UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.
                                    FORM 10-Q



(Mark One)

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

For the quarter ended March 29, 1997

                                       OR

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


For the transition period from __________ to __________


Commission file number 0-17229


                            DAKA INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


Delaware                                                              04-3024178
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)


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


                                 (508) 774-9115
              (Registrant's telephone number, including area code)


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



Number of shares of Common Stock,  $.01 par value,  outstanding  at May 9, 1997:
11,153,203


<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                            DAKA INTERNATIONAL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                      March 29,       June 29,
                                                                                                        1997            1996
<S>                                                                                                   <C>             <C>
ASSETS:
Current assets:
   Cash and cash equivalents .......................................................................  $  7,956        $ 11,708
   Accounts receivable, net ........................................................................    45,618          36,699
   Inventories .....................................................................................    11,343          10,119
   Prepaid expenses and other current assets .......................................................    10,198           5,265
                                                                                                      --------        --------
     Total current assets ..........................................................................    75,115          63,791
                                                                                                      --------        --------

Property and equipment, net ........................................................................   131,349         124,563
Investments in, and advances to, affiliates ........................................................     5,000           5,000
Other assets, net ..................................................................................    32,349          32,717
Deferred income taxes ..............................................................................     5,486           5,486
                                                                                                      --------        --------
                                                                                                      $249,299        $231,557
                                                                                                      ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Accounts payable ................................................................................  $ 31,709        $ 17,772
   Accrued expenses ................................................................................    17,084          15,110
   Current portion of long-term debt ...............................................................    32,200           1,507
   Deferred income taxes ...........................................................................       787             787
                                                                                                      --------        --------
     Total current liabilities .....................................................................    81,780          35,176
                                                                                                      --------        --------

Long-term debt .....................................................................................    77,496          98,355
Other long-term liabilities ........................................................................    13,310          12,978
Minority interests .................................................................................     1,088           2,181

Commitments and contingencies (Note 3)

Stockholders' equity:
Series A Preferred Stock, $.01 par value, $100 liquidation preference; 1,000,000
   shares authorized; 11,912 shares issued and
   outstanding at March 29, 1997 and June 29, 1996 .................................................      --              --
Common Stock, $.01 par value; 30,000,000 shares authorized;
   11,148,302 and 11,120,900 shares issued and outstanding at
   March 29, 1997 and June 29, 1996, respectively ..................................................       111             111
Capital in excess of par value .....................................................................    71,974          71,907
Retained earnings ..................................................................................     3,540          10,849
                                                                                                      --------        --------
     Total stockholders' equity ....................................................................    75,625          82,867

                                                                                                      $249,299        $231,557
                                                                                                      ========        ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.


<PAGE>


                            DAKA INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Three Months Ended        Nine Months Ended
                                                                          ------------------        -----------------
                                                                           March         March       March         March
                                                                         29, 1997      30, 1996    29, 1997      30, 1996
                                                                         --------      --------    --------      --------
                                                                                    (as restated)              (as restated)
<S>                                                                      <C>         <C>          <C>           <C>
Revenues:
   Sales .............................................................   $  98,376    $ 100,208    $ 293,193    $ 294,292
   Management and other fees .........................................       2,570        3,006        7,623       10,627
                                                                         ---------    ---------    ---------    ---------
                                                                           100,946      103,214      300,816      304,919
                                                                         ---------    ---------    ---------    ---------

Costs and expenses:
   Cost of sales and operating expenses ..............................      84,360       85,743      254,749      248,209
   Selling, general and administrative expenses ......................      10,129        9,971       33,010       28,750
   Depreciation and amortization .....................................       5,609        4,724       16,549       12,865
   Impairment charges ................................................        --          5,711         --          5,711
   Merger costs ......................................................        --          2,900         --          2,900
                                                                         ---------    ---------    ---------    ---------
                                                                           100,098      109,049      304,308      298,435
                                                                         ---------    ---------    ---------    ---------

Income (loss) from operations ........................................         848       (5,835)      (3,492)       6,484
Other (expense) income:
   Interest expense ..................................................      (2,881)      (1,830)      (8,064)      (4,691)
   Interest income ...................................................         117           44          322          244
                                                                         ---------    ---------    ---------    ---------
Income (loss) before income taxes and minority interests .............      (1,916)      (7,621)     (11,234)       2,037
Income tax expense (benefit) .........................................        (667)      (1,490)      (3,910)       2,247
Minority interests ...................................................         (10)        (603)         (63)        (753)
                                                                         ---------    ---------    ---------    ---------
Net income (loss) ....................................................      (1,239)      (5,528)      (7,261)         543
Preferred Stock dividend .............................................        --           --             48         --
                                                                         ---------    ---------    ---------    ---------
Net income (loss) available for Common Stockholders ..................   $  (1,239)   $  (5,528)   $  (7,309)   $     543
                                                                         =========    =========    =========    =========

Earnings (loss)  per share:
   Primary ...........................................................   $   (0.11)   $   (0.56)   $   (0.66)   $    0.06
   Fully diluted .....................................................   $   (0.11)   $   (0.56)   $   (0.66)   $    0.06
</TABLE>







See notes to unaudited condensed consolidated financial statements.


<PAGE>


                            DAKA INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               Nine Months Ended March 29, 1997 and March 30, 1996
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                               March         March
                                                                             29, 1997       30, 1996
                                                                             --------       --------
                                                                                          (as restated)
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Cash flows from operating activities:
Net income (loss) ......................................................     ($ 7,309)     $    543
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Depreciation and amortization .......................................       16,549        12,865
   Impairment charges ..................................................         --           5,711
   Loss on sale of property and equipment ..............................         --             793
   Minority interests ..................................................          (63)         (753)
Changes in assets and liabilities:
   Accounts receivable .................................................       (8,919)      (19,016)
   Inventories .........................................................       (1,224)       (2,052)
   Other assets ........................................................       (6,078)       (7,263)
   Accounts payable and accrued expenses ...............................       15,910         4,769
   Other long-term liabilities .........................................          333         4,711
                                                                             --------      --------
     Net cash provided by operations ...................................        9,199           308

