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 27, 1999

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

For the transition period from ___ to ___

Commission File Number:  0-22639


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

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

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


                                  978-774-6606
              (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 26, 1999 was  $20,073,019  (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 26,
1999: 11,652,692


<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 or about December 8, 1999
         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>

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

PART III

10                Directors and Executive            Election of Directors and  Committees in the Company's
                  Officers of the Registrant         Proxy Statement relating to its Annual Meeting of Stockholders
                                                     to be held on or about December 8, 1999.

11                Executive Compensation             Executive  Compensation  in the  Company's  Proxy  Statement
                                                     relating to its Annual  Meeting of  Stockholders  to be held
                                                     on or about December 8, 1999.

12                Security Ownership of Certain      Principal  Stockholders  in the  Company's  Proxy  Statement
                  Beneficial Owners and Management   relating to its Annual  Meeting of  Stockholders  to be held
                                                     on or about December 8, 1999.
</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,
Champps  Entertainment,  Inc., One Corporate Place, 55 Ferncroft Road,  Danvers,
Massachusetts 01923.


<PAGE>



                                 FORM 10-K INDEX

                                     PART I
<TABLE>
<CAPTION>
<S>               <C>                                                                                       <C>
Item 1            Business                                                                                   1

Item 2            Properties                                                                                14

Item 3            Legal Proceedings                                                                         15

Item 4            Submission of Matters to a Vote of Security Holders                                       15

                                     PART II

Item 5            Market for the Registrant's Common Stock and Related Stockholder Matters                  16

Item 6            Selected Financial Data                                                                   17

Item 7            Management's  Discussion  and  Analysis of  Results of  Operations  and
                     Financial Condition                                                                    18

Item 7a           Quantitative and Qualitative Market Risk Disclosures                                      24

Item 8            Financial Statements and Supplementary Data                                               25

Item 9            Changes in and Disagreements with Accountants on Accounting and
                     Financial Disclosure                                                                   25

                                    PART III

Item 10           Directors and Executive Officers of the Registrant                                        25

Item 11           Executive Compensation                                                                    26

Item 12           Security Ownership of Certain Beneficial Owners and Management                            26

Item 13           Certain Relationships and Related Transactions                                            26

                                     PART IV

Item 14           Exhibits, Financial Statement Schedules, and Reports on Form 8-K                          26
</TABLE>




<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.

Champps Entertainment,  Inc. (formerly known as 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 (978) 774-6606. At the
time of the Spin-off, the Company's business consisted of owning,  operating and
franchising  casual dining  restaurants  through various  subsidiaries under the
Champps Americana, Fuddruckers World's Greatest Hamburgers and the Great Bagel &
Coffee Company brands. Additionally,  the Company also owned, at the time of the
Spin-off,  a 17% passive investment in La Salsa Fresh Mexican Grill ("La Salsa")
and a 50% interest in Restaurant  Consulting  Services,  Inc. ("RCS").  La Salsa
owned,   operated  and  franchised  a  chain  of  fresh  Mexican  casual  dining
restaurants.  RCS was a diversified  consulting and technology  company offering
data  processing,  strategic  planning  and  other  technology  services  on  an
outsource basis to its customers, including the Company.

The Company ceased all  operations of the Great Bagel & Coffee  business on June
28,  1998.  On November  24, 1998,  the Company  sold its  Fuddruckers  business
segment to King Cannon, Inc. See "Acquisition and Disposition Transactions". The
Company has  reported  the results of  operations  of the  Fuddruckers  business
segment for all periods presented herein as discontinued operations.

On May 24, 1999,  the Company  sold its 50%  interest in RCS as  discussed  more
fully under the caption "Acquisition and Disposition Transactions".

On July 15, 1999,  La Salsa was  purchased  by Santa  Barbara  Restaurant  Group
("SBRG") and the Company exchanged its convertible  preferred shares of La Salsa
for common shares of SBRG. See "Acquisition and Disposition Transactions".


<PAGE>




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

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

Consideration  of  Strategic  Alternatives,  Changes in  Executive  Officers and
   Directors, and Resolution of Proxy Contest

On November 13, 1998, a preliminary  proxy was filed by Atticus  Partners,  L.P.
("Atticus")  with respect to the Company's 1998 Annual  Meeting which  indicated
Atticus  intended to solicit proxies for election to the Board of Directors (the
"Board") of its nominees in opposition  to the Company's  nominees for Director.
On March 11,  1999,  the  Company  announced  that this proxy  contest  had been
settled  by  agreement  between  the  Company  and  Atticus.  As a result of the
settlement,  among other  things,  Atticus'  nominees for election as Directors,
Timothy R. Barakett and James S. Goodwin,  were appointed to the Board,  Atticus
supported for election the Company's nominees,  who were re-elected to the Board
at the Annual  Meeting of  Shareholders  held on March 17,  1999,  and the Board
established  a two member  strategic  committee  with the  authority  to control
and/or oversee the  negotiation  and  preparation of any transaction to sell the
Company and provide a  recommendation  regarding  such a transaction to the full
Board.  The  strategic  committee  also was given the  authority  to review  and
evaluate  the  Company's  senior  executive  officers in light of the  Company's
strategic   needs  and  objectives  and  take  action  in  connection  with  its
evaluation.

The settlement  agreement further provided that in the event the Company had not
entered into a  definitive  agreement  with  respect to a sale,  merger or other
business  combination  by May 31, 1999,  then the Board would be reduced in size
from  seven  members  to  five  and two of the  members  existing  prior  to the
settlement would be required to step down.

On September 24, 1998,  the Company had announced it had retained Bear Stearns &
Co., Inc. to assist the Company's Board in evaluating and seeking  financial and
strategic  alternatives,  including a possible sale of the Company.  On June 28,
1999,  the Company  announced  it had  terminated  this process and would remain
independent and concentrate on  repositioning  and  strengthening  its remaining
business segment,  the Champps Americana  restaurant  concept.  The Company also
announced  on June 28,  1999,  that  William  H.  Baumhauer  had been  named the
Company's  President  and Chief  Executive  Officer,  replacing its Acting Chief
Executive Officer Donald C. Moore. Mr. Moore subsequently resigned as a Director
of the Company and as Chief  Financial  Officer  and the  Company  accepted  his
resignation.

On August 23, 1999,  the Board of Directors  elected  William H.  Baumhauer  and
Nathaniel  Rothschild as members of the Board of Directors and appointed William
H.  Baumhauer as its Chairman of the Board.  Mr.  Rothschild  is Executive  Vice
President of Atticus  Capital L.L.C.  Messrs.  Baumhauer and Rothschild  replace
E.L. Cox and Joseph W. O'Donnell.



<PAGE>




On April 15, 1999,  Erline  Belton  notified the Company of her desire to resign
from the Board  because of her  commitment  to serve as a Director of  Applebees
International,  Inc.,  a  diversified  casual  restaurant  company and the Board
accepted her resignation.

Messrs. Cox and O'Donnell served on the Board of the Company since May 1997, and
its predecessor  companies  since September 1988 and August 1996,  respectively,
both of whom  voluntarily  resigned  from the Board on August 13, 1999.  Mr. Cox
also served as the  Chairman of the Board of the Company  since July 1998.  With
the prior  resignation  of Ms.  Erline  Belton on April 15, 1999,  the Board was
reduced  from  seven  members  to five  members  as  contemplated  by the  proxy
settlement  agreement between the Company and Atticus Partners,  L.P.  discussed
above.

The Company Board currently  consists of Timothy Barakett,  President of Atticus
Capital, L.L.C.; James Goodwin, an independent consultant; Nathaniel Rothschild,
Executive Vice President of Atticus Capital LLC; Alan Schwartz,  Senior Managing
Director  -  Corporate  Finance  of Bear  Stearns & Co.,  Inc.;  and  William H.
Baumhauer.

On August 23, 1999, the Company also announced the  resignation of K.C.  Moylan,
who had served as Chief  Executive  Officer of the Company's  Champps  Operating
Corporation,  Inc.  subsidiary  since  February  1998, and announced that it had
promoted  Don N.  Lamb  to the  newly  created  position  of Vice  President  of
Operations.  Mr.  Lamb is  responsible  for  the  day-to-day  operations  of all
Company-owned  Champps  restaurants and oversees all franchised  locations.  Mr.
Lamb is a restaurant  veteran with over 20 years of  experience in the industry,
including  more  than 15 years of  multi-unit  supervision  at  Houlihans,  Ruby
Tuesday's,  and for the  past  three  and one  half  years  as a  Regional  Vice
President of Champps.

Acquisition and Disposition Transactions

Sale of Fuddruckers

On November 24, 1998, the Company  completed the sale of all of the  outstanding
common stock of Fuddruckers,  Inc.  ("Fuddruckers") to King Cannon,  Inc. ("King
Cannon") pursuant to a Stock Purchase Agreement (the  "Agreement"),  dated as of
July 31,  1998 (the  "Fuddruckers  Sale").  The sale price was $43.0  million in
cash,  subject to certain  possible  adjustments.  At the  closing,  the Company
disbursed  approximately  $2.5  million  to  escrow  agents  to be held  pending
resolution  of  certain  contingent  obligations  discussed  further  below.  In
addition, the Company used proceeds to pay obligations associated with the early
termination of certain leases,  obtaining  landlord consents to the transaction,
certain litigation  settlements,  and legal,  accounting and severance expenses,
and to settle the Company's  obligations under a put/call  agreement relating to
Fuddruckers' Atlantic Restaurant Ventures, Inc. subsidiary. The Company received
approximately  $2.6 million in previously  restricted cash balances,  which were
released  by  virtue  of the  Company's  settling  certain  of  the  obligations
discussed above. The Company also purchased two closed Fuddruckers locations and
recorded  assets  held  for sale  valued  at  approximately  $1.6  million.  The
Fuddruckers  sale  was  approved  by a vote  of the  Company's  shareholders  on
November 5, 1998.

Pursuant to the  Agreement,  King  Cannon had 120 days from the closing  date to
review and propose  adjustments  to the portion of the estimated  purchase price
related to working  capital.  The  Company  and King  Cannon  have agreed on the
amount of working  capital as of the closing  date,  resulting in a reduction of
the estimated purchase price of approximately $1.5 million,  including interest.
Both the Company and King Cannon have now accepted as final, the working capital
at the  closing  date.  This  reduction  in  estimated  purchase  price has been
included in the loss from discontinued  operations in the accompanying financial
statements.


<PAGE>



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

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

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

Further,  at the  closing,  the Company  established  a $1.0 million cash escrow
(included  in the  amount  reported  as  restricted  cash  in  the  accompanying
consolidated   balance   sheet)  as  a  fund  for  payment  of  any  claims  for
indemnification  pursuant to the Agreement.  Such escrow does not serve to limit
the Company's maximum exposure for indemnification  claims. However, the Company
believes  the risk of a claim for  indemnification  exceeding  the $1.0  million
escrow is remote.  As of June 27,  1999,  no money had been paid from the escrow
fund,  however in the first  quarter of fiscal 2000 a total of $0.2  million was
paid  for  agreed   amounts   presented  to  the  Company  by  King  Cannon  for
indemnification.


<PAGE>



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

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

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

La Salsa Merger

On July 16,  1999,  SBRG,  a publicly  held  corporation,  reported  that it had
completed the  acquisition  of La Salsa Fresh  Mexican  Grill ("La  Salsa").  In
connection  with this  transaction,  the Company  exchanged  all of its Series D
Convertible  Preferred Stock of La Salsa for  approximately  1,277,500 shares of
common stock of SBRG, of which approximately  120,650 shares have been placed in
escrow to cover any claims for  indemnification  by SBRG in connection with this
transaction.  The Company recorded a loss on its Series D Convertible  Preferred
Stock investment of  approximately  $2.3 million in the fourth quarter of fiscal
1999,  which  represents  the decrease in market value of the stock through June
27, 1999.

RCS Disposition

On May 24,  1999,  the Company sold its 50% interest in RCS to RCS pursuant to a
Stock Redemption and Debt Restructuring  Agreement. As part of this transaction,
the Company also  canceled all amounts due to the Company from RCS,  including a
note and accrued interest in the amount of $2.5 million.  In  consideration  for
its  shares of RCS common  stock and the  cancellation  of the note and  accrued
interest,  the Company  received a note payable which was paid in full on August
25, 1999,  certain  computer  equipment and  software,  a commitment to complete
certain work in progress  without charge to the Company,  services under a three
year consulting and professional data processing agreement without charge to the
Company and cancellation of accounts payable to RCS. The Company recorded a loss
on this transaction of approximately $350,000 during fiscal 1999.


<PAGE>



Recent Trends in Operations

The Company has reported its  Fuddruckers  segment as a discontinued  operation,
and as a result, the following  discussion is focused primarily on the Company's
continuing operation, the Champps Americana restaurant concept. For fiscal 1999,
1998 and 1997, except as otherwise stated,  the Company reported net losses from
continuing  operations  before  cumulative  effect of change in  accounting  for
preopening costs of approximately $14.1 million, $6.0 million and $27.4 million,
respectively. The Company incurred a loss from discontinued operations in fiscal
1999,  1998 and 1997 of  approximately  $9.8  million,  $20.7  million and $11.7
million,  respectively.  Discontinued  operations represent the Company's former
Fuddruckers  business  segment which was sold in November 1998.  During the past
two years,  the Company has  evaluated  its  strategic  position  and  evaluated
various  strategic  alternatives,  including a possible sale of the Company.  In
June 1999, the Board culminated this process with a decision to have the Company
remain independent and to focus the attention of management on repositioning and
strengthening  the  Champps  Americana  restaurant  concept.  As  part  of  this
decision,  the  Board  elected a new  Chairman,  President  and Chief  Executive
Officer,  and other changes  occurred in the make-up of the Company's  Board and
its executive officers.  These changes are discussed in more detail elsewhere in
this Form 10-K.

Results  of   continuing   operations   for  fiscal  1999  include   charges  of
approximately $9.4 million associated with these decisions as follows:

                                                       (In millions)
Sale and write-down of non-essential assets              $    2.7
Exit and other charges                                        1.3
Changes in estimates on continuing obligations
 for predecessor businesses                                   2.7
Losses on business and lease contracts                        2.7
                                                         --------
                                                         $    9.4
                                                         ========

The  Company  believes  that  these  decisions  and  its  near-term   strategies
including, but not limited to, its streamlining of corporate overhead, continued
development of new Champps restaurants and improving operational  performance at
all levels of the organization should provide it a good opportunity for a return
to profitability.  See  "Management's  Discussion and Analysis of Operations and
Financial  Condition"  for a further  discussion  of the  Company's  results  of
operations for fiscal 1999, 1998 and 1997.

Champps Americana Concept

Operations

The  Champps  Americana  ("Champps")  concept is based upon  providing  the best
possible food, value and service to its customers. Although food and service are
the most important parts of the Champps Americana concept, an atmosphere that is
entertaining  and  energetic,  yet  comfortable,  is  also  critical.  The  food
offerings at Champps' restaurants combine a wide selection of appetizers, soups,
salads,  innovative  sandwiches,  pizza, burgers, and entrees including chicken,
beef,  fish,  pasta and  desserts.  Selections  reflect a variety  of ethnic and
regional cuisines and traditional  favorites.  Because Champps' menu is not tied
to any particular type of food,  Champps can introduce and eliminate items based
on  current  consumer  trends  without  altering  its theme.  Portion  sizes are
generous and each dish is attractively  presented.  Champps  believes that these
qualities give customers a sense of value.  Entree prices  currently  range from
$4.95  to  $15.95.   Champps  emphasizes  freshness  and  quality  in  its  food
preparation.  Fresh sauces,  dressings,  batters and mixes are prepared daily on
the premises,  generally from original ingredients using fresh produce.  Champps
invests  substantial time in training and testing kitchen  employees to maintain
consistent food preparation.  Strict food standards at Champps-owned restaurants
have also been established to maintain quality.


<PAGE>



The Champps  customer's  experience is enhanced by the attitude and attention of
restaurant  personnel.   Accordingly,  the  Champps  concept  emphasizes  prompt
greeting of arrivals,  frequent  visits to customer  tables to monitor  customer
satisfaction  and service and friendly  treatment of its  customers.  Service is
based upon a team concept so that  customers  are made to feel that any employee
can help  them and  they are  never  left  unattended.  Success  of the  Champps
restaurants  depends upon  employee  adherence to these  standards.  To maintain
these  standards,  Champps  seeks to hire and train  personnel  who will work in
accordance  with Champps'  philosophy  and  frequently  rewards  individual  and
restaurant  achievement through several  recognition  programs intended to build
and  maintain  employee  morale.  All of the service  personnel  at each Champps
restaurant meet with the managers at two daily pre-shift  motivational meetings.
Restaurant  promotions,  specials  and  quality  control are all  discussed  and
explained during these meetings. 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.  Champps
restaurants  generally range in size from  approximately  7,000 to 12,000 square
feet.  Champps' standard  restaurant  features a bar, open kitchen and dining on
multiple  levels .  Customers  can also dine at the bar or outside on the patio,
where available.  The spacious design facilitates efficient service,  encourages
customer  participation  in  entertainment  and  promotional  events  and allows
customers  to view the  kitchen,  dining  area,  and bar.  Strategically  placed
television  monitors stimulate customer perception of activity and contribute to
the total entertainment experience and excitement of the restaurant.

