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

                                    FORM 10-K
         (Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               For the fiscal year ended        OCTOBER 29, 2000

                                       OR

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

               For the transition period from _______ to ________

Commission file number   0-23420

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


                 INDIANA                              35-1804902
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

        4220 EDISON LAKES PARKWAY
           MISHAWAKA, INDIANA                               46545
(Address of principal executive offices)                  (Zip Code)

                                 (219) 271-4600
              (Registrant's telephone number, including area code)

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

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                         COMMON STOCK, WITHOUT PAR VALUE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [x]    No [ ]

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

                                  $22,396,847

Aggregate market value of the voting stock held by nonaffiliates of the
Registrant based on the last sale price for such stock at November 27, 2000
(assuming solely for the purposes of this calculation that all Directors and
executive officers of the Registrant are "affiliates").

                                   11,974,594

              Number of shares of Common Stock, without par value,
                        outstanding at January 17, 2001


                       DOCUMENT INCORPORATED BY REFERENCE

Portions of the following document have been incorporated by reference into this
Annual Report on Form 10-K
IDENTITY OF DOCUMENT                              PART OF FORM 10-K INTO WHICH
                                                  DOCUMENT IS INCORPORATED

Definitive Proxy Statement for the Annual
Meeting of Shareholders to be held March 6, 2001.  PART III


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                              QUALITY DINING, INC.
                               Mishawaka, Indiana
               Annual Report to Securities and Exchange Commission
                                October 29, 2000

                                     PART I

ITEM 1.  BUSINESS.

GENERAL

     Quality Dining, Inc. (the "Company") operates four distinct restaurant
concepts. It owns the Grady's American Grill(R) and two Italian Dining concepts
and operates Burger King(R) restaurants and Chili's Grill & Bar(TM)
("Chili's"(R)) as a franchisee of Burger King Corporation and Brinker
International, Inc. ("Brinker"), respectively. The Company operates its Italian
Dining restaurants under the tradenames of Spageddies Italian Kitchen(R)
("Spageddies"(R)) and Papa Vino's Italian Kitchen(R) ("Papa Vino's"(R)). As of
October 29, 2000, the Company operated 145 restaurants, including 71 Burger King
restaurants, 31 Chili's, 35 Grady's American Grill restaurants, three Spageddies
and five Papa Vino's. Summarized financial information concerning the Company's
reportable segments is included in Note 14 to the Company's financial statements
included elsewhere in this report.

     The Company was founded in 1981 and has grown from a two-unit Burger King
franchisee to a multi-concept restaurant operator. The Company has grown by
capitalizing on (i) its significant presence in targeted markets, (ii) the
stable operating performance of its Burger King restaurants, (iii) strategic
acquisitions of Burger King restaurants, Chili's restaurants and the Grady's
American Grill concept, and (iv) management's extensive experience.

     The Company is an Indiana corporation, which is the indirect successor to a
corporation that commenced operations in 1981. Prior to the consummation of the
Company's initial public offering on March 8, 1994 (the "Offering"), the
business of the Company was transacted by the Company and eight affiliated
corporations. As a result of a reorganization effected prior to the Offering,
the Company became a management holding company. The Company, as used herein,
means Quality Dining, Inc. and all of its subsidiaries.

DISPOSITION OF BAGEL-RELATED BUSINESSES

     On October 20, 1997, the Company sold its bagel-related businesses to Mr.
Nordahl L. Brue, Mr. Michael J. Dressell and an entity controlled by them and
their affiliates. The Company's board of directors determined to sell the
bagel-related businesses after a careful evaluation of the future prospects for
the bagel business, the competitive environment that then existed in the bagel
segment, and the historical performance of the Company's bagel-related
businesses. The sale included the stock of Bruegger's Corporation and the stock
of all of the other bagel-related businesses. The total proceeds from the sale
were $45,164,000. The consideration included the issuance by Bruegger's
Corporation of a junior subordinated note in the amount of $10,000,000 (the
"Subordinated Note"), which was recorded net of a $4,000,000 reserve for legal
indemnification, the transfer of 4,310,740 shares of the Company's common stock
valued at $21,823,000, owned by Messrs. Brue and Dressell, which were retired, a
receivable for purchase price adjustment of $500,000, and $16,841,000 in cash.
The cash component of the proceeds included an adjustment for the calculation of
the net working capital deficit. The calculation used was subject to final
adjustment and is being disputed by Messrs. Brue and Dressell. See ITEM 3 -
Legal Proceedings. The Subordinated Note has an annual interest rate of 12%,
matures in October 2004 and is guaranteed by certain affiliates of Bruegger's
Corporation ("Affiliate Guarantors"). The Subordinated Note provides that
interest is to be accrued and added to the principal amount of the note through
October 2000 and thereafter paid in cash for the remaining life of the note. The
Company has never recognized any interest income from this note. Bruegger's
Corporation failed to make the interest payment on the Subordinated Note that
was due to the Company on December 1, 2000 and the Company has subsequently been
advised that the Affiliate Guarantors failed to make an interest payment that
was due to their senior secured lender on January 2, 2001. The Affiliate
Guarantors own and operate Bruegger's Bagel Bakeries as franchisees of
Bruegger's Franchise Corporation, a subsidiary of Bruegger's Corporation. The
Company believes that the Bruegger's Bagel Bakeries operated by the Affiliate
Guarantors constitute a majority of the Bruegger's Bagel Bakery System and
therefore account for a majority of Bruegger's Franchise Corporation revenues.
The Company has been advised that Bruegger's Franchise Corporation has


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subordinated its right to receive royalty payments from the Affiliate Guarantors
to the Affiliate Guarantors' senior secured lender. Consequently, there can be
no assurance when, if ever, the Company might receive any principal or interest
payments in respect of the Subordinated Note. In view of these and other
circumstances, as of the fourth quarter of fiscal 2000, the Company recorded a
$10.0 million non-cash charge to fully reserve for the Subordinated Note.

     During the second quarter of fiscal 1997, the Company recorded a non-cash
impairment charge of $185,000,000 and a store closing charge of $15,513,000 as a
result of its decision to divest its bagel-related businesses. The consummation
of the sale of the bagel-related businesses in fiscal 1997 did not result in any
additional gain or loss.


BUSINESS STRATEGY

     The Company's fundamental business strategy is to optimize the cash flow of
its operations through proven operating management, reduce debt and
appropriately grow the Company's restaurant concepts in a manner focusing on
total customer satisfaction, while maximizing the long term value of the Company
for its shareholders. Management's operating philosophy, which is shared by all
of the Company's concepts, is comprised of the following key elements:

     Value-Based Concepts. Value-based restaurant concepts are important to the
Company's business strategy. Accordingly, in each of its restaurants, the
Company seeks to provide customers with value, which is a product of
high-quality menu selections, reasonably priced food, prompt, courteous service
and a pleasant dining atmosphere.

     Focus on Customer Satisfaction. Through its comprehensive management
training programs and experienced management team, the Company seeks to ensure
that its employees provide customers with an enjoyable dining experience on a
consistent basis.

     Hands-On Management Style. Members of the Company's senior management are
actively involved in the operations of each of the Company's restaurant
concepts. This active management approach is a key factor in the Company's
efforts to control costs and optimize operating income.

     Quality Franchise Partners. The Company has historically sought franchisors
with established reputations for leadership in their various segments of the
restaurant industry who have proven integrity and share the Company's focus on
value, customer service and quality.

     Use of Technology. The Company actively tracks the performance of its
business utilizing computer and point-of-sale technology. In addition, the
Company's voice and data communications systems provide timely and accurate
reporting.


EXPANSION

     The Company currently plans to open two to four Burger King restaurants and
two to three full service restaurants in fiscal 2001. The Company's long term
expansion strategy is focused on the development of restaurants in existing
markets in order to achieve increased market penetration. In addition, the
Company may consider strategic acquisitions in the Burger King system. During
fiscal 2000, the Company added two new Burger King restaurants, closed one
Burger King restaurant, sold one Grady's American Grill restaurant and added
three new Chili's restaurants.

     The amount of the Company's total investment to develop new restaurants
depends upon various factors, including prevailing real estate prices and lease
rates, raw material costs and construction labor costs in each market in which a
new restaurant is to be opened. The Company may own or lease the real estate for
future development.

     The Company's ability to manage the diverse operations resulting from its
past growth will be essential to its ability to succeed. Prior to fiscal 1996,
the Company's business historically was focused primarily on the development and
operation of Burger King restaurants and Chili's restaurants. The Grady's
American Grill and Italian Dining concepts have varying degrees of name
recognition. Although the Company opened its first

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Spageddies in 1994, the Company's Italian Dining concepts are not yet time
proven. In addition, the Company's acquisitions of Grady's American Grill and
Spageddies have caused it to assume many functions performed by the previous
owners, requiring increased staffing and expenditures in various areas including
advertising and marketing, purchasing and management information systems.

BURGER KING RESTAURANTS

     General. Headquartered in Miami, Florida, Burger King Corporation is an
indirect wholly-owned subsidiary of Diageo, PLC. Burger King Corporation has
been franchising Burger King restaurants since 1954 and has since expanded to
locations throughout the world.

     Menu. Each Burger King restaurant offers a diverse menu containing a
variety of traditional and innovative food items, featuring the Whopper(R)
sandwich and other flame-broiled hamburgers and sandwiches, which are prepared
to order with the customer's choice of condiments. The menu also typically
includes breakfast entrees, french fries, onion rings, desserts and soft drinks.
The Burger King system philosophy is characterized by its "Have It Your Way"(R)
service, generous portions and competitive prices, resulting in high value to
its customers. Management believes these characteristics distinguish Burger King
restaurants from their competitors and provide a significant competitive
advantage.

     Advertising and Marketing. As required by its franchise agreements, the
Company contributes 4% of its restaurant sales to an advertising and marketing
fund controlled by Burger King Corporation. Burger King Corporation uses this
fund primarily to develop system-wide advertising, sales promotions and
marketing materials and concepts. In addition to its required contribution to
the advertising and marketing fund, the Company makes local advertising
expenditures intended specifically to benefit its own Burger King restaurants.
Typically, the Company spends its local advertising dollars on television and
radio.


CHILI'S GRILL & BAR

     General. The Chili's concept is owned by Brinker, a publicly-held
corporation headquartered in Dallas, Texas. The first Chili's Grill & Bar
restaurant opened in 1975.

     Menu. Chili's restaurants are full service, casual dining restaurants
featuring quick, efficient and friendly table service designed to minimize
customer waiting and facilitate table turnover. Service personnel are dressed
casually to reinforce the casual, informal environment. Chili's restaurants
feature a diverse menu of broadly appealing food items, including a variety of
hamburgers, fajitas, chicken and seafood entrees and sandwiches, barbecued ribs,
salads, appetizers and desserts, all of which are prepared fresh daily according
to recipes specified by Chili's. Emphasis is placed on serving substantial
portions of quality food at modest prices. Each Chili's restaurant has a full
bar serving beer, wine and cocktails.

     Advertising and Marketing. Pursuant to its franchise agreements with
Brinker, the Company contributes 0.5% of sales from each restaurant to Brinker
for advertising and marketing to benefit all restaurants. As part of a
system-wide promotional effort, the Company paid an additional advertising fee
of 0.375% of sales for the period beginning September 1, 1999 and ending August
30, 2000 and has agreed to pay a similar fee of 1.0% of sales for the period
beginning September 1, 2000 and ending June 20, 2001. The Company is also
required to spend 2% of sales from each restaurant on local advertising. The
Company's advertising expenditures typically exceed the levels required under
its agreements with Brinker and the Company spends substantially all of its
advertising dollars on television and radio advertising. The Company also
conducts promotional marketing efforts targeted at its various local markets.

     The Chili's franchise agreements provide that Brinker may establish
advertising cooperatives ("Cooperatives") for geographic areas where one or more
restaurants are located. Any restaurants located in areas subject to a
Cooperative are required to contribute 3% of sales to the Cooperative in lieu of
contributing 0.5% of sales to Brinker. Each such restaurant is also required to
directly spend 0.5% of sales on local advertising. To date, no Cooperatives have
been established in any of the Company's markets.


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GRADY'S AMERICAN GRILL

     General. Grady's American Grill restaurants feature high-quality food in a
classic American style, served in a warm and inviting setting. Prior to the
Company's acquisition of the concept from Brinker on December 21, 1995, Brinker
owned and operated 34 of the 35 Grady's American Grill restaurants now owned and
operated by the Company. The Company's Grady's American Grill concept is
proprietary and provides the Company with flexibility for expansion and
development.

     Menu. The Grady's American Grill menu features signature prime rib,
high-quality steaks, daily servings of seafood, inviting salads, sandwiches,
soups and high quality desserts. Entrees emphasize on-premise scratch
preparation in a classic American style.

     Advertising and Marketing. As the owner of the Grady's American Grill
concept, the Company has full responsibility for marketing and advertising. The
Company focuses advertising and marketing efforts in local print media, use of
direct mail programs, television and radio, with total annual expenditures
estimated to range between 2% and 3% of the sales for its Grady's American Grill
restaurants.


ITALIAN DINING CONCEPTS

     General. The Company's Italian Dining concepts consist of Papa Vino's
Italian Kitchen and Spageddies Italian Kitchen. The first Papa Vino's restaurant
was opened in 1996 and the first Spageddies restaurant was opened in 1994. The
Company had been a franchisee of Spageddies since 1994, and became the owner of
the concept in October 1995. Papa Vino's and Spageddies each offers a casual
dining atmosphere with high-quality food, generous portions and moderate prices,
all enjoyed in a setting featuring the ambiance of a traditional Italian
trattoria with stone archways, large wines casks and wine racks lining the walls
and exhibition cooking in an inviting, comfortable environment. The Company's
Italian Dining concepts are proprietary and provide the Company with flexibility
for expansion and development.

     Menu. A fundamental component of the Italian Dining concepts is to provide
the customer with a wide variety of high-quality, value-priced Italian food. The
restaurant menu includes an array of entrees, including traditional Italian
pasta, grilled meats and freshly prepared selections of pizzas, soups, salads
and sandwiches. The menu also includes specialty appetizers, fresh baked bread
and desserts, together with a full-service bar serving beer, wine and cocktails.

     Advertising and Marketing. As the owner of these concepts, the Company has
full responsibility for marketing and advertising its Italian Dining
restaurants. The Company focuses its advertising and marketing efforts in local
print media, use of direct mail programs and radio, with total annual
expenditures estimated to range between 2% and 3% of the sales for these
restaurants.


TRADEMARKS

     The Company owns the following registered trademarks: Grady's American
Grill(R), Spageddies Italian Kitchen(R), Spageddies(R), Papa Vino's(R) and Papa
Vino's Italian Kitchen(R). The Company also owns a number of other trademarks
and service marks which are used in connection with its owned concepts. The
Company believes its marks are valuable and intends to maintain its marks and
any related registrations. Burger King(R) is a registered trademark of Burger
King Corporation. Chili's(R) and Chili's Grill & Bar(TM) are a registered
trademark and trademark, respectively, of Brinker.


ADMINISTRATIVE SERVICES

     From its headquarters in Mishawaka, Indiana, the Company provides
accounting, cash management, information technology, purchasing and procurement,
human resources, finance, marketing, advertising, menu development, budgeting
and planning, legal, site selection and development support services for each of
its operating subsidiaries.


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     Management. The Company is managed by a team of senior managers who are
responsible for the establishment and implementation of a strategic plan. The
Company believes that its management team possesses the ability to manage its
diverse operations.

     The Company has an experienced management team in place for each of its
concepts. Each concept's operations are managed by geographic region with a
senior manager responsible for each specific region of operations.

      During fiscal 1999, the Company decreased the span of control within each
of its concepts by adding additional multi-unit managers. This action lowered,
on average, the number of restaurants for which each multi-unit manager is
responsible.

     Site Selection. Site selection for new restaurants is made by the Company's
senior management under the direction of the Company's Chief Development
Officer, subject in the case of the Company's franchised restaurants to the
approval of its franchisors. Within a potential market area, the Company
evaluates high-traffic locations to determine profitable trading areas.
Site-specific factors considered by the Company include traffic generators,
points of distinction, visibility, ease of ingress and egress, proximity to
direct competition, access to utilities, local zoning regulations and various
other factors. In addition, in evaluating potential full service dining sites,
the Company considers applicable laws regulating the sale of alcoholic
beverages. The Company regularly reviews potential sites for expansion. Once a
potential site is selected, the Company utilizes demographic and site selection
data to assist in final site selection.

     Quality Control. The Company's senior management and restaurant management
staff are principally responsible for assuring compliance with the Company's and
its franchisors' operating procedures. The Company and its franchisors have
uniform operating standards and specifications relating to the quality,
preparation and selection of menu items, maintenance and cleanliness of the
premises and employee conduct. Compliance with these standards and
specifications is monitored by frequent on-site visits and inspections by the
Company's senior management. Additionally, the Company employs the use of toll
free customer feedback telephone services and outside "shopper services" to
visit restaurants periodically to ensure that the restaurants meet the Company's
operating standards. The Company's operational structure encourages all
employees to assume a proprietary role ensuring that such standards and
specifications are met.

          Burger King. The Company's Burger King operations are focused on
      achieving a high level of customer satisfaction with speed, accuracy and
      quality of service closely monitored. The Company's senior management and
      restaurant management staff are principally responsible for ensuring
      compliance with the Company's and Burger King Corporation's operating
      procedures. The Company and Burger King Corporation have uniform operating
      standards and specifications relating to the quality, preparation and
      selection of menu items, maintenance and cleanliness of the premises and
      employee conduct. These standards include food preparation rules
      regarding, among other things, minimum cooking times and temperatures,
      sanitation and cleanliness.

          Full Service Dining. The Company has uniform operating standards and
      specifications relating to the quality, preparation and selection of menu
      items, maintenance and cleanliness of the premises and employee conduct in
      its full service dining concepts. At the Company's Chili's restaurants,
      compliance with these standards and specifications is monitored by
      representatives of Brinker. Each Full Service Dining restaurant typically
      has a general manager and three to four assistant managers who together
      train and supervise employees and are, in turn, overseen by a multi-unit
      manager.

     Information Technology Systems. Financial controls are maintained through a
centralized accounting system, which allows the Company to track the operating
performance of each restaurant. The Company has a point-of-sale system in each
of its restaurants which is linked directly to the Company's accounting system,
thereby making information available on a timely basis. This information enables
the Company to analyze customer purchasing habits, operating trends and
promotional results. During fiscal 1999 and early fiscal 2000, the Company
replaced the point of sale equipment in all of its full service restaurants.

     Training. The Company maintains comprehensive training programs for all of
its restaurant management personnel. Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction.


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          Burger King. The training program for the Company's Burger King
     restaurant managers features an intensive hands-on training period followed
     by classroom instruction and simulated restaurant management activities.
     Upon certification, new managers work closely with experienced managers to
     solidify their skills and expertise. The Company's existing restaurant
     managers regularly participate in the Company's ongoing training efforts,
     including classroom programs, off-site training and other
     training/development programs, which the Company's senior concept
     management designs from time to time. The Company generally seeks to
     promote from within to fill Burger King restaurant management positions.

          Full Service Dining. The Company requires all general and restaurant
     managers of its full service dining concepts to participate in a
     system-wide, comprehensive training program. These programs teach
     management trainees detailed food preparation standards and procedures for
     each concept. These programs are designed and implemented by the Company's
     senior concept management teams.

     Purchasing. Purchasing and procurement for the Company's Grady's American
Grill and Italian Dining concepts are managed by a dedicated purchasing function
and are generally contracted with full-service distributors. Unit-level
purchasing decisions from an approved list of suppliers are made by each of the
Company's restaurant managers based on their assessment of the provisioning
needs of the particular location. Purchase orders and invoices are reviewed by
restaurant general managers and by concept management.

     The Company participates in system-wide purchasing and distribution
programs with respect to its Chili's and Burger King restaurants, which have
been effective in reducing store-level expenditures on food and paper packaging
commodities.


FRANCHISE AND DEVELOPMENT AGREEMENTS

     Burger King. The Company and Burger King Corporation entered into a
development agreement on December 24, 1993 (the "Burger King Agreement"). The
Burger King Agreement reserves for the Company 25 specifically defined limited
geographic areas ("Areas") and grants the Company the exclusive right to select
and develop one Burger King restaurant in each of up to 18 of those Areas. The
Company paid a $90,000 fee for the exclusivity provided by the Burger King
Agreement. The Company's exclusive right in an Area expires with the opening by
the Company of a Burger King restaurant in that Area. In January of 2000, the
Company developed its 18th and final restaurant under the Burger King Agreement.
In addition, the Company opened one additional Burger King restaurant under a
separate agreement with Burger King in December of 1999.