Cash flows from investing activities:
Purchase of property and equipment .....................................      (30,590)      (47,379)
Proceeds from sale of property and equipment ...........................        2,300           130
Investments in, and advances to, affiliates ............................       (2,538)       (4,712)
                                                                             --------      --------
     Net cash used in investing activities: ............................      (30,828)      (51,961)
                                                                             --------      --------

Cash flows from financing activities:
Increase in line-of-credit borrowing ...................................       11,950        37,955
Repayment of long-term debt ............................................       (3,242)         (980)
Proceeds from sale-leaseback facility ..................................        9,081        11,833
Other, net .............................................................           88         1,944
                                                                             --------      --------
     Net cash provided by financing activities .........................       17,877        50,752
                                                                             --------      --------

Net decrease in cash and cash equivalents ..............................       (3,752)         (901)

Cash and cash equivalents, beginning of period .........................       11,708        10,538
                                                                             --------      --------
Cash and cash equivalents, end of period ...............................     $  7,956      $  9,637
                                                                             ========      ========

Supplemental cash flow disclosures:
Interest  paid                                                               $  6,922      $  4,164
Income taxes paid                                                            $  1,303      $  4,834
</TABLE>


During the nine  months  ended  March 29,  1997 and March 30,  1996 the  Company
acquired certain  equipment by entering into capital leases  aggregating  $1,756
and $3,330, respectively.

See notes to unaudited condensed consolidated financial statements.

<PAGE>



                            DAKA INTERNATIONAL, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              Nine Months Ended March 29, 1997 and March 30, 1996
                  (Dollars in thousands, except per share data)
                                   (Unaudited)

1.  Summary of Significant Accounting Policies

The accompanying  unaudited condensed  consolidated financial statements include
the  accounts  of  DAKA   International,   Inc.   and  its   majority-controlled
subsidiaries   ("DAKA"  or  the  "Company")   including  Daka,  Inc.   ("Daka"),
Fuddruckers,  Inc.  ("Fuddruckers"),   Champps  Entertainment,  Inc.  ("CEI"  or
"Champps"),  The Great Bagel and Coffee  Company  ("Great Bagel and Coffee") and
Americana  Dining  Corp.  ("ADC").  The  accompanying  March 30, 1996  unaudited
condensed  consolidated  financial  statements have been restated to reflect the
business  combination  accounted  for  as  a  pooling-of-interests   more  fully
described   in  Note  2  and   the   matters   discussed   under   the   caption
"Classifications"   discussed  below.   Significant  intercompany  balances  and
transactions have been eliminated in consolidation.

The Company is a diversified  restaurant  company  serving  customers  through a
variety of channels. The Company's Fuddruckers and Champps subsidiaries (CEI and
ADC) operate in casual and upscale restaurant settings, respectively, throughout
the United States and in Canada,  Australia  and the Middle East.  The Company's
Great Bagel and Coffee subsidiary  primarily serves coffee,  bagels and sandwich
items in a cafe setting in western  locations of the United  States.  Restaurant
operations  are conducted  through  Company-owned  and  franchised  stores.  The
Company's  Daka  subsidiary  is  a  leading  contract   foodservice   management
corporation operating throughout the United States.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  include all  adjustments,  consisting of normal recurring
adjustments,  necessary  for the fair  presentation  of  financial  position and
results  of  operations.   The  accompanying  unaudited  condensed  consolidated
financial statements should be read in conjunction with the audited consolidated
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K for the fiscal year ended June 29, 1996. The unaudited consolidated
results of  operations  for the quarter and nine months ended March 29, 1997 and
March 30,  1996 are not  necessarily  indicative  of the  results  that could be
expected for a full year.

Fiscal Year

The Company's  fiscal year ends on the Saturday closest to June 30. For purposes
of these notes to the unaudited condensed consolidated financial statements, the
quarter and nine months  ended March 29, 1997 and March 30, 1996 are referred to
as 1997 and 1996, respectively.

Classifications

Certain amounts related to the third quarter of 1996 have been reclassified from
their  presentation  in such  previously  filed  Form  10-Q to  reflect  further
analysis  performed  by the Company  related to the adoption of SFAS No. 121 and
the write-down of reacquired  franchise  rights,  investments  and other assets.
Such  reclassifications  had the effect of  reducing  the  amounts  reported  as
"impairment charges" as of March 30, 1996 by approximately $2,250 and increasing
the amount reported as "cost of sales and operating  expenses" by  approximately
$2,250.  Certain  other  reclassifications  have been  made to the prior  year's
financial  statements  in  order to  conform  to the  1997  presentation.  These
reclassifications  had no effect on previously  reported  gross  profit,  income
(loss)  before taxes and minority  interests,  net income  (loss) or primary and
fully diluted earnings (loss) per share.

<PAGE>

Significant Estimates

In the process of preparing its financial statements,  the Company estimates the
appropriate  carrying  value of  certain  assets and  liabilities  which are not
readily  apparent  from other  sources.  The primary  estimates  underlying  the
Company's  financial  statements  include  allowances for potential bad debts on
accounts and notes receivable, the useful lives and recoverability of its assets
such as property  and  intangibles,  fair values of financial  instruments,  the
realizable value of its tax assets and accruals for health  insurance,  workers'
compensation  and other  matters.  Management  bases its  estimates  on  certain
assumptions,  which they believe are reasonable in the circumstances,  and while
actual results could differ from those  estimates,  management  does not believe
that any  change in those  assumptions  in the near term  would  have a material
effect on the Company's financial position or the results of operations.

Earnings (Loss) Per Share

Primary earnings (loss) per share are computed using the weighted average number
of common and common  equivalent  shares  (dilutive  options)  outstanding.  The
calculation  of fully diluted  earnings per share  includes the shares  issuable
upon conversion of the Preferred Stock which amounted to  approximately  264,700
shares in 1996,  and the shares  issuable upon  conversion of the 7% Convertible
Subordinated  Notes (the  "Notes")  which  amounted to 1,003,750 in 1996.  Fully
diluted  earnings  per share  assumes  that the  Preferred  Stock and Notes were
converted into Common Stock as of the beginning of the fiscal year,  unless they
are  anti-dilutive,  and reflect the elimination of interest  expense related to
the  Notes,  net of the  related  income  tax  effect,  and the  elimination  of
dividends related to the Preferred Stock.