An important part of the Champps dining experience is the entertainment. Patrons
may watch one of several sporting events being broadcast, or listen to a variety
of music played by the disc  jockey,  music which is changed for the time of day
and season of the year. The exposed kitchen offers  customers the opportunity to
observe the cooks, and, in certain locations,  a discreetly located game room is
provided for arcade games. The entertainment  aspects of the Champps restaurants
are designed to  encourage  repeat  visits,  increase the length of a customer's
stay and attract customers outside of normal peak hours. In addition,  a variety
of creative  promotions and  activities  are conducted  such as "Family  Bingo,"
"Spring Time Big Bike  Give-Away" and Karaoke.  These  promotions and activities
allow for customer  participation  and are continually  changing.  Change of the
ambiance  is also  experienced  in each  restaurant  when  the  restaurants  are
decorated for the holidays 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
generally  consists  of an  associate  manager,  two  floor  managers  and a bar
manager.  Back-of-House  management generally consists of a kitchen manager, two
to three  assistant  kitchen  managers and a daily  specials  chef.  All General
Managers  report   directly  to  the  Directors  of  Operations.   Managers  are
compensated  based on salary plus a monthly  bonus.  The bonus is  determined by
means of monthly restaurant sales and profit goals.


<PAGE>



Marketing

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

Site Selection

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

The cost to construct a typical Champps restaurant, where Champps purchases real
estate,  depending  upon its location,  is  approximately  $4.5 to $6.0 million,
which includes approximately $1.0 million for furniture, fixtures and equipment,
$1.5 to $2.5  million for building  and  improvements,  $1.5 to $2.0 million for
land and site  work,  and  $0.4  million  related  to  pre-opening  costs of the
restaurant.

The typical cost to construct a new Champps restaurant where Champps enters into
a leasing  arrangement is approximately  $3.0 to $3.5 million which is comprised
of  approximately  $1.0 million for furniture,  fixtures and equipment,  $1.5 to
$2.0 million for leasehold improvements, and $0.4 million related to pre-opening
costs of the restaurant.

Future development of Champps restaurants will be accomplished primarily through
the  development of  Champps-owned  restaurants.  The  development of additional
restaurants  is  contingent  upon  locating   satisfactory   sites,   financing,
negotiating  satisfactory  leases  or,  alternatively,  leasing  and  converting
existing  restaurant sites into Champps  restaurants.  It is also dependent upon
securing appropriate governmental permits and obtaining liquor licenses.  During
1999, two new Champps Company-owned restaurants were opened. During fiscal 1998,
four new Champps Company-owned restaurants were opened, and on February 2, 1998,
the Company sold a Champps  Company-owned  restaurant in Minnetonka,  Minnesota.
The restaurant was sold to Dean Vlahos, a former Director of the Company and the
former  President and Chief Executive  officer of Champps  Americana,  Inc., for
$2.9  million  representing  the fair  value  of the  restaurant  based  upon an
independent appraisal.  The purchase price was settled through a cash payment by
Mr.  Vlahos of $1.5  million  and the  cancellation  of Mr.  Vlahos'  employment
contract.  The Company  recognized a net gain of approximately  $700,000 on this
transaction. As part of this transaction,  the Company entered into a separation
agreement with Mr. Vlahos which grants Mr. Vlahos the right,  subject to certain
restrictions,  to develop up to six franchised Champps restaurants in the United
States by February 2, 2006. Under the separation agreement,  Mr. Vlahos will not
pay a franchise fee with respect to such  restaurants  and will pay a continuing
royalty of 1.25% of gross  sales.  At June 27,  1999,  the Company had three new
Champps Company-owned restaurants under construction and one Champps restaurants
under  development,  which are expected to open in fiscal 2000.  Development  of
Champps-owned   restaurants  will  be  concentrated  in  selected  markets  with
population density levels sufficient to support the restaurants.

Franchising and Licensing

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


<PAGE>



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

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































                  [Remainder of page left intentionally blank]



<PAGE>



Champps Restaurant Locations

The following table sets forth the locations of restaurants  operated by Champps
and its franchisees as of October 6, 1999:

Company Owned Restaurant Locations               Franchised Restaurant Locations
   Domestic - Total 20                              Domestic - Total 13
CALIFORNIA                                       MINNESOTA
   Irvine                                           Burnsville
COLORADO                                            Maple Grove
   Denver                                           Maplewood
FLORIDA                                             Minnetonka (2)
   Ft. Lauderdale                                   New Brighton
GEORGIA                                             St. Paul
   Alpharetta                                       Woodbury
ILLINOIS                                         NEBRASKA
   Schaumburg                                       Omaha
INDIANA                                          NORTH CAROLINA
   Indianapolis                                     Charlotte
MICHIGAN                                         SOUTH DAKOTA
   Livonia                                          Sioux Falls
   Troy                                          WISCONSIN
MINNESOTA                                           Milwaukee (2)
   Richfield
NEW JERSEY
   Edison
   Marlton
OHIO
   Columbus (3)
   Dayton
   Lyndhurst
TEXAS
   Addison
   Houston
   San Antonio
VIRGINIA
   Reston

Centralized Functions

During  fiscal  1998,  and  through  the first half of fiscal  1999 the  Company
provided  Fuddruckers and Champps with  centralized  purchasing,  accounting and
management  information services.  During the first few months after the sale of
Fuddruckers,  the  Company  and King Cannon  agreed to "share"  certain  support
functions including purchasing,  payroll,  accounts payable, risk management and
technology  support.  On June  27,  1999,  the  Company  and  King  Cannon  have
terminated all significant support function sharing arrangements.


<PAGE>




Purchasing

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

Accounting and Management Information Systems

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

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

Competition

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

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


<PAGE>



Government Regulation

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

Champps restaurants are subject to state and local licensing and regulation with
respect  to selling  and  serving  alcoholic  beverages.  The sale of  alcoholic
beverages  accounted for  approximately  33% of Champps' total restaurants sales
during fiscal year 1999 and 1998.  The failure to receive or retain,  or a delay
in obtaining,  a liquor license in a particular  location could adversely affect
Champps' or a franchisee's  operation in that location and could impair Champps'
or such franchisee's ability to obtain licenses elsewhere.  Typically,  licenses
must be renewed annually and may be revoked or suspended for cause.

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

Research and Development

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

Service Marks

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

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

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


<PAGE>



Seasonality

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

Corporate Offices and Associates

Champps  Entertainment,  Inc.  is  incorporated  under  the laws of the State of
Delaware and employs at its corporate  headquarters  approximately 16 associates
on a full-time basis, two of which are executive officers, as of June 27, 1999.

Champps Operating Corporation,  Inc. is incorporated under the laws of the State
of Minnesota  and employs  approximately  3,124  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 maintains its present  principal  executive offices at One Corporate
Place, 55 Ferncroft Road, Danvers, Massachusetts 01923. The telephone number for
the Company is (978)  774-6606.  See  "Properties"  for  transfer  of  corporate
office.

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 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  which  were  contributed  to the
Company.

Certain  non-restaurant  operating assets and liabilities of DAKA  International
were also  contributed to the Company (the  "Additional  Capital  Contribution")
consisting of notes receivable, property and accounts payable, accrued expenses,
and contingent liabilities.  These net assets and liabilities, which resulted in
a decrease to stockholders' equity of approximately $1.5 million,  were recorded
within their respective captions during fiscal 1998.

Following  the  consummation  of the Offer,  Compass  merged  with and into DAKA
International.  Pursuant to the Offer,  DAKA  International  distributed to each
holder of record of 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.


<PAGE>



As  part of the  merger  and  the  Spin-off  transaction,  except  as  otherwise
specifically provided, the Company agreed to 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 the liabilities that Compass did not agree to assume (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.  Further  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. 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.

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 not  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.

Item 2.     Properties.

As of June 27, 1999,  the Company  leased  approximately  44,000  square feet of
office space at its  corporate  headquarters  in Danvers,  Massachusetts,  at an
average annual rent of $722,000  through  November 30, 2001.  Compass  subleased
approximately  20,000  square feet from the Company for the first half of fiscal
1999 and all of fiscal 1998 at an annual  rental of  $361,000  equal to one-half
the  Company's  annual  rent.  As of June 28,  1998,  King  Cannon had agreed to
sub-lease  10,000 square feet at a monthly rent of $10,800 from February 1, 1999
to the end of the lease,  and RCS subleases  approximately  3,700 square feet at
$5,000 monthly, for the remaining term of the lease.

Champps Operating  Corporation,  Inc. leases approximately 4,000 square feet for
its corporate  office,  located in Wayzata,  Minnesota,  pursuant to a five-year
lease at an average annual rent of $70,800.


<PAGE>



As part of the  Company's  decision to  terminate  its  evaluation  of strategic
alternatives  and  refocus  on  repositioning   and  strengthening  the  Champps
restaurant  concept,  the Company has made a decision to consolidate  all of its
corporate offices into approximately 7,500 square feet in Denver,  Colorado. The
Company is currently  negotiating for space in Denver.  No lease has been signed
as of October 15, 1999. The Company  anticipates  completing the move by the end
of  December  1999,  although  there  can be no  assurance  that the move can be
completed  in this time frame.  The Company  believes  that the  elimination  of
excess assets, space and work force, and the consolidation and relocation of the
two existing  headquarters will cost approximately  $2.0 million,  of which $1.3
million  was  recorded  as  "Exit  and  other   charges"  in  fiscal  1999.  See
"Management's Discussion of Results of Operations and Financial Condition."

Item 3.     Legal Proceedings.

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

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.























                  [Remainder of page left intentionally blank]



<PAGE>



                                     PART II

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

The Company's  common stock  originally was listed on the Nasdaq National Market
("Nasdaq")  under the symbol  "UNIQ" from July 17,  1997,  the date on which the
Company  became a publicly  trade  company as a result of its spin-off from DAKA
through  July 28,  1999.  On July 28,  1999,  the Company  changed its name from
Unique Casual Restaurants,  Inc. to Champps Entertainment,  Inc. and changed its
symbol on Nasdaq to "CMPP." The table below sets forth,  since such date and for
the calendar periods indicated, the high and low intra-day sales price per share
with respect to fiscal 1998 and closing price with respect to fiscal 1999 of the
Common  Stock as reported  on the  Nasdaq.  The Company has no history of market
price for its  common  stock  prior to such date and data  with  respect  to the
common stock of DAKA, as predecessor of the Company,  which was listed on Nasdaq
before July 17, 1997, would not be meaningful.

                                                       High              Low
Fiscal 1998
First Fiscal Quarter (after July 17, 1997)         $   7.44          $   6.13
Second Fiscal Quarter                                  7.06              5.75
Third Fiscal Quarter                                   7.00              5.81
Fourth Fiscal Quarter                                  6.50              5.13

Fiscal 1999
First Fiscal Quarter                                   7.38              4.88
Second Fiscal Quarter                                  6.94              4.56
Third Fiscal Quarter                                   6.38              4.56
Fourth Fiscal Quarter                                  5.25              3.56


On October 18, 1999,  there were 2,810 holders of record of the Company's Common
Stock.

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
















                  [Remainder of page left intentionally blank]



<PAGE>


Item 6.     Selected Financial Data.

                             SELECTED FINANCIAL DATA

The  following  table  presents  selected   consolidated  data  from  continuing
operations and balance sheet data of the Company. Data for periods prior to 1999
have been  restated  to  account  for the  Company's  Fuddruckers  segment  as a
discontinued  operation.  The balance  sheet data as of June 27, 1999,  June 28,
1998, and June 29, 1997 and 1996 and the statements of operations  data for each
of the four fiscal years in the period ended June 27, 1999  presented  below are
derived  from the  Company's  audited  consolidated  financial  statements.  The
balance  sheet data as of July 1, 1995 and for the  fiscal  year then ended have
been derived from the Company's unaudited internal financial statements.

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

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

<TABLE>
<CAPTION>

                                                                                  As of and for the Fiscal Years Ended
                                                                       -------------------------------------------------------------
                                                                       June 27,     June 28,     June 29,     June 29,      July 1,
                                                                         1999         1998         1997         1996         1995
                                                                         ----         ----         ----         ----         ----
                                                                                  (In thousands, except per share data)
<S>                                                                   <C>          <C>          <C>          <C>          <C>
Statements of Operations Data:
Total revenues                                                        $  87,950    $  77,700    $  64,239    $  45,589    $  21,655
Loss from continuing operations before cumulative effect
   of change in accounting for preopening costs                         (14,079)      (5,999)     (27,389)     (12,736)      (5,813)
Net income (loss)                                                       (23,922)     (27,735)     (39,043)      (5,670)       1,798

Basic and diluted loss per share from continuing
   operations                                                             (1.21)       (0.52)        --           --           --
Pro forma basic and diluted loss per share from
   continuing operations                                                   --           --          (2.40)       (1.11)       (0.51)

Weighted average shares (in thousands):
   Historical                                                            11,622       11,489
   Pro forma                                                                                       11,426       11,426       11,426

Balance Sheet Data:
Total assets                                                          $  57,142    $  86,660    $ 110,267    $ 125,239    $  92,107
Long-term debt related to continuing operations,
   including current portion                                              6,157        6,945        4,256        4,460        1,992
Total equity                                                             27,819       50,398       79,053      108,894       73,979

Discontinued operations:
   Minority interests and obligations under put agreement
     related to the discontinued operations                                --          5,400        1,100        1,168        1,908
   Net long-term assets                                                    --         44,335       65,307       83,591       71,638
   Net current liabilities                                                 --         (4,202)      (6,492)        (132)      (4,606)
</TABLE>



<PAGE>



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

General

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

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

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in
the following Management's  Discussion and Analysis of Results of Operations and
Financial  Condition of the Company and  elsewhere in this Annual Report on Form
10-K are  forward-looking  statements  within the  meaning of Section 27A of the
Securities  Act and Section 21E of the Exchange  Act.  Words such as  "believe",
"anticipate",  "estimate",  "project",  and similar  expressions are intended to
identify  such  forward-looking  statements.  Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
respective dates.  Forward-looking  statements  involve risks and uncertainties,
many of which may be beyond the Company's  control.  Should one or more of these
risks or uncertainties materialize,  or should any of the underlying assumptions
prove  incorrect,  actual  results of current  and  future  operations  may vary
materially  from those  anticipated,  estimated or  projected.  Factors that may
cause such a difference include, among others, the following: the ability of the
Company to successfully  implement strategies to improve overall  profitability;
the impact of  increasing  competition  in the casual and upscale  casual dining
segments of the  restaurant  industry;  changes in general  economic  conditions
which  impact  consumer  spending  for  restaurant  occasions;  adverse  weather
conditions,  competition  among  restaurant  companies for attractive  sites and
unforeseen   events  which  increase  the  cost  to  develop  and/or  delay  the
development and opening of new  restaurants;  increases in the costs of product,
labor,  and other  resources  necessary to operate the  restaurants;  unforeseen
difficulties in integrating acquired  businesses;  the availability and terms of
financing for the Company and any changes to that financing;  the revaluation of
any of the  Company's  assets (and related  expenses);  the ultimate  outcome of
certain  contingent  obligations  related to the  Company's  former  Fuddruckers
segment and its other predecessor  businesses;  the impact on the Company and/or
its suppliers of matters related to the so-called Y2K problem;  the issuance and
renewal of licenses  and  permits for  restaurant  development  and  operations,
including  the sale of alcoholic  beverages;  and the amount of, and any changes
to, tax rates.




<PAGE>



                              RESULTS OF OPERATIONS

Overview

The Company incurred a net loss from continuing  operations of $14.1 million for
the fiscal year ended June 27, 1999, compared to a comparable  operating loss of
$6.0  million  last year.  Included in the loss for  continuing  operations  for
fiscal 1999 were charges  associated with exit and other charges ($1.3 million);
sale and write-down of non-essential assets ($2.7 million); changes in estimates
for continuing  obligations of predecessor businesses ($2.7 million); and losses
on business and lease contracts ($2.7 million).  Exclusive of these charges, the
Company  would have reported a loss from  continuing  operations of $4.7 million
for fiscal 1999.  While the Company believes it has strategies that will give it
an  opportunity  to return to overall  profitability,  there can be no assurance
that such strategies will be implemented, or if implemented, will be successful.
Accordingly,  the Company may continue to incur operating losses.  The amount of
losses and the time  required  by the Company to reach  sustained  profitability
cannot be predicted  with  certainty  and to achieve  profitability  the Company
must,   among  other   things,   successfully   reduce   selling,   general  and
administrative  expenses as a percentage of sales from  historical  levels while
continuing  to increase  net  revenues  from its  restaurants  and  successfully
executing its growth strategy for the Champps Americana concept.

In Item 1, see  "Consideration of Strategic  Alternatives,  Changes in Executive
Officers and Directors and  Resolution of Proxy  Contest" and  "Acquisition  and
Disposition  Transactions"  for a discussion  of events in fiscal 1999 that,  in
part, will shape the future direction of the Company.

The Company's Champps Americana concept is in the expansion phase. The timing of
revenues and expenses  associated  with  opening new  restaurants  or closing or
repositioning of existing  restaurants are expected to result in fluctuations in
the Company's quarterly and annual results. In addition,  the Company's results,
and the results of the restaurant industry as a whole, may be adversely affected
by changes in consumer  tastes,  discretionary  spending  priorities,  national,
regional or local economic conditions,  demographic trends,  consumer confidence
in the economy, traffic patterns, weather conditions,  employee availability and
the type, number and location of competing restaurants.  Changes in any of these
factors could adversely affect the Company. To date, however, these factors have
not had a significant negative impact since both sales and same store sales have
increased overall.

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

Notwithstanding these risks, the Company believes that its near-term strategies,
including,  but not limited to,  continued  expansion  of the Champps  Americana
concept, improving the execution of operating fundamentals, and streamlining the
Company's  organizational  structure  and  the  effects  of  the  Spin-off,  the
Fuddruckers  Sale, the  consolidation of corporate  headquarters and the sale of
non-essential  assets and  businesses,  and other related  transactions,  should
provide it with an opportunity for improved overall profitability.





<PAGE>




Champps

The following table sets forth certain financial information for Champps.

