EXHIBIT 10.19

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------X
                                            :

                                            :
In re:                                         Chapter 11
                                            :
RANCH *1, INC., ET AL.,                        Case Nos. 01-41853 (AJG)
                                            :        through 01-41881 (AJG)

               Debtors.                     :  (Jointly Administered)

                                            :

                                            :

--------------------------------------------X


             FIRST AMENDED DISCLOSURE STATEMENT PURSUANT TO SECTION
               1125 OF THE BANKRUPTCY CODE FOR THE JOINT PLAN OF
                 REORGANIZATION OF RANCH *1, INC. AND THE OTHER
                ABOVE-CAPTIONED DEBTORS AND DEBTORS-IN-POSSESSION




                                        LOUIS T. DELUCIA (LD-3879)
                                        ALAN J. BRODY (AB-4777)
                                        BUCHANAN INGERSOLL, P.C.
                                        700 Alexander Park
                                        Suite 300
                                        Princeton, New Jersey 08540
                                        (609) 986-6800
                                        -and-
                                        140 Broadway
                                        New York, New York 10005
                                        (646) 458-2340


                                        ATTORNEYS FOR THE DEBTORS
                                        AND DEBTORS-IN-POSSESSION


December 31, 2001


          THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE
          PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A
          DISCLOSURE  STATEMENT  HAS BEEN  APPROVED BY THE  BANKRUPTCY
          COURT.  THIS  DISCLOSURE  STATEMENT IS BEING  SUBMITTED  FOR
          APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE COURT.
<PAGE>
                  DISCLOSURE STATEMENT, DATED DECEMBER 31, 2001


                              SOLICITATION OF VOTES
                               WITH RESPECT TO THE
                          JOINT PLAN OF REORGANIZATION
                                       OF
                             RANCH *1, INC., ET AL.


     Ranch *1,  Inc.  ("Ranch  *1") and the other  above-captioned  debtors  and
debtors-in-possession  (collectively,  the "Debtors")(1)  submit this disclosure
statement (the "Disclosure  Statement") to all creditors and parties-in-interest
pursuant to Section 1125 of title 11 of the United  States Code, as amended (the
"Bankruptcy Code"), in order to disclose information important and necessary for
a  reasonably   informed  decision  for  each  creditor  and   party-in-interest
respecting  their right to vote on, or otherwise  participate  in,  confirmation
proceedings  concerning  the  plan of  reorganization  jointly  proposed  by the
Debtors,  the Official Committee of Unsecured  Creditors of the Debtors' Estates
(the "Committee") and R1 Franchise Systems,  LLC ("R1 Franchise") dated November
19, 2001 (the  "Plan"),  filed with the United States  Bankruptcy  Court for the
Southern District of New York. A copy of the Plan is attached to this Disclosure
Statement as EXHIBIT A, and the terms and definitions  contained in the Plan are
incorporated herein by reference.

     THE  DEBTORS  AND THE  COMMITTEE  BELIEVE  THAT  THE  PLAN  IS IN THE  BEST
INTERESTS OF CREDITORS. ALL CREDITORS ENTITLED TO VOTE THEREON ARE URGED TO VOTE
IN  FAVOR OF THE  PLAN.  A  SUMMARY  OF THE  VOTING  INSTRUCTIONS  IS SET  FORTH
BEGINNING  ON  PAGE  19  OF  THIS  DISCLOSURE  STATEMENT.   ADDITIONAL  DETAILED
INSTRUCTIONS ARE CONTAINED ON THE BALLOTS  DISTRIBUTED TO CREDITORS  ENTITLED TO
VOTE ON THE PLAN. TO BE COUNTED,  BALLOTS MUST BE DULY  COMPLETED,  EXECUTED AND
RECEIVED  BY  4:00  P.M.,  EASTERN  TIME,  ON  FEBRUARY  8,  2002  (THE  "VOTING
DEADLINE"), UNLESS SUCH DEADLINE IS EXTENDED BY ORDER OF THE COURT.

     THE  CONFIRMATION  AND  EFFECTIVENESS  OF THE PROPOSED  PLAN ARE SUBJECT TO
MATERIAL CONDITIONS PRECEDENT, SOME OF WHICH MAY NOT BE SATISFIED. SEE "OVERVIEW
OF THE PLAN -- CONDITIONS TO  CONFIRMATION  AND THE EFFECTIVE  DATE OF THE PLAN"
AND "VOTING AND CONFIRMATION OF THE PLAN -- ACCEPTANCE OR CRAMDOWN." THERE IS NO
ASSURANCE THAT THESE CONDITIONS WILL BE SATISFIED OR WAIVED.

     No person is authorized  by any of the Debtors in connection  with the Plan
or the  solicitation  of acceptances  of the Plan to give any  information or to
make any representation other than as contained in this Disclosure Statement and
the exhibits  and  schedules  attached  hereto or  incorporated  by reference or
referred to herein,  and, if given or made, such  information or  representation
may not be relied upon as having been authorized by any of the Debtors. Although
the Debtors will make  available to creditors  entitled to vote on the Plan such
additional  information as may be required by applicable law prior to the Voting
Deadline,  the  delivery  of  this  Disclosure  Statement  will  not  under  any
circumstances  imply  that the  information  herein  is  correct  as of any time
subsequent to the date hereof.

----------
(1)  The Debtors include:  Ranch *1, Inc.; Ranch *1 Metro,  Inc.; Ranch *1 Metro
     Tech, Inc.; Ranch *1 Pearl,  Inc.; Ranch *1 Group,  Inc.;  Moorgrho,  Inc.;
     Ranch *1 Eighth Avenue, Inc.; Ranch *1 of America,  Inc.; Ranch *1 Fashion,
     Inc.;  Ranch  *1  Number  0117,  Inc.;  Ranch  *1  Palisades,   Inc.;  Dome
     Enterprises,  Inc.;  Ranch *1 Number 0118, Inc.; Ranch *1 Number 202, Inc.;
     Ranch *1 Number 1701, Inc.; Ranch *1 of Broadway;  Ranch *1 on 34th Street,
     Inc.; Ranch *1 Number 0207, Inc.; Ranch *1 0112, Inc.; Ranch *1 52nd, Inc.;
     Ranch *1 Number 0137,  Inc.;  Ranch *1 Number 0113,  Inc.;  Ranch *1 Number
     0135,  Inc.;  Ranch *1 Number 0125,  Inc.; OME, Inc.; Ranch *1 Number 1904,
     Inc.; Ranch *1 Downtown,  Inc.; Ranch *1 Number 0150, Inc.; Ranch *1 Number
     0128, Inc.

                                      -i-
<PAGE>
     ALL CREDITORS AND EQUITY SECURITY  INTEREST HOLDERS ENTITLED TO VOTE ON THE
PLAN ARE  ENCOURAGED  TO READ AND  CAREFULLY  CONSIDER  THIS  ENTIRE  DISCLOSURE
STATEMENT,  INCLUDING THE PLAN  ATTACHED AS EXHIBIT A AND THE MATTERS  DESCRIBED
UNDER "RISK FACTORS," PRIOR TO SUBMITTING BALLOTS PURSUANT TO THIS SOLICITATION.

     The  summaries  of the  Plan  and the  other  documents  contained  in this
Disclosure Statement are qualified by reference to the Plan itself, the exhibits
thereto and documents  described therein as being filed prior to approval of the
Disclosure Statement.

     The  information  contained in this  Disclosure  Statement,  including  the
information  regarding the history,  business and operations of the Debtors, the
historical,  projected and budgeted financial  information regarding the Debtors
and the liquidation  analyses relating to the Debtors,  is included for purposes
of  soliciting  acceptances  of the  Plan,  but,  as to  contested  matters  and
adversary proceedings, is not to be construed as admissions or stipulations, but
rather as statements made in settlement negotiations.

     THIS DISCLOSURE STATEMENT INCLUDES FORWARD-LOOKING STATEMENTS BASED LARGELY
ON THE CURRENT  EXPECTATION OF THE DEBTORS AND  PROJECTIONS  ABOUT FUTURE EVENTS
AND  FINANCIAL  TRENDS  AFFECTING  THE  FINANCIAL  CONDITION  OF THE DEBTORS' OR
REORGANIZED RANCH *1'S BUSINESS. THE WORDS "BELIEVE," "MAY," "WILL," "ESTIMATE,"
"CONTINUE,"  "ANTICIPATE,"  "INTEND," "EXPECT" AND SIMILAR EXPRESSIONS  IDENTIFY
THESE FORWARD-LOOKING  STATEMENTS.  THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO A NUMBER OF RISKS,  UNCERTAINTIES AND ASSUMPTIONS,  INCLUDING THOSE DESCRIBED
BELOW  UNDER  THE  CAPTION   "RISK   FACTORS."  IN  LIGHT  OF  THESE  RISKS  AND
UNCERTAINTIES,  THE FORWARD-LOOKING  EVENTS AND CIRCUMSTANCES  DISCUSSED IN THIS
DISCLOSURE  STATEMENT MAY NOT OCCUR AND ACTUAL  RESULTS COULD DIFFER  MATERIALLY
FROM THOSE ANTICIPATED IN THE  FORWARD-LOOKING  STATEMENTS.  NEITHER THE DEBTORS
NOR  REORGANIZED  RANCH *1 UNDERTAKE ANY OBLIGATION TO PUBLICLY UPDATE OR REVISE
ANY FORWARD-LOOKING STATEMENTS,  WHETHER AS A RESULT OF NEW INFORMATION,  FUTURE
EVENTS OR OTHERWISE.

     ALL CAPITALIZED  TERMS IN THIS DISCLOSURE  STATEMENT NOT OTHERWISE  DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN.

                                      -ii-
<PAGE>
                                TABLE OF CONTENTS



                                                                            PAGE


INTRODUCTION ................................................................  1

OVERVIEW OF THE DEBTORS .....................................................  1

CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILINGS ....................  2

OVERVIEW OF THE PLAN ........................................................  2

  Introduction ..............................................................  2
  Substantive Consolidation of Debtors and Cancellation of
    Intercompany Claims .....................................................  2
  Summary of Classes and Treatment of Claims and Interests ..................  3
  Information Regarding Assertion and Treatment of Administrative Claims,
    Priority Claims and Tax Claims ..........................................  5
      Administrative Claims .................................................  5
      Tax Claims ............................................................  6
      Priority Claims .......................................................  6
  Conditions to Confirmation, the Effective Date and Consummation
    of the Plan .............................................................  6
  Modification or Revocation of the Plan ....................................  8

OPERATIONS DURING THE REORGANIZATION CASES ..................................  8
  First Day Relief ..........................................................  8
  Joint Administration of Debtor's Cases ....................................  8
  Debtor-in-Possession Financing ............................................  9
  Appointment of Creditors' Committee .......................................  9
  Claims Process and Bar Dates ..............................................  9
  Executory Contracts and Unexpired Leases .................................. 10
  Exclusivity ............................................................... 11
  Recovery Actions .......................................................... 11
    Introduction
    Preference Claims ....................................................... 11
    Fraudulent Conveyance Actions ........................................... 11
    Avoidance Actions to be Commenced by the Debtors ........................ 12
  Projected Financial Information ........................................... 12
    Introduction
    Principal Assumptions for the Projections ............................... 13
    Projections
  Management and Board of Directors ......................................... 13
    Reorganized Ranch *1 Board of Directors ................................. 13
    Reorganized Ranch *1 Executive Officers ................................. 14
    Reorganized Ranch *1 Key Employees ...................................... 15

                                     -iii-
<PAGE>
RISK FACTORS ................................................................ 15
  Projections Are Inherently Uncertain ...................................... 15

GENERAL INFORMATION CONCERNING THE PLAN ..................................... 16
  Discharge of Claims and Termination of Interests; Related Injunction ...... 16
  Discharge Injunction ...................................................... 16
  Preservation of Rights of Action Held by the Debtors or
    Reorganized Ranch *1 .................................................... 17
  Releases and Related Injunction ........................................... 18
  Vesting of Property in the Debtors ........................................ 18

DISTRIBUTIONS UNDER THE PLAN ................................................ 18
  General ................................................................... 18
  Manner of Payments Under the Plan ......................................... 18
  Payment Dates ............................................................. 18
  Disbursing Agent .......................................................... 19
  Fractional Cents .......................................................... 19
  Non-Negotiated Checks ..................................................... 19
  Unclaimed Distributions ................................................... 19
  No Cash Payments of $10.00 or Less on Account of Allowed Claims ........... 19
  Disputed Payments or Distributions ........................................ 19
  Procedures for Resolving Disputed Claims .................................. 20

VOTING AND CONFIRMATION OF THE PLAN ......................................... 20
  General ................................................................... 20
  Voting Procedures and Requirements ........................................ 21
  Confirmation Hearing ...................................................... 21
  Confirmation .............................................................. 22
  Acceptance or Cramdown .................................................... 22
  Best Interests Test; Liquidation Analysis ................................. 23
  Feasibility ............................................................... 24
  Compliance with Applicable Provisions of the Bankruptcy Code .............. 24

RECOMMENDATION AND CONCLUSION ............................................... 25

                                      -iv-
<PAGE>
                                  INTRODUCTION

     The Debtors are seeking  approval of the Plan,  a copy of which is attached
hereto as EXHIBIT A. This  Disclosure  Statement  is submitted by the Debtors in
connection with the solicitation of acceptances of the Plan.