     On November 3, 2000, the Company entered into a Non-Exclusive Development
Agreement with Burger King Corporation ("the "BKC II Agreement"). The BKC II
Agreement grants the Company the non-exclusive right to develop 12 Burger King
restaurants in three specified counties in Michigan, two specified counties in
Ohio and 20 specified counties in Indiana. The BKC II Agreement expires June 30,
2004 and establishes the following development schedule:


<TABLE>
<CAPTION>
                                                                       No. of Additional
                  Performance Period                                  Restaurants to be Opened
                  ------------------                                  ------------------------
<S>                                                                   <C>
                  On or before June 30, 2001                                    1
                  July 1, 2001 through September 30, 2001                       1
                  October 1, 2001 through June 30, 2002                         2
                  July 1, 2002 through August 31, 2002                          1
                  September 1, 2002 through June 30, 2003                       3
                  July 1, 2003 through June 30, 2004                            4
</TABLE>


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     The Company paid a $60,000 franchise fee deposit to Burger King
Corporation. With each new restaurant that the Company opens pursuant to the BKC
II Agreement, it will receive a credit of $5,000 against the applicable
franchise fee for such restaurant.

     The Company is responsible for all costs and expenses incurred in locating,
acquiring and developing restaurant sites. The Company must also satisfy Burger
King Corporation's development criteria, which include the specific site, the
related purchase contract or lease agreement and architectural and engineering
plans for each of the Company's new Burger King restaurants. Burger King
Corporation may refuse to grant a franchise for any proposed Burger King
restaurant if the Company is not conducting the operations of each of its Burger
King restaurants in compliance with Burger King Corporation's franchise
requirements. Burger King Corporation periodically monitors the operations of
its franchised restaurants and notifies its franchisees of failures to comply
with franchise or development agreements that come to its attention.

     Burger King Corporation's franchise agreements convey the right to use its
trade names, trademarks and service marks with respect to specific Burger King
restaurants. The franchise fee for each Burger King restaurant opened in fiscal
2000 was $40,000. In addition, each fiscal 2000 franchise agreement requires the
Company to pay a monthly royalty fee of 3.5% of sales and advertising fees of 4%
of sales.

     During fiscal 2000, Burger King Corporation increased its royalty and
franchise fees for most new restaurants. The franchise fee for new restaurants
increased from $40,000 to $50,000 for a 20 year agreement and the royalty rate
increased from 3.5% of sales to 4.5% of sales, after a transitional period. For
franchise agreements entered into during the transitional period, the royalty
rate will be 4% of sales for the first 10 years and 4.5% of sales for the
balance of the term.

     For new restaurants, the transitional period will be from July 1, 2000 to
June 30, 2003. As of July 1, 2003, the royalty rate will become 4.5% of sales
for the full term of new restaurant franchise agreements. For renewals of
existing franchise agreements, the transitional period will be from July 1, 2000
through June 30, 2001. As of July 1, 2001, existing restaurants that renew their
franchise agreements will pay a royalty of 4.5% of sales for the full term of
the renewed agreement. The advertising contribution will remain 4% of sales.
Royalties payable under existing franchise agreements are not affected by these
changes until the time of renewal, at which time the then prevailing rate
structure will apply.

     Burger King Corporation offered a voluntary program to incent franchisees
to renew their franchise agreements prior to the scheduled expiration date
("Early Renewal Program"). Franchisees that elected to participate in the Early
Renewal Program are required to make capital investments in their restaurants
by, among other things, bringing them up to Burger King Corporation's current
image, and to extend occupancy leases. Franchise agreements entered into under
the Early Renewal Program have special provisions regarding the royalty payable
during the term, including a reduction in the royalty to 2.75% over five years
beginning April, 2002 and concluding in April, 2007.

     The Company included 36 restaurants in the Early Renewal Program. The
Company paid franchise fees of $877,000 in the third quarter of fiscal 2000 to
extend the franchise agreements of the selected restaurants for sixteen to
twenty years. The Company expects to invest approximately $7,000,000 to
$8,000,000 to remodel the selected restaurants to bring them up to Burger King
Corporation's current image. The remodeling is required to be completed by
December 31, 2001.

     On January 27, 2000 the Company executed a "Franchisee Commitment" in which
it agreed to undertake certain "Transformational Initiatives" including capital
improvements and other routine maintenance in all of its Burger King
restaurants. The capital improvements include the installation of signage
bearing the new Burger King logo and the installation of a new drive-through
ordering system. The Company is required to complete these capital improvements
by December 31, 2001. In addition, the Company agreed to perform, as necessary,
certain routine maintenance such as exterior painting, sealing and striping of
parking lots and upgraded landscaping. The Company completed this maintenance by
September 30, 2000, as required. In consideration for executing the Franchisee
Commitment, the Company received "Transformational Payments" totaling
approximately $3.9 million during fiscal 2000. The portion of the
Transformational Payments that corresponds to the amount required for the
capital improvements will be recognized as income over the useful life of the
capital improvements. The portion of the Transformational Payments that
corresponds to the required routine maintenance was recognized as a reduction in
maintenance expense over the period during which maintenance was performed. The
remaining balance of the

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Transformational Payments is being recognized as other income ratably through
December 31, 2001, the term of the Franchisee Commitment.

     Burger King Corporation also provides general specifications for designs,
color schemes, signs and equipment, formulas for preparation of food and
beverage products, marketing concepts, inventory, operations and financial
control methods, management training, technical assistance and materials. Each
franchise agreement prohibits the Company from transferring a franchise without
the prior approval of Burger King Corporation.

     Burger King Corporation's franchise agreements prohibit the Company, during
the term of the agreements, from owning or operating any other hamburger
restaurant. For a period of one year following the termination of a franchise
agreement, the Company remains subject to such restriction within a two mile
radius of the Burger King restaurant which was the subject of the franchise
agreement.

     Chili's. The Company has a development agreement with Brinker (the "Chili's
Agreement") to develop 37 Chili's restaurants in two regions encompassing
counties in Indiana, Michigan, Ohio, Kentucky ("Midwest Region"), and Delaware,
New Jersey and Pennsylvania ("Philadelphia Region"). The Company paid
development fees totaling $260,000 for the right to develop the restaurants in
the regions. Each Chili's franchise agreement requires the Company to pay an
initial franchise fee of $40,000, a monthly royalty fee of 4% of sales and
advertising fees of 0.5% of sales. As part of a system-wide promotional effort,
the Company paid an additional advertising fee of 0.375% of sales for the period
beginning September 1, 1999 and ending August 30, 2000 and has agreed to pay a
similar fee of 1.0% of sales for the period beginning September 1, 2000 and
ending June 20, 2001.

     The Company may develop up to 41 Chili's without specific approval of the
franchisor, but is obligated to satisfy the following development schedule:
<TABLE>
<CAPTION>

                                                 MINIMUM CUMULATIVE NUMBER OF RESTAURANTS


                                                MIDWEST        PHILADELPHIA        ENTIRE
                                                REGION            REGION          TERRITORY
                                                ------         ------------      ----------
<S>                                             <C>            <C>               <C>
        December 31, 2000                         15                14               31(1)
        December 31, 2001                         16                15               33(1)
        December 31, 2002                         15                16               35(1)
        December 31, 2003                         15                16               37(1)
</TABLE>



(1)  Two of the restaurants to be opened in this year may be located in either
     region at the Company's discretion.

     Failure to adhere to this schedule constitutes a default under the Chili's
Agreement and Brinker could terminate the Chili's Agreement. The Chili's
Agreement prohibits Brinker or any other Chili's franchisee from establishing a
Chili's restaurant within a specified geographic radius of the Company's Chili's
restaurants. The term of the Chili's Agreement expires when the Company has
completed the development schedule. The Chili's Agreement and the franchise
agreements prohibit the Company, for the term of the agreements, from owning or
operating other restaurants which are similar to a Chili's restaurant. The
Chili's Agreement extends this prohibition, but only within the Company's
development territories, for a period of two years following the termination of
such agreement. In addition, each franchise agreement prohibits the Company, for
the term of the franchise agreement and for a period of two years following its
termination, from owning or operating such other restaurants within a 10-mile
radius of the Chili's restaurant which was the subject of such agreement.

     Under the Chili's Agreement, the Company is responsible for all costs and
expenses incurred in locating, acquiring and developing restaurant sites. Each
proposed restaurant site, the related purchase contract or lease agreement and
the architectural and engineering plans for each of the Company's new Chili's
restaurants are subject to Brinker's approval. Brinker may refuse to grant a
franchise for any proposed Chili's restaurant if the Company is not conducting
the operations of each of its Chili's restaurants in compliance with the Chili's
restaurant franchise requirements. Brinker may terminate the Chili's Agreement
if the Company defaults in its performance thereunder or under any franchise
agreement. Brinker periodically monitors the operations of its franchised
restaurants and

                                       9
<PAGE>   10
notifies the franchisees of any failure to comply with franchise or development
agreements that comes to its attention.

     The franchise agreements convey the right to use the franchisor's trade
names, trademarks and service marks with respect to specific restaurant units.
The franchisor also provides general specifications for designs, color schemes,
signs and equipment, formulas for preparation of food and beverage products,
marketing concepts, inventory, operations and financial control methods,
management training and technical assistance and materials. Each franchise
agreement prohibits the Company from transferring a franchise without the prior
approval of the franchisor.

     Risks and Requirements of Franchisee Status. Due to the nature of
franchising and the Company's agreements with its franchisors, the success of
the Company's Burger King and Chili's concepts is, in large part, dependent upon
the overall success of its franchisors, including the financial condition,
management and marketing success of its franchisors and the successful operation
of restaurants opened by other franchisees. Certain matters with respect to the
Company's franchised concepts must be coordinated with, and approved by, the
Company's franchisors. In particular, certain franchisors must approve the
opening by the Company of any new franchised restaurant, including franchises
opened within the Company's existing franchised territories, and the closing of
any of the Company's existing franchised restaurants. The Company's franchisors
also maintain discretion over the menu items that may be offered in the
Company's franchised restaurants.


COMPETITION

     The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition can
be expected to increase. There are many well-established competitors with
substantially greater financial and other resources than the Company, some of
which have been in existence for a substantially longer period than the Company
and may have substantially more units in the markets where the Company's
restaurants are, or may be, located. McDonald's and Wendy's restaurants are the
principal competitors to the Company's Burger King restaurants. The competitors
to the Company's Chili's and Italian Dining restaurants are other casual dining
concepts such as Applebee's, T.G.I. Friday's, Bennigan's, Olive Garden and Red
Lobster restaurants. The primary competitors to Grady's American Grill are
Houston's, J. Alexander's, Outback Steakhouse, Houlihan's, Cooker Bar & Grille,
and O'Charley's Restaurant & Lounge, as well as a large number of locally-owned,
independent restaurants. The Company believes that competition is likely to
become even more intense in the future.

     The Company and the restaurant industry in general are significantly
affected by factors such as changes in local, regional or national economic
conditions, changes in consumer tastes, weather conditions and various other
consumer concerns. In addition, factors such as increases in food, labor and
energy costs, the availability and cost of suitable restaurant sites,
fluctuating insurance rates, state and local regulations and the availability of
an adequate number of hourly-paid employees can also adversely affect the
restaurant industry.


GOVERNMENT REGULATION

     Each of the Company's restaurants is subject to licensing and regulation by
a number of governmental authorities, which include alcoholic beverage control
in the case of the Chili's, Italian Dining and Grady's American Grill
restaurants, and health, safety and fire agencies in the state or municipality
in which the restaurant is located. Difficulties or failures in obtaining the
required licenses or approvals could delay or prevent the opening of a new
restaurant in a particular area.

     Alcoholic beverage control regulations require each of the Company's
Chili's, Italian Dining and Grady's American Grill restaurants to apply to a
state authority and, in certain locations, county or municipal authorities for a
license or permit to sell alcoholic beverages on the premises and to provide
service for extended hours and on Sundays. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily operations
of the Company's restaurants, including minimum age of patrons and employees,
hours of operation, advertising, wholesale purchasing, inventory control and
handling, storage and dispensing of alcoholic beverages. The loss of a liquor
license for a

                                       10
<PAGE>   11
particular Grady's American Grill, Italian Dining or Chili's restaurant would
most likely result in the closing of the restaurant.

     The Company may be subject in certain states to "dramshop" statutes, which
generally provide a person injured by an intoxicated patron the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance and has never been named as a
defendant in a lawsuit involving "dramshop" liability.

     The Company's restaurant operations are also subject to federal and state
minimum wage laws governing such matters as working conditions, overtime and tip
credits. Significant numbers of the Company's food service and preparation
personnel are paid at rates related to the federal minimum wage and,
accordingly, increases in the minimum wage could increase the Company's labor
costs.

     The Company is also subject to various local, state and federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and, if
necessary, to correct environmental problems, the Company conducts environmental
audits of a proposed restaurant site in order to determine whether there is any
evidence of contamination prior to purchasing or entering into a lease with
respect to such site. To date, the Company's operations have not been materially
adversely affected by the cost of compliance with applicable environmental laws.


EMPLOYEES

     As of October 29, 2000, the Company employed approximately 7,000 persons.
Of those employees, approximately 130 held management or administrative
positions, approximately 682 were involved in restaurant management, and the
remainder were engaged in the operation of the Company's restaurants. None of
the Company's employees is covered by a collective bargaining agreement. The
Company considers its employee relations to be good.


                                       11
<PAGE>   12
ITEM 2.  PROPERTIES.

     The following table sets forth, as of October 29, 2000, the 17 states in
which the Company operated restaurants and the number of restaurants in each
state. Of the 145 restaurants which the Company operated as of October 29, 2000,
the Company owned 52 and leased 93. Many leases provide for base rent plus an
additional rent based upon sales to the extent the additional rent exceeds the
base rent, while other leases provide for only a base rent.

                     NUMBER OF COMPANY-OPERATED RESTAURANTS
<TABLE>
<CAPTION>
                                                                       GRADY'S
                                                 BURGER                AMERICAN  ITALIAN
                                                  KING      CHILI'S     GRILL     DINING     TOTAL
                                                 ------     -------    --------  --------    -----
<S>                                              <C>        <C>        <C>       <C>         <C>
                Alabama                                                    1                    1
                Arkansas                                                   1                    1
                Colorado                                                   3                    3
                Delaware                                        2                               2
                Florida                                                    6                    6
                Georgia                                                    5                    5
                Illinois                                                   1                    1
                Indiana                              39         5                    2         46
                Michigan                             32         9          1         4         46
                Mississippi                                                1                    1
                New Jersey                                      5          1                    6
                North Carolina                                             2                    2
                Ohio                                            3          1         2          6
                Oklahoma                                                   1                    1
                Pennsylvania                                    7                               7
                Tennessee                                                  5                    5
                Texas                                                      6                    6
                                                  -----------------------------------------------
                   Total                             71        31         35         8        145
                                                     ==        ==         ==         =        ===
</TABLE>

     Burger King. As of October 29, 2000, 41 of the Company's Burger King
restaurants were leased from real estate partnerships owned by certain of the
Company's founding shareholders. In addition, the Company leased two of its
Burger King restaurants from William R. Schonsheck, a former director and
executive officer of the Company, or entities controlled by him. See ITEM 13,
"Certain Relationships and Related Transactions." The Company also leased seven
Burger King restaurants directly from Burger King Corporation and seven
restaurants from unrelated third parties. The seven leases with Burger King
Corporation are subject to the renewal of the franchise agreements for those
locations. The Company owned 14 of its Burger King restaurants as of October 29,
2000.

     Chili's Grill & Bar. As of October 29, 2000, the Company owned 12 of its
Chili's restaurants and leased 19 other restaurants from unrelated parties.

     Grady's American Grill. As of October 29, 2000, the Company owned 21 of its
Grady's American Grill restaurants. The Company leased one Grady's American
Grill restaurant from a limited partnership of which a subsidiary of the Company
is the general partner. The Company's other 13 Grady's American Grill
restaurants were leased from unrelated parties.

     Italian Dining. As of October 29, 2000, the Company owned five of the
Italian Dining restaurants and leased the three other restaurants from unrelated
parties.

     Office Lease. The Company leases approximately 53,000 square feet for its
headquarters facility in an office building located in Mishawaka, Indiana that
was constructed in 1997 and is leased from a limited liability company in which
the Company owns a 50% interest. The remaining term of the lease agreement is 11
years. Approximately 4,500 square feet, 12,400 square feet and 5,200 square feet
of the Company's headquarters building have been subleased to three tenants with
remaining terms of four, five and seven years, respectively.

ITEM 3.  LEGAL PROCEEDINGS


                                       12
<PAGE>   13
     The Company and certain of its officers and directors are parties to
various legal proceedings relating to the Company's purchase, operation and
financing of the Company's bagel-related businesses.

     D & K Foods, Inc., Pacific Capital Ventures, Inc., and PLB Enterprises,
Inc., franchisees of Bruegger's Franchise Corporation, and Ken Wagnon, Dan
Carney, Jay Wagnon and Patrick Beatty, principals of the foregoing franchisees,
commenced an action on July 16, 1997 in the United States District Court for the
District of Maryland, against Bruegger's Corporation, Bruegger's Franchise
Corporation, Quality Dining, Inc., Daniel B. Fitzpatrick, Michael J. Dressell
and Nordahl L. Brue, alleging that the plaintiffs purchased their franchises
based upon financial representations that did not materialize, that they
purchased preferred stock in Bruegger's Corporation based upon false
representations, that Bruegger's Corporation falsely represented its intentions
with respect to purchasing bakeries from the plaintiffs or providing financing
to the plaintiffs, and that the defendants violated implied covenants of good
faith and fair dealing. The parties have reached a tentative settlement of this
matter pursuant to which the Company agreed to make an initial payment of
$125,000 and an additional payment of $175,000 on December 31, 2001. The Company
also agreed to purchase 96,064 shares of its common stock presently owned by the
plaintiffs, on December 31, 2001, for an amount equal to the greater of $2.75
per share or the midpoint between $2.59 and the market price of the Company's
stock at the time of closing. As part of the tentative settlement, the
plaintiffs have agreed to vote their stock in the Company in accordance with the
recommendation of the Company's Board of Directors and Bruegger's Corporation
has agreed to purchase certain equipment from the plaintiffs for $200,000,
payable in December of 2002. The Company has agreed to guarantee $25,000 of this
payment.

     On or about April 15, 1997, Texas Commerce Bank National Association
("Texas Commerce") made a loan of $4,200,000 (the "Loan") to BFBC Ltd., a
Florida limited partnership ("BFBC"). At the time of the Loan, BFBC was a
franchisee under franchise agreements with Bruegger's Franchise Corporation (the
"Franchisor"). The Company at that time was an affiliate of the Franchisor. In
connection with the Loan and as an accommodation of BFBC, the Company executed
to Texas Commerce a "Guaranty". By the terms of the Guaranty the Company agreed
that upon maturity of the Loan by default or otherwise that it would either (1)
pay the Loan obligations or (2) buy the Loan and all of the related loan
documents (the "Loan Documents") from Texas Commerce or its successors. In
addition several principals of BFBC (the "Principal Guarantors") guaranteed
repayment of the Loan by each executing a "Principal Guaranty". On November 10,
1998, Texas Commerce (1) declared that the Loan was in default, (2) notified
BFBC, the Principal Guarantors and the Company that all of the Loan obligations
were due and payable, and (3) demanded payment.

     The Company elected to satisfy its obligations under the Guaranty by
purchasing the Loan from Texas Commerce. On November 24, 1998, the Company
bought the Loan for $4,294,000. Thereafter, the Company sold the Loan to its
Texas affiliate, Grady's American Grill, L.P. ("Grady's"). On November 30, 1998
Grady's commenced an action seeking to recover the amount of the Loan from one
of the Principal Guarantors, Michael K. Reilly ("Reilly"). As part of this
action Grady's also seeks to enforce a Subordination Agreement that was one of
the Loan Documents against MKR Investments, L.P., a partnership ("MKR"). Reilly
is the general partner of MKR. This action is pending in the United States
District Court for the Southern District of Texas Houston Division as Case No.
H-98-4015. Reilly has denied liability and filed a counterclaim against Grady's
alleging that Grady's engaged in unfair trade practices, violated Florida's
"Rico" statute, engaged in a civil conspiracy and violated state and federal
securities laws in connection with the Principal Guaranty (the "Counterclaims").
Reilly also filed a third party complaint against Quality Dining, Inc., Grady's
American Grill Restaurant Corporation, David M. Findlay, Daniel B. Fitzpatrick,
Bruegger's Corporation, Bruegger's Franchise Corporation, Champlain Management
Services, Inc., Nordahl L. Brue, Michael J. Dressell and Ed Davis ("Third Party
Defendants") alleging that Reilly invested in BFBC based upon false
representations, that the Third Party Defendants violated state franchise
statutes, committed unfair trade practices, violated covenants of good faith and
fair dealing, violated the state "Rico" statute and violated state and federal
securities laws in connection with the Principal Guaranty. In addition, BFBC and
certain of its affiliates, including the Principal Guarantors ("Intervenors")
have intervened and asserted claims against Grady's and the Third Party
Defendants that are similar to those asserted in the counter claims and the
third party complaint. In addition, the Company and Bruegger's Corporation are
currently disputing the nature and extent of their indemnity obligations, if
any, to the other with respect to this litigation (which dispute would be
resolved if the "Bruegger's Resolution" is consummated. See description of
Bruegger's Resolution below). Based upon the currently available information,
the Company does not believe that these matters will have a material adverse
effect on the Company's financial position or results of operations. However,
there can be no assurance that the Company will be able to realize sufficient
value from Reilly to satisfy the amount of the Loan or that the Company will not
incur any liability as a result of the Counterclaims or third party complaints
filed by Reilly and the Intervenors.