<TABLE>
<CAPTION>

                                                                                                    (In thousands)
                                                                                    1999                1998                1997
                                                                                    ----                ----                ----
<S>                                                                              <C>                 <C>                 <C>
Restaurant sales                                                                 $  87,392           $  73,387           $  57,832
                                                                                 =========           =========           =========

Sales from Champps restaurants                                                       100.0%              100.0%              100.0%
Operating expenses:
   Labor costs                                                                       (32.9)              (33.0)              (33.0)
   Product costs                                                                     (28.8)              (29.0)              (28.9)
   Other restaurant operating expenses                                               (28.1)              (27.8)              (25.7)
   Depreciation and amortization                                                      (3.9)               (3.9)               (8.2)
                                                                                 ---------           ---------           ---------
Restaurant unit contribution                                                           6.3%                6.3%                4.2%
                                                                                 =========           =========           =========

Restaurant unit contribution                                                    $    5,539          $    4,622          $    2,435
Gain on sale of franchise                                                             --                   677                --
Franchising and royalty income                                                         558                 644                 539
                                                                                 ---------           ---------           ---------
Restaurant unit, franchising and royalty contribution                           $    6,097         $     5,943          $    2,974
                                                                                 =========           =========           =========
</TABLE>

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

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

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

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


<PAGE>




Comparison of Fiscal Years Ended June 28, 1998 and June 29, 1997

Sales in Champps-owned  restaurants  increased  approximately  $15.6 million, or
26.9%,  to $73.4 million for fiscal 1998 compared with $57.8 million a year ago.
The increase  primarily  reflects three new Champps-owned  restaurants in fiscal
1997 opened for the full current fiscal year, four new Champps-owned restaurants
opened  during 1998,  and higher per  restaurant  average  sales  volumes  ($5.6
million annually for same stores).  Same store sales increased  approximately 1%
in 1998.

Restaurant  unit  contribution,  for fiscal 1998  increased  approximately  $2.2
million  to $4.6  million  compared  with $2.4  million in the  preceding  year.
Operating margins for 1998 were impacted by lower depreciation  offset, in part,
by higher occupancy costs.  Other operating  expenses in 1998 include preopening
costs  directly  incurred  totaling $1.9 million,  compared with $1.6 million in
fiscal 1997.

Specialty Concepts

On June 28, 1998,  the Company ceased the operations of its Great Bagel & Coffee
business, which represented the sole remaining business of its former "Specialty
Concepts"  operation.  This  decision  resulted  in a charge of $1.4  million in
fiscal 1998 for exit costs associated with the termination of leases,  severance
and write-downs of fixed assets abandoned.  Specialty  Concepts has historically
included the  operations of the Great Bagel & 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 of fiscal  1997,  the
Company decided to terminate its non-traditional  restaurant  operations leaving
only the  Great  Bagel &  Coffee  business  operating.  The  Specialty  Concepts
operation  generated  restaurant total revenues of $3.7 million in 1998 and $5.9
million in 1997 and unit losses of $1.4  million and $7.8 million in fiscal 1998
and 1997, respectively.

General and Administrative Expenses

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

General  and   administrative   expenses   from   continuing   operations   were
approximately  $19.0 million for fiscal 1999,  compared with approximately $10.8
million in fiscal 1998.  In fiscal  1999,  general and  administrative  expenses
include losses of $2.7 million of the sale of non-essential assets, $2.7 million
in charges related to predecessor  businesses and $2.3 million of the total $2.7
million in losses on business  and lease  contracts.  Exclusive  of these costs,
general  and  administrative  expenses  for 1999 would  have been $11.3  million
representing a 4.6% increase over the prior year.

The Company has recently  undertaken an initiative to  consolidate  its existing
corporate  offices in Massachusetts and Minnesota into one office to be based in
Denver,  Colorado. The Company is targeting the completion of this initiative by
late calendar 1999 or early in calendar 2000, although there can be no assurance
this initiative can be completed  within this time frame.  The Company  believes
that as a result of the changes discussed  elsewhere in this Form 10-K,  general
and administrative expenses in fiscal 2000 should approximate 7.0% of revenues.

Comparison of Continuing Operations Fiscal Year Ended June 28, 1998 and June 29,
  1997

General  and  administrative  expenses  were 13.9% of  revenues  in fiscal  1998
compared  with 26.1% in fiscal  1997.  This  improvement  relates  primarily  to
reduction in the work force and other  reductions taken in 1998 coupled with the
actual costs of maintaining the corporate  overhead of the Company when compared
with the allocation of DAKA International's overhead estimated in fiscal 1997 as
previously discussed.


<PAGE>




Income Taxes

Prior to July 17, 1997, the operations of the Company were generally included in
the  consolidated  U.S.  federal  income  tax return and  certain  combined  and
separate state and local tax returns of DAKA International.  Given the Company's
history of losses, no benefit for net operating losses were recognized in fiscal
1999 and 1998. The Company's  effective tax benefit rate was approximately  8.7%
for 1997. As of June 27, 1999, the Company had net operating loss  carryforwards
of  approximately  $40.5  million.  The  carryforwards  expire at various  dates
through 2019.

Discontinued Operations

On November 24, 1998, the Company completed the sale of its Fuddruckers business
to King Cannon for an  estimated  purchase  price of $43.0  million,  subject to
certain  adjustments.  Results of operations for the  Fuddruckers  business have
been  presented  in  the  accompanying   financial  statements  as  discontinued
operations.  See "Acquisition and Disposition Transactions" in Item 1 for a more
complete discussion of this transaction.

Accounting Pronouncements Not Yet Adopted

In June 1999 the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging  Activities." The Company will adopt SFAS No. 133 during
fiscal year 2000.  Management is currently  reviewing  the effect,  if any, from
adoption of this statement to the Company's consolidated financial statements.

Year 2000 Compliance

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

The  Company  is aware of the issues  associated  with the  programming  code in
existing  computer systems as the year 2000 approaches.  The "year 2000 problem"
is pervasive and complex as virtually every computer  operation will be affected
in some way by the roll-over of the two digit year value to "00".  This issue is
whether computer systems will properly recognize date sensitive information when
the  year  changes  to  2000.  Systems  that  do  not  properly  recognize  such
information could generate erroneous data or cause a system to fail.

The Company has an Information  Technology  Steering Committee (the "Committee")
which has been given the assignment of evaluating  year 2000  compliance for all
of the  Company's  primary and mission  critical  software and  hardware  assets
("core systems") and attempt to mitigate year 2000 compliance exposure. Based on
the  Committee's  review,  the Company has  segregated its core systems into the
following categories:  consolidated accounting and financial reporting; payroll;
restaurant sales and accounting; data transmission;  office support; and banking
services. Except for banking services, the Committee has completed its review of
each of these categories and, as discussed further below, has identified several
areas of non-compliance including Champps point of sale devices (cash registers)
and payroll  processing  hardware  and  software as systems  requiring  upgrades
and/or  replacement  in  order  to be  year  2000  compliant.  With  respect  to
consolidated  accounting  and  financial  reporting  core  systems,  the Company
utilizes  nationally  recognized  systems  such as Oracle,  Windows,  Novell and
Xcellenet  which are,  or with  readily  available  upgrades  will be, year 2000
compliant  and has received  written  assurances  from a majority of these third
parties to this effect. The Company estimates the costs to upgrade these systems
are  insignificant  and its exposure to catastrophic year 2000 risk to be highly
unlikely.


<PAGE>



With respect to its payroll core system, the Company's existing software and the
related  hardware  are year 2000  deficient.  The  Company  has  selected  a new
software  provider and the new payroll system is currently being installed.  The
Company completed initial installation tests of this year 2000 compliant payroll
system in early October, 1999. However, due to other software changes, retesting
of the Company's  payroll system  implementation  will be required.  All work is
targeted to be  completed  by  mid-November,  1999.  Originally  the Company had
estimated  this  system  would  be  installed  by  July  1,  1999,  however  the
implementation  was  delayed in part due to the changes in  strategic  direction
discussed  elsewhere in this Form 10-K. The Company presently estimates the cost
to bring its  payroll  core  systems  year 2000  compliant  to be  approximately
$200,000.  The payroll  core system is  important  to the  Company's  day to day
operations.  However,  the  Company  believes  that it could  manage its payroll
processes manually in the event of a year 2000 system failure.

The Company's Champps' point of sale and back office systems run on a Windows 95
platform.  The Company is aware that although Windows 95 is  substantially  year
2000  compliant,  there  are  certain  non-compliant  features  (see  "Financial
Condition and Liquidity"). The operating software that resides on the Windows 95
platform are year 2000  compliant,  however,  the effect on such programs of any
Windows 95 non-compliance  has not been determined.  As a result, the Company is
evaluating the impact, if any, of Windows 95 non-compliance on its other POS and
back office software.

The Company's  data  transmission  and office support core systems are year 2000
compliant in all  significant  respects.  An analysis of the  Company's  banking
services core systems has not been  completed.  The Company's  primary banks are
large,  national banks, which the Company believes mitigates exposure.  However,
the Company's  review of its banking services will be completed by mid-November,
1999.

The Company has not  completed  its  evaluation  of year 2000  compliance of its
primary  vendors for impact on the Company.  The Company has  requested  written
confirmation  from its third party vendors  regarding  their state of compliance
with the year 2000 problem. The Company's main information  technology provider,
RCS, has a back-up  generator which will  facilitate the continued  operation of
financial  reporting  systems.  In addition,  one Champps'  finance  person will
continue to reside in Massachusetts  near the RCS headquarters at the end of the
calendar  year.  Along with other  responsibilities,  this person will support a
contingency strategy for corporate financial reporting should long distance data
communication  be disrupted by year 2000  issues.  The Company will  continue to
examine cost effective  contingency  strategies where  warranted.  Unless public
suppliers  of water,  electricity,  natural  gas and banks are  disrupted  for a
substantial  period  of time  (in  which  case  the  Company's  business  may be
materially adversely affected),  the Company believes its operations will not be
significantly  disrupted  even if  third  parties  with  whom  the  Company  has
relationships  are  not  year  2000  compliant.   However,   uncertainty  exists
concerning  the  potential  costs  and  effects  associated  with any year  2000
compliance,  and as a result  it is  impossible  to  predict  the  impact of the
Company's  computers to fail to recognize the year 2000. The Company  intends to
continue  to  make  efforts  to  ensure  that  third  parties  with  whom it has
relationships  are year 2000  compliant.  Any year 2000  compliance  problem  of
either  the  Company  or its  vendors  could  materially  adversely  affect  the
Company's business, financial condition or operating results.


<PAGE>




                        FINANCIAL CONDITION AND LIQUIDITY

The working  capital needs of companies  engaged in the restaurant  industry are
generally  low as sales are made for cash,  and  purchases of food and supplies,
labor costs and other  operating  expenses are  generally  paid in 30 to 60 days
after receipt of invoices.  Capital expenditures for expansion during 1999, 1998
and 1997 were  generally  provided  through cash  balances  (including in 1999 a
portion  of the  proceeds  from  the  sale of  Fuddruckers)  and  proceeds  from
sale-leaseback facilities. Capital expenditures were $10.4 million, $5.4 million
and $7.6 million for continuing operations,  respectively, for fiscal 1999, 1998
and 1997.

At the end of fiscal 1999, the Company's  unrestricted cash was $7.2 million and
restricted cash was $3.0 million.  The Company anticipates that it will generate
positive cash flow from operations during fiscal 2000,  however,  there are also
significant cash expenditures anticipated during the forthcoming year.

Anticipated  in fiscal  2000 are capital  expenditures  of  approximately  $15.7
million, primarily for new restaurants now under construction and a new point of
sale  system.  On  September  15, 1999,  the Company  received a commitment  for
sale-leaseback  financing  for new  restaurants.  This  commitment is subject to
various pre-closing conditions and there can be no assurances that the financing
will be available on the terms  currently  anticipated or at all. The Company is
also pursuing a bank line of credit,  although no commitment has been secured to
date. Any additional  restaurants  opened in fiscal 2000 will be contingent upon
obtaining additional financing.

It is also  anticipated  that there will be substantial  cash payments in fiscal
2000  associated  with  liabilities  recorded  in  fiscal  1999  related  to the
Spin-Off,  the  Fuddruckers  Sale and the  consolidation  and  relocation of the
headquarters to Denver, Colorado.  Included in theses cash payments, the Company
anticipates  expenditures of more than $1.5 million for early termination of the
lease on excess  space,  severance  and  other  headquarters  consolidation  and
relocation  expenses.  In  addition,  there  will be  payments  for  prior  year
insurance claims,  tax audits and legal settlements.  These latter  expenditures
are estimated to range between $1.5 million to $2.5 million.

There  can  be no  assurance  that  a line  of  credit  will  be  obtained  or a
sale-leaseback facility implemented.  If the Company is unable to obtain sources
of financing,  the Company's planned expansion program and its ability to manage
continuing obligations associated with predecessor businesses would be adversely
effected.  In such a case,  the  Company  believes  that it has the  ability  to
curtail its Champps expansion program and further reduce non-essential operating
costs to  conserve  working  capital  sufficiently  to  continue  its day to day
operations through fiscal 2000.

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

Item 7a.    Quantitative and Qualitative Market Risk Disclosures

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


<PAGE>

Market risk for cash and cash equivalents and fixed rate borrowings is estimated
as the potential change in the fair value of the assets or obligations resulting
from a hypothetical  ten percent adverse change in interest  rates,  which would
not have been  significant  to the  Company's  financial  position or results of
operations during 1999. The effect of a similar  hypothetical change in interest
rates on the Company's  variable rate debt and the investment  rates implicit in
the Company's sale-leaseback arrangements also would have been insignificant due
to the immaterial  amounts of borrowings  outstanding under the Company's credit
arrangements.

For additional  information about the Company's financial  instruments and these
financing arrangements, see Notes to Consolidated Financial Statements.

Item 8. Financial Statements and Supplementary Data.

The  information  required  under this Item 8 is set forth on pages F-1  through
F-24 of this Report.

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

Not applicable.

<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

Directors of the Registrant

Incumbent Directors

         The following table sets forth certain  information  regarding  current
members of the Board of Directors:
<TABLE>
<CAPTION>
                                                      Principal                         Director      Expiration
            Name                       Age           Occupation                           Since         of Term     Class
            ----                       ---           ----------                           -----         -------     -----
<S>                                    <C>     <C>                                     <C>               <C>         <C>
William H. Baumhauer...............    51      Chairman, President and                 June 1999         2001         II
                                               Chief Executive Officer of the
                                               Company

Timothy R. Barakett................    34      President of Atticus Capital,L.L.C.     March 1999        2000          I

James Goodwin......................    43      Independent Consultant                  March 1999        2000          I

Nathaniel P.J.V. Rothschild........    28      Executive Vice President of
                                               Atticus Capital, L.L.C.                 August 1999       2001         II

Alan D. Schwartz...................    49      Senior Managing Director                May 1997          1999        III
                                               of Corporate Finance for
                                               Bear, Stearns & Co., Inc.
</TABLE>
-----------------------

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

William H. Baumhauer,  51, has served as a director and Chairman of the Board of
Directors since August 23, 1999, and as President and Chief Executive Officer of
the Company since June 24, 1999. Mr.  Baumhauer  also held these  positions with
the Company or its predecessors from September 1988 until July 24, 1998, when he
left the Company to serve as  President  and Chief  Operating  Officer of Planet
Hollywood  International,  Inc.,  a  position  he held  until his  return to the
Company on June 24, 1999. He served Fuddruckers,  Inc. as Chairman of the Board,
President  and Chief  Executive  Officer  between  March  1985 and the merger of
Fuddruckers, Inc. with DAKA in 1988.
<PAGE>

Timothy R. Barakett,  34, has been the President and Managing  Member of Atticus
Capital,  L.L.C., a private  investment  management  company and an affiliate of
Atticus  Partners,  since  October  1995.  From June 1993 until March 1995,  Mr.
Barakett was a Managing Director at Junction Advisors Inc., a private investment
management company.

James  Goodwin,  43, has been a private  investor  since  1998.  From 1990 until
February 1998, Mr. Goodwin was a Managing Director at Gleacher Natwest, Inc., an
investment banking company.

Nathaniel  P.J.V.  Rothschild,  28, has been Executive Vice President of Atticus
Capital,  L.L.C.  since January 1999. Mr. Rothschild is also a Vice President at
Atticus  Management  (Bermuda) Ltd. From July 1995 to April 1997 Mr.  Rothschild
was a  Financial  Analyst  with  Gleacher  & Co. and prior to that time he was a
Financial Analyst with Lazard Brothers & Co. Ltd. in London.

Alan  D.  Schwartz,  49,  has  served  as a  director  of  the  Company  or  its
predecessors since September 1988 and served as a director of Fuddruckers,  Inc.
from September  1984 until its merger with DAKA in 1988. Mr.  Schwartz is Senior
Managing  Director--Corporate  Finance  of  Bear,  Stearns  & Co.,  Inc.,  and a
director of its parent, The Bear Stearns Companies,  Inc. He has been associated
with such investment banking firm for more than five years. Mr. Schwartz is also
a director  of Young & Rubicam,  Inc.,  Atwood  Richards,  Inc.,  St.  Vincent's
Services,  the American Foundation for AIDS Research,  the New York Blood Center
and NYU Medical Center and a member of the Board of Visitors of the Fuqua School
of Business at Duke University.

Meetings and Committees

The Board of Directors of the Company has a Compensation Committee, a Nominating
Committee  and an Audit  Committee.  During the fiscal  year 1999,  the Board of
Directors held 19 meetings and the  Compensation  Committee held three meetings.
The Nominating and Audit  Committees  did not meet  separately,  as their duties
were  performed by the full Board of Directors.  Each  director  attended 75% or
more of the  aggregate  of (a) the  total  number  of  meetings  of the Board of
Directors  during fiscal year 1999, and (b) the total number of meetings held by
all  committees of the Board of Directors on which such  director  served during
fiscal year 1999.