The weighted average number of shares used in the computation of earnings (loss)
per share for 1997 and 1996 are as follows:

                       Three Months Ended             Nine Months Ended
                       ------------------             -----------------
                      March          March          March           March
                     29, 1997       30, 1996       29, 1997        30, 1996
                     --------       --------       --------        --------
                                  (as restated)                  (as restated)

Primary             11,148,302      9,802,236     11,140,536       9,513,250
Fully diluted       11,148,302      9,802,236     11,140,536      11,379,922

In March 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards (SFAS) No. 128, "Earnings per Share," which the
Company will adopt in fiscal 1998. Had SFAS No. 128 been effective for the three
and nine  months  ended  March 29, 1997 and March 30,  1996,  reported  earnings
(loss) per share would have been as follows:

                       Three Months Ended             Nine Months Ended
                       ------------------             -----------------
                      March          March          March           March
                     29, 1997       30, 1996       29, 1997        30, 1996
                     --------       --------       --------        --------
Basic                 (0.11)         (0.56)          (0.66)           0.06
Diluted               (0.11)         (0.56)          (0.66)           0.06



<PAGE>



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

2.   Merger with The Great Bagel and Coffee Company

In April 1996,  the Company merged with Great Bagel and Coffee  whereupon  Great
Bagel and Coffee became a  wholly-owned  subsidiary of DAKA. The merger has been
accounted  for  as  a  pooling-of-interests  and,  accordingly,   the  Company's
previously  issued  unaudited  condensed March 31, 1996  consolidated  financial
statements  have been restated to include the accounts of Great Bagel and Coffee
for all periods presented.

3.  Commitments and Contingencies

Litigation

On October 18,  1996, a purported  class action  lawsuit was filed in the United
States District Court for the District of Massachusetts on behalf of persons who
acquired the  Company's  stock  between  October 30, 1995 and  September 9, 1996
(Venturino et al. V. DAKA  International,  Inc. And William H. Baumhauer,  Civil
Action No. 96-12109-GAO).  The complaint alleges violations of federal and state
securities  laws  by,  among  other  things,  allegedly  misrepresenting  and/or
omitting   material   information   concerning  the  results  and  prospects  of
Fuddruckers  during that period and seeks  compensatory  damages and  reasonable
costs and expenses,  including  counsel fees.  Contrary to earlier  indications,
counsel for the plaintiffs  have informed the Company that they do not intend to
amend the complaint and the parties have agreed that the Company will have until
May 22, 1997 to answer or otherwise  respond to the original pending  complaint.
The Company believes that the case is without merit and intends to defend itself
vigorously.

The  Company is also  engaged  in various  other  legal  actions  arising in the
ordinary course of business. The Company believes,  based upon consultation with
legal counsel, that the ultimate outcome will not have a material adverse effect
on the Company's financial condition, results of operations or liquidity.

Letters of Credit

As of March 29, 1997, the Company has approximately  $3.0 million of outstanding
letters of  credit.  The  outstanding  letters  of credit  reduce the  Company's
borrowing  capacity under its  line-of-credit  agreement (see Note 4 of Notes to
Unaudited Condensed Consolidated Financial Statements).


<PAGE>



4.  Debt

On February 7, 1997, the Company amended its revolving  line-of-credit agreement
(the "February  Agreement")  principally to reduce the Company's borrowing limit
to $115 million,  change the maturity date to January 2, 1998, and amend certain
loan  covenants.  On May 7, 1997,  the Company  renegotiated  certain  terms and
conditions of the February  Agreement (the "May  Agreement",  collectively,  the
"Agreements") whereby the Company's borrowing limit will be sequentially reduced
to $72.5  million by March 31, 1998,  the maturity date was extended to April 2,
1998,  and certain loan  covenants  were  amended.  The  Agreements  require the
Company  to reduce  its  borrowing  limit  and to repay  principal  balances  as
follows:

<TABLE>
<CAPTION>
                                                                                                   Borrowing
Date                                                Amount           Limit
----                                                ------           -----
<S>                                             <C>             <C>           
May 31, 1997 ................................   $ 5.0 million   $110.0 million
June 30, 1997 ...............................    10.0 million    100.0 million
July 31, 1997 ...............................     0.5 million     99.5 million
August 31, 1997 .............................     0.5 million     99.0 million
September 30, 1997 ..........................     0.5 million     98.5 million
October 31, 1997 ............................     1.0 million     97.5 million
November 30, 1997 ...........................     2.5 million     95.0 million
December 31, 1997 ...........................     5.0 million     90.0 million
January 31, 1998 ............................     5.0 million     85.0 million
February 28, 1998 ...........................     5.0 million     80.0 million
March 31, 1998 ..............................     7.5 million     72.5 million
                                                -------------    -------------
  ...........................................   $42.5 million
                                                =============        
</TABLE>


Accordingly,   the  Company  has  classified   approximately  $31.1  million  of
outstanding  borrowings as current in the balance sheet as of March 29, 1997. At
March 29, 1997,  the Company had available  borrowings  under the  Agreements of
approximately $11.4 million.



<PAGE>



5.  Segment Information

The Company  operates in the  contract  foodservice  management  and  restaurant
industries.  The table below  presents  selected  results of operations  for the
Company's  businesses  for the quarter and nine months  ended March 29, 1997 and
March 30, 1996, respectively.

