  sold  three-Fuddruckers   restaurants,  with  an
                  aggregate book value of $1,944,  in exchange for various notes
                  receivable.

Equity and Pro Forma Loss Per Share

The  authorized  capital stock of the Company  consists of 30,000,000  shares of
common stock,  of which 1,000 shares were issued and  outstanding as of June 29,
1997 and  approximately  11,425,000  shares were issued and outstanding upon the
consummation of the  Transaction,  and 5,000,000  shares of preferred  stock, of
which no shares are issued and outstanding as of June 29, 1997.


<PAGE>



Pro forma loss per share for 1997 is computed using the weighted  average number
of shares  outstanding as of June 29, 1997 for DAKA  International  after giving
effect to the anticipated  conversion,  in connection with the  Transaction,  of
11,912 shares of convertible  preferred stock into 264,701  additional shares of
common stock.

In February 1997, the FASB issued SFAS No. 128,  "Earnings per Share," which the
Company will adopt in fiscal  1998.  Had SFAS No. 128 been  effective  for 1997,
there would be an immaterial effect to the Company's reported pro forma loss per
share.

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

In March 1995, the FASB issued SFAS No. 121,  "Accounting  for the Impairment of
Long-Lived  Assets  and  Long-Lived  Assets to Be  Disposed  Of."  SFAS No.  121
requires  the  Company to  evaluate  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.  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 the third quarter of 1996, the Company adopted the provisions of SFAS No. 121
which resulted in a pretax charge of approximately  $3.0 million.  The provision
includes  charges for  impairments to the carrying  value of certain  restaurant
assets, reacquired franchise rights, and certain other assets.

In the fourth  quarter of 1997 the  Company  recorded a pre-tax  charge of $21.7
million  of  which  $13.7  million  represented  impairment  of  net  assets  at
restaurants  which have been or will be  closed,  $2.6  million  related to exit
costs  associated  with lease  settlements and identified  employee  termination
benefits and $5.4 million  consisting  primarily of legal costs  associated with
the Spin-off and the sale of the Foodservice business.

Reclassifications

Certain  amounts in the 1996 and 1995 combined  financial  statements  have been
reclassified to conform to the 1997 presentation.

New Accounting Pronouncements

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 130,
"Reporting  Comprehensive  Income" and SFAS No. 131, "Disclosures about Segments
of an  Enterprise  and  Related  Information."  The  Company  will  adopt  these
statements  during  fiscal  year 1998 and does not expect  that the  adoption of
these  statements  will  have  a  material  impact  on  the  combined  financial
statements.

4.       Merger with Champps and Great Bagel and Coffee

On February 21, 1996, CEI Acquisition  Corp., a wholly-owned  subsidiary of DAKA
International,   merged  with  and  into  Champps  whereupon  Champps  became  a
wholly-owned  subsidiary of DAKA International pursuant to an Agreement and Plan
of Merger dated October 10, 1995 (the  "Champps  Merger  Agreement").  Under the
terms of the Champps Merger Agreement, the Champps common stockholders exchanged
their  holdings  in  Champps'   common  stock  for  2,181,722   shares  of  DAKA
International  common stock valued at approximately  $49,634 on the merger date.
On April 3, 1996, DAKA International  merged with Great Bagel and Coffee whereby
DAKA  International  exchanged  339,236  shares of its  common  stock  valued at
approximately $8,566 for all outstanding shares of Great Bagel and Coffee common
stock (collectively the "1996 Mergers" and the "1996 Merged Companies").


<PAGE>



The 1996 Mergers were accounted for as  poolings-of-interests  and, accordingly,
the accompanying  combined financial  statements include the accounts of Champps
and Great Bagel and Coffee for all periods presented.

In connection  with the 1996 Mergers,  the Company  recorded a charge for merger
costs of $2,900.  Included  in these  costs are legal,  investment  banking  and
professional  fees associated with the  transactions,  and costs associated with
combining  the  operations  of previously  separate  companies  and  instituting
certain operational efficiencies.

Transactions  between the Company and the Merged  Companies prior to the Mergers
were not significant.  The Company has not recorded an adjustment to conform the
accounting  policies of the Merged companies to the Company's,  as such policies
were generally comparable.