                                       13
<PAGE>   14
     In each of the above cases, one or more present or former officers and
directors of the Company were named as party defendants and the Company has
and/or is advancing defense costs on their behalf.

     Pursuant to the Share Exchange Agreement by and among Quality Dining, Inc.,
Bruegger's Corporation, Nordahl L. Brue and Michael J. Dressell ("Share Exchange
Agreement"), the Agreement and Plan of Merger by and among Quality Dining, Inc.,
Bagel Disposition Corporation and Lethe, LLC, and certain other related
agreements entered into as part of the disposition of the Company's
bagel-related businesses, the Company is responsible for 50% of the first $14
million of franchise-related litigation expenses, inclusive of attorney's fees,
costs, expenses, settlements and judgments (collectively "Franchise Damages").
Bruegger's Corporation and certain of its affiliates are obligated to indemnify
the Company from all other Franchise Damages. The Company is obligated to pay
the first $3 million of its share of Franchise Damages in cash. As of August 6,
2000, the Company had satisfied this obligation. The remaining $4 million of the
Company's share of Franchise Damages is payable by crediting amounts owed to the
Company pursuant to the $10 million junior subordinated note issued to the
Company by Bruegger's Corporation. However, the Company and Bruegger's
Corporation are currently disputing the nature and extent of their indemnity
obligations under the Share Exchange Agreement. If the Bruegger's Resolution
(described below) is consummated, the remaining $4 million of the Company's
share of Franchise Damages would be payable in cash. Through October 29, 2000
the outstanding balance due under the Subordinated Note has been reduced by
$600,000 in respect of Franchise Damages. Based upon the currently available
information, the Company does not believe that these cases individually or in
the aggregate will have a material adverse effect on the Company's financial
position and results of operations but there can be no assurance thereof.

     On or about September 10, 1999, Bruegger's Corporation, Lethe LLC, Nordahl
L. Brue, and Michael J. Dressel commenced an action against the Company in the
United States District Court for the District of Vermont alleging that the
Company breached various provisions of the Share Exchange Agreement which arise
out of the ongoing dispute concerning the net working capital adjustment
contemplated by the Share Exchange Agreement. On February 1, 2000, the Company
filed counter-claims against Bruegger's Corporation for the working capital
adjustment to which it believes it is entitled. Additionally, on or about
September 13, 1999, Messrs. Brue and Dressell asserted a claim for breach of
representations and warranties under the Share Exchange Agreement. The Company
does not expect the ultimate resolution of these matters to have a material
adverse effect on the Company's financial position or results of operations, but
there can be no assurance thereof.

     The Company and Bruegger's Corporation are discussing a resolution (the
"Bruegger's Resolution") of their various disputes that may include, among other
things, one or more of the following provisions: (a) the principal and accrued
interest outstanding under the Subordinated Note would be reduced to $10
million; (b) the Company and Bruegger's Corporation each give up their claim
against the other to receive a net working capital adjustment; (c) the
Subordinated Note would be modified to, among other things, extend the period
through which interest would be accrued and added to the principal amount of the
Subordinated Note from October, 2000 through January, 2002. From January, 2002
through June, 2002, one-half of the interest would be accrued and added to the
principal amount of the Subordinated Note and one-half of the interest would be
paid in cash. Commencing in January, 2003, interest would be paid in cash
through the maturity of the Subordinated Note in October 2004; (d) the Company
and Bruegger's Corporation would each be responsible for 50% of the Franchise
Damages with respect to the claims asserted by D & K Foods, Inc., et al and BFBC
Ltd., et al. The Company would be entitled to 25% of any net recovery made by
Bruegger's Corporation on its counter-claim against D & K Foods, Inc., et al and
Bruegger's Corporation would be entitled to 25% of any net recovery made by the
Company on the BFBC, Ltd., Loan; provided, however, that any such recovery shall
be credited against the Subordinated Note; (e) Bruegger's Corporation and its
affiliates would release their claim for breach of representations and
warranties under the Share Exchange Agreement; and (f) the Company would give
Bruegger's Corporation a credit of two dollars against the Subordinated Note for
every one dollar that Bruegger's Corporation prepays against the Subordinated
Note prior to October, 2003 up to a maximum credit of $4 million.

     The Company does not expect the Bruegger's Resolution, if consummated on
terms substantially the same as those presently being discussed, to have a
material adverse effect on the Company's financial position or results of
operations, but there can be no assurance thereof. There also can be no
assurance that the Bruegger's Resolution will be consummated and whether or not
consummated there can be no assurance when, if ever, the Company might receive
any

                                       14
<PAGE>   15
principal or interest payments in respect of the Subordinated Note. See ITEM 1-
Disposition of Bagel-Related Businesses.

     On April 19, 2000, NBO, LLC ("NBO") filed a Verified Complaint for
Injunctive and Declaratory Relief in the United States District Court for the
Northern District of Indiana, South Bend Division, naming as defendants the
Company, Daniel B. Fitzpatrick, certain other officers of the Company, certain
unidentified associates and affiliates of Daniel B. Fitzpatrick and certain
other unidentified members of management. The Complaint alleged among other
things, that the director defendants' decision to authorize Daniel B.
Fitzpatrick and/or his associates and affiliates and/or other members of
management to acquire up to 1,000,000 additional shares of the Company's common
stock without triggering the Company's Shareholder Rights Agreement would give
management effective control of the Company without the payment of a control
premium and would thwart NBO's tender offer. The Complaint alleged that this
decision was not made in good faith after a reasonable investigation of the
consequences, and was in breach of the director defendants' fiduciary duties. On
May 26, 2000 the Court dismissed these allegations for failure to state a claim.
The Complaint also alleged violations of the federal securities laws and seeks
injunctive and declaratory relief. On June 8, 2000, the Company renewed its
Motion to Dismiss the remaining allegations of NBO's complaint on grounds that
these allegations were moot. On June 9, 2000 NBO voluntarily withdrew its
request for a preliminary injunction and on September 12, 2000 NBO voluntarily
dismissed its Complaint, without prejudice. The Company is currently in
discussions with NBO with respect to a transaction that would enable NBO to
dispose of its shares of Common Stock of the Company.

     The Company is involved in various other legal proceedings incidental to
the conduct of its business, including employment discrimination claims. Based
upon currently available information, the Company does not expect that any such
proceedings will have a material adverse effect on the Company's financial
position or results of operations but there can be no assurance thereof.


                                       15
<PAGE>   16
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     The Company did not submit any matters to a vote of security holders during
the fourth quarter of the 2000 fiscal year.

EXECUTIVE OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
                  Name                       Age                               Position
------------------------------------------   ---    ------------------------------------------------------------
<S>                                          <C>    <C>
Daniel B. Fitzpatrick                         43    Chairman of the Board, President and Chief Executive Officer

John C. Firth                                 43    Executive Vice President, General Counsel and Secretary

James K. Fitzpatrick                          45    Senior Vice President, Chief Development Officer and Director

Patrick J. Barry                              38    Senior Vice President - Administration and Information
                                                    Technology

Lindley E. Burns                              46    Senior Vice President - Full Service Dining

Gerald O. Fitzpatrick                         40    Senior Vice President - Burger King Division

Christopher L. Collier                        39    Vice President - Finance

Robert C. Hudson                              44    Vice President - Grady's American Grill Division

Jeanne M. Yoder                               34    Vice President and Controller
</TABLE>


     Daniel B. Fitzpatrick has served as President and Chief Executive Officer
and a Director of the Company since 1982. Prior to founding the Company, Mr.
Fitzpatrick worked for a franchisee of Burger King Corporation, rising to the
level of regional director of operations. He has over 25 years of experience in
the restaurant business. Mr. Fitzpatrick also serves as a director of 1st Source
Corporation, a publicly held diversified bank holding company based in South
Bend, Indiana.

     John C. Firth serves as Executive Vice President, General Counsel and
Secretary. Prior to joining the Company in June 1996, he was a partner with the
law firm of Sopko and Firth. Beginning in 1985, he represented the Company as
outside legal counsel with responsibility for the Company's legal affairs.

     James K. Fitzpatrick has served as Senior Vice President and Chief
Development Officer of the Company since August 1995. Prior to that, Mr.
Fitzpatrick served as Vice President or Senior Vice President of the Company in
charge of the Company's Fort Wayne, Indiana Burger King restaurant operations
since 1984. Prior to joining the Company, he served as a director of operations
for a franchisee of Burger King Corporation. He has over 25 years of experience
in the restaurant business.

     Patrick J. Barry joined the Company in October 1996 and serves as the
Company's Senior Vice President - Administration and Information Technology.
Prior to joining the Company, Mr. Barry was a management consultant with The
Keystone Group and Andersen Consulting.

     Lindley E. Burns joined the Company in June of 1995. Prior to joining the
Company he worked for Brinker as a multi-unit manager in its Chili's division
for two years and was a Chili's franchisee for eight years prior to joining
Brinker. He has over 25 years of experience in the restaurant business.



                                       16
<PAGE>   17
     Gerald O. Fitzpatrick serves as a Senior Vice President in the Company's
Burger King Division. Mr. Fitzpatrick has served in various capacities in the
Company's Burger King operations since 1983. Prior to joining the Company, he
served as a district manager for a franchisee of Burger King Corporation. He has
over 20 years of experience in the restaurant business.

     Christopher L. Collier joined the Company in July of 1996. Since that time
he has served in various capacities in the Finance Department, most recently as
the Vice President of Financial Reporting. Prior to joining the Company, he
served as the Vice President-Finance at a regional restaurant chain. Mr. Collier
is a certified public accountant.

     Robert C. Hudson joined the Company in December of 1995 when the Company
acquired Grady's American Grill. From 1992 until joining the Company, Mr. Hudson
held various operational positions at Brinker, most recently as an area director
in its Grady's American Grill division.

     Jeanne M. Yoder joined the Company in March of 1996. Since that time she
has served in various capacities in the Accounting Department, most recently as
Assistant Controller. Prior to joining the Company, she served as Controller at
a regional travel agency. Ms. Yoder is a certified public accountant.

     The above information includes business experience during the past five
years for each of the Company's executive officers. Executive officers of the
Company serve at the discretion of the Board of Directors. Messrs. Daniel B.
Fitzpatrick, James K. Fitzpatrick and Gerald O. Fitzpatrick are brothers. There
is no family relationship between any other Directors or executive officers of
the Company.

     The success of the Company's business is dependent upon the services of
Daniel B. Fitzpatrick, Chairman, President and Chief Executive Officer of the
Company. The Company maintains key man life insurance on the life of Mr.
Fitzpatrick in the principal amount of $1.0 million. The loss of the services of
Mr. Fitzpatrick would have a material adverse effect upon the Company.

     (Pursuant to General Instruction G(3) of Form 10-K, the foregoing
information is included as an unnumbered Item in Part I of this Annual Report in
lieu of being included in the Company's Proxy Statement for its 2001 Annual
Meeting of Shareholders.)


                                       17
<PAGE>   18
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's Common Stock is traded on the NASDAQ Stock Market's National
Market under the symbol QDIN. The prices set forth below reflect the high and
low sales quotations for the Company's Common Stock as reported by NASDAQ for
the calendar periods indicated. As of January 17, 2001, there were 430 holders
of record and approximately 3,600 beneficial owners.
<TABLE>
<CAPTION>

                                Calendar 2000                             Calendar 1999
                           High             Low                        High              Low
                         ---------------------------                  ----------------------
<S>                       <C>            <C>                          <C>            <C>
First Quarter             $ 4.125        $ 1.813                      $ 4.219        $ 2.500
Second Quarter              4.000          2.000                        4.188          2.500
Third Quarter               3.625          2.000                        3.000          2.375
Fourth Quarter              2.938          1.688                        3.000          1.875
</TABLE>

     The Company does not pay cash dividends on its Common Stock. The Company
does not anticipate paying cash dividends in the foreseeable future. The
Company's revolving credit agreement prohibits the payment of cash dividends and
restricts other distributions. The agreement expires October 31, 2002.

     No unregistered equity securities were sold by the Company during fiscal
2000.


                                       18
<PAGE>   19
ITEM 6.    SELECTED FINANCIAL DATA.

   QUALITY DINING, INC.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------

                                                                        Fiscal Year Ended (1)
                                                  October 29,  October 31,  October 25,  October 26,  October 27,
                                                      2000        1999         1998         1997          1996
 ----------------------------------------------------------------------------------------------------------------
                                                          (In thousands, except unit and per share data)
<S>                                                <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA(2):
Revenues:
Restaurant sales:
    Burger King                                    $  81,724    $  82,650    $  80,391    $  74,616    $  70,987
    Grady's American Grill                            68,615       75,198       81,241       85,403       85,101
    Chili's Grill & Bar                               60,921       56,837       55,572       54,277       41,913
    Italian Dining Division                           16,756       16,066       15,040       12,973        8,388
    Bruegger's Bagel Bakery                               --           --           --       64,928       25,967
----------------------------------------------------------------------------------------------------------------
 Total restaurant sales                              228,016      230,751      232,244      292,197      232,356
----------------------------------------------------------------------------------------------------------------
     Franchise related revenue                            --           --           --       10,055        5,274
----------------------------------------------------------------------------------------------------------------
 Total revenues                                      228,016      230,751      232,244      302,252      237,630
----------------------------------------------------------------------------------------------------------------
 Operating expenses
     Restaurant operating expenses
        Food and beverage                             64,607       67,732       69,102       88,629       72,201
        Payroll and benefits                          66,782       67,073       66,404       87,905       66,176
        Depreciation and amortization                 11,312       11,002       11,475       17,691       11,635
        Other operating expenses                      54,832       55,890       55,644       74,691       52,452
----------------------------------------------------------------------------------------------------------------
 Total restaurant operating expenses:                197,533      201,697      202,625      268,916      202,464
     General and administrative (3)                   17,073       15,912       15,488       28,718       11,229
     Amortization of intangibles                         910        1,032        1,085        3,112        2,537
     Impairment of assets and facility
       closing costs                                      --        2,501          250      200,813           --
     Franchise operating partner expense                  --           --           --        2,066           --
     Restructuring and integration costs                  --           --           --           --        9,938
----------------------------------------------------------------------------------------------------------------
 Total  operating expenses                           215,516      221,142      219,448      503,625      226,168
----------------------------------------------------------------------------------------------------------------
 Operating income (loss) (4) (5)                      12,500        9,609       12,796     (201,373)      11,462
----------------------------------------------------------------------------------------------------------------
 Other income (expense):
     Interest expense                                (11,174)     (10,709)     (11,962)     (10,599)      (6,340)
     Provision for uncollectible note
      receivable (6)                                 (10,000)          --           --           --           --
     Gain (loss) on sale of property and
      equipment (7)                                     (878)        (188)        (345)         362            4
     Interest income                                      27          103          190          221          206
     Other income (expense), net                         997           43          541           32          154
----------------------------------------------------------------------------------------------------------------
 Total other expense                                 (21,028)     (10,751)     (11,576)      (9,984)      (5,976)
----------------------------------------------------------------------------------------------------------------
 Income (loss) before income taxes                    (8,528)      (1,142)       1,220     (211,357)       5,486
 Income tax provision (benefit)                        1,183          815        1,107      (14,869)       2,816
----------------------------------------------------------------------------------------------------------------
 Net income (loss)                                 $  (9,711)   $  (1,957)   $     113    $(196,488)   $   2,670
----------------------------------------------------------------------------------------------------------------
 Basic net income (loss) per share                 $   (0.79)   $   (0.15)   $    0.01    $  (11.68)   $    0.23
----------------------------------------------------------------------------------------------------------------
 Diluted net income (loss) per share               $   (0.79)   $   (0.15)   $    0.01    $  (11.68)   $    0.22

----------------------------------------------------------------------------------------------------------------
 Weighted average shares outstanding
----------------------------------------------------------------------------------------------------------------
 Basic                                                12,329       12,668       12,599       16,820       11,855
----------------------------------------------------------------------------------------------------------------
 Diluted                                              12,329       12,668       12,654       16,820       11,947
----------------------------------------------------------------------------------------------------------------
</TABLE>



                                       19
<PAGE>   20
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                   Fiscal Year Ended (1)
                                            October 29,  October 31,  October 25,  October 26,  October 27,
                                                 2000         1999        1998         1997          1996
-----------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>          <C>
RESTAURANT DATA:
Units open at end of period:
       Grady's American Grill                     35           36           39           40           42
       Italian Dining Division                     8            8            8            8            6
       Burger King                                71           70           70           66           63
       Chili's Grill & Bar                        31           28           28           28           22
       Bruegger's Bagel Bakery Division:
           Company-owned                          --           --           --           --          100
           Franchised                             --           --           --           --          325
--------------------------------------------------------------------------------------------------------
                    Totals                       145          142          145          142          558
--------------------------------------------------------------------------------------------------------

BALANCE SHEET DATA:
       Working capital (deficiency)        $ (22,312)   $ (17,962)   $ (14,747)   $  (8,239)   $  (3,383)
       Total assets                          178,861      189,037      196,275      215,973      388,014
       Long-term debt, capitalized lease
       and non-competition obligations       106,815      112,815      118,605      133,111       85,046
       Total stockholders' equity             37,984       49,002       50,926       50,813      269,123
</TABLE>



(1)  All fiscal years presented consisted of 52 weeks except fiscal 1999 which
     had 53 weeks.

(2)  The selected statement of operations data include the operations of
     Bruegger's Corporation from June 7, 1996 until October 19, 1997 and the
     Grady's American Grill restaurants from December 21, 1995.

(3)  General and administrative costs in fiscal 2000 included approximately
     $1.25 million in unanticipated expenses related to the litigation, proxy
     contest and tender offer initiated by NBO, LLC.

(4)  Operating loss for the fiscal year ended October 26, 1997 includes an
     impairment of asset charge of $185.0 million, store closing costs of $15.5
     million and franchise operating partner expense of $2.1 million which all
     relate to the divestiture by the Company of its bagel-related companies.
     Operating income for the fiscal year ended October 27, 1996 includes
     restructuring and integration charges of $1.9 million associated with costs
     related to the acquisitions of the Grady's American Grill concept and
     restaurants and Spageddies Italian Kitchen concept and $8.0 million
     associated with costs related to the acquisition of Bruegger's Corporation.

(5)  Operating income for the fiscal year ended October 31, 1999 includes
     non-cash charges for the impairment of assets and facility closings
     totaling $2,501,000. The non-cash charges consisted primarily of $650,000
     for the disposal of obsolete point of sale equipment that the Company
     identified as a result of installing its new point of sale system in its
     full service dining restaurants, $1,047,000 for the estimated costs and
     losses associated with the anticipated closing of two regional offices and
     three restaurant locations and $804,000 primarily for a non-cash asset
     impairment write down for two under-performing restaurants.

(6)  As of the fourth quarter of fiscal 2000 the Company recorded a $10,000,000
     non-cash charge to fully reserve for the Subordinated Note.

(7)  During the third quarter of fiscal 2000 the Company recorded a $717,000
     loss on the sale of a Grady's American Grill restaurant.


                                       20
<PAGE>   21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

QUALITY DINING, INC.

For an understanding of the significant factors that influenced the Company's
performance during the past three fiscal years, the following discussion should
be read in conjunction with the consolidated financial statements appearing
elsewhere in this Annual Report.

RESULTS OF OPERATIONS

The following table reflects the percentages that certain items of revenue and
expense bear to total revenues.