The  Audit  Committee  has  the   responsibility   of  selecting  the  Company's
independent  auditors and communicating with the Company's  independent auditors
on matters of auditing and accounting. The Audit Committee is currently composed
of Mr. Barakett, Mr. Goodwin and Mr. Rothschild.

The  Compensation  Committee  has the  responsibility  of reviewing on an annual
basis all officer and  employee  compensation.  The  Compensation  Committee  is
currently  composed  of Mr.  Barakett,  Mr.  Goodwin,  Mr.  Rothschild  and  Mr.
Schwartz.  The Compensation  Committee also acts as the Stock Option  Committee,
and has the  responsibility of administering the Company's 1997 Stock Option and
Incentive Plan and the 1997 Stock Purchase Plan.
<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     51        Director, Chairman of the Board of Directors,
                                      President and Chief Executive Officer

Donna L. Depoian         39        Vice President, General Counsel and Secretary

William H. Baumhauer,  51, has served as a director and Chairman of the Board of
Directors since August 23, 1999, and as President and Chief Executive Officer of
the Company since June 24, 1999. Mr.  Baumhauer  also held these  positions with
the Company or its predecessors from September 1988 until July 24, 1998, when he
left the Company to serve as  President  and Chief  Operating  Officer of Planet
Hollywood  International,  Inc.,  a  position  he held  until his  return to the
Company on June 24, 1999. He served Fuddruckers,  Inc. as Chairman of the Board,
President  and Chief  Executive  Officer  between  March  1985 and the merger of
Fuddruckers, Inc. with DAKA in 1988.

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

Compliance With Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Company's executive  officers,  directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership  with the  Securities  and Exchange  Commission  and to
furnish copies to the Company.

Based upon a review of the reports furnished to the Company and  representations
made to the Company by its officers and  directors,  the Company  believes that,
during fiscal year 1999, its officers,  directors and its 10% beneficial owners,
other than Messrs.  Baumhauer,  Moore,  Moylan,  Cox, O'Donnell and Schwartz and
Mmes. Depoian and Randall, complied with all applicable reporting requirements.
<PAGE>

Item 11.    Executive Compensation.

The following table provides  information as to compensation paid by the Company
for fiscal years 1997, 1998 and 1999 to the Chief Executive Officer and the four
other most highly  compensated  executive  officers whose total salary and bonus
for fiscal year 1999 exceeded $100,000 (the "Named Executives").

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                     Long-Term
                                                                                   Compensation
                                               Annual                                 Awards
          Name and                          Compensation          Other Annual       Options/       All Other
     Principal Position          Year    Salary       Bonus       Compensation        SARs(1)     Compensation
     ------------------          ----    ------       -----       ------------    --------------- ------------
<S>                              <C>     <C>       <C>            <C>               <C>            <C>
William H. Baumhauer(2)......    1999    $58,950   $      0                               0(3)     $      0(3)
     Chairman, President and     1998   $450,500   $175,000(4)                      250,000        $675,000(5)
     Chief Executive Officer     1997   $449,869   $      0                                        $265,014(6)

Donald C. Moore(7)...........    1999   $250,000   $      0                         35,000
     Chief Executive Officer     1998   $187,981   $ 80,000                         35,000
                                 1997   $ 70,673   $ 30,000       $40,820(8)

K.C. Moylan(9)...............    1999   $240,000   $      0                         20,000
                                 1998   $200,000   $ 80,000       $31,700(10)       50,000
                                 1997   $163,130   $ 50,000

Donna L. Depoian.............    1999   $120,000   $      0                         20,000         $120,000(11)
     Vice President, General     1998   $ 80,000   $ 35,000
     Counsel and Secretary       1997   $ 76,000   $      0

Cynthia S. Randall...........    1999  $ 110,000   $      0                          5,000
     Director of Human Resources 1998  $  90,000   $ 11,000
                                 1997  $  76,800   $  9,000
</TABLE>
-------------

(1)  Represents the number of options to acquire Common Stock granted during the
     applicable fiscal year.

(2)  Mr.  Baumhauer  resigned as President  and Chief  Executive  Officer of the
     Company in June 1998 and  returned  to the Company as  President  and Chief
     Executive Officer effective June 24, 1999. He was elected a director of the
     Company and appointed Chairman of the Board of Directors in August 1999.

(3)  Does not include the extension  until June 30, 1999,  upon Mr.  Baumhauer's
     resignation  from the  Company in July  1998,  of the  termination  date of
     options  to  acquire  437,000  shares of Common  Stock at  exercise  prices
     ranging  from  $1.21 per share to $6.31 per  share  (including  options  to
     acquire  187,500  shares of Common Stock at an exercise  price of $6.31 per
     share which were not vested at the time of Mr. Baumhauer's resignation from
     the Company on July 24, 1998 and which would have  terminated  on such date
     unless  exercised).  The  termination  date of these  options  was  further
     extended until June 30, 2001 upon Mr.  Baumhauer's return to the Company on
     June 24, 1999.  The Company  recorded  $1,243,000 of non-cash  compensation
     expense in fiscal year 1999 on account of these  modifications  to employee
     stock options.

(4)  Represents a bonus for fiscal year 1998 made  conditional and paid upon the
     consummation  of the  sale  of  Fuddruckers  awarded  to Mr.  Baumhauer  in
     consideration  of his  contribution  to the  turnaround of the  Fuddruckers
     business, his role in positioning  Fuddruckers for sale, and his commitment
     to cooperate with the Company in satisfying various  pre-closing  covenants
     and conditions.
<PAGE>

(5)  Represents a cash payment made to Mr.  Baumhauer upon the  consummation  of
     the sale of Fuddruckers  pursuant to separation  arrangements in July 1998,
     in part in consideration  of his  contribution to the Fuddruckers  business
     during fiscal year 1998 and his commitment to cooperate with the Company in
     completing the sale of  Fuddruckers  during fiscal year 1999 and in part in
     consideration  of the fact that the sale of Fuddruckers  would have allowed
     Mr.  Baumhauer to terminate his  employment  agreement with the Company for
     "good reason",  thereby becoming entitled to termination  benefits equal to
     his base salary of $450,500 per year for a period of three years, if he had
     resigned after the date of consummation of the sale.

(6)  Represents  amounts earned under Mr.  Baumhauer's long term incentive plan,
     which  vested  during  fiscal year 1997.  In  connection  with the Spin-off
     Transaction,  the Board of Directors  determined  to pay amounts due to Mr.
     Baumhauer  pursuant to his long term incentive plan through the issuance of
     Common  Stock of the  Company  rather  than in cash.  On July 23,  1997 the
     Company  issued to Mr.  Baumhauer  37,973 shares of Common Stock,  having a
     value of  $265,014  based on the  average  closing  price of the  Company's
     Common Stock during the period from July 21, 1997 through July 23, 1997.

(7)  Mr. Moore served as Chief Executive  Officer and Chief Financial Officer of
     the Company from July 1998 through June 1999. As of July 1999 Mr. Moore was
     no longer employed by the Company.

(8)  Represents reimbursed relocation expenses.

(9)  Mr. Moylan served as President and Chief Executive Officer of the Company's
     Champps  Entertainment,  Inc. subsidiary during fiscal years 1998 and 1999.
     As of August 1999 Mr. Moylan was no longer employed by the Company.


(10) Represents amounts paid in connection with the repurchase of stock options.

(11) Represents a cash payment made to Ms. Depoian upon the  consummation of the
     sale of Fuddruckers in consideration of her in role in completing the sale.

                        Option Grants in Fiscal Year 1999

The following table provides  certain  information with respect to stock options
granted by the Company  during fiscal year 1999 to the Chief  Executive  Officer
and the Named Executives, all of which became fully vested upon the consummation
of the sale of Fuddruckers.
<TABLE>
<CAPTION>
                                        % of
                                    Total Options
                                     Granted to      Exercise
                       Options      Employees in       Price     Expiration
       Name            Granted       Fiscal Year     Per Share       Date     Grant Date Valuation
       ----            -------       -----------     ---------       ----     --------------------
<S>                     <C>            <C>             <C>         <C>             <C>
William H. Baumhauer    0(1)
Donald C. Moore        35,000          22.65%          $6.50       8/12/08         $49,457(2)
Kevin C. Moylan        20,000          12.94%          $6.50       8/12/08         $28,261(2)
Donna L. Depoian       20,000          12.94%          $6.50       8/12/08         $28,261(2)
Cynthia S. Randall      5,000           3.23%          $5.12       9/02/08         $ 5,188(3)
</TABLE>

--------------------
<PAGE>

(1)  Does not  include  options to  acquire  437,000  shares of Common  Stock at
     exercise prices ranging from $1.21 per share to $6.31 per share  (including
     options to acquire  187,500  shares of Common Stock at an exercise price of
     $6.31  per  share  which  were not  vested  at the time of Mr.  Baumhauer's
     resignation  from the Company on July 24, 1998, which would have terminated
     on such date unless  exercised  and which  became  immediately  vested) the
     termination  date of  which  was  extended  until  June 30,  1999  upon Mr.
     Baumhauer's resignation from the Company in July 1998. The termination date
     of  these  options  was  further  extended  until  June 30,  2001  upon Mr.
     Baumhauer's  return to the  Company  in June  1999.  The  Company  recorded
     $1,243,000 of non-cash  compensation expense in fiscal year 1999 on account
     of these modifications to employee stock options.

(2)  Calculated  using the  binomial  pricing  model.  The  assumptions  used in
     determining  the present value of these options using this  methodology are
     as  follows:  option  term of 10  years;  risk-free  rate of  5.72%;  .3728
     volatility over the course of a year; closing price of Common Stock on date
     of grant of $6.50; and a 0% reduction factor for the risk of forfeiture due
     to  vesting  restrictions.  The actual  value,  if any,  that an  executive
     officer  may  realize  will  depend  on  the  continued  employment  of the
     executive  officer holding the option through its vesting  period,  and the
     excess of the market price over the  exercise  price on the date the option
     is exercised so that there is no  assurance  that the value  realized by an
     executive  officer  will be at or near the value  estimated by the binomial
     pricing  model,  which is based on assumptions as to the variables of stock
     price volatility, future dividend yield, interest rates, etc.

(3)  Calculated  using the  binomial  pricing  model.  The  assumptions  used in
     determining  the present value of these options using this  methodology are
     as  follows:  option  term of 10  years;  risk-free  rate of  5.72%;  .4122
     volatility over the course of a year; closing price of Common Stock on date
     of grant of $5.12; and a 0% reduction factor for the risk of forfeiture due
     to  vesting  restrictions.  The actual  value,  if any,  that an  executive
     officer  may  realize  will  depend  on  the  continued  employment  of the
     executive  officer holding the option through its vesting  period,  and the
     excess of the market price over the  exercise  price on the date the option
     is exercised so that there is no  assurance  that the value  realized by an
     executive  officer  will be at or near the value  estimated by the binomial
     pricing  model,  which is based on assumptions as to the variables of stock
     price volatility, future dividend yield, interest rates, etc.

                 Aggregate Option Exercises in Fiscal Year 1999
                           and Year-End Option Values

Neither the Chief Executive  Officer nor any of the Named  Executives  exercised
any of their stock  options  during fiscal year 1999.  The following  table sets
forth the number of shares of Common Stock  covered by the stock options held by
the Chief  Executive  Officer and the Named  Executives  as of the end of fiscal
year 1999. The value of unexercised in-the-money options is based on the closing
price of the  Common  Stock as  reported  by Nasdaq on June 25,  1999  minus the
exercise price, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
                                                                           Value of Outstanding
                        Shares                    Number of Beneficial     In-the-Money options
                       Acquired       Value    Options at Fiscal Year-End  at Fiscal Year-End(1)
   Name               On Exercise   Realized   Exercisable Unexercisable  ExercisableUnexercisable
   ----               -----------   --------   -------------------------  ------------------------
<S>                        <C>         <C>      <C>       <C>                <C>         <C>
William H. Baumhauer       0           $0       437,000   750,000(1)         $319,640    $0
Donald C. Moore            0           $0       100,000         0            $0          $0
K.C. Moylan                0           $0        70,000         0            $0          $0
Donna L. Depoian           0           $0        21,300         0            $0          $0
Cynthia S. Randall         0           $0        10,000         0            $0          $0
</TABLE>
--------------------

(1)  Granted effective July 1, 1999.
<PAGE>

Employment and Termination Agreements

William H. Baumhauer Employment Agreement.

On June 24, 1999 the Company  entered into a two-year  employment  contract with
Mr.  Baumhauer.  The agreement  provides for a base salary of $400,000 per year.
The agreement  further  provides  that, in the event the Company  terminates Mr.
Baumhauer's  employment  without  "Cause"  (as defined  below) or Mr.  Baumhauer
terminates  his  employment  for "Good Reason" (as defined  below),  the Company
shall  continue  to pay Mr.  Baumhauer's  base  salary  through  the term of the
agreement as described above. "Good Reason" is defined as: (i) any assignment to
Mr.  Baumhauer of any duties other than those  contemplated by or any limitation
of the powers of Mr. Baumhauer in any respect not contemplated by the agreement;
(ii) removal of Mr. Baumhauer from or failure to re-elect or elect Mr. Baumhauer
to the positions of President and Chief Executive  Officer of the Company except
in connection  with  termination  of employee's  employment for cause or (iii) a
reduction in Mr.  Baumhauer's rate of  compensation.  "Cause" is defined as: (i)
theft or fraud from the Company; (ii) Mr. Baumhauer's  conviction of or pleading
guilty or no contest to a felony; (iii) violation of terms and conditions of his
employment;  (iv) his willful  disregard or neglect in the duties required to be
performed under the agreement or (v) his willful and demonstrated  unwillingness
to prosecute and perform such duties to the extent deemed  reasonably  necessary
and advisable and which duties  encompass  the duties  reasonably  required of a
President and Chief  Executive  Officer of a restaurant  company.  The agreement
grants Mr. Baumhauer  certain rights in the event of a sale of the Company which
would cause a termination of his  employment.  These rights include a payment on
account of Mr.  Baumhauer's  stock  options if the amount of salary  paid to him
plus gross proceeds  received by him, net of any cash exercise price paid,  upon
the exercise or other disposition of stock options is less than $1,200,000.  Mr.
Baumhauer was granted,  pursuant to the  agreement,  options to acquire  750,000
shares of Common Stock at an exercise price of $4.00 per share,  which will vest
in December 2000 or earlier if Mr.  Baumhauer's  employment is terminated by the
Company without Cause or by Mr. Baumhauer with Good Reason, or if the Company is
sold. In addition,  all stock options held by Mr.  Baumhauer and fully vested as
of June 24, 1999 were extended until June 30, 2001.

Donna L. Depoian Employment Agreement.

Effective  as of February  26,  1999,  the Company  entered  into an  employment
agreement with Donna L. Depoian to serve as Vice President,  General Counsel and
Secretary of the Company. The agreement provides for an initial term of one year
and for  successive  one-year  renewals  thereafter.  Under the  agreement,  Ms.
Depoian receives an annual base salary of $120,000, subject to adjustment at the
discretion of the Board of Directors.  The agreement  further  provides that, in
the event the Company  terminates Ms. Depoian's  employment  without "Cause" (as
defined below) or Ms. Depoian  terminates  her employment  for"Good  Reason" (as
defined  below),  the  Company  shall pay Ms.  Depoian  an  amount  equal to Ms.
Depoian's  cash  compensation  for one year.  "Good  Reason"  is  defined in the
agreement  as:  (i) an  assignment  to Ms.  Depoian  of duties  other than those
contemplated by the agreement,  or a limitation on the powers of Ms. Depoian not
contemplated  by the agreement;  (ii) the removal of Ms. Depoian from or failure
to elect Ms.  Depoian to her named  position,  including  the  position  of Vice
President,  General Counsel and Secretary of the Company or (iii) a reduction in
Ms.  Depoian's  rate of  compensation  or level of fringe  benefits.  "Cause" is
defined  in the  agreement  as:  Ms.  Depoian's  (i) theft  from or fraud on the
Company; (ii) conviction of a felony or crime of moral turpitude;  (iii) willful
violation of the terms of the agreement;  (iv) conscious disregard or neglect of
her duties or (v) willful and  demonstrated  unwillingness to perform her duties
under the agreement.
<PAGE>

Donald C. Moore Termination Agreement

On July 21,  1999  Donald C. Moore  entered  into a  Termination  Agreement  and
General  Release  (the  "Termination  Agreement").   The  Termination  Agreement
provides  that Mr.  Moore will be paid  $500,000 in  liquidated  damages  over a
two-year  period.  In August 1999, the Company paid Mr. Moore a $50,000  advance
toward future liquidated  damages payments.  With respect to Mr. Moore's options
to acquire  100,000  shares of Common  Stock of the Company,  the period  during
which all unexercised and unexpired  options may be exercised was extended until
July 21, 2001. The Termination  Agreement provided for a mutual release from Mr.
Moore and the Company from any actions,  suits,  debts,  demands, or claims. Mr.
Moore was party to an  employment  agreement  with the Company  dated August 12,
1999.  The  agreement  provided  for an  initial  term of one  year.  Under  the
agreement,  Mr.  Moore  received an annual base salary of  $250,000,  subject to
adjustment at the  discretion of the Board of Directors.  The agreement  further
provided  that,  in the event the  Company  terminated  Mr.  Moore's  employment
without  "Cause" (as defined  below) or Mr. Moore  terminated his employment for
"Good  Reason" (as defined  below),  the Company  would pay Mr.  Moore an amount
equal to Mr. Moore's cash compensation for two years.  "Good Reason" was defined
in the  agreement as (i) an  assignment  to Mr. Moore of duties other than those
contemplated  by the  agreement,  or a limitation on the powers of Mr. Moore not
contemplated by the agreement,  (ii) the removal of Mr. Moore from or failure to
elect Mr. Moore to his named position, including the position of Chief Executive
Officer of the Company, or (iii) a reduction in Mr. Moore's rate of compensation
or level of fringe benefits. "Cause" was defined in the agreement as Mr. Moore's
(i) theft from or fraud on the Company,  (ii) conviction of a felony or crime of
moral  turpitude,  (iii) willful  violation of the terms of the agreement,  (iv)
conscious  disregard or neglect of his duties,  or (v) willful and  demonstrated
unwillingness to perform his duties under the agreement.