<TABLE>
<CAPTION>
                                                                                 Three Months Ended             Nine Months Ended
                                                                                 ------------------             -----------------
                                                                                  March          March       March        March
                                                                                29, 1997       30, 1996     29, 1997     30, 1996
                                                                                --------       --------     --------     --------
                                                                                            (as restated)             (as restated)
<S>                                                                             <C>           <C>           <C>           <C>
Revenues:
   Sales from profit and loss contracts ........................................$ 48,038      $ 55,883      $144,728      $165,987
   Management and other fees ...................................................   1,348         1,517         3,730         4,099
   Restaurant sales - Fuddruckers ..............................................  34,670        32,058       102,790        96,788
   Franchising income - Fuddruckers ............................................   1,001         1,174         2,856         5,755
   Restaurant sales - Champps ..................................................  14,300        11,591        41,847        29,612
   Franchising income - Champps ................................................     120           141           385           427
   Unit sales - Specialty Concepts .............................................   1,368           676         3,828         1,905
   Franchising income - Specialty Concepts .....................................     101           174           652           346
                                                                                --------      --------      --------      --------
     Total revenues ........................................................... $100,946      $103,214      $300,816      $304,919
                                                                                ========      ========      ========      ========

Foodservice:
   Sales from profit and loss contracts ........................................$ 48,038      $ 55,883      $144,728      $165,987
   Operating expenses:
     Labor costs ...............................................................  16,212        20,807        48,997        57,060
     Product costs .............................................................  17,123        20,240        53,043        60,251
     Other operating expenses ..................................................   7,000         8,136        21,170        24,169
     Depreciation and amortization .............................................   1,509         1,490         4,236         4,163
     Impairment charges ........................................................    --           3,198          --           3,198
                                                                                --------      --------      --------      --------
   Income from profit and loss contracts .......................................   6,194         2,012        17,282        17,146
   Management and other fees ...................................................   1,348         1,517         3,730         4,099
                                                                                --------      --------      --------      --------
   Income from foodservice operations ..........................................   7,542         3,529        21,012        21,245
                                                                                --------      --------      --------      --------

Fuddruckers:
   Sales from restaurant operations ............................................  34,670        32,058       102,790        96,788
   Operating expenses:
     Labor costs ...............................................................  10,261         9,247        31,285        27,487
     Product costs .............................................................   9,280         8,900        28,373        27,028
     Other operating expenses ..................................................  11,005         8,054        32,408        25,790
     Depreciation and amortization .............................................   2,471         2,001         7,172         5,650
     Impairment charges ........................................................    --           2,450          --           2,450
                                                                                --------      --------      --------      --------

   Income from restaurant operations ...........................................   1,653         1,406         3,552         8,383
   Franchising income - Fuddruckers ............................................   1,001         1,174         2,856         5,755
                                                                                --------      --------      --------      --------
   Income from restaurant and franchising operations ...........................   2,654         2,580         6,408        14,138
                                                                                --------      --------      --------      --------

</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                                                                                 Three Months Ended          Nine Months Ended
                                                                                 ------------------          -----------------
                                                                                  March          March       March        March
                                                                                29, 1997       30, 1996     29, 1997     30, 1996
                                                                                --------       --------     --------     --------
                                                                                            (as restated)             (as restated)
<S>                                                                             <C>           <C>           <C>           <C>
Champps:
   Sales from restaurant operations ............................................  14,300        11,591        41,847        29,612
   Operating expenses:
     Labor costs ...............................................................   4,531         3,852        13,629         9,766
     Product costs .............................................................   4,108         3,331        12,100         8,489
     Other operating expenses ..................................................   3,353         2,599         9,814         6,645
     Depreciation and amortization                                                 1,122           957         3,447         2,324
     Impairment charges                                                             --              63          --              63
     Merger costs ..............................................................    --           2,900          --           2,900
                                                                                --------      --------      --------      --------
   Income (loss) from restaurant operations ....................................   1,186        (2,111)        2,857          (575)
   Franchising income - Champps ................................................     120           141           385           427
                                                                                --------      --------      --------      --------
   Income (loss) from restaurant and franchising
     operations ................................................................   1,306        (1,970)        3,242          (148)
                                                                                --------      --------      --------      --------

Specialty Concepts:
   Sales from unit operations ..................................................   1,368           676         3,828         1,905
   Operating expenses:
     Labor costs ...............................................................     713           169         1,770           435
     Product costs .............................................................     384           298         1,092           817
     Other operating expenses ..................................................     390           110         1,068           272
     Depreciation and amortization                                                   289            23           574            73
                                                                                --------      --------      --------      --------
   Income (loss) from unit operations ..........................................    (408)           76          (676)          308
   Franchising income - Specialty Concepts .....................................     101           174           652           346
                                                                                --------      --------      --------      --------
   Income (loss) from unit and franchising operations ..........................    (307)          250           (24)          654
                                                                                --------      --------      --------      --------


Income from operations before selling,
  general and administrative expenses ..........................................  11,195         4,389        30,638        35,889
                                                                                --------      --------      --------      --------

Selling, general and administrative expenses (1):
   Foodservice .................................................................   1,909         2,361         6,095         6,671
   Fuddruckers .................................................................   3,040         2,859        10,284         8,974
   Champps .....................................................................     769         1,095         2,650         2,850
   Specialty Concepts ..........................................................     598           122         1,819           302
   Corporate ...................................................................   4,031         3,787        13,282        10,608
                                                                                --------      --------      --------      --------
     Total .....................................................................  10,347        10,224        34,130        29,405
                                                                                --------      --------      --------      --------

Operating income (loss) ........................................................     848        (5,835)       (3,492)        6,484
Interest expense ...............................................................  (2,881)       (1,830)       (8,064)       (4,691)
Interest income ................................................................     117            44           322           244
                                                                                --------      --------      --------      --------
Income (loss) before income taxes and minority interests .......................  (1,916)       (7,621)      (11,234)         2,037
Income tax expense (benefit) ...................................................    (667)       (1,490)       (3,910)         2,247
Minority interests .............................................................     (10)         (603)          (63)         (753)
                                                                                --------      --------      --------      --------
Net income (loss) ..............................................................  (1,239)       (5,528)       (7,261)          543
Preferred Stock dividend .......................................................    --            --             (48)         --
                                                                                --------      --------      --------      --------
Net income (loss) available for common
  stockholders .................................................................$ (1,239)     $ (5,528)     $ (7,309)     $    543
                                                                                ========      ========      ========      ========
</TABLE>

(1)  Includes  depreciation  expense  of  $218,  $253,  $1,120  and $655 for the
quarters and nine months ended March 29, 1997 and March 30, 1996, respectively.