<TABLE>
<CAPTION>

                                                                   Fiscal Year Ended
                                                       October 29,     October 31,   October 25,
                                                          2000           1999           1998
-----------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>            <C>
Revenues:
Restaurant sales:
    Burger King                                             35.9%          35.8%          34.6%
    Grady's American Grill                                  30.1           32.6           35.0
    Chili's Grill & Bar                                     26.7           24.6           23.9
    Italian Dining Division                                  7.3            7.0            6.5
----------------------------------------------------------------------------------------------
Total revenues                                             100.0          100.0          100.0
----------------------------------------------------------------------------------------------
Operating expenses:
    Restaurant operating expenses:
       Food and beverage                                    28.3           29.4           29.8
       Payroll and benefits                                 29.3           29.1           28.6
       Depreciation and amortization                         5.0            4.8            4.9
       Other operating expenses                             24.0           24.2           24.0
----------------------------------------------------------------------------------------------
Total restaurant operating expenses:                        86.6           87.5           87.3
----------------------------------------------------------------------------------------------
Income from restaurant operations                           13.4           12.5           12.7
----------------------------------------------------------------------------------------------
    General and administrative                               7.5            6.9            6.7
    Amortization of intangibles                              0.4            0.4            0.5
    Impairment of assets and facility closing costs           --            1.1            0.1
----------------------------------------------------------------------------------------------
Operating income (loss)                                      5.5            4.1            5.4
----------------------------------------------------------------------------------------------
Other income (expense):
    Interest expense                                        (4.9)          (4.6)          (5.2)
    Provision for uncollectible note receivable             (4.4)            --             --
    Gain (loss) on sale of property and equipment           (0.4)            --           (0.1)
    Interest income                                           --             --            0.1
    Other income (expense), net                              0.4             --            0.2
----------------------------------------------------------------------------------------------
Total other expense, net                                    (9.3)          (4.6)          (5.0)
----------------------------------------------------------------------------------------------
Income (loss) before income taxes                           (3.8)          (0.5)           0.4
Income tax provision (benefit)                               0.5            0.4            0.4
----------------------------------------------------------------------------------------------
Net income (loss)                                           (4.3)%         (0.9)%           -%
----------------------------------------------------------------------------------------------
</TABLE>


                                       21
<PAGE>   22
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999


         Restaurant sales in fiscal 2000 were $228,016,000, a decrease of 1.2%
or $2,735,000, compared to restaurant sales of $230,751,000 in fiscal 1999.
Fiscal 2000 was 52 weeks in duration compared to 53 weeks for fiscal 1999.

         The Company's Burger King restaurant sales were $81,724,000 in fiscal
2000 compared to restaurant sales of $82,650,000 in fiscal 1999, a decrease of
$926,000. The Company closed two restaurants with expired leases: one in the
fourth quarter of fiscal 1999 and one in the first quarter of fiscal 2000, which
contributed $633,000 to fiscal 1999 sales. The Company had increased revenue of
$2,191,000 due to additional sales weeks from two new restaurants opened during
fiscal 2000 and one restaurant opened in fiscal 1999 which was open for its
first full year in fiscal 2000. The Company's Burger King restaurants had
average weekly sales of $22,286 in fiscal 2000 versus $22,164 in the same period
in fiscal 1999.

         The Company's Grady's American Grill restaurant sales were $68,615,000
in fiscal 2000 compared to restaurant sales of $75,198,000 in fiscal 1999, a
decrease of $6,583,000. Two units were sold and one unit with an expired lease
was closed in fiscal 1999 and one unit was sold in the third quarter of fiscal
2000. These units did not fit the Company's long-term strategic plan as they
were located in geographically remote markets and were not meeting the Company's
performance expectations. These units contributed $3,087,000 to fiscal 1999
sales. The Company's Grady's American Grill restaurants had average weekly sales
of $36,949 in fiscal 2000 versus $37,769 in the same period in fiscal 1999. The
Company continues to implement expanded marketing, operational and menu
initiatives intended to stimulate sales at its Grady's American Grill
restaurants. The marketing initiatives include the use of radio and television
advertising in targeted markets, direct mail promotional programs and enhanced
local marketing programs within each unit's specific market. Due to the
competitive nature of the restaurant industry, these initiatives have not to
date achieved the intended results and there can be no assurances that these
initiatives will achieve the intended results.

         The Company's Chili's Grill & Bar restaurant sales increased $4,084,000
to $60,921,000 in fiscal 2000 when compared to restaurant sales of $56,837,000
in fiscal 1999. The Company opened three new units in fiscal 2000 that
contributed $2,624,000 in sales. The Company's Chili's Grill & Bar restaurants
average weekly sales increased to $40,533 in fiscal 2000 versus $38,300 in
fiscal 1999.

         The Company's Italian Dining Division's restaurant sales increased
$690,000 to $16,756,000 in fiscal 2000 when compared to restaurant sales of
$16,066,000 in fiscal 1999. The increase was due to the continued success of
operational and marketing initiatives which increased average weekly sales to
$40,280 in fiscal 2000 from $37,893 in fiscal 1999.

         Total restaurant operating expenses were $197,533,000 in fiscal 2000,
compared to $201,697,000 in fiscal 1999. As a percentage of restaurant sales,
total restaurant operating expenses decreased to 86.6% in fiscal 2000 from 87.5%
in fiscal 1999. The following factors influenced the operating margins:

         Food and beverage costs were $64,607,000, or 28.3% of total restaurant
sales in fiscal 2000, compared to $67,732,000, or 29.4% of total restaurant
sales in fiscal 1999. The decrease as a percentage of total revenue was mainly
due to increased efficiencies and favorable commodity prices that resulted in
decreased food costs at each of the Company's restaurant concepts.

         Payroll and benefits were $66,782,000 in fiscal 2000, compared to
$67,073,000 in fiscal 1999. As a percentage of total restaurant sales, payroll
and benefits increased 0.2% to 29.3% in fiscal 2000 from 29.1% in fiscal 1999.
Payroll and benefits increased as a percentage of total revenues in the
Company's Burger King, Chili's and Italian Dining divisions. Overall, the
Company has increased hourly wages at each of its restaurant concepts due to the
high level of competition to attract qualified employees.

         Depreciation and amortization increased $310,000 to $11,312,000 in
fiscal 2000 compared to $11,002,000 in fiscal 1999. As a percentage of total
restaurant sales, depreciation and amortization increased to 5.0% in fiscal 2000
compared to 4.8% in fiscal 1999.


                                       22
<PAGE>   23
         Other restaurant operating expenses include rent and utilities,
royalties, promotional expense, repairs and maintenance, property taxes and
insurance. Other restaurant operating expenses decreased $1,058,000 to
$54,832,000 in fiscal 2000 compared to $55,890,000 in 1999. Other restaurant
operating expenses as a percentage of total restaurant sales decreased in fiscal
2000 to 24.0% from 24.2% in fiscal 1999. The decrease was primarily due to the
disposition of under-performing restaurants.

         General and administrative expenses, which include corporate and
district management costs, were $17,073,000 in fiscal 2000, compared to
$15,912,000 in fiscal 1999. As a percentage of total revenues, general and
administrative expenses increased to 7.5% in fiscal 2000 compared to 6.9% in
fiscal 1999. The increase in fiscal 2000 is mainly due to approximately
$1,250,000 in unanticipated expenses related to the litigation, proxy contest
and tender offer initiated by NBO, LLC.

         Amortization of intangibles was $910,000 in fiscal 2000, compared to
$1,032,000 in fiscal 1999. As a percentage of total revenues, amortization of
intangibles remained consistent at 0.4% in fiscal 2000 compared to 0.4% in
fiscal 1999.

         During the third quarter of fiscal 1999, the Company recorded non-cash
charges for the impairment of assets and facility closings totaling $2,501,000.
The fiscal 1999 non-cash charges consisted primarily of $650,000 for the
disposal of obsolete point of sale equipment that the Company identified as a
result of installing its new point of sale system in its full service dining
restaurants, $1,047,000 for the estimated costs and losses associated with the
anticipated closing of two regional offices and three restaurant locations and
$804,000 primarily for a non-cash asset impairment write down for two
under-performing restaurants. This non-cash asset impairment charge resulted
from the Company's determination that an impairment write down should be
considered when there is a sustained trend of negative operating performance as
measured by restaurant level cash flow. The non-cash facility closure charges
include amounts for the write off of fixed assets and other costs related to the
closing of these facilities. Each of these non-cash charges represents a
reduction of the carrying amount of the assets to their estimated fair market
value.

         The Company had operating income of $12,500,000 in fiscal 2000 compared
to operating income of $9,609,000 in fiscal 1999. The increase is primarily due
to the non-cash charges of $2,501,000 in fiscal 1999.

         Total other expenses, as a percentage of total revenues, increased to
9.3% in fiscal 2000 compared to 4.6% in fiscal 1999. The increase is primarily
due to the $10.0 million non-cash charge to reserve for the Subordinated Note.
The Company had an increase in other income from Transformational Payments made
by Burger King to the Company. See ITEM 1 - Franchise and Development
Agreements.

         Bruegger's Corporation failed to make the interest payment on the
Subordinated Note that was due to the Company on December 1, 2000 and the
Company has subsequently been advised that the Affiliate Guarantors failed to
make an interest payment that was due to their senior secured lender on
January 2, 2001. The Affiliate Guarantors own and operate Bruegger's Bagel
Bakeries as franchisees of Bruegger's Franchise Corporation, a subsidiary of
Bruegger's Corporation. The Company believes that the Bruegger's Bagel Bakeries
operated by the Affiliate Guarantors constitute a majority of the Bruegger's
Bagel Bakery System and therefore account for a majority of Bruegger's Franchise
Corporation revenues. The Company has been advised that Bruegger's Franchise
Corporation has subordinated its right to receive royalty payments from the
Affiliate Guarantors to the Affiliate Guarantors' senior secured lender.
Consequently, there can be no assurance when, if ever, the Company might receive
any principal or interest payments in respect of the Subordinated Note. In view
of these and other circumstances, as of the fourth quarter of fiscal 2000, the
Company recorded a $10.0 million non-cash charge to fully reserve for the
Subordinated Note.

         Income tax expense of $1,183,000 was recorded in fiscal 2000 compared
to $815,000 in fiscal 1999. The increase in income tax was mainly due to
increased state income taxes. The Company has a large portion of state taxes
based on criteria other than income. The Company did not have a tax benefit for
fiscal 2000 since an increase in the valuation reserve for its net operating
loss carryforwards offset the benefit created by the fiscal 2000 net loss.


                                       23
<PAGE>   24
         The Company has net operating loss carryforwards of approximately $52.8
million as well as FICA tip credits and alternative minimum tax credits of $3.5
million. Net operating loss carryforwards of $49.8 million expire in 2012 and
$3.0 million expire in 2018. FICA tip credits of $1.3 million expire in 2012,
$477,000 expire in 2013, $572,000 expire in 2014 and $571,000 expire in 2015.
The alternative minimum tax credits of $521,000 carryforward indefinitely. The
Company's federal income tax returns for fiscal years 1994-1997 were examined by
the Internal Revenue Service ("IRS"). The IRS completed its audit during fiscal
2000 resulting in a change to the net operating loss carryover of $8.6 million.
The increase to the net operating loss was the result of additional tax losses
identified as a result of the disposition of various assets of the bagel
businesses sold during fiscal 1997. At the end of fiscal 2000 the Company had a
valuation reserve against its net operating loss carryforwards of $20.4 million
resulting in a net deferred tax asset of $10.0 million. The Company's assessment
of its ability to realize the net deferred tax asset was based on the weight of
both positive and negative evidence, including the taxable income of its current
operations. Based on this assessment, the Company's management believes it is
more likely than not that the net deferred tax benefit recorded will be
realized. Such evidence will be reviewed prospectively and should the Company's
operating performance continue to improve, the Company may recognize additional
tax benefits related to its net deferred tax asset position in the future.

         The net loss in fiscal 2000 was $9,711,000, or $0.79 per share,
compared to net loss of $1,957,000, or $0.15 per share, in fiscal 1999.



FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998


         Results for fiscal 1999 include 53 weeks compared to 52 weeks for
fiscal 1998. Restaurant sales in fiscal 1999 were $230,751,000, a decrease of
0.6% or $1,493,000, compared to restaurant sales of $232,244,000 in fiscal 1998.

         The Company's Burger King restaurant sales increased $2,259,000 to
$82,650,000 in fiscal 1999 compared to restaurant sales of $80,391,000 in fiscal
1998. The Company's Burger King restaurants had average weekly sales of $22,164
in fiscal 1999 versus $22,806 in the same period in fiscal 1998. The decrease in
average weekly sales was offset by revenues of $2,543,000 due to additional
sales weeks from one new restaurant opened during fiscal 1999 and four
restaurants opened in fiscal 1998 which were open for their first full year in
fiscal 1999. The decline in average weekly sales for fiscal 1999 resulted
primarily from inclement weather during the first quarter of fiscal 1999 and the
intense competition in the quick service restaurant market.

         The Company's Grady's American Grill restaurant sales were $75,198,000
in fiscal 1999 compared to restaurant sales of $81,241,000 in fiscal 1998. The
decrease of $6,043,000 was attributable in part to the sale of one unit in
fiscal 1998 and two units in fiscal 1999 and the closing of one unit in fiscal
1999. The absence of these units contributed approximately $3,264,000 to the
sales decrease. The units that were disposed of did not fit the Company's long
term strategic plan as they were located in geographically remote markets and
were not meeting the Company's performance expectations. The Company's Grady's
American Grill restaurants had average weekly sales of $37,769 in fiscal 1999
versus $39,096 in the same period in fiscal 1998.

         The Company's Chili's Grill & Bar restaurant sales increased $1,265,000
to $56,837,000 in fiscal 1999 when compared to restaurant sales of $55,572,000
in fiscal 1998. The Company's marketing and operational initiatives implemented
during fiscal 1999 increased average weekly sales to $38,300 in fiscal 1999
versus $38,168 in fiscal 1998.

         The Company's Italian Dining Division's restaurant sales increased
$1,026,000 to $16,066,000 in fiscal 1999 when compared to restaurant sales of
$15,040,000 in fiscal 1998. The increase was due to the success of operational
and marketing initiatives which increased average weekly sales to $37,893 in
fiscal 1999 from $36,153 in fiscal 1998.


                                       24
<PAGE>   25
         Total restaurant operating expenses were $201,697,000 in fiscal 1999,
compared to $202,625,000 in fiscal 1998. As a percentage of restaurant sales,
total restaurant operating expenses increased slightly to 87.5% in fiscal 1999
from 87.3% in fiscal 1998. The following factors influenced the operating
margins:

         Food and beverage costs were $67,732,000, or 29.4% of total restaurant
sales in fiscal 1999, compared to $69,102,000, or 29.8% of total restaurant
sales in fiscal 1998. The decrease as a percentage of total revenue was mainly
due to increased efficiencies and favorable commodity prices that resulted in
decreased food costs at the Company's Burger King, Chili's and Italian Dining
restaurants.

         Payroll and benefits were $67,073,000 in fiscal 1999, compared to
$66,404,000 in fiscal 1998. As a percentage of total restaurant sales, payroll
and benefits increased 0.5% to 29.1% in fiscal 1999 from 28.6% in fiscal 1998.
Payroll and benefits increased as a percentage of total revenues in the
Company's Burger King, Grady's American Grill and Chili's divisions. Overall,
the Company has increased hourly wages at each of its restaurant concepts due to
the high level of competition to attract qualified employees.

         Depreciation and amortization decreased $473,000 to $11,002,000 in
fiscal 1999 compared to $11,475,000 in fiscal 1998. As a percentage of total
restaurant sales, depreciation and amortization remained relatively consistent
at 4.8% in fiscal 1999 compared to 4.9% in fiscal 1998.

         Other restaurant operating expenses include rent and utilities,
royalties, promotional expense, repairs and maintenance, property taxes and
insurance. Other restaurant operating expenses were $55,890,000 in fiscal 1999
compared to $55,644,000 in 1998. Other restaurant operating expenses as a
percentage of total restaurant sales increased in fiscal 1999 to 24.2% from
24.0% in fiscal 1998. The increase was primarily due to a $337,000 increase in
workers compensation expense and a $168,000 increase in advertising expense in
fiscal 1999 versus fiscal 1998.

         General and administrative expenses, which include corporate and
district management costs, were $15,912,000 in fiscal 1999, compared to
$15,488,000 in fiscal 1998. As a percentage of total revenues, general and
administrative expenses increased to 6.9% in fiscal 1999 compared to 6.7% in
fiscal 1998. The increase is mainly due to an increased number of multi-unit
restaurant managers and a decrease in sales performance.

         Amortization of intangibles was $1,032,000 in fiscal 1999, compared to
$1,085,000 in fiscal 1998. As a percentage of total revenues, amortization of
intangibles remained relatively consistent at 0.4% in fiscal 1999 compared to
0.5% in fiscal 1998.

         The Company recorded non-cash charges for the impairment of assets and
facility closings totaling $2,501,000 during the third quarter of fiscal 1999.
The non-cash charges consisted primarily of $650,000 for the disposal of
obsolete point of sale equipment that the Company identified as a result of
installing its new point of sale system in its full service dining restaurants,
$1,047,000 for the estimated costs and losses associated with the anticipated
closing of two regional offices and three restaurant locations and $804,000
primarily for a non-cash asset impairment write down for two under-performing
restaurants. This non-cash asset impairment charge resulted from the Company's
determination that an impairment write down should be considered when there is a
sustained trend of negative operating performance as measured by restaurant
level cash flow. The non-cash facility closure charges include amounts for the
write off of fixed assets and other costs related to the closing of these
facilities. Each of these non-cash charges represents a reduction of the
carrying amount of the assets to their estimated fair market value.

         The Company had operating income of $9,609,000 in fiscal 1999 compared
to operating income of $12,796,000 in fiscal 1998. The decrease is mainly due to
the $2,501,000 in non-cash charges for the impairment of assets and facility
closings.

         Total other expenses, as a percentage of total revenues, decreased to
4.6% in fiscal 1999 compared to 5.0% in fiscal 1998. The decrease was primarily
due to a decrease in interest expense resulting from decreased borrowings under
the Company's revolving credit agreement. The decrease in interest expense
occurred despite a higher interest rate associated with the Company's fixed rate
mortgage facility.


                                       25
<PAGE>   26
         Income tax expense of $815,000 was recorded in fiscal 1999 compared to
$1,107,000 in fiscal 1998. The decrease in the income tax provision for fiscal
1999 was mainly due to the implementation of state tax strategies to reduce
state income tax expense and to lower taxable income.

         The net loss in fiscal 1999 was $1,957,000, or $0.15 per share,
compared to net income of $113,000, or $0.01 per share, in fiscal 1998.


                                       26
<PAGE>   27
LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the Company's principal sources and uses of cash:

(Dollars in thousands)
<TABLE>
<CAPTION>

                                                      Fiscal Year Ended
                                             October 29,   October 31,   October 25,
                                                2000          1999          1998
------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>
Net cash provided by operations              $ 20,384       $ 13,762       $ 14,899
Nonoperating sources of cash:
     Borrowings of long-term debt              53,677         63,566             --
     Proceeds from the sale of assets           1,105          2,790          2,453
 Nonoperating uses of cash:
     Purchase of property and equipment       (11,055)        (8,262)        (6,205)
     Repayment of long-term debt              (58,795)       (67,884)       (14,350)
     Purchase of treasury stock                (1,448)            --             --
     Purchase of note receivable                   --         (4,294)            --
     Payment for other assets                  (1,501)          (112)          (235)
     Loan financing fees                           --         (1,327)          (290)
</TABLE>


         In fiscal 2000 cash provided by operations was $20,384,000 compared to
$13,762,000 in fiscal 1999. The increase in fiscal 2000 over fiscal 1999 was
mainly due to increased income from restaurant operations of $1.4 million and
Burger King Transformational Payments totaling approximately $3.9 million.

         On August 3, 1999 the Company completed the refinancing of its existing
debt with a financing package totaling $125,066,000, consisting of a $76,000,000
revolving credit agreement and a $49,066,000 mortgage facility, as described
below. The revolving credit agreement was executed with Chase Bank of Texas, as
agent for a group of six banks, providing for borrowings of up to $76,000,000
with interest payable at the adjusted LIBOR rate plus a contractual spread. The
Company had $20,975,000 available under its revolving credit agreement as of
October 29, 2000. The revolving credit agreement is collateralized by the stock
of certain subsidiaries of the Company, the $10 million junior subordinated note
issued by Bruegger's Corporation, certain interests in the Company's franchise
agreements with Brinker and Burger King Corporation and substantially all of the
Company's personal property not pledged in the mortgage financing. The revolving
credit agreement will mature on October 31, 2002, at which time all amounts
outstanding thereunder are due.

         The revolving credit agreement contains, among other provisions,
certain restrictive covenants including maintenance of certain prescribed debt
and fixed charge coverage ratios, limitations on the incurrence of additional
indebtedness, limitations on consolidated capital expenditures, restrictions on
the payment of dividends (other than stock dividends) and limitations on the
purchase or redemption of shares of the Company's capital stock.

         The $49,066,000 mortgage facility has 34 separate mortgage notes and
the term of each mortgage note is either 15 or 20 years. The notes have fixed
rates of interest of either 9.79% or 9.94%. The notes require equal monthly
interest and principal payments. The mortgage notes are collateralized by a
first mortgage/deed of trust and security agreement on the real estate,
improvements and equipment on 19 of the Company's Chili's restaurants and 15 of
the Company's Burger King restaurants. The mortgage notes contain, among other
provisions, certain restrictive covenants including maintenance of a
consolidated fixed charge coverage ratio for the financed properties. The
Company used the proceeds of the mortgage facility to repay indebtedness under
its existing revolving credit agreement.