Kevin C. Moylan Agreement

On August 31, 1999, Mr. Moylan resigned as President and Chief Executive Officer
of  the  Company's  Champps  Entertainment,   Inc.  subsidiary  and  received  a
termination  payment of $87,692  (including unpaid vacation) in cash. Mr. Moylan
was party to an employment  agreement  with the Company dated November 17, 1998,
as amended as of July 27, 1999.  The  agreement  provided for an initial term of
one year.  Under the  agreement,  Mr.  Moylan  received an annual base salary of
$240,000, subject to adjustment at the discretion of the Board of Directors. The
agreement  further  provided  that,  in the event  the  Company  terminated  Mr.
Moylan's  employment without "Cause" (as defined below) or Mr. Moylan terminated
this employment for "Good Reason" (as defined below),  the Company would pay Mr.
Moylan an amount equal to Mr.  Moylan's cash  compensation  for one year.  "Good
Reason" was  defined in the  agreement  as (i) an  assignment  to Mr.  Moylan of
duties other than those  contemplated  by the agreement,  or a limitation on the
powers of Mr. Moylan not contemplated by the agreement,  (ii) the removal of Mr.
Moylan from or failure to elect Mr. Moylan to his named position,  including the
position  of Chief  Executive  Officer of Champps,  or (iii) a reduction  in Mr.
Moylan's rate of compensation or level of fringe  benefits.  "Cause" was defined
in the  agreement as Mr.  Moylan's (i) theft from or fraud on the Company,  (ii)
conviction of a felony or crime of moral turpitude,  (iii) willful  violation of
the terms of the agreement,  (iv) conscious  disregard or neglect of his duties,
or (v) willful an  demonstrated  unwillingness  to perform his duties  under the
agreement.  The  employment  agreement  further  provided  that in the event the
Company  completed a sale of itself or Champps (or a  transaction  with  similar
effect),  the  Company  would pay Mr.  Moylan  upon the  closing of such sale or
transaction  a lump sum amount equal to his base salary in effect at the time of
the sale.

Directors' Compensation

In fiscal year 1999,  non-employee  directors  received a quarterly  retainer of
$3,000 and a fee of $1,000 per meeting attended, plus travel expenses. Effective
for fiscal year 2000, the directors'  compensation  has been revised.  Directors
will not  receive  any cash  compensation  for  their  service  on the  Board of
Directors or committees  other than  reimbursement of expenses.  Instead,  while
serving on the Board of Directors  each director will receive an annual grant of
options to acquire  5,000 shares of Common  Stock at an exercise  price at least
equal to the fair market value of the Common Stock as of the date of grant.
<PAGE>

Indemnification Agreements

The Company has entered  into  Indemnification  Agreements  with  certain of the
executive  officers of the Company and members of the Board who are not officers
of the Company (the "Indemnitees"),  pursuant to which the Company has agreed to
advance  expenses and indemnify such  Indemnitees  against  certain  liabilities
incurred  in  connection  with  their  services  as  executive  officers  and/or
directors  of the Company and in  connection  with their  services as  executive
officers  and/or  directors  of DAKA  prior to the  completion  of the  Spin-Off
Transaction. In the event of a proceeding brought against an Indemnitee by or in
the right of DAKA or the  Company,  such  Indemnitee  shall not be  entitled  to
indemnification  if such  Indemnitee  is  adjudged  to be  liable to DAKA or the
Company,   as  the  case  may  be,  or  if   applicable   law   prohibits   such
indemnification;   provided,  however,  that,  if  applicable  law  so  permits,
indemnification  shall nevertheless be made by the Company in such event if, and
only to the extent  that,  the Court of  Chancery of the State of  Delaware,  or
another  court in which such  proceeding  shall have been brought or is pending,
shall determine.

Under the terms of each Indemnification Agreement, the Company shall advance all
reasonable  expenses  incurred by or on behalf of such  Indemnitee in connection
with  any  proceeding  in  which  such  Indemnitee  is  involved  by  reason  of
Indemnitee's service to the Company or by reason of Indemnitee's service to DAKA
prior to the  completion  of the  Spin-Off  Transaction.  Such  statement  shall
include,  among other things,  an undertaking by or on behalf of such Indemnitee
to repay any expenses so advanced if it shall be ultimately determined that such
Indemnitee is not entitled to indemnification for such expenses.

Compensation Committee Report

The  Compensation  Committee  reviews and approves  compensation  levels for the
Company's   executive  officers  and  oversees  and  administers  the  Company's
executive  compensation  programs.  All members of the  Compensation  Committee,
listed at the end of this report,  are outside directors who are not eligible to
participate  in  the  compensation  programs  that  the  Compensation  Committee
oversees  except  for   non-discretionary   option  grants.   See  "--Directors'
Compensation."

Philosophy.  The  Compensation  Committee  believes  that the  interests  of the
Company's  stockholders  are best served when  compensation is directly  aligned
with the Company's financial performance.  Therefore, the Compensation Committee
has  approved  overall  compensation  programs  which award a  competitive  base
salary, and then encourage exceptional  performance through meaningful incentive
awards, both short and long term, which are tied to the Company's performance.

Responsibilities. The responsibilities of the Compensation Committee include:

     -    developing  compensation  programs  that are  consistent  with and are
          linked to the Company's strategy;

     -    assessing  the   performance   of  and   determining   an  appropriate
          compensation package for the Chief Executive Officer; and

     -    ensuring that  compensation for the other executive  officers reflects
          individual, team, and the Company's performance appropriately.

<PAGE>

Purpose. The Company's executive compensation programs are designed to:


     -    attract, retain, and motivate key executive officers;

     -    link  the  interests  of  executive   officers  with  stockholders  by
          encouraging stock ownership;

     -    support  the  Company's  goal  of  providing  superior  value  to  its
          stockholders and customers; and

     -    provide  appropriate  incentives  for  executive  officers,  based  on
          achieving key operating and organizational goals.

The Compensation  Committee believes that the Company's  executive  compensation
policies should be reviewed during the first quarter of the fiscal year when the
financial results of the prior fiscal year become available. The policies should
be  reviewed  in  light  of  their  consistency  with  the  Company's  financial
performance,  its business plan and its position within the restaurant industry,
as well as the  compensation  policies of similar  companies  in the  restaurant
business.  The compensation of individual executives is reviewed annually by the
Compensation  Committee in light of its executive compensation policies for that
year.

In  setting  and  reviewing   compensation  for  the  executive  officers,   the
Compensation  Committee  considers  a number of  different  factors  designed to
assure that compensation levels are properly aligned with the Company's business
strategy,  corporate  culture  and  operating  performance.  Among  the  factors
considered are the following:

         Comparability -- The Compensation  Committee considers the compensation
         packages  of  similarly   situated   executives  at  companies   deemed
         comparable to the Company. The objective is to maintain competitiveness
         in the  marketplace in order to attract and retain the highest  quality
         executives.  This is a  principal  factor  in  setting  base  levels of
         compensation.

         Pay  for  Performance  --  The  Compensation  Committee  believes  that
         compensation   should  in  part  be   directly   linked  to   operating
         performance.   To  achieve   this  link  with   regard  to   short-term
         performance,  the  Compensation  Committee relies on cash bonuses which
         are  determined  on  the  basis  of  certain  objective   criteria  and
         recommendations of the Chief Executive Officer.

         Equity   Ownership  --  The   Compensation   Committee   believes  that
         equity-based,  long-term  compensation  aligns  executives'  long-range
         interests with those of the  stockholders.  These  long-term  incentive
         programs  are  reflected  in the  Company's  stock  option  plans.  The
         Compensation  Committee  believes that significant stock ownership is a
         major  incentive in building  stockholder  value and reviews  grants of
         options with that goal in mind.

         Qualitative  Factors -- The  Compensation  Committee  believes  that in
         addition  to  corporate   performance   and  specific   business   unit
         performance,  in setting and  reviewing  executive  compensation  it is
         appropriate  to consider the personal  contributions  that a particular
         individual  may  make  to the  overall  success  of the  Company.  Such
         qualitative  factors as leadership  skills,  planning  initiatives  and
         employee  development  have  been  deemed to be  important  qualitative
         factors to take into account in considering levels of compensation.

Annual Cash  Compensation.  Annual cash compensation for the executive  officers
consists  of a base  salary and a variable,  at-risk  incentive  bonus under the
Company's Management Annual Incentive Plan.

It is the Company's  general policy to pay competitive base  compensation to its
executive  officers.   The  Compensation  Committee  annually  reviews  and,  if
appropriate,  adjusts  executive  officers' base salaries.  In making individual
base  salary   recommendations,   the  Compensation   Committee   considers  the
executive's experience,  management and leadership ability and technical skills,
his or her compensation  history, as well as the performance of the Company as a
whole and, where applicable, the performance of specific business units.

Under the Management  Annual Incentive Plan, each executive is assigned a target
incentive award.  This incentive  award, or some portion thereof,  is awarded by
the  Compensation  Committee  in its  discretion  based on its  assessment  of a
combination of four factors:  the Company's overall  performance,  business unit
performance,  attainment of  predetermined  individual  goals,  and the level of
personal/leadership   impact.   This   evaluation   process   is  not   strictly
quantitative,  but is largely based on  qualitative  judgments made by the Chief
Executive Officer, with the concurrence of the Compensation  Committee,  related
to individual, team, and the Company's performance.
<PAGE>

Chief Executive  Officer  Compensation.  Upon the departure of Mr.  Baumhauer on
July 24, 1998, the Board of Directors  determined that Mr. Moore was the logical
choice  to serve as the  Company's  acting  Chief  Executive  Officer  while the
Company  pursued the sale of  Fuddruckers  and  tackled  issues  concerning  its
strategic direction. Upon the appointment of Mr. Moore as acting Chief Executive
Officer,  his salary was adjusted  commensurate  with his new  responsibilities,
while he also continued to perform the duties of Chief Financial Officer. At the
recommendation  of the  Compensation  Committee,  the  Company  entered  into an
employment  contract  with  Mr.  Moore  on  terms  comparable  to  those  of his
predecessor,  as disclosed elsewhere in this Proxy Statement, to ensure that his
services as an  executive  knowledgeable  of the  operations  and affairs of the
Company  continued to be available to the Company during a period of uncertainty
and transition.  For fiscal year 1999 Mr. Moore participated in the compensation
programs outlined above. As disclosed elsewhere in this Proxy Statement, on July
21, 1999 Mr. Moore entered into a Termination Agreement and General Release with
the Company.

At the time of his  departure in July 1998,  Mr.  Baumhauer  was employed by the
Company as Chairman of the Board of Directors and Chief Executive  Officer under
the  terms  of an  employment  contract  and,  upon  the  recommendation  of the
Compensation  Committee,  entered into separation arrangements with the Company,
as  disclosed  elsewhere  in this  Proxy  Statement.  For  fiscal  year 1999 Mr.
Baumhauer did not participate in the compensation programs outlined above except
for the period prior to his departure.  On June 24, 1999, Mr. Baumhauer returned
to the Company as President and Chief  Executive  Officer and in August 1999 was
elected as a director and was appointed  Chairman of the Board of Directors.  At
the recommendation of the Compensation Committee, the Company entered into a new
employment  contract with Mr.  Baumhauer,  as disclosed  elsewhere in this Proxy
Statement. The Compensation Committee believes that the terms of Mr. Baumhauer's
new  employment  contract are  appropriate  in light of the Company's  strategic
direction  following the sale of Fuddruckers,  the Board of Directors'  decision
that the Company would remain  independent  and pursue the growth of the Champps
Americana restaurant concept,  and Mr. Baumhauer's  experience and reputation in
the restaurant industry.

Compensation of Other Officers. The Company's executive compensation program for
other executive  officers is described  above,  although the corporate  business
unit  and  individual  performance  goals  and  the  relative  weighting  of the
quantitative  performance  factors  described  above varies,  depending upon the
responsibilities of particular officers.

                                                    Timothy R. Barakett
                                                    James Goodwin
                                                    Nathaniel P.J.V. Rothschild
                                                    Alan D. Schwartz

                                PERFORMANCE GRAPH


                               [Performance Graph]


COMPANY/INDEX/MARKET              7/15/1997        6/26/1998         6/25/1999
Champps Entertainment Inc.          100.00           91.96             53.57
Customer Selected Stock List        100.00           98.34             82.41
Russell 3000 Index                  100.00           119.44           142.18


Selected Index Group:

Avado Brands Inc.
Cheesecake Factory Inc.
Dave & Buster's Inc.
Landrys Seafood Rest Inc.
Rainforest Cafe Inc.
Rare Hospitality Int Inc.
<PAGE>

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

The following table sets forth certain information, as of October 18, 1999, with
respect to each person known by the Company to be the  beneficial  owner of more
than 5% of the Common Stock,  each director of the Company,  executive  officers
included  in the  Summary  Compensation  Table  below,  and  all  directors  and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
                                                                           Amount and
                                                                            Nature of
      Name and Address of                                                  Beneficial         Percent
        Beneficial Owner                                                  Ownership(1)       Of Class
        ----------------                                                  ------------       --------
<S>                                                                     <C>                     <C>
William H. Baumhauer(2)...........................................        446,037(3)            3.7%
James Goodwin(2)..................................................              0(4)               *
Alan D. Schwartz(2)...............................................         14,880(5)               *
Nathaniel P.J.V. Rothschild(6)....................................              0(7)               *
Timothy R. Barakett(6)............................................      1,908,506(8)           16.4%
Donna L. Depoian(2)...............................................         22,433(9)               *
Cynthia S. Randall (2)............................................         17,825(10)              *
Douglas A. Hirsch(11).............................................        719,880(12)           6.2%
Franklin Resources, Inc(13).......................................      1,135,000(14)           9.7%
Atticus Holdings, L.L.C.(6).......................................      1,025,500(6)            8.8%
Atticus Qualified Partners, L.P.(6). .............................        607,450(6)            5.2%
All directors and executive officers
  as a group (7 persons)..........................................      2,409,681(15)          19.9%
</TABLE>
--------------------
* Less than 1%

(1)  Beneficial share ownership is determined pursuant to Rule 13d-3 promulgated
     by the Securities and Exchange  Commission (the "SEC") under the Securities
     Exchange Act of 1934,  as amended.  Accordingly,  a  beneficial  owner of a
     security  includes  any person  who,  directly or  indirectly,  through any
     contract,  arrangement,  understanding,  relationship or otherwise,  has or
     shares  the power to vote such  security  or the power to  dispose  of such
     security.  The amounts set forth in the table as beneficially owned include
     shares owned,  if any, by spouses and relatives  living in the same home as
     to which beneficial  ownership may be disclaimed.  The amounts set forth in
     the table as  beneficially  owned  include  shares of  Common  Stock  which
     directors  and  executive  officers  have the right to acquire  pursuant to
     previously granted options exercisable within 60 days of October 18, 1999.

(2)  The address of the beneficial owner is c/o Champps Entertainment, Inc., One
     Corporate Place, 55 Ferncroft Road, Danvers, Massachusetts 01923.

(3)  Includes  437,000  shares of Common  Stock  issuable  upon the  exercise of
     options.

(4)  In connection with Mr.  Goodwin's  appointment to the Board of Directors in
     March 1999,  Atticus  Capital,  L.L.C.  entered into an agreement  with Mr.
     Goodwin which provides that Atticus Capital, L.L.C. will pay to Mr. Goodwin
     an amount equal to five  percent of the proceeds  above $4.875 per share of
     Common  Stock  realized  by  Atticus  Partners,   L.P.,  Atticus  Qualified
     Partners, L.P. and Atticus International, Ltd. upon the sale or disposition
     of the  Common  Stock  beneficially  owned by them.  In  addition,  Atticus
     Partners,  L.P. agreed to indemnify Mr. Goodwin against any and all losses,
     claims,  liabilities and expenses in connection with serving as a member of
     the Company's  Board of Directors.  Mr.  Goodwin does not have or share the
     power  to vote or the  power to  dispose  of any  shares  of  Common  Stock
     beneficially owned by Atticus Partners,  L.P., Atticus Qualified  Partners,
     L.P. or Atticus  International,  Ltd., and therefore  disclaims  beneficial
     ownership  of any of the  1,577,056  shares  of Common  Stock  held by them
     collectively.

(5)  Includes  14,500  shares of Common  Stock  issuable  upon the  exercise  of
     options.

(6)  The address of the beneficial  owner is c/o Atticus  Capital,  L.L.C.,  590
     Madison Avenue, 32nd Floor, New York, NY 10022

(7)  Mr.  Rothschild is Executive Vice President of Atticus  Capital,  L.L.C., a
     Delaware  limited  liability  company  that (i) is an  affiliate of Atticus
     Holdings,  L.L.C., a Delaware limited  liability company that serves as the
     general partner of Atticus Partners,  L.P. and Atticus Qualified  Partners,
     L.P.,  which  beneficially  own 418,050 and 607,450 shares of Common Stock,
     respectively,  and (ii) has investment  discretion  with respect to certain
     managed accounts (the "Managed Accounts"),  which collectively beneficially
     own 331,450  shares of Common Stock.  He is also Vice  President of Atticus
     Management,  Ltd., an international  business  company  organized under the
     laws of the British  Virgin  Islands  that serves as the manager of Atticus
     International,  Ltd.,  which  beneficially  owns  551,556  shares of Common
     Stock. Mr. Rothschild does not have or share the power to vote or the power
     to  dispose  of any shares of Common  Stock  beneficially  owned by Atticus
     Partners,  L.P., Atticus Qualified Partners,  L.P., Atticus  International,
     Ltd. or the Managed Accounts,  and therefore disclaims beneficial ownership
     of any of the 1,908,506 shares of Common Stock held by them collectively.