<PAGE>


ITEM 2.  Management's  Discussion  and  Analysis  of Results of  Operations  and
         Financial Condition

                              RESULTS OF OPERATIONS

Certain Factors Affecting Future Operating Results

This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Such  statements  involve  certain risks and  uncertainties  that could
cause  actual  results to differ  materially  from those in the  forward-looking
statements including uncertainties regarding the effectiveness of initiatives to
lower selling,  general and  administrative  expenses and to improve  operations
within the core  businesses.  Certain  factors which may cause such a difference
include,  but are not  limited  to,  the  following:  the  impact  of  increased
competition in the bidding process for foodservice contracts against competitors
with  significant   financial  resources  and  market  share;  the  exercise  by
foodservice  clients  of their  right to  terminate  contracts  which  typically
provide for  termination  upon 30 to 60 days  notice;  the impact of  increasing
competition  in the casual and upscale  casual dining  segment of the restaurant
industry;  changes in general economic conditions which impact consumer spending
for  restaurant  occasions;   adverse  weather  conditions;   competition  among
restaurant  companies for attractive sites and unforeseen  events which increase
the cost to develop and/or delay the development and opening of new restaurants;
increases in the cost of product, labor and other resources necessary to operate
both the restaurants and the foodservice facilities;  unforeseen difficulties in
integrating  acquired  businesses;  the amount and rate of growth of general and
administrative  expenses  associated  with  building  a  strengthened  corporate
infrastructure  to support  operations;  the availability and terms of financing
for the Company and any changes to that financing; the revaluation of any of the
Company's assets (and related expenses);  and the amount of, and any changes to,
tax rates.

Summary

The Company  recorded a net loss for the three months  ended March 29, 1997,  of
$1.2 million,  or $0.11 per share,  compared with net income of $1.8 million, or
$0.17 per share (on a fully diluted  basis),  excluding  impairment  charges and
merger  costs,  for the same period last year.  The Company also  reported a net
loss of $7.3  million,  or $0.66 per share,  for the first nine months of fiscal
1997 compared  with net income of $5.4  million,  or $0.52 per share (on a fully
diluted basis),  excluding  impairment  charges and merger costs,  for the first
nine months of fiscal 1996.

Total  revenues for the three and nine months  ended March 29,  1997,  decreased
2.2% to $100.9 million and 1.3% to $300.8 million,  respectively,  compared with
$103.2 million and $304.9 million, respectively, in the same periods last year.

Income (loss) from operations, excluding impairment charges and merger costs, in
fiscal 1996, declined 69% to $848 for the current quarter compared with $2,776 a
year  ago.  This  decrease  was  primarily  attributable  to  lower  foodservice
revenues, lower average store sales in the Fuddruckers segment which reduced the
Company's  ability to leverage fixed costs,  and poor  operating  results in the
Specialty   Concepts   segment   principally   related  to  its   operations  in
non-traditional  foodservice venues, offset, in part, by higher sales in Champps
and improved operating margins in the foodservice and Champps segments.

Income (loss) from operations, excluding impairment charges and merger costs, in
fiscal 1996,  were $3,492 for the first nine months of fiscal 1997 compared with
$15,095 in the same period a year ago. This decrease was primarily  attributable
to lower  foodservice  revenues,  lower average  store sales in the  Fuddruckers
segment  which  reduced the  Company's  ability to leverage  fixed costs,  lower
Fuddruckers  franchise income,  poor operating results in the Specialty Concepts
segment and higher SG&A costs,  offset,  in part, by higher sales in Champps due
to one new store being opened between periods.


<PAGE>



The results of the prior year third  quarter and nine months  results  have been
restated to reflect the  Company's  merger with Great Bagel and Coffee which was
accounted for as a pooling-of-interests.

On May 7, 1997,  the Company  renegotiated  certain terms and  conditions of its
existing line-of-credit facility (see Financial Condition and Liquidity and Note
4 of Notes to Unaudited Condensed Consolidated Financial Statements).

Selling, General and Administrative Expenses

Selling,  general  and  administrative  expenses  increased  approximately  $0.1
million and $4.7 million,  respectively,  to $10.3 million and $34.1 million for
the three and nine  months  ended  March 29,  1997.  These  increases  primarily
reflect the impact of costs  associated in the current year with the  terminated
venture with Kmart, increased marketing costs for Fuddruckers,  higher overhead,
including  severance costs,  associated with the Specialty  Concepts segment and
ongoing  investment  in  divisional   infrastructures.   Selling,   general  and
administrative  expenses  expressed as a  percentage  of managed  volume,  which
includes  managed  volume  in the  foodservice  business  as  well as  sales  at
Company-owned Fuddruckers,  Champps and Specialty Concepts locations,  increased
to  8.2%  and  9.2%  for the  three  and  nine  months  ended  March  29,  1997,
respectively,  compared  with 8.0% and 7.9% for the same periods last year.  The
Company   expects  to  lower  the  absolute   level  of  selling,   general  and
administrative  expenses  over  the  balance  of  fiscal  1997 as its  near-term
expansion  plans have been moderated and the effect of certain events  described
herein are not expected to continue to impact operations.  Subsequent to the end
of the quarter, the Company has taken certain actions, including the elimination
of 35  positions  in the  corporate  office,  to further  reduce its general and
administrative  expenses.  The Company  believes these actions should reduce its
general and  administrative  expenses on an on-going basis by approximately $1.8
million.

Interest Expense

Interest expense increased  approximately  $1.1 million and $3.4 million to $2.9
million and $8.1 million,  respectively,  during the three and nine months ended
March 29, 1997,  compared  with $1.8 million and $4.7 million a year ago.  These
increases  reflect  higher levels of borrowings  during the current year coupled
with higher borrowing rates and costs associated with the Company's October 1996
and February 1997 amended and restated credit agreements (see Note 4 of Notes to
Unaudited Condensed Consolidated Financial Statements). The Company has used the
line-of-credit to finance capital  expenditures and working capital requirements
for new and existing  Company-owned  restaurants,  foodservice client facilities
and corporate infrastructure.

Income Taxes

The Company's effective tax benefit rate was approximately 35% for the three and
nine months ended March 29, 1997,  respectively,  compared with an effective tax
benefit  rate  of  approximately  20%  and an  effective  tax  expense  rate  of
approximately  110% for the comparable periods last year. The effective tax rate
reflects  the  federal tax benefit  expected to be received by the  Company.  No
benefit has been provided on state operating  losses where such losses cannot be
carried back by the Company.