         Under the Company's original share repurchase program, which expired in
September 2000, the Company purchased 604,500 shares of its common stock in
fiscal 2000. The Company spent $1,448,000 for the purchases of these shares in
fiscal 2000. In October of 2000 the Board of Directors authorized a new share
repurchase program for the purchase of up to an additional 1,000,000 shares of
the Company's common stock. Under the current share repurchase program, the
Company may purchase shares from time to time, through October, 2001, in the
open market or in privately negotiated transactions depending on market
conditions and other considerations.


                                       27
<PAGE>   28
         The Company's primary cash requirements in fiscal 2001 will be capital
expenditures in connection with the opening of new restaurants, remodeling of
existing restaurants, maintenance expenditures, purchases of the Company's
common stock and the reduction of debt under the Company's debt agreements. The
Company's capital expenditures for fiscal 2001 are expected to range from
$12,000,000 to $15,000,000. During fiscal 2001, the Company anticipates opening
two to four Burger King restaurants and two to three full service restaurants.
The actual amount of the Company's cash requirements for capital expenditures
depends in part on the number of new restaurants opened, if the Company owns or
leases new units and the actual expense related to remodeling and maintenance of
existing units.

         The Company anticipates that its cash flow from operations, together
with the $20,975,000 available under its revolving credit agreement as of
October 29, 2000, will be sufficient to fund its planned internal expansion and
other internal operating cash requirements through the end of fiscal 2001.


RECENTLY ISSUED ACCOUNTING STANDARDS

         In 1998, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (FAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. In June 1999, FASB issued FAS No. 137, which
deferred the effective date of FAS No. 133. In June 2000, the FASB issued FAS
No. 138, which amended FAS No. 133 for certain derivative instruments and
hedging activities. Accordingly, FAS No. 133 is effective for all fiscal years
beginning after June 15, 2000. FAS No. 133, as amended, requires that all
changes in derivatives be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company is
currently not involved in derivative instruments or hedging activities and
therefore the Company does not expect any impact from FAS No. 133, as amended.


IMPACT OF INFLATION

         Management does not believe that inflation has had a material effect on
the Company's operations during the past several years. Increases in labor,
food, and other operating costs could adversely affect the Company's operations.
In the past, however, the Company generally has been able to modify its
operating procedures or increase menu prices to substantially offset increases
in its operating costs.

         Many of the Company's employees are paid hourly rates related to
federal and state minimum wage laws and various laws that allow for credits to
that wage. Although the Company has been able to and will continue to attempt to
pass along increases in costs through food and beverage price increases, there
can be no assurance that all such increases can be reflected in its prices or
that increased prices will be absorbed by customers without diminishing, to some
degree, customer spending at the Company's restaurants.


FORWARD-LOOKING STATEMENTS

         This report contains and incorporates forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, including
statements about the Company's development plans and trends in the Company's
operations and financial results. Forward-looking statements can be identified
by the use of words such as "anticipates," "believes," "plans," "estimates,"
"expects," "intends," "may," and other similar expressions. Forward-looking
statements are made based upon management's current expectations and beliefs
concerning future developments and their potential effects on the Company. There
can be no assurance that the Company will actually achieve the plans, intentions
and expectations discussed in these forward-looking statements. Actual results
may differ materially. Among the risks and uncertainties that could cause actual
results to differ materially are the following: the availability and cost of
suitable locations for new restaurants; the availability and cost of capital to
the Company; the ability of the Company to develop and operate its restaurants;
the hiring, training and retention of skilled corporate and restaurant
management and other restaurant personnel; the integration and assimilation of
acquired concepts; the overall success of the Company's franchisors; the ability
to obtain the necessary government approvals and third-party consents; changes
in governmental regulations, including increases in the minimum wage; the
results of pending litigation; and weather and other acts of God. The Company
undertakes no obligation to

                                       28
<PAGE>   29
update or revise any forward-looking information, whether as a result of new
information, future developments or otherwise.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.


                                       29
<PAGE>   30
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

QUALITY DINING, INC.
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                        October 29,       October 31,
                                                                                           2000              1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                           $   2,912         $   1,019
     Accounts receivable                                                                     2,216             1,946
     Inventories                                                                             2,242             1,876
     Deferred income taxes                                                                   2,729             2,630
     Other current assets                                                                    1,651             1,787
--------------------------------------------------------------------------------------------------------------------
Total current assets                                                                        11,750             9,258
--------------------------------------------------------------------------------------------------------------------
Property and equipment, net                                                                126,223           128,349
--------------------------------------------------------------------------------------------------------------------
Other assets:
     Deferred income taxes                                                                   7,271             7,370
     Trademarks, net                                                                        11,657            11,988
     Franchise fees and development fees, net                                                9,204             8,748
     Goodwill, net                                                                           7,513             8,053
     Note receivable, less allowance                                                            --            10,000
     Liquor licenses, net                                                                    2,595             2,686
     Other                                                                                   2,648             2,585
--------------------------------------------------------------------------------------------------------------------
Total other assets                                                                          40,888            51,430
--------------------------------------------------------------------------------------------------------------------
Total assets                                                                             $ 178,861         $ 189,037
--------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
     Current portion of capitalized lease and long-term debt                             $   1,660         $   1,471
     Accounts payable                                                                       11,441             8,673
     Accrued liabilities                                                                    20,961            17,076
--------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                   34,062            27,220
Long-term debt                                                                             102,115           107,384
Capitalized leases principally to related  parties, less current portion                     4,700             5,431
--------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                          140,877           140,035
--------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 9, 10 and 12) Stockholders' equity:
     Preferred stock, without par value: 5,000,000 shares authorized; none issued               --                --
     Common stock, without par value: 50,000,000 shares authorized;
     12,855,594 and 12,773,849 shares issued, respectively                                      28                28
     Additional paid-in capital                                                            237,031           236,881
     Accumulated deficit                                                                  (196,940)         (187,229)
     Unearned compensation                                                                    (437)             (428)
--------------------------------------------------------------------------------------------------------------------
                                                                                            39,682            49,252
     Less treasury stock, at cost, 624,500 and 20,000 shares, respectively                   1,698               250
--------------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                                  37,984            49,002
====================================================================================================================
Total liabilities and stockholders' equity                                               $ 178,861         $ 189,037
--------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       30
<PAGE>   31
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                           Fiscal Year Ended
                                                               October 29,     October 31,     October 25,
                                                                   2000           1999            1998
-----------------------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>               <C>
Revenues:
Restaurant sales:
     Burger King                                              $  81,724         $  82,650         $  80,391
     Grady's American Grill                                      68,615            75,198            81,241
     Chili's Grill & Bar                                         60,921            56,837            55,572
     Italian Dining Division                                     16,756            16,066            15,040
-----------------------------------------------------------------------------------------------------------
Total revenues                                                  228,016           230,751           232,244
-----------------------------------------------------------------------------------------------------------
Operating expenses:
     Restaurant operating expenses:
         Food and beverage                                       64,607            67,732            69,102
         Payroll and benefits                                    66,782            67,073            66,404
         Depreciation and amortization                           11,312            11,002            11,475
         Other operating expenses                                54,832            55,890            55,644
-----------------------------------------------------------------------------------------------------------
Total restaurant operating expenses:                            197,533           201,697           202,625
-----------------------------------------------------------------------------------------------------------
Income from restaurant operations                                30,483            29,054            29,619
-----------------------------------------------------------------------------------------------------------
     General and administrative                                  17,073            15,912            15,488
     Amortization of intangibles                                    910             1,032             1,085
     Impairment of assets and facility closing costs                 --             2,501               250
-----------------------------------------------------------------------------------------------------------
Operating income                                                 12,500             9,609            12,796
-----------------------------------------------------------------------------------------------------------
Other income (expense):
        Interest expense                                        (11,174)          (10,709)          (11,962)
        Provision for uncollectible note receivable             (10,000)               --                --
        Gain (loss) on sale of property and equipment              (878)             (188)             (345)
        Interest income                                              27               103               190
        Other income, net                                           997                43               541
-----------------------------------------------------------------------------------------------------------
Total other expense                                             (21,028)          (10,751)          (11,576)
-----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                                (8,528)           (1,142)            1,220
Income tax provision                                              1,183               815             1,107
-----------------------------------------------------------------------------------------------------------
Net income (loss)                                             $  (9,711)        $  (1,957)        $     113
-----------------------------------------------------------------------------------------------------------
Basic net income (loss) per share                             $   (0.79)        $   (0.15)        $    0.01
-----------------------------------------------------------------------------------------------------------
Diluted net income (loss) per share                           $   (0.79)        $   (0.15)        $    0.01
-----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding
-----------------------------------------------------------------------------------------------------------
     Basic                                                       12,329            12,668            12,599
-----------------------------------------------------------------------------------------------------------
     Diluted                                                     12,329            12,668            12,654
-----------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       31
<PAGE>   32
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


(Dollars and shares in thousands)
<TABLE>
<CAPTION>
                                                              Additional    Retained                               Stock-
                                      Shares      Common      Paid-in       Earnings      Unearned    Treasury     holders'
                                   Common Stock   Stock        Capital     (Deficit)    Compensation   Stock       Equity
--------------------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>         <C>           <C>           <C>          <C>         <C>
Balance, October 26, 1997             12,619     $    28     $ 236,420     $(185,385)    $  --        $  (250)    $ 50,813
        Net income, fiscal 1998           --          --            --           113        --             --          113
--------------------------------------------------------------------------------------------------------------------------
Balance, October 25, 1998             12,619          28       236,420      (185,272)       --           (250)      50,926
       Restricted stock grants           155          --           461            --      (461)            --           --
       Amortization of unearned
       compensation                       --          --            --            --        33             --           33
      Net loss, fiscal 1999               --          --            --        (1,957)       --             --       (1,957)
--------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999             12,774          28       236,881      (187,229)     (428)          (250)      49,002
       Purchase of treasury stock         --                                                           (1,448)      (1,448)
       Restricted stock grants           104          --           209            --      (209)            --           --
       Amortization of unearned
       compensation                       --          --            --            --       141             --          141
       Restricted stock forfeited        (23)         --           (59)           --        59             --           --
      Net loss, fiscal 2000               --          --            --        (9,711)       --             --       (9,711)
--------------------------------------------------------------------------------------------------------------------------
Balance, October 29, 2000             12,855     $    28     $ 237,031     $(196,940)    $(437)       $(1,698)    $ 37,984
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


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


                                       32
<PAGE>   33
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                           Fiscal Year Ended
                                                                             October 29,     October 31,   October 25,
                                                                                 2000           1999           1998
---------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>             <C>
Cash flows from operating activities:
    Net income (loss)                                                        $ (9,711)       $ (1,957)       $    113
    Adjustments to reconcile net income (loss) to net cash provided by
       operating activities:
        Depreciation and amortization of property and equipment                11,605          11,353          11,381
        Amortization of other assets                                            1,943           2,375           2,877
        Impairment of assets and facility closing costs                            --           2,501             250
        Provision for uncollectible note receivable                            10,000              --              --
        Loss on sale of property and equipment                                    878             188             345
        Amortization of unearned compensation                                     141              33              --
        Changes in operating assets and liabilities, excluding effects
           of acquisitions and dispositions:
           Accounts receivable                                                   (270)            412             279
           Inventories                                                           (366)             (4)             40
           Other current assets                                                   136            (219)          4,374
           Accounts payable                                                     2,143           1,292          (2,174)
           Accrued liabilities                                                  3,885          (2,212)         (2,586)
---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                      20,384          13,762          14,899
---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
    Increase in notes receivable                                                   --          (4,294)             --
    Proceeds from sales of property and equipment                               1,105           2,790           2,453
    Purchase of property and equipment                                        (11,055)         (8,262)         (6,205)
    Payment for other assets                                                   (1,501)           (112)           (235)
    Other, net                                                                    (57)           (200)            (88)
---------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                                        (11,508)        (10,078)         (4,075)
---------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
    Purchase of treasury stock                                                 (1,448)             --              --
    Borrowings of long-term debt                                               53,677          63,566              --
    Repayment of long-term debt                                               (58,795)        (67,884)        (14,350)
    Repayment of capitalized lease and non-competition obligations               (417)           (371)           (333)
    Loan financing fees                                                            --          (1,327)           (290)
---------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities                                         (6,983)         (6,016)        (14,973)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                            1,893          (2,332)         (4,149)
---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year                                    1,019           3,351           7,500
---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                       $  2,912        $  1,019        $  3,351
---------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       33
<PAGE>   34
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


(Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                           Fiscal Year Ended
                                                                                October 29,   October 31,     October 25,
                                                                                  2000           1999             1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>           <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid for interest, net of amounts capitalized                            $ 10,941      $ 11,277      $ 11,157
    Cash paid for income taxes                                                         928         1,099         1,106
NONCASH INVESTING AND FINANCING ACTIVITIES:
    Property and equipment purchased and related liability
      included in accounts payable                                                   1,666         1,041           746

</TABLE>


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

                                       34
<PAGE>   35
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

{1} NATURE OF BUSINESS,  DISPOSITION OF BUSINESS AND  PUBLIC OFFERINGS

NATURE OF BUSINESS - Quality Dining, Inc. and its subsidiaries (the "Company")
develop and operate both quick service and full service restaurants in 17
states. The Company owns and operates 35 Grady's American Grill restaurants,
five restaurants under the tradename of Spageddies Italian Kitchen and three
restaurants under the tradename Papa Vino's Italian Kitchen. The Company also
operates, as a franchisee, 71 Burger King restaurants and 31 Chili's Grill & Bar
restaurants.

DISPOSITION OF BAGEL-RELATED BUSINESSES - On October 20, 1997, the Company sold
its bagel-related businesses to Mr. Nordahl L. Brue, Mr. Michael J. Dressell and
an entity controlled by them and their affiliates. The Company's board of
directors determined to sell the bagel-related businesses after a careful
evaluation of the future prospects for the bagel business, the competitive
environment that then existed in the bagel segment, and the historical
performance of the Company's bagel-related businesses. The sale included the
stock of Bruegger's Corporation and the stock of all of the other bagel-related
businesses. The total proceeds from the sale were $45,164,000. The consideration
included the issuance by Bruegger's Corporation of a junior subordinated note in
the amount of $10,000,000 (the "Subordinated Note"), which was recorded net of a
$4,000,000 reserve for legal indemnification, the transfer of 4,310,740 shares
of the Company's common stock valued at $21,823,000, owned by Messrs. Brue and
Dressell, which were retired, a receivable for purchase price adjustment of
$500,000, and $16,841,000 in cash. The cash component of the proceeds included
an adjustment for the calculation of the net working capital deficit. The
calculation used was subject to final adjustment and is being disputed by
Messrs. Brue and Dressell, see Note 10. The Subordinated Note has an annual
interest rate of 12%, matures in October 2004 and is guaranteed by certain
affiliates of Bruegger's Corporation ("Affiliate Guarantors"). The Subordinated
Note provides that interest is to be accrued and added to the principal amount
of the note through October 2000 and thereafter paid in cash for the remaining
life of the note. The Company has never recognized any interest income from this
note. Bruegger's Corporation failed to make the interest payment on the
Subordinated Note that was due to the Company on December 1, 2000 and the
Company has subsequently been advised that the Affiliate Guarantors failed to
make an interest payment that was due to their senior secured lender on January
2, 2001. The Affiliate Guarantors own and operate Bruegger's Bagel Bakeries as
franchisees of Bruegger's Franchise Corporation, a subsidiary of Bruegger's
Corporation. The Company believes that the Bruegger's Bagel Bakeries operated by
the Affiliate Guarantors constitute a majority of the Bruegger's Bagel Bakery
System and therefore account for a majority of Bruegger's Franchise Corporation
revenues. The Company has been advised that Bruegger's Franchise Corporation has
subordinated its right to receive royalty payments from the Affiliate Guarantors
to the Affiliate Guarantors' senior secured lender. Consequently, there can be
no assurance when, if ever, the Company might receive any principal or interest
payments in respect of the Subordinated Note. In view of these and other
circumstances, as of the fourth quarter of fiscal 2000, the Company recorded a
$10.0 million non-cash charge to fully reserve for the Subordinated Note.


{2} SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR - The Company maintains its accounts on a 52/53 week fiscal year
ending the last Sunday in October. The fiscal year ended October 29, 2000
(fiscal 2000) contained 52 weeks. The fiscal year ended October 31, 1999 (fiscal
1999) contained 53 weeks. The fiscal year ended October 25, 1998 (fiscal 1998)
contained 52 weeks.

BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of Quality Dining, Inc. and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

INVENTORIES - Inventories consist primarily of restaurant food and supplies and
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.

PROPERTY AND EQUIPMENT - Property and equipment, including capitalized leased
properties, are stated at cost. Depreciation and amortization are being recorded
on the straight-line method over the estimated useful lives of the related
assets. Leasehold

                                       35
<PAGE>   36
improvements are amortized over the shorter of the estimated useful life or the
lease term of the related asset. The general ranges of original depreciable
lives are as follows:
<TABLE>
<CAPTION>
                                                                Years
                                                                -----
<S>                                                             <C>
              Capitalized Lease Property                        17-20
              Buildings and Leasehold Improvements              15-31-1/2
              Furniture and Equipment                            4-7
              Computer Equipment and Software                    5
</TABLE>

Upon the sale or disposition of property and equipment, the asset cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in income. Normal repairs and maintenance costs are
expensed as incurred.

IMPAIRMENT OF LONG-LIVED ASSETS AND FACILITY CLOSURE EXPENSE - Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets," established accounting standards for the impairment of
long-lived assets, certain intangibles and goodwill related to those assets. The
Company reviews long-lived assets related to each restaurant annually for
impairment, or whenever events or changes in circumstances indicate that the
carrying amount of a restaurant may not be recoverable. An impaired restaurant
is written down to its estimated fair market value based on the best information
available to the Company. Considerable management judgment is necessary to
estimate the fair market value. Accordingly, actual results could vary
significantly from such estimates.

The Company recorded non-cash charges totaling $2,501,000 during the third
quarter of fiscal 1999 consisting primarily of $650,000 for the disposal of
obsolete point of sale equipment in its full service dining restaurants that the
Company identified as a result of installing its new point of sale system,
$1,047,000 for the estimated costs and losses associated with the anticipated
closing of two regional offices and three restaurant locations and $804,000
primarily for a non-cash asset impairment write down for two under-performing
restaurants.

The Company recorded a $250,000 non-cash impairment charge in fiscal 1998 in
connection with its decision to sell a Grady's American Grill Restaurant.

GOODWILL AND TRADEMARKS - Goodwill arising from the excess of the purchase price
over the acquired tangible and intangible net assets acquired in acquisitions
and trademarks are being amortized on a straight-line basis, principally over 40
years. Accumulated amortization of goodwill as of October 29, 2000 and October
31, 1999 was $3,250,000 and $2,710,000, respectively. Accumulated amortization
of trademarks as of October 29, 2000 and October 31, 1999 was $1,607,000 and
$1,275,000, respectively.

FRANCHISE FEES AND DEVELOPMENT FEES - The Company's Burger King and Chili's
franchise agreements require the payment of a franchise fee for each restaurant
opened. Franchise fees are deferred and amortized on the straight-line method
over the lives of the respective franchise agreements. Development fees paid to
the respective franchisors are deferred and expensed in the period the related
restaurants are opened. The franchise agreements generally provide for a term of
20 years with renewal options upon expiration. Franchise fees are being
amortized on a straight-line basis, principally over 20 years. Accumulated
amortization of franchise fees as of October 29, 2000 and October 31, 1999 was
$3,881,000 and $3,312,000, respectively.

ADVERTISING - The Company incurs advertising expense related to its concepts
under franchise agreements (see Note 5) or through local advertising.
Advertising costs are expensed at the time the related advertising first takes
place. Advertising costs were $7,967,000, $6,975,000 and $6,807,000 for fiscal
years 2000, 1999 and 1998, respectively.

PRE-OPENING COSTS - Effective with fiscal 1999, the Company expenses pre-opening
costs as incurred in accordance with SOP 98-5 "Reporting on the Costs of
Start-up Activities". Prior to fiscal 1999 direct costs incurred in connection
with opening new restaurants were deferred and amortized on a straight-line
basis over a 12-month period following the opening of a restaurant. Amortization
of pre-opening costs aggregated $577,000 for fiscal year 1998.

LIQUOR LICENSES - Costs incurred in securing liquor licenses for the Company's
restaurants and the fair value of liquor licenses acquired in acquisitions are
capitalized and amortized on a straight-line basis, principally over 20 years.
Accumulated amortization of liquor licenses as of October 29, 2000 and October
31, 1999 was $985,000 and $800,000, respectively.

DEFERRED FINANCING COSTS - Deferred costs of debt financing included in other
non-current assets are amortized over the life of the related loan agreements,
which range from three to 20 years.


                                       36
<PAGE>   37
COMPUTER SOFTWARE COSTS - Costs of purchased and internally developed computer
software are capitalized and amortized over a five-year period using the
straight-line method. As of October 29, 2000 and October 31, 1999, capitalized
computer software costs, net of related accumulated amortization, aggregated
$989,000 and $655,000, respectively. Amortization of computer software costs was
$536,000, $476,000 and $445,000 for fiscal years 2000, 1999 and 1998
respectively.