(8)  Mr. Barakett is the Managing Member of Atticus Holdings, L.L.C., a Delaware
     limited  liability  company  that serves as the general  partner of Atticus
     Partners, L.P. and Atticus Qualified Partners, L.P., which beneficially own
     418,050 and 607,450 shares of Common Stock,  respectively.  Mr. Barakett is
     also the President of Atticus Management,  Ltd., an international  business
     company  organized under the laws of the British Virgin Islands that serves
     as the manager of Atticus  International,  Ltd.,  which  beneficially  owns
     551,556 shares of Common Stock. Mr. Barakett is also the Managing Member of
     Atticus  Capital,  L.L.C,  which has investment  discretion with respect to
     certain  managed  accounts (the  "Managed  Accounts"),  which  collectively
     beneficially  own 331,450 shares of Common Stock. Mr. Barakett is deemed to
     be the  beneficial  owner of all  shares of Common  Stock  owned by Atticus
     Partners,  L.P., Atticus Qualified Partners,  L.P., Atticus  International,
     Ltd. and the Managed Accounts.
<PAGE>

(9)  Includes  21,300  shares of Common  Stock  issuable  upon the  exercise  of
     options.

(10) Includes  10,000  shares of Common  Stock  issuable  upon the  exercise  of
     options.

(11) The address of the beneficial owner is c/o Seneca Capital Advisors LLC, 830
     Third Avenue, 14th Floor, New York, NY 10022.

(12) Includes 569,800 shares  beneficially  owned by Seneca Capital Advisors LLC
     and Seneca Capital  Investments,  LLC, of which Mr. Hirsch is a controlling
     person.  Includes 150,000 shares with respect to which Mr. Hirsch disclaims
     beneficial  ownership.  This  information is based on a Schedule 13D, dated
     June 23, 1997,  filed by Seneca  Capital  Advisors LLC on behalf of Douglas
     Hirsch with the SEC.

(13) The address of the  beneficial  owner is 777  Mariners  Island  Blvd.,  6th
     Floor, San Mateo, CA 94404.

(14) This  information  is based on a Schedule  13G/A,  dated  February 9, 1999,
     filed by Franklin Resources, Inc. with the SEC.

(15) Includes  482,800  shares of Common  Stock  issuable  upon the  exercise of
     options.

Item 13.     Certain Relationships And Related Transactions.

Compensation Committee Interlocks

Alan  D.  Schwartz,  a  director  of the  Company  who is also a  member  of the
Compensation  Committee, is Senior Managing  Director-Corporate  Finance of Bear
Stearns & Co.,  Inc. In the past Bear Stearns and its  affiliates  have provided
financial  advisory and financing services to the Company and have received fees
and reimbursement of expenses for rendering such services. In particular, during
fiscal year 1999 Bear  Stearns (i)  received  payment of an  approximately  $1.8
million  fee  earned  in  fiscal  year  1997 in  connection  with  its role as a
financial advisor to the Company with respect to the Spin-Off Transaction, which
had not been  paid  during  fiscal  year  1997,  and (ii)  was  entitled  to the
reimbursement of out of pocket expenses of approximately  $50,000,  which remain
payable,  related to its role as financial  advisor to the Company in connection
with evaluating and seeking  financial and strategic  alternatives,  including a
possible sale of the Company.
<PAGE>

Timothy R.  Barakett  and  Nathaniel  P.J.V.  Rothschild,  two  directors of the
Company who are also members of the  Compensation  Committee,  are President and
Executive Vice President,  respectively, of Atticus Capital, L.L.C. As disclosed
elsewhere  in  this  Proxy  Statement,  Mr.  Barakett  may  also be  deemed  the
beneficial owner of 1,908,506 shares of Common Stock, or approximately  16.4% of
all Common Stock  outstanding.  During fiscal year 1999 Atticus Capital,  L.L.C.
and  certain  of its  affiliates  (collectively,  "Atticus")  conducted  a proxy
contest regarding the Company's annual meeting of stockholders held on March 17,
1999,  which  proxy  contest was  settled by  agreement  between the Company and
Atticus on March 11, 1999.  Under the terms of the settlement  agreement,  among
other  things,  Mr.  Barakett and James  Goodwin were  appointed to the Board of
Directors  as Class I  directors  to serve  until  the 2000  annual  meeting  of
stockholders  and the  Company  paid  certain of Atticus'  expenses  incurred in
connection  with the  solicitation  of proxies in the  amount of  $150,000.  Mr.
Goodwin is also a member of the Compensation  Committee.  In connection with Mr.
Goodwin's  appointment  to the Company's  Board of Directors,  Atticus  Capital,
L.L.C.  entered into an agreement  with Mr.  Goodwin which provides that Atticus
Capital,  L.L.C.  will pay to Mr. Goodwin an amount equal to five percent of the
proceeds  above $4.875 per share of Common Stock  realized by Atticus  Partners,
L.P., Atticus Qualified Partners, L.P. and Atticus International,  Ltd. upon the
sale or disposition of 1,577,056  shares of Common Stock  beneficially  owned by
them.  In addition,  Atticus  Partners,  L.P.  agreed to indemnify  Mr.  Goodwin
against any and all losses, claims,  liabilities and expenses in connection with
serving as a member of the Company's Board of Directors.

Joseph W.  O'Donnell,  who was a  director  of the  Company  and a member of the
Compensation  Committee  until his resignation in August 1999, is a principal in
Osgood, O'Donnell and Walsh, which has in the past provided marketing consulting
services to the Company and received fees for providing  such  services.  During
fiscal year 1999, the Company paid Osgood,  O'Donnell and Walsh $30,000 for such
services and related  expenses.  Mr.  O'Donnell  also owns a controlling  equity
interest  in  PulseBack,   Inc.,  a  company   engaged  in  providing   customer
satisfaction  measurement  services  to the  restaurant  industry  to which  the
Company paid $67,744 for services  rendered during fiscal year 1999. The Company
owns a  non-controlling  equity  interest in  Pulseback,  the value of which was
written down to zero by the Company before fiscal year 1999.  During fiscal year
1999 the Company wrote off a $75,000 note receivable from PulseBack.

                                     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

         Consolidated Balance Sheets - June 27, 1999 and June 28, 1998

         Consolidated  Statements  of  Operations  - Fiscal years ended June 27,
         1999, June 28, 1998, and June 29, 1997

         Consolidated  Statements  of  Cash Flows - Fiscal  years ended June 27,
         1999,  June 28,  1998,  and June 29, 1997

         Consolidated  Statements  of Changes in  Stockholders'  Equity - Fiscal
         years ended June 27, 1999, June 28, 1998, and June 29, 1997

         Notes to Consolidated Financial Statements


<PAGE>



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").

**2.4Series 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.

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

**2.6Asset 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.

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

**2.8Stock 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 Unique Casual  Restaurants,
     Inc. Common Stock.

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

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

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

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

*10.3Stock 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.

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

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

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

*10.7Employment Agreement,  dated as of January 1, 1997, by and between DAKA and
     William H. Baumhauer.

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

*10.9Employment Agreement, dated as of February 21, 1996, by and among Dean
     P. Vlahos, DAKA and Champps.

**10.10 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.

**10.11 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.

**10.12 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.

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

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

+ 10.15 Separation Agreement, dated as of February 2, 1998, by and among Dean
     P. Vlahos, the Company and Champps.

+ 10.16 Asset  Purchase  Agreement,  dated as of  February  2, 1998,  by and
     between Dean P. Vlahos and Champps.

+ 10.17 Champps  Restaurant  Development  Agreement,  dated as of February 2,
     1998, by and between Dean P. Vlahos and Champps.

+ 10.18 Venturino Settlement  Agreement,  dated as of December,  1997, by and
     among Rita Venturino, Cosmos Phillips and Matthew Minogue, et. al. and DAKA
     International, Inc. and William H. Baumhauer.

+ 10.19 Stock Purchase  Agreement,  dated as of July 31, 1998, by and between
     King Cannon, Inc. and Unique Casual Restaurants, Inc.

+ 10.20  Employment  Agreement,  dated as of August 12, 1998,  by and between
     Unique Casual Restaurants, Inc. and Donald C. Moore.

10.21Post  Closing  Payments  Agreement,  dated as of January 21,  1998,  by and
     among DAKA  International,  Inc.,  Daka,  Inc.,  Compass Group PCL,  Unique
     Casual  Restaurants,  Inc., Champps and Fuddruckers  incorporated herein by
     reference  to the amended  Annual  Report on Form  10-K/A of Unique  Casual
     Restaurants, Inc. for the year ended June 28, 1998.

10.22Letter agreement among Unique Casual  Restaurants,  Inc., Atticus Partners,
     L.P.,  and the other parties  thereto,  dated March 10, 1999,  incorporated
     herein by  reference  to the  Current  Report on Form 8-K of Unique  Casual
     Restaurants, Inc. filed March 17, 1999.

10.23Employment  Agreement,  dated as of June 24,  1999,  by and between  Unique
     Casual Restaurants, Inc. and William H. Baumhauer.
<PAGE>

10.24Stock  Redemption  and Debt  Restructuring  Agreement,  dated as of May 24,
     1999,  by and among  Champps  Entertainment,  Inc.,  f/k/a/  Unique  Casual
     Restaurants,   Inc.,  Theodore  M.  Mountzuris  and  Restaurant  Consulting
     Services, Inc.

21.1 Subsidiaries of the Company.

23.1 Consent of Deloitte & Touche LLP

24.1 Powers of Attorney.

*        Incorporated herein by reference to the Company's, when known as Unique
         Casual Restaurants,  Inc., 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.

+        Incorporated herein by reference to the  Annual Report on  Form 10-K of
         Unique Casual Restaurants, Inc. for the year ended June 28, 1998.

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.


                    CHAMPPS ENTERTAINMENT, INC.
                    (Registrant)


                    By:  /s/William H. Baumhauer
                    ----------------------------
                    William H. Baumhauer
                    Chairman of the Board, President and
                    Chief Executive Officer,
                    (Principal Executive, Financial and
                    Accounting Officer)

Date:  October 27, 1999


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

Signature                                         Title

William H. Baumhauer                              Chairman of the Board

Timothy Barakett*                                 Director

James Goodwin*                                    Director

Nathaniel Rothschild*                             Director

Alan D. Schwartz*                                 Director

*By: /s/Donna L. Depoian                          Date:  October 27, 1999
    --------------------
Donna L. Depoian
Attorney-In-Fact


<PAGE>


INDEPENDENT AUDITORS' REPORT


Champps Entertainment, Inc.:


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Champps
Entertainment,  Inc. and subsidiaries (formerly Unique Casual Restaurants, Inc.)
as of June 27, 1999 and June 28, 1998 and the related consolidated statements of
operations, cash flows and changes in stockholders' equity for each of the three
years in the period  ended June 27, 1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the companies as of June 27, 1999
and June 28, 1998 and the results of their  operations  and their cash flows for
each of the three years in the period ended June 27, 1999,  in  conformity  with
generally accepted accounting principles.





Deloitte & Touche LLP

Boston, Massachusetts
October 1, 1999



<PAGE>


                           CHAMPPS ENTERTAINMENT, INC.
                           CONSOLIDATED BALANCE SHEETS
                      As of June 27, 1999 and June 28, 1998
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                           1999              1998
                                                                           ----              ----
<S>                                                                      <C>              <C>
ASSETS:
Current assets:
   Cash and cash equivalents (overdraft)                                 $  7,240         $   (646)
   Restricted cash, current                                                   397            2,602
   Accounts receivable, net                                                 1,288              801
   Inventories                                                              1,205              973
   Prepaid expenses and other current assets                                1,637              726
   Net assets held for sale                                                 1,665             --
                                                                         --------         --------
     Total current assets                                                  13,432            4,456
Restricted cash, non-current                                                2,596             --
Property and equipment, net                                                36,096           29,850
Net long-term assets related to the discontinued operations                  --             44,335
Investment                                                                  2,748            5,000
Other assets, net                                                           2,270            3,019
                                                                         --------         --------
   Total assets                                                          $ 57,142         $ 86,660
                                                                         ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Accounts payable                                                      $  5,264         $  4,784
   Accrued expenses                                                         8,679            5,378
   Accrued transaction costs                                                 --              1,800
   Current portion of long-term debt                                        2,010            2,188
   Net current liabilities related to the discontinued operations            --              4,202
                                                                         --------         --------
     Total current liabilities                                             15,953           18,352
Long-term debt, net of current portion                                      4,147            4,757
Other long-term liabilities                                                 9,223            7,753
                                                                         --------         --------
     Total liabilities                                                     29,323           30,862
                                                                         --------         --------
Minority interests and obligations under put agreement
  related to the discontinued operations                                     --              5,400
                                                                         --------         --------
Commitments and contingencies (Note 11)

Stockholders' equity:
   Common stock ($.01 par value per share;  authorized
    30,000 shares and 11,647 and 11,593 issued and outstanding
    at June 27, 1999, and June 28, 1998, respectively)                        116              116
   Additional paid-in capital                                              79,360           78,017
   Accumulated deficit                                                    (51,657)         (27,735)
                                                                         --------         --------
     Total stockholders' equity                                            27,819           50,398
                                                                         --------         --------
       Total liabilities and stockholders' equity                        $ 57,142         $ 86,660
                                                                         ========         ========
</TABLE>



See notes to consolidated financial statements.


<PAGE>


                           CHAMPPS ENTERTAINMENT, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
       Fiscal Years Ended June 27, 1999, June 28, 1998, and June 29, 1997
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                         1999              1998              1997
                                                                                         ----              ----              ----
<S>                                                                                   <C>               <C>               <C>
Revenues:
   Sales                                                                              $  87,392         $  76,711         $  63,117
   Franchising and royalty income                                                           558               989             1,122
                                                                                      ---------         ---------         ---------
     Total                                                                               87,950            77,700            64,239
                                                                                      ---------         ---------         ---------
Costs and expenses:
   Cost of sales and operating expenses                                                  78,412            69,310            56,176
   General and administrative expenses                                                   18,998            10,804            16,771
   Depreciation and amortization                                                          3,441             3,080             5,719
   Impairment, exit costs and other charges                                               1,305             1,436            12,564
   Gain on sale of restaurant to related party                                             --                (677)             --
   Other (income) expenses, net                                                            (127)             (254)              398
                                                                                      ---------         ---------         ---------
     Total                                                                              102,029            83,699            91,628
                                                                                      ---------         ---------         ---------
Loss from continuing operations before cumulative effect of
   change in accounting for preopening costs                                            (14,079)           (5,999)          (27,389)
                                                                                      ---------         ---------         ---------
Loss from discontinued operations:
   Income (loss) from discontinued operations, net of income tax
     benefit of $3,721 in 1997                                                              910           (20,749)          (11,654)
   Loss on disposal of discontinued operations                                          (10,753)             --                --
                                                                                      ---------         ---------         ---------
     Loss from discontinued operations                                                   (9,843)          (20,749)          (11,654)
                                                                                      ---------         ---------         ---------
Loss before cumulative effect of change in accounting for
   preopening costs                                                                     (23,922)          (26,748)          (39,043)
Cumulative effect of change in accounting for preopening costs
                                                                                           --                (987)             --
                                                                                      ---------         ---------         ---------
Net loss                                                                              $ (23,922)        $ (27,735)        $ (39,043)
                                                                                      =========         =========         =========

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

Weighted average shares outstanding                                                      11,622            11,489              --
                                                                                      =========         =========         =========

Pro forma basic and diluted loss per share:
   Pro forma loss from continuing operations                                               --                --           $   (2.40)
   Pro forma loss from discontinued operations                                             --                --               (1.02)
                                                                                                                          ---------
   Pro forma net loss                                                                      --                --           $   (3.42)
                                                                                                                          =========
Pro forma weighted average shares outstanding                                              --                --              11,426
                                                                                                                          =========
</TABLE>


See notes to consolidated financial statements.