Earnings (Loss) Per Share

Primary  and fully  diluted  earnings  (loss)  per share,  excluding  impairment
expenses and merger costs, decreased significantly for the three and nine months
ended  March  29,  1997  compared  with the same  periods  last  year  primarily
reflecting the significant losses incurred in fiscal 1997.


<PAGE>



The following tables set forth,  for the periods  presented,  certain  financial
information  for  the  Company's  business  segments.  For  further  information
relating  to  the  businesses,  see  Note  5 of  Notes  to  Unaudited  Condensed
Consolidated Financial Statements.

Foodservice

<TABLE>
<CAPTION>
                                                                                 Three Months Ended          Nine Months Ended
                                                                                 ------------------          -----------------
                                                                                  March          March       March        March
                                                                                29, 1997       30, 1996     29, 1997     30, 1996
                                                                                --------       --------     --------     --------
                                                                                            (as restated)             (as restated)
<S>                                                                             <C>           <C>           <C>           <C>
Managed volume:
   Management fee contracts ....................................................$  27,504     $  27,907     $  76,355     $  80,038
   Profit and loss contracts ...................................................   48,038        55,883       144,728       165,987
                                                                                ---------     ---------     ---------     ---------
     Total managed volume ......................................................$  75,542     $  83,790     $ 221,083     $ 246,025
                                                                                =========     =========     =========     =========

Sales from profit and loss contracts ...........................................    100.0%        100.0%        100.0%       100.0%
Operating expenses:
   Labor costs .................................................................    (33.7)        (37.2)        (33.9)       (34.4)
   Product costs ...............................................................    (35.6)        (36.2)        (36.7)       (36.3)
   Other operating expenses ....................................................    (14.6)        (14.6)        (14.6)       (14.6)
   Depreciation and amortization                                                     (3.1)         (2.7)         (2.9)        (2.5)
   Impairment charges ..........................................................    --             (5.7)        --            (1.9)
                                                                                ---------     ---------     ---------    ---------
Income from profit and loss contracts ..........................................     13.0%          3.6%         11.9%        10.3%
                                                                                =========     =========     =========    =========

Income  from  profit  and  loss  contracts .....................................$   6,194     $   2,012     $  17,282    $  17,146
Management  and other fees .....................................................    1,348         1,517         3,730        4,099
                                                                                ---------     ---------     ---------    --------- 
Income  from  foodservice operations ...........................................$   7,542     $   3,529     $  21,012    $  21,245 
                                                                                =========     =========     =========    =========
</TABLE>

Daka conducts its operations on the basis of two types of foodservice  contracts
with its clients.  The first type is a management fee contract pursuant to which
a client  pays  Daka a  negotiated  fee for  overseeing  and  administering  its
foodservice  operations and reimburses  Daka for all costs incurred in providing
such service.  Management fee contracts are prevalent where companies  subsidize
foodservice as part of the benefits  provided to employees and in elementary and
secondary  schools.  The second type of  contract is a profit and loss  contract
whereby Daka assumes the risk of profit or loss from the foodservice operations.
While Daka manages the total sales volume  attributable  to both contract types,
generally accepted  accounting  principles require that Daka recognize sales and
expenses  from profit and loss  contracts,  but only the  management  fee amount
derived from  management  fee contracts as earned.  Consequently,  Daka does not
recognize  sales and  related  costs of sales  with  respect to  management  fee
contracts.

Managed volume in the foodservice segment decreased  approximately $8.2 million,
or 9.8%,  to $75.5  million for the three months  ended March 29, 1997  compared
with $83.8 million in the comparable  quarter of 1996. For the nine months ended
March 29, 1997, managed volume decreased  approximately $24.9 million, or 10.1%,
to $221.1 million  compared with $246.0 million in 1996. The decrease in managed
volume  reflects  the impact of a net  reduction  in  contracts  in fiscal  1997
offset,  in part, by higher same location  foodservice  sales volumes.  Prior to
1996,  the  Company had  increased  its managed  volumes  primarily  through the
acquisition of contracts and other foodservice  businesses.  Given the Company's
limited  financial  resources  in the  current  year,  there  have  been no such
acquisitions in 1997 and none are presently anticipated.


<PAGE>



Income from foodservice  operations,  excluding impairment  expenses,  increased
12.1% to $7.5 million for the three months  ended March 29, 1997  compared  with
$6.7 million in the comparable quarter of 1996. For the three months ended March
29,  1997,  operating  margins,  excluding  impairment  charges,  expressed as a
percentage of sales  increased 3.7% resulting from lower labor and product costs
offset, in part, by higher depreciation and amortization  expenses.  Income from
foodservice operations,  excluding impairment charges,  decreased 14.0% to $21.0
million for the nine months ended March 29, 1997,  compared  with $24.2  million
for the comparable period last year.  Operating  margins,  excluding  impairment
charges, expressed as a percentage of sales, for the first nine months of fiscal
1997 decreased 0.3%  reflecting the impact of higher product,  depreciation  and
amortization costs offset, in part, by lower labor costs.

Fuddruckers

<TABLE>
<CAPTION>
                                                                                 Three Months Ended           Nine Months Ended
                                                                                 ------------------           -----------------
                                                                                  March          March       March         March
                                                                                29, 1997       30, 1996     29, 1997      30, 1996
                                                                                --------       --------     --------      --------
                                                                                             (as restated)             (as restated)
<S>                                                                             <C>           <C>          <C>            <C>
Restaurant sales ...............................................................$  34,670      $  32,058   $ 102,790      $ 96,780

Sales from Fuddruckers-owned restaurants .......................................    100.0%         100.0%      100.0%        100.0%
Operating expenses:
   Labor costs .................................................................    (29.6)         (28.8)      (30.4)        (28.4)
   Product costs ...............................................................    (26.8)         (27.8)      (27.6)        (27.9)
   Other operating expenses ....................................................    (31.7)         (25.1)      (31.5)        (26.6)
   Depreciation and amortization ...............................................     (7.1)          (6.2)       (7.0)         (5.8)
   Impairment charges ..........................................................     --             (7.6)       --            (2.5)
                                                                                ---------      ---------   ---------      --------
Income from restaurant operations ..............................................      4.8%           4.5%        3.5%          8.8%
                                                                                =========      =========   =========      ========