CAPITALIZED INTEREST - Interest costs capitalized during the construction period
of new restaurants and major capital projects were $104,000, $24,000 and $57,000
for fiscal years 2000, 1999 and 1998 respectively.

STOCK-BASED COMPENSATION - The Company has adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." The Statement
encourages rather than requires companies to adopt a new method that accounts
for stock-based compensation awards based on their estimated fair value at the
date they are granted. Companies are permitted, however, to continue accounting
for stock compensation awards under APB Opinion No. 25 which requires
compensation cost to be recognized based on the excess, if any, between the
quoted market price of the stock at the date of the grant and the amount an
employee must pay to acquire the stock. The Company has elected to continue to
apply APB Opinion No. 25 and has disclosed the pro forma net income (loss) per
share, determined as if the new method had been applied, in Note 8.

NET INCOME (LOSS) PER SHARE - Basic net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding. Diluted net income per share assumes the exercise of stock options
using the treasury stock method, if dilutive.

CONCENTRATIONS OF CREDIT RISK - Financial instruments, which potentially subject
the Company to credit risk, consist primarily of cash and cash equivalents and
notes receivable. Substantially all of the Company's cash and cash equivalents
at October 29, 2000 were concentrated with a bank located in Chicago, Illinois.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

INCOME TAXES - The Company utilizes SFAS No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to reverse. SFAS 109
requires the establishment of a valuation reserve against any deferred tax
assets if the realization of such assets is not deemed likely.

RECLASSIFICATION - Certain reclassifications have been made to the fiscal 1999
financial statements to conform them to the fiscal 2000 presentation.

SEGMENT INFORMATION - The Company adopted SFAS 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") in fiscal 1999. SFAS 131
establishes standards for the reporting of information about operating segments
in annual and interim financial statements and requires restatement of prior
year information. Operating segments are defined as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision maker(s) in deciding how to allocate
resources and in assessing performance. SFAS 131 also requires disclosures about
products and services, geographic areas and major customers. The adoption of
SFAS 131 did not affect the Company's consolidated financial position or results
of operations but did change the disclosure of segment information, as presented
in Note 14.

COMPREHENSIVE INCOME - The Company adopted SFAS 130, "Reporting Comprehensive
Income" ("SFAS 130") in fiscal 1999. SFAS 130 requires that other comprehensive
income items be displayed in financial statements and that the accumulated
balance of other comprehensive income be displayed separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company did not have any comprehensive income items that
were required to be reported under SFAS 130.


RECENTLY ISSUED ACCOUNTING STANDARDS - In 1998, the Financial Accounting
Standards Board (FASB) issued Financial Accounting Standard (FAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities. In June 1999, FASB
issued FAS No. 137,which deferred the effective date of FAS No. 133. In June
2000, the FASB issued FAS No. 138, which amended FAS No. 133 for certain
derivative instruments and hedging activities. Accordingly, FAS No. 133 is
effective for all fiscal years beginning after June 15, 2000. FAS No. 133, as
amended, requires that all changes in derivatives be recorded each period in
current earnings or other

                                       37
<PAGE>   38
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company is
currently not involved in derivative instruments or hedging activities and
therefore the Company does not expect any impact from FAS No. 133, as amended.

{3} OTHER CURRENT ASSETS AND ACCRUED LIABILITIES

Other current assets and accrued liabilities consist of the following:
<TABLE>
<CAPTION>

(Dollars in thousands)                            October 29,    October 31,
                                                     2000           1999
----------------------------------------------------------------------------
<S>                                               <C>            <C>
Other current assets:
        Deposits                                    $   921       $ 1,131
        Prepaid expenses and other                      730           656
-------------------------------------------------------------------------
                                                    $ 1,651       $ 1,787
-------------------------------------------------------------------------
Accrued liabilities:
        Accrued salaries, wages and severance       $ 4,893       $ 3,587
        Accrued advertising and royalties               912         1,184
        Unearned income                               4,663         1,467
        Accrued property taxes                        1,273         1,345
        Accrued sales taxes                             903           878
        Accrued disposition costs                       350         1,521
        Accrued store closing costs                     697           804
        Accrued insurance costs                       2,274         1,857
        Other accrued liabilities                     4,996         4,433
-------------------------------------------------------------------------
                                                    $20,961       $17,076
-------------------------------------------------------------------------
</TABLE>

{4}  PROPERTY AND EQUIPMENT

Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                                     October 29,     October 31,
(Dollars in thousands)                                                                   2000           1999
---------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>             <C>
Land                                                                                   $  38,509      $  37,116
Capitalized lease property                                                                 7,297          7,644
Buildings and leasehold improvements                                                      82,348         77,471
Furniture and equipment                                                                   63,093         59,568
Construction in progress                                                                     153            573
---------------------------------------------------------------------------------------------------------------
                                                                                         191,400        182,372
---------------------------------------------------------------------------------------------------------------
Less, accumulated depreciation and capitalized lease amortization                         65,177         54,023
---------------------------------------------------------------------------------------------------------------
Property and equipment, net                                                            $ 126,223      $ 128,349
---------------------------------------------------------------------------------------------------------------
</TABLE>


                                       38
<PAGE>   39
{5} FRANCHISE AND DEVELOPMENT RIGHTS

         The Company has entered into franchise agreements with two franchisors
for the operation of two of its restaurant concepts, Burger King and Chili's.
The existing franchise agreements provide the franchisors with significant
rights regarding the business and operations of the Company's franchised
restaurants. The franchise agreements with Burger King Corporation require the
Company to pay royalty and advertising fees equal to 3.5% and 4.0% of Burger
King restaurant sales, respectively. The franchise agreements with Brinker
International, Inc. ("Brinker") covering the Company's Chili's restaurant
concept require the Company to pay royalty and advertising fees equal to 4.0%
and 0.5% of Chili's restaurant sales, respectively. In addition, the Company is
required to spend 2% of sales from each of its Chili's restaurants on local
advertising. As part of a system-wide promotional effort, the Company paid an
additional advertising fee of 0.375% of sales for the period beginning September
1, 1999 and ending August 30, 2000 and has agreed to pay a similar fee of 1.0%
of sales for the period beginning September 1, 2000 and ending June 20, 2001.

         The Company has entered into development agreements to develop
additional restaurants in each of the two concepts. Each of the development
agreements requires the Company to pay a development fee. In addition, the
development agreements contain certain requirements regarding the number of
units to be opened in the future. Each restaurant opened will be subject to a
separate franchise agreement, which requires the payment of an initial franchise
fee (currently Chili's $40,000, Burger King $50,000) for each such restaurant.
Should the Company fail to comply with the required development schedules or
with the requirements of the agreements for restaurants within areas covered by
the development agreements, the franchisors have the right to terminate the
Company's development agreements and the exclusivity provided by the development
agreements.

         During fiscal 2000, Burger King Corporation increased its royalty and
franchise fees for most new restaurants. The franchise fee for new restaurants
increased from $40,000 to $50,000 for a 20 year agreement and the royalty rate
increased from 3.5% of sales to 4.5% of sales, after a transitional period. For
franchise agreements entered into during the transitional period, the royalty
rate will be 4% of sales for the first 10 years and 4.5% of sales for the
balance of the term.

         For new restaurants, the transitional period will be from July 1, 2000
to June 30, 2003. As of July 1, 2003, the royalty rate will become 4-1/2% of
sales for the full term of new restaurant franchise agreements. For renewals of
existing franchise agreements, the transitional period will be from July 1, 2000
through June 30, 2001. As of July 1, 2001, existing restaurants that renew their
franchise agreements will pay a royalty of 4.5% of sales for the full term of
the renewed agreement. The advertising contribution will remain 4% of sales.
Royalties payable under existing franchise agreements are not affected by these
changes until the time of renewal, at which time the then prevailing rate
structure will apply.

         Burger King Corporation offered a voluntary program to incent
franchisees to renew their franchise agreements prior to the scheduled
expiration date ("Early Renewal Program"). Franchisees that elected to
participate in the Early Renewal Program are required to make capital
investments in their restaurants by, among other things, bringing them up to
Burger King Corporation's current image, and to extend occupancy leases.
Franchise agreements entered into under the Early Renewal Program will have
special provisions regarding the royalty payable during the term, including a
reduction in the royalty to 2.75% over five years beginning April, 2002 and
concluding in April, 2007.

         The Company included 36 restaurants in the Early Renewal Program. The
Company paid franchise fees of $877,000 in the third quarter of fiscal 2000 to
extend the franchise agreements of the selected restaurants for sixteen to
twenty years. The Company expects to invest approximately $7,000,000 to
$8,000,000 to remodel the selected restaurants to bring them up to Burger King
Corporation's current image. The remodeling is required to be completed by
December 31, 2001.

         On January 27, 2000 the Company executed a "Franchisee Commitment" in
which it agreed to undertake certain "Transformational Initiatives" including
capital improvements and other routine maintenance in all of its Burger King
restaurants. The capital improvements include the installation of signage
bearing the new Burger King logo and the installation of a new drive-through
ordering system. The Company is required to complete these capital improvements
by December 31, 2001. In addition, the Company agreed to perform, as necessary,
certain routine maintenance such as exterior painting, sealing and striping of
parking lots and upgraded landscaping. The Company completed this maintenance by
September 30, 2000, as required. In consideration for executing the Franchisee
Commitment, the Company received "Transformational Payments" totaling
approximately $3.9 million during fiscal 2000. The portion of the
Transformational Payments that corresponds to the amount required for the
capital improvements will be recognized as income over the useful life of the
capital improvements. The portion of the Transformational Payments that
corresponds to the required routine maintenance was recognized as a reduction in
maintenance expense over the period during which maintenance

                                       39
<PAGE>   40
was performed. The remaining balance of the Transformational Payments is being
recognized as other income ratably through December 31, 2001, the term of the
Franchisee Commitment.

{6}  INCOME TAXES

The provision for income taxes for the fiscal years ended October 29, 2000,
October 31, 1999 and October 25, 1998 is summarized as follows:
<TABLE>
<CAPTION>

                                                   Fiscal Year Ended
                                           October 29,    October 31,  October 25,
(Dollars in thousands)                       2000           1999         1998
--------------------------------------------------------------------------------
<S>                                         <C>           <C>          <C>
Current:
    Federal                                  $  102       $   --       $   --
    State                                     1,081          815        1,107
-----------------------------------------------------------------------------
                                              1,183          815        1,107
-----------------------------------------------------------------------------
Deferred:
    Provision (benefit) for the period           --           --           --
-----------------------------------------------------------------------------
    Total                                    $1,183       $  815       $1,107
-----------------------------------------------------------------------------
</TABLE>


The components of the deferred tax asset and liability are as follows:
<TABLE>
<CAPTION>

                                                  October 29,      October 31,
(Dollars in thousands)                               2000             1999
----------------------------------------------------------------------------
<S>                                               <C>              <C>
Deferred tax asset:
     Net operating loss carryforwards              $ 18,464        $ 17,930
     Note receivable allowance                        6,554           2,301
     FICA tip credit and minimum tax credit           3,481           2,661
     Accrued liabilities                              3,597           1,662
     Capitalized lease obligations                      733             807
     Other                                            1,033             320
---------------------------------------------------------------------------
     Deferred tax asset                              33,862          25,681
     Less: Valuation allowance                      (20,362)        (11,510)
---------------------------------------------------------------------------
                                                     13,500          14,171
---------------------------------------------------------------------------
 Deferred tax liability:
     Property and equipment                          (2,267)         (2,636)
     Franchise fees, trademarks and goodwill         (1,188)         (1,488)
     Other                                              (45)            (47)
---------------------------------------------------------------------------
     Deferred tax liability                          (3,500)         (4,171)
---------------------------------------------------------------------------
     Net deferred tax asset                        $ 10,000        $ 10,000
---------------------------------------------------------------------------
</TABLE>


         The Company has net operating loss carryforwards of approximately $52.8
million as well as FICA tip credits and alternative minimum tax credits of $3.5
million.

         Net operating loss carryforwards expire as follows:
<TABLE>
<CAPTION>

                                                      Net operating loss
                                                        carryforwards
                                                     ------------------
<S>                                                  <C>
Net operating loss carryforwards expiring 2012           $ 49,755,000
Net operating loss carryforwards expiring 2018              3,000,000
---------------------------------------------------------------------
Total net operating loss carryforwards                   $ 52,755,000
---------------------------------------------------------------------
</TABLE>


          FICA tip credits expire as follows:


                                       40
<PAGE>   41
<TABLE>
<CAPTION>

                                                       FICA Tip Credits
                                                     ------------------
<S>                                                  <C>
FICA tip credit expiring in 2012                          $ 1,340,000
FICA tip credit expiring in 2013                              477,000
FICA tip credit expiring in 2014                              572,000
FICA tip credit expiring in 2015                              571,000
---------------------------------------------------------------------
Total FICA tip credits                                    $ 2,960,000
---------------------------------------------------------------------
</TABLE>


         The alternative minimum tax credits of $521,000 carryforward
indefinitely.

         During fiscal 2000, the Company increased its valuation reserve against
its net operating loss carryforwards to $20.4 million leaving a net deferred tax
asset of $10.0 million. The Company's assessment of its ability to realize the
net deferred tax asset was based on the weight of both positive and negative
evidence, including the taxable income of its current operations. Based on this
assessment, the Company's management believes it is more likely than not that
the net deferred tax benefit recorded will be realized. Such evidence will be
reviewed prospectively and should the Company's operating performance continue
to improve, the Company may recognize additional tax benefits related to its net
deferred tax asset position in the future.

         The Company's federal income tax returns for fiscal years 1994-1997
were examined by the Internal Revenue Service ("IRS"). The IRS completed its
audit during fiscal 2000 resulting in an increase to the net operating loss
carryover of $8.6 million. The increase to the net operating loss was the result
of additional tax losses identified as a result of the disposition of various
assets of the bagel businesses sold during fiscal 1997. The schedule of deferred
tax assets and valuation allowance have been adjusted accordingly to reflect the
results of this audit.

Differences between the effective income tax rate and the U.S. statutory tax
rate were as follows:

<TABLE>
<CAPTION>

                                                                                    Fiscal Year Ended
                                                                        October 29,    October 31,    October 25,
(Percent of pretax income)                                                 2000           1999           1998
----------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>            <C>
Statutory tax rate                                                          (34.0)%        (34.0)%         34.0%
State income taxes, net of federal income tax benefit                         8.2           47.1           59.0
FICA tax credit                                                              (4.4)         (50.1)         (39.8)
Change in valuation allowance                                                44.0           89.3           20.5
Other, net                                                                    0.1           19.1           17.0
---------------------------------------------------------------------------------------------------------------
Effective tax rate                                                            13.9%          71.4%         90.7%
---------------------------------------------------------------------------------------------------------------
</TABLE>


                                       41
<PAGE>   42
{7} LONG-TERM DEBT AND CREDIT AGREEMENTS

         On August 3, 1999 the Company completed the refinancing of its existing
debt with a financing package totaling $125,066,000, consisting of a $76,000,000
revolving credit agreement and a $49,066,000 mortgage facility, as described
below. The revolving credit agreement was executed with Chase Bank of Texas, as
agent for a group of six banks, providing for borrowings of up to $76,000,000
with interest payable at the adjusted LIBOR rate plus a contractual spread. The
Company had $20,975,000 available under its revolving credit agreement as of
October 29, 2000. The revolving credit agreement is collateralized by the stock
of certain subsidiaries of the Company, the $10 million junior subordinated note
issued by Bruegger's Corporation, certain interests in the Company's franchise
agreements with Brinker and Burger King Corporation and substantially all of the
Company's personal property not pledged in the mortgage financing. The revolving
credit agreement will mature on October 31, 2002, at which time all amounts
outstanding thereunder are due.

         The revolving credit agreement contains, among other provisions,
certain restrictive covenants including maintenance of certain prescribed debt
and fixed charge coverage ratios, limitations on the incurrence of additional
indebtedness, limitations on consolidated capital expenditures, restrictions on
the payment of dividends (other than stock dividends) and limitations on the
purchase or redemption of shares of the Company's capital stock.

         The $49,066,000 mortgage facility has 34 separate mortgage notes and
the term of each mortgage note is either 15 or 20 years. The notes have fixed
rates of interest of either 9.79% or 9.94%. The notes require equal monthly
interest and principal payments. The mortgage notes are collateralized by a
first mortgage/deed of trust and security agreement on the real estate,
improvements and equipment on 19 of the Company's Chili's restaurants and 15 of
the Company's Burger King restaurants. The mortgage notes contain, among other
provisions, certain restrictive covenants including maintenance of a
consolidated fixed charge coverage ratio for the financed properties. The
Company used the proceeds of the mortgage facility to repay indebtedness under
its existing revolving credit agreement.

         During fiscal 1999 the Company paid fees and expenses totaling
$1,327,000 related to the refinancing of its existing debt. These costs related
primarily to transaction and legal expenses for the mortgage facility and
up-front fees to the bank group and legal expenses for the revolving credit
agreement.

         The aggregate maturities of long-term debt subsequent to October 29,
2000 are as follows:
<TABLE>
<CAPTION>

         (Dollars in thousands)
         ----------------------------------------------------------------------------
         FISCAL YEAR
         ----------------------------------------------------------------------------
<S>                                                                        <C>
         2001                                                               $   1,205
         2002                                                                   1,329
         2003                                                                  56,491
         2004                                                                   1,617
         2005                                                                   1,784
         2006 and thereafter                                                   40,894
         ----------------------------------------------------------------------------
         Total                                                              $ 103,320
         ----------------------------------------------------------------------------
</TABLE>


                                       42
<PAGE>   43
{8} EMPLOYEE BENEFIT PLANS

STOCK OPTIONS

         The Company has four stock option plans: the 1993 Stock Option and
Incentive Plan, the 1997 Stock Option and Incentive Plan , the 1993 Outside
Directors Stock Option Plan and the 1999 Outside Directors Stock Option Plan .

         On March 26, 1997 the Company's shareholders approved the 1997 Stock
Option and Incentive Plan and therefore no awards for additional shares of the
Company's common stock will be made under the 1993 Stock Option and Incentive
Plan. Under the 1997 Stock Option and Incentive Plan, shares of restricted stock
and options to purchase shares of the Company's common stock may be granted to
officers and other employees. An aggregate of 1,100,000 shares of common stock
has been reserved for issuance under the 1997 Stock Option and Incentive Plan.

         In December of 2000 the Company approved the 1999 Outside Directors
Stock Option Plan and therefore no awards for additional shares of the Company's
common stock will be made under the 1993 Outside Directors Stock Option Plan.
Under the 1999 Outside Directors Stock Option Plan, 80,000 shares of common
stock have been reserved for the issuance of nonqualified stock options to be
granted to non-employee directors of the Company. On May 1, 2001 and on each May
1 thereafter, each then non-employee director of the Company will receive an
option to purchase 2,000 shares of common stock at an exercise price equal to
the fair market value of the Company's common stock on the date of grant. Each
option has a term of 10 years and becomes exercisable six months after the date
of grant. As of October 29, 2000, there were 16,000 options outstanding under
the 1999 Outside Directors Stock Option Plan.

         On June 1, 1999, the Company repurchased options for 298,340 shares of
the Company's common stock, that had previously been issued under its 1993 Stock
Option and Incentive Plan at strike prices ranging from $13.60 to $34.50, for
their fair value of $44,751, or $0.15 per option. These options are not
available to be reissued. The Company recorded $44,751 in compensation expense
related to this repurchase.

         On June 1, 1999, the Company implemented a Long Term Incentive
Compensation Plan (the "Long Term Plan") for seven of its executive officers and
certain other senior executives (the "Participants"). The Long Term Plan is
designed to incent and retain those individuals who are critical to achieving
the Company's long term business objectives. The Long Term Plan consists of (a)
options granted with an exercise price equal to the closing price of the
Company's common stock on the grant date, which vest over three years; (b)
restricted stock awards of common shares which vest over seven years, subject to
accelerated vesting in the event the price of the Company's common stock
achieves certain targets; and, for certain Participants, (c) a cash bonus
payable at the conclusion of fiscal year 2000. Under the Long Term Plan, the
Company issued 104,360 restricted shares in fiscal 2000 and 155,552 restricted
shares in fiscal 1999. The Company issued an additional 93,557 restricted shares
in December of 2000. There were 22,615 shares of restricted stock forfeited in
fiscal 2000 and none in fiscal 1999.

         The Company also entered into agreements with five of its executive
officers and two other senior executives pursuant to which the employees have
agreed not to compete with the Company for a period of time after the
termination of their employment and are entitled to receive certain payments in
the event of a change of control of the Company.