5.       Acquisition and Disposition Transactions

Business  transactions  accounted  for using the purchase  method of  accounting
present the results of operations  and cash flows of the acquired  business from
the date of  acquisition in the Company's  combined  financial  statements.  The
following  presents the business  acquisitions  accounted  for as purchases  and
dispositions occurring during the three-year period ended June 29, 1997:

1996 Transactions

On March 31, 1996,  DAKA  International  entered into  separate  Stock  Purchase
Agreements (the "Stock  Agreements")  with two  stockholders of Americana Dining
Corporation  ("ADC")  (the  "Selling  Stockholders")  to acquire  the 43% voting
interest  in ADC not  held  by DAKA  International.  Based  upon an  independent
valuation,   the  fair  market  value  of  the  43%  voting  interest   acquired
approximated the consideration given by DAKA International.

On March 31, 1996,  DAKA  International  sold a restaurant to one of the Selling
Stockholders of ADC in exchange for a $1,280  promissory note  collateralized by
the assets of the restaurant. Interest accrues at the rate of 8.5% per annum and
is payable in monthly installments. The note matures on March 31, 2003, at which
time the  outstanding  balance,  $1,180,  will be due.  Based on an  independent
valuation,  the book value of the restaurant assets sold approximated their fair
market value at March 31, 1996.

1995 Transactions

On February 1, 1995,  the Company  acquired the assets,  operations  and certain
working capital items of a Fuddruckers restaurant in Texas from a franchisee for
a purchase  price of $623 which was paid in cash. On June 23, 1995,  the Company
acquired  the assets of four  Fuddruckers  restaurants  located in Canada from a
franchisee  for a purchase  price of $961 and the  issuance of a 19% interest in
the acquired  restaurants to the former  franchisee.  The purchase price for the
four restaurants in Canada  consisted of offsets to amounts  receivable from the
franchisee.

Also during 1995, the Company sold, at book value which approximated fair market
value,  three  Fuddruckers  restaurants  located  in the  Kansas  City and Omaha
markets for a purchase price of $1,300, substantially all of which is payable in
the  form  of  notes  receivable  collateralized  by all of  the  assets  of the
restaurants sold. During 1997, these restaurants were placed into  receivership,
and the Company was given  operating  control by the courts as the result of the
non-performance  of the  purchaser  under the terms of the  aforementioned  note
agreements and the franchise agreements.


<PAGE>



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. Each share of La Salsa Preferred Stock may
be  converted  into La  Salsa's  Class D Common  Stock at $1.50 per share and is
redeemable  at face  value in  installments  beginning  on March  3,  2000.  The
warrants expired during fiscal 1997. In addition,  the Company received warrants
to acquire,  within 18 months, shares of convertible  redeemable preferred stock
representing an additional 13.3% equity interest for  approximately  $7,100.  In
addition,  the Company entered into a 10-year license agreement with La Salsa to
operate La Salsa outlets within certain existing Fuddruckers restaurants whereby
the Company will pay a franchise  fee,  royalty  payments  equal to 5% of the La
Salsa outlets' gross sales,  certain  training costs and marketing fund fees for
each outlet opened. The Company's  investment in La Salsa is accounted for under
the cost method of accounting.

7.       Long-Term Debt

Obligations Transferred to the Company

The components of long-term debt transferred to the Company are as follows:

                                            1997             1996
                                            ----             ----
Notes payable                           $    442          $    687
Capital lease obligations                  4,686             5,679
                                        --------          --------
                                           5,128             6,366
Less current portion                      (1,102)           (1,299)
                                        --------          --------      
  Total                                 $  4,026          $  5,067
                                        ========          ========

Notes payable  include  several notes bearing  interest  ranging from 6% to 11%,
require  monthly or quarterly  payments of principal  and interest and mature at
various times ranging from July 1997 to July 2002. Maturities of long-term debt,
including capital lease obligations, at June 29, 1997 are as follows:

Maturities  of long-term  debt,  including  capital  lease  obligations,  are as
follows:

     1998                                    $ 1,102
     1999                                      1,141
     2000                                      1,114
     2001                                      1,119
     2002                                        652
                                             -------
                                             $ 5,128
                                             =======

Company Assets Serving as Collateral

All of  the  assets  of the  Company  were  pledged  as  collateral  under  DAKA
International's  various debt agreements pursuant to such agreements through the
Transaction Date. Subsequent to the transaction, the security interests in these
assets  were  released.  In  connection  with the  Transaction,  the Company has
pledged  eight  Fuddruckers  restaurants,  furniture,  fixtures and equipment of
certain Champps and Fuddruckers  restaurants and future  royalties as collateral
to creditors and to Compass pending the Company's release of certain  guarantees
(see Note 11) and the  Company's  payment of deposits  ($3.5  million) and trade
payables ($15.8 million). Subsequent to year end, approximately $14.5 million in
payments have been made.