<PAGE>


                           CHAMPPS ENTERTAINMENT, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
       Fiscal Years Ended June 27, 1999, June 28, 1998, and June 29, 1997
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                1999           1998          1997
                                                                                                ----           ----          ----
<S>                                                                                          <C>            <C>            <C>
Cash flows from (used in) operating activities:
Net loss                                                                                     $(23,922)      $(27,735)      $(39,043)
Cumulative effect of change in accounting for preopening costs                                   --              987           --
Adjustments to reconcile  net loss to net cash  provided by (used in)  operating
   activities:
     Depreciation and amortization                                                              4,145         10,227         15,547
     Non-cash compensation for continuing operations                                              331            265           --
     Non-cash compensation for discontinuing operations                                           912           --             --
     Gain on sale of property and equipment                                                      --              (56)          --
     Gain on sale of restaurant to related party                                                 --             (677)          --
     Impairment, exit costs and other charges                                                   1,305         24,625         21,671
     Loss on investment                                                                         2,252           --             --
     Deferred income taxes                                                                       --             --              454
     Other                                                                                       --             --              (68)
Changes in assets and liabilities, net of dispositions:
     Restricted cash                                                                             (391)         2,398         (5,000)
     Accounts receivable, net                                                                    (487)           314          1,133
     Inventories                                                                                 (232)          (193)        (1,312)
     Prepaid expenses and other assets                                                           (170)        (4,838)        (1,428)
     Accounts payable and accrued expenses, net                                                   684         (6,263)         8,481
     Other long-term and deferred liabilities                                                   1,470          2,473            398
                                                                                             --------       --------       --------
       Net cash provided by (used in) operating activities                                    (14,103)         1,527            833
                                                                                             --------       --------       --------

Cash flows from investing activities:
Purchases of property and equipment                                                           (10,391)        (7,318)       (23,685)
Net proceeds from sale of discontinued operations                                              33,068           --             --
Proceeds from sale of restaurant to related party                                                --            1,515           --
                                                                                             --------       --------       --------
     Net cash provided by (used in) investing activities                                       22,677         (5,803)       (23,865)
                                                                                             --------       --------       --------
Cash flows from financing activities:
Proceeds from equipment financing                                                               1,023          3,642           --
Proceeds from sale-leaseback facility                                                            --            1,338         11,489
Proceeds from issuance of common stock                                                            100            343           --
Contributed capital                                                                              --             --            9,080
Repayments of long-term debt                                                                   (1,811)        (1,865)        (2,646)
                                                                                             --------       --------       --------
     Net cash provided by (used in) financing activities                                         (688)         3,458         17,923
                                                                                             --------       --------       --------

Net increase (decrease) in cash and cash equivalents                                            7,886           (818)        (5,109)

Cash and cash equivalents (overdraft), beginning of year                                         (646)           172          5,281
                                                                                             --------       --------       --------
Cash and cash equivalents (overdraft), end of year                                           $  7,240       $   (646)      $    172
                                                                                             ========       ========       ========
</TABLE>


See notes to consolidated financial statements.


<PAGE>



                           CHAMPPS ENTERTAINMENT, INC.
               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
    EQUITY Fiscal Years Ended June 29, 1997, June 28, 1998 and June 27, 1999
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                             Additional
                                                                 Common       Paid-in      Accumulated       Group
                                                    Shares       Stock        Capital        Deficit        Equity          Total
                                                    ------       -----        -------        -------        ------          -----
<S>                                                  <C>        <C>           <C>           <C>            <C>            <C>
Balance, June 29, 1996                                 --       $    --       $    --       $    --        $ 108,894      $ 108,894
Contributed capital:
   Cash                                                --            --            --            --            9,080          9,080
   Non-cash                                            --            --            --            --              122            122
Net loss                                               --            --            --            --          (39,043)       (39,043)
Common shares issued                                      1          --            --            --            --            --
                                                  ---------     ---------     ---------     ---------      ---------      ---------
Balance, June 29, 1997                                    1          --            --            --           79,053         79,053
Net liabilities contributed by
   former Parent                                       --            --            --            --           (1,528)        (1,528)
 Common stock issued in connection
   with distribution by former
   Parent                                            11,425           114        77,411          --          (77,525)          --
Common shares issued                                    167             2           606          --             --              608
Net loss                                               --            --            --         (27,735)          --          (27,735)
                                                  ---------     ---------     ---------     ---------      ---------      ---------
Balance, June 28, 1998                               11,593           116        78,017       (27,735)          --           50,398
                                                  ---------     ---------     ---------     ---------      ---------      ---------
Common shares issued                                     54          --             100          --             --              100
Non-cash compensation                                  --            --           1,243          --             --            1,243
Net loss                                               --            --            --         (23,922)          --          (23,922)
                                                  ---------     ---------     ---------     ---------      ---------      ---------
Balance, June 28, 1998                               11,647     $     116     $  79,360     $ (51,657)          --        $  27,819
                                                  =========     =========     =========     =========      =========      =========
</TABLE>


















See notes to consolidated financial statements.

<PAGE>




                           CHAMPPS ENTERTAINMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       Fiscal Years Ended June 27, 1999, June 28, 1998, and June 29, 1997
                (Dollars in thousands, except per share amounts)

1.   Background, Basis of Presentation and Business Activities of the Company

Background

Champps  Entertainment,  Inc. (the  "Company"),  formerly known as Unique Casual
Restaurants,  Inc.,  is a  Delaware  corporation  formed  on  May  27,  1997  in
connection   with  the   spin-off  to  holders  of  the  common  stock  of  DAKA
International,   Inc.  ("DAKA  International")   pursuant  to  the  transactions
described  below  in  Note 2 (the  "Spin-off"  or  "Spin-off  Transaction").  At
inception,  and  continuing  through  November  1998,  the  Company's  principal
business activities were to own and operate the restaurant operations previously
operated by various  subsidiaries and divisions of DAKA  International  prior to
the formation and the Spin-off of the Company.  At June 27, 1999,  the Company's
principal  business  activity is to own, operate and franchise Champps Americana
casual dining restaurants within a single business segment.

Basis of Presentation

The accompanying  consolidated  financial statements include for various periods
of time the accounts of the Company,  Champps Operating  Corporation,  Inc., the
Great Bagel & Coffee Company ("Great Bagel & Coffee"),  Casual Dining  Ventures,
Inc. ("CDVI") and Restaurant  Consulting Services,  Inc. ("RCS").  Great Bagel &
Coffee ceased  operations on June 28, 1998. The Company sold its interest in RCS
on May 24, 1999. On November 24, 1998, the Company  completed the sale of all of
the  outstanding  common  stock of  Fuddruckers,  Inc.  ("Fuddruckers")  to King
Cannon,  Inc.  as  discussed  more  fully in Note 3. The  historical  results of
operations of  Fuddruckers,  Inc. and its majority  owned  subsidiary,  Atlantic
Restaurant Ventures,  Inc. ("ARVI") have been treated as discontinued operations
for all periods presented.  Significant  intercompany  balances and transactions
have been eliminated in consolidation.  The historical DAKA International  basis
in the assets and  liabilities  of the spun-off  operations  transferred  to the
Company  in  connection  with the  transactions  described  in Note 2 have  been
recorded as the Company's  initial cost basis. The  accompanying  1997 financial
statements  are  combined  financial   statements  which  present  the  combined
financial  position,  results  of  operations  and cash  flows  of the  spun-off
operations   for   various   periods   of  time  in  a  manner   similar   to  a
pooling-of-interests.  Significant  intercompany  balances and transactions have
been eliminated in consolidation.

Business Activities of the Company

The Company's Champps operations serve customers in upscale restaurant  settings
throughout  the United  States.  Restaurant  operations  are  conducted  through
Company-owned and franchised stores.

2.     Formation of the Company

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

<PAGE>

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

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

3.     Disposition Transactions

Sale of Fuddruckers

On November 24, 1998, the Company  completed the sale of all of the  outstanding
common stock of  Fuddruckers  to King Cannon,  Inc. (the "Buyer")  pursuant to a
Stock  Purchase  Agreement  (the  "Agreement"),  dated as of July 31,  1998 (the
"Fuddruckers  Sale").  The sale price was  $43,000  in cash,  subject to certain
adjustments.  At the  closing,  the Company  disbursed  approximately  $2,500 to
escrow agents to be held pending  resolution of certain  contingent  obligations
discussed further below. At June 27, 1999, $2,596 continues to be held in escrow
and is reported as restricted  cash.  In addition,  the Company used proceeds to
pay  obligations  associated  with the  early  termination  of  certain  leases,
obtaining landlord consents to the transaction,  certain litigation settlements,
and legal,  accounting  and  severance  expenses,  and to settle  the  Company's
obligations under a put/call agreement relating to ARVI which was originally due
to be paid in  January  2000.  The  Company  received  approximately  $2,600  in
previously  restricted  cash  balances,  which  were  released  by virtue of the
Company's settling certain of the obligations  discussed above. The Company also
purchased two closed  Fuddruckers  locations  and recorded  assets held for sale
valued at approximately $1,600. The sale was approved by a vote of the Company's
shareholders on November 5, 1998.

Pursuant to the  Agreement,  King  Cannon had 120 days from the Closing  Date to
review and propose  adjustments  to the portion of the estimated  purchase price
related to working  capital.  The  Company  and King  Cannon  have agreed on the
amount of working  capital  resulting in a reduction of the  estimated  purchase
price of approximately  $1,500,  including  interest.  Both the Company and King
Cannon have now accepted as final, the working capital at the closing date. This
reduction  in  estimated  purchase  price  has been  included  in the loss  from
discontinued operations in the accompanying financial statements.

As part of the  adjustment  to working  capital  discussed  above,  the  Company
received from King Cannon  approximately  $430 in royalty  receivables  from its
former franchisees which King Cannon deemed uncollectible.  The Company believes
that  $220 of such  receivables  are  collectable  and  will  vigorously  pursue
collection of these amounts from such former franchisees.

Closure of Great Bagel and Coffee

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

Other Transactions

Effective July 1, 1997, the Company  entered into a sale and services  agreement
with RCS whereby  the Company  sold to RCS for an  aggregate  purchase  price of
$2,300  certain data  processing  equipment.  The purchase  price was  evidenced
through a promissory note due June 30, 2002 which bore interest at 6% per annum.
The  promissory  note was  contributed  to the Company as part of the additional
capital  contribution.  The  Company  also  received  DAKA  International's  50%
interest in RCS at the Spin-off Transaction Date. The Company entered into a two
year service agreement with RCS for data processing and consulting  services for
an annual fee of $1,800.  The Company  consolidated RCS' operations  through May
24,  1999,  when the Company  sold its 50%  interest in RCS to RCS pursuant to a
Stock  Redemption  and  Debt  Restructuring  Agreement  (the  "Stock  Redemption
Agreement"). As part of this transaction,  the Company also canceled all amounts
due to the Company from RCS, including a note and accrued interest in the amount
of  $2,500.  In  consideration  for  its  shares  of RCS  common  stock  and the
cancellation  of the note and  accrued  interest,  the  Company  received a note
payable which was paid in full on August 25, 1999,  certain  computer  equipment
and software,  a commitment to complete  certain work in progress without charge
to the Company,  services under a three year  consulting and  professional  data
processing  agreement  without charge to the Company,  cancellation  of accounts
payable to RCS,  and the  release of the  Company  for a  contingent  obligation
related to RCS employment of its Chief Executive Officer. The Company recorded a
loss on this transaction of approximately $350 during fiscal 1999.

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

4.     Summary of Significant Accounting Policies

Fiscal Year

The Company's  fiscal year ends on the Sunday closest to June 30th. For purposes
of these notes to the consolidated financial statements,  the fiscal years ended
June 27, 1999,  June 28, 1998, and June 29, 1997 are referred to as 1999,  1998,
and 1997, respectively. Fiscal 1999, 1998, and 1997 each contain 52 weeks.

Allocation of Certain Expenses

The 1997 continuing operations of the Spin-off Transaction, 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
consolidated  financial  statements  were  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 $9,800 for 1997. Management believes these
allocations were made on a reasonable  basis.  However,  the  accompanying  1997
consolidated  financial  statements  may not  necessarily  be  indicative of the
conditions  that would  have  existed,  the  financial  position,  or results of
operations, if the Spun-off Operations had been operated as a separate entity.


<PAGE>


The  accompanying  1997  consolidated  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 Compass pursuant
to the terms of the  Spin-off  Transaction.  Interest on  long-term  obligations
transferred to the Company has been included in the Company's 1997  consolidated
statement of operations.

Significant Estimates by the Company

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

Concentration of Credit Risk

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

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

Cash Equivalents and Restricted Cash

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

Inventories

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

The components of inventories are as follows:
                                                (In thousands)
                                             1999              1998
                                             ----              ----
Food and liquor products                   $    617          $    574
Smallwares                                      292               120
Supplies                                        296               279
                                           --------          --------
                                           $  1,205          $    973
                                           ========          ========



<PAGE>



Prepaid Expenses and Other Current Assets

Through June 29, 1997, the Company had capitalized direct incremental preopening
costs  associated with the opening of new or the expansion and major  remodeling
of existing  restaurants with such costs being amortized over twelve months.  In
April 1998,  the  American  Institute  of Certified  Public  Accountants  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-up  Activities"
("SOP  98-5") which  requires  companies  to expense all costs  associated  with
preopening activities.  The effect of adopting the provisions of SOP 98-5 during
1998 was to expense approximately $987 of capitalized costs existing at June 29,
1997 as of June 30, 1997, of which  approximately  $800 is related to continuing
operation.  The Company has reported this expense as the cumulative effect of an
accounting  change  in  the  accompanying  fiscal  1998  consolidated  financial
statements.

Property and Equipment

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

Accrued Transaction Costs

Accrued Transaction costs included legal,  accounting and other costs associated
with completing the Spin-off Transaction at June 28, 1998.

Accrued Insurance Costs

The Company has purchased commercial  insurance to cover workers'  compensation,
general  liability,  and various other risks for claims  incurred after June 29,
1997.  Through  June  29,  1997,  the  Company  was  self-insured  for  workers'
compensation, general liability, and various other risks up to specified limits.
The  Company's  share of  prior  workers'  compensation  and  general  liability
programs of DAKA International  through June 29, 1997 were allocated using labor
costs and the aggregate costs of such programs were determined through actuarial
studies  which  determined  the  estimated  amount  required to be provided  for
incurred incidents. In connection with the Spin-off Transaction,  the Company is
obligated  to indemnify  Compass for all claims that relate to events  occurring
prior to the Spin-off  Transaction  Date which arise  subsequent to the Spin-off
Transaction,  including  claims related to employees of DAKA  International  not
continuing with the Company after the Spin-off Transaction. The Company believes
that any claims  related to its  obligation to further  indemnify  Compass after
June 27, 1999 are not material.

Other Long-Term Liabilities

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


<PAGE>



Deferred Rent Assets and Liabilities

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

Group Equity

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

Revenue Recognition

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

Franchising and Royalty Income

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

Amounts received in connection with such  development  agreements are recognized
as  franchise  fee  revenues  when earned  since the Company is not  required to
provide  any  future  services  and such  fees are  non-refundable.  Franchisees
entering into  development  agreements  are also  required to execute  franchise
agreements  and pay the standard  franchise fee which is sufficient to cover the
Company's contractual obligations to the franchisee for each unit opened. To the
extent that the Company provides services beyond its contractual obligation, the
Company charges the franchisee a fee for such additional  services.  The Company
recognized  development  and franchise fee revenues of $86 and $165 during 1998,
and  1997,  respectively.   No  development  and  franchise  fee  revenues  were
recognized in fiscal 1999.

Royalty  revenues from  franchised  restaurants  are recognized as revenues when
earned in  accordance  with the  respective  franchise  agreement.  The  Company
recognized  royalty  revenues from continuing  operations of $558, $903 and $957
during 1999, 1998, and 1997, respectively.

Income Taxes

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


<PAGE>




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

The Company has entered into an indemnification  agreement,  whereby the Company
has agreed to indemnify  Compass  against all state and federal income and other
tax  liabilities  of DAKA  International  for any  period  before  the  Spin-off
Transaction  Date as well as any tax  consequences  resulting  from the Spin-off
Transaction.  The Company  believes  that any amounts due to Compass  under this
indemnification agreement after June 27, 1999, if any, will not be material.

As part of the sale of Fuddruckers, the Company agreed to indemnify the acquiror
against liabilities arising from breaches of the acquisition agreement,  as well
as identified  preclosing  liabilities,  including tax liabilities.  The Company
believes  that  any  amounts  due to  King  Cannon  under  this  indemnification
agreement after June 27, 1999, if any, will not be material.

Accounting for Stock-Based Compensation

The Company  continues 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 discloses the required pro forma effect
on results from  operations  and net income (loss) per share in accordance  with
SFAS No. 123, "Accounting for Stock-Based Compensation.".

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

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

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

Cash Flow Information

Cash payments for interest  aggregated  $635,  $491, and $451 in 1999, 1998, and
1997, respectively.

Capital lease  obligations of $1,605 were incurred when the Company entered into
leases for new Champps restaurant equipment in 1997.






<PAGE>


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

1998

         Certain   non-restaurant   operating   assets  and   liabilities   were
         contributed to the Company in connection with the Spin-off  Transaction
         resulting in a net decrease to stockholders' equity of $1,528.

         The Company also increased its  obligations  under a minority  interest
         put obligation related to the discontinued operations by $4,300.

1997

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

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  11,647,427  and  11,593,000  shares  were  issued  and
outstanding as of June 27, 1999 and June 28, 1998,  respectively,  and 5,000,000
shares of  preferred  stock,  of which no shares  are  issued  and  outstanding.
Approximately  11,425,000  shares  were  issued  upon  the  consummation  of the
Spin-off Transaction.

During 1998 the Company  adopted  SFAS No.  128,  "Earnings  per Share." The pro
forma  loss  per  share  for  1997 was  computed  using  the  number  of  shares
outstanding immediately after the Spin-off.

For purposes of the fiscal 1999 and 1998 earnings per share calculations,  stock
options  have  been   excluded  from  the  diluted   computation   as  they  are
anti-dilutive.  Had such options been included in the computation.  The weighted
average  shares  would have  increased  by  approximately  132,000 and  166,000,
respectively.

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

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

In 1999,  the  Company  recorded  approximately  $1,300  in exit  costs  against
continuing  operations.  Included in exit costs is approximately $250 related to
the  termination  of fifteen  employees  which is expected  to begin  during the
second  quarter of fiscal 2000.  The Company  expects to pay amounts  related to
non-severance costs in the first and second quarter of fiscal 2000.

In addition,  the Company has recorded  approximately  $8,100 against continuing
operations  of which  $2,700  represents  losses on the sale and  write  down of
non-essential  assets,  $2,700  represents  changes in estimates  of  continuing
obligations  for the  Company's  predecessor  businesses  and $2,700  represents
losses on business and lease contracts. The Company recorded accrued liabilities
aggregating $3,900 in connection with such charges, none of which have been paid
as of June 27, 1999.