         As a result of the restricted stock grants, the Company recorded an
increase to additional paid in capital and an offsetting deferred charge for
unearned compensation. The deferred charge is equal to the number of shares
granted multiplied by the Company's closing share price on the day of the grant.
The deferred charge is classified in the equity section of the Company's
consolidated balance sheet as unearned compensation and is being amortized to
compensation expense on a straight-line basis over the vesting period, subject
to accelerated vesting if the Company's common stock reaches certain benchmarks.

         The Company accounts for all of its stock-based compensation awards in
accordance with APB Opinion No. 25 which requires compensation cost to be
recognized based on the excess, if any, between the quoted market price of the
stock at the date of grant and the amount an employee must pay to acquire the
stock. Under this method, no compensation cost has been recognized for stock
option awards.

         Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair value method as prescribed by SFAS 123 (see
Note 2), the Company's net earnings (loss) and net earnings (loss) per share
would have been the pro forma amounts indicated below:




                                       43
<PAGE>   44
         (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                            October 29,      October 31,       October 25,
                                                               2000             1999              1998
<S>                                                         <C>             <C>              <C>
Net income (loss), as reported                              $ ( 9,711)       $ ( 1,957)       $     113
Net income (loss), pro forma                                $  (9,814)       $  (2,190)       $    (826)
Basic net income (loss) per common share, as reported       $    (.79)       $    (.15)       $     .01
Basic net income (loss) per common share, pro forma         $    (.80)       $    (.17)       $    (.07)
</TABLE>

         The weighted average fair value at the date of grant for options
granted during fiscal 2000, 1999 and 1998 was $1.12, $1.47 and $1.67 per share,
respectively, which, for the purposes of this disclosure, is assumed to be
amortized over the respective vesting period of the grants. The fair value of
each option grant is estimated on the date of the grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in fiscal 2000, 1999 and 1998: dividend yield of 0% for all years;
expected volatility of 48.8%, 48.1% and 47.7%, respectively; risk-free interest
rate of 6.19%, 5.5% and 5.7%, respectively; and expected lives of 5.00, 5.00 and
4.98 years, respectively.

         Activity with respect to the Company's stock option plans for fiscal
years 2000, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
                                                                           Weighted Average
                                                       Number of Shares    Exercise Price
-------------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>
Outstanding, October 26, 1997                               765,790           $20.12
  Granted                                                   526,600             3.41
  Canceled                                                 (187,005)           10.08
  Exercised                                                    (385)             .10
------------------------------------------------------------------------------------
Outstanding, October 25, 1998                             1,105,000            13.83
  Granted                                                   161,261             3.00
  Canceled                                                 (494,271)           20.19
  Exercised                                                    --               --
------------------------------------------------------------------------------------
Outstanding, October 31, 1999                               771,990             7.55
  Granted                                                    72,179             2.20
  Canceled                                                 (209,344)           11.05
  Exercised                                                    --               --
------------------------------------------------------------------------------------
Outstanding, October 29, 2000                               634,825           $ 5.71
------------------------------------------------------------------------------------
Exercisable, October 29, 2000                               343,450
-------------------------------------------------------------------
Available for future grants at October 29, 2000             427,602
-------------------------------------------------------------------
</TABLE>


         The following table summarizes information relating to fixed-priced
stock options outstanding for all plans as of October 29, 2000.
<TABLE>
<CAPTION>

                                             Options Outstanding                              Options Exercisable
                             ----------------------------------------------------       ---------------------------------
                                                Weighted
                                                 Average           Weighted                                 Weighted
                                 Number         Remaining          Average                  Number          Average
Range of Exercise Price        Outstanding  Contractual Life    Exercise Price           Exercisable     Exercise Price
------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>                 <C>                      <C>             <C>
       $.10 - $3.00            215,170         8.95 years            $ 2.73                 56,395            $ 2.89
       $3.01 - $8.50           281,400         7.16 years            $ 3.59                148,800            $ 3.74
      $8.51 - $32.875          138,255         4.40 years            $14.99                138,255            $14.99
</TABLE>


RETIREMENT PLANS

         The Company maintains a discretionary, noncontributory profit sharing
plan for its eligible employees. Plan contributions are determined by the
Company's Board of Directors.


                                       44
<PAGE>   45
         Employees are also eligible to participate in either a 401(k) plan or a
deferred compensation program after one year of service in which the employee
has worked a minimum of 1,000 hours. The Company matches a portion of the
employee's contribution to the plans and provides investment choices for the
employee. The Company's contributions under both plans aggregated $226,000,
$265,000 and $173,000 for fiscal years 2000, 1999 and 1998, respectively.

{9} LEASES

         The Company leases its office facilities and a substantial portion of
the land and buildings used in the operation of its restaurants. The restaurant
leases generally provide for a noncancelable term of five to 20 years and
provide for additional renewal terms at the Company's option. Most restaurant
leases contain provisions for percentage rentals on sales above specified
minimums. Rental expense incurred under these percentage rental provisions
aggregated $961,000, $970,000 and $1,054,000 for fiscal years 2000, 1999 and
1998, respectively.

As of October 29, 2000, future minimum lease payments related to these leases
were as follows:

(Dollars in thousands)

<TABLE>
<CAPTION>
Fiscal Year                                                            Capital         Operating
                                                                      Leases             Leases        Total
------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>          <C>
2001                                                                 $   1,096         $  8,056     $  9,152
2002                                                                     1,054            7,939        8,993
2003                                                                     1,026            7,844        8,870
2004                                                                     1,026            7,279        8,305
2005                                                                     1,026            5,486        6,512
------------------------------------------------------------------------------- ----------------------------
2006 and thereafter                                                      3,319           24,705       28,024
------------------------------------------------------------------------------- ----------------------------
                                                                         8,547        $  61,309     $ 69,856
                                                                                ----------------------------

Less: Amount representing interest                                       3,391
------------------------------------------------------------------------------
Present value of  future minimum lease payments of which
     $455 is included in current liabilities at  October 29, 2000    $   5,156
------------------------------------------------------------------------------
</TABLE>


         Rent expense, including percentage rentals based on sales, was
$9,077,000, $9,453,000 and $9,518,000 for fiscal years 2000, 1999 and 1998,
respectively.



                                       45
<PAGE>   46
{10} COMMITMENTS AND CONTINGENCIES

     The Company is self-insured for a portion of its employee health care
costs. The Company is liable for medical claims up to $100,000 per eligible
employee annually, and aggregate annual claims up to approximately $2,500,000.
The aggregate annual deductible is determined by the number of eligible covered
employees during the year and the coverage they elect.

     The Company is self-insured with respect to any worker's compensation
claims not covered by insurance. The Company maintains a $250,000 annual
deductible per occurrence and is liable for aggregate claims up to $2,300,000
for the three year insurance plan period beginning March 1, 1998 and ending
April 30, 2001.

     The Company is self-insured with respect to any general liability claims
below the Company's per occurrence deductible. The Company currently maintains a
$15,000 per occurrence deductible.

     At October 29, 2000, the Company had commitments aggregating $901,000 for
the construction of restaurants.

     The Company and certain of its officers and directors are parties to
various legal proceedings relating to the Company's purchase, operation and
financing of the Company's bagel-related businesses.

     D & K Foods, Inc., Pacific Capital Ventures, Inc., and PLB Enterprises,
Inc., franchisees of Bruegger's Franchise Corporation, and Ken Wagnon, Dan
Carney, Jay Wagnon and Patrick Beatty, principals of the foregoing franchisees,
commenced an action on July 16, 1997 in the United States District Court for the
District of Maryland, against Bruegger's Corporation, Bruegger's Franchise
Corporation, Quality Dining, Inc., Daniel B. Fitzpatrick, Michael J. Dressell
and Nordahl L. Brue, alleging that the plaintiffs purchased their franchises
based upon financial representations that did not materialize, that they
purchased preferred stock in Bruegger's Corporation based upon false
representations, that Bruegger's Corporation falsely represented its intentions
with respect to purchasing bakeries from the plaintiffs or providing financing
to the plaintiffs, and that the defendants violated implied covenants of good
faith and fair dealing. The parties have reached a tentative settlement of this
matter pursuant to which the Company agreed to make an initial payment of
$125,000 and an additional payment of $175,000 on December 31, 2001. The Company
also agreed to purchase 96,064 shares of its common stock presently owned by the
plaintiffs, on December 31, 2001, for an amount equal to the greater of $2.75
per share or the midpoint between $2.59 and the market price of the Company's
stock at the time of closing. As part of the tentative settlement, the
plaintiffs have agreed to vote their stock in the Company in accordance with the
recommendation of the Company's Board of Directors and Bruegger's Corporation
has agreed to purchase certain equipment from the plaintiffs for $200,000,
payable in December of 2002. The Company has agreed to guarantee $25,000 of this
payment.

     On or about April 15, 1997, Texas Commerce Bank National Association
("Texas Commerce") made a loan of $4,200,000 (the "Loan") to BFBC Ltd., a
Florida limited partnership ("BFBC"). At the time of the Loan, BFBC was a
franchisee under franchise agreements with Bruegger's Franchise Corporation (the
"Franchisor"). The Company at that time was an affiliate of the Franchisor. In
connection with the Loan and as an accommodation of BFBC, the Company executed
to Texas Commerce a "Guaranty". By the terms of the Guaranty the Company agreed
that upon maturity of the Loan by default or otherwise that it would either (1)
pay the Loan obligations or (2) buy the Loan and all of the related loan
documents (the "Loan Documents") from Texas Commerce or its successors. In
addition several principals of BFBC (the "Principal Guarantors") guaranteed
repayment of the Loan by each executing a "Principal Guaranty". On November 10,
1998, Texas Commerce (1) declared that the Loan was in default, (2) notified
BFBC, the Principal Guarantors and the Company that all of the Loan obligations
were due and payable, and (3) demanded payment.

     The Company elected to satisfy its obligations under the Guaranty by
purchasing the Loan from Texas Commerce. On November 24, 1998, the Company
bought the Loan for $4,294,000. Thereafter, the Company sold the Loan to its
Texas affiliate Grady's American Grill, L.P. ("Grady's"). On November 30, 1998
Grady's commenced an action seeking to recover the amount of the Loan from one
of the Principal Guarantors, Michael K. Reilly ("Reilly"). As part of this
action Grady's also seeks to enforce a Subordination Agreement that was one of
the Loan Documents against MKR Investments, L.P., a partnership ("MKR"). Reilly
is the general partner of MKR. This action is pending in the United States
District Court for the Southern District of Texas Houston Division as Case No.
H-98-4015. Reilly has denied liability and filed a counterclaim against Grady's
alleging that Grady's engaged in unfair trade practices, violated Florida's
"Rico" statute, engaged in a civil conspiracy and violated state and federal
securities laws in connection with the Principal Guaranty (the "Counterclaims").
Reilly also filed a third party complaint against Quality Dining, Inc., Grady's
American Grill Restaurant Corporation, David M. Findlay, Daniel B. Fitzpatrick,
Bruegger's Corporation, Bruegger's Franchise Corporation, Champlain Management
Services, Inc., Nordahl L. Brue, Michael J. Dressell and Ed Davis ("Third Party
Defendants") alleging that Reilly invested in BFBC based upon false
representations, that the Third Party Defendants violated state

                                       46
<PAGE>   47
franchise statutes, committed unfair trade practices, violated covenants of good
faith and fair dealing, violated the state "Rico" statute and violated state and
federal securities laws in connection with the Principal Guaranty. In addition,
BFBC and certain of its affiliates, including the Principal Guarantors
("Intervenors") have intervened and asserted claims against Grady's and the
Third Party Defendants that are similar to those asserted in the counter claims
and the third party complaint. In addition, the Company and Bruegger's
Corporation are currently disputing the nature and extent of their indemnity
obligations, if any, to the other with respect to this litigation (which dispute
would be resolved if the "Bruegger's Resolution" is consummated. See description
of Bruegger's Resolution below). Based upon the currently available information,
the Company does not believe that these matters will have a materially adverse
effect on the Company's financial position or results of operations. However,
there can be no assurance that the Company will be able to realize sufficient
value from Reilly to satisfy the amount of the Loan or that the Company will not
incur any liability as a result of the Counterclaims or third party complaints
filed by Reilly and the Intervenors.

     In each of the above cases, one or more present or former officers and
directors of the Company were named as party defendants and the Company has
and/or is advancing defense costs on their behalf.

     Pursuant to the Share Exchange Agreement by and among Quality Dining, Inc.,
Bruegger's Corporation, Nordahl L. Brue and Michael J. Dressell ("Share Exchange
Agreement"), the Agreement and Plan of Merger by and among Quality Dining, Inc.,
Bagel Disposition Corporation and Lethe, LLC, and certain other related
agreements entered into as part of the disposition of the Company's
bagel-related businesses, the Company is responsible for 50% of the first $14
million of franchise-related litigation expenses, inclusive of attorney's fees,
costs, expenses, settlements and judgments (collectively "Franchise Damages").
Bruegger's Corporation and certain of its affiliates are obligated to indemnify
the Company from all other Franchise Damages. The Company is obligated to pay
the first $3 million of its share of Franchise Damages in cash. As of August 6,
2000, the Company had satisfied this obligation. The remaining $4 million of the
Company's share of Franchise Damages is payable by crediting amounts owed to the
Company pursuant to the $10 million junior subordinated note issued to the
Company by Bruegger's Corporation. However, the Company and Bruegger's
Corporation are currently disputing the nature and extent of their indemnity
obligations under the Share Exchange Agreement. If the Bruegger's Resolution
(described below) is consummated, the remaining $4 million of the Company's
share of Franchise Damages would be payable in cash. Through October 29, 2000
the outstanding balance due under the Subordinated Note has been reduced by
$600,000 in respect of Franchise Damages. Based upon the currently available
information, the Company does not believe that these cases individually or in
the aggregate will have a material adverse effect on the Company's financial
position and results of operations but there can be no assurance thereof.

     On or about September 10, 1999, Bruegger's Corporation, Lethe LLC, Nordahl
L. Brue, and Michael J. Dressel commenced an action against the Company in the
United States District Court for the District of Vermont alleging that the
Company breached various provisions of the Share Exchange Agreement which arise
out of the ongoing dispute concerning the net working capital adjustment
contemplated by the Share Exchange Agreement. On February 1, 2000, the Company
filed counter-claims against Bruegger's Corporation for the working capital
adjustment to which it believes it is entitled. Additionally, on or about
September 13, 1999, Messrs. Brue and Dressell asserted a claim for breach of
representations and warranties under the Share Exchange Agreement. The Company
does not expect the ultimate resolution of these matters to have a material
adverse effect on the Company's financial position or results of operations, but
there can be no assurance thereof.

     The Company and Bruegger's Corporation are discussing a resolution (the
"Bruegger's Resolution") of their various disputes that may include, among other
things, one or more of the following provisions: (a) the principal and accrued
interest outstanding under the Subordinated Note would be reduced to $10
million; (b) the Company and Bruegger's Corporation each give up their claim
against the other to receive a net working capital adjustment; (c) the
Subordinated Note would be modified to, among other things, extend the period
through which interest would be accrued and added to the principal amount of the
Subordinated Note from October, 2000 through January, 2002. From January, 2002
through June, 2002, one-half of the interest would be accrued and added to the
principal amount of the Subordinated Note and one-half of the interest would be
paid in cash. Commencing in January, 2003, interest would be paid in cash
through the maturity of the Subordinated Note in October 2004; (d) the Company
and Bruegger's Corporation would each be responsible for 50% of the Franchise
Damages with respect to the claims asserted by D & K Foods, Inc., et al and BFBC
Ltd., et al. The Company would be entitled to 25% of any net recovery made by
Bruegger's Corporation on its counter-claim against D & K Foods, Inc., et al and
Bruegger's Corporation would be entitled to 25% of any net recovery made by the
Company on the BFBC, Ltd., Loan; provided, however, that any such recovery shall
be credited against the Subordinated Note; (e) Bruegger's Corporation and its
affiliates would release their claim for breach of representations and
warranties under the Share Exchange Agreement; and (f) the Company would give
Bruegger's

                                       47
<PAGE>   48
Corporation a credit of two dollars against the Subordinated Note for every one
dollar that Bruegger's Corporation prepays against the Subordinated Note prior
to October, 2003 up to a maximum credit of $4 million.

     The Company does not expect the Bruegger's Resolution, if consummated on
terms substantially the same as those presently being discussed, to have a
material adverse effect on the Company's financial position or results of
operations, but there can be no assurance thereof. There also can be no
assurance that the Bruegger's Resolution will be consummated and whether or not
consummated there can be no assurance when, if ever, the Company might receive
any principal or interest payments in respect of the Subordinated Note.

     On April 19, 2000, NBO, LLC ("NBO") filed a Verified Complaint for
Injunctive and Declaratory Relief in the United States District Court for the
Northern District of Indiana, South Bend Division, naming as defendants the
Company, Daniel B. Fitzpatrick, certain other officers of the Company, certain
unidentified associates and affiliates of Daniel B. Fitzpatrick and certain
other unidentified members of management. The Complaint alleged among other
things, that the director defendants' decision to authorize Daniel B.
Fitzpatrick and/or his associates and affiliates and/or other members of
management to acquire up to 1,000,000 additional shares of the Company's common
stock without triggering the Company's Shareholder Rights Agreement would give
management effective control of the Company without the payment of a control
premium and would thwart NBO's tender offer. The Complaint alleged that this
decision was not made in good faith after a reasonable investigation of the
consequences, and was in breach of the director defendants' fiduciary duties. On
May 26, 2000 the Court dismissed these allegations for failure to state a claim.
The Complaint also alleged violations of the federal securities laws and seeks
injunctive and declaratory relief. On June 8, 2000, the Company renewed its
Motion to Dismiss the remaining allegations of NBO's complaint on grounds that
these allegations were moot. On June 9, 2000 NBO voluntarily withdrew its
request for a preliminary injunction and on September 12, 2000 NBO voluntarily
dismissed its Complaint, without prejudice. The Company is currently in
discussions with NBO with respect to a transaction that would enable NBO to
dispose of its shares of common stock of the Company.

     The Company is involved in various other legal proceedings incidental to
the conduct of its business, including employment discrimination claims. Based
upon currently available information, the Company does not expect that any such
proceedings will have a material adverse effect on the Company's financial
position or results of operations but there can be no assurance thereof.

{11} IMPAIRMENT OF LONG-LIVED ASSETS

         The Company recorded non-cash charges totaling $2,501,000 during the
third quarter of fiscal 1999 consisting primarily of $650,000 for the disposal
of obsolete point of sale equipment in its full service dining restaurants that
the Company identified as a result of installing its new point of sale system,
$1,047,000 for the estimated costs and losses associated with the anticipated
closing of two regional offices and three restaurant locations and $804,000
primarily for a non-cash asset impairment write down for two under-performing
restaurants. This non-cash asset impairment charge resulted from the Company's
determination that an impairment write down should be considered for certain
locations when there is a sustained trend of negative operating performance as
measured by restaurant level cash flow. The non-cash facility closure charges
include amounts for the write off of fixed assets and other costs related to the
closing of these facilities. Each of these non-cash charges represents a
reduction of the carrying amount of the assets to their estimated fair market
values. All facility closures were completed during the fourth quarter of fiscal
1999 except for one restaurant which was closed early in fiscal 2000.

         The Company recorded a $250,000 non-cash impairment charge in fiscal
1998 in connection with its decision to sell a Grady's American Grill
Restaurant.


                                       48
<PAGE>   49
{12} RELATED PARTY TRANSACTIONS

The Company leases a substantial number of its Burger King restaurants from
entities that are substantially owned by certain directors, officers and
stockholders of the Company. Amounts paid for leases with these related entities
are as follows:

<TABLE>
<CAPTION>

                                                                          Fiscal Year Ended
                                                                  October 29,   October 31,   October 25,
(Dollars in thousands)                                                2000         1999         1998
---------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>           <C>
Operating leases:
           Base rentals                                               $ 2,378       $ 2,456     $ 2,513
           Percentage rentals                                             450           456         451
-------------------------------------------------------------------------------------------------------
                                                                        2,828         2,912       2,964
-------------------------------------------------------------------------------------------------------
Capitalized leases:
           Interest                                                       684           725         761
           Reduction of lease obligations                                 342           300         264
           Percentage rentals                                             192           222         246
-------------------------------------------------------------------------------------------------------
                                                                        1,218         1,247       1,271
-------------------------------------------------------------------------------------------------------
           Total                                                      $ 4,046       $ 4,159     $ 4,235
-------------------------------------------------------------------------------------------------------
</TABLE>

         Affiliated real estate partnerships and two other entities related
through common ownership pay management fees to the Company as reimbursement for
administrative services provided. Total management fees for fiscal 2000, 1999
and 1998 were $14,000, $14,000 and $14,000, respectively.

         During the fiscal years 2000, 1999 and 1998, the Company made payments
to companies owned by certain directors, stockholders and officers of the
Company of $237,000, $260,000 and $185,000, respectively, for air transportation
services.