<PAGE>



In connection with the  Transaction,  the Purchaser  assumed $110 million of the
outstanding DAKA  International  debt. At June 29, 1997, DAKA  International had
approximately $109.9 million outstanding under its Principal Credit Agreements.

8.       Other Assets

The components of other assets are as follows:

                                                     1997             1996
                                                     ----             ----
Preopening costs                                 $  3,628          $  5,567
Reacquired franchise rights                         2,862             4,488
Notes receivable                                    4,558             3,320
Deferred rent                                       1,983             1,673
Other                                               1,528             2,332
                                                 --------          --------
                                                   14,559            17,380
Less accumulated amortization                      (3,933)           (4,445)
                                                 --------          --------
                                                 $ 10,626          $ 12,935
                                                 ========          ========

Notes Receivable  include various notes bearing interest ranging form 8% to 10%,
require  monthly  payments and interest and mature at various dates ranging from
September 1997 to April 2004.

9.       Accrued Expenses

The components of accrued expenses are as follows:

                                                      1997             1996
                                                      ----             ----
Salaries, wages and related taxes                 $  4,163           $ 3,096
Taxes                                                3,511             2,134
Other                                                3,874             1,947
                                                  --------           -------
                                                  $ 11,548           $ 7,177
                                                  ========           =======
10.      Income Taxes

Income tax (benefit) expense is comprised of the following:

<TABLE>
<CAPTION>
                                                                                  1997                 1996                  1995
                                                                                  ----                 ----                  ----
<S>                                                                             <C>                   <C>                   <C>
Currently (receivable) payable:
Federal                                                                         $(4,175)              $(1,299)              $ 2,328
State                                                                              --                    --                     776
Deferred income tax (benefit) expense                                               454                   763                   (36)
                                                                                -------               -------               -------
Income tax expense (benefit)                                                    $(3,721)              $  (536)              $ 3,068
                                                                                =======               =======               =======
</TABLE>



<PAGE>



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

<TABLE>
<CAPTION>
                                                                               1997                   1996                   1995
                                                                               ----                   ----                   ----
<S>                                                                          <C>                    <C>                    <C>
Current:
  Accrued expenses                                                           $  1,635               $    321               $    428
  Prepaid expenses                                                               (330)                (1,467)                  (821)
  Net operating loss carryforwards                                                327                    327                    342
  Other                                                                           412                    591                    421
  Less valuation allowance                                                     (2,044)                  --                     --
                                                                             --------               --------               --------
                                                                             $      0               $   (228)              $    370
                                                                             ========               ========               ========
Noncurrent:
  Net operating loss carryforwards                                           $  4,704               $  4,876               $  4,924
  Depreciation and amortization                                                 6,069                    470                   (400)
  Deferred income                                                                 300                    166                    163
  Accrued expenses                                                              1,967                    729                  1,184
  Less valuation allowance                                                    (13,040)                (5,559)                (5,024)
                                                                             --------               --------               --------
                                                                             $      0               $    682               $    847
                                                                             ========               ========               ========
</TABLE>


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

                                                                                    1997                 1996                 1995
                                                                                    ----                 ----                 ----
<S>                                                                               <C>                  <C>                  <C>
Income tax provision (benefit) computed
  at statutory federal income tax rates                                           $(14,970)            $ (2,172)            $  1,703
Non-deductible costs                                                                   865                1,175                 --
State income taxes, net of federal tax benefit                                        --                   --                    269
Increase in the valuation allowance                                                  9,525                  535                  822
Other, net                                                                             859                  (74)                 274
                                                                                  --------             --------             --------
   Income tax (benefit) expense                                                   $ (3,721)            $   (536)            $  3,068
                                                                                  ========             ========             ========
</TABLE>


As of June 29, 1997, the Company had federal net operating loss carryforwards of
approximately  $12,812  expiring at various dates  through  2012.  Approximately
$9,786 of the  losses  are  related to  Fuddruckers  and  $3,026 are  related to
Fuddruckers'  63% owned  subsidiary,  ARVI. Both the  Fuddruckers' and ARVI loss
carryforwards  are limited on an annual basis.  For the fiscal years ended 1997,
1996 and 1995, 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
1997,  1996 and 1995 the valuation  allowance was increased by $9,525,  $535 and
$822, respectively.