     The  confirmation  of a plan of  reorganization,  which is the  vehicle for
satisfying  the rights of holders of claims  against and equity  interests  in a
debtor,  is the overriding goal of a chapter 11 case. The primary  objectives of
the Plan are to: (a) alter the  Debtors  debt and capital  structures  to permit
them to emerge from their Chapter 11 Cases with viable capital  structures;  (b)
maximize the value of the ultimate  recoveries to all creditor  groups on a fair
and equitable basis; and (c) settle,  compromise or otherwise dispose of certain
claims and interests on terms that the Debtors believe to be fair and reasonable
and in the best  interests of their  respective  Estates,  creditors  and equity
security  interest  holders.  The Plan  provides for,  among other  things:  (a)
transactions  that  will  result  in the  ultimate  consolidated  company  being
Reorganized Ranch *1, the stock of which will be owned by R1 Franchise;  (b) the
cancellation  of stock in the Debtors;  (c) the  cancellation  of certain  other
indebtedness in exchange for cash,  notes and common stock in Reorganized  Ranch
*1 and other entities;  (d) the satisfaction of Administrative  Claims;  (e) the
assumption,  assumption and  assignment or rejection of Executory  Contracts and
Unexpired  Leases to which any Debtor is a party;  and (f) the  selection of the
board of directors of Reorganized Ranch *1.

     By an order of the Bankruptcy Court dated February 8, 2002, this Disclosure
Statement has been approved as containing  "adequate  information" for creditors
and equity security  interest  holders of the Debtors in accordance with Section
1125 of the Bankruptcy Code. The Bankruptcy Code defines "adequate  information"
as  "information  of a kind, and in sufficient  detail,  as far as is reasonably
practicable  in  light of the  nature  and the  history  of the  debtor  and the
condition of the debtor's  books and records,  that would enable a  hypothetical
reasonable  investor  typical of holders of claims or  interests of the relevant
class  to make an  informed  judgment  about  the  plan.  . . ." 11  U.S.C.  ss.
1125(a)(1).

     THE  DEBTORS'   BOARD  OF  DIRECTORS  AND  THE  COMMITTEE   (THE  STATUTORY
REPRESENTATIVE  OF  UNSECURED  CREDITORS)  BELIEVE  THAT THE PLAN IS IN THE BEST
INTERESTS  OF  CREDITORS.  ALL  CREDITORS  ENTITLED TO VOTE ARE URGED TO VOTE IN
FAVOR OF THE PLAN BY NO LATER  THAN  4:00  P.M.,  EASTERN  TIME,  ON THE  VOTING
DEADLINE.

     The  requirements  for  Confirmation,  including  the vote of  creditors to
accept the Plan and certain of the  statutory  findings that must be made by the
Bankruptcy  Court,  are set forth in  "Voting  and  Confirmation  of the  Plan."
Confirmation of the Plan and the occurrence of the Effective Date are subject to
a number of  significant  conditions,  which are  summarized in "Overview of the
Plan -- Conditions to Confirmation and the Effective Date of the Plan." There is
no assurance that these conditions will be satisfied or waived.

                            OVERVIEW OF THE DEBTORS

     The Debtors  own,  operate,  franchise  and license  upscale  quick-service
restaurants that specialize in fresh-grilled  skinless,  boneless chicken breast
sandwiches,  which are  advertised  as "The Best  Grilled  Chicken  Sandwich  on
Earth,"  Famous  Ranch *1 Fries and a variety of  freshly-prepared  healthy menu
selections.  In  July  2000,  the  Debtors  were  selected  by  RESTAURANTS  AND
INSTITUTIONS,  an industry  publication,  as one of the top 400 U.S.  restaurant
concepts of the year and were  awarded  "Best Fast Food of New York" by NEW YORK
MAGAZINE in April  1996.  The Debtors  were  originally  founded in 1989 and the
first  Ranch *1  restaurant,  a 1,000  square  foot  restaurant  on  Broadway in
Manhattan  next to the Ed  Sullivan  Theater,  was  opened  in 1990.  Due to the

                                      -1-
<PAGE>
success of the first restaurant,  a second restaurant was opened and the Debtors
began  franchising  their  operations in 1994,  growing to ten (10)  system-wide
restaurants by 1996. The Debtors are privately owned and operated.

     In November 1996,  George Naddaff founder of Boston Chicken,  and other key
investors  purchased the Ranch *1 business from its former owners.  Ranch *1 has
continued  its   dedication  to  providing  high  quality  food  in  an  upscale
quick-service  environment.  As of the Petition  Date,  there are fifty-one (51)
Ranch *1 restaurants located in twelve (12) States, the District of Columbia and
Taiwan.  The  Debtors  own  and  operate,  as of the  Petition  Date,  four  (4)
restaurants,  and their  franchisees  and  licensees  operate  forty-seven  (47)
restaurants.  All of the Debtors' company owned stores are currently  located in
the borough of Manhattan in New York City.  The Debtors'  franchise  restaurants
are  located  in New York,  New  Jersey,  Maryland,  Arizona,  the  District  of
Columbia,  Virginia, North Carolina, Missouri,  Pennsylvania,  Texas, Tennessee,
Colorado  and  Indiana.  The  Debtors  and  Reorganized  Ranch  *1  plan to open
additional  restaurants,  including  both domestic and  international  franchise
operations.

            CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILINGS

     Prior to the Petition Date,  the Debtors  launched  aggressive  franchising
efforts intent on opening 1,000 franchises domestically and internationally. The
Debtors  attempted  to raise  funds by the private  sale of equity,  in order to
expand the business.  Due to adverse market conditions,  the Debtors were unable
to go forward  with  their  equity  offerings.  Shortly  thereafter,  one of the
Debtors'  officers (who is no longer an officer of the Debtors) was charged with
criminal  allegations  completely  unrelated  to the  Debtors'  business  plans.
Although Ranch *1 was not implicated by the indictments in any  wrongdoing,  the
charges brought adverse notoriety to the company.  The negative publicity caused
by the criminal  allegations and continuing liquidity problems made it difficult
for the Debtors to meet their day-to-day cash operating needs. As a result,  the
Debtors  determined  to seek relief under Chapter 11 of the  Bankruptcy  Code in
order to  maintain  stable  day-to-day  operations  by  improving  the  Debtors'
liquidity by availing  themselves of the financing  provisions of the Bankruptcy
Code while they pursue their long term strategic objectives.

                              OVERVIEW OF THE PLAN

          INTRODUCTION

     The  following is a brief  overview of certain  material  provisions of the
Plan.  This overview is qualified in its entirety by reference to the provisions
of the Plan,  a copy of which is attached  hereto as EXHIBIT A, and the exhibits
thereto,  as amended  from time to time.  For a  description  of  certain  other
significant  terms  and  provisions  of  the  Plan,  see  "General   Information
Concerning the Plan" and "Distributions Under the Plan."

     SUBSTANTIVE CONSOLIDATION OF DEBTORS AND CANCELLATION OF INTERCOMPANY
     CLAIMS

     On the  Effective  Date,  the  Chapter 11 Cases and the  Debtors  and their
Estates shall only be  substantively  consolidated  for all purposes of the Plan
and shall not be deemed to alter,  amend or  destroy  the  Debtors  as  separate
entities for any other purpose.  The assets and liabilities of the Debtors shall
be pooled and all Allowed  Claims shall be satisfied from the assets of a single
consolidated  Estate.  Any Claims  against one or more of the Debtors based on a
guaranty,  indemnity,  co-signature,  surety or  otherwise,  of  Claims  against
another  Debtor(s)  shall be treated as a single Claim against the  consolidated
Estate of the Debtors, and shall be entitled to distribution under the Plan only
with  respect to such  single  Claim.  The Court  shall  consider  the  Debtors'
application for substantive  consolidation at the  Confirmation  Hearing and any
objections to substantive consolidation shall be served and filed as is required
for objections to the Confirmation of the Plan.

                                      -2-
<PAGE>
     On the Effective Date, all  intercompany  Claims that exist or may exist by
and amongst the Debtors shall be extinguished, discharged and forgiven.

     SUMMARY OF CLASSES AND TREATMENT OF CLAIMS AND INTERESTS

     The  classification  of Allowed Claims,  the estimated  aggregate amount of
Allowed Claims in each Class,  the amount and nature of distributions to holders
of Allowed Claims in each Class are summarized in the table below. In accordance
with Section 1123(a)(1) of the Bankruptcy Code,  Administrative Claims. Priority
Claims and Tax Claims  have not been  classified.  For a  discussion  of certain
additional  matters related to  Administrative  Claims,  Priority Claims and Tax
Claims,  see "Information  Regarding  Assertion and Treatment of  Administrative
Claims, Priority Claims and Tax Claims."

     The  information set forth in the table below with respect to each Class of
Claims is presented on a combined  basis for all of the Debtors in that Class to
which such information is applicable. The estimated aggregate amounts of Allowed
Claims are based on the  Debtors'  estimates  of the  aggregate  amounts of such
Allowed Claims that the Debtors  believe will be asserted upon resolution of all
such Claims that the Debtors believe will be Disputed  Claims.  Certain of these
Disputed  Claims are  likely to be  material,  and the total  amount of all such
Claims,  including  Disputed  Claims,  may be  materially in excess of the total
amount of Allowed Claims assumed in the development of the Plan and reflected in
the table below.

     THE AMOUNTS SHOWN IN THE TABLE BELOW AS "ESTIMATED  AGGREGATE ALLOWED CLAIM
AMOUNTS"  ARE BASED UPON THE  DEBTORS'  REVIEW OF CLAIMS  FILED PRIOR TO THE BAR
DATE AND THE DEBTORS' BOOKS AND RECORDS AND MAY BE SUBSTANTIALLY  REVISED IN THE
COURSE OF THE ONGOING CLAIMS RECONCILIATION  PROCESS. SEE "OPERATIONS DURING THE
REORGANIZATION CASES - CLAIMS PROCESS AND BAR DATES." FURTHER, THE AMOUNT OF ANY
DISPUTED  CLAIM  THAT  ULTIMATELY  IS  ALLOWED  BY THE  BANKRUPTCY  COURT MAY BE
SIGNIFICANTLY  MORE OR LESS  THAN  THE  ESTIMATED  AMOUNT  OF SUCH  CLAIM.  AS A
CONSEQUENCE,  THE ACTUAL ULTIMATE  AGGREGATE AMOUNT OF ALLOWED CLAIMS MAY DIFFER
SIGNIFICANTLY FROM THE ESTIMATE SET FORTH BELOW. ACCORDINGLY,  THE AMOUNT OF THE
PRO RATA DISTRIBUTION THAT ULTIMATELY WILL BE RECEIVED BY A HOLDER OF AN ALLOWED
CLAIM MAY BE ADVERSELY OR FAVORABLY  AFFECTED BY THE AGGREGATE  AMOUNT OF CLAIMS
ULTIMATELY  ALLOWED  IN SUCH  CLASS.  SEE "RISK  FACTORS -  DISPUTED  CLAIMS MAY
ADVERSELY  AFFECT  DISTRIBUTION  AMOUNTS."  DISTRIBUTIONS  TO HOLDERS OF ALLOWED
CLAIMS IN EACH CLASS WILL BE MADE ON AN  INCREMENTAL  BASIS  UNTIL ALL  DISPUTED
CLAIMS IN SUCH CLASS HAVE BEEN RESOLVED.  SEE  "DISTRIBUTIONS  UNDER THE PLAN --
TIMING AND CALCULATION OF "AMOUNTS TO BE DISTRIBUTED" AND  "DISTRIBUTIONS  UNDER
THE PLAN -- DISPUTED CLAIMS; RESERVES AND ESTIMATIONS."

                                      -3-
<PAGE>
DESCRIPTION AND AMOUNT
OF CLAIMS OR INTERESTS                                 TREATMENT
----------------------                                 ---------
Class 1 (Allowed Secured Claim of R1    Unimpaired.    In   exchange   for   the
Franchise):                             financial       accommodations      more
                                        particularly set forth herein and in the
                                        Plan,  R1  Franchise  shall be acquiring
                                        and shall be issued one hundred  percent
Estimated Aggregate Allowed             (100%)  of the  stock  (equity  security
Class 1 Claim:                          interests)  in  Reorganized   Ranch  *1.
                                        Specifically, in exchange for making and
                                        funding:     (i)    the    Net    Equity
                                        Contribution,     and    (ii)    causing
$1,200,000.00                           Reorganized  Ranch  *1  to  execute  and
                                        deliver the Class 2 Note and the Insider
                                        Note,  R1  Franchise  shall  receive one
                                        hundred  percent  (100%)  of all  Equity
                                        Security  Interests in Reorganized Ranch
                                        *1.

Class 2 (Allowed Non-Insider            Impaired.  Within thirty (30) days after
Unsecured Claims):                      the  Effective  Date,  each holder of an
                                        Allowed   Non-Insider   Unsecured  Claim
                                        (Class 2 Claims)  shall  receive its PRO
                                        RATA   distribution   the   Net   Equity
                                        Contribution.     The     Net     Equity
Estimated Allowed Class 2 Claims:(2)    Contribution is calculated as the sum of
$5,500,000.00 to $6,500,000.00          the  Equity   Contribution  paid  by  R1
                                        Franchise   ($2,750,000.00),   less  the
                                        Professional Reserve ($125,000.00), less
                                        the   Allowed   Administrative   Claims,
                                        discussed  hereinafter.   Within  thirty
                                        (30) days after the Effective  Date, the
                                        Committee shall receive the Class 2 Note
                                        for  the   benefit  of  the  holders  of
                                        Allowed Non-Insider Unsecured Claims.(3)

                                        Estimated Distribution  Percentage:  55%
                                        to 65%

----------
(2)  The  Estimated  Allowed  Class 2 and  Class 3  Claims  are  based  upon the
     Debtors'  review of  Claims  filed  prior to the Bar Date and the  Debtors'
     books and  records  and may be  substantially  revised in the course of the
     ongoing  claims   reconciliation   process.   See  "Operations  During  the
     Reorganization Cases - Claims Process and Bar Dates."
(3)  The Class 2 Note shall be in the principal sum of  $2,250,000.00,  together
     with  interest  at seven  percent  (7%) per annum,  compounded  and payable
     semi-annually  with the first payment (of nine equal  payments)  commencing
     twelve  (12) months  after the  Effective  Date.  The Class 2 Note shall be
     secured by a first priority lien in the amount then  outstanding  under the
     Class 2 Note on all royalties to be paid by Ranch *1 franchises existing as
     of the  Confirmation  Date,  until such time as the Class 2 Note is paid in
     full.