{13} ACQUISITIONS AND DISPOSITIONS

         During the third quarter of fiscal 2000 the Company recorded a $717,000
loss on the sale of a Grady's American Grill restaurant.


{14} SEGMENT REPORTING

         The Company adopted SFAS 131, "Disclosure about Segments of an
Enterprise and Related Information" (SFAS 131") in its fiscal year ending
October 29, 2000.

         The Company operates four distinct restaurant concepts in the
food-service industry. It owns the Grady's American Grill and two Italian Dining
concepts and operates Burger King restaurants and Chili's Grill & Bar as a
franchisee of Burger King Corporation and Brinker International, Inc.,
respectively. The Company has identified each restaurant concept as an operating
segment based on management structure and internal reporting. For purposes of
applying SFAS 131, the Company considers the Grady's American Grill, the two
Italian Concepts and Chili's Grill & Bar to be similar and have aggregated them
into a single reportable operating segment (Full Service). The Company considers
the Burger King restaurants as a separate reportable segment (Quick Service).


         Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "other" column includes corporate
related items and income and expense not allocated to reportable segments.



                                       49
<PAGE>   50
<TABLE>
<CAPTION>
                                                       FULL             QUICK
         (Dollars in thousands)                       SERVICE          SERVICE          OTHER              TOTAL
-----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                <C>             <C>               <C>
FISCAL 2000
Revenues                                             $ 146,292          $81,724         $   --            $228,016
Income from restaurant operations (1)                   16,220           14,158              105            30,483

Operating income                                         7,905            6,408           (1,813)         $ 12,500
Interest expense                                                                                            11,174
Provision for uncollectible note receivable (2)                                                             10,000
Other income                                                                                                   146
                                                                                                          --------
Loss before income taxes                                                                                  $ (8,528)
                                                                                                          ========

Total assets                                           123,151           36,222           19,488          $178,861
Depreciation and amortization                            8,812            3,094            1,642            13,548


FISCAL 1999
Revenues                                             $ 148,101          $82,650         $   --            $230,751
Income from restaurant operations (1)                   15,134           13,794              126            29,054

Operating income (loss)                                  5,038 (3)        6,731(4)        (2,160)(5)      $  9,609
Interest expense                                                                                            10,709
Other expense                                                                                                   42
                                                                                                          --------
Loss before income taxes                                                                                  $ (1,142)
                                                                                                          ========

Total assets                                           127,512           33,571           27,954          $189,037
Depreciation and amortization                            8,572            3,202            1,954            13,728


FISCAL 1998
Revenues                                             $ 151,853          $80,391         $   --            $232,244
Income from restaurant operations (1)                   16,048           13,559               12            29,619

Operating income (loss)                                  8,014 (6)        7,121           (2,339)         $ 12,796
Interest expense                                                                                            11,962
Other income                                                                                                   386
                                                                                                          --------
Income before income taxes                                                                                $  1,220
                                                                                                          ========

Total assets                                           134,973           33,572           27,730          $196,275
Depreciation and amortization                            8,914            3,000            2,344            14,258
</TABLE>


(1)  Income from operations is restaurant sales minus total operating expenses.

(2)  Non-cash charge for the $10,000,000 reserve for the Bruegger's Subordinated
     Note.

(3)  Includes charges for the impairment of assets and facility closing costs
     totaling $2,174,000.

(4)  Includes charges for the impairment of assets and facility closing costs
     totaling $159,000.

(5)  Includes charges for the impairment of assets and facility closing costs
     totaling $168,000.

(6)  Includes charges for the impairment of assets totaling $250,000.



                                       50
<PAGE>   51
{15} SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                                               Year ended October 29, 2000
                                            ----------------------------------------------------------
                                             First          Second           Third           Fourth
                                            Quarter         Quarter         Quarter (1)      Quarter (2)
                                            -------         -------         ----------       ---------
<S>                                         <C>             <C>             <C>               <C>
Total revenues                              $68,768         $53,589         $ 53,586          $ 52,073
Operating income (loss)                       3,813           3,387            2,449             2,851
Income (loss) before income taxes               534             934             (611)           (9,385)
Net income (loss)                           $   226         $   466         $   (733)         $ (9,670)
                                            =======         =======         ========          ========

Basic net income (loss) per share           $  0.02         $  0.04         $  (0.06)         $  (0.79)
                                            =======         =======         ========          ========
Diluted net income (loss) per share         $  0.02         $  0.04         $  (0.06)         $  (0.79)
                                            =======         =======         ========          ========

Weighted average shares:
Basic                                        12,530          12,287           12,265            12,235
Diluted                                      12,538          12,305           12,265            12,235
</TABLE>

<TABLE>
<CAPTION>
                                                          Year ended October 31, 1999
                                             --------------------------------------------------------
                                              First          Second           Third             Fourth
                                             Quarter        Quarter         Quarter (3)        Quarter
                                             -------        --------        ----------         -------
<S>                                          <C>             <C>             <C>               <C>
Total revenues                               $68,058         $53,709         $ 53,465          $55,519
Operating income                               3,413           2,954              123            3,119
Income (loss) before income taxes                218             366           (2,136)             410
 Net income (loss)                           $    87         $   146         $ (2,355)         $   165
                                             =======         =======         ========          =======
 Basic net income (loss) per share           $   .01         $   .01         $   (.19)         $  0.01
                                             =======         =======         ========          =======
 Diluted net income (loss) per share         $   .01         $   .01         $   (.19)         $  0.01
                                             =======         =======         ========          =======
Weighted average shares:
Basic                                         12,599          12,599           12,712           12,759
Diluted                                       12,629          12,603           12,712           12,760
</TABLE>



(1)  During the third quarter of fiscal 2000 the Company recorded a $717,000
     loss on the sale of a Grady's American Grill restaurant.

(2)  Includes the $10,000,000 non-cash charge to fully reserve for the
     Bruegger's Subordinated Note.

(3)  During the third quarter of fiscal 1999 the Company recorded asset
     impairment charges and a facility closing charge totaling $2,501,000.


                                       51
<PAGE>   52
QUALITY DINING, INC.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
of  Quality Dining, Inc.:

In our opinion, the consolidated balance sheets and the related consolidated
statements of operations, stockholders' equity and cash flows present fairly, in
all material respects, the financial position of Quality Dining, Inc. and its
subsidiaries at October 29, 2000 and October 31, 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
October 29, 2000, in conformity with accounting principles generally accepted in
the United States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.





PricewaterhouseCoopers LLP

Chicago, Illinois
December 20, 2000, except for Note 1
as to which the date is January 5, 2001



                                       52
<PAGE>   53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     There have been no changes in or disagreements with the Company's
independent accountants on accounting or financial disclosures.


                                       53
<PAGE>   54
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   The information required by this Item concerning the Directors and nominees
for Director of the Company and concerning disclosure of delinquent filers is
incorporated herein by reference to the Company's definitive Proxy Statement for
its 2001 Annual Meeting of Shareholders, to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company's last
fiscal year. Information concerning the executive officers of the Company is
included under the caption "Executive Officers of the Company" at the end of
Part I of this Annual Report. Such information is incorporated herein by
reference, in accordance with General Instruction G(3) to Form 10-K and
Instruction 3 to Item 401(b) of Regulation S-K.

ITEM 11.  EXECUTIVE COMPENSATION.

   The information required by this Item concerning remuneration of the
Company's officers and Directors and information concerning material
transactions involving such officers and Directors is incorporated herein by
reference to the Company's definitive Proxy Statement for its 2001 Annual
Meeting of Shareholders which will be filed pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

   The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference to the Company's definitive Proxy Statement for its 2001 Annual
Meeting of Shareholders which will be filed pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item concerning certain relationships and
related transactions is incorporated herein by reference to the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Shareholders which
will be filed pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year.


                                       54
<PAGE>   55
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  1.  Financial Statements:

         The following consolidated financial statements of the Company and its
         subsidiaries are set forth in Part II, Item 8.

         Consolidated Balance Sheets as of October 29, 2000 and October 31,
         1999.

         Consolidated Statements of Operations for the fiscal years ended
         October 29, 2000, October 31, 1999, and October 25, 1998.

         Consolidated Statements of Stockholders' Equity for the fiscal years
         ended October 29, 2000, October 31, 1999, and October 25, 1998.

         Consolidated Statements of Cash Flows for the fiscal years ended
         October 29, 2000, October 31, 1999, and October 25, 1998.

         Notes to Consolidated Financial Statements

         Report of Independent Accountants

     2.  Financial Statement Schedules:

         None

     3.  Exhibits:

         A list of exhibits required to be filed as part of this report is set
         forth in the Index to Exhibits, which immediately precedes such
         exhibits, and is incorporated herein by reference.

(b)      Reports on Form 8-K

         None.


                                       55
<PAGE>   56
                                   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.


                                                Quality Dining, Inc.


                                                By: /s/ Daniel B. Fitzpatrick
                                                   ----------------------------
                                                   Daniel B. Fitzpatrick
                                                   Chairman, President and
                                                   Chief Executive Officer

Date:  January 25, 2001

Pursuant to the requirements 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 dates indicated.

<TABLE>
<CAPTION>

               Signature                                          Title                                  Date
               ---------                                          -----                                  ----
<S>                                      <C>                                                      <C>
    /s/ Daniel B. Fitzpatrick            Chairman of the Board, President, Chief Executive        January 25, 2001
-----------------------------            Officer and Director (Principal Executive Officer)
Daniel B. Fitzpatrick

   /s/ Christopher L. Collier            Vice President-Finance                                   January 25, 2001
-----------------------------            (Principal Financial Officer)
Christopher L. Collier

   /s/ Jeanne Yoder                      Vice President, Controller                               January 25, 2001
----------------------------             (Principal Accounting Officer)
Jeanne Yoder

    /s/ James K. Fitzpatrick             Senior Vice President, Chief Development Officer and     January 25, 2001
----------------------------             Director
James K. Fitzpatrick

    /s/ Philip J. Faccenda               Director                                                 January 25, 2001
--------------------------
Philip J. Faccenda

    /s/ Ezra H. Friedlander              Director                                                 January 25, 2001
---------------------------
Ezra H. Friedlander

    /s/ Bruce M. Jacobson                Director                                                 January 25, 2001
---------------------------
Bruce M. Jacobson

    /s/ Steven M. Lewis                  Director                                                 January 25, 2001
---------------------------
Steven M. Lewis

    /s/ Christopher J. Murphy III        Director                                                 January 25, 2001
---------------------------------
Christopher J. Murphy III
</TABLE>


                                       56
<PAGE>   57
                                INDEX TO EXHIBITS


         Exhibit
           No.                        Description
           ---                        -----------
           2-F        (1)  Share Exchange Agreement, by and among Quality
                           Dining, Inc., Bruegger's Corporation, Nordahl L. Brue
                           and Michael J. Dressell, dated as of September 3,
                           1997


           2-G        (2)  Agreement and Plan of Merger, by and among Quality
                           Dining, Inc., Bagel Disposition Corporation and
                           Lethe, LLC, dated as of September 3, 1997

           3-A        (3)  (i) Restated Articles of Incorporation of
                           Registrant

                      (3)  (ii) Amendment to Registrant's Restated Articles of
                           Incorporation establishing the Series A Convertible
                           Cumulative Preferred Stock of the Registrant

                      (3)  (iii) Amendment to Registrant's Restated Articles of
                           Incorporation establishing the Series B Participating
                           Cumulative Preferred Stock of the Registrant

           3-B       (12)  By-Laws of the  Registrant, as amended to date

           4-A        (4)  Form of Mortgage, Assignment of Rents, Fixture Filing
                           and Security Agreement

           4-B        (4)  Form of Lease

           4-C        (4)  Form of Promissory Note

           4-D        (4)  Intercreditor Agreement by and among Burger King
                           Corporation, the Company and Chase Bank of Texas,
                           National Association, NBD Bank, N.A. and NationsBank,
                           N.A. effective as of May 11, 1999

           4-E        (4)  Intercreditor Agreement by and among Captec Financial
                           Group, Inc., CNL Financial Services, Inc., Chase Bank
                           of Texas, National Association and the Company dated
                           August 3, 1999.

           4-F        (4)  Collateral Assignment of Lessee's Interest in Leases
                           by and between Southwest Dining, Inc. and Chase Bank
                           of Texas, National Association dated July 26, 1999


                                       57
<PAGE>   58
           4-G        (4)  Collateral Assignment of Lessee's Interest in Leases
                           by and between Grayling Corporation and Chase Bank of
                           Texas, National Association dated July 26, 1999


           4-H        (4)  Collateral Assignment of Lessee's Interest in Leases
                           by and between Bravokilo, Inc. and Chase Bank of
                           Texas, National Association dated July 26, 1999

           4-I        (4)  Third Amended and Restated Revolving Credit Agreement
                           dated as of May 11, 1999 by and between Quality
                           Dining, Inc. and GAGHC, Inc., as Borrowers, Chase
                           Bank of Texas, National Association, as
                           Administrative Agent, NBD Bank, N.A., as
                           Documentation Agent, NationsBank, N.A. (South) as
                           Co-Agent, and LaSalle Bank, N.A., The Northern Trust
                           Company, KeyBank National Association (successor in
                           interest to Society National Bank), SunTrust Bank,
                           Central Florida, N.A. (collectively the "Banks")

           4-J        (4)  First Amendment to Third Amended and Restated
                           Revolving Credit Agreement dated as of July 26, 1999
                           by and between Quality Dining, Inc., and GAGHC, Inc.,
                           as Borrowers and the Banks

           4-K        (4)  Second Amendment to Third Amended and Restated
                           Revolving Credit Agreement dated as of September 9,
                           1999 by and between Quality Dining, Inc. and GAGHC,
                           Inc., Banks which are Party thereto and Chase Bank of
                           Texas, National Association

           4-L        (5)  Rights Agreement, dated as of March 27, 1997, by and
                           between Quality Dining, Inc. and KeyCorp Shareholder
                           Services, Inc., with exhibits

           4-M       (13)  Third Amendment to Third Amended and Restated
                           Revolving Credit Agreement dated as of April 26, 2000

           4-N       (14)  Reaffirmation of Subsidiary Guaranty

          10-A        (6)  Form of Burger King Franchise Agreement

          10-B        (6)  Form of Chili's Franchise Agreement

          10-C             Non-Exclusive Development Agreement between Burger
                           King Corporation and Bravokilo, Inc. dated November
                           3, 2000

          10-D        (4)  Second Amendment to Development Agreement by and
                           between Southwest Dining, Inc. and Brinker
                           International, Inc. dated July 26, 1999


                                       58
<PAGE>   59
          10-E        (6)  (i) Target Reservation Agreement between Burger King
                           Corporation and the Registrant dated December 24,
                           1993; (ii) Side Letter Agreement to Target
                           Reservation Agreement dated December 21, 1993

          10-F        (6)  Development Agreement between Chili's, Inc. and the
                           Registrant dated June 27, 1990

          10-G        (4)  *Employment Agreement between the Company and John C.
                           Firth dated August 24, 1999

          10-H        (7)  *1997 Stock Option and Incentive Plan of the
                           Registrant

          10-I        (8)  *1993 Stock Option and Incentive Plan, as amended of
                           the Registrant

          10-J        (6)  *Outside Directors Stock Option Plan of the
                           Registrant adopted December 17, 1993

          10-K        (6)  Lease Agreement between B.K. Main Street Properties
                           and the Registrant dated January 1, 1994

          10-L        (7)  Schedule of Related Party Leases

          10-M        (6)  Form of Related Party Lease

          10-O       (12)  *1999 Outside Directors Stock Option Plan

          10-Q        (4)  Non Compete Agreement between the Company and James
                           K. Fitzpatrick dated June 1, 1999

          10-R        (4)  Non Compete Agreement between the Company and Gerald
                           O. Fitzpatrick dated June 1, 1999

          10-S        (4)  Non Compete Agreement between the Company and David
                           M. Findlay dated June 1, 1999

                                       59
<PAGE>   60
          10-T        (9)  First Amendment dated May 2, 1995 to Development
                           Agreement between Chili's, Inc. and the Registrant
                           dated June 27, 1990

          10-U        (4)  Non Compete Agreement between the Company and Robert
                           C. Hudson dated June 1, 1999

          10-W        (9)  Non-Competition Agreement between the Registrant and
                           William R. Schonsheck dated August 14, 1995

          10-X        (9)  Lease Agreement for Farmington Hills #509 between the
                           Registrant and William R. Schonsheck dated August 14,
                           1995

          10-Y        (9)  Lease Agreement for Belleville #4814 between the
                           Registrant and William R. Schonsheck dated August 14,
                           1995

          10-Z        (9)  Purchase and Sale Agreement between the Registrant
                           and John D. Fitzpatrick dated July 10, 1995

          10-AD      (10)  Priority Charter Agreement between the Registrant and
                           Burger Management of South Bend #3 Inc., dated
                           September 1, 1994

          10-AF      (10)  Lease Agreement between the Registrant and Six Edison
                           Lakes, L.L.C. dated September 19, 1996

          10-AG      (11)  Amended and Restated Priority Charter Agreement
                           between the Registrant and Burger Management of South
                           Bend #3 Inc., dated October 21, 1998

          10-AO            Employment Agreement between the Company and Daniel
                           B. Fitzpatrick dated October 30, 2000

          10-AP      (12)  Form of Agreement for Restricted Shares Granted under
                           Quality Dining, Inc. 1997 Stock Option and Incentive
                           Plan dated June 1, 1999 between the Company and
                           certain executive officers identified on the schedule
                           attached thereto.

          10-AQ      (12)  Severance Agreement and General Release between the
                           Company and Marti'n Miranda dated January 14, 2000

          10-AR            Form of Agreement for Restricted Shares Granted

                                       60
<PAGE>   61
                           under Quality Dining, Inc. 1997 Stock Option and
                           Incentive Plan dated December 20, 2000, between the
                           Company and certain executive officers identified on
                           the schedule attached thereto.

          10-AS            Early Successor Incentive Program (Fiscal 2000)
                           Addendum to Successor Franchise Agreement

          10-AV      (14)  Severance Agreement and General Release between the
                           Company and David M. Findlay dated September 1, 2000

          10-AX       (4)  Consulting Agreement between the Company and William
                           R. Schonsheck dated August 13, 1999

          10-AY      (12)  Form of Agreement for Restricted Shares Granted under
                           Quality Dining, Inc. 1997 Stock Option and Incentive
                           Plan dated December 15, 1999 between the Company and
                           certain executive officers identified on the schedule
                           attached thereto

          10-AZ            Franchisee Commitment dated January 27, 2000

           21              Subsidiaries of the Registrant

           23              Written consent of PricewaterhouseCoopers LLP


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

*        The indicated exhibit is a management contract, compensatory plan or
         arrangement required to be filed by Item 601 of Regulation S-K.

(1)      The copy of this exhibit filed as exhibit number 1 to Amendment No. 5
         of Schedule 13D filed by Nordahl L. Brue, Michael J. Dressell, Steven
         P. Schonberg and David T. Austin, dated September 4, 1997, is
         incorporated herein by reference.

(2)      The copy of this exhibit filed as exhibit number 2 to Amendment No. 5
         of Schedule 13D filed by Nordahl L. Brue, Michael J. Dressell, Steven
         P. Schonberg and David T. Austin, dated September 4, 1997, is
         incorporated herein by reference.


                                       61
<PAGE>   62
(3)      The copy of this exhibit filed as the same exhibit number to the
         Company's Registration Statement on Form 8-A filed on April 1, 1997 is
         incorporated herein by reference.

(4)      The copy of this exhibit filed as the same exhibit number to the
         Company's Quarterly Report on Form 10-Q for the quarterly period ended
         August 1, 1999, is incorporated herein by reference.

(5)      The copy of this exhibit filed as Exhibit 10-AO to the Company's
         Registration Statement on Form 8-A filed on April 1, 1997 is
         incorporated herein by reference.

(6)      The copy of this exhibit filed as the same exhibit number to the
         Company's Registration Statement on Form S-1 (Registration No.
         33-73826) is incorporated herein by reference.

(7)      The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10K for the year ended October 26, 1997 is
         incorporated herein by reference.

(8)      The copy of this exhibit filed as the same exhibit number to the
         Company's Quarterly Report on Form 10-Q for the quarterly period ended
         May 12, 1996 is incorporated herein by reference.

(9)      The copy of this exhibit filed as the same exhibit number to the
         Company's Registration Statement on Form S-1 (Registration No.
         33-96806) is incorporated herein by reference.

(10)     The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10-K for the year ended October 27, 1996 is
         incorporated herein by reference.

(11)     The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10-K for the year ended October 25, 1998 is
         incorporated herein by reference.

(12)     The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10-K for the year ended October 29, 1999 is
         incorporated herein by reference.

(13)     The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10-Q for the quarterly period ended May 14,
         2000 is incorporated herein by reference.

(14)     The copy of this exhibit filed as the same exhibit number to the
         Company's Report on Form 10-Q for the quarterly period ended August 6,
         2000 is incorporated herein by reference.

                                       62