11.      Commitments and Contingencies

Transaction Indemnifications

The Company has agreed to assume  certain  liabilities  in  connection  with the
Transaction  including  all losses or damages  related  to the  purported  class
action lawsuit  discussed  further below.  In addition,  the Company has entered
into Post-Closing  Covenants Agreement which provides for post-closing  payments
by the Company to Compass  under certain  circumstances.  To the extent there is
any amount owing from the Company to Compass for post-closing  payments relating
to any Foodservice Current Asset shortfall,  outstanding share value calculation
or Managed Volume/Profitability Adjustment, Compass will have a right of set-off
against any amounts  owing to the Company with respect to Compass's  obligations
to remit  the net  proceeds  from the  liquidation  of the  Contributed  Working
Capital.

Leases

Pursuant to the terms of the 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.

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.  Finally,  the Company also leases certain restaurant and
computer  equipment under operating leases which expire at various dates through
June 2001.

In  October  1995,   Fuddruckers   obtained  a  commitment  for  a  $25  million
sale-leaseback  financing facility from Franchise Finance Corporation of America
("FFCA").  Pursuant to the terms of the  facility,  the Company was permitted to
sell and lease-back from FFCA up to 20 Fuddruckers restaurants to be constructed
for which the Company  paid a  commitment  fee of 1.5% of the sale price of each
property  sold to FFCA.  The sale price was  limited to the lesser of 80% of the
fair  market  value of the  property  or $1.25  million.  The unused  commitment
expired on October 31, 1996.  The leases  provide for a fixed  minimum rent plus
additional  rent based on a percentage of sales and provide for an initial lease
term of 20 years with two 5-year  renewal  options  exercisable at the option of
the  Company.  The terms and  conditions  of the leases  were such that they are
accounted  for  as  operating  leases.  As of  June  29,  1997,  25  Fuddruckers
restaurants  have been sold to FFCA.  In January  1997,  the Company  obtained a
commitment for an additional $7.5 million of sale-leaseback  financing from FFCA
for  the  construction  of up to six new  Fuddruckers  restaurants.  Any  unused
commitment expires on January 30, 1998.

In December 1995, CEI obtained a commitment  for a $40 million  development  and
sale-leaseback  financing  facility  from AEI  Fund  Management,  Inc.  ("AEI").
Pursuant to the terms of the  agreement,  the Company  will sell and  lease-back
from AEI, Champps restaurants to be constructed and will pay a commitment fee of
1% of the sale price of each  property  sold to AEI. The purchase  price will 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,
if any, expires on December 6, 1997. 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 CEI. The terms and conditions of the leases are such that they are
accounted for as operating leases. As of June 29, 1997, four Champps restaurants
have been sold to AEI.

In January,  1996,  the Company  obtained a $5,000 capital lease facility from a
third  party  lender to fund the cost of certain  restaurant,  audio/visual  and
point-of-sale  equipment  related  to new  restaurant  construction.  The  lease
facility has a five-year term and an implicit interest rate of 10.2%. As of June
29, 1997,  the third party lender has  suspended  this  facility  pending  their
review of the Company after giving effect to the Spin-off.

Included in property and equipment in 1997, 1996 and 1995 are $5,813, $5,794 and
$3,271, respectively,  of equipment held pursuant to capital lease arrangements.
The related accumulated amortization was $1,868, $1,208 and $424, respectively.


<PAGE>



Future minimum lease payments pursuant to leases with noncancelable  lease terms
in excess of one year at June 29, 1997 are as follows:

Fiscal
Years                                   Operating          Capital
Ending                                    Leases           Leases
------                                    ------           ------
1998                                   $   17,331         $   1,408
1999                                       17,076             1,429
2000                                       16,397             1,298
2001                                       16,129               945
2002                                       14,776               214
Thereafter                                115,070                20
                                       ----------         ---------
Total future minimum lease payments    $  196,779             5,314
                                       ==========              (628) 
Less amount representing interest                         ---------
Present value of future minimum 
   lease payments                                         $   4,686
                                                          =========

Total rent  expense in 1997,  1996 and 1995  amounted  to  $21,019,  $16,755 and
$12,182,  respectively.  Contingent  rentals  included  in rent  expense are not
material for the periods presented.