Income from restaurant operations ..............................................$   1,653      $   1,406    $  3,552      $  8,383
Franchising income .............................................................    1,001          1,174       2,856         5,755
                                                                                ---------      ---------   ---------      --------
Income from restaurant and franchising operations ..............................$   2,654      $   2,580    $  6,408      $ 14,138
                                                                                =========      =========    ========      ========
Number of restaurants (end of period):
   Fuddruckers-owned                                                                                             122           115
   Franchised                                                                                                     79            76
                                                                                                            --------      -------- 
     Total restaurants                                                                                           201           191
                                                                                                            ========      ========
</TABLE>


Sales from Fuddruckers-owned  restaurants increased  approximately $2.6 million,
or 8.1%,  to $34.7  million for the three months  ended March 29, 1997  compared
with $32.1  million  for the  comparable  period  last year.  For the first nine
months of fiscal 1997, sales increased  approximately $6.0 million,  or 6.2%, to
$102.8 million compared with $96.8 million for the comparable  period last year.
These  increases  reflect  the  net  addition  of  nine  new   Fuddruckers-owned
restaurants  during the periods  offset  primarily by a 3.1% and 7.7% decline in
comparable  restaurant  sales for the  quarter  and first nine  months of fiscal
1997,  respectively,  and lower per restaurant  average sales volumes within the
Fuddruckers segment compared to last year.

Income from restaurant  operations,  excluding impairment charges, for the three
months ended March 29, 1997 decreased  approximately $2.2 million,  or 57.1%, to
$1.7  million  compared  with $3.9  million a year ago.  Income from  restaurant
operations,  excluding  impairment charges,  for the first nine months of fiscal
1997 decreased  approximately  $7.3 million,  or 67.2%, to $3.6 million compared
with $10.8  million a year ago.  Operating  margins  continue  to be  negatively
impacted by poor sales  levels,  higher  labor and other  operating  costs,  and
higher depreciation and amortization  expenses offset, in part, by the impact of
new menu changes,  a 3% price  increase  effective in early  December,  1996 and
improved product costs.


<PAGE>



Franchise income decreased  approximately  $0.2 million and $2.9 million for the
three and nine months ended March 29, 1997, respectively.  During the first nine
months of fiscal 1997, the Company did not execute any international  multi-unit
development  agreements.  Royalty  income from domestic  franchised  restaurants
remained  consistent  for the  quarter  and first  nine  months  of fiscal  1997
compared to last year.

Champps
<TABLE>
<CAPTION>
                                                                            Three Months Ended               Nine Months Ended
                                                                            ------------------               -----------------
                                                                           March          March            March            March
                                                                         29, 1997       30, 1996         29, 1997         30, 1996
                                                                         --------       --------         --------         --------
                                                                                      (as restated)                    (as restated)
<S>                                                                     <C>            <C>              <C>             <C>
Restaurant sales .....................................................  $  14,300      $  11,591        $  41,847        $  29,612

Sales from Champps-owned restaurants .................................      100.0%         100.0%           100.0%           100.0%
Operating expenses:
   Labor costs .......................................................      (31.7)         (33.2)           (32.6)           (33.0)
   Product costs .....................................................      (28.7)         (28.7)           (28.9)           (28.7)
   Other operating expenses ..........................................      (23.5)         (22.4)           (23.5)           (22.4)
   Depreciation and amortization
                                                                             (7.8)          (8.3)            (8.2)            (7.8)
   Merger costs ......................................................       --            (25.0)            --               (9.8)
                                                                        ---------      ---------        ---------        ---------
Income (loss)  from restaurant operations ............................        8.3%         (17.6)%            6.8%            (1.7)%
                                                                        =========      =========        =========        =========

Income (loss) from restaurant operations .............................  $   1,186      $  (2,111)       $   2,857        $    (575)
Franchising income ...................................................        120            141              385              427
                                                                        ---------      ---------        ---------        ---------
Income (loss) from restaurant and franchising operations .............  $   1,306      $  (1,970)       $   3,242        $    (148)
                                                                        =========      =========        =========        =========

Number of restaurants (end of period): 
   Champps-owned .....................................................                                         11                9
   Franchised ........................................................                                         10               10
                                                                                                        ---------        ---------
     Total restaurants                                                                                         21               19 
                                                                                                        =========        =========
</TABLE>

Sales in Champps-owned  restaurants  increased  approximately  $2.7 million,  or
23.4%, to $14.3 million for the three months ended March 29, 1997, compared with
$11.6  million  a year ago.  For the first  nine  months of fiscal  1997,  sales
increased  approximately $12.2 million, or 41.3%, to $41.8 million compared with
$29.6 million a year ago. These increases  primarily reflect the addition of six
new  Champps-owned  restaurants  in fiscal 1996 (open for all of 1997),  one new
Champps-owned  restaurant opened in 1997, continued positive quarterly increases
in comparable  restaurant sales and higher per restaurant  average sales volumes
for the quarter and first nine months of fiscal 1997.

Income from restaurant operations,  excluding merger costs, for the three months
ended March 29, 1997 increased  approximately  $0.4 million,  or 50.3%,  to $1.2
million   compared  with  $0.8  million  a  year  ago.  Income  from  restaurant
operations,  excluding  merger  costs,  for the first nine months of fiscal 1997
increased  approximately  $0.5 million,  or 22.9%, to $2.9 million compared with
$2.3 million a year ago.  Operating  margins for the three and nine months ended
March 29, 1997,  continue to be directly  impacted by the increase in comparable
restaurant  sales and improved  product costs  offset,  in part, by higher other
operating expenses,  depreciation and amortization  expenses associated with new
store openings and pre-opening costs.