                                      -4-
<PAGE>
DESCRIPTION AND AMOUNT
OF CLAIMS OR INTERESTS                                 TREATMENT
----------------------                                 ---------
Class 3 (Allowed Insider Unsecured      Impaired.  Within thirty (30) days after
Claims):(4)                             the Effective  Date,  (x) each holder of
                                        an  Allowed  Class 3  Insider  Unsecured
                                        Claim  that  is an  Accredited  Investor
                                        shall  receive its pro rata share (based
Estimated Aggregate Class 3             on the aggregate amount of Allowed Class
Allowed Claims:                         3  Claims)  of:  (A)  143,750  shares of
                                        common stock of Kahala Corp. (KAHA) (the
                                        "Kahala  Stock");  plus (B) the proceeds
                                        of  the  Insider  Note,(5) and (y)  each
$2,300,000.00                           holder  of an  Allowed  Class 3  Insider
                                        Unsecured   Claim   that   is   not   an
                                        Accredited  Investor  shall  receive (A)
                                        its  pro  rata   share   (based  on  the
                                        aggregate  amount  of  Allowed  Class  3
                                        Claims) of the  proceeds  of the Insider
                                        Note and (B) its pro rata  share  (based
                                        on the aggregate amount of Allowed Class
                                        3 Claims  held by  holders  that are not
                                        Accredited Investors) of the proceeds of
                                        the   Additional   Insider  Note.(6) The
                                        portion  of  143,750  shares  of  Kahala
                                        Stock in excess of the  amount of shares
                                        distributed  to holders of Allowed Class
                                        3  Insider  Unsecured  Claims  that  are
                                        Accredited   Investors   shall   not  be
                                        distributed under the Plan.

                                        Estimated Distribution Percentage: 31.1%

Class 4 (Allowed Equity Security        Impaired.   Class  4  consists   of  all
Interests)                              holders of pre-petition  Equity Security
                                        Interest in the Debtors,  whose  present
                                        stock (equity security) interests in the
                                        Debtors   shall  be   cancelled  on  the
                                        Effective Date and they will not receive
                                        a  distribution,  and are deemed to have
                                        rejected the Plan.

                                        Estimated Distribution Percentage: 0%

----------
(4)  As  Insiders  (as  such  term  is  defined  under  Section  101(31)  of the
     Bankruptcy  Code)  of the  Debtors,  holders  of  Class 3  Allowed  Insider
     Unsecured Claims (i) made loans to the Debtors when they were in a position
     to know of the Debtors' financial condition and the risks involved with the
     making of such loans and (ii) were in a unique  position to  influence  the
     ongoing financial and business  operations of the Debtors.  Therefore,  the
     Debtors believe that there is a reasonable basis for the  classification of
     Allowed  Insider  Unsecured  Claimants  separately  from  those of  Allowed
     Non-Insider  Unsecured  Claimants  without the same knowledge or influence,
     and that such classification is not unfairly discriminatory.
(5)  The Insider Note shall be in the principal amount of $575,000.00,  together
     with  interest at seven  percent (7%) per annum,  amortized  over seven (7)
     years, compounded semi-annually,  with the first payment (of thirteen equal
     payments) commencing twelve (12) months after the Effective Date.
(6)  The  Additional  Insider  Note  shall  be in the  principal  amount  of the
     Additional  Insider Amount,  without  interest,  with the first payment (of
     thirteen equal payments)  commencing twelve (12) months after the Effective
     Date.

                                      -5-
<PAGE>
     INFORMATION  REGARDING  ASSERTION AND TREATMENT OF  ADMINISTRATIVE  CLAIMS,
PRIORITY CLAIMS AND TAX CLAIMS.

          ADMINISTRATIVE CLAIMS

     Except  as  otherwise  provided  in  Article  XI of the Plan,  the  Debtors
anticipate that all Allowed Administrative Claims will have been paid in full by
the Debtors on or before the Effective Date of the Plan in cash or on such other
terms as may be agreed upon by a holder of an Allowed  Administrative Claims and
the Debtors and/or  Reorganized  Ranch *1. All fees payable and reports required
to be filed pursuant to 28 U.S.C.  ss.1930 will be paid and filed by Reorganized
Ranch *1 in  accordance  therewith  until  the  closing  of the  Debtors'  cases
pursuant to Section 350(a) of the Bankruptcy Code.

     Administrative   Claims   include   claims  for  any  cost  or  expense  of
administration  of the  Chapter 11 Cases  allowed  under  Section  503(b) of the
Bankruptcy Code,  including,  without  limitation,  (i) any actual and necessary
costs and expenses of preserving the Debtors' Estates and operating the Debtors'
business,  including, without limitation, all Cure Amount Claims (whether or not
payable on the Effective Date); (ii) all allowances of compensation for legal or
other professional services or reimbursement of costs and expenses to the extent
allowed by the Court under  Sections 330,  331, 503 or 506(c) of the  Bankruptcy
Code or  otherwise  allowed  by the  Court;  (iii) all  outstanding  and  unpaid
principal,  interest,  costs and other  charges due R1  Franchise  under the DIP
Financing Facility;  and (iv) all fees and charges assessed against the Debtors'
estates  under  Chapter  123 of title 28 of the United  States  Code,  28 U.S.C.
ss.ss.1911  through  1930.  The  aggregate  Allowed  Administrative  Claims  are
anticipated to be approximately $1,400,00.00 as of the Effective Date (inclusive
of R1 Franchise's Allowed Claim).

     Except as  otherwise  provided  in Article  XI of the Plan,  all Claims for
Priority or Administrative  Claims  (excluding Claims by Professionals)  must be
filed with the  Bankruptcy  Court and served on counsel  for the Debtors and all
interested  parties on or before the Confirmation Date or be forever barred from
asserting such Administrative Claim against the Debtors, Reorganized Ranch *1 or
their  respective  property  and such  Administrative  Claims  shall  be  deemed
discharged as of the Effective Date,  except as otherwise  provided herein or so
ordered by the Bankruptcy Court; PROVIDED,  HOWEVER, that Professionals or other
entities  asserting a Fee Claim for services  rendered before the Effective Date
must file and serve on  Reorganized  Ranch *1 and such  other  entities  who are
designated by the Bankruptcy  Rules,  the  Confirmation  Order, the Fee Order or
other order of the Bankruptcy  Court, an application for final allowance of such
Fee  Claim,  no later  than ten (10) days after the  Effective  Date;  PROVIDED,
HOWEVER,  that any professional who may receive compensation or reimbursement of
expenses  pursuant to the Ordinary  Course  Professionals  Order MAY continue to
receive such  compensation and  reimbursement of expenses for services  rendered
before the Effective Date,  without further Bankruptcy Court review or approval,
pursuant to the Ordinary Course Professional Order.  Objections to any Fee Claim
must be filed and served on Reorganized Ranch *1 and the requesting party within
twenty  (20) days  after the  Effective  Date,  with a hearing to be held by the
Bankruptcy  Court on such Fee Claim within  thirty (30) days after the Effective
Date, or as now thereafter as the Bankruptcy Court schedules such a hearing.  To
the extent  necessary,  the  Confirmation  Order will  amend and  supersede  any
previously  entered  order of the  Bankruptcy  Court,  including  the Fee Order,
regarding the payment of Fee Claims.

     The Debtors'  Professionals and the Committee's  Professionals shall submit
their bills for fees and  reimbursement of expenses incurred after the Effective
Date directly to Reorganized  Ranch *1 and shall not be required to apply to the
Court for approval,  which  post-Effective  Date  payments to the  Professionals
shall be paid by Reorganized Ranch *1 within fifteen (15) days of the submission
of such bills from the Professional Reserve; PROVIDED,  HOWEVER, that (1) to the
extent the  Professional  Reserve  is  insufficient  to pay all of the  Debtors'
Professionals  post-Effective  Date  payments,  such  deficiency  shall  be  the
obligation of and shall be timely paid by  Reorganized  Ranch *1,  provided that
such services  relating to the fees and  reimbursement  of expenses in excess of
the the Professional  Reserve were authorized in writing by Reorganized Ranch *1
or were  incurred  as a result  of a default  under  the Plan;  (2) all fees and
expenses incurred by the Debtors'  Professionals (to the extent  authorized,  in
writing,  by Reorganized Ranch *1) with respect to post-Effective  Date services
performed in connection with preference actions,  fraudulent  conveyance actions

                                       -6-
<PAGE>
or other  courses of action under  Sections  544,  547,  548, 549 and 550 of the
Bankruptcy  Code shall be paid directly by  Reorganized  Ranch *1 within fifteen
(15)  days of the  submission  of  bills  for  such  services,  and not from the
Professional   Reserve;   and  (3)  the  Committee's   Professionals'  fees  for
post-Effective Date services paid from the Professional Reserve shall not exceed
the amount of $20,000.00.

          TAX CLAIMS

     Allowed Tax Claims will be paid in full, in cash:  (a) in the manner and to
the extent  permitted by Section  1129(a)(9)(c)  of the Bankruptcy  Code,  which
Allowed  Tax  Claims  may be paid by  Reorganized  Ranch  *1 over a  period  not
exceeding six (6) years after the date of assessment of such Allowed Tax Claims;
or (b) upon such terms and  conditions  as may be agreed upon by and between the
Debtors and/or Reorganized Ranch *1 and any holder of an Allowed Tax Claim.

          PRIORITY CLAIMS

     Allowed  Priority  Claims  will be paid  (a) in  full,  in  cash,  upon the
Effective  Date; or (b) upon such terms and  conditions as may be agreed upon by
and between the Debtors and/or Reorganized Ranch *1 and any holder of an Allowed
Priority Claim.

     CONDITIONS TO CONFIRMATION, THE EFFECTIVE DATE AND CONSUMMATION OF THE PLAN

     The funds  needed to pay the holders of Allowed  Claims  shall be generated
from Reorganized Ranch *1's business operations and the Equity Contribution made
by R1 Franchise.  There are several conditions precedent to Confirmation and the
occurrence of the Effective Date.

     The  conditions  to  the   consummation  of  the  Plan  are  that  (i)  the
Confirmation  Order is a Final  Order,  unless such  condition  is waived by the
Debtors with the consent of R1 Franchise,  and (ii) all of the  requirements and
conditions to the funding obligations of R1 Franchise pursuant to the Plan shall
have been satisfied or waived by R1 Franchise, in its sole discretion.

     Moreover,  the  Effective  Date  will not  occur  and the Plan  will not be
consummated unless and until each of the following conditions has been satisfied
or duly waived pursuant to Article XII of the Plan:

     (a)  unless otherwise  terminated pursuant to Section 12.03(c) of the Plan,
          and conditioned upon the Confirmation Order becoming a Final Order, on
          the Effective Date, R1 Franchise shall make an equity  contribution to
          Reorganized   Ranch  *1  of  at  least  the   amount  of  the   Equity
          Contribution,  shall cause R1  Franchise  to deliver the Kahala  Stock
          pursuant  to Section  6.02 of the Plan,  and shall  cause  Reorganized
          Ranch *1 to execute and deliver  the Class 2 Note,  the Insider  Note,
          and the Additional  Insider Note pursuant to Sections 6.01 and 6.02 of
          the Plan, respectively;

     (b)  R1  Franchise  shall have  received  100% of the  direct and  indirect
          equity security interests of Reorganized Ranch *1;

     (c)  Prior to the Effective Date, R1 Franchise's obligations under the Plan
          shall   terminate   (unless  R1  Franchise   waives  in  writing  such
          termination):

          (i)    automatically and immediately upon (1) the conversion of any of
                 the  Chapter  11  Cases  to a  case  under  Chapter  7  of  the
                 Bankruptcy  Code;  (2) the  appointment of a trustee for any of
                 the  Debtors  under  Chapter 7 or Chapter 11 of the  Bankruptcy
                 Code; (3) the  appointment in any of the Chapter 11 Cases of an
                 examiner  with  powers  other  than  those set forth in Section
                 1106(a)(3)  and (4) of the  Bankruptcy  Code;  (4)  entry of an
                 order authorizing the sale of the Debtors' assets under Section
                 363 of the  Bankruptcy  Code; or (5) the withdrawal of the Plan
                 by the Debtor.

                                       -7-
<PAGE>
          (ii)   by mutual written consent of R1 Franchise,  the Debtors and the
                 Committee;

          (iii)  at the  option of R1  Franchise  in the event  that,  due to no
                 fault of R1  Franchise,  (a) the Plan is not filed on or before
                 November  19, 2001;  (b) the Plan is not  confirmed by March 1,
                 2002; or (c) the Plan is not consummated by April 15, 2002;

          (iv)   at the option of R1 Franchise, in the event there is a material
                 adverse change (as determined in good faith by R1 Franchise) in
                 the business, financial condition,  operations, or prospects of
                 the  Debtors'  business or in the Debtors'  relationships  with
                 their franchisees,  customers,  suppliers, employees and others
                 having business relationships with the Debtors;

          (v)    at the  option of R1  Franchise  and/or the  Committee,  in the
                 event the  aggregate  amount of Allowed  Administrative  Claims
                 shall exceed $2,750,000;

          (vi)   at the  option of R1  Franchise,  in the event  that  aggregate
                 amount of  Allowed  Priority  Claims,  Allowed  Tax  Claims and
                 Allowed Secured Claims shall exceed $700,000;

          (vii)  at the  option of R1  Franchise,  in the event that the Plan is
                 amended or modified without R1 Franchise's written consent; or

          (viii) at the option of R1  Franchise,  in the event  that  either the
                 Debtors or the Committee  withdraws as a proponent of the Plan,
                 or either the Debtors or the Committee do not actively  support
                 Confirmation of the Plan.

     In addition to the foregoing conditions,  there are a number of substantial
confirmation  requirements  under the Bankruptcy Code that must be satisfied for
the  Plan  to be  confirmed.  See  "Voting  and  Confirmation  of  the  Plan  --
Confirmation."