Put/Call Agreements

On October 22, 1993,  the Company  entered into an agreement  with a partnership
affiliated  with the  president of a  majority-owned  subsidiary  of the Company
pursuant  to which the  partnership  has agreed to  purchase  substantially  all
shares of common stock of the subsidiary not currently owned by the Company. The
partnership also invested $1,100 in shares of the subsidiary's  preferred stock.
Additionally,  the Company and the partnership entered into a put/call agreement
whereby the Company has an option to purchase and the  partnership has the right
to require  the Company to purchase  all the common and  preferred  stock of the
subsidiary  owned by the  partnership  for a  purchase  price of  $5,400  plus a
premium based on the  subsidiary's  future financial  performance.  The put/call
option is exercisable by either the Company or the partnership between March 15,
1999 and  February 15, 2000.  On the date of the  put/call  agreement,  the fair
market value of the  subsidiary's  common stock plus the redemption value of the
preferred  stock was greater  than the present  value of the  put/call  price of
$5,400 based upon an  independent  valuation of the common stock obtained by the
Company from an investment  banking firm.  Similarly,  at June 29, 1997 and June
29, 1996, based upon independent valuations,  the value of ARVI not owned by the
Company  was in  excess  of  the  present  value  of the  put/call  price.  DAKA
International's  guarantee of the purchase price has been assumed by Compass for
which the Company has pledged as collateral to Compass 5 restaurants  with a net
book value of $7.9  million in lieu of  obtaining a release of the  guarantee by
DAKA International.

Purchase Commitments

In  July  1995,  the  Company   entered  into  a  five-year   Exclusive   Coffee
Manufacturing  Agreement (the "Coffee Agreement") with a third-party supplier of
ground and whole bean coffees,  including  flavored and gourmet coffee products.
Purchase prices to be paid by the Company are based on commodity market exchange
prices. At June 29, 1997 and June 29, 1996, the Company's  commitments under the
Coffee Agreement were approximately $360 and $400, respectively.


<PAGE>



Litigation

On October 18,  1996, a purported  class action  lawsuit was filed in the United
States District Court for the District of Massachusetts on behalf of persons who
acquired  DAKA  International's  common  stock  between  October  30,  1995  and
September 9, 1996 (Venturino et al. V. DAKA  International,  Inc. and William H.
Baumhauer,  Civil Action No. 96-12109-GAO).  The complaint alleges violations of
federal  and  state   securities   laws  by,  among  other   things,   allegedly
misrepresenting  and/or omitting material information concerning the results and
prospects of Fuddruckers during that period and seeks  compensatory  damages and
reasonable  costs and expenses,  including  counsel fees. On May 22, 1997,  DAKA
International  filed with the court a motion to dismiss  plaintiffs'  complaint.
The  Company  has  agreed  to  indemnify  Compass  for any  losses  or  expenses
associated with the complaint.  The Company  believes this suit is without merit
and  intends to defend  itself  vigorously  unless the  litigation  is  settled.
Settlement  negotiations  are in  process.  While the outcome of the case is not
presently  determinable,  the Company believes that the ultimate outcome of this
matter  will  not have a  material  adverse  effect  on the  Company's  combined
financial condition, results of operations or cash flows.

The Company and DAKA  International  are 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  combined
financial condition, results of operations or cash flows.

12.      Stock Options and Employee Benefit Plans

Stock Options

Through the Transaction  date, the Company's  employees  participated in various
incentive and non-qualified  stock option plans sponsored by DAKA  International
(the "Plans").  The Plans have 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. At
June 29, 1997 and 1996,  445,980 and 539,146  options to purchase shares of DAKA
International  common stock under the Plans were  exercisable  by the  Company's
employees at exercise prices ranging from $2.50 to $35.94 per share.