<PAGE>



Specialty Concepts
<TABLE>
<CAPTION>
                                                                             Three Months Ended           Nine Months Ended
                                                                             ------------------           -----------------
                                                                            March          March           March           March
                                                                          29, 1997       30, 1996         29, 1997       30, 1996
                                                                          --------       --------         --------       --------
                                                                                       (as restated)                   (as restated)
<S>                                                                      <C>            <C>             <C>              <C>     
Unit sales ..............................................................$  1,368       $    676        $   3,828        $  1,905

Sales from unit operations ..............................................   100.0%         100.0%           100.0%          100.0%
Operating expenses:
   Labor costs ..........................................................   (52.1)         (25.0)           (46.2)          (22.8)
   Product costs ........................................................   (28.1)         (44.1)           (28.5)          (42.9)
   Other operating expenses .............................................   (28.5)         (16.3)           (27.9)          (14.3)
   Depreciation and amortization ........................................   (21.1)          (3.4)           (15.0)           (3.8)
                                                                         --------       --------         --------        --------
Income (loss) from unit operations ......................................   (29.8)%         11.2%           (17.7)%          16.2%
                                                                         ========       ========         ========        ========

Income (loss) from unit operations ......................................$   (408)      $     76         $   (676)       $    308
Franchising income ......................................................     101            174              652             346
                                                                         --------       --------         --------        --------
Income (loss) from unit and franchising operations ......................$   (307)      $    250         $    (24)       $    654
                                                                         ========       ========         ========        ========
</TABLE>


Sales in Specialty Concepts units increased  approximately $0.7 million and $1.9
million to $1.4 million and $3.8  million,  respectively,  for the three and the
nine months ended March 29, 1997 compared with $0.7 million and $1.9 million for
the  comparable  three and nine months last year.  These  increases  reflect the
expansion  initiatives in nontraditional  foodservice venues in late fiscal 1996
and throughout  fiscal 1997.  Operating  results  within the Specialty  Concepts
segment  remained  unprofitable in fiscal 1997 due to higher  operating costs in
the Fudd Cafe units and the development and construction of the Company's "Leo's
Deli"  concept.  The  Company is  currently  evaluating  its  strategic  options
regarding this segment as a whole.  Prior year quarterly and nine month results,
which were  immaterial for reporting  purposes in fiscal 1996,  except for Great
Bagel  and  Coffee,   were  combined  within  the  foodservice  and  Fuddruckers
operations.  At March 29, 1997,  Specialty Concepts consisted of six Fudd Cafes,
three Company-owned and approximately 25 franchised Great Bagel and Coffee units
and over 400 French Quarter Coffee locations.


<PAGE>



                        FINANCIAL CONDITION AND LIQUIDITY

At March 29, 1997, the Company had negative  working capital of $6.7 million,  a
decrease of $35.3 million  compared to working  capital of $28.6 million at June
29, 1996. The decrease in working  capital is  principally  due to the change in
current  maturities of its long-term  debt offset,  in part, by working  capital
provided by increases in accounts payable.  Capital  expenditures for restaurant
expansion  during the  quarter  and first nine months of fiscal 1997 were funded
primarily  through  $9.4  million  of  existing   sale-leaseback  and  equipment
financing facilities, while corporate capital expenditures were funded primarily
through the Company's existing line-of-credit facility.

On February 7, 1997, the Company amended its revolving  line-of-credit agreement
(the  "February  Agreement").   Under  the  February  Agreement,  the  Company's
borrowing  limit was reduced to $115 million,  the maturity date was extended to
January 2, 1998,  and its loan  covenants  amended.  On May 7, 1997, the Company
renegotiated  certain terms and  conditions of its February  Agreement (the "May
Agreement"  collectively the "Agreements") whereby the Company's borrowing limit
will be further  reduced to $72.5  million by March 31, 1998,  the maturity date
extended to April 2, 1998,  and certain loan covenants  amended.  The Agreements
require  certain  principal  repayments and further  reductions in the Company's
borrowing  limits  (see Note 4 to  Unaudited  Condensed  Consolidated  Financial
Statements).

Accordingly,   the  Company  has  classified   approximately  $32.1  million  of
outstanding  borrowings as current in the balance sheet as of March 29, 1997. At
March 29,  1997,  the  Company  had  available  borrowings  under  the  February
Agreement of approximately $11.4 million.

At March 29, 1997,  the Company had three new  Champps-owned  restaurants  under
construction and two Champps restaurants under development which are expected to
open in fiscal 1997 and the first half of fiscal 1998, respectively. The Company
had no new  Fuddruckers-owned  restaurants  under  construction  or development.
There are no other  restaurant  expansion or development  efforts planned by the
Company  for the balance of fiscal  1997 or the first half of fiscal  1998.  The
Company  will  continue  to  make  improvements  at  existing   restaurants  and
facilities of its foodservice  clients,  and will continue to invest in improved
data  processing  systems,  pursuant  to the  terms  and  conditions  of its May
Agreement.

The Company has been  exploring a number of  strategic  alternatives  to improve
performance and increase  shareholder value. While no agreement has been reached
with respect to any particular strategic alternative,  the Company currently 
expects to be in a position to announce  specific  initiatives  before the end 
of fiscal 1997.  There can be no assurance,  however,  that the Company will be
able to reach any agreement or complete any transaction.  Currently,  
management believes that the curtailment  of  restaurant  expansion,  
improved  cash flows  from  operations, existing cash balances and working 
capital,  available  sale-leaseback financing and  equipment   financing  
will  provide  sufficient   liquidity  to  meet  its obligations, fund 
capital expenditures and service debt requirements as outlined in the 
Agreements.


<PAGE>


                           PART II - OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K

(a)     Exhibits

10.26   Second  Amendment  Agreement,  dated  as of  May  7,  1997,  among  DAKA
        International,  Inc.  Subsidiary  Guarantors,  The Chase Manhattan Bank,
        N.A., Fleet National Bank, Mellon Bank, N.A. and The First National Bank
        of Boston.

11      Computation Regarding Per Share Earnings


(b)     Reports on Form 8-K

        There were no reports on Form 8-K filed during the quarter ended 
        March 29, 1997.


                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                        DAKA INTERNATIONAL, INC.
                                             (Registrant)

                                 By:    /s/Donald C. Moore
                                        --------------------------------
                                           Donald C. Moore
                                           Chief Financial Officer
                                          (Principal Financial and Principal
                                           Accounting Officer)




Date:    May 12, 1997