     Following  the  Effective  Date  and the  distribution  of the  Net  Equity
Contribution,  the Class 2 Notes,  the Insider Notes and the Additional  Insider
Notes in  accordance  with the Plan,  Reorganized  Ranch*1 may move to close the
Chapter  11  Cases  in  accordance  with  section  350  of the  Bankruptcy  Code
notwithstanding the fact that the notes have not been paid in full.

     MODIFICATION OR REVOCATION OF THE PLAN

     The Debtors  have the sole and  exclusive  right,  in  accordance  with the
Bankruptcy  Code, to amend,  modify or withdraw the Plan prior to  Confirmation,
with the written consent of R1 Franchise and the Committee.  After Confirmation,
the Debtors  and/or  Reorganized  Ranch *1 may,  upon Order from the  Bankruptcy
Court,  in accordance with Section  1127(b) of the Bankruptcy  Code,  remedy any
defect or omission or reconcile any  inconsistency in the Plan in such manner as
may be necessary to carry out the purpose of the Plan. If the Debtors  revoke or
withdraw the Plan as to any or all of the Debtors,  or if Confirmation as to any
or all of the Debtors does not occur,  then,  with respect to such Debtors,  the
Plan will be null and void in all  respects,  and nothing  contained in the Plan
will:  (a)  constitute  a waiver or release of any claims by or against,  or any
interests  in, such  Debtors,  or (b)  prejudice in any manner the rights of any
Debtors or any other party.

                                       -8-
<PAGE>
                   OPERATIONS DURING THE REORGANIZATION CASES

     FIRST DAY RELIEF

     On the Petition Date, the Debtors Filed a number of motions (the "First Day
Motions").  The First Day Motions were  designed to meet the Debtors'  goals of:
(a) continuing their operations in chapter 11 with as little disruption and loss
of productivity  as possible;  (b) maintaining the confidence and support of the
Debtors' customers, franchisees,  employees, vendors, suppliers, contractors and
other key groups;  (c) maintaining  good relations in the communities  served by
the Debtors' business;  and (d) continuing to comply with the state,  provincial
and territorial regulations that govern the Debtors' business.

     The  First  Day   Motions   included:   (a)   motions   relating   to  case
administration;  (b) motions  relating to the Debtors'  retention of counsel and
other  professionals;  and (c) a motion  relating  to the  continued  use of the
Debtors'  existing cash  management  system,  bank accounts,  business forms and
investment  and deposit  guidelines.  All of the Debtors' First Day Motions were
ultimately granted.

     JOINT ADMINISTRATION OF DEBTOR'S CASES

     In light of the  interrelationships  among the Debtors,  it was  determined
that the joint  administration  of the  Debtors'  Chapter 11 Cases,  pursuant to
Bankruptcy Rule 1015, would serve the best interests of the Debtors' Estates and
creditors  generally.  In particular,  the joint  administration of the Debtors'
Chapter 11 Cases avoided  unnecessary costs and delays by eliminating  duplicate
filings  with  the  Court,  thereby  facilitating  the  efficient  and  economic
administration of the Debtors' Estates.  Furthermore,  the joint handling of the
administrative   matters  attendant  to  these  interrelated  Estates  aided  in
expediting   the   prosecution   of  the  Chapter  11  Cases  and  rendered  the
reorganization process less costly and onerous.

     DEBTOR-IN-POSSESSION FINANCING

     In  connection  with their  preparations  for the filing of the  Chapter 11
Cases,    the   Debtors    determined   that   they   would   need   to   obtain
debtor-in-possession  financing  to ensure  sufficient  liquidity  to meet their
ongoing  operating  needs.  On the Petition Date, the Debtors filed a motion for
entry of  interim  and final  orders  authorizing  debtor-in-possession  secured
financing from RI Franchise, an affiliate of Kahala Corporation  ("Kahala"),  in
an  aggregate  amount of $2.5  million  (such  request  was later  reduced to $2
million)   in   accordance   with  the  terms  of  such  orders  and  a  certain
Debtor-in-Possession  Loan and  Security  Agreement  between  the Debtors and R1
Franchise.  Kahala is the sole member of R1  Franchise.  On July 31,  2001,  the
Bankruptcy  Court  entered a final  Order  approving  such  financing  (the "DIP
Financing Facility"). The DIP Financing Facility is secured by a perfected first
priority  security  interest  in  substantially  all of the  assets of  Debtors.
Subject to  carveouts  for fees and  expenses of estate  professionals  and fees
payable to the U.S.  Trustee under 28 U.S.C.  ss. 1930,  the  obligations of the
Debtors  under  the DIP  Financing  Facility  constitute  allowed  superpriority
administrative expense claims under Section 364(c)(1) of the Bankruptcy Code.

     APPOINTMENT OF CREDITORS' COMMITTEE

     On July 11, 2001,  the Office of the United  States  Trustee  appointed the
following  unsecured  creditors to the Committee pursuant to Section 1102 of the
Bankruptcy Code:

     COMMITTEE MEMBERS:
     -----------------
     FBE Limited                              Darren Yelin
     111 Broadway                             9 Balmoral Drive
     New York, New York 10022                 New City, New York 10956

                                       -9-
<PAGE>
     W.H. Silver's Hardware                   Joseph Daprile
     c/o Paritz & Co.                         125-10 Queens Boulevard, Suite 315
     15 Warren Street                         Kew Gardens, New York 11415
     Hackensack, New Jersey 07601

     Restaurant Auction Outlet, Inc.          Franchise Realty
     c/o Jacob Azoulay, Esq.                  143 E. Main Street
     113-25 Queens Boulevard, Suite 702       Smithtown, New York 11787
     Forest Hills, New York 11375

     Paper Plus, Inc.
     600 Federal Boulevard
     Carteret, New Jersey

     COMMITTEE COUNSEL:                       COMMITTEE ACCOUNTANTS:
     -----------------                        ---------------------
     Silverman, Perlstein & Acampora, LLP     Paritz & Company, P.A.
     100 Jericho Quadrangle                   15 Warren Street, Suite 25
     Jericho, New York 11530                  Hackensack, New Jersey 07601
     Tel. No: (546) 479-6300                  Tel. No.: (201) 342-7753

     CLAIMS PROCESS AND BAR DATES

     The Debtors have previously filed their Schedules of Assets and Liabilities
and Schedules of Executory  Contracts and Unexpired  Leases with the  Bankruptcy
Court,  identifying the assets and liabilities of their respective  Estates.  In
addition,  pursuant to an order dated October 17, 2001 (the "Bar Date Order"), a
general Bar Date of November 26, 2001 at 5:00 p.m.,  Eastern Time (the  "General
Bar Date") was  established  for all Claims in the  Debtors'  Cases,  other than
Claims arising out of the rejection of Executory  Contracts and Unexpired Leases
("Rejection  Damage Claims")  approved after the entry of the Bar Date Order and
certain other Claims.

     Each Entity who has a claim  against the Debtors by virtue of the  Debtors'
rejection of its  Executory  Contract or  Unexpired  Lease is required to file a
proof of claim  with the  Clerk of the  Court  and serve a copy of same upon the
Debtors and Debtors' counsel within thirty (30) days following service upon such
Entity of notice of entry of the  Confirmation  Order or order  authorizing such
rejection,  whichever  date is  earlier.  If such Claim is not filed  within the
specified  time, it shall be forever barred from assertion  against the Debtors,
Reorganized  Ranch *1 or their  assets and  property.  A Rejection  Damage Claim
shall be  treated  as a  Disputed  Class 2 Claim  until  the  period of time has
elapsed within which the Debtors may file an objection to such Claim.

     The Debtors are  presently in the process of analyzing  the various  claims
filed against the Debtors'  estates and shall file the appropriate  objection to
Disputed  Claims in  accordance  with Sections  14.01 and 1402 of the Plan.  See
"Distributions Under the Plan--Procedures for Resolving Disputed Claims."

     EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     Since the Petition  Date,  the Debtors have  devoted  significant  time and
effort  to the  process  of  reviewing  each of their  Executory  Contracts  and
Unexpired Leases. The Debtors' review of their Executory Contracts and Unexpired
Leases is a particularly  difficult task in these cases because of the number of
Debtors,  the number of  locations  at which they  operate,  and other  industry
factors.

                                      -10-
<PAGE>
     The prepetition  Executory  Contracts and Unexpired  Leases to which one or
more of the Debtors were parties include numerous  prepetition  unexpired leases
of nonresidential real property. As debtors in possession,  the Debtors have the
right under Section 365 of the Bankruptcy  Code,  subject to the approval of the
Bankruptcy Court, to assume or reject Executory  Contracts and Unexpired Leases,
including  real property  leases.  Section 365 of the  Bankruptcy  Code provides
generally  that a debtor  is given  until  sixty  (60)  days  after  the date of
commencement  of its  bankruptcy  case to decide  whether to assume,  assume and
assign or reject an unexpired lease of nonresidential real property. This period
may be extended for "cause."

     By orders of the  Bankruptcy  Court  dated  August 29,  2001 and October 5,
2001, the Debtors  obtained an extension of the period within which to assume or
reject  nonresidential  real property  leases  through and including  January 3,
2002,  except for certain leases which were deemed rejected by the Debtors as of
the Petition Date pursuant to the Court's Order entered on October 5, 2001. From
time to time during the pendency of the  Debtors'  Cases,  the  Debtors,  in the
exercise of their  business  judgment,  may seek and obtain  authority  from the
Bankruptcy  Court to reject  individual  or small groups of unexpired  leases of
nonresidential real property in instances where continued  performance under the
leases  would not be in the  interests of the  Debtors'  respective  estates and
creditors.

     Except as otherwise  provided for under the Plan, any Executory Contract or
Unexpired Lease of the Debtors not expressly  rejected by the Debtors,  or which
is not the subject of a pending  application to reject on the Confirmation Date,
shall be deemed assumed on the Effective Date. The Cure Amount Claims associated
with each Executory  Contract and Unexpired Lease to be assumed  pursuant to the
Plan will be satisfied, pursuant to Section 365(b)(1) of the Bankruptcy Code, at
the option of the Debtor assuming such contract or lease or the assignee of such
Debtor,  if any, (1) by payment of the Cure Amount  Claim in cash within  ninety
(90) days after the Effective  Date;  (2) after the  Effective  Date, as soon as
practicable  after entry of an applicable  order providing for the assumption or
assumption and assignment of the Executory  Contract or Unexpired  Lease; or (3)
on such other terms as are agreed to by the parties to such  Executory  Contract
or Unexpired  Lease. If there is a dispute  regarding (1) the amount of any Cure
Amount Claim; (2) the ability of Reorganized Ranch *1 or any assignee to provide
"adequate assurance of future performance" (within the meaning of Section 365 of
the Bankruptcy Code) under the contract or lease to be assumed; or (3) any other
matter pertaining to assumption or assumption and assignment of such contract or
lease, the payment of any Cure Amount Claim required by Section 365(b)(1) of the
Bankruptcy  Code will be made following the entry of a final order resolving the
dispute and approving the assumption.

     EXCLUSIVITY

     Under Section 1121 of the Bankruptcy Code, a debtor has the exclusive right
to (a) file a plan of reorganization during the first 120 days of its chapter 11
case and (b) solicit acceptances of such a plan during the first 180 days of the
case.  These periods (the  "Exclusive  Periods") may be extended for "cause." In
October 2001,  the Debtors  filed a motion (the  "Exclusivity  Motion")  seeking
extensions of the Exclusive  Periods through  December 30, 2001 and February 28,
2002,  respectively.  The Creditors  Committee supported the Exclusivity Motion,
which was approved by the Court on November 13, 2001.

     RECOVERY ACTIONS

          INTRODUCTION

     A number  of  transactions  occurred  prior to the  Petition  Date that the
Debtors  believe  may  have  given  rise  to  claims  (collectively,   "Recovery
Actions"),  including preference actions,  fraudulent conveyance actions, rights
of setoff and other claims or causes of action that the Debtors may pursue under
Sections 510, 544, 547, 548, 549, 550 and 553 of the  Bankruptcy  Code and other
applicable bankruptcy or non-bankruptcy law.

                                      -11-
<PAGE>
          PREFERENCE CLAIMS

     Under  Sections  547 and 550 of the  Bankruptcy  Code, a debtor may seek to
avoid and recover certain  prepetition  payments and other transfers made by the
debtor to or for the benefit of a creditor in respect of an antecedent  debt, if
such  transfer  (a) was made when the debtor was  insolvent  and (b) enabled the
creditor to receive more than it would receive in a hypothetical  liquidation of
the debtor in a chapter 7 where the transfer had not been made.  Transfers  made
to a creditor  that was not an  "insider"  of the  debtor  are  subject to these
provisions  generally only if the payment was made within ninety (90) days prior
to the  debtor's  filing of a petition  under  chapter 11.  Under  Section  547,
certain  defenses,  in addition to the solvency of the debtor at the time of the
transfer and the lack of preferential effect of the transfer, are available to a
creditor from which a preference  recovery is sought.  Among other  defenses,  a
debtor may not recover a payment to the extent such creditor  subsequently  gave
new value to the debtor on account  of which the  debtor  did not,  among  other
things,  make an  otherwise  unavoidable  transfer  to or for the benefit of the
creditor. A debtor may not recover a payment to the extent such payment was part
of a substantially  contemporaneous exchange between the debtor and the creditor
for new value given to the debtor.  Further,  a debtor may not recover a payment
if such  payment  was made,  and the related  obligation  was  incurred,  in the
ordinary course of business of both the debtor and the creditor.  The debtor has
the initial burden of proof in  demonstrating  the existence of all the elements
of a  preference,  including  its  insolvency,  at the time of the payment.  The
creditor has the initial burden of proof as to the aforementioned defenses.

          FRAUDULENT CONVEYANCE ACTIONS

     Generally,  a conveyance or transfer is fraudulent if: (a) it was made with
the actual intent to hinder,  delay or defraud a creditor  (I.E., an intentional
fraudulent conveyance);  or (b) (i) reasonably equivalent value was not received
by the transferee in exchange for the transfer and (ii) the debtor was insolvent
at the time of the transfer,  was rendered insolvent as a result of the transfer
or was left with insufficient  capitalization as a result of the transfer (I.E.,
a  constructive  fraudulent  conveyance).  Two  primary  sources  of  fraudulent
conveyance law exist in a chapter 11 case.

     The first is Section 548 of the  Bankruptcy  Code,  under which a debtor in
possession or bankruptcy  trustee may avoid fraudulent  transfers that were made
or incurred on or within one (1) year before the date that a bankruptcy  case is
filed.

     The second  source is Section 544 of the  Bankruptcy  Code - the  so-called
"strong arm provision" - under which the debtor in possession (or creditors with
bankruptcy  court  permission)  may look to  state  law to  avoid  transfers  as
fraudulent.   State  fraudulent   conveyance  laws  generally  have  statues  of
limitations  longer  than  one (1)  year  and  are  applicable  in a  bankruptcy
proceeding  pursuant  to Section  544 of the  Bankruptcy  Code if the statute of
limitations  with respect to a transfer  has not expired  prior to the filing of
the bankruptcy  case. If such statute of limitation has not expired,  the debtor
in  possession  (or  creditors  with  bankruptcy  court  permission)  may  bring
fraudulent  conveyance claims within the time period permitted by Section 546 of
the  Bankruptcy  Code,  notwithstanding  whether  the state  limitations  period
expires prior thereto.  Generally,  Section 546 of the Bankruptcy Code permits a
state fraudulent conveyance action to be brought within the later of (a) two (2)
years after the  commencement  of the bankruptcy  proceeding or (b) one (1) year
after  the  appointment  or  election  of a  trustee  for  the  debtor  if  such
appointment or election occurs within such two (2) year period.

     The primary sources of applicable state fraudulent conveyance law are state
enactments  of the Uniform  Fraudulent  Conveyance  Act ("UFCA") and the Uniform
Fraudulent Transfer Act ("UFTA").  As of June 2000,  enactments of the UFCA were
effective  in four (4) states,  and  enactments  of the UFTA were  effective  in
thirty-nine  (39) states and the District of Columbia.  Other states,  including
certain states whose fraudulent conveyance law could be applicable to fraudulent
conveyance  claims described  below,  have enacted neither the UFCA or UFTA, but
instead operate under either a derivation of the English Statute of Elizabeth or
some other  fraudulent  conveyance  statute.  Like Section 548 of the Bankruptcy
Code,  under both the UFCA and the UFTA a  conveyance  or transfer is  generally
fraudulent  if:  (a) it was made  with the  actual  intent to  hinder,  delay or

                                      -12-
<PAGE>
defraud a creditor  (i.e.,  an intentional  fraudulent  conveyance);  or (b) (i)
reasonably  equivalent  value was not received by the transferee in exchange for
the transfer and (ii) the debtor was insolvent at the time of the transfer,  was
rendered  insolvent  as result  of the  transfer  or was left with  insufficient
capitalization  as a result of the transfer  (i.e.,  a  constructive  fraudulent
conveyance).

     AVOIDANCE ACTIONS TO BE COMMENCED BY THE DEBTORS

     Pursuant to Section 546(a) of the Bankruptcy  Code,  absent the appointment
of a trustee in the Debtors'  chapter 11 cases,  the statute of limitations with
respect to the commencement of avoidance or recovery actions under Sections 544,
545, 547, 548 and 553 of the Bankruptcy Code will expire on July 3, 2003,  I.E.,
two (2) years after the Petition Date. The Debtors  preliminary believe that the
recoveries  of  such  Recovery  Actions  would  be  nominal.   The  Debtors  and
Reorganized  Ranch *1 intend to  commence  avoidance  actions  in respect of the
payments  and other  transfers  described  above,  PROVIDED,  HOWEVER,  that the
anticipated   recoveries  of  such  actions  exceed  the  anticipated  costs  of
litigation.

     PROJECTED FINANCIAL INFORMATION

          INTRODUCTION

     As  a  condition  to  Confirmation  of  the  Plan  of  reorganization,  the
Bankruptcy  Code  requires,  among  other  things,  that  the  Bankruptcy  Court
determine that  Confirmation  is not likely to be followed by the liquidation or
the need for further  financial  reorganization  of the debtor.  See "Voting and
Confirmation  of the Plan -  Confirmation"  and "Voting and  Confirmation of the
Plan -  Feasibility."  In connection  with the  development of the Plan, and for
purposes determining whether the Plan satisfies this feasibility  standard,  the
Debtors'  management  analyzed the ability of Reorganized Ranch *1 to meet their
obligation  under the Plan with  sufficient  liquidity and capital  resources to
conduct their business.  In that regard, the Debtors'  management  developed and
prepared  certain  projections  (the  "Projections")  of the Debtors'  operating
profit, free cash flow and certain other items from January 21, 2002 through the
end of the fiscal year 2007 (the "Projection Period").

     THE DEBTORS DO NOT, AS A MATTER OF COURSE,  PUBLISH THEIR  BUSINESS  PLANS,
BUDGETS  OR  STRATEGIES  OR MAKE  EXTERNAL  PROJECTIONS  OR  FORECASTS  OF THEIR
ANTICIPATED  FINANCIAL  POSITIONS  OR RESULTS OF  OPERATIONS.  ACCORDINGLY,  THE
DEBTORS  (INCLUDING  REORGANIZED RANCH *1) DO NOT ANTICIPATE THAT THEY WILL, AND
DISCLAIM  ANY  OBLIGATION  TO,  FURNISH  UPDATED  BUSINESS  PLANS,   BUDGETS  OR
PROJECTIONS  TO HOLDERS OF CLAIMS OR INTERESTS  PRIOR TO THE  EFFECTIVE  DATE OR
OTHERWISE MAKE SUCH INFORMATION PUBLICLY AVAILABLE.

          PRINCIPAL ASSUMPTIONS FOR THE PROJECTIONS

     The Projections are based on, and assume the successful  implementation of,
the Plan.  The  Projections  reflect  numerous  assumptions,  including  various
assumptions  regarding the anticipated  future  performance of Reorganized Ranch
*1, industry  performance,  general  business and economic  conditions and other
matters,  most of which are beyond the  control  of the  Debtors or  Reorganized
Ranch *1. Specific risks and  uncertainties  that may affect the accuracy of the
Projections  include,  among  others,  those  relating  to:  (a) the  successful
consummation  of the Plan; (b) the ability of  Reorganized  Ranch *1 to increase
revenues  and control  costs of  operations  through the  implementation  of its
present business plan; (c) the ability of Reorganized Ranch *1 to reduce general
and administrative  expenses through the implementation of the Debtors' business
plan;  (d) the ability of  Reorganized  Ranch *1 to generate  positive cash flow
through the  implementation  of the  Debtors'  business  plan;  (e) the expected
enhancements  to the  ability of  Reorganized  Ranch *1 to attract  and  exploit
business  opportunities;  (f) the  effect  that the new  Board of  Directors  of
Reorganized  Ranch *1 will have on the  implementation  of the Debtors' business
plan; (g) the ability of Reorganized  Ranch *1 to respond to any existing or new
competition  within  their  markets;  and (h) the  effect of any new or  amended
legislation  applicable  to the  business of  Reorganized  Ranch *1.  THEREFORE,

                                      -13-
<PAGE>
ALTHOUGH THE PROJECTIONS ARE NECESSARILY  PRESENTED WITH NUMERICAL  SPECIFICITY,
THE ACTUAL  RESULTS  ACHIEVED  DURING THE  PROJECTION  PERIOD WILL VARY FROM THE
PROJECTIONS.  THESE VARIATIONS MAY BE MATERIAL.  ACCORDINGLY,  NO REPRESENTATION
CAN BE OR IS BEING MADE WITH RESPECT TO THE ACCURACY OF THE  PROJECTIONS  OR THE
ABILITY OF REORGANIZED  RANCH *1 TO ACHIEVE THE PROJECTIONS.  See "Risk Factors"
for a  discussion  of certain  factors  that may  affect  the  future  financial
performance of  Reorganized  Ranch *1 and of various risks  associated  with the
Plan.

     Although  the  Debtors   believe  that  the   assumptions   underlying  the
Projections, when considered on an overall basis, are reasonable in light of the
current circumstances, no assurance can be or is given that the Projections will
be realized.  IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN,  HOLDERS
OF CLAIMS AND INTERESTS  ENTITLED TO VOTE MUST MAKE THEIR OWN  DETERMINATIONS AS
TO  THE   REASONABLENESS   OF  SUCH  ASSUMPTIONS  AND  THE  RELIABILITY  OF  THE
PROJECTIONS. See "Risk Factors".

          PROJECTIONS

     The projected  consolidated  financial  statements of Reorganized  Ranch *1
annexed  hereto as  EXHIBIT B have been  prepared  based  on,  INTER  ALIA,  the
assumption  that the  Effective  Date will be January  21,  2002.  Although  the
Debtors presently intend to seek to cause the Effective Date to occur as soon as
practicable,  there can be no assurance as to when the  Effective  Date actually
will occur.

     MANAGEMENT AND BOARD OF DIRECTORS

          REORGANIZED RANCH *1 BOARD OF DIRECTORS

     The Bylaws of  Reorganized  Ranch *1 will  provide  that the  business  and
affairs  of  Reorganized  Ranch  *1 will  be  managed  under  the  direction  of
Reorganized  Ranch *1's Board of Directors.  The initial  members of Reorganized
Ranch *1 Board of Directors  may include:  (a) George  Naddaff (who is presently
the Chairman and CEO of Ranch *1); (b) Raymond  DioGuardi  (who is presently the
President  and Chief  Financial  Officer and  Secretary  of Ranch *1); (c) Kevin
Blackwell;  and (d) David  Guarino.  None of the  Debtors'  current  officers or
directors are related to or employed by R1 Franchise.

     Certain biographical information relating to each of the individuals is set
forth below.

     GEORGE A.  NADDAFF,:  Mr. Naddaff has been Ranch *1's Chairman of the Board
since November 1996 and was Ranch *1's Chief Executive  Officer until June 1997.
He was reappointed CEO in June 2000. He has been Vice Chairman of  Mortgage.com,
an internet  mortgage Company and Chairman of Corners,  Inc., a chain of picture
framing superstores,  since 1997. In addition,  since 1987, Mr. Naddaff has been
the President and is the founder of Business  Expansion Capital  Corporation,  a
company  that  provides  financial  and  managerial  resources  to newly  formed
ventures.  Mr. Naddaff was also the Chairman and Chief Executive  Officer of New
Boston  Chicken,  Inc.  which he  founded  in 1988  and  sold in  1993.  He also
established  Living and Learning  Center Inc. in 1970,  and opened a total of 47
facilities before selling them to Kindercare in 1979. Additionally, early in his
career,  Mr. Naddaff co-founded  International  Foods, Inc., opening 19 Kentucky
Fried Chicken franchised outlets from 1967 to 1970.

     RAYMOND  DIOGUARDI,  President and Secretary:  Mr. DioGuardi has been Ranch
*1's Chief  Financial  Officer and  Secretary  since  January 2000 and President
since  June  2000.  Prior to joining  Ranch *1,  Mr.  DioGuardi  served as Chief
Financial  Officer and  Treasurer  for Kapson Senior  Quarters  Corp.,  a senior
assisted  living  company from  January 1998 to July 1999.  From October 1995 to
December  1998, Mr.  DioGuardi was the Senior Vice  President of Finance,  Chief
Financial Officer and Secretary for Dataflex Corporation, a computer value-added
reseller and service  provider.  From 1990 to 1995, Mr.  DioGuardi was the Chief
Financial  Officer,  Vice President of Finance and Secretary of Nathan's Famous,
Inc., an operator and  franchiser  of  quick-service  restaurants.  From 1977 to
1989,  Mr.  DioGuardi  held  a  variety  of  positions  with  the  international
accounting firm of Price Waterholes. Mr. DioGuardi received his B.A. in Business
Administration from Rutgers University and is a Certified Public Accountant.  He

                                      -14-
<PAGE>
is also a member of the American Institute of Certified Public Accountants,  the
New Jersey State Society of Certified  Public  Accountants  and the Institute of
Management Accountants.

     DAVID GUARINO, Chief Financial Officer: Mr. Guarino has been Vice-President
Financial  Officer and a director of Kahala Corp.  since October 12, 1999.  From
March 15, 1999 to October 12, 1999,  Mr. Guarino was a consultant to Kahala from
April 1997 to March 1999, and again from December 1995 to July 1996, Mr. Guarino
served as  Vice-President-Chief  Financial Officer of Surf City. Mr. Guarino was
also a director of Surf City from January 1998 to March 1999,  and from December
1995 to July 1996. Prior to his employment with Surf City, Mr. Guarino served as
Senior Vice-President-Principal  Financial Officer of TLV Beatrice International
Holdings,  Inc. Mr. Guarino graduated form the University of Denver in 1985 with
a Masters and a Bachelors of Science degree in accounting.

     KEVIN BLACKWELL,  Chairman and Chief Executive  Officer:  Mr. Blackwell has
been President and Director of Kahala Corp. since March 15, 1999. Prior to March
1999,  Mr.  Blackwell was President and Director of Surf City for more than five
years.  Mr.  Blackwell,  and his wife  Kathryn,  founded the Surf City juice bar
concept in 1981. Mr. Blackwell attended Eastern Washington University, where his
studies emphasized mathematics and business law.

          REORGANIZED RANCH *1 EXECUTIVE OFFICERS

     The executive officers of Reorganized Ranch *1 following the Effective Date
may include each of the individuals identified below:

                            Anticipated Position with      Compensation of
     Name                   Reorganized Ranch *1           Insider of Debtors(7)
     ----                   --------------------           ---------------------
     GEORGE A. NADAFF       Officer                        $175,000

     RAYMOND DIOGUARDI      President and Secretary        $140,000

     KEVIN BLACKWELL        Chairman and Chief             N/A
                            Executive Officer

     DAVID GUARINO          Chief Financial Officer        N/A

     The Debtors  believe that the  employment of the  aforementioned  executive
officers  of  Reorganized  Ranch  *1 is in the  best  interest  of the  Debtors'
estates.

          REORGANIZED RANCH *1 KEY EMPLOYEES

     Certain of the Debtors' key  employees as designated by R1 Franchise may be
responsible for the day-to-day  management of Reorganized Ranch *1 and may enter
into employment agreements with Reorganized Ranch *1.

                                  RISK FACTORS

     The  distributions  to be made pursuant to the Plan are subject to a number
of material risks, including those enumerated below. The risk factors enumerated
below assume  Confirmation and the consummation of the Plan and the transactions
contemplated  by  the  Plan  and do  not  include  matters  that  could  prevent

----------
(7)  As of the General Bar Date,  no claims had been filed  against the Debtors'
     estates by insiders of the  Debtors  who may become  executive  officers of
     Reorganized Ranch *1.

                                      -15-
<PAGE>
Confirmation.  See  "Overview of the Plan - Summary of Classes and  Treatment of
Claims and Interests,"  "Overview of the Plan - Conditions to Confirmation,  the
Effective Date and Consummation of the Plan" and "Voting and Confirmation of the
Plan" for discussions of such matters.  Prior to voting on the Plan, each holder
of Claims entitled to vote should carefully consider the risk factors enumerated
or  referred  to  below,  as well as all of the  information  contained  in this
Disclosure Statement, including the exhibits annexed hereto.

     PROJECTIONS ARE INHERENTLY UNCERTAIN

     The fundamental premise of the Plan is the successful implementation of the
Debtors'  business plan, as reflected in the  Projections.  The  Projections are
inherently uncertain and are dependent upon the successful implementation of the
business plan and the reliability of the other  assumptions  contained  therein.
Projections   reflect   numerous   assumptions,   including   Confirmation   and
consummation  of the Plan in accordance with its terms,  the anticipated  future
performance of Reorganized Ranch *1, industry performance,  general business and
economic  conditions and other matters,  most of which are beyond the control of
Reorganized  Ranch  *1 and  some of  which  may not  materialize.  In  addition,
unanticipated events and circumstances  occurring subsequent to the date of this
Disclosure Statement,  including unanticipated changes in applicable regulations
or U.S. GAAP, may affect the actual financial  condition,  results of operations
and cash flows of Reorganized Ranch *1 in the future.

                     GENERAL INFORMATION CONCERNING THE PLAN

     Confirmation  of the Plan and the  occurrence  of the  Effective  Date will
result in the  discharge  of certain  Claims and  interests  and the creation of
related  injunctions with respect thereto.  Moreover,  upon confirmation and the
occurrence of the Effective Date, the Debtors and/or  Reorganized  Ranch *1 will
retain and may enforce certain claims and causes of actions against entities not
specifically  released pursuant to the Plan. These legal effects of the Plan are
set forth in detail in the Plan.

     DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS; RELATED INJUNCTION

     Except as otherwise  provided in the Plan and the  treatment of all Claims,
the  rights  afforded  in the Plan  shall  be in  exchange  for and in  complete
satisfaction,  discharge  and release of all Claims or  interests  of any nature
whatsoever,  including any interest accrued thereon before,  on or after July 3,
2001, against the Debtors or the Debtors-In-Possession or any of their assets or
properties,  and except as otherwise  provided herein.  Upon the Effective Date,
all  such  Claims  against  the  Debtors  and  Debtors-In-Possession   shall  be
satisfied,  discharged  and  released  in  full;  and  all  Claimants  shall  be
precluded,  barred and forever  prohibited  from asserting  against  Reorganized
Ranch  *1 or any of its  assets,  properties,  employees,  officers,  directors,
representatives or professionals,  any other or further claim based upon any act
or omission,  transaction  or other activity of any kind or nature that occurred
prior to the Effective  Date.  Further,  upon the  confirmation of the Plan, the
taxing  authorities  shall be  prohibited  from pursuing any  collection  action
against the Debtors'  officers and shareholders for pre-petition debt as long as
the  Debtors  and/or  Reorganized  Ranch *1 shall  not have  defaulted  in their
obligations  under  the  Plan,  to the  extent  such  parties  would  be able or
permitted to do so under applicable law.

     DISCHARGE INJUNCTION

     The  Confirmation  Order shall  provide that all Entities  which have held,
hold or may hold  Claims that are  discharged  pursuant to the terms of the Plan
shall be permanently stayed,  restrained and enjoined on and after the Effective
Date from  taking any of the  following  actions  on account of such  discharged
Claims,  other than actions  brought to enforce any rights or obligations  under
the Plan: (i)  commencing,  conducting or continuing in any manner any action or
proceeding  of  any  kind  (including  any  thereof  in  a  judicial,  arbitral,
administrative  or  other  forum)  against  Reorganized  Ranch  *1,  any  of its
property,  or any direct or indirect transferee of any property of, or direct or
indirect  successor in interest to, any of the Debtors or Reorganized  Ranch *1,

                                      -16-
<PAGE>
or any property of any such transferee or successor,  (ii)  enforcing,  levying,
attaching   (including   pre-judgment   attachment),   collecting  or  otherwise
recovering, by any manner or means, any judgment, award, decree or order against
Reorganized Ranch *1, any of its property,  or any direct or indirect transferee
of any property  of, or direct or indirect  successor in interest to, any of the
Debtors or  Reorganized  Ranch *1, or any  property  of any such  transferee  or
successor,  (iii)  creating,  perfecting  or otherwise  enforcing in any manner,
directly  or  indirectly,  any lien  against  Reorganized  Ranch *1,  any of its
property,  or any direct or indirect transferee of any property of, or successor
in interest to, any of the Debtors or  Reorganized  Ranch *1, (iv) asserting any
setoff,  right of subrogation or recoupment of any kind, directly or indirectly,
against  Reorganized  Ranch *1,  or any  direct or  indirect  transferee  of any
property  of, or  successor  in interest  to, any of the Debtors or  Reorganized
Ranch *1, or (v) acting or  proceeding in any manner that does not conform to or
comply with the provisions of the Plan and/or the Confirmation Order.

     Should any provision in the Plan be determined  to be  unenforceable,  such
determination  shall in no way limit or affect the  enforceability and operative
effect of any and all other provisions of the Plan.

     Except as otherwise  provided herein,  the classification and the manner of
satisfying  all Claims under the Plan take into  consideration  the existence of
guarantees  by the  Debtors of any  obligation  of any other  Person or Persons,
including  another  Debtors,  and that the Debtors may be a joint  obligor  with
another  Person or  Persons  with  respect  to the same  obligation.  All Claims
against the Debtors  based upon any such  guarantees  shall be discharged in the
manner provided in the Plan, and each creditor shall be entitled to only one (1)
distribution  with respect to any  obligation of the Debtors.  Any obligation of
the Debtors and all guarantees thereof executed by the Debtors will be deemed to
be  one  obligation   under  the  Plan  entitling  that  creditor  to  only  one
distribution.

     By accepting  distributions pursuant to the Plan, each holder of an Allowed
Claim or interest receiving  distributions  pursuant to the Plan or that did not
properly  file an  objection  to the Plan will be  deemed  to have  specifically
consented to the injunctions and fee provisions set forth in the Plan.

     The  classification and manner of satisfying all Claims and interests under
the Plan take into consideration all subordination rights, whether arising under
general principles of' equitable subordination,  contract, Section 510(c) of the
Bankruptcy  Code or  otherwise,  that a holder of a Claim or  interest  may have
against other Claim or interest  holders with respect to any  distribution  made
pursuant  to the  Plan.  All  subordination  rights  that a holder of a Claim or
interest may have with respect to any  distribution  to be made  pursuant to the
Plan  will  be  discharged  and  terminated,  and  all  actions  related  to the
enforcement  of  such  subordination   rights  will  be  permanently   enjoined.
Accordingly,  distributions  pursuant  to the Plan to holders of Allowed  Claims
will not be subject to payment to a beneficiary of such terminated subordination
rights  or  to  levy,  garnishment,  attachment  or  other  legal  process  by a
beneficiary of such terminated subordination rights.

     Pursuant to Bankruptcy Rule 9019 and in consideration for the distributions
and other  benefits  provided  under the Plan,  the  provisions of the Plan will
constitute a good faith compromise and settlement of all claims or controversies
relating to the  subordination  rights that a holder of a Claim or interest  may
have with  respect to any Allowed  Claim or interest or any  distribution  to be
made pursuant to the Plan on account of any Allowed Claim or interest. The entry
of the Confirmation Order will constitute the Bankruptcy Court's approval, as of
the  Effective  Date,  of the  compromise  or  settlement  of all such claims or
controversies  and the  Bankruptcy  Court's  finding  that  such  compromise  or
settlement is in the best interests of the Debtors,  Reorganized Ranch *1, their
respective  property and holders of Allowed Claims,  and is fair,  equitable and
reasonable.

     PRESERVATION OF RIGHTS OF ACTION HELD BY THE DEBTORS OR REORGANIZED RANCH
     *1

     Except as provided in the Plan or in any contract,  instrument,  release or
other  agreement  entered  into or  delivered in  connection  with the Plan,  in
accordance with Section 1123(b) of the Bankruptcy Code,  Reorganized Ranch *1 or
its successors will retain and may enforce any claims,  demands,  rights, causes

                                      -17-
<PAGE>
of action and liabilities  that any Debtor or Estate may hold,  including claims
transferred to Reorganized Ranch *1 on the Effective Date, against any person or
entity.  Reorganized Ranch *1 or its successors may pursue such retained claims,
demands, rights or causes of action, as appropriate, in accordance with the best
interests  of  Reorganized  Ranch  *1 or its  successors  holding  such  claims,
demands,  rights or  causes  of  action.  Further,  Reorganized  Ranch *1 or its
successors   retain  the  Debtors'  right  to  file  and  pursue  any  adversary
proceedings  against any trade creditor,  vendor or franchisee  related to debit
balances or deposits owed to any Debtor.

     Nothing  contained  herein shall  prohibit the Debtors from  prosecuting or
defending any of their rights as may exist on their own behalf.  If Confirmation
of the Plan does not  occur,  the Plan  shall be deemed  null and void.  In such
event,  nothing  contained in the Plan shall be deemed to constitute a waiver or
release of any Claims by or against  the  Debtors or their  Estates or any other
Person, or to prejudice in any manner, the rights and remedies of the creditors,
the Debtors or their Estates or any Person in any further proceedings  involving
the  Debtors  or their  Estates.  Moreover,  in the event  that the Plan and all
transactions contemplated thereby are not substantially consummated on or before
the earlier of (i) sixty (60) days after the Confirmation Date or (ii) April 15,
2002,  then the Debtors  shall not be obligated to  consummate  the Plan, or the
transactions  set forth and contemplated in this Plan, and, at the option of the
Debtors,  ALL  transactions  set  forth  in the  Plan,  shall  be  canceled  and
terminated,  and the  Debtors  shall  continue to have,  or be restored  to, all
rights  and  remedies  it has,  had,  or  would  have had as if the Plan and the
transactions contemplated herein had never been executed, proposed,  negotiated,
discussed,  or in any way acted upon, and no Plan proponent or Person shall have
any claims against the Debtors by virtue of such termination.  The filing of the
Plan and or any modifications hereto, and the Plan itself shall not constitute a
waiver by the Debtors of any and all rights, remedies,  objections and/or causes
of action the  Debtors may have or may wish to raise with  respect to  anything,
including,  without limitation,  any other plan or plans filed or to be filed in
these bankruptcy  cases, all of which rights and objections are hereby reserved.
Reorganized  Ranch *1 reserves the right to modify the  treatment of any Allowed
Claims at any time on and  after the  Effective  Date  upon the  consent  of the
holder of such Allowed Claim whose treatment is being modified, provided that no
such modification which materially adversely affects other Allowed Claims can be
made,  unless such modification has been approved by Final Order, upon notice to
the Committee, or has been agreed to by the Committee or accepted by the holders
of Allowed Claims in the applicable Class as determined pursuant to Section 1126
of the Bankruptcy Code.

     RELEASES AND RELATED INJUNCTION

     The Debtors,  the Committee,  their respective agents,  representatives and
attorneys shall be fully and completely  released from any and all claims and/or
causes of action and/or  remedies which the Debtors,  their  respective  estates
and/or their  creditors  and/or  equity  holders may have against them (known or
unknown,  liquidated or  unliquidated,  fixed or contingent)  from , existing or
hereinafter arising from any past, present or future actions taken or omitted to
be taken  since the  Petition  Date under or in  connection  with,  related  to,
effecting, or arising out of the Debtors, the Debtors' operations,  the Debtors'
bankruptcy  cases,  the  administration  of  the  Debtors'  estates  and/or  the
consummation of the Plan,  which release shall be binding on the Debtors,  their
estates,  and all creditors,  immediately upon entry of the Confirmation  Order,
PROVIDED, FURTHER, that said release, as defined herein, shall be binding on any
subsequently appointed Chapter 7 trustee.

     VESTING OF PROPERTY IN THE DEBTORS

     Except as otherwise  provided by the Plan, on the Effective Date,  title to
all assets  dealt with by the Plan shall pass to  Reorganized  Ranch *1 free and
clear of all liens,  claims and interests in accordance with Section 1141 of the
Bankruptcy Code, subject only to the liens, claims and interests provided by the
Class 2 Note and the claims and  interests  provided by the Insider Note and the
Additional Insider Note.

                                      -18-
<PAGE>
                          DISTRIBUTIONS UNDER THE PLAN

     GENERAL

     Payments and  distributions to be made by the Debtors on the Effective Date
pursuant  to the Plan  shall be made on such  date,  or as soon as  practicable,
except as otherwise provided for in the Plan, or as may be ordered by the Court.

     MANNER OF PAYMENTS UNDER THE PLAN

     Cash  payments  made  pursuant to the Plan shall be made in the currency of
the United States,  by check drawn on a domestic bank or by wire transfer from a
domestic bank.  Distributions to all holders of Allowed Claims shall be made (a)
at the  addresses  set forth in the proof of claim filed by such  holders (or at
last known  addresses  of such  holders if no proofs of claims were filed or the
Debtors were notified of a change of address); or (b) at the addresses set forth
in any  written  notices  of  address  change  delivered  to the  Debtors or the
Bankruptcy  Court  after the date the proof of claim  was  filed;  or (c) at the
addresses  reflected in the Debtors' schedules if no claim shall have been filed
and no written notice of an address change has been received by the Debtors.  No
payments  shall be made to a holder of a Disputed or Contested  Claim unless and
until such Claim becomes an Allowed Claim by a Final Order.

     PAYMENT DATES

     Whenever any payment or distribution to be made under the Plan shall be due
on a day other than a Business Day, such payment or  distribution  shall instead
be made, without interest, on the next Business Day.

     DISBURSING AGENT

     Reorganized  Ranch *1 is the disbursing  agent under the Plan. All payments
to  claimants  in Classes 2 and 3 shall be made by  Reorganized  Ranch *1 from a
separate disbursement account. The Plan does not require the disbursing agent to
obtain a bond to insure distributions not paid on the Effective Date. The United
States  Trustee has objected to the Plan not requiring the  disbursing  agent to
obtain a bond which may be canceled  upon thirty (30) days  notice,  inasmuch as
claimants may be subject to the risk of loss in the event of  defalcation by the
disbursing agent.  However,  the Class 2 Note executed on behalf of the Alllowed
Class 2 non-insider  unsecured  claimants  shall be secured by a first  priority
lien in the amount then  outstanding  under the Class 2 Note on all royalties to
be paid by Ranch *1 franchises  existing as of the Confirmation Date, until such
time as the Class 2 Note is paid in full.

     FRACTIONAL CENTS

     Any  other  provision  of the  Plan  to the  contrary  notwithstanding,  no
payments of fractions of cents will be made.  Whenever any payment of a fraction
of a cent would  otherwise be called for,  the actual  payment  shall  reflect a
rounding of such fraction to the nearest whole cent  (rounding  down in the case
of .5).

     NON-NEGOTIATED CHECKS

     Except as otherwise  set forth in Section 8.06 of the Plan,  if a holder of
an Allowed  Claim,  or and other  claim or interest  fails to  negotiate a check
issued to such holder under the Plan within one hundred and eighty (180) days of
the date such check was issued by Reorganized  Ranch *1, then the amount of Cash
or other  property  attributable  to such check shall be deemed to be "Unclaimed
Distributions,"  and the payee of such check  shall be deemed to have no further
Claim or future  Claim  against the  Debtors  and/or  Reorganized  Ranch *1 with
respect of such check.

                                      -19-
<PAGE>
     UNCLAIMED DISTRIBUTIONS

     In the event any  payment  to a holder of a Class 2  Unsecured  Non-Insider
Claim under the Plan remains unclaimed for a period of six (6) months after such
distribution  has been made (or after such  delivery has been  attempted),  such
Unclaimed  Distribution and all future  distributions to be made to such holders
shall be deemed forfeited by such holder and the Unclaimed Distribution shall be
distributed  PRO RATA to the  other  holders  of an  Allowed  Class 2  Unsecured
Non-Insider Claims.

     NO CASH PAYMENTS OF $10.00 OR LESS ON ACCOUNT OF ALLOWED CLAIMS

     If a cash  payment  otherwise  provided  for by the Plan with respect to an
Allowed Claim would be less than Ten Dollars ($10.00)  (whether in the aggregate
or on any payment  date  provided  in the Plan),  notwithstanding  any  contrary
provision of this Plan,  no such payment will be made and  Reorganized  Ranch *1
shall retain such funds for its own purposes.

     DISPUTED PAYMENTS OR DISTRIBUTIONS

     In the event of any dispute  between  and among  Claimants  (including  the
Entity or  Entities  asserting  the right to  receive  the  disputed  payment or
distribution)  as to the right of any Entity to receive or retain any payment or
distribution  to be made to such Entity under the Plan, the Debtors may, in lieu
of making such payment or distribution  to such Entity,  make it instead into an
escrow account or to a disbursing  agent, for payment or distribution as ordered
by a court  of  competent  jurisdiction  or as the  interested  parties  to such
dispute may otherwise agree among themselves.

     PROCEDURES FOR RESOLVING DISPUTED CLAIMS

     Objections  to  Claims  shall be filed by the  Debtors  with the  Court and
served upon each holder of each of the Claims to which  objections  are made, no
later than  thirty (30) days  subsequent  to the  Effective  Date or within such
other time period as may be fixed by the Court. In lieu of making a distribution
to such holder,  such  distribution  shall be held in a segregated  non-interest
bearing account by Reorganized Ranch *1. If the Disputed or Contested Claim of a
holder of a Class 2 Non-Insider Unsecured Claim and/or Class 3 Insider Unsecured
Claim  becomes a  disallowed  Claim,  the  payments  withheld  pursuant  to this
paragraph  shall be  distributed  to  holders  of  Allowed  Claims in such class
following  the entry of a Final Order on a Disallowed  Claim.  Unless  otherwise
ordered by the Court, the Debtors shall litigate to judgment, settle or withdraw
objections to Disputed Claims,  in their sole discretion,  without notice to any
party in interest.

     Payments  and  distributions  to  each  holder  of a  Disputed  Claim  that
ultimately  becomes  an  Allowed  Claim  shall  be made in  accordance  with the
provisions  of the Plan  with  respect  to the Class of  Claimants  to which the
respective  holder of an Allowed Claim belongs unless  otherwise  ordered by the
Court.  Such  payments and  distributions  shall be made as soon as  practicable
after  the date  that the  Court  entered a Final  Order  allowing  such  Claim.
Payments made in  accordance  with Article XIV of the Plan shall not include the
interest on the amount of such  payment from the date on which the holder of the
Allowed Claim would have been  entitled to receive  payment if its Claim had not
been a Disputed  Claim.  Payments shall be made as and when a Disputed Claim has
become, in whole or in part, an Allowed Claim or a Disallowed Claim, pursuant to
a Final Order or agreement between the Debtors and such Claimant. In the event a
claim is disputed as of the Effective  Date,  the Debtors shall reserve the full
amount of the distribution to that Claimant as if the Claim was allowed in full.

                                      -20-
<PAGE>
                       VOTING AND CONFIRMATION OF THE PLAN

     GENERAL

     To confirm the Plan, the Bankruptcy Code requires that the Bankruptcy Court
make a series of findings  concerning the Plan and the Debtors,  including that:
(a) the Plan has classified  Claims and interests in a permissible  manner;  (b)
the Plan complies with the applicable provisions of the Bankruptcy Code; (c) the
Debtors have complied with the applicable provisions of the Bankruptcy Code; (d)
the Plan is proposed in good faith and not by any means  forbidden  by law;  (e)
the disclosure  required by Section 1125 of the  Bankruptcy  Code has been made;
(f) the Plan has been  accepted by the  requisite  votes of creditors and equity
security interest holders (except to the extent that cramdown is available under
Section 1129(b) of the Bankruptcy Code (see "-- Confirmation" and "-- Acceptance
or  Cramdown"));  (g) the Plan is feasible and  Confirmation  will not likely be
followed by the liquidation or the need for further financial  reorganization of
Reorganized  Ranch *1; (h) the Plan is in the "best interests" of all holders of
Claims or  interests  in an impaired  Class by  providing to creditors or equity
security  interest holders on account of such Claims or interests  property of a
value,  as of the  Effective  Date,  that is not less than the amount  that such
holder would receive or retain in a chapter 7 liquidation, unless each holder of
a Claim or  interest  in such  Class has  accepted  the  Plan;  (i) all fees and
expenses payable under 28 U.S.C. ss. 1930, as determined by the Bankruptcy Court
at the Confirmation Hearing, have been paid or the Plan provides for the payment
of such fees on the  Effective  Date;  and (j) the  disclosures  required  under
Section 1129(a)(5)  concerning the identity and affiliations of persons who will
serve as officers and directors of Reorganized Ranch *1 have been made.

     VOTING PROCEDURES AND REQUIREMENTS

     Pursuant to the Bankruptcy Code, only classes of claims against,  or equity
interests  in,  a  debtor  that  are  "impaired"  under  the  terms of a plan of
reorganization  are  entitled  to vote to accept  or  reject a plan.  A class is
"impaired" if the legal, equitable or contractual rights attaching to the claims
or  interests  of that class are  modified,  other than by curing  defaults  and
reinstating  maturity.  Classes of Claims that are not impaired are not entitled
to vote on the Plan and are conclusively  presumed to have accepted the Plan. In
addition,  Classes of Claims that  receive no  distributions  under the Plan are
impaired,  are not entitled to vote on the Plan and are deemed to have  rejected
the Plan unless such Class otherwise indicates acceptance. The classification of
Claims is  summarized,  together  with an  indication  of whether  each Class of
Claims or interests is impaired or unimpaired,  in "Overview of the Plan-Summary
of Classes and Treatment of Claims."

     Pursuant to Section 502 of the Bankruptcy  Code and  Bankruptcy  Rule 3018,
the Bankruptcy  Court may estimate and  temporarily  allow a Claim for voting or
other purposes.

     VOTING ON THE PLAN BY EACH HOLDER OF AN IMPAIRED CLAIM OR INTEREST ENTITLED
TO VOTE ON THE PLAN IS  IMPORTANT.  IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS OR
IF  YOU  HOLD  MULTIPLE   GENERAL   UNSECURED  CLAIMS  OR  UNDER  CERTAIN  OTHER
CIRCUMSTANCES,  YOU MAY  RECEIVE  MORE THAN ONE  BALLOT  FOR  WHICH  YOU  SHOULD
COMPLETE, SIGN AND RETURN EACH BALLOT YOU RECEIVE.

     PLEASE  CAREFULLY  FOLLOW ALL OF THE  INSTRUCTIONS  CONTAINED ON THE BALLOT
PROVIDED TO YOU. ALL BALLOTS MUST BE COMPLETED AND RETURNED IN  ACCORDANCE  WITH
THE INSTRUCTIONS PROVIDED.

     TO BE  COUNTED,  BALLOTS  MUST BE ACTUALLY  RECEIVED BY 5:00 P.M.,  EASTERN
TIME, ON THE VOTING  DEADLINE OF ________ ___, 2002 (UNLESS THE VOTING  DEADLINE
IS  EXTENDED).  IT IS OF THE  UTMOST  IMPORTANCE  TO THE  DEBTORS  THAT YOU VOTE
PROMPTLY TO ACCEPT THE PLAN.

                                      -21-
<PAGE>
     VOTES CANNOT BE TRANSMITTED  ORALLY.  ACCORDINGLY,  YOU ARE URGED TO RETURN
YOUR SIGNED AND COMPLETED BALLOT PROMPTLY.

     IF ANY OF THE CLASSES OF HOLDERS OF IMPAIRED  CLAIMS OR  INTERESTS  VOTE TO
REJECT THE PLAN,  (A) THE  DEBTORS  MAY SEEK TO  SATISFY  THE  REQUIREMENTS  FOR
CONFIRMATION OF THE PLAN UNDER THE CRAMDOWN PROVISIONS OF SECTION 1129(b) OF THE
BANKRUPTCY CODE AND, IF REQUIRED, MAY AMEND THE PLAN TO CONFORM TO THE STANDARDS
OF SUCH SECTION OR (B) THE PLAN MAY BE MODIFIED OR  WITHDRAWN  WITH RESPECT TO A
PARTICULAR  DEBTOR,  WITHOUT  AFFECTING THE PLAN AS TO OTHER DEBTORS,  OR IN ITS
ENTIRETY. See "- Acceptance or Cramdown."

     IF YOU ARE  ENTITLED TO VOTE AND YOU DID NOT  RECEIVE A BALLOT,  RECEIVED A
DAMAGED  BALLOT OR LOST YOUR  BALLOT,  CONTACT THE  DEBTORS'  COUNSEL,  BUCHANAN
INGERSOLL,  P.C. (ATTN: LOUIS T. DELUCIA,  ESQ. OR ALAN J. BRODY, ESQ.) AT (609)
987-8000.

     CONFIRMATION HEARING

     The Bankruptcy Code requires the Bankruptcy Court,  after notice, to hold a
hearing on whether the Debtors have fulfilled the  Confirmation  requirements of
Section 1129 of the Bankruptcy Code. The Confirmation Hearing has been scheduled
to commence on ________ __, 2002 at 9:30 a.m.,  Eastern Time,  and if necessary,
to continue thereafter,  before the Honorable Arthur J. Gonzalez,  United States
Bankruptcy  Judge for the Southern  District of New York,  in the Judge's  usual
courtroom at the United States Bankruptcy Court for the Southern District of New
York, One Bowling Green,  The Alexander  Hamilton  Customs House,  New York, New
York.  The  Confirmation  Hearing  may be  adjourned  from  time  to time by the
Bankruptcy  Court without  further  notice,  except for an  announcement  of the
adjourned date made in open court. Any objection to Confirmation must be made in
writing  and must  specify in detail the name and address of the  objector,  all
grounds for the objection and the amount of the Claim held by the objector.  Any
such  objections  must be filed and served  upon the persons  designated  in the
notice of the Confirmation  Hearing, in the manner and by the deadline described
therein.

     CONFIRMATION

     At the  Confirmation  Hearing,  the Bankruptcy  Court will confirm the Plan
only if all of the  applicable  requirements  of Section 1129 of the  Bankruptcy
Code are met. Among the  requirements  for Confirmation are that the Plan (a) is
accepted by the requisite holders of Claims in impaired Classes of Claims of the
Debtors  or,  if  not so  accepted,  is  "fair  and  equitable"  and  "does  not
discriminate  unfairly"  as to the  nonaccepting  Classes;  (b) is in the  "best
interests" of each holder of a Claim in each impaired  Class under the Plan; (c)
is feasible;  and (d) complies with the applicable  provisions of the Bankruptcy
Code.

     ACCEPTANCE OR CRAMDOWN

     A plan is accepted  by an  impaired  class of claims if holders of at least
two-thirds  (2/3) in dollar  amount and a  majority  in number of claims of that
class vote to accept the plan.  Only those  holders of claims who actually  vote
(and  are  entitled  to  vote)  to  accept  or to  reject  a plan  count in this
tabulation.  For purposes of determining whether the requisite approval has been
received  as to the  Debtors,  the votes in each  Class  will be  tabulated.  In
addition  to  this  voting  requirement,  Section  1129 of the  Bankruptcy  Code
requires  that a plan be  accepted  by each  holder of a claim or interest in an
impaired class or that the plan otherwise be found by the Bankruptcy Court to be
in the best  interests  of each  holder of a claim or  interest  in an  impaired
class. See "Voting and Confirmation of the Plan-Best Interests Test; Liquidation
Analysis." The Bankruptcy  Code contains  provisions for  confirmation of a plan
even if it is not accepted by all impaired classes,  as long as at least one (1)
impaired class of claims has accepted it. These so-called "cramdown"  provisions
are set forth in Section 1129(b) of the Bankruptcy Code. As indicated above, the
Plan  may be  confirmed  under  the  cramdown  provisions  if,  in  addition  to
satisfying the other  requirements  of Section 1129 of the Bankruptcy  Code, it:
(a) is "fair  and  equitable";  and (b) "does not  discriminate  unfairly"  with
respect to each class of Claims that is impaired  under,  and has not  accepted,
the  Plan.  The "fair  and  equitable"  standard,  also  known as the  "absolute

                                      -22-
<PAGE>
priority rule," requires,  among other things, that unless a dissenting class of
Claims receives full  compensation for its Allowed Claims,  no holder of Allowed
Claims in any junior Class may receive or retain any property on account of such
Claim.  With  respect to a  dissenting  Class of Secured  Claims,  the "fair and
equitable" standard requires, among other things that holders either: (a) retain
their liens and receive  deferred cash payments with a value as of the Effective
Date  equal to the  value of their  interest  in  property  or (b)  receive  the
indubitable  equivalent  of their  Secured  Claims.  The  "fair  and  equitable"
standard has also been  interpreted to prohibit any Class senior to a dissenting
Class from  receiving  under a plan more than one hundred  percent (100%) of its
Allowed Claims. The Debtors believe that, if necessary,  the Plan may be crammed
down over the  dissent  of certain  Classes  of Claims in view of the  treatment
proposed for such impaired  Classes.  If necessary and appropriate,  the Debtors
intend to modify the Plan to permit cramdown of dissenting Classes of Claims.

     The requirement  that the Plan not  "discriminate  unfairly"  means,  among
other things, that a dissenting Class must be treated substantially equally with
respect to other Classes of equal rank. The Debtors do not believe that the Plan
unfairly  discriminates  against  any Class  that may not  accept  or  otherwise
consent to the Plan.

     Any Class of Claims that receives nothing under the Plan are deemed to be a
dissenting  Class.  As a result,  in addition to any Class that does not vote to
accept  the Plan the  Debtors  will,  to the  extent  required,  seek to use the
"cramdown"  provisions described above, with respect to such dissenting Class of
Claims.

     Subject to the  conditions  set forth in the Plan, a  determination  by the
Bankruptcy  Court that the Plan is not  confirmable  pursuant to Section 1129 of
the Bankruptcy Code will not limit or affect the Debtors'  ability to modify the
Plan to satisfy the provisions of Section 1129(b) of the Bankruptcy Code.

     BEST INTERESTS TEST; LIQUIDATION ANALYSIS

     Notwithstanding  acceptance of the Plan by each impaired  Class, to confirm
the Plan,  the  Bankruptcy  Court  must  determine  that the Plan is in the best
interests of each holder of an Allowed Claim in any such impaired  Class who has
not voted to  accept  the  Plan.  Accordingly,  if an  impaired  Class  does not
unanimously  accept  the  Plan,  the "best  interests"  test  requires  that the
Bankruptcy  Court find that the Plan  provides to each  member of such  impaired
Class,  a recovery on account of the member's  Allowed Claim that has a value as
of the Effective Date, at least equal to the value of the distribution that each
such member  would  receive if the  applicable  Debtors  were  liquidated  under
chapter 7 of the Bankruptcy Code on such date.

     To estimate  what  members of each  impaired  Class of Claims or  interests
would receive if the Debtors were  liquidated  under chapter 7 of the Bankruptcy
Code, the Bankruptcy Court must first determine the aggregate dollar amount that
would be available if the Debtors' Cases were converted to chapter 7 cases under
the Bankruptcy  Code and each of the respective  Debtors' assets were liquidated
by a chapter 7 trustee (the "Liquidation  Value").  The Liquidation Value of the
Debtors would consist of the net proceeds from the  disposition of the assets of
the Debtors augmented by any cash held by the Debtors.

     The  Liquidation  Value  available to holders of Unsecured  Claims would be
reduced  by,  among other  things,  (a) the Claims of secured  creditors  to the
extent of the value of their collateral, (b) the costs, fees and expenses of the
liquidation,  as well as other administrative expenses of the Debtor's chapter 7
cases; (c) unpaid  Administrative Claims of the Debtors' Cases; and (d) Priority
Claims and Priority Tax Claims.  The Debtors'  costs of liquidation in chapter 7
cases would include the compensation of a trustee,  as well as of counsel and of
other  professionals  retained  by such  trustee,  asset  disposition  expenses,
applicable  taxes,  litigation  costs,  claims arising from the operation of the
Debtors during the pendency of the chapter 7 cases and all unpaid Administrative
Claims  incurred by the Debtors  during the Chapter 11 Cases that are allowed in
the chapter 7 cases. The liquidation itself may trigger certain Priority Claims,

                                      -23-
<PAGE>
and would likely  accelerate the payment of other  Priority  Claims and Priority
Tax  Claims  that would  otherwise  be  payable  in the  ordinary  course of the
Debtors'  business.  These Priority  Claims would be paid in full out of the net
liquidation proceeds,  after payment of Secured Claims, before the balance would
be made  available  to pay  Unsecured  Claims.  The  Debtors  believe  that  the
liquidation also would generate a significant increase in Unsecured Claims, such
as Rejection Damage Claims, and tax and other governmental Claims.

     The information contained in EXHIBIT C, annexed hereto,  provides a summary
of  the  Liquidation  Values  of  the  Debtors'  interests  in  property,  on  a
consolidated basis, by assuming  hypothetical  chapter 7 liquidations in which a
trustee   appointed  by  the  Bankruptcy  Court  would  liquidate  the  Debtors'
properties and interests in property. The liquidation analysis annexed hereto as
EXHIBIT C has been  prepared as of January 21, 2002,  based on, INTER ALIA,  the
assumption  that the  Effective  Date will be January 21,  2002.  Moreover,  the
chapter  7  liquidations  could  result  in  litigation  that  could  delay  the
liquidation beyond the periods assumed in EXHIBIT C. This delay could materially
reduce the amount determined on a present value basis available for distribution
to creditors.  Such litigation and attendant  delay could  adversely  affect the
values realizable in the sale of the Debtors' assets to an extent that cannot be
estimated at this time.

     Based on the  liquidation  analyses set forth in EXHIBIT C, the Debtors and
the Committee  believe that holders of Allowed Claims will receive greater value
as of the  Effective  Date under the Plan than such holders  would receive under
chapter 7 liquidations.

     In actual  liquidations of the Debtors,  distributions to holders of Claims
could  also be made  substantially  later  than the  Effective  Date  assumed in
connection  with the  Plan.  This  delay  could  materially  reduce  the  amount
determined on a present value basis available for distribution to creditors.

     In  summary,   the  Debtors  and  the  Committee  believe  that  chapter  7
liquidations of the Debtors would result in substantial  diminution in the value
to be  realized  by holders of  Allowed  Claims,  as  compared  to the  proposed
distributions  under the Plan, because of, among other factors:  (a) the failure
to realize the maximum  going  concern  value of the  Debtors'  assets;  (b) the
substantial  negative  impact of  conversion  to chapter 7 cases and  subsequent
liquidation  on the  employees,  franchisees  and customers of the Debtors;  (c)
additional  costs  and  expenses  involved  in  the  appointment  of a  trustee,
attorneys,  accountants  and other  professionals  to assist such trustee in the
chapter 7 cases;  (d)  additional  expenses  and claims,  some of which would be
entitled to priority in payment,  which would arise by reason of the liquidation
and from the  rejection  of  unexpired  real estate  leases and other  Executory
Contracts  and Unexpired  Leases in connection  with a cessation of the Debtors'
operations; and (e) the substantial time that would elapse before entities would
receive any distribution in respect of their Allowed Claims.  Consequently,  the
Debtors and the  Committee  believe that the Plan will  provide a  substantially
greater ultimate return to holders of Claims than would chapter 7 liquidations.

     FEASIBILITY

     Section  1129(a)(11) of the Bankruptcy Code requires that  Confirmation not
be likely to be followed by the liquidation,  or the need for further  financial
reorganization,  of the Debtors or any  successor  to the Debtors  (unless  such
liquidation  or  reorganization  is  proposed  in the  Plan).  For  purposes  of
determining  whether the Plan meets this requirement,  the Debtors have analyzed
their ability to meet their respective  obligations  under the Plan. As part of'
this  analysis,  the  Debtors  have  prepared  the  Projections.  Based upon the
Projections,  the Debtors believe that their reorganization under the Plan meets
the feasibility requirements of the Bankruptcy Code.

     COMPLIANCE WITH APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE

     Section  1129(a)(1)  of the  Bankruptcy  Code requires that the Plan comply
with the  applicable  provisions  of the  Bankruptcy  Code.  The Debtors and the
Committee  have  considered  each of these issues and believe that that the Plan
complies with all provisions of the Bankruptcy Code.

                                      -24-
<PAGE>
     The Debtors and the Committee have evaluated  numerous  alternatives to the
Plan, including alternative structures and terms of the Plan, the liquidation of
the Debtors and  delaying  the  adoption of any plan of  reorganization  and the
pursuit of various  litigation  strategies.  While the Debtors and the Committee
have  concluded  that  the  Plan  is the  best  alternative  and  will  maximize
recoveries  by holders  of Allowed  Claims,  if the Plan is not  confirmed,  the
Debtors,  individually or  collectively,  or (subject to the Debtors'  exclusive
periods under the Bankruptcy  Code to file and solicit  acceptances of a plan or
plans of  reorganization)  any other party in interest  in the  Debtors'  Cases,
could  attempt  to  formulate   and  propose  a  different   plan  or  plans  of
reorganization.  Further,  if no plan of  reorganization  can be confirmed,  the
Debtors' Cases may be converted to chapter 7 cases.  In liquidation  cases under
chapter 7 of the  Bankruptcy  Code,  a trustee or  trustees  would be elected or
appointed  to  liquidate  the  assets  of  each  Debtor.  The  proceeds  of  the
liquidation  would be distributed to the respective  creditors of the Debtors in
accordance with the priorities  established by the Bankruptcy  Code. For further
discussion  of the  potential  impact on the  Debtors of the  conversion  of the
Debtors'  Chapter 11 Cases to  chapter 7  liquidations,  see "-- Best  Interests
Test;   Liquidation   Analysis."  The  Debtors  believe  that  Confirmation  and
consummation of the Plan is preferable to the alternatives described above.

                          RECOMMENDATION AND CONCLUSION

     For all the reasons set forth in this Disclosure Statement, the Debtors and
the Committee  believe that the  Confirmation  and  consummation  of the Plan is
preferable  to  all  other  alternatives.  Consequently,  the  Debtors  and  the
Committee  urge all  holders  of Claims in voting  Classes to vote to accept the
Plan and to evidence their  acceptance by duly  completing  and returning  their
Ballots so that they will be received on or before the Voting Deadline.

                                        Respectfully submitted,

Dated: New York, New York
       December 31, 2001

                                        RANCH *1, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 METRO, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 METRO TECH, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                      -25-
<PAGE>
                                        RANCH *1 PEARL, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 GROUP, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        MOORGRHO, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 EIGHTH AVENUE, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 OF AMERICA, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                      -26-
<PAGE>
                                        RANCH *1 FASHION, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0117, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 PALISADES, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        DOME ENTERPRISES, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0118, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 202, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 1701, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                      -27-
<PAGE>
                                        RANCH *1 OF BROADWAY


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 ON 34TH STREET, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0207, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0112, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 52ND, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0137, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0113, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                      -28-
<PAGE>
                                        RANCH *1 NUMBER 0135, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0125, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        OME, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 1904, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 DOWNTOWN, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0150, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                      -29-
<PAGE>
                                        RANCH *1 NUMBER 0128, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        COUNSEL:


                                        BUCHANAN INGERSOLL, P.C.
                                        Attorneys for the Debtors
                                          and Debtors-in-Possession


                                        By: /s/ Alan J. Brody
                                            ------------------------------------
                                            Louis T. DeLucia (LD-3879)
                                            Alan J. Brody (AB-4777)
                                            700 Alexander Park
                                            Suite 300
                                            Princeton, New Jersey 08540
                                            (609)987-6800
                                                  -and-
                                            140 Broadway
                                            New York, New York 10005
                                            (546) 458-2340

                                      -30-
<PAGE>
                                    EXHIBIT A


                 Plan of Reorganization Jointly Proposed by the
                  Debtors, the Official Committee of Unsecured
                     Creditors and R1 Franchise Systems, LLC
<PAGE>
                                    EXHIBIT B


       Projected Consolidated Financial Statements of Reorganized Ranch *1
<PAGE>
                                    EXHIBIT C


                        Consolidated Liquidation Analysis
<PAGE>
                                    EXHIBIT D


                                  Class 2 Note
<PAGE>
                                    EXHIBIT E


                                  Insider Note
<PAGE>
                                    EXHIBIT F


                             Additional Insider Note