DAKA  International  and the Company apply APB Opinion No. 25 to account for its
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
1997 and 1996 had  been  determined  using  the  fair  value  method  under  the
provisions  of SFAS No. 123, the  Company's  net loss and pro forma net loss per
share would have been reduced to the pro forma amounts shown below:

                                                     1997             1996
                                                     ----             ----
Net loss:
  As reported                                    $  39,043        $   5,670
  Pro forma                                         39,943            6,470
Net loss per share:
  Pro forma - as reported                        $    3.42
  Pro forma - as adjusted                        $    3.50



<PAGE>



The pro forma net loss  reflects the  compensation  cost only for those  options
granted  during  1997 and  1996.  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.  Therefore, the full potential impact of compensation
cost of DAKA International's  stock plans under SFAS No. 123 is not reflected in
the pro forma net loss amounts presented above for the Company.

The fair  value of each  stock  option  granted  in 1997  and  1996  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          Expected                            Dividend
          Risk Free Rate         Life          Volatility            Yield
          --------------         ----          ----------            -----
1996           6.28%           4 years           50.00%                0%
1997           6.28%           4 years           50.00%                0%

The weighted-average  fair values per share of stock options granted during 1997
and 1996 were $4.13 and $10.74, 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.

Concurrent  with  the  consummation  of the  Transaction,  a  stock  option  and
restricted  stock  plans  for  the  benefit  of the  employee  and  non-employee
directors of the Company were adopted  pursuant to which the Company  authorized
and reserved for issuance  1,250,000 shares. In connection with the 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 Transaction.

Employee Benefit Plan

Through the Transaction  date the Company's  employees  participated in a 401(k)
retirement plan sponsored by DAKA  International.  The Plan enabled employees to
contribute up to 15% of their annual compensation.  The Company's  discretionary
contributions  to the Plan  have  been  determined  by DAKA  International.  The
Company  contributed  $25,  $204 and $251 to the  Plan in 1997,  1996 and  1995,
respectively.  After the consummation of the Transaction, plans similar to those
previously  offered by DAKA International were adopted and made available to the
Company's employees.

Long-Term Incentive Plan

Effective  July  3,  1994,  the  Company   implemented  a  long-term   incentive
compensation  plan ("LTIP") for its Chief Executive Officer whereby a portion of
the  increase  in the market  value of DAKA  International's  common  stock over
predefined  amounts,  is  payable  in either  cash or stock at the option of the
Company. Amounts payable under the LTIP were scheduled to vest on June 30, 1997.


<PAGE>



On May 22, 1997, the Board of Directors of DAKA International  amended the LTIP.
Under the terms of the amendment, the Chief Executive Officer's right to receive
a  performance  award was amended to provide for the granting of an option which
would vest on June 30,  1997 to  acquire  228,260  shares of DAKA  International
Common Stock at an exercise  price of $12.07 (the "Deemed  LTIP  Option").  Upon
consummation  of the  Transaction,  the Deemed  LTIP Option was  converted  in a
manner  similar to the  Adjusted  Options  and the Company  purchased  the Chief
Executive  Officer's Deemed LTIP Option. At June 29, 1997, $265 had been accrued
representing  the  expected  payment  to be made after the  consummation  of the
Transaction.

13.      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
receivables,  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.



<PAGE>






14.     Business Information

Income from restaurant and franchising  operations have been determined applying
the accounting policies in Note 3. Revenue and costs as shown below are directly
related to each business and do not include an allocation of corporate expenses,
non-operating  income,  interest  expense and income  taxes.  There are no sales
among the Company's three businesses. The table below presents certain financial
information  for the  Company's  Fuddruckers,  Champps  and  Specialty  Concepts
businesses, for 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                                                        1997               1996              1995
                                                                                        ----               ----              ----
<S>                                                                                  <C>                <C>                <C>    
Total Revenues:
   Sales from Fuddruckers-owned restaurants                                          $ 137,624          $ 131,592          $ 110,703
   Franchising and royalty income - Fuddruckers                                          4,021              6,574              5,372
   Sales from Champps-owned restaurants                                                 57,832             41,593             19,257
   Franchising and royalty income - Champps                                                539                555                636
   Sales from Specialty Concepts unit operations                                         5,285              2,865              1,738
   Franchising and royalty income - Specialty Concepts                                     583                576                 24
                                                                                     ---------          ---------          ---------
       Total revenues                                                                $ 205,884          $ 183,755          $ 137,730
                                                                                     =========          =========          =========

Fuddruckers:
   Sales from Fuddruckers-owned restaurants                                          $ 137,624          $ 131,592          $ 110,703
Operating expenses:
     Labor costs                                                                        45,204             41,944             34,206
     Product costs                                                                      38,524             38,203             31,559
     Other operating expenses                                                           38,731             30,719             25,414
     Depreciation and amortization                                                       9,010              7,953              5,273
     Impairment and exit costs                                                           9,107              2,450               --
                                                                                     ---------          ---------          ---------
   Restaurant unit contribution                                                         (2,952)            10,323             14,251
     Franchising and royalty income                                                      4,021              6,574              5,372
                                                                                     ---------          ---------          ---------
   Restaurant unit, franchising and royalty contribution                             $   1,069          $  16,897          $  19,623
                                                                                     =========          =========          =========

Champps:
   Sales from Champps-owned restaurants                                              $  57,832          $  41,593          $  19,257
Operating expenses:
     Labor costs                                                                        19,048             13,797              5,971
     Product costs                                                                      16,735             11,981              5,590
     Other operating expenses                                                           14,880              9,631              4,177
     Depreciation and amortization                                                       4,734              3,596              1,056
     Impairment and exit costs                                                            --                   62               --
     Merger costs                                                                         --                2,600               --
                                                                                     ---------          ---------          ---------
   Restaurant unit contribution                                                          2,435                (74)             2,463
     Franchising and royalty income                                                        539                555                636
                                                                                     ---------          ---------          ---------
   Restaurant unit, franchising and royalty contribution                             $   2,974          $     481          $   3,099
                                                                                     =========          =========          =========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                                       1997               1996              1995
                                                                                       ----               ----              ----
<S>                                                                                  <C>                <C>                <C>
Specialty Concepts:
   Sales from Specialty Concepts unit operations                                     $  5,285           $  2,865           $  1,738
Operating expenses:
     Labor costs                                                                        2,658                846                643
     Product costs                                                                      2,180              1,225                431
     Other operating expenses (income)                                                    676               (190)               137
     Depreciation and amortization                                                        985                152                 52
     Impairment and exit costs                                                          7,125                513               --
     Merger costs                                                                        --                  300               --
                                                                                     --------           --------           --------
   Restaurant unit contribution                                                        (8,339)                19                475
     Franchising and royalty income                                                       583                576                 24
                                                                                     --------           --------           --------

   Restaurant unit, franchising and royalty contribution                             $ (7,756)          $    595           $    499
                                                                                     ========           ========           ========

Restaurant unit, franchising and royalty contributions                               $ (3,713)          $ 17,973           $ 23,221

Selling, general and administrative expenses (1)                                       33,423             24,616             18,815
                                                                                     --------           --------           --------

Other charges                                                                           5,439               --                 --
Interest expense                                                                          744                641                331
Interest income                                                                          (487)              (353)              (622)
                                                                                     --------           --------           --------

Income (loss) before income taxes and minority interests                              (42,832)            (6,931)             4,697
                                                                                     --------           --------           --------

Income tax expense (benefit)                                                           (3,721)              (536)             3,068
Minority interests                                                                        (68)              (725)              (169)
                                                                                     --------           --------           --------

Net income (loss)                                                                    $(39,043)          $ (5,670)          $  1,798
                                                                                     ========           ========           ========
</TABLE>

(1)      Selling,  general  and  administrative  expenses  include  depreciation
         expense on corporate  assets of $820,  $435 and $249 in 1997,  1996 and
         1995, respectively.

Corporate  assets include computer  equipment and deposits.  The following table
presents  total assets for each of the businesses of the Company:

<TABLE>
<CAPTION>

                                                                           1997                     1996                      1995
                                                                           ----                     ----                      ----
<S>                                                                     <C>                       <C>                       <C>     
Fuddruckers                                                             $ 86,080                  $109,177                  $ 83,835


Champps                                                                 $ 30,512                  $ 27,386                  $ 15,729


Specialty Concepts                                                      $  2,282                  $  2,845                  $    756


Corporate                                                               $  6,335                  $  2,940                  $  2,111
                                                                        --------                  --------                  --------
                                                                        $125,209                  $142,348                  $102,431
                                                                        ========                  ========                  ========
</TABLE>