<PAGE>



In 1998, the Company  recorded a provision for  continuing  operations of $1,400
which  represents  exit costs  associated  with closing the Great Bagel & Coffee
business.  Additional fiscal 1998 impairment,  exit and other charges of $23,225
have been reclassified as discontinued operations.

In 1997,  the Company  recorded a provision  against  continuing  operations  of
$12,564 of which  $7,164  represented  impairment  of net assets at  restaurants
which  had  been or were to be  closed  and exit  costs  associated  with  lease
settlements  and  identified  employee  termination  benefits.  The remainder of
$5,400  consisted  primarily of legal costs associated with the Spin-off and the
sale of the  Foodservice  business.  An  additional  charge of  $9,107  has been
reclassified to discontinued operations for fiscal 1997.

Reclassifications

Certain amounts in the 1998 and 1997 consolidated financial statements have been
reclassified to conform to the 1999 presentation.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Accounting  Financial Standards ("SFAS") No. 133,  "Accounting for Derivative
Instruments  and Hedging  Activities."  SFAS No. 133  establishes  standards for
accounting for derivative  instruments and hedging  activities.  The Company has
not yet determined the effect that the adoption of SFAS No. 133 will have on the
Company's results of operations or financial condition.

5.       Investment

In January  1996,  the Company  acquired a 16.7% equity  interest in the form of
convertible  redeemable  preferred stock (the "La Salsa Preferred  Stock") in La
Salsa  Holding Co. ("La Salsa"),  a franchisor  and operator of La Salsa Mexican
restaurants for approximately $5,000. On July 16, 1999, Santa Barbara Restaurant
Group ("SBRG"), a publicly held corporation,  reported that it had completed the
acquisition  of La Salsa.  In  connection  with this  transaction,  the  Company
exchanged  all of its Series D  Convertible  Preferred  Stock for  approximately
1,277,500 shares of common stock of SBRG, of which approximately  120,650 shares
have been  placed in escrow to cover any claims for  indemnification  by SBRG in
connection  with this  transaction.  The  Company  recorded a loss based on this
transaction  of  approximately  $2,252 in the  fourth  quarter  of fiscal  1999.
Effective  the first  quarter of fiscal  2000,  the Company will account for the
investment  in SBRG in  accordance  with SFAS No. 115,  "Accounting  for Certain
Investments in Debt and Equity  Securities",  and the Company will classify this
investment as available for sale.

6.     Property, Plant and Equipment

Property and equipment consist of the following:

                                                     (In thousands)
                                                 1999              1998
                                                 ----              ----

Buildings and leasehold improvements         $   22,597        $   21,653
Equipment                                        18,117            15,352
Construction in progress                          7,506               549
                                             ----------        ----------
                                                 48,220            37,554
Accumulated depreciation                        (12,124)           (7,704)
                                             ----------        ----------
                                             $   36,096        $   29,850
                                             ==========        ==========



<PAGE>




7.       Other Assets

The components of other assets are as follows:

                                                 (In thousands)
                                               1999              1998
                                               ----              ----
Notes receivable                             $  1,904          $  2,427
Other                                             366               592
                                             --------          --------
                                             $  2,270          $  3,019
                                             ========          ========


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


8.       Accrued Expenses

The components of accrued expenses are as follows:

                                                        (In thousands)
                                                     1999             1998
                                                     ----             ----
Salaries, wages and related taxes                $   1,874         $   2,727
Sales and use taxes                                  1,433               615
Insurance accruals                                   2,987             1,061
Lease termination accruals                           1,047                 -
Other                                                1,338               975
                                                 ---------         ---------
                                                 $   8,679         $   5,378
                                                 =========         =========


9.       Long-Term Debt

The components of long-term debt are as follows:

                                                  (In thousands)
                                              1999              1998
                                              ----              ----
Notes payable                               $    250          $    439
Capital lease obligations                      5,907             6,506
                                            --------          --------
                                               6,157             6,945
Less current portion                          (2,010)           (2,188)
                                            --------          --------
  Total                                     $  4,147          $  4,757
                                            ========          ========



<PAGE>



Maturities of long-term debt,  including capital lease obligations,  at June 27,
1999 are as follows:

                                                   (In thousands)
 2000                                                  $ 2,010
 2001                                                    1,955
 2002                                                    1,179
 2003                                                      950
 2004                                                       63
                                                       -------
                                                       $ 6,157
                                                       =======

10.      Income Taxes

Deferred tax assets and (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
                                                       (In thousands)
                                               1999         1998         1997
                                               ----         ----         ----
<S>                                          <C>          <C>          <C>
Current:
  Accrued expenses                           $  2,651     $    282     $  1,635
  Prepaid expenses                               --           (366)        (330)
  Net operating loss carryforwards               --           --            327
  Other                                            86          526          412
  Less valuation allowance                     (2,737)        (442)      (2,044)
                                             --------     --------     --------
                                             $      0     $      0     $      0
                                             --------     --------     --------
Noncurrent:
  Net operating loss carryforwards           $ 14,192     $  9,457     $  4,704
  Depreciation and amortization                 1,856       12,215        6,069
  Deferred income                                  73          268          300
  Accrued expenses                               --           --          1,967
  Less valuation allowance                    (16,121)     (21,940)     (13,040)
                                             --------     --------     --------
                                             $      0     $      0     $      0
                                             ========     ========     ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                   (In thousands)
                                                         1999         1998       1997
                                                         ----         ----       ----
<S>                                                    <C>         <C>         <C>
Income tax  provision  (benefit)  computed  at
statutory  federal income tax rates                    $ (8,372)   $ (9,707)   $(14,970)
Adjustment related to net operating loss limitations     11,860        --          --
Non-deductible costs                                         36         162         865
Increase (decrease) in the valuation allowance           (3,524)      7,298       9,525
Other, net                                                 --         2,247         859
                                                       --------    --------    --------
   Income tax benefit                                  $      0    $      0    $ (3,721)
                                                       ========    ========    ========
</TABLE>



<PAGE>




As of June 27, 1999, the Company had federal net operating loss carryforwards of
approximately  $40,500,  expiring at various dates through 2019.  For the fiscal
years ended 1999, 1998 and 1997, the Company provided a valuation  allowance for
the tax benefit of the deferred tax assets not expected to be utilized  based on
historical  operating  results and other available  evidence.  During the fiscal
years ended 1998 and 1997 the  valuation  allowance  was increased by $7,300 and
$9,500,  respectively,  principally as a result of the Company's losses.  During
1999, the valuation allowance decreased $3,500 on a net basis due to adjustments
to the Company's  deferred tax assets,  offset by current year operating losses.
During 1999, as a result of a change in ownership,  as defined under Section 382
of the Internal Revenue Code ("IRC"), and the decline in the market price of the
Company's stock, the Company wrote off $11,860 of deferred tax assets which will
not be utilized as a result of net operating loss carryforward limitations under
IRC Section 382. The  reduction had no effect on operations as such assets had a
full valuation allowance. The Company's remaining loss carryforwards at June 27,
1999 may be subject to further limitations under IRC Section 382.

11.      Commitments and Contingencies

Fuddruckers Representations and Indemnity

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

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


<PAGE>



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

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

Further,  at the  closing,  the Company  established  a $1.0 million cash escrow
(included  in the amount  reported  as  restricted  cash at June 27, 1999 in the
accompanying consolidated balance sheet) as a fund for payment of any claims for
indemnification  pursuant to the Agreement.  Such escrow does not serve to limit
the Company's maximum exposure for indemnification  claims. However, the Company
believes  the risk of a claim for  indemnification  exceeding  the $1.0  million
escrow is remote.  As of June 27,  1999,  no money had been paid from the escrow
fund,  however in the first  quarter of fiscal 2000 a total of $0.2  million was
paid  for  agreed   amounts   presented  to  the  Company  by  King  Cannon  for
indemnification.

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

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


<PAGE>



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

Spin-Off Indemnifications

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

Leases

Pursuant  to the terms of the  Spin-off  Transaction,  the  Company  assumed the
existing  lease  obligations  and  purchase  commitments  of DAKA  International
consisting principally of the corporate  headquarters in Danvers,  Massachusetts
which expires  during 2001.  The Company plans to exit this location by December
31, 1999, and expects that a lease termination penalty of $1,000 will be paid to
the landlord.

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 December 1995,  Champps  obtained a commitment for a $40,000  development and
sale-leaseback  financing  facility  from AEI  Fund  Management,  Inc.  ("AEI").
Pursuant to the terms of the  agreement,  the Company would sell and  lease-back
from AEI,  Champps  restaurants to be constructed and would pay a commitment fee
of 1% of the sale price of each property  sold to AEI. The purchase  price would
be equal to the total project cost of the property, as defined in the agreement,
not to exceed its appraised value (the "Purchase Price").  The unused commitment
expired on December 31, 1998.  The leases provide for a fixed minimum rent based
on a  percentage  of  the  respective  property's  Purchase  Price,  subject  to
subsequent  increases based on the Consumer Price Index. The leases also provide
for an initial term of 20 years with two 5-year renewal  options  exercisable at
the option of Champps.  As of June 27, 1999, eight Champps  restaurants had been
fully funded under this commitment and none had been partially funded.

Future minimum lease payments pursuant to leases with noncancelable  lease terms
in excess of one year at June 27, 1999 are as follows:


<PAGE>



Fiscal                                             (In thousands)
Years                                         Operating        Capital
Ending                                         Leases           Leases
------                                         ------           ------
 2000                                       $   5,855         $   2,301
 2001                                           5,819             2,139
 2002                                           5,580             1,315
 2003                                           5,291               996
 2004                                           5,261                64
 Thereafter                                    56,490              --
                                            ---------         ---------
 Total future minimum lease payments         $ 84,296             6,815
                                             ========
 Less amount representing interest                                 (908)
                                                              ---------
 Present value of future minimum lease payments               $   5,907
                                                              =========

Total  rent  expense  in 1999,  1998 and 1997  approximated  $6,509,  $4,315 and
$3,154,  respectively.  Contingent  rentals  included  in rent  expense  are not
material for the periods presented.

Included in property  and  equipment  in 1999,  1998 and 1997 are  approximately
$9,300, $9,300 and $5,700,  respectively,  of equipment held pursuant to capital
lease  arrangements.  The related  accumulated  amortization  was  approximately
$3,700, $2,400 and $1,300, respectively.

Litigation

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

12.      Stock Options and Employee Benefit Plans

Stock Options

On July 17, 1998, the Company  adopted a stock option and restricted  stock plan
for the  benefit of the  employees  and  non-employee  directors  of the Company
whereby the Company  authorized  and reserved for issuance  1,250,000  shares of
common stock.  In connection  with the Spin-off  Transaction,  each  outstanding
option held by a Company employee to acquire DAKA International common stock was
converted into an option to acquire one share of common stock of the Company and
one share of common stock of DAKA  International (the "Adjusted  Options").  The
exercise  prices of the Adjusted  Options were  determined such that each option
holder  will  remain in an  equivalent  economic  position  before and after the
Spin-off Transaction.

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


<PAGE>



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


                                        Weighted       Weighted
                                                        Average        Average
                                        Number of      Exercise       Grant Date
                                         Options         Price        Fair Value
                                         -------         -----        ----------
Outstanding at July 17, 1997                   --          --
   DAKA International adjusted options      597,554    $    6.10
   Granted                                  569,850         6.31       $   1.47
   Exercised                                (70,280)        2.93
   Forfeited                               (245,894)       10.92
                                         ----------    ---------
Outstanding at June 28, 1998                851,230         5.11
   Granted                                1,028,500         5.79       $   1.70
   Exercised                                (35,150)        1.48
   Forfeited                             (1,026,905)        6.57
                                         ----------    ---------
Outstanding at June 27, 1999                817,675    $    5.12
                                         ==========    =========

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

                                                          Weighted
                                                          Average
                                          Options       Exercisable
                                        Exercisable        Price
                                        -----------        -----

July 17, 1997                             487,689       $     6.40

June 28, 1998                             246,265             3.16

June 27, 1999                             817,675             5.12


The following table sets forth information regarding options outstanding at June
27, 1999:
                                           Weighted
                                            Average                  Weighted
                               Weighted    Remaining    Number     Average Price
 Number of       Range of       Average   Contractual  Currently  for Currently
  Options         Prices         Price       Life     Exercisable  Exercisable
  -------         ------         -----       ----     -----------  -----------
  193,500    $ 1.21 - 2.41      $ 1.95        1         193,500      $ 1.95
   38,025      4.52 - 4.86        4.73        6          38,025        4.73
   88,025      5.12 - 5.85        5.20        8          88,025        5.20
  488,925      6.03 - 6.72        6.34        8         488,925        6.34
    9,200      7.00 -13.80        8.20        6           9,200        8.20



<PAGE>




The Company  applies APB  Opinion  No. 25 to account  for various  stock  plans.
Accordingly,  pursuant to the terms of the plans, no compensation  cost has been
recognized for the stock plans.  However,  if compensation cost for stock option
grants  issued  to  Company  employees  during  1999,  1998  and  1997  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 increased to
the pro forma amounts shown below:

                                      (In thousands,except per share amounts)
                                      1999             1998              1997
                                      ----             ----              ----
Net loss:
   As reported                    $  23,922        $  27,735         $  39,043
   Pro forma                         24,532           28,869            39,943
Net loss per share:
   As reported                    $    2.06        $    2.41         $    3.42
   Pro forma - as adjusted             2.11             2.51              3.50

The pro forma net loss  reflects the  compensation  cost only for those  options
granted during 1999, 1998 and 1997.  Compensation cost is reflected over a stock
option's vesting period and compensation  cost for options granted prior to July
2, 1995 is not considered..

The fair value of each stock  option  granted in 1999,  1998 and 1997 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
            --------------           ----          ----------          -----
1997              6.28%           4 years           50.00%                0%
1998              5.36%           4 years           14.73%                0%
1999              5.72%           2 years           53.44%                0%

The weighted-average fair values per share of stock options granted during 1999,
1998 and 1997 were $5.79, $2.14 and $4.13, respectively. It should be noted that
the option  pricing  model used was  designed to value  readily  tradable  stock
options with  relatively  short lives.  The options granted to employees are not
tradable  and have  contractual  lives of up to ten years.  However,  management
believes  that the  assumptions  used and the model  applied to value the awards
yields a  reasonable  estimate  of the fair value of the  grants  made under the
circumstances.

Employee Stock Purchase Plan

The Company has reserved  400,000 shares of its common stock to be offered under
its 1997 Stock Purchase Plan (the "Plan"). Under the Plan, eligible employees of
the  Company  may  participate  in  quarterly  offerings  of shares  made by the
Company.  The  participating  employees  purchase  shares at a discount from the
lower of fair value at the beginning or end of each  quarterly  offering  period
through payroll  deductions.  In fiscal 1999,  employees purchased 19,000 shares
for a total of $90.



<PAGE>



Shareholders' Rights Plan

On January 30, 1998, the Company  adopted a Shareholder  Rights Plan designed to
enhance the Company's ability to protect all of its shareholders'  interests and
ensure  that  all  shareholders  receive  fair  treatment  in the  event  of any
potential  sale of the  Company.  In  connection  with this  plan,  the Board of
Directors declared a dividend distribution of one preferred stock purchase right
for each  outstanding  share of common stock to shareholders of record as of the
close of business on February  11,  1998.  These rights  became  exercisable  on
January 30,  1998.  Each holder of a right is entitled to acquire such number of
shares of preferred  stock which are  equivalent to the  Company's  common stock
having a value of twice the  then-current  exercise  price of the right.  If the
Company is acquired in a merger or other business combination  transaction after
any  such  event,  each  holder  of a right  is  entitled  to  purchase,  at the
then-current  exercise  price,  shares of the acquiring  company's  common stock
having a value of twice the exercise price of the right.

Employee Benefit Plan

The Company  sponsors a 401(k)  retirement  plan and,  prior to the  Transaction
Date, the Company's employees participated in a 401(k) retirement plan sponsored
by DAKA  International.  Both plans enabled employees to contribute up to 15% of
their annual compensation. The Company's discretionary contributions to the Plan
have been  determined  by the Board for fiscal 1998,  and by DAKA  International
before the Spin-off  Transaction.  The Company  contributed  $25 and $204 to the
Plan in 1997 and 1996, respectively.  A contribution of $65 was made in 1999 for
the 1998 plan.

13.      Fair Value of Financial Instruments

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

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

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

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


<PAGE>



14.     Related Party Transactions

See Note 3, "Other Transactions".

The Company's Chief Executive Officer received various below market stock option
grants in fiscal 1999.  Non-cash  compensation  expense  related to these grants
aggregated $1,243.

Fiscal 1999 results  included a $150 payment made to Atticus  Partners,  L.P., a
related party, as part of a proxy settlement.

In fiscal 1999, Bear Stearns & Co., Inc., the employer of Alan Schwartz,  member
of the Company's Board of Directors,  received a fee of approximately $1,800 for
services related to the 1997 Spin-Off Transaction.  In fiscal 1999, Bear Stearns
provided services related to the Company's financial and strategic alternatives,
and is entitled to  approximately  $50 in out-of-pocket  expenses,  which remain
payable.

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

In  connection  with  Mr.  Goodwin's  appointment  to  the  Company's  Board  of
Directors,  Atticus Capital,  L.L.C.  entered into an agreement with Mr. Goodwin
which provides that Atticus  Capital,  L.L.C.  will pay to Mr. Goodwin an amount
equal to five  percent of the  proceeds  above  $4.875 per share of Common Stock
realized by Atticus Partners, L.P., Atticus Qualified Partners, L.P. and Atticus
International,  Ltd. upon the sale or disposition of 1,577,056  shares of Common
Stock beneficially owned by them. In addition,  Atticus Partners, L.P. agreed to
indemnify  Mr.  Goodwin  against any and all  losses,  claims,  liabilities  and
expenses  in  connection  with  serving  as a member of the  Company's  Board of
